DEBT

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

DEBT

DEBT

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

	December 31,
	2022		2021
2020 ABL Facility	$	—	$	62,000
2022 ABL Facility	99,916		—
APSC Term Loan	31,562		214,191
Subordinated Term Loan	107,905		36,358
Total	239,383		312,549
Convertible Debt1	40,650		87,662
Finance lease obligations2	5,902		5,640
Total debt and finance lease obligations	285,935		405,851
Current portion of long-term debt and finance lease obligations	(280,993)		(667)
Total long-term debt and finance lease obligations, less current portion	$	4,942	$	405,184

_________________

1        Comprised of principal amount outstanding, less unamortized discount and issuance costs. See Convertible Debt section below for additional information.

2        Excludes finance lease obligations associated with discontinued operations.

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

2020 ABL Facility

On December 18, 2020, we entered into an asset-based credit agreement (such agreement, as amended, restated, supplemented or otherwise modified from time to time, the “Citi Credit Agreement”) led by Citibank, N.A. (“Citibank”), as agent, which provided for available borrowings up to $150.0 million (the “2020 ABL Facility”). The 2020 ABL Facility’s original maturity date was December 18, 2024. The 2020 ABL Facility had a variable interest rate of either a base rate or a LIBOR rate, plus an applicable margin. The 2020 ABL Facility was fully paid off on February 11, 2022.

2022 ABL Facility

On February 11, 2022, we entered into a new credit agreement, with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent, (“Eclipse”) (such agreement, as amended by ABL Amendment No. 1 and ABL Amendment No. 2, the “2022 ABL Credit Agreement”). Available funding commitments to us under the 2022 ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $130.0 million to be provided by certain affiliates of Eclipse (the “Revolving Credit Loans”), with a $35.0 million sublimit for swingline borrowings and a $26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $35.0 million (the “Delayed Draw Term Loan”) provided by Corre Partners Management, LLC and certain of its affiliates (“Corre”) (collectively, the “2022 ABL Credit Facility”). The proceeds of the loans under the 2022 ABL Credit Facility were used to, among other things, pay off and terminate the 2020 ABL Facility. The 2022 ABL Facility matures in February 2025.

Our obligations under the 2022 ABL Credit Agreement are guaranteed by certain of our direct and certain indirect subsidiaries referenced below as the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties”. Our obligations under the 2022 ABL Credit Facility are secured on a first priority basis by, among other things, accounts receivable, deposit accounts, securities accounts and inventory of the ABL Loan Parties and are secured on a second priority basis by substantially all of the other assets of the ABL Loan Parties. Availability under the revolving credit line under the 2022 ABL Credit Facility is based on a percentage of the value of accounts receivable and inventory, reduced by certain reserves.

Revolving credit loans under the 2022 ABL Credit Facility bear interest through maturity at a variable rate based upon a LIBOR Rate (or a base rate if the LIBOR Rate is unavailable for any reason), plus an applicable margin (“LIBOR Rate Loan” and “Base Rate Loan”, respectively). The “base rate” is a fluctuating interest rate equal to the greatest of (1) the federal funds rate plus 0.50%, (2) Wells Fargo Bank, National Association’s prime rate, and (3) the one-month LIBOR Rate. The “applicable margin” is defined as a rate of 3.15%, 3.40% or 3.65% for Base Rate Loans with a 2.00% base rate floor and a rate of 4.15%, 4.40% or 4.65% for LIBOR Rate Loans with a 1.00% LIBOR floor, in each case depending on the amount of EBITDA as of the most recent measurement period, as reported in a monthly compliance certificate. The Delayed Draw Term Loan bears interest through maturity at a rate of the LIBOR Rate plus 10.0%, with a 1.00% LIBOR floor. The fee for undrawn revolving amounts is 0.50% and the fee for undrawn Delayed Draw Term Loan amounts is 3.00%. Interest under the 2022 ABL Credit Facility is payable monthly. The Company will also be required to pay customary letter of credit fees, as necessary. The Company may make voluntary prepayments of the loans under the 2022 ABL Credit Facility from time to time, subject, in the case of the Delayed Draw Term Loan, to certain conditions. Mandatory prepayments are also required in certain circumstances, including with respect to the Delayed Draw Term Loan, if the ratio of aggregate value of the collateral under the 2022 ABL Credit Facility to the sum of the Delayed Draw Term Loan plus revolving facility usage outstanding is less than 130%. Amounts repaid may be re-borrowed, subject to compliance with the borrowing base and the other conditions set forth in the 2022 ABL Credit Agreement, subject, in the case of the Delayed Draw Term Loan to a maximum of four such borrowings in any 12-month period. Certain permanent repayments of the 2022 ABL Credit Facility loans are subject to the payment of a premium of 2.00% during the first year of the facility, 1.00% during the second year of the facility, and 0.50% in the last year of the facility. The 2022 ABL Credit Agreement contains customary conditions to borrowings and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of certain debt. The 2022 ABL Credit Agreement also requires that we will not exceed $20.0 million in unfinanced capital expenditures in any calendar year; provided that this requirement will not apply if we maintain a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year. In addition, the 2022 ABL Credit Agreement includes customary events of default, the occurrence of which may require that we pay an additional 2.0% interest on the outstanding loans under the 2022 ABL Credit Facility.

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

Direct and incremental costs associated with the issuance of the 2022 ABL Credit Facility were approximately $8.4 million and were capitalized as deferred financing costs. These costs are being amortized on a straight-line basis over the term of the 2022 ABL Credit Facility. Unamortized deferred financing cost amounted to $3.1 million and $2.9 million as of December 31, 2022 and December 31, 2021, respectively. Additionally, the amortization period for deferred financing costs and debt discounts and issuance cost was accelerated to reflect the revised Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) and the related reclassification of debt as current. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

On May 6, 2022, we entered into Amendment No.1 to the 2022 ABL Credit Agreement (“ABL Amendment No. 1”) which, among other things, modified the Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) such that the date on which a reserve must, subject to certain conditions, be put into place with respect to the outstanding principal amount of the Notes was 75 days prior to their maturity date rather than 120 days or May 18, 2023, by which date, the Notes balance must be paid down to less than $10.0 million, or the Company must have equivalent cash on hand to pay down the Notes to $10.0 million.

In connection with the Quest Integrity Transaction, on November 1, 2022, we entered into Amendment No. 2 to the 2022 ABL Credit Agreement (“ABL Amendment No. 2”) which, among other things, (i) modified the Maturity Reserve Trigger Date such that the date on which a reserve must, subject to certain conditions, be put into place with respect to the outstanding principal amount of the Notes is 45 days prior to the maturity date of the Notes rather than 75 days, or June 17, 2023, and (ii) made certain modifications to negative covenants and mandatory prepayment provisions.

As of December 31, 2022, we had $64.9 million outstanding under the Revolving Credit Loans and $35.0 million outstanding under the Delayed Draw Term Loans. There were $8.7 million outstanding in letters of credit secured by these instruments, which are off-balance sheet.

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

APSC Term Loan

On December 18, 2020, we entered into that certain Term Loan Credit Agreement (as amended by Term Loan Amendment No. 1, Term Loan Amendment No. 2, Term Loan Amendment No. 3, Term Loan Amendment No. 4, Term Loan Amendment No. 5, Term Loan Amendment No. 6, Term Loan Amendment No. 7, Term Loan Amendment No. 8 and Term Loan Amendment No. 9, the “Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), pursuant to which we borrowed $250.0 million (the “Term Loan”). The Term Loan was issued with a 3% original issuance discount, such that total proceeds received were $242.5 million. The Term Loan matures, and all outstanding amounts become due and payable on December 18, 2026. However, certain conditions could result in an earlier maturity, including if, on the Maturity Trigger Date (45 days prior to the maturity date of the Notes (currently June 17, 2023)), (i) the maturity date of the Notes has not been extended past the date that is 91 days after the sixth anniversary of the closing date of the Term Loan Credit Agreement or (ii) the Notes have an aggregate principal amount outstanding of $10.0 million or more, in which case the Term Loan will terminate on the Maturity Trigger Date. As set forth in the Term Loan Credit Agreement, the Term Loan is secured by substantially all assets, other than those secured on a first lien basis by the 2022 ABL Credit Facility, and we may, subject to the terms and conditions in the Term Loan Credit Agreement, increase the Term Loan by an amount not to exceed $100.0 million.

The Term Loan bears interest through maturity at a variable rate based upon, at our option, an annual rate of either a base rate or a LIBOR rate, plus an applicable margin. The base rate is a fluctuating interest rate equal to the greater of (i) the federal funds rate plus 0.50%, (ii), the prime rate as specified in the Term Loan Credit Agreement, and (iii) one-month LIBOR rate plus 1.00%. The applicable margin is defined as a rate of 6.50% for base rate borrowings with a 2.00% base rate floor and 7.50% for LIBOR rate borrowings with a 1.00% LIBOR rate floor. Interest is payable either (i) monthly for Base rate borrowings or (ii) the last day of the interest period for LIBOR rate borrowings, as set forth in the Term Loan Credit Agreement. The Term Loan is prepayable in whole or in part, at any time and from time to time, subject to a prepayment premium (including a make whole during the first two years) specified in the Term Loan Credit Agreement (subject to certain exceptions), plus accrued and unpaid interest. The effective interest rate on the Term Loan as of December 31, 2022 and December 31, 2021 was 37.99% and 20.90%, respectively. As of December 31, 2022, the effective interest consisted of a 11.73% variable interest rate paid in cash and an additional 26.26% due to the acceleration of the amortization of the related debt issuance costs. As of December 31, 2021, the effective interest consisted of a 8.5% variable interest rate paid in cash and an additional 12.4% due to the acceleration of the amortization of the related debt issuance costs. The unamortized balances of debt discounts, warrant discount and debt issuance cost amounted to $3.9 million and $35.8 million at December 31, 2022 and December 31, 2021, respectively. Interest expense amounted to $21.8 million and $21.9 million for the years ended December 31, 2022 and 2021, respectively.

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

On October 19, 2021, we entered into Amendment No. 1 to the Term Loan Credit Agreement (“Term Loan Amendment No. 1”) with the financial institutions party thereto from time to time (the “Lenders”) and APSC, as agent. Term Loan Amendment No. 1, among other things, (i) deferred an October 19, 2021 interest payment until October 29, 2021; (ii) required

that the Company use commercially reasonable efforts to appoint an additional independent director to our Board of Directors who is acceptable to the agent; (iii) provided the Lenders with additional information rights; and (iv) tightened certain negative covenants included in the Term Loan Credit Agreement until the deferred interest is made current.

On October 29, 2021, we entered into Amendment No. 2 to the Term Loan Credit Agreement (“Term Loan Amendment No. 2”) with the Lenders and APSC, as agent. Term Loan Amendment No. 2, among other things, (i) further deferred an October 29, 2021 interest payment until November 15, 2021; (ii) contained certain milestones; (iii) provided the Lenders with a ten-day right of first refusal regarding any refinancing of the Company’s obligations under the 2020 ABL Facility; (iv) obligated the Company to establish, pursuant to a charter to be adopted by the our Board of Directors and reasonably acceptable to the agent, a special committee that shall have exclusive responsibility and authority to make recommendations to our Board of Directors regarding certain transactions; and (v) provided that the Company will not permit a covenant trigger event under the 2020 ABL Facility to occur.

On November 8, 2021, we entered into Amendment No. 3 to the Term Loan Credit Agreement (“Term Loan Amendment No. 3”). Term Loan Amendment No. 3, among other things, (i) waived certain covenants until September 30, 2022 and modified covenants thereafter to provide us with more flexibility and (ii) required us to seek shareholder approval (or an exception therefrom) to issue additional warrants to APSC, providing for the purchase of an aggregate of 1,417,051 shares of our common stock (the “APSC Warrants”) at an exercise price of $1.50 per share, and to amend the warrants issued in December 2020 to APSC to purchase up to 3,582,949 shares of our common stock, which was initially exercisable at the holder’s option at any time, in whole or in part, until June 14, 2028, at an exercise price of $7.75 per share (the “Existing Warrant”), to provide for an exercise price of $1.50 per share. Following the Reverse Stock Split, the APSC Warrants provide for the purchase of up to 500,000 shares of our common stock at an exercise price of $15.00 per share. Term Loan Amendment No. 3 also reduced the required amount of principal outstanding on the Notes on the Maturity Trigger Date from $50.0 million to $10.0 million.

On December 2, 2021, and December 7, 2021, respectively, we entered into Amendment No. 4 to the Term Loan Credit Agreement (“Term Loan Amendment No. 4”) and Amendment No.5 to the Term Loan Credit Agreement (“Term Loan Amendment No. 5”), respectively. Term Loan Amendment No. 4 extended the date upon which the Company must issue the APSC Warrants to December 7, 2021, and Term Loan Amendment No. 5 extended the date upon which the Company must issue the APSC Warrants to December 8, 2021.

On February 11, 2022, we entered into Amendment No. 6 to the Term Loan Credit Agreement (“Term Loan Amendment No. 6”). Term Loan Amendment No. 6, among other things, (i) permitted the entry into the 2022 ABL Credit Agreement, (ii) permitted certain interest payments due under the Term Loan Credit Agreement to be paid in kind, (iii) permitted certain asset sales and required certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amended the financial covenants such that the maximum net leverage ratio of 7.00 to 1.00 would not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $20.0 million in unfinanced capital expenditures in any calendar year; provided, that such unfinanced capital expenditures limitation will not apply if the Company maintains a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

On May 6, 2022, we entered into Amendment No. 7 to the Term Loan Credit Agreement (“Term Loan Amendment No. 7”). Term Loan Amendment No. 7, among other things, (i) modified the Maturity Trigger Date (as defined in the Term Loan Credit Agreement) such that the date on which the maturity of the Term Loan Credit Agreement is triggered as a result of there being an aggregate principal amount of more than $10.0 million outstanding under the Notes is 75 days prior to the Notes maturity date instead of 120 days prior to their maturity date, and (ii) amended the financial covenants such that the maximum net leverage ratio to be tested for the fiscal quarter ending March 31, 2023 be increased from 7.00 to 1.00 to 12.00 to 1.00.

In connection with the Quest Integrity Transaction, on November 1, 2022, we, the guarantors party thereto, the lenders party thereto and APSC, as agent for the lenders and secured parties, entered into Amendment No. 8 to the Term Loan Credit Agreement (“Term Loan Amendment No. 8”) which, among other things, (i) modified mandatory prepayment requirements to allow us to retain up to $26.0 million of proceeds in connection with the Quest Integrity Transaction, subject to certain limitations, (ii) modified the Maturity Trigger Date such that the date on which the maturity of the Term Loan Credit Agreement is triggered as a result of there being an aggregate principal amount of more than $10.0 million outstanding under the Notes is 45 days prior to the maturity date of the Notes rather than 75 days, or June 17, 2023, and (iii) made certain modifications to negative covenants and mandatory prepayment provisions.

On November 2, 2022, we used the net proceeds from the sale of Quest Integrity to pay down $225.0 million of debt under the Term Loan Credit Agreement and to pay certain fees associated with such repayment and related accrued interest, which reduced the principal balance to $35.5 million, with the remaining proceeds reserved for general corporate purposes, thereby reducing our future debt service obligations and leverage and improving our liquidity. The transaction was treated as a partial debt extinguishment, and a loss in the amount of $30.1 million was recognized in the current income statement consisting of cash fees and premium paid in the amount of $12.4 million and the noncash write off of the related unamortized balance of deferred issuance cost and warrant and debt discounts in the amount of $17.7 million.

On November 4, 2022, we entered into Amendment No. 9 to the Term Loan Credit Agreement which amended the financial covenant to provide relief from the maximum net leverage ratio covenant thereunder such that it is not tested until the fiscal quarter ending June 30, 2023 and for each fiscal quarter thereafter at 7.00 to 1.00.

Subordinated Term Loan Credit Agreement

On November 9, 2021, we entered into a credit agreement (as amended by Corre Amendment 1, Corre Amendment 2, Corre Amendment 3, Corre Amendment 4, Corre Amendment 5, Corre Amendment 6, Corre Amendment 7, Corre Amendment 8, Corre Amendment 9, Corre Amendment 10 and Corre Amendment 11, and the related Springing Maturity Date (as defined below) provision (the “Subordinated Term Loan Credit Agreement”) with Corre Credit Fund, LLC (“Corre Fund”), as agent, and the lenders party thereto providing for an unsecured $50.0 million delayed draw subordinated term loan facility (the “Subordinated Term Loan”). Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $22.5 million on November 9, 2021, and an additional $27.5 million on December 8, 2021. The Subordinated Term Loan matures, and all outstanding amounts become due and payable, on the earlier of December 31, 2027 and the date that is two weeks following the maturity or full repayment of the Term Loan (the “Springing Maturity Date”). The stated interest rate on the Subordinated Term Loan is 12.00% which is payable in the form of paid-in-kind interest (“PIK Interest”). The effective interest rate as of December 31, 2022 and December 31, 2021 was 29.23% and 45.53%, respectively. As of December 31, 2022, the effective interest consisted of 12.00% stated interest and an additional 17.23% due to the acceleration of the amortization of the related debt issuance costs. At December 31, 2021, the effective interest consisted of the 12.00% stated interest and an additional 33.53% due to the acceleration of the amortization of the related debt issuance costs. The unamortized debt issuance cost amounted to $7.5 million and $13.9 million as of December 31, 2022 and December 31, 2021, respectively. Interest expense amounted to $11.4 million and $0.6 million for the years ended December 31, 2022 and 2021, respectively.

Under the Subordinated Term Loan Credit Agreement, we were required to, among other things, (i) subject to certain conditions, issue the lenders warrants (as defined below), (ii) amend our charter, bylaws, and all other necessary corporate governance documents to reduce the size of our Board of Directors to seven directors, one of whom included our Chief Executive Officer, and (iii) reconstitute our Board of Directors. The Subordinated Term Loan Credit Agreement also contained other customary prepayment provisions, events of default and covenants.

On November 30, 2021, we entered into Amendment No. 1 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 1”). Corre Amendment 1 (i) extended the payment date for interest in the form of PIK interest with respect to the Initial Term Loans (as defined in the Subordinated Term Loan Credit Agreement), (ii) extended the date upon which the Company must deliver a fully executed ABL Consent (as defined in the Subordinated Term Loan Credit Agreement) to, in each case, 11:59 P.M. on December 6, 2021 and (iii) extended the date upon which we must issue the Corre Warrants to 11:59 P.M. on December 7, 2021.

On December 6, 2021, we entered into Amendment No. 2 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 2”). Corre Amendment 2 (i) extended the payment date for interest in the form of PIK Interest with respect to the Initial Term Loans, and (ii) extended the date upon which we must deliver a fully executed ABL Consent to, in each case, 11:59 P.M. on December 7, 2021.

On December 7, 2021, we entered into Amendment No. 3 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 3”). Corre Amendment 3, among other things, (i) extended the payment date for interest in the form of PIK Interest with respect to the Initial Term Loans, (ii) extended the date upon which we must deliver a fully executed ABL Consent and (iii) extended the date upon which we must issue the Corre Warrants to, in each case, 11:59 P.M. on December 8, 2021.

On December 8, 2021, we entered into Amendment No. 4 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 4”). Corre Amendment 4 appointed Cantor Fitzgerald Securities as successor agent.

In connection with the transactions contemplated by the 2022 ABL Credit Agreement on February 11, 2022, Corre, agreed to provide the Company with incremental financing (the “Incremental Financing”), totaling approximately $55.0 million, consisting of (i) a $35.0 million Delayed Draw Term Loan under the 2022 ABL Credit Facility; (ii) $10.0 million from Corre in the form of the February 2022 Delayed Draw Term Loan (as defined in the Subordinated Term Loan Credit Agreement) on a pari passu basis with the existing loans issued pursuant to the Subordinated Term Loan Credit Agreement; and (iii) $10.0 million through the purchase of 11,904,762 PIPE Shares (the “PIPE Shares”) of our common stock to Corre

Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP and Corre Horizon II Fund, LP (collectively, the “Corre Holders”) at a price of $0.84 per share (the “Equity Issuance”). The business purpose of the Corre Amendments was to further extend the liquidity runway of the Company and support ongoing negotiations of the financing transactions completed on February 11, 2022.

On February 11, 2022, we entered into Amendment No. 5 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 5”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent. Corre Amendment 5, which among other things, (i) provided for an additional commitment of $10.0 million in subordinated delayed draw term loans to be available for borrowing by the Company until July 1, 2022, (ii) permitted entry into the 2022 ABL Credit Facility, (iii) permitted certain asset sales and required certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amended the financial covenants, such that the maximum net leverage ratio of 7.00 to 1.00 will not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $20.0 million in unfinanced capital expenditures in any calendar year; provided, that these unfinanced capital expenditures requirement will not apply if the Company maintains a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

On May 6, 2022, we entered into Amendment No. 6 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 6”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent. Corre Amendment 6, among other things, amended the financial covenants, such that the maximum net leverage ratio to be tested for the fiscal quarter ending March 31, 2023 will be increased from 7.00 to 1.00 to 12.00 to 1.00.

On June 28, 2022, we entered into Amendment No. 7 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 7”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that, among other things, extended the availability date for the additional commitment of $10.0 million in subordinated delayed draw term loans from July 1, 2022 to October 31, 2022.

On October 4, 2022, we entered into Corre Amendment No. 8 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 8”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, that among other things, (i) increased the total principal amount outstanding under the Subordinated Term Loan Credit Agreement to approximately $112.7 million to give effect to the exchange of their convertible debt and (ii) extended the availability date for the additional commitment of $10.0 million in subordinated delayed draw term loans from October 31, 2022 to December 31, 2022. See Convertible Debt below for impact of the amendment to the Notes outstanding.

On November 1, 2022, we entered into Amendment No. 9 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 9”) with the guarantors party thereto, the lenders from time to time party thereto and Cantor Fitzgerald Securities, as agent. Corre Amendment 9, among other things, (i) modified the mandatory prepayment requirements to allow us to retain up to $26.0 million of proceeds in connection with the Quest Integrity Transaction, subject to certain limitations and (ii) made certain modifications to negative covenants and mandatory prepayment provisions.

On November 4, 2022, we entered into Corre Amendment No. 10 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 10”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent, which amended the financial covenant to provide relief from the maximum net leverage ratio covenant thereunder such that it is not tested until the fiscal quarter ending June 30, 2023 and for each fiscal quarter thereafter at 7.00 to 1.00.

On November 21, 2022, we entered into Amendment No. 11 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 11”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent. Corre Amendment 11 amended the Subordinated Term Loan Credit Agreement to, inter alia, (i) extend the stated maturity date from December 31, 2026 to December 31, 2027 (subject to the Springing Maturity Date), (ii) extend the availability date for the additional commitment of $10.0 million in Subordinated delayed draw term loans to the end of March 31, 2023 rather than December 31, 2022 and (iii) create a new tranche of term loans representing the increased principal amount of unsecured term loans (which loans are not subject to the springing maturity of 14 days after payment in full of the Term Loan created in connection with the exchange of the Notes pursuant to the Exchange Agreement (as defined below) dated as of October 4, 2022, by and among the Company and certain holders of the Notes. There was no increase in the aggregate amount outstanding under the Subordinated Term Loan as a result of Corre Amendment 11.

Warrants

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

	Original					After Reverse Stock Split (Effective date December 22, 2023)
Holder	Date	Number of shares	Exercise price		Expiration date	Number of shares	Exercise price		Total value of stock		Expiration date
APSC Holdco II, LP
Original	12/18/2020	3,582,949	$	7.75	6/14/2028
Amended	11/9/2021	500,000	$	1.50	6/14/2028
Amended	12/8/2021	917,051	$	1.50	12/8/2028
Total APSC		5,000,000	$	1.50	12/8/2028	500,000	$	15.00	$	7,500,000	12/8/2028
Corre	12/8/2021	5,000,000	$	1.50	12/8/2028	500,000	$	15.00	$	7,500,000	12/8/2028
Total warrants		10,000,000				1,000,000			$	15,000,000

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

In connection with execution of the Subordinated Term Loan Credit Agreement and Term Loan Amendment No. 3, on November 9, 2021, we entered into an Amended and Restated Common Stock Purchase Warrant (the “A&R Warrant”) with APSC Holdco II, L.P. (“APSC Holdco”) pursuant to which the Existing Warrant was amended and restated to provide for the purchase of up to 4,082,949 shares of our common stock and to reduce the exercise price to $1.50 per share.

In connection with execution of the Subordinated Term Loan Credit Agreement and the amendments to the Term Loan Credit Agreement, on December 8, 2021 we entered into (i) the Second Amended and Restated Common Stock Purchase Warrant No. 1 (the “Second A&R Warrant”) with APSC Holdco, pursuant to which the A&R Warrant was amended and restated to provide for the purchase of up to 5,000,000 shares of our common stock (including 4,082,949 shares of Common Stock issuable pursuant to the A&R Warrant) exercisable at the holder’s option at any time, in whole or in part, until December 8, 2028, at an exercise price of $1.50 per share, and (ii) the Common Stock Purchase Warrants (collectively, the “Corre Warrants” and, together with the Second A&R Warrant, the “Warrants”) with each of Corre Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP and Corre Horizon Fund II, LP providing for the purchase of an aggregate of 5,000,000 shares of our common stock, exercisable at such holder’s option at any time, in whole or in part, until December 8, 2028, at an exercise price of $1.50 per share.

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

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

In connection with the Subscription Agreement (as defined below), on February 11, 2022, the Company, the Corre Holders and APSC Holdco entered into those certain Team, Inc. Waivers of Anti-Dilution Adjustments and Cash Transaction Exercise (collectively, the “Warrant Waivers”) with respect to each of the Warrants. Pursuant to the Warrant Waivers, the Corre Holders and APSC Holdco agreed with respect to such holders’ Warrant, subject to certain terms and conditions set forth therein (and for only so long as the applicable provisions remain in effect), among other things, (i) to irrevocably waive certain anti-dilution adjustments set forth in such Warrant in connection with the Proposed Equity Financing (as defined in the Warrant Waivers); (ii) to not exercise such Warrant, in whole or in part, if the Company determines that such exercise will cause an ownership change within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (assuming, among other things, that the ownership change threshold is 47% rather than 50%); and (iii) to only exercise such Warrant in a “cashless” or “net-issue” exercise.

Subscription Agreement

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

In accordance with, and subject to the terms and conditions of the Subscription Agreement, the Board was required to create a vacancy for one qualified nominee of the Corre Holders to the Board, who shall be designated by the Corre Holders and qualify as an independent director (a “Board Nominee”), and the Board is required to appoint such initial Board Nominee as a Class II director within seven business days of the date of the Subscription Agreement. This nominee has been appointed to the Board and this condition will remain active as long as the Subscription Agreement remains outstanding.

For so long as the Corre Holders and their affiliates collectively beneficially own at least 10% of the outstanding shares of our common stock, pursuant to and subject to the terms and conditions of the Subscription Agreement, we will nominate the initial Board Nominee, or a successor Board Nominee chosen by the Corre Holders, for re-election as a Class II director at the first annual meeting of the Company’s stockholders to be held after the Equity Issuance and at the end of each subsequent term of such Board Nominee. If at any time, the Corre Holders and their affiliates beneficially own less than 10% of the outstanding shares of common stock, then, if requested by the Company, the Board Nominee then on the Board will resign from his or her directorship, effective as of our next annual meeting of stockholders or such earlier date reasonably requested by the Company.

Convertible Debt

Description of the Notes

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

The Notes bear interest at a rate of 5.0% per year, payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2018. The Notes mature on August 1, 2023 unless repurchased, redeemed or converted in accordance with their terms prior to such date. As a result of the Reverse Stock Split, the Notes are convertible at a conversion rate of 4.6083 shares of our common stock per $1,000 principal amount of the Notes, which is equivalent to a conversion price of approximately $217.00 per share. The conversion rate, and thus the conversion price, may be further adjusted under certain circumstances as described in the indenture governing the Notes. Pursuant to the Exchange Agreement, the Company agreed to exchange approximately $57.0 million of aggregate principal amount, plus accrued and unpaid PIK Interest, of the Notes beneficially owned by the Exchanging Holders (as defined below) for an equivalent increased principal amount of term loans under the Subordinated Term Loan Credit Agreement. Following the closing of the Exchange Agreement and Corre Amendment No. 8, the Company has approximately $41.2 million in aggregate principal amount of Notes outstanding, which pay interest at a rate of 5.00% per annum entirely in cash.

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

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

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

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

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

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

The Notes were initially convertible into 10,599,067 shares of pre-Reverse Split common shares. Previously, because the Notes could be convertible in full into more than 19.99% of our outstanding common stock, we were required by the listing

rules of the NYSE to obtain shareholder approval before the Notes could be converted. At our annual shareholders’ meeting, held on May 17, 2018, our shareholders approved the issuance of shares of common stock upon conversion of the Notes. 

As a result of the redemption and extinguishment of the Notes discussed below, the execution of the Exchange Agreement described below as well as the Reverse Stock Split, the Notes are currently convertible into 189,682 shares of common stock. The Notes will be convertible into, subject to various conditions, cash or shares of our common stock or a combination of cash and shares of our common stock, in each case, at our election.

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

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

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

On January 13, 2022, we entered into a supplemental indenture (the “Supplemental Indenture”) with Truist Bank, as trustee, to the indenture governing the Notes (the “Indenture”) to effect certain amendments (the “Amendments”) to the Indenture and to modify the Notes held by consenting holders (the “Consenting Holders”) of $52.0 million in aggregate principal amount of the Notes (such modified Notes, the “PIK Securities”).

The Supplemental Indenture amended the Indenture to, among other things: (i) allow for interest payable on the PIK Securities on February 1, 2022 to be paid in PIK Interest (as defined in the Supplemental Indenture) and on subsequent interest payment dates to be payable, at the Company’s option, at a rate of 5.00% per annum entirely in cash or at a rate of 8.00% per annum in PIK Interest; (ii) provide for additional changes to the Indenture to allow for the payment of PIK Interest and for the PIK Securities to be issued in denominations of $1,000 and integral multiples thereof (or if PIK Interest has been paid with respect to the PIK Securities, in minimum denominations of $1.00 and integral multiples of $1.00 in excess thereof); (iii) clarify that the unmodified Notes and PIK Securities will be treated as a single series of Notes for all purposes under the Indenture, other than the option of the Company to pay PIK Interest on the PIK Securities; and (iv) make certain conforming changes, including conforming modifications to certain definitions and cross-references as a result of such amendments. Notes held by holders other than the Consenting Holders were not modified and interest on such Notes will continue to be paid in cash at a rate of 5.00% per annum as set forth in the Indenture.

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

Pursuant to the Exchange Agreement, we agreed to exchange approximately $57.0 million of aggregate principal amount, plus accrued and unpaid PIK Interest, of PIK Securities beneficially owned by the Exchanging Holders for an equivalent increased principal amount of term loans (the “New Term Loans”) under the Subordinated Term Loan Credit Agreement. Following the closing of the Exchange Agreement and Corre Amendment 8 to the Subordinated Term Loan Credit Agreement, we had approximately $41.2 million in aggregate principal amount of Notes outstanding, which pay interest at a rate of 5.00% per annum entirely in cash. The exchange of the Notes into the New Term Loans was treated as debt modification and the unamortized balance of debt issuance and discount in the amount of $1.4 million was added to the modified debt and is amortized over the term of the Term Loan using the new effective interest rate.

Accounting Treatment of the Notes

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

	December 31,
	2022		2021
Liability component:
Principal	$	41,162	$	93,130
Unamortized issuance costs	(377)		(916)
Unamortized discount	(135)		(4,552)
Net carrying amount of the liability component1	$	40,650	$	87,662
Equity component:
Carrying amount of the equity component, net of issuance costs2	$	—	$	7,969
Carrying amount of the equity component, net of issuance costs3	$	37,276	$	37,276

_________________

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

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

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

Under ASC 470-20, Debt with Conversion and Other Options, (“ASC 470-20”), an entity must separately account for the liability and equity components of convertible debt instruments that may be settled entirely or partially in cash upon conversion (such as the Notes) in a manner that reflects the issuer’s economic interest cost. However, entities must first consider the guidance in ASC 815-15, Embedded Derivatives (“ASC 815-15”), to determine if an instrument contains an embedded feature that should be separately accounted for as a derivative.

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

	December 31,
	2022			2021
Coupon interest	$	5,700		$	4,657
Amortization of debt discount and issuance costs	2,405			3,129
Total interest expense	$	8,105		$	7,786
Effective interest rate	7.84		%	9.12		%

ASU 2020-06 Adoption. In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for convertible instruments by removing certain separation models in ASC 470-20, Debt—Debt with Conversion and Other Options, for convertible instruments. ASU 2020-06 updates the guidance on certain embedded conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, such that those features are no longer required to be separated from the host contract. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. This will also result in the interest expense recognized for convertible debt instruments to be typically closer to the coupon interest rate when applying the guidance in Topic 835, Interest. Further, ASU 2020-06 made amendments to the EPS guidance in Topic 260 for convertible debt instruments, the most significant impact of which is requiring the use of the if-converted method for diluted EPS calculation, and no longer allowing the net share settlement method. ASU 2020-06 also made revisions to Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. The amendments to Topic 815-40 change the scope of contracts that are recognized as assets or liabilities. ASU 2020-06 is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted for periods beginning after December 15, 2020. Adoption of ASU 2020-06 can either be on a modified retrospective or full retrospective basis. On January 1, 2022, we adopted ASU 2020-06 using the modified retrospective method. We recognized a cumulative effect of initially applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.

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

	Balances as of December 31, 2021		Adjustments from Adoption of ASU 2020-06		Balances at January 1, 2022
Liabilities
Long-term debt and finance lease obligations	$	405,191	$	1,827	$	407,018
Equity
Additional paid-in capital	$	453,247	$	(5,651)	$	447,596
Accumulated deficit	$	(375,584)	$	3,824	$	(371,760)

The impact of adoption on our consolidated statements of operations for the year ended December 31, 2022 was primarily to decrease net interest expense by $1.3 million. This had the effect of decreasing our basic and diluted net loss per share of common stock attributable to common stockholders for the year ended December 31, 2022 by $0.31. The change in methodology by requiring the use of the if-converted method to determine the denominator used in the calculation of diluted net income per share of common stock attributable to common stockholders did not have an impact on the diluted EPS as the shares of common stock issuable upon conversion were not included in the denominator because of the antidilutive effect.

1970 Group Substitute Insurance Reimbursement Facility

On September 29, 2022, we entered into the Substitute Insurance Reimbursement Facility Agreement with the 1970 Group (the “Substitute Insurance Reimbursement Facility Agreement”). Under this agreement, the 1970 Group extended us credit in the form of a substitute reimbursement facility (the “Substitute Reimbursement Facility”) to provide up to approximately $21.4 million of letters of credit on our behalf in support of our workers’ compensation, commercial automotive and general liability insurance carriers for workers’ compensation, commercial automotive and/or general liability policies (the “Insurance Policies”).

Under the Substitute Insurance Reimbursement Facility Agreement, 1970 Group arranged for the issuance of letters of credit from financial institutions approved by the National Association of Insurance Commissioners. Such letters of credit arranged by the 1970 Group permit the return of certain existing letters of credit for our account that are outstanding for the purpose of supporting the Insurance Policies and that are required to be collateralized, thereby providing us increased liquidity in the amount of approximately $21.3 million. Under the Substitute Insurance Reimbursement Facility Agreement, we are required to reimburse the 1970 Group for any draws made under the letters of credit within five business days of notice of any such draw. The Substitute Insurance Reimbursement Facility Agreement terminates upon the earlier of (i) the expiration or termination of our Insurance Policies or (ii) September 29, 2023. This arrangement replaced certain existing letters of credit which allowed us to release $16.3 million out of a total of $25.7 million of restricted cash previously held as collateral for the replaced letters of credit as well as reduced the outstanding letters of credit under the 2022 ABL Credit Facility by $5.0 million thereby improving our liquidity.

The Agreement contained certain affirmative covenants, including for us to keep and maintain our Insurance Policies for the compliance in all material respects with applicable requirements. The Agreement contains certain events of default, including, without limitation, our Company’s failure to reimburse 1970 Group for any draw or other financial obligation or our payment of 1970 Group’s fees. Upon an event of default, 1970 Group has the option to declare all outstanding obligations immediately due within five (5) business days after our receipt of such notice from 1970 Group. Our obligations under the Agreement are not guaranteed by any of our subsidiaries, are unsecured and are subordinated to our obligations to each of the lenders under each of (1) the Term Loan Credit Agreement, (2) the 2022 ABL Credit Agreement, and (3) the Subordinated Term Loan Credit Agreement.

According to the provisions of ASC 470 – Debt, the arrangement is a Substitute Insurance Reimbursement Facility limited to the amounts drawn under the letters of credit. Therefore, until we use or draw on the Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement. The fees in the amount of $2.9 million paid by us are deferred and amortized over the term of the arrangement. As of December 31, 2022, the unamortized balance in the amount of $1.8 million is included in other current assets.

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

As referenced above, all debt with original maturities greater than one year are classified as current as of December 31, 2022 due to the Trigger Date and the Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) provisions.

As of December 31, 2022 and December 31, 2021, capitalized deferred financing costs, inclusive of debt issuance costs and discounts, net of accumulated amortization, related to our outstanding debt were $15.1 million and $58.0 million, respectively. Due to the Trigger Date and the Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) provisions, the amortization period for deferred financing costs, debt and warrant discounts and debt issuance costs was updated to reflect the potential accelerated maturity dates. This resulted in additional amortization charges of $21.8 million during the twelve months ended December 31, 2022. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion.

Loss on Debt Extinguishment

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

Liquidity

As of December 31, 2022, we had $51.1 million of unrestricted cash and cash equivalents and $7.0 million of restricted cash including $4.6 million of restricted cash held as collateral for letters of credit and commercial card programs. International cash balances as of December 31, 2022 were $16.3 million, and approximately $1.4 million of such cash is located in countries where currency restrictions exist. As of December 31, 2022, we had approximately $52.4 million of availability in additional borrowing capacity consisting of $42.4 million available under the Revolving Credit Loans and $10.0 million available under the Corre Delayed Draw Term Loan. We have $33.3 million in letters of credit issued domestically. Internationally, we have letters of credit outstanding in the amount of $0.3 million. Additionally, we have $1.6 million in surety bonds outstanding and an additional $0.5 million in miscellaneous cash deposits securing leases or other required obligations. Our cash and cash equivalents as of December 31, 2021 totaled $55.2 million, of which $4.1 million was restricted for interest due on the Term Loan. Additionally, $14.2 million of the $55.2 million of cash and cash equivalents was in foreign accounts, primarily in Europe, Canada and Australia including $2.4 million of cash located in countries where currency restrictions exist. Refer to Note 1 - Summary of Significant Accounting Policies and Practices for additional liquidity and going concern discussion