DEBT

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

DEBT

DEBT

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

	March 31, 2023		December 31, 2022
	(unaudited)
2022 ABL Credit Facility	$	93,915	$	99,916
APSC Term Loan	33,599		31,562
Subordinated Term Loan	114,756		107,905
Total	242,270		239,383
Convertible Debt1	40,922		40,650
Finance lease obligations2	5,751		5,902
Total long-term debt and finance lease obligations	288,943		285,935
Current portion of long-term debt and finance lease obligations	(284,102)		(280,993)
Total long-term debt and finance lease obligations, less current portion	$	4,841	$	4,942

_________________

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.

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 Amendment No. 1 dated as of May 6, 2022 and Amendment No. 2 dated as of November 1, 2022 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 Credit Facility. The 2022 ABL Credit Facility is scheduled to mature in February 2025. Availability of the Revolving Credit Loans is subject to a Maturity Reserve Trigger Date (as defined in the 2022 ABL Credit Agreement) concept such that, subject to certain conditions, a reserve will be put into place with respect to the outstanding principal amount of the Notes 45 days prior to the maturity date of the Notes, or June 17, 2023, if on such date, the Notes balance is not paid down to less than $10.0 million, or the Company does not have equivalent cash on hand to pay down the Notes to $10.0 million.

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 qualifying 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 March 31, 2023 was 9.31% for Revolving Credit Loans and 14.66% for the Delayed Draw Term Loan. The interest rate as of March 31, 2022 was 5.65% for Revolving Credit Loans and 11.00% for the Delayed Draw Term Loan. Interest expense on Revolving Credit Loans amounted to $1.4 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively. Cash interest paid on the Delayed Draw Term Loan amounted to $1.3 million and $0.1 million for the three months ended March 31, 2023 and 2022, respectively.

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. The costs are amortized on a straight-line basis over the term of the 2022 ABL Credit Facility. Unamortized deferred financing cost amounted to $1.4 million and $3.1 million as of March 31, 2023 and December 31, 2022, 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 and the related reclassification of debt as current. Refer to Note 1 - Description of Business and Basis of Presentation for additional liquidity and going concern discussion.

As of March 31, 2023, we had $58.9 million of Revolving Credit Loans outstanding and $35.0 million outstanding under the Delayed Draw Term Loan. There were $8.9 million outstanding in letters of credit secured by these instruments, which are off-balance sheet.

As of March 31, 2023, subject to the applicable sublimit and other terms and conditions, $27.3 million was available for loans or for issuance of new letters of credit.

APSC Term Loan

On December 18, 2020, we entered into that certain Term Loan Credit Agreement (as amended by Amendment No. 1, dated as of October 19, 2021, Amendment No. 2, dated as of October 29, 2021, Amendment No. 3, dated as of November 8, 2021, Amendment No. 4, dated as of December 2, 2021, Amendment No. 5, dated as of December 7, 2021 Amendment No. 6,

dated as of February 11, 2022, Amendment No. 7, dated as of May 6, 2022, Amendment No. 8, dated as of November 1, 2022 and Amendment No. 9, dated as of November 4, 2022, the “Term Loan Credit Agreement”) with Atlantic Park Strategic Capital Fund, L.P., as agent (“APSC”), pursuant to which we borrowed $250.0 million (the “Term Loan”). The Term Loan 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. As of March 31, 2023, the effective interest rate of 38.48% consisted of a 12.30% variable interest rate paid in cash and an additional 26.18% due to the acceleration of the amortization of the related debt issuance costs due to the Maturity Trigger Date provision. As of March 31, 2022, the effective interest rate of 12.22% consisted of a 10.00% weighted-average cash and PIK interest rate and an additional 2.22% due to the acceleration of the amortization of the related debt issuance costs due to the Maturity Trigger Date provision. The unamortized balances of debt discounts, warrant discount and debt issuance cost amounted to $1.9 million and $3.9 million at March 31, 2023 and December 31, 2022, respectively. Cash interest paid amounted to $1.1 million and $4.2 million for the three months ended March 31, 2023 and 2022, respectively.

The Term Loan Credit Agreement 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. The Term Loan Credit Agreement contains a maximum net leverage ratio covenant that will begin being tested for 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 Amendment No. 1 dated as of November 30, 2021, Amendment No. 2 dated as of December 6, 2021,Amendment No. 3 dated as of December 7, 2021, Amendment No. 4 dated as of December 8, 2021, Amendment No. 5 dated as of February 11, 2022, Amendment No. 6 dated as of May 6, 2022, Amendment No. 7 dated as of June 28, 2022, Amendment No. 8 dated as of October 4, 2022, Amendment No. 9 dated as of November 1, 2022, Amendment No. 10 dated as of November 4, 2022, Amendment No. 11 dated as of November 21, 2022 and Amendment No. 12 dated as of March 29, 2023, the “Subordinated Term Loan Credit Agreement”) with Cantor Fitzgerald Securities, as agent, and the lenders party thereto providing for an unsecured approximately $119.0 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. An additional approximately $57.0 million was added to the outstanding principal amount under the Subordinated Term Loan Credit Agreement on October 4, 2022 via an exchange of the Company’s convertible debt. As of March 31, 2023, the availability date for the $10.0 million in Subordinated Term Loans remaining to be drawn is September 30, 2023. 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 APSC Term Loan. 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”). As of March 31, 2023, the effective interest rate of 30.32% consisted of 12.00% stated interest and an additional 18.32% due to the acceleration of the amortization of the related debt issuance costs due to the Trigger Date provision. At March 31, 2022, the effective interest rate of 19.61% consisted of the 12.00% stated interest and an additional 7.61% due to the acceleration of the amortization of the related debt issuance costs due to the Trigger Date provision. The unamortized debt issuance cost amounted to $4.1 million and $7.5 million as of March 31, 2023 and December 31, 2022, respectively. PIK interest expense amounted to $3.5 million and $1.5 million for the three months ended March 31, 2023 and 2022, respectively.

The Subordinated Term Loan Credit Agreement 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. The Subordinated Term Loan Credit Agreement contains a maximum net leverage ratio covenant that will begin being tested for the fiscal quarter ending June 30, 2023 and for each fiscal quarter thereafter at 7.00 to 1.00.

On March 29, 2023, we entered into Amendment No. 12 to the Subordinated Term Loan Credit Agreement (“Corre Amendment 12”) with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent. Corre Amendment 12 amended the Subordinated Term Loan Credit Agreement to, inter alia, extend the availability date for the remaining $10.0 million in Subordinated Term Loans to September 30, 2023 rather than March 31, 2023.

Warrants

As of March 31, 2023 and December 31, 2022, we held the following warrants:

	Original					After Reverse Stock Split (Effective date December 22, 2022)
Holder	Date	Number of shares	Exercise price		Expiration date	Number of shares	Exercise price		Expiration date
APSC Holdco II, LP
Original, as awarded	12/18/2020	3,582,949	$	7.75	6/14/2028
Amended	11/9/2021	500,000	$	1.50	6/14/2028
Amended	12/8/2021	917,051	$	1.50	12/8/2028
Total APSC		5,000,000	$	1.50	12/8/2028	500,000	$	15.00	12/8/2028
Corre	12/8/2021	5,000,000	$	1.50	12/8/2028	500,000	$	15.00	12/8/2028
Total warrants		10,000,000				1,000,000

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

On February 11, 2022, we entered into a common stock subscription agreement (the “Subscription Agreement”) with Corre Opportunities Qualified Master Fund, LP, Corre Horizon Fund, LP and Corre Horizon II Fund LP (collectively, the “Corre Holders”), pursuant to which the Company issued and sold 1,190,476 shares of our common stock to the Corre Holders at a price of $8.40 per share (the “Equity Issuance”) 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 Notes

Description of the Notes

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

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 (as defined below), the Company agreed to exchange approximately $57.0 million of aggregate principal amount, plus accrued and unpaid PIK Interest, of the PIK Securities (as defined below) 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 Amendment No. 8 to the Subordinate Term Loan Credit Agreement, 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.

As a result of the redemption and extinguishment of the Notes discussed below, the execution of the Exchange Agreement described below, 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.

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

	March 31, 2023		December 31, 2022
	(unaudited)
Liability component:
Principal	$	41,162	$	41,162
Unamortized issuance costs	(177)		(377)
Unamortized discount	(63)		(135)
Net carrying amount of the liability component1	$	40,922	$	40,650
Equity component:
Carrying amount of the equity component, net of issuance costs2	$	37,276	$	37,276

_________________

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

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

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

Fair Value of Debt

The fair value of our 2022 ABL Credit Facility, Term Loan and Subordinated Term Loan are representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the debt. The fair value of the Notes as of March 31, 2023 and December 31, 2022 was $34.0 million and $37.5 million, respectively, (inclusive of the fair value of the conversion option) and are a “Level 2” measurement, determined based on the observed trading price of these instruments.

1970 Group Substitute Insurance Reimbursement Facility

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

The 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 permitted the return of certain existing letters of credit for our account that were outstanding for the purpose of supporting the Insurance Policies and that were required to be collateralized, thereby providing us increased liquidity in the amount of approximately $21.3 million. 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.

According to the provisions of ASC 470 – Debt, the arrangement is a Substitute Insurance Reimbursement Facility limited to the amounts drawn under the letters of credit. Therefore, until there is a draw on the Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement. The fees in the amount of $2.9 million paid by us are deferred and amortized to interest expense over the term of the arrangement. As of March 31, 2023, the unamortized balance in the amount of $0.7 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 March 31, 2023 due to the Trigger Date provisions.

As of March 31, 2023 and December 31, 2022, capitalized deferred financing costs, inclusive of debt issuance costs and discounts, net of accumulated amortization, related to Team’s outstanding debt were $7.7 million and $15.1 million, respectively. Due to the Trigger Date provisions, the amortization period for deferred financing costs, debt and warrant discounts and debt issuance costs was updated to reflect the potential accelerated maturity date of June 17, 2023. Refer to Note 1 - Description of Business and Basis of Presentation for additional liquidity and going concern discussion.

Liquidity

As of March 31, 2023, we had $26.4 million of unrestricted cash and cash equivalents and $5.5 million of restricted cash including $4.5 million of restricted cash held as collateral for letters of credit and commercial card programs. International cash balances as of March 31, 2023 were $13.7 million, and approximately $1.0 million of such cash is located in countries where currency restrictions exist. As of March 31, 2023, we had approximately $37.3 million of availability in additional borrowing capacity consisting of $27.3 million available under the Revolving Credit Loans and $10.0 million available under the Subordinated Term Loan Credit Agreement. We have $32.4 million in letters of credit issued domestically. Internationally, we have letters of credit outstanding in the amount of $0.3 million. Additionally, we have $2.4 million in surety bonds outstanding and an additional $0.7 million in miscellaneous cash deposits securing leases or other required obligations. Our cash and cash equivalents as of December 31, 2022 totaled $58.1 million. Additionally, $16.3 million of the cash and cash equivalents was in foreign accounts, primarily in Europe, Canada and Australia including $1.4 million of cash located in countries where currency restrictions exist. Refer to Note 1 - Description of Business and Basis of Presentation for additional liquidity and going concern discussion.