In November 2018, EBGL made the final payment due to the sellers of EBGL, freeing up ~~$100,000~~$0.1 million per month of cash flows to be used for operations;

In 2017, we instituted a lumber hedging program for EBGL to assist in preserving existing margins against the potential large fluctuations in lumber raw material prices;

In August 2016, we amended certain of our debt agreements to allow the Company to pay PIK Interest on approximately ~~$11~~$11.0 million of our debt, reducing strain on current cash flows;

In June 2017, we refinanced EBGL’s revolving credit facility and amended the terms of our agreement with the EBGL Sellers providing for deferred payments to obtain more favorable lending and payment terms and reduce total fees paid under these agreements;

~~As disclosed in Note 19, in~~In September 2017, we converted $13.3 million of the Company’s outstanding debt, including accrued interest, to ~~preferred stock;~~the Company’s 10.00% Series B Cumulative Preferred Stock ("Series B Stock");

ATRM HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As ~~disclosed~~discussed in ~~Note 19,~~Notes 13 and 18, in January 2018 and in June 2018, the Company issued an unsecured promissory ~~note~~notes in the principal ~~amount~~amounts of ~~$1.4~~$0.5 million and $0.9 million, respectively, to LSV Co-Invest I to provide additional working capital for the Company;

In April 2019, KBS and EBGL executed sale leasebacks of several of its real estate properties (see further discussion in Note ~~19)~~18); and

We continue to look for opportunities to refinance our remaining debt on more favorable terms.

On September 10, 2018, ATRM entered into a non-binding letter of intent (the “LOI”) relating to the acquisition of ATRM (the "ATRM Acquisition") by Digirad Corporation ("Digirad") (NASDAQ: DRAD). Under the terms contemplated in the LOI, ATRM stockholders ~~will receive~~would have received consideration consisting of 0.4 shares of Digirad common stock for each share of outstanding ATRM common stock acquired by the Company in the ATRM Acquisition (see Note 1918 for additional information). Although the LOI expired by its terms on December 31, 2018, Digirad and ATRM have had additional discussions regarding the terms and conditions of a proposed transaction and the consideration to be paid for ATRM shares. The parties are currently discussing that the consideration would notbe Digirad shares of common stock, but some other form of security. In addition, on May 15, 2019, Digirad and ATRM entered into an Agreement which provides that, in the event the ATRM Acquisition does not close on or prior to December 31, 2019, ATRM will reimburse Digirad of certain consulting and related fees paid by Digirad on behalf of ATRM. We anticipate the ATRM Acquisition to close in the third quarter of ~~2019.~~2019; however, the parties have not reached any definitive agreement, and there can be no assurance regarding timing of completion of regulatory approvals, which could delay timing of the closing and any ATRM Acquisition would remain subject to the satisfaction of customary closing conditions.

Our historical operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern. We believe that the actions discussed, have already occurred or are probable of occurring, and alleviate the substantial doubt raised by our historical operating results, as well as satisfy our estimated liquidity needs for the twelve months from the issuance of the Condensed Consolidated Financial Statements. However, we cannot predict with certainty the outcome of our actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned.

If we continue to experience operating losses, and we are not able to generate additional liquidity through the mechanisms described above or through some combination of other actions, ~~while not expected,~~ we may not be able to continue operations. Additionally, a failure to generate additional liquidity could negatively impact our access to materials or services that are important to the operation of our business. In addition, these losses could further trigger violations of covenants under our debt agreements, resulting in accelerated payment of these loans.

There can be no assurance that our existing cash reserves, together with funds generated by our operations and any future financings, will be sufficient to satisfy our debt payment obligations, to avoid liquidity issues and/or fund operations beyond this fiscal year. Our inability to generate funds from our operations and/or obtain financing sufficient to satisfy our payment obligations may result in our obligations being accelerated by our lenders, which would likely have a material adverse effect on our business, financial condition and results of operations. Given these uncertainties, there can be no assurance that our existing cash reserves will be sufficient to avoid liquidity issues and/or fund operations beyond this fiscal year.

~~Although~~Other intangible assets with indefinite lives, such as tradenames, are assessed annually in order to determine whether their carrying value exceeds their fair value. In addition, they are tested on an interim basis if an event occurs or circumstances change between annual tests that would more likely than not ~~a binding commitment, LSVM has advised us~~reduce their fair value below carrying value. If we determine the fair value of ~~its present intention to continue to financially support the Company~~goodwill or other indefinite-lived intangible assets is less than their carrying value, an impairment loss is recognized. Impairment losses, if any, are reflected in operating income or loss in the ~~event~~period incurred. The Company performs its annual tests of trademarks during the second quarter of each fiscal year. As a result of our assessment we concluded that additional financing is required. In 2014, 2015, 2016, 2017 and 2018, LSVM has provided financial support in the form of financing through various debt agreements disclosed in Note 14. Based on the previous commitments, management believes that additional financing may be provided by LSVM or its affiliates, if necessary, in the future. In addition, it should be noted that LSVM is a related party to Digirad, with whom ATRM has entered into a LOI, as mentioned above.there was no impairment.

3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS



3.	~~BUSINESS COMBINATION~~

On October 4, 2016, the Company acquired certain assets of EdgeBuilder Wall Panels, Inc. and Glenbrook Lumber & Supply, Inc. (collectively, the “EBGL Sellers”) through the Company’s wholly-owned subsidiaries EdgeBuilder and Glenbrook, respectively, pursuant to the terms of an Asset Purchase Agreement, dated as of the same date, by and among the Company, EdgeBuilder, Glenbrook, the EBGL Sellers and the individual owners of the EBGL Sellers (the “EBGL Acquisition”). The Company operates the businesses of EdgeBuilder and Glenbrook on a combined basis, and such businesses are referred to on a combined basis as EBGL.

EBGL’s results are included in our consolidated statement of operations since October 4, 2016, the date of the EBGL Acquisition. The following unaudited pro forma financial information presents the combined results of ATRM and the EBGL Sellers for the three- and six-month periods ended June 30, 2016 as if the EBGL Acquisition had occurred on January 1, 2016 (in thousands, except per share amount):

Three Months Six Months
Pro forma net sales $ 10,314
$ 20,394
Pro forma net loss (903 ) (2,014 )
Pro forma loss per share – basic and diluted (0.39 ) (0.87 )

~~The above unaudited pro forma financial information is not necessarily indicative of what our consolidated results of operations actually would have been or what results may be expected in the future.~~



4.	~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS~~

In ~~May 2017,~~August 2018, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ("ASU") ~~2017-09,~~ ~~Compensation-Stock Compensation (Topic 718): Scope~~No. 2018-13, which eliminates disclosures, modifies existing disclosures and adds new Fair Value disclosure requirements to Topic 820 for the range and weighted average of ~~Modification Accounting,~~ ~~which clarifies when changes~~significant unobservable inputs used to ~~the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification accounting is only required if the~~develop Level 3 fair value ~~vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified. This update~~measurements. The ASU is effective for annual and interim ~~financial statement~~reporting periods beginning after December 15, ~~2017, with early adoption permitted.~~2019. The ~~new guidance must be applied prospectively to awards modified on or after~~Company is currently in the ~~adoption date; consequently~~process of evaluating the impact ~~will be dependent on whether the Company modifies any of its share-based payment awards and the nature of such modifications. There were no material impacts on the Company’s results based on~~ the adoption of this ~~update.~~ASU will have on the Company’s consolidated financial statements.

In July 2018, the FASB issued ASU 2018-09, "Codification Improvements", which does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB ASC areas based on comments and suggestions made by various stakeholders. Certain updates are applicable immediately, while others provide for a transition period to adopt as part of the next fiscal year beginning after December 15, 2018. The Company does not expect the adoption of this guidance to have a material impact on the Company's consolidated financial statements.

ATRM HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in its balance sheet a liability to make lease payments and an asset representing its right to use the underlying asset for the lease term. The new standard is effective for the Company on January ~~2017,~~1, 2019. The amendments should be applied either at the beginning of the earliest period presented using a modified retrospective approach or as of the adoption date using a modified retrospective approach. The Company will adopt the standard effective January 1, 2019 and has chosen to use the effective date as our date of initial application. The new standard provides a number of optional practical expedients in transition. The Company has elected to apply the ‘package of practical expedients’ which allow us to not reassess (i) whether existing or expired arrangements contain a lease, (ii) the lease classification of existing or expired leases, or (iii) whether previous initial direct costs would qualify for capitalization under the new lease standard. The Company has also elected to apply (i) the practical expedient which allows us to not separate lease and non-lease components, and (ii) the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the recognition and measurements requirements in the new standard. The Company expects that adoption of this standard will add a right to use asset of $0.7 million and an additional lease liability of $0.7 million. The Company does not expect a material impact to the consolidated statement of operations or cash flows. Subsequent to the issuance of ASU 2016-02, the FASB issued ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842. This ASU will have the same effective date and transition requirements as ASU 2016-02.

4. REVENUE RECOGNITION

In May 2014, the FASB issued ASU No. ~~2017-04,~~2014-09, "Revenue from Contracts with Customers." This new standard replaced most existing revenue recognition guidance in U.S. GAAP and codified guidance under FASB ASC Topic 606 ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~Revenue from Contracts with Customers ("ASC 606"). The ~~amendments~~underlying principle of this new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration that the entity expects to be entitled to receive in exchange for those goods or services.

The Company adopted ASU No. 2014-09 as of January 1, 2018 using the modified retrospective method. Under this ~~ASU simplify~~method, results for the ~~subsequent measurement~~reporting period beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported in accordance with the Company's historic accounting practices under FASB ASC Topic 605, Revenue Recognition ("ASC 605").

In accordance with the new guidance, the Company recognizes revenue at an amount that reflects the consideration that the Company expects to be entitled to receive in exchange for transferring goods or services to its customers. The Company's policy is to record revenue when control of ~~goodwill~~the goods transfers to the customer. Net sales are comprised of gross revenues from sales of products less trade discounts and rebates.

The Company's historic accounting practice under ASC 605 was to apply the percentage of completion method. Percentage of completion is determined using a units-of-production methodology based on modules delivered in accordance with the terms of the contract (KBS) and cost-to-cost method with cost determined based on costs incurred to date related to each performance obligation identified in the wall panel (EBGL) contracts. Under ASC 606, it was determined that since the Company does not meet the criteria to recognize revenue over time, point in time revenue recognition should be applied. While the Company had previously recognized revenue upon delivery, it had also applied the uncompleted construction contract accounting to record a "Costs" and estimated profit in excess of billings and a "Billings" in excess of costs and estimated profit amount each reporting period. With the adoption of ASC 606, recording estimates of completion by ~~eliminating Step 2 from~~specific contract activity will no longer be required.

The Company’s contracts do not offer a right to return any of the ~~goodwill impairment test and eliminating~~products sold unless covered under the ~~requirement~~assurance-type warranty offered. Assurance-type warranties provide a customer with assurance that the related product will function as the parties intended because it complies with agreed-upon specifications. Such warranties do not represent a separate performance obligation. The Company does not offer additional service-type warranties for its products.

Costs incurred to obtain a ~~reporting unit~~customer contract are not material to the Company for the KBS or EBGL revenue streams. The Company elected to apply the practical expedient to not capitalize costs to obtain contracts with a ~~zero~~duration of one year or ~~negative carrying amount~~less, which are expensed and included within Cost of sales in the Condensed Consolidated Statements of Operations.

ATRM HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company generally requires deposits prior to ~~perform~~the start of production of customer orders. The Company will not finance any part of the sale. The full balance is due upon delivery. Below is a ~~qualitative assessment. Instead, under~~summary of deposits utilized during the year by operating segment:



	Modular Home Manufacturing			Structured Wall Panel Manufacturing			Total
(in thousands)
January 1, 2018	$	682		$	300		$	982
Revenue recognized that was included in deposit at beginning of period	(682		)	(300		)	(982		)
Increase due to cash received, excluding amounts recognized as revenue during the period	1,070			8			1,078
March 31, 2018	$	1,070		$	8		$	1,078

The Company has expanded its financial statement disclosures as required by this ~~pronouncement, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value~~new standard. See Note 17, "Operating Segments" for additional disclosures provided as a result of ~~a reporting unit with its carrying amount and would recognize an impairment change for~~this ASU.

A summary of the amount by which each financial statement line item was affected in the ~~carrying amount exceeds~~current reporting period by ASC 606 as compared with the ~~reporting unit’s fair value; however, the loss recognized is not~~guidance that was in effect prior to exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is ~~permitted and should be adopted on a prospective basis. The Company has adopted this ASU on a prospective basis~~set forth in the ~~second quarter of 2017.~~tables below:



	Impact of ASC 606 Adoption on Condensed Consolidated Balance Sheet as of March 31, 2018
(in thousands)	As reported under ASC 606		Adjustments			Balances without adoption of ASC 606
Inventory	$	2,132	$	(750	)	$	1,382
Costs and estimated profit in excess of billings	—		540			540
Billings in excess of costs and estimated profit	—		1,343			1,343
Customer deposits	1,078		(1,078		)	—

~~In November 2015, the FASB issued ASU No. 2015-17,~~ ~~Income Taxes (Topic 740~~)~~: Balance Sheet Classification of Deferred Taxes~~. ASU 2015-17 was issued to simplify the presentation of deferred income taxes. The amendments in this guidance require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. As required, ATRM adopted this update effective January 1, 2017. There were no material impacts on the Company’s results based on the adoption of this update.

~~In July 2015, the FASB issued ASU No. 2015-11,~~ ~~“Simplifying the Measurement of Inventory”~~, which requires all inventory to be measured at the lower of cost and net realizable value, except for inventory that is accounted for using the LIFO or the retail inventory method, which will be measured under existing accounting standards. The new guidance must be applied on a prospective basis and was adopted on January 1, 2017 with no material impact on our consolidated financial statements.



	Impact of ASC 606 Adoption on Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2018
(in thousands)	As reported under ASC 606			Adjustments			Balances without adoption of ASC 606
Inventory	$	(847	)	$	750		$	(97	)
Costs and estimated profit in excess of billings	565			(540		)	25
Billings in excess of costs and estimated profit	(983		)	(1,343		)	(2,326		)
Customer deposits	1,078			1,078			—



5.	~~RESTRICTED CASH~~

5.CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the ~~condensed consolidated balance sheet~~Condensed Consolidated Balance Sheet that sum to the total of the same such amounts shown in the ~~condensed consolidated statement~~Condensed Consolidated Statement of ~~cash flows.~~

Cash Flows (unaudited)(in thousands):


	June 30, 2017		December 31, 2016		March 31, 2018		December 31, 2017
Cash and cash equivalents	$	454	$	1,247	$	46	$	48
Restricted cash	280		150		597		482
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows	$	734	$	1,397
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated Statement of Cash Flows					$	643	$	530

ATRM HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Amounts included in restricted cash represent ~~those~~$0.6 million on deposit with Gerber Finance from time-to-time as additional collateral to support borrowing under the KBS ~~revolving line of credit facility.~~ loan agreement and an additional $26.7 thousand on deposit with INTL FC Stone related to our lumber commodity hedging program.



6.	~~FAIR VALUE MEASUREMENTS~~

~~Financial assets reported at fair value on a recurring basis included the following at June 30, 2017 (in thousands):~~

Level 1 Level 2 Level 3
Contingent earn-out receivable related to the transfer of test handler product line:
Current portion $ —
$ —
$ 467
Noncurrent portion —
—
214
Total $ —
$ —
$ 681
6. FAIR VALUE MEASUREMENTS

Financial assets reported at fair value on a recurring basis included the following ~~at December 31, 2016~~(unaudited) (in thousands):


	Level 1		Level 2		Level 3			March 31, 2018		December 31, 2017
Contingent earn-out receivable related to the transfer of test handler product line:
Lumber derivative contracts (Level 1)								$	88	$	9

Contingent earn-out receivable (based on Level 3 inputs):
Current portion	$	—	$	—	$	359		$	271	$	373
Noncurrent portion	—		—		202			—		61
Total	$	—	$	—	$	561		$	271	$	434

Contingent earn-out payable	$	—	$	—	$	(967	)

ATRM HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

ATRM HOLDINGS, INC.



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

The following discussion and analysis should be read in conjunction with our unaudited Condensed Consolidated Financial Statements, and the notes thereto, and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~2017 (the ~~“2016~~“2017 10-K”). All figures in the following discussion are presented on a consolidated basis. All dollar amounts and percentages presented herein have been rounded to approximate values.

Forward-Looking Statements

This report may contain “forward-looking statements,” as such term is used within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not based on historical fact and involve assessments of certain risks, developments, and uncertainties in our business looking to the future. Such forward-looking statements can be identified by the use of terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “intend,” “continue,” or “believe,” or the negatives or other variations of these terms or comparable terminology. Forward-looking statements may include projections, forecasts, or estimates of future performance and developments. These forward-looking statements are based upon assumptions and assessments that we believe to be reasonable as of the date of this report. Whether those assumptions and assessments will be realized will be determined by future factors, developments, and events, which are difficult to predict and may be beyond our control. Actual results, factors, developments, and events may differ materially from those we assumed and assessed. Risks, uncertainties, contingencies, and developments, including those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this report and those identified in “Risk Factors” in the ~~2016~~2017 10-K, could cause our future operating results to differ materially from those set forth in any forward-looking statement. There can be no assurance that any such forward-looking statement, projection, forecast or estimate contained can be realized or that actual returns, results, or business prospects will not differ materially from those set forth in any forward-looking statement. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.

~~Recent Developments~~Overview

Prior to October 2016, ATRM’s sole business was the manufacturing, selling and distributing modular housing units for residential and commercial use. On October 4, 2016, we completed the EBGL Acquisition, adding Glenbrook and EdgeBuilder to our operations. Currently, throughThrough our wholly-owned subsidiaries, KBS, Glenbrook and EdgeBuilder, we manufacture modular buildings for commercial and residential applications in production facilities located in South Paris and Waterford, Maine, operate a retail lumber yard located in Oakdale, Minnesota, and manufacture structural wall panels, permanent wood foundation systems and other engineered wood products for use in construction of ~~commercial~~residential and ~~residential~~commercial buildings in a production facility located in Prescott, Wisconsin.

On June 30, 2017, EBGL entered into the Premier Loan Agreement with Premier providing EBGL with a working capital line of credit of up to $3.0 million. The Premier Loan Agreement replaced the EBGL Loan Agreement with Gerber Finance, which was terminated on the same date.

On June 30, 2017, the Company and the EBGL Sellers amended the EBGL Asset Purchase Agreement, replacing EBGL’s obligations to pay certain deferred payments to the EBGL Sellers ($0.75 million) and the contingent earn-out payment ($1.0 million) with set monthly payments totaling $1.8 million, payable with an initial $0.2 million payment made on or about July 3, 2017 and 16 monthly installments beginning August 1, 2017 and ending on November 1, 2018.

On September 29, 2017, we completed the Exchange, issuing to LSVI and LSV Co-Invest I a total of 132,548 shares of Series B Preferred Stock ("Series B Stock") in exchange for the return and cancellation of all of the Notes held by LSVI and LSV Co-Invest I. The Notes had an aggregate of $13.3 million unpaid principal and accrued and unpaid interest outstanding at the time of their cancellation. The Statement of Designation authorizes the issuance of 160,000 shares of Series B Stock, having a Our common stock, par value of $0.001 per share, ~~and a stated value~~trades on the OTC Pink marketplace of ~~$100.00 per share (subject to adjustment). Holders of Series B Stock are entitled to receive, when, as and if declared by~~ the ~~Board, cumulative preferential dividends, payable quarterly in cash at a rate per annum~~OTC Markets Group, Inc. under the symbol “ATRM.”

Recent Developments

equal to 10.0% multiplied by the stated value; provided that the Company may pay dividends in-kind through the issuance of additional shares of Series B Stock at a rate per annum equal to 12.0% multiplied by the stated value, at the sole option of the Company, for up to four quarterly dividend periods in any consecutive 36-month period (determined on a rolling basis).

Amendments to Gerber Finance Loan Agreements

On July 20, 2017, the parties to the KBS Loan Agreement entered into a Fourth Agreement of Amendment to Loan and Security Agreement providing for increased availability under the KBS Loan Agreement to KBS for new equipment additions, as well as a waiver for certain covenants.

On September 29, 2017, the parties to the KBS Loan Agreement entered into a Fifth Agreement of Amendment to Loan and Security Agreement and the parties to the Acquisition Loan Agreement entered into a Third Agreement of Amendment to Loan and Security Agreement in conjunction with the Exchange with LSVI and LSV Co-Invest (see discussion below).

On December 22, 2017, the parties to the KBS Loan Agreement entered into a Sixth Agreement of Amendment to Loan and Security Agreement providing for increased availability under the KBS Loan Agreement to KBS under certain circumstances, and certain other changes. In connection with this amendment to the KBS Loan Agreement, Jeffrey E. Eberwein, a director of the Company, executed a guaranty dated November 20, 2017 in favor of Gerber Finance unconditionally guaranteeing up to $0.5 million of KBS’s obligations under the KBS Loan Agreement arising from certain permitted overadvances. On December 22, 2017, the Company also entered into a Fourth Agreement of Amendment to Loan and Security Agreement to amend the terms of the Acquisition Loan Agreement to reflect certain changes made to the KBS Loan Agreement.

Through a series of correspondence between KBS and Gerber Finance, on or about January 15, 2018, which the parties to the KBS Loan Agreement deemed to be the Seventh Agreement of Amendment to the Loan and Security Agreement, the parties clarified certain definitions in the KBS Loan Agreement.

On October 1, 2018, the parties to the KBS Loan Agreement entered into an Eighth Agreement of Amendment to the Loan and Security Agreement to extend the availability of up to $0.6 million of ~~overadvances~~over advances to KBS above the borrowing base in order to provide KBS with additional working capital. The overadvance was scheduled to be paid down by ~~$75,000~~$75.0 thousand per week beginning January 4, 2019 in order to be fully repaid on or before February 23, 2019 to coincide with the expiration date of the line of credit. As the line was automatically renewed through February 23, 2020, Gerber Finance has subsequently agreed to begin the scheduled pay down of ~~$75,000~~$75.0 thousand per week to begin on February 15, 2019 for eight weeks with final repayment scheduled for April 8, 2019. The $0.6 million overadvance was paid in full on April 3, 2019.

On February 22, 2019, the Company entered into ~~the~~a Ninth Agreement of Amendment to Loan and Security Agreement (the "Ninth KBS Loan ~~Amendment~~Amendment") to amend the terms of the KBS Loan Agreement to extend the availability of up to $0.6 million of ~~overadvances~~over advances through no later than ~~May 3, 2019~~February 23, 2020 in order to provide KBS with additional working capital. The overadvance was paid in full onin April 3, 2019.

On April 1, 2019, the Company entered into ~~the~~a Tenth Agreement of Amendment to Loan and Security Agreement (the “Tenth KBS Loan ~~Amendment~~Amendment”) to amend the terms of the KBS Loan Agreement, and ~~the~~a Fifth Agreement of Amendment to Loan and Security Agreement (the “Fifth EBGL Loan ~~Amendment~~Amendment”) to amend the terms of the ~~EBGL~~ Acquisition Loan Agreement. The Tenth KBS Loan Amendment and the Fifth EBGL Loan Amendment amended the terms of the KBS Loan Agreement and the ~~EBGL~~ Acquisition Loan Agreement, respectively, to permit the Company’s acquisition of Lone Star Value Management, ~~("LSVM"~~LLC (“LSVM”) and to clarify the parties’ rights and duties in connection therewith, among other things.

In connection with each of the Ninth KBS Loan Amendment and the Tenth KBS Loan Amendment, Mr. Eberwein executed a reaffirmation of guaranty in favor of Gerber Finance relating to his unconditional guaranty of $0.6 million of KBS’s obligations under the KBS Loan Agreement arising from the $0.6 million of ~~overadvances~~over advances permitted under the Ninth KBS Loan Amendment.

~~Preferred Stock Exchange~~

On September 29, 2017, the Company, LSVI and LSV Co-Invest I entered into the Exchange Agreement, pursuant to which the Company issued to LSVI and LSV Co-Invest I a total of 132,548 shares of the new Series B Stock, of the Company in exchange for the return and cancellation of all of the unsecured promissory Notes of the Company held by LSVI and LSV Co-Invest I. The Notes had an aggregate of $13.3 million unpaid principal and accrued and unpaid interest outstanding at the time of their cancellation. The Statement of Designation authorizes the issuance of 160,000 shares of Series B Stock, having a par value of $0.001 per share and a stated value of $100.00 per share (subject to adjustment). Holders of Series B Stock are entitled to receive, when, as and if declared by the Board, cumulative preferential dividends, payable quarterly in cash at a rate per annum equal to 10.0% multiplied by the stated value; provided that the Company may pay dividends in-kind through the issuance of additional shares of Series B Stock at a rate per annum equal to 12.0% multiplied by the stated value, at the sole option of the Company, for up to four quarterly

dividend periods in any consecutive 36-month period (determined on a rolling basis). In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, before any payment or distribution to holders of junior shares, holders of Series B Stock will be entitled to receive an amount of cash per share of Series B Stock equal to the stated value plus all accumulated accrued and unpaid dividends thereon (whether or not earned or declared).

~~On September 29, 2017, in connection with the Exchange,~~April 15, 2019, the Company entered into ~~the Registration Rights~~an Eleventh Agreement ~~which provides that at any time after October 15, 2018, upon the written request~~ of ~~the holders of at least 66 2/3% of the shares of Series B Stock issued in the Exchange that qualify as registrable securities as defined therein, the Company will prepare~~Amendment to Loan and ~~file with the SEC a registration statement covering the resale of those shares by their holders.~~

At the time of the Exchange, LSVI also owned 1,067,885 shares of the Company’s common stock, or approximately 45% of the shares outstanding. Additionally, 10,000 shares of the Company’s common stock were held in an account managed by LSVM, an affiliate of LSVI and LSV Co-Invest I. Jeffrey E. Eberwein, Chairman of the Board, is the manager of LSVGP, the general partner of LSVI and LSV Co-Invest I, and the sole member of LSVM, the investment manager of LSVI, and therefore may be deemedSecurity Agreement (the “Eleventh KBS Loan Amendment”) to beneficially own the securities owned by LSVI and the securities held in the account managed by LSVM. The terms of the Exchange and the Series B Stock were negotiated and approved by a special committee of the Board consisting solely of disinterested and independent directors.

As previously noted, on September 29, 2017, in connection with the Exchange, the Company entered into amendments to its two Loan Agreements with Gerber Finance to permit the Exchange and the Company’s payment of dividends on the Series B Stock in-kind, by the issuance of additional shares of Series B Stock, in accordance withamend the terms of the ~~Series B Stock (as described below)~~KBS Loan Agreement to (i) provide for increased borrowing capability; (ii) to eliminate the Leverage Ratio financial covenant required by Schedule III (Financial Covenants); and (iii) to amend the Net Loss covenant required by Schedule III (Financial Covenants). ~~Under~~In addition, the Eleventh KBS Loan ~~Agreements,~~Amendment provided a waiver for certain covenants for the ~~Company is not permitted to pay dividends on the Series B Stock in cash without the consent of Gerber Finance. Additionally, in~~2017 and 2018 fiscal years. In connection with the ~~Exchange, the subordination~~Eleventh KBS Loan Amendment, Mr. Eberwein executed a reaffirmation of agreements ~~by and among the Company, LSVI, LSV Co-Invest I and~~in favor of Gerber Finance ~~providing for the subordination of the Company’s obligations under the Notes~~relating to ~~its obligations~~his unconditional guaranty as described above and any other documents related to ~~Gerber Finance, were terminated.~~

~~Charter Amendments~~

~~At the Company’s 2017 Annual Meeting of Shareholders held on December 4, 2017, shareholders approved amendments to its Existing Charter to:~~


~~(i)~~	increase the number of authorized shares of the Company’s capital stock from 3,200,000 to 10,000,000, and make corresponding changes to the number of authorized shares of the Company’s common stock and preferred stock;


~~(ii)~~	~~effect a 4-for-1 forward stock split of the Series B Stock; and~~

~~(iii)~~

effect an extension to December 5, 2020 of the provisions of the Existing Charter designed to protect the tax benefits of the Company’s net operating loss carryforwards by generally restricting any direct or indirect transfers of the Company’s common stock that increase the direct or indirect ownership of the Company’s common stock by any Person (as defined in the Existing Charter) from less than 4.99% to 4.99% or more of the Company��s common stock, or increase the percentage of the Company’s common stock owned directly or indirectly by a Person owning or deemed to own 4.99% or more of the Company’s common stock (the “Extended Protective Amendment”).

~~On December 4, 2017, the Company filed Articles of Amendment with the Office of the Secretary of State of the State of Minnesota to effect these amendments.~~KBS.

Promissory Notes Sales to LSV Co-Invest I

On January 12, 2018, the Company issued to Lone Star Value Co-Invest I, LP (“LSV Co-Invest ~~I the LSV Co-Invest I January Note~~I”) an unsecured promissory note in the principal amount of $0.5 million in exchange for the same amount in ~~cash.~~cash (the “LSV Co-Invest I January Note”). The LSV Co-Invest I January Note was issued pursuant to a securities purchase agreement by and between the Company and LSV Co-Invest I dated as of the same date. The LSV Co-Invest I January Note bears interest at 10.0% per annum, with interest payable semiannually; provided, however, LSV Co-Invest I may elect to receive any interest as PIK Interest at an annual rate of 12.0%, so long as any such interest payment is made either (x) entirely in PIK Interest or (y) 50% cash and 50% PIK Interest. Any unpaid principal and interest under the LSV Co-Invest I January Note is due on January 12, 2020. The Company may prepay the LSV Co-Invest I January Note at any time after a specified amount of advance notice to LSV Co-Invest I (subject to certain restrictions under the Company’s existing loan agreements). The LSV Co-Invest I January Note provides for customary events of default, the occurrence of any of which may result in the principal and unpaid interest then outstanding becoming immediately due and payable.

As of January 12, 2018, LSVI owned 1,067,885 shares of our common stock, or approximately 45.1% of our outstanding shares, including 900,000 shares purchased in a common stock rights offering we completed in September 2015. Jeffrey E. Eberwein, ATRM’s Chairman of the Company's Board of Directors (the "Board"), is the manager of LSVGP, the general partner of LSVI and LSV Co-Invest I, and the sole member of LSVM, the investment manager of LSVI. ATRM’s entry into the securities purchase agreement with LSV Co-Invest I was approved by a Special Committee of our Board consisting solely of independent directors.

On June 1, 2018, the Company issued to LSV Co-Invest I ~~the LSV Co-Invest I June Note~~an additional unsecured promissory note in the principal amount of $0.9 million in exchange for the same amount in ~~cash.~~cash (the “LSV Co-Invest I June Note”). The LSV Co-Invest I June Note was issued pursuant to a securities purchase agreement by and between the Company and LSV Co-Invest I dated as of the same date. The LSV Co-Invest I June Note bears interest at 10.0% per annum, with interest payable semiannually; provided, however, LSV Co-Invest I may elect to receive any interest payment entirely in-kind at an annual rate of 12.0%. Any unpaid principal and interest under the LSV Co-Invest I June Note is due on June 1, 2020. The Company may prepay the LSV Co-Invest I June Note at any time after a specified amount of advance notice to LSV Co-Invest I (subject to certain restrictions under the Company’s existing loan agreements). The LSV Co-Invest I June Note provides for customary events of default, the occurrence of any of which may result in the principal and unpaid interest then outstanding becoming immediately due and payable.

As of June 1, 2018, LSV Co-Invest I held 353,060 shares of the Company’s 10.00% Series B Cumulative Preferred Stock ("Series B Stock") and the LSV Co-Invest I January Note in the principal amount of $0.5 million. Also, as of June 1, 2018, LSVI, an affiliate of LSV Co-Invest I, held 209,800 shares of Series B Stock, and LSVGP held 3,005 shares of the Company’s common

stock. Additionally, as of June 1, 2018, 415,012 shares of the Company’s common stock, or approximately 17% of its outstanding shares, were owned directly by Jeffrey E. Eberwein, Chairman of the Company’s ~~Board of Directors.~~Board. Mr. Eberwein is the manager of LSVGP, the general partner of LSVI and LSV Co-Invest I, and sole member of Lone Star Value Management, LLC, the investment manager of LSVI. The Company’s sale of the LSV Co-Invest I June Note to LSV Co-Invest I was approved by the independent members of the Company’s Board of Directors.

Merger with Digirad Corporation

On September 10, 2018, Digirad ~~Corporation ("Digirad")~~ announced that its board of directors had approved the conversion of Digirad into a diversified holding company and in conjunction with that new structure, that it would be acquiring the ~~Company. In~~Company (the "ATRM Acquisition"). Under the ~~transaction, shareholders~~terms contemplated in a non-binding letter of ~~the Company will receive~~intent (the "LOI"), ATRM stockholders would have received consideration consisting of 0.4 shares of Digirad common stock for each share of outstanding ATRM common stock ~~which is~~acquired by the ~~approximate price ratio between the two stocks over the prior year.~~

~~The issuance of Digirad common stock~~Company in ~~connection with~~ the ATRM Acquisition ~~is expected~~(see Note 18 for additional information). Although the LOI expired by its terms on December 31, 2018, Digirad and ATRM have had additional discussions regarding the terms and conditions of a proposed transaction and the consideration to ~~increase~~be paid for ATRM shares. The parties are currently discussing that the ~~number of~~consideration would notbe Digirad shares of ~~outstanding Digirad~~ common stock, ~~by just under 5%. The~~but some other form of security. In addition, on May 15, 2019, Digirad and ATRM ~~Acquisition will be subject to, among other things, ATRM becoming current with its SEC filings and~~entered into an Agreement which provides that, in the ~~negotiation and execution of definitive documentation. The final terms of~~event the ATRM Acquisition ~~are~~does not close on or prior to December 31, 2019, ATRM will reimburse Digirad of certain consulting and related fees paid by Digirad on behalf of ATRM. We anticipate the ATRM Acquisition to close in the third quarter of 2019; however, the parties have not reached any definitive agreement, and there can be no assurance regarding timing of completion of regulatory approvals, which could delay timing of the closing and any ATRM Acquisition would remain subject to ~~change depending on~~ the ~~outcome~~satisfaction of ~~the Company’s due diligence investigation and may differ from those reflected in the LOI. The ATRM Acquisition was approved by a special committee of independent directors of the Company.~~customary closing conditions.

As of September 10, 2018, Jeffrey E. Eberwein, the Chairman of the Company’s Board, owns approximately 17.4% of the outstanding common stock of ATRM. Mr. Eberwein also is the Chairman of the Board of Digirad and beneficially owns ~~544,152~~869,152 shares of ~~Digirad’ s~~Digirad's common stock, or approximately ~~2.7%~~4.3% of the shares outstanding. Mr. Eberwein is also the Chief Executive Officer of Lone Star Value Management, LLC, which is the investment manager of LSVI. LSVI owns 216,094 shares of the Company’s Series B Stock and another 363,651 shares of Series B Stock are owned directly by LSV Co-Invest I. Through these relationships and other relationships with affiliated entities, Mr. Eberwein may be deemed the beneficial owner of the securities owned by LSVI and LSV Co-Invest I. Mr. Eberwein disclaims beneficial ownership of Series B Stock, except to the extent of his pecuniary interest therein.

Promissory Note Sale to Digirad

On December 14, 2018, the Company issued to Digirad ~~the Digirad Note~~an unsecured promissory note in the principal amount of $0.3 million in exchange for the same amount in ~~cash.~~cash (the “Digirad Note”). The Digirad Note bears interest at 10.0% per annum for the first 12 months of its term, and at 12.0% per annum for the remaining 12 months. All unpaid principal and interest under the Digirad Note is due on December 14, 2020. The Company may prepay the Digirad Note at any time after a specified amount of advance notice to Digirad (subject to certain restrictions under the Company’s existing loan agreements). The Digirad Note provides for customary events of default, the occurrence of any of which may result in the principal and unpaid interest then outstanding becoming immediately due and payable.

Promissory Note Sale to Lone Star Value Management, LLC

On December 17, 2018, the Company issued to LSVM ~~the LSVM Note~~an unsecured promissory note in the principal amount of $0.3 million in exchange for the same amount in ~~cash.~~cash (the “LSVM Note”). The LSVM Note was issued pursuant to a securities purchase agreement by and between the Company and LSVM dated as of the same date. The LSVM Note bears interest at 10.0% per annum, with interest payable annually; provided, however, LSVM may elect to receive any interest payment entirely in-kind at a rate of 12.0% per annum. Any unpaid principal and interest under the LSVM Note is due on November 30, 2020. The Company may prepay the LSVM Note at any time after a specified amount of advance notice to LSVM (subject to certain restrictions under the Company’s existing loan agreements). The LSVM Note provides for customary events of default, the occurrence of any of which may result in the principal and unpaid interest then outstanding becoming immediately due and payable.

Jeffrey E. Eberwein, the Chairman of the Company’s Board, owns approximately 17.4% of the outstanding common stock of ATRM. Mr. Eberwein is also the Chief Executive Officer and the sole member of Lone Star Value Management, LLC, which is the investment manager of LSVI. Mr. Eberwein is also the manager of LSVGP, the general partner of LSVI and LSV Co-Invest I. As of December 17, 2018, LSVI owns 216,094 shares of the Company’s 10.00% Series B Stock, LSVGP held 3,005 shares of the Company’s common stock, and another 363,651 shares of Series B Stock are owned directly by LSV Co-Invest I. LSV Co-Invest I also holds unsecured promissory notes of the Company in the principal amount totaling $1.4 million. Through these relationships and other relationships with affiliated entities, Mr. Eberwein may be deemed the beneficial owner of the

securities owned by LSVI and LSV Co-Invest I. Mr. Eberwein disclaims beneficial ownership of Series B Stock, except to the extent of his pecuniary interest therein.

Digirad Joint Venture and Services Agreement

On December 14, 2018, the Company entered into ~~the~~a Joint Venture Agreement with Digirad (the "Joint Venture Agreement"), forming Star Procurement, LLC ("Star Procurement"), with each of ATRM and Digirad holding a 50% interest. The purpose of the joint venture is for Star Procurement to purchase from third parties and sell building materials and related goods to KBS Builders, Inc., the Company's wholly owned subsidiary. Star Procurement entered into ~~the~~a Services Agreement (the "Services Agreement") on January 2, 2019 with KBS in connection with the joint venture. Digirad's initial capital contribution to the joint venture was $1.0 million. ATRM did not make an initial capital contribution.

Acquisition of Lone Star Value Management

On April 1, 2019, the Company entered into ~~the LSVM~~a Membership Interest Purchase Agreement (the “LSVM Purchase Agreement”) with LSVM and Mr. Eberwein. Pursuant to the terms of the LSVM Purchase Agreement, Mr. Eberwein sold all of the issued and outstanding membership interests of LSVM to the Company (the “LSVM Acquisition”) for a purchase price of $100.00, subject to a working capital adjustment provision. The LSVM Acquisition closed simultaneously with the execution and delivery of the LSVM Purchase Agreement, and was deemed effective as of January 1, 2019 for accounting purposes, as a result of which LSVM became a wholly-owned subsidiary of ATRM. Pursuant to the LSVM Purchase Agreement, the current assets (as well as the $0.3 million LSVM December 2018 Note issued by the Company) and current liabilities existing prior to January 1, 2019 remain with Mr. Eberwein. The LSVM Purchase Agreement contains representations, warranties, covenants and indemnification provisions customary for transactions of this type. The Company's entry into the LSVM Purchase Agreement and the LSVM Acquisition were unanimously approved by a special committee of the Board comprised solely of independent directors.

As of the date of these condensed consolidated financial statements, the initial accounting for the LSVM Acquisition was incomplete, as the Company continues to determine the fair value of the acquired assets and liabilities. As of the date of these condensed consolidated financial statements, the initial accounting for this acquisition was incomplete as the Company is currently working to determine the fair value of the acquired assets and liabilities.

~~KBS-Digirad Sale-Leaseback~~Sale of Maine Facilities

On April 3, 2019, 947 Waterford Road, LLC (“947 Waterford”) entered into ~~the Waterford~~a Purchase and Sale Agreement (the “Waterford Purchase Agreement”) with KBS, ~~as seller and ATRM as guarantor,~~ pursuant to which 947 Waterford purchased ~~the~~certain real property and related improvements (including buildings) located in Waterford, ~~Facility~~Maine (the “Waterford Facility”) from ~~KBS. 947 Waterford is a wholly-owned indirect subsidiary of Digirad, formed for the purpose of acquiring~~KBS (the “Waterford Transaction”), and ~~holding~~acquired the Waterford Facility. The Waterford Purchase Agreement contains representations, warranties and covenants of KBS and 947 Waterford that are customary for a transaction of this nature. The purchase price of the Waterford Facility is $1.0 million, subject to adjustment for taxes and other charges and assessments.

~~On April 3, 2019, 300 Park entered into the Park Purchase Agreement with KBS as seller and ATRM as guarantor, pursuant to which 300 Park purchased the Park Facility from KBS. 300 Park~~947 Waterford is a wholly-owned indirect subsidiary of Digirad, formed for the purpose of acquiring and holding the Waterford Facility.

On April 3, 2019, 300 Park Street, LLC (“300 Park”) entered into a Purchase and Sale Agreement (the “Park Purchase Agreement”) with KBS, pursuant to which 300 Park purchased certain real property and related improvements and personal property (including buildings, machinery and equipment) located in Paris, Maine (the “Park Facility”) from KBS (the “Park Transaction”), and acquired the Park Facility. The Park Purchase Agreement contains representations, warranties and covenants of KBS and 300 Park that are customary for a transaction of this nature. The purchase price of the Park Facility is $2.9 million, subject to adjustment for taxes and other charges and assessments.

On April 3, 2019, KBS entered into a separate lease agreement with each of 947 Waterford (the “Waterford Lease”) and 300 Park ~~and 56 Mechanic.~~(the “Park Lease”). The Waterford Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Waterford Lease are estimated to be between $1.2 million and $1.3 million in the aggregate. The Park Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Park Lease are estimated to be between $3.3 million and $3.6 million in the aggregate. ~~The Oxford Lease will be effective~~

~~upon the closing of the sale of the~~On April 3, 2019, KBS entered into a lease agreement (the “Oxford Lease”) with 56 Mechanic Falls Road, LLC (“56 Mechanic”), in connection with that certain real property and related improvements and personal property owned by RJF – Keiser Real Estate, LLC (“RJF”) (including buildings, fixtures, and other improvements on the land, and all machinery and equipment and other personal property, if any, owned by RJF and located on the property) located in Oxford, ~~Maine.~~Maine (the “Oxford Premises”). The Oxford Lease was amended as of April 18, 2019 (the “Oxford Lease Amendment”) to provide that the commencement date will be the later of the closing of the sale of the Oxford Premises (the "Oxford Transaction"), which occurred on March 27, 2019,

and the date that possession of the leased premises is able to be delivered to KBS, which is anticipated to occur on or prior to June 30, 2019. The Oxford Transaction is pursuant to that certain Purchase and Sale Agreement between 56 Mechanic and RJF. The Oxford Lease has an initial term of 120 months, which is subject to extension. The base rental payments associated with the initial term under the Oxford Lease are estimated to be between $1.4 million and $1.6 million in the aggregate. ATRM has unconditionally guaranteed the performance of all obligations under each of the Leases to be performed by KBS, including, without limitation, the payment of all required rent.

Results of Operations

~~Net Loss.~~ Net loss for the six months ended June 30, 2017 was approximately $5.4 million as compared to net loss of approximately $2.8 million for the same period in 2016. For the three months ended June 30, 2017, net loss was approximately $4.6 million as compared to net loss of approximately $1.1 million for the same period in 2016. The change from the prior year periods was primarily due to a one-time non-cash write-off the goodwill of approximately $3.0 million in June 2017, without a similar write-off in the 2016 periods.

Net Sales. Net sales were approximately ~~$20.2~~$7.7 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared with approximately ~~$11.0~~$9.4 million for the same period in 2016. A significant portion of the increase is the addition of the EBGL operations, which were acquired in October 2016. The EBGL operations added approximately $8.3 million of net sales for the six months ended June 30, 2017. The ~~remaining increase~~$1.7 million decrease was primarily due to a decrease in ~~net sales of approximately $0.9 million is related to the growth of net sales for KBS.~~ KBS’s net sales, which were approximately $4.8 million for the ~~six~~three months ended ~~June 30, 2017 were approximately $11.9 million~~March 31, 2018 as compared to ~~approximately $11.0~~$5.6 million for the ~~six months ended June 30, 2016. KBS’s growth was driven primarily by the sale of single-family homes,~~same period in 2017 and a decrease in EBGL net sales which ~~increased from~~were approximately ~~$8.6~~$2.8 million for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2018 compared to ~~approximately $10.2~~$3.8 million for the ~~six months ended June 30, 2017. The $1.6 million increase~~comparable period in the sale of single-family homes was partially offset by a decrease in revenue related to commercial projects of approximately $0.7 million from approximately $2.4 million for the six months ended June 30, 2016 to approximately $1.7 million for the six months ended June 30, 2017. The decrease in KBS net sales was primarily due to a decrease in commercial ~~project revenue reflects KBS’s previously announced~~developer sales as the Company adjusts to the strategic ~~plan~~shift away from large commercial projects with significant site work to focus on its core competency of manufacturing modular buildings for residential ~~home business, while continuing~~customers, as disclosed in Note 2 to ~~be selective~~the condensed consolidated financial statements. The decrease in ~~the major commercial projects it selects. Net sales of single-family homes represented 86% and 77% of total KBS~~ net sales for the six-month periods ended June 30, 2017 and 2016, respectively. Conversely, net revenue from commercial projects represented approximately 14% and 23% for the six-month periods ended June 30, 2017 and 2016, respectively. Additionally, the increase in sales of single-family homes at ~~KBS for the six months ended June 30, 2017, as compared~~EBGL was primarily due to ~~the six months ended June 30, 2016, included an improved sales mix of its residential single-family homes, which contributed to the increase in overall gross margins for KBS.~~timing.

Cost of Sales. Cost of sales amounted to approximately ~~$18.0~~$7.0 million for the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, compared to approximately ~~$10.8~~$8.2 million for the same period in ~~2016.~~2017. This ~~increase~~decrease of approximately ~~$7.2~~$1.2 million was ~~primarily~~ due to the addition of the EBGL operations, which were acquired in October 2016, which added approximately $7.4 million in cost of sales for the six months ended June 30, 2017. This increase due to the EBGL Acquisition was partially offset by a decrease of approximately $0.2 million in the cost of sales for KBS. Despite the growth in KBS’s net revenues in the same period of 2016, KBS’s cost of sales decreased. This decrease in ~~cost of~~net sales ~~for~~at KBS ~~as compared to the prior year~~and EBGL and also reflects the results of ~~KBS’s~~the Company's strategic initiatives at KBS including more selectivity in the commercial projects the Company undertakes, improved project pricing (implementing regular price increases to its customers) and ongoing cost control and efficiency measures, as disclosed in Note 2 to the ~~Condensed Consolidated Financial Statements,~~condensed consolidated financial statements, resulting in lower direct and overhead costs. Additionally, due to the strong backlog as of December 31, 2016, going into the year, KBS was able to operate its South Paris factory at or near full capacity through the entire six month period ended June 30, 2017 as compared to the first half of 2016 especially the first quarter, where the factory only operated at approximately half the capacity due to a seasonal weakness in sales and limited backlog at the end of 2015. The strategic initiatives at KBS, coupled with an improved sales mix and high capacity utilization rates, have resulted in higher gross margins for the first six months of 2017 as compared to the same period in 2016.

Selling, General and Administrative. Selling, general and administrative (“SG&A”) expense was approximately ~~$3.6~~$1.4 million and ~~$2.2~~$1.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively. The ~~increase~~decrease in SG&A expense of approximately ~~$1.4~~$0.3 million is primarily ~~attributable~~due to ongoing cost control measures at KBS, as disclosed in Note 2 to the addition of the EBGL operations, which were acquired in October 2016, which added approximately $1.2 million of SG&A expenses (including approximately $0.3 million of amortization expense related to the acquired intangible assets) to the Company’s operating results. In addition, SG&A increased due to higher legal fees incurred related to post-acquisition related matters with respect to the EBGL Acquisition, as well as higher costs for KBS related to bank service charges incurred in 2017 which were incurred to a lesser extent in 2016. The bank service charges related to the KBS line of credit with Gerber Finance added in February 2016.

~~Goodwill Impairment Charge.~~ We completed a goodwill impairment assessment as of June 30, 2017, and determined that the value of goodwill related to the EBGL Acquisition was zero versus the carrying value of goodwill of $3.0 million as of that date. Since the acquisition of the EBGL operations, the results of those operations have underperformed the pre-acquisition expectations from a net sales, gross profit margin and net income perspective. Additionally, given the significant increase in raw material costs, more specifically, lumber and sheet goods, the projection of EBGL’s profits are projected to be lower than initially expected. Accordingly, management’s updated projections for the EBGL operations could not support the carrying value of goodwill. Accordingly, we recorded a goodwill impairment charge in the amount of $3.0 million in the six months ended June 30, 2017. No impairment charge was recorded in the six months ended June 30, 2016.condensed consolidated financial statements.

Interest Expense. Interest expense ~~increased by approximately $0.7 million~~decreased from approximately ~~$0.7~~$0.6 million for the ~~six~~three months ended ~~June 30, 2016~~March 31, 2017 to approximately ~~$1.4~~$0.2 million for the ~~six~~three months ended ~~June 30, 2017.~~March 31, 2018. The ~~increase~~decrease is attributable to the ~~increase~~decrease in overall debt for the ~~company~~Company from approximately ~~$13.1~~$20.5 million at ~~June 30, 2016~~March 31, 2017 to approximately ~~$21.7~~$9.5 million at ~~June 30, 2017.~~March 31, 2018. The decrease in debt was a result of the implementation of our strategic initiatives in fiscal 2017 (see Note 2 to the condensed consolidated financial statements). See Notes 1312 and 1413 to the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements for the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, for further details of the Company’s outstanding debt.

Change in Fair Value of Contingent Earn-outs, net. We assess the fair value of our contingent earn-outs at the end of each quarter. The contingent earn-out receivable included in our balance sheets at March 31, 2018 and 2017 is related to the transfer of our test handler product line to Boston Semi Automation LLC in April 2014. Change in fair value of contingent earn-out receivable during the three months ended March 31, 2018 represented a net decrease of approximately $0.2 million in the fair value of this earn-out as a result of timing and payments.

Income Taxes. Since 2009, we have maintained a valuation allowance to fully reserve our deferred tax assets. We expect to continue to maintain a full valuation allowance until we determine that we can sustain a level of profitability that demonstrates our ability to realize these assets. To the extent we determine that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. Such a reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, a decrease in shareholders’ deficit. We recorded income tax expense of ~~$8,000 and $5,000~~$4.0 thousand for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ respectively, which included deferred income tax expense associated with taxable differences related to our indefinite-lived assets, which are omitted from the calculation of our valuation allowance due to the unpredictability of the reversal of these differences.

~~Change in Fair Value of Contingent Earn-outs, net.~~Net Loss. ~~We assess~~Net loss for the fair value of our contingent earn-outs at the end of each quarter. The contingent earn-out receivable included in our balance sheets at June 30, 2017 and 2016 is related to the transfer of our test handler product line to Boston Semi Automation LLC in April 2014. The change in fair value of contingent earn-out receivable during the sixthree months ended ~~June 30, 2017 represented a~~March 31, 2018 was approximately $1.0 million as compared to net ~~increase~~loss of approximately $0.35 million in the fair value of this earn-out as a result of our assessments to fair value. In addition, the contingent earn-out liability is related to the EBGL Acquisition in October 2016 as a contingent payment to the EBGL Sellers. The change in the fair value of the contingent earn-out payable during the six months ended June 30, 2017 represented a net decrease of approximately $0.08 million in the fair value of this earn-out obligation as a result of our assessment to fair value. The combination of the increase in fair value of the contingent earn-out receivable of $0.35 million and the decrease in the fair value of the contingent earn-out payable of $0.08 million, resulted in a total change in contingent earn-outs of $0.43$0.9 million for the ~~six months ended June 30,~~same period in 2017. The increase was due to the factors discussed above.

Financial Condition, Liquidity and Capital Resources

Cash, ~~and~~ cash equivalents ~~decreased~~and restricted cash increased by approximately ~~$0.7~~$0.1 million in the ~~six~~three months ended ~~June 30, 2017.~~March 31, 2018.

~~Cash flows used in~~Net cash provided by (used in) operating activities. In the ~~six~~three months ended ~~June 30,~~March 31, 2018, cash flows provided by operating activities were approximately $0.6 million, consisting primarily of changes in operating assets and liabilities for the three months ended March 31, 2018, which netted to approximately $1.4 million, which included a $1.6 million decrease in trade accounts receivable due to the timing of customer payments, a $0.6 million increase in trade accounts payable, partially offset by a $0.5 million decrease due to other accrued liabilities. These changes in operating assets and liabilities were offset by our net loss of $1.0 million. Also, please refer to Note 4 "Revenue Recognition" in the notes to our condensed consolidated financial statements for an explanation of changes due to the adoption of ASC 606.

In the three months ended March 31, 2017, cash flows used in operating activities were approximately ~~$1.6~~$1.2 million, consisting primarily of changes in operating assets and liabilities of approximately $1.1 million and our net loss of approximately ~~$5.4~~$0.9 million ~~which were~~and the non-cash net changes in the fair value of our contingent earnouts of approximately $0.2 million, partially offset by ~~(i)~~ the ~~non-cash goodwill impairment charge of approximately $3.0 million, (ii)~~ non-cash PIK Interest of approximately $0.6 million, ~~and (iii)~~ approximately ~~$0.9~~$0.4 million of non-cash depreciation amortization and share-based compensation ~~expense, as well as $0.4 million~~expense. Changes in operating assets and liabilities for the ~~non-cash changes in fair value and changes in net working capital of approximately $0.3 million. Working capital changes for the six months~~three-month period ended ~~June 30,~~March 31, 2017, netted to approximately ~~$0.3~~$1.1 million ~~and included a $1.3~~including an increase of approximately $1.8 million ~~increase~~ in accounts receivable ~~due to~~resulting from the increased sales activity and the timing ~~of customer~~differences in billings to customers and payments ~~and increased production activity in the quarter ended June 30, 2017, offset by an increase in accounts payable of $0.8 million due to higher production levels~~received from customers, and a ~~net increase~~decrease of approximately $0.5 million in other ~~working capital of $0.2 million~~.

~~In the six months ended June 30, 2016, cash flows used in operating activities was approximately $2.3 million, consisting~~accrued liabilities, primarily ~~of our net loss of approximately $2.8 million,~~accrued interest. These were partially offset by increases of approximately ~~$0.3~~$0.9 million in ~~non-cash depreciation, amortization~~trade accounts payable and ~~share-based compensation expense and approximately $0.1~~$0.2 million in ~~working capital changes.~~billings in excess of costs and estimated profit.

~~Cash flows generated~~Net cash provided by investing activities. Net cash flows ~~generated~~provided by investing activities were approximately $0.2 million for the ~~six-month periods~~three-month period ended ~~June 30, 2017 and 2016. Net cash flows generated by investing activities for the six months ended June 30, 2017~~March 31, 2018 which included $0.23 million of proceeds from earn-out consideration, partially offset by $0.07 million net purchases of property and equipment. During the six months ended June 30, 2016, net cash flows generated by investing activities included $0.14$0.2 million proceeds from earn-out ~~consideration and $0.06 million~~consideration. During the three months ended March 31, 2017, net ~~sales of equipment.~~cash flows provided by investing activities were insignificant.

~~Cash flows generated~~Net cash (used in) provided by financing activities. In the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, cash flows ~~generated by~~used in financing activities ~~was~~were approximately ~~$0.8~~$0.6 million, which included approximately ~~$1.3~~$0.8 million of net ~~advances under~~payments on the KBS Loan Agreement and the EBGL Loan Agreement ~~$0.6~~and approximately $0.3 million to reduce principal balances of our long-term debt, partially offset by $0.5 million of proceeds from the issuance of long-term ~~debt, partially offset by the approximately $1.0 million to reduce principal balances of our long-term~~ debt.

In the ~~six~~three months ended ~~June 30, 2016,~~March 31, 2017, cash flows ~~generated~~provided by financing activities was approximately ~~$1.8~~$0.6 million, which ~~consisted primarily~~included $0.5 million proceeds from the issuance of ~~$3.5~~the promissory note to LSV Co-Invest I on March 31, 2017 and approximately $0.7 million of net advances under the revolving lines of credit for KBS ~~Loan Agreement, partially~~and EBGL, offset by ~~principal repayments~~approximately $0.5 million in payments on our long-term debt including a scheduled payment of ~~approximately $1.6 million.~~

$0.25 million to the EBGL Sellers and three scheduled payments totaling $0.3 million to the primary seller of KBS.

We acknowledge that the Company continues to face a challenging operating environment, and ~~while~~ we continue to focus on improving our overall ~~profitability, we reported an operating loss for the three and six months ended June 30, 2017.~~profitability. We have incurred significant operating losses in recent years and, as of ~~June 30, 2017,~~March 31, 2018, we had an accumulated deficit of approximately ~~$85.6~~$89.9 million. Working capital has remained negative over the past several years. Cash used in operating activities, while improved as compared to the six months ended June 30, 2016, remains negative for the six months ended June 30, 2017. This has required us to generate funds from investing and financing activities. At ~~June 30, 2017,~~March 31, 2018, we had outstanding debt of approximately ~~$21.7~~$9.5 million.

We have issued various promissory notes to finance our acquisitions of KBS and EBGL and to provide for our general working capital needs. As of ~~June 30, 2017,~~March 31, 2018, we had outstanding debt totaling approximately ~~$21.7~~$9.5 million. Our debt primarily ~~included:~~included (i) ~~$3.3~~$3.4 million principal outstanding on KBS’s $4.0 million revolving credit facility under a loan and security agreement (as amended, the "KBS Loan Agreement") with Gerber Finance Inc. (“("Gerber ~~Finance”~~Finance") ~~(the “KBS Loan Agreement”)~~, and $3.0 million principal outstanding under a loan and security agreement with Gerber Finance used to finance the acquisition of EBGL (as amended, the “Acquisition Loan Agreement”), and (ii) ~~$1.6~~$1.8 million principal outstanding on EBGL’s $3.0 million revolving credit facility under a revolving credit loan agreement (the "Premier Loan Agreement") with Premier Bank ~~(the “Premier Loan Agreement”~~("Premier"), which became effective on June 30, 2017 and replaced the prior $3.0 million revolving credit facility under a loan and security agreement with Gerber Finance (the ~~“EBGL~~"EBGL Loan ~~Agreement”~~Agreement"); (iii) $4.5 million principal amount of unsecured promissory notes issued to Lone Star Value Investors, LP (“LSVI”) and $7.6 million principal amount of unsecured promissory notes issued to Lone Star Value Co-Invest I, LP (“LSV Co-Invest I”), with interest payable semiannually and any unpaid principal and interest due on April 1, 2019; and (iv) $0.1 million principal amount outstanding under an unsecured promissory note issued to the primary sellers of KBS, payable in monthly installments of $100,000, inclusive of interest, through July 1, 2017.. We also have obligations to make ~~$1.4~~$0.8 million in deferred cash payments to the sellers of EBGL, payable in monthly ~~quarterly~~ installments of $100,000, inclusive of interest, through November 1, ~~2018.~~

~~Jeffrey E. Eberwein, Chairman of the Company’s Board of Directors (the “Board”), is the manager of Lone Star Value Investors GP, LLC (“LSVGP”), the general partner of LSVI~~2018, and a $0.5 million unsecured promissory note payable to LSV Co-Invest I, a related party, with interest payable semi-annually with any unpaid principal and ~~the sole member of LSVM, the investment manager of LSVI.~~ interest due on January 12, 2020.

At the applicable test dates, we were not in compliance with the following financial covenants under our loan agreements: (i) a requirement for KBS to maintain a minimum leverage ratio of 7:1 for the fiscal year ended December 31, ~~2016,~~2017, as its actual

leverage ratio for such period was negative; (ii) a requirement for KBS not to incur a net annual post-tax loss in any fiscal year of the loan agreements, as KBS’s net annual post-tax loss for the fiscal year ended December 31, ~~2016~~2017 was ~~$3.2~~$1.9 million; and (iii) a requirement to deliver the Company’s fiscal year-end financial statements reviewed by an independent certified accounting firm acceptable to Gerber Finance within 105 days from the fiscal year ended December 31, ~~2016.~~2017. In August 2017, Gerber Finance provided us with a waiver for these events. As of December 31, ~~2017 and~~ 2018, KBS was not in compliance with the financial covenants under the KBS Loan Agreement requiring no net annual post-tax loss for KBS or the minimum leverage ratio covenant as of these test dates. Additionally, KBS was not in compliance with the requirement to deliver the Company's fiscal year-end financial statements reviewed by an independent certified accounting firm acceptable to Gerber Finance within 105 days from the fiscal year ended December 31, ~~2017.~~2018. The occurrence of any event of default under the KBS Loan Agreement may result in KBS’s obligations under the KBS Loan Agreement becoming immediately due and payable. In April 2019, we obtained a waiver from Gerber Finance for these events. ~~While~~In addition, the Company and Gerber Finance agreed to eliminate the minimum leverage ratio covenant for years after 2018. The Company currently projects that it will be in compliance with the covenant requiring no net annual post-tax loss for KBS ~~the Company projects that it will continue to~~for 2019.

As of December 31, 2018, EBGL was not be in compliance with the ~~minimum leverage ratio covenant.~~ following covenants under the Premier Loan Agreement: (i) requirement to maintain a Debt Service Coverage Ratio for the calendar year of at least 1.0; and (ii) a requirement to deliver the Company's fiscal year-end audited financial statements within 120 days of the end of each calendar year. The occurrence of any event of default under the Premier Loan Agreement may result in EBGL’s obligations under the Premier Loan Agreement becoming immediately due and payable. In April 2019, we obtained a waiver from Premier for these events through August 1, 2019 (the current maturity date of the Premier Loan Agreement).

If the Company fails to comply with any financial covenants under our loan agreements with Gerber Finance or Premier going forward, ~~Gerber Finance~~the applicable lender(s) may demand the repayment of the credit facilities amount outstanding and any unpaid interest thereon.

~~During 2016, 2017 and 2018, we~~We have implemented several strategic initiatives, effected certain actions and continued to consider additional actions to improve the Company’s overall profitability and increase cash flows, including:

KBS’s strategic shift away from large commercial projects with significant site work to focus on its core competency of manufacturing modular buildings;

KBS’s efforts to improve operating efficiencies, including reconfiguring the South Paris factory to increase

production, investments in automated equipment to reduce labor costs, implementing lean manufacturing techniques, and elimination of duplicate overhead costs through the shut-down of the Waterford factory;

Reduction in KBS workforce including manufacturing, sales, engineering and front-office staff;

KBS increased pricing on its base ranch model in 2017, and in November 2017, instituted a 6% lumber surcharge on all new orders to help offset the significant rise in lumber and other raw materials costs;

KBS ~~has~~ implemented a new dynamic pricing model for 2018, which iswas designed to determine its bid price quoted to customers on the most current cost information to better ensure full recovery of its manufacturing costs and improve overall gross margins;

In July 2017, KBS made the final payment due to the primary seller of KBS, freeing up ~~$100,000~~$0.1 million per month of cash flows to be used for operations;

In November 2018, EBGL made the final payment due to the sellers of EBGL, freeing up ~~$100,000~~$0.1 million per month of cash flows to be used for operations;

In 2017, we instituted a lumber hedging program for EBGL to assist in preserving existing margins against the potential large fluctuations in lumber raw material prices;

In August 2016, we amended certain of our debt agreements to allow the Company to pay PIK Interest on approximately $11 million of our debt, reducing strain on current cash flows;

total fees paid under these agreements;

~~As disclosed in Note 19, in~~In September 2017, we converted $13.3 million of the Company’s outstanding debt, including accrued interest, to ~~preferred stock;~~

the Company’s Series B Stock;

As ~~disclosed~~discussed in ~~Note 19,~~Notes 13 and 18, in January ~~2018 and in June~~ 2018 and in June 2018, the Company issued an unsecured promissory ~~note~~notes in the principal ~~amount of$1.4~~amounts of $0.5 million and $0.9 million, respectively, to LSV Co-Invest I to provide additional working capital for the Company;

In April 2019, KBS and EBGL executed sale leasebacks of several of its real estate properties (see further discussion in Note ~~19)~~18); and

We continue to look for opportunities to refinance our remaining debt on more favorable terms.

On September 10, 2018, ATRM entered into a non-binding LOI relating to the acquisition of ATRM ~~Acquisition~~ by ~~Digirad.~~Digirad Corporation ("Digirad") (NASDAQ: DRAD). Under the terms contemplated in the LOI, ATRM stockholders ~~will receive~~would have received consideration consisting of 0.4 shares of Digirad common stock for each share of outstanding ATRM common stock acquired by the Company in the ATRM Acquisition (see Note 1918 for additional information). Although the LOI expired by its terms on December 31, 2018, Digirad and ATRM have had additional discussions regarding the terms and conditions of a proposed transaction and the consideration to be paid for ATRM shares. The parties are currently discussing that the consideration would notbe Digirad shares of common stock, but some other form of security. In addition, on May 15, 2019, Digirad and ATRM entered into an Agreement which provides that, in the event the ATRM Acquisition does not close on or prior to December 31, 2019, ATRM will reimburse Digirad of certain consulting and related fees paid by Digirad on behalf of ATRM. We anticipate the ATRM Acquisition to close in the third quarter of ~~2019.~~2019; however, the parties have not reached any definitive agreement, and there can be no assurance regarding timing of completion of regulatory approvals, which could delay timing of the closing and any ATRM Acquisition would remain subject to the satisfaction of customary closing conditions.

Although not a binding commitment, LSVM has advised us of its present intention to continue to financially support the Company in the event that additional financing is required. In 2014, 2015, 2016, 2017 and 2018,LSVM has provided financial support in the form of financing through various debt agreements disclosed in Note 14. Based on the previous commitments, management believes that additional financing may be provided by LSVM or its affiliates, if necessary, in the future. In addition, it should be noted that LSVM is a related party to Digirad, with whom ATRM has entered into a LOI, as mentioned above.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

~~Not applicable.~~

None.



Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our chief executive officer and our chief financial officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ~~as amended~~ (the ~~“Exchange Act”~~"Exchange Act")). Based on their evaluation of our disclosure controls and procedures and due to the material weaknesses described below, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of ~~June 30, 2017,~~March 31, 2018, to ensure that

information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management, with oversight by the Board, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2018, based on the criteria established in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation and due to the material weaknesses described below, our management, including our chief executive officer and chief financial officer, concluded that our internal control over financial reporting was not effective as of March 31, 2018.

Description of Material Weaknesses

~~In April 2014, we acquired the assets~~Our internal control over financial reporting is supported by written policies and ~~assumed certain liabilities related~~procedures that (1) pertain to the ~~operations~~maintenance of ~~KBS~~records that, in reasonable detail, accurately and ~~subsequently,~~fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in ~~October 2016, we acquired~~accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

We have identified certain ~~assets related~~deficiencies in the principles associated with each component of the COSO framework, as described below, which our management concluded constitute material weaknesses, either individually or in the aggregate.

Control Environment

We did not maintain an effective control environment based on the criteria established in the COSO framework to enable the ~~operations~~identification and mitigation of ~~EBGL. Prior~~risks of material accounting errors based on:

An insufficient number of personnel with an appropriate level of GAAP knowledge and experience to create the ~~acquisitions,~~proper environment for effective internal control over financial reporting and to ensure that (i) there were adequate processes for oversight, (ii) there was accountability for the ~~KBS~~performance of internal control over financial reporting responsibilities, and ~~EBGL operations~~(iii) corrective activities were ~~privately-owned businesses with very limited administrative~~appropriately applied, prioritized, and ~~accounting resources, outdated accounting software and generally weak accounting~~implemented in a timely manner.

Our oversight processes and procedures that guide individuals in applying internal control ~~procedures.~~over financial reporting were not adequate in preventing or detecting material accounting errors.

The Company does not utilize a perpetual inventory system for tracking inventory at KBS. The Company’s processes and controls for tracking costs through the production processes and cost of sales was not considered effective.

Risk Assessment

We did not design and implement an effective risk assessment based on the criteria established in the COSO framework, specifically relating to: (i) identifying, assessing, and communicating appropriate objectives, (ii) identifying and analyzing risks to achieve these objectives, and (iii) identifying and assessing changes in the business that could impact our system of internal controls.

Control Activities

We did not design and implement effective control activities based on the criteria established in the COSO framework. Specifically, the control activities did not adequately (i) address relevant risks, (ii) provide evidence of performance, (iii) provide appropriate segregation of duties, or (iv) operate at a level of precision to identify all potentially material errors.

Information and Communication

We did not generate and provide quality information and communication based on the criteria established in the COSO framework, specifically relating to communicating accurate information internally and externally, including providing information pursuant to objectives, responsibilities, and functions of internal control.

Monitoring Activities

We did not design and implement effective monitoring activities based on the criteria established in the COSO framework. Specifically, we did not maintain effective monitoring controls to ascertain whether the components of internal control are present and functioning.

Remediation Plan and Status for Material Weaknesses in Internal Control over Financial Reporting

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017, management concluded as of December 31, 2017 that several material weaknesses existed at that date. Management has been engaged in ~~KBS’s and EBGL’s financial reporting processes with respect~~remediation efforts to ~~(1)~~address the material weaknesses. We have made enhancements to our control ~~over accounts payable cut-offs, (2) inventory accounting, (3) contract accounting and (4) inadequate segregation of duties in certain accounting processes,~~environment from various activities including the ~~payroll, cash receipts~~following:

Engage external consultants to provide support related to more complex applications of GAAP and ~~disbursements processes~~document and ~~management of user access rights in~~assess our accounting ~~system, partly as a result of our limited size~~policies and ~~accounting staff.~~procedures for existing accounts and processes.

~~Remediation of Material Weaknesses~~

We are working to remediate these material weaknesses. Since the April 2014 acquisition of KBS, we have implemented organizational changes to strengthen the accounting and other administrative functions at KBS and improvements in processes, procedures and controls, including in the areas of payroll processing, contract accounting, proper transaction cutoffs, inventory controls, financial reporting and management oversight. In January 2016, we installed a new management information system at KBS that we believe, when fully implemented, will significantly improve our reporting and controls. At EBGL, we ~~installed a new upgraded financial management information system, which was completed~~are in ~~September 2017. The upgrade~~the process of ~~the old system, which was over 20 years old, is expected to improve EBGL's financial reporting capabilities and provide enhanced controls. In addition, at EBGL, we continue to implement~~implementing improvements in internal processes, procedures and controls and ~~have established~~establishing regular reporting and routine management oversight.

~~Although significant progress has been made in improving the controls~~The Company does not utilize a perpetual inventory system for tracking inventory at ~~KBS, additional time is required to fully develop adequate processes, procedures and controls and to determine whether such~~KBS. The Company’s processes and controls ~~are~~for tracking costs through the production processes and cost of sales was not considered effective. ~~At EBGL,~~

We continue to redesign and implement internal control activities. We continue to establish policies and procedures and enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediating our material weaknesses.

While we have made ~~significant~~and expect to make additional improvements ~~since the acquisition, however, the improvements are at an early stage, so~~to our internal controls, we ~~expect it will take significant~~may determine that additional time to fully develop and implement an adequate system of internal controls. We will continue to work to improve such processes, procedures and controls, and will disclose in future periods the progress we have made in our effortssteps beyond those described above may be necessary to remediate ~~these~~the material weaknesses.

~~Changes in Internal Control Over Financial Reporting~~

~~As a result~~ While we intend to resolve all of the material control deficiencies ~~at KBS and EBGL~~ discussed above, we ~~determined~~cannot provide any assurance that ~~we have material weaknesses in~~these remediation efforts will be successful, will be completed quickly, or that our internal control over financial ~~reporting.~~reporting will be effective as a result of these efforts by any particular date. We ~~are working~~have not yet quantified the cost to ~~remediate these material weaknesses as discussed above.~~implement our planned remediation activities related to our existing or acquired businesses, which have not been fully assessed.

PART II. OTHER INFORMATION



Item 1.	Legal Proceedings

The Company is and may become involved in various lawsuits as well as other certain legal proceedings that arise in the ordinary course of business. Information regarding certain material proceedings is provided below.

UTHE Technology Corporation v. Aetrium Incorporated

Since December 1993, an action brought by UTHE Technology Corporation (“UTHE”) against ATRM and its then sales manager for Southeast Asia (“Sales Manager”), asserting federal securities claims, a RICO claim, and certain state law claims, had been stayed in the United States District Court for the Northern District of California. UTHE’s claims were based on its allegations that four former employees of a Singapore company, which UTHE formerly owned, conspired to and did divert business from the subsidiary, and directed that business to themselves and a secret company they had formed, which forced UTHE to sell its subsidiary shares to the former employee defendants at a distressed price. The complaint alleged that ATRM and the Sales Manager participated in the conspiracy carried out by the former employee defendants. In December 1993, the case was dismissed as to the former employee defendants because of a contract requiring UTHE and them to arbitrate their claims in Singapore. The district court stayed the case against ATRM and the Sales Manager pending the resolution of arbitration in Singapore involving UTHE and three of the former employee defendants, but not involving ATRM or the Sales Manager. ATRM received notice in March 2012 that awards were made in the Singapore arbitration against one or more of the former employee defendants who were parties to the arbitration. In June 2012, UTHE filed a motion to reopen the case against ATRM and the Sales Manager and to lift the stay, which the court granted. On September 13, 2013, the court entered final judgment dismissing all remaining claims UTHE asserted against ATRM in the litigation. On September 23, 2013, UTHE appealed the district court judgment to the United States Court of Appeal for the Ninth Circuit only as to the dismissal of UTHE’s RICO claim. The appeal was argued in a court hearing on November 19, 2015. On December 11, 2015, the court of appeal issued an order reversing the district court’s grant of summary judgment of UTHE’s RICO claim and remanded the case back to the district court for further proceedings. On July 14, 2016, ATRM filed a motion for summary judgment in the district court seeking dismissal of the sole remaining RICO claim. On August 26, 2016, the district court granted ATRM’s motion for summary judgment and dismissed the case. On September 19, 2016, UTHE filed its appeal to the Ninth Circuit of the district court’s grant of summary judgment and dismissal. The parties completed the appellate briefing on February 13, 2017. Oral arguments were held by the appellate court on February 14, 2018. On July 2, 2018, the Ninth District Court of Appeals rendered its decision affirming the District Court’s opinion and upheld the dismissal of the case against ATRM. UTHE did not appeal that decision to the Supreme Court of the United States by the October 1, 2018 deadline. As such, this Ninth Circuit affirmance of the case dismissal stands, and the lawsuit has been successfully and completely defeated by the Company.

KBE Building Corporation v. KBS Builders, Inc., and ATRM Holdings, Inc., et. al.

At the time of the KBS acquisition in April 2014, KBS purchased receivables for a construction project known as the Nelton Court Housing Project (“Nelton Court”) in Hartford, CT, and also performed certain “punch-list” and warranty work. Modular units for Nelton Court were supplied by KBS Building Systems, Inc. (“KBS-BSI”) pursuant to a contract with KBE Building Corporation (“KBE”). KBE has asserted claims against KBS-BSI, KBS and ATRM arising out of alleged delays, and for the repair of certain alleged defects in the modular units supplied to the project. KBE’s claim seeks an unspecified amount of damages. The action has been transferred to the complex litigation docket of the Hartford Superior Court. On December 18, 2017, KBS was notified that a global settlement had been reached between all defendants and the plaintiff. Under the settlement, the Company’s insurance carriers have agreed to pay ~~$300,000~~$0.3 million to the plaintiff in full settlement on KBS’s behalf. KBS paid a $10,000 deductible to its insurance carriers for this claim. The Settlement became effective on January 5, 2018.

From time to time, in the ordinary course of ATRM’s business, it is party to various other disputes, claims and legal proceedings. In the opinion of management, based on information available at this time, such disputes, claims and proceedings will not have a material effect on ATRM’s condensed consolidated financial statements.



Item 1A.	Risk Factors

Not applicable.



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None.



Item 3.	Defaults on Senior Securities

None.



Item 4.	Mine Safety Disclosures

None.



Item 5.	Other Information

None.



Item 6.	Exhibits



~~2.1~~4.1	~~Amendment,~~Promissory Note, dated asJanuary 12, 2018, made by ATRM Holdings, Inc. for the benefit of ~~June 30, 2017,~~Lone Star Value Co-Invest I, LP (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the ~~Asset~~SEC on January 19, 2018).
10.1	Securities Purchase Agreement, dated as of ~~October 4, 2016, by and among ATRM Holdings, Inc., EdgeBuilder, Inc., Glenbrook Building Supply, Inc., EdgeBuilder Wall Panels, Inc., Glenbrook Lumber & Supply, Inc. and certain individual owners.~~
~~10.1~~	Second Agreement of Amendment to the Loan and Security Agreement, dated as of June 30, 2017, by and among Gerber Finance Inc., Edgebuilder, Inc., Glenbrook Bulding Supply, Inc., KBS Builders, Inc. and ATRM Holdings, Inc.
~~10.2~~	~~Third Agreement of Amendment to the Loan and Security Agreement, dated as of June 30, 2017, by and among Gerber Finance Inc., KBS Builders, Inc. and ATRM Holdings, Inc.~~
~~10.3~~	~~Revolving Credit Loan Agreement, dated as of June 30, 2017,~~January 12, 2018, by and between ~~Glenbrook Building Supply, Inc., EdgeBuilder,~~ATRM Holdings, Inc. and ~~Premier Bank.~~Lone Star Co-Invest I, LP (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on January 19, 2018).
31.1	Certification of Principal Executive Officer ~~pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~31.2~~	~~Certification of~~and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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.

ATRM HOLDINGS, INC.

(Registrant)



Date: ~~April 16,~~June 26, 2019	By:	/s/ Daniel M. Koch
		Daniel M. Koch
		President and Chief Executive Officer (Principal Executive ~~Officer)~~

~~Date: April 16, 2019~~	~~By:~~	~~/s/ Stephen A. Clark~~
		~~Stephen A. Clark~~
		~~Chief~~Officer and Principal Financial ~~Officer (Principal Financial and Accounting~~ Officer)



Minnesota		41-1439182
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)



5215 Gershwin Avenue N., Oakdale, Minnesota		55128
(Address of Principal Executive Offices)		(Zip Code)



Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer ~~[ ]~~[X]	Smaller reporting company [X]

			Emerging growth company [ ]

ATRM HOLDINGS, INC. INDEX

			Page
PART I. FINANCIAL INFORMATION

	Item 1.	Condensed Consolidated Financial Statements

		Condensed Consolidated Balance Sheets as of ~~June 30, 2017~~March 31, 2018 (unaudited) and December 31, ~~2016~~2017	3

		Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (unaudited)	4

		Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (unaudited)	5

		Notes to Condensed Consolidated Financial Statements (unaudited)	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2724

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3631

	Item 4.	Controls and Procedures	3631


ATRM HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)(unaudited)							ATRM HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)(unaudited)
	June 30, 2017			December 31, 2016
	(Unaudited)							March 31, 2018			December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	454		$	1,247			$	46		$	48
Restricted cash	280			150				597			482
Accounts receivable, net	3,953			2,604				2,239			3,840
Costs and estimated profit in excess of billings	843			1,045				—			565
Inventories	1,400			1,404				2,132			1,285
Fair value of contingent earn-out receivable, current	467			359				271			373
Other current assets	270			237				370			216
Total current assets	7,667			7,046				5,655			6,809
Property, plant and equipment, net	4,295			4,393				4,369			4,456
Fair value of contingent earn-out receivable, noncurrent	214			202				—			61
Goodwill	—			3,020
Intangible assets, net	1,747			2,117				1,510			1,589
Total assets	$	13,923		$	16,778			$	11,534		$	12,915

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Notes payable – revolving lines of credit	$	4,943		$	3,420
Notes payable								$	5,175		$	5,969
Current portion of long-term debt	1,094			1,675				800			1,068
Trade accounts payable	4,595			3,776				5,464			4,856
Customer deposits								1,078			—
Billings in excess of costs and estimated profit	694			652				—			983
Accrued compensation	472			407				379			416
Fair value of contingent earn-out payable	—			967
Other accrued liabilities	2,264			2,264				1,880			2,370
Total current liabilities	14,062			13,161				14,776			15,662
Long-term debt, less current provision	15,708			14,069
Long-term debt								3,555			3,061
Deferred income taxes	25			19				28			28
Total long-term liabilities								3,583			3,089
Total liabilities								18,359			18,751

Commitments and contingencies

Shareholders' deficit:
Common stock, $.001 par value; 3,000,000 shares authorized; 2,396,219 shares issued and outstanding at June 30, 2017 and December 31, 2016	2			2
Preferred stock, $.001 par value; 2,000,000 shares authorized; 562,860 shares issued and outstanding at March 31, 2018 and 546,466 shares issued and outstanding at December 31, 2017								1			—
Common stock, $.001 par value; 7,500,000 shares authorized as of March 31, 2018 and December 31, 2017, respectively; 2,396,219 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively								2			2
Additional paid-in capital	69,736			69,702				83,034			83,014
Accumulated deficit	(85,610		)	(80,175		)		(89,862		)	(88,852		)
Total shareholders' deficit	(15,872		)	(10,471		)		(6,825		)	(5,836		)
Total liabilities and shareholders' deficit	$	13,923		$	16,778			$	11,534		$	12,915


ATRM HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)(unaudited)													ATRM HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)(unaudited)

	Three months ended June 30,						Six months ended June 30,							Three Months Ended March 31,
	2017			2016			2017			2016				2018			2017
Net sales	$	10,823		$	5,901		$	20,227		$	10,952			$	7,684		$	9,404
Costs and expenses:
Cost of sales	9,853			5,406			18,036			10,840				7,044			8,183
Selling, general, and administrative expenses	1,916			1,160			3,619			2,187				1,411			1,703
Goodwill impairment charge	3,020			—			3,020			—
Total costs and expenses	14,789			6,566			24,675			13,027				8,455			9,886
Operating loss	(3,966		)	(665		)	(4,448		)	(2,075		)		(771		)	(482		)

Other (expense) income:
Interest expense	(846		)	(423		)	(1,409		)	(724		)
Interest expense, net														(237		)	(563		)
Change in fair value of contingent earn-outs, net	242			1			430			2				2			188
Loss before income taxes	(4,570		)	(1,087		)	(5,427		)	(2,797		)		(1,006		)	(857		)
Income tax expense	(4		)	(1		)	(8		)	(5		)		(4		)	(4		)
Net loss	$	(4,574	)	$	(1,088	)	$	(5,435	)	$	(2,802	)		(1,010		)	(861		)
Preferred stock dividend														(410		)	—
Net loss attributable to common shareholders														$	(1,420	)	$	(861	)

Net loss per share, basic and diluted	$	(1.93	)	$	(0.49	)	$	(2.30	)	$	(1.27	)		$	(0.59	)	$	(0.36	)
Weighted average common shares outstanding, basic and diluted	2,366			2,223			2,366			2,214				2,396			2,366



	Three Months			Six Months
Pro forma net sales	$	10,314		$	20,394
Pro forma net loss	(903		)	(2,014		)
Pro forma loss per share – basic and diluted	(0.39		)	(0.87		)



	Fair Value (Level 3)		Total Gains and (Losses)⁽¹⁾
Goodwill	$	—	$	(3,020	)



	Earn-out Receivable ⁽¹⁾			Earn-out Payable ⁽²⁾
Balance at December 31, 2016	$	561		$	(967	)
Add – adjustment based on re-assessments	354			—
Add – net decrease based on re-assessments	—			76
Subtract – settlements	(234		)	—
Subtract – amendment (see Note 14)	—			891
Balance at June 30, 2017	$	681		$	—



	Earn-out Receivable ⁽¹⁾
Balance at December 31, 2017	$	434
Add – adjustment based on re-assessments	3
Subtract – settlements	(166		)
Balance at March 31, 2018	$	271


⁽¹⁾	Earn-out receivable related to the transfer of our test handler product line in 2014.


⁽²⁾	~~Earn-out payable related to the EBGL Acquisition.~~



	EBGL Goodwill
Balance at December 31, 2016	$	3,020
Subtract – goodwill impairment recorded at June 30, 2017 (included in earnings)	(3,020		)
Balance at June 30, 2017	$	—



1.	1. BASIS OF PRESENTATION



2.	~~FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES~~



8.	~~INVENTORIES~~



9.	~~GOODWILL AND INTANGIBLE ASSETS, NET~~



7.Fair Value Asset	~~ACCOUNTS RECEIVABLE, NET~~	Valuation Technique	Unobservable Input	Unobservable Input Amount
Contingent earn-out receivable related to transfer of test handler product line		Discounted cash flow	Total revenue for the remaining royalty period	$6.9 million
			Discount rate	2.41% to 2.64%



	March 31, 2018
Realized gain, net	$	42
Unrealized gain, net	62
Total	$	104



	March 31, 2018		December 31, 2017
Raw materials	$	1,382	$	1,285
Finished goods	405		—
Work-in-process	345		—
Inventories, net	$	2,132	1,285


2017 (six months)	$	158
2018	315
2018 (nine months)			$	237
2019	315		315
2020	315		315
2021	164		164
2022			85
Thereafter	86		—
Total	$	1,353	$	1,116


	Six Months Ended June 30, 2017
	2017		2016			Three Months Ended March 31,
	(unaudited)					2018		2017
Accrual balance, beginning of period	$	49	$	39		$	50	$	49
Accruals for warranties	3		37			2		1
Settlements made	—		(29		)
Accrual balance, end of period	$	52	$	47		$	52	$	50



	March 31, 2018			December 31, 2017
Promissory note payable to Gerber Finance, secured, interest at the current prime rate plus 3.0% payable monthly with any unpaid principal and interest due on December 31, 2018 (automatically extended to December 31, 2019 as neither party elected to terminate), supported by pledge agreement between LSVI and Gerber Finance of up to $3.0 million plus additional fees	$	3,000		$	3,000
Amended deferred payments to EBGL Sellers, inclusive of interest (imputed at 15.14%), monthly payments of $100,000 beginning on August 1, 2017 through November 1, 2018; amount paid in full in November 2018	766			1,034
Promissory note payable to LSV Co-Invest I (a Related Party), unsecured, interest of 10% per annum (12% per annum PIK interest) payable semi-annually in July and January, with any unpaid principal and interest due on January 12, 2020	500			—
EBGL computer equipment and software financing, secured by underlying assets, interest at 9.0% per annum, payable in monthly installments of $1,105 per month, through May 2022	46			48
KBS software installment payment agreement, unsecured, interest at 8.0% per annum, payable in monthly installments of $1,199 through September 2020	31			35
Revolving equipment credit line, unsecured	12			12
Total long-term debt	4,355			4,129
Current portion	(800		)	(1,068		)
Noncurrent portion	$	3,555		$	3,061



~~15.~~	~~STOCK INCENTIVE PLAN AND SHARE-BASED COMPENSATION~~



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contract Term	Aggregate Intrinsic Value (in thousands)
Outstanding, January 1, 2017	27,500		$	6.88
Options expired	(16,200	)	$	7.75
Outstanding, June 30, 2017	11,300		$	5.64	0.37 years	$	—
Exercisable, June 30, 2017	11,300		$	5.64	0.37 years	$	—



	Modular Home Manufacturing					Structural Wall Panel Manufacturing						Total
Three Months Ended March 31,	2018			2017		2018			2017			2018			2017
Segment net sales	$	4,849		$	5,608	$	2,835		$	3,796		$	7,684		$	9,404
Depreciation and amortization expense	132			123		48			157			180			280
Interest expense, net	90			85		134			129			224			214
Segment net (loss) income	(284		)	35		(281		)	(279		)	(565		)	(244		)
Total segment assets	7,095			7,867		3,563			8,463			10,658			16,330
Expenditures for segment assets	12			19		5			23			17			42



Three Months Ended June 30, 2017	Modular Home Manufacturing			Structural Wall Panel Manufacturing			Total
Segment net sales	$	6,282		$	4,541		$	10,823
Depreciation and amortization expense	123			144			267
Interest expense, net	93			384			477
Segment net loss	(340		)	(3,463		)	(3,803		)
Total segment assets	7,884			4,934			12,818
Expenditures for segment assets	10			54			64



Revenues	Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
Total net sales for reportable segments	$	10,823		$	20,227
Other net sales	—			—
Consolidated net sales	$	10,823		$	20,227
Net loss
Total net loss for reportable segments	$	(3,803	)	$	(4,047	)
Unallocated amounts:
Other corporate expenses	(539		)	(1,016		)
Interest expense	(369		)	(718		)
Change in fair value of contingent earn-out receivable	141			354
Provision for income taxes	(4		)	(8		)
Consolidated net loss	$	(4,574	)	$	(5,435	)

Assets				June 30, 2017
Total assets for reportable segments				$	12,818
Other assets				1,105
Consolidated assets				$	13,923



	March 31,		December 31,
	2018		2017
Total assets for reportable segments	$	10,658	$	12,009
Other assets	876		906
Consolidated assets	$	11,534	$	12,915


Other Significant Adjustments	Segment Totals		Adjustments		Consolidated Totals
							Segment Totals				Unallocated Amounts				Consolidated Totals
March 31,							2018		2017		2018		2017		2018		2017
Depreciation and amortization expense	$	547	$	—	$	547	$	180	$	280	$	—	$	—	$	180	$	280
Interest expense	$	691	$	718	$	1,409	224		214		13		349		237		563

~~Fair Value Asset~~

~~Valuation Technique~~

~~Unobservable Input~~

~~Amount~~

~~Earn-out receivable related to transfer of test handler product line~~

~~Discounted cash flow~~

~~Total projected revenue (including actual results for periods through December 31, 2018)~~

~~$9.9 million~~

~~Performance weighted average~~

~~Discount rate~~

~~2.2% to 2.6%~~