UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. -20549

FORM 10-Q

☑ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~January 26,~~November 2, 2019

☐

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number 1-9065

ECOLOGY AND ENVIRONMENT INC.

(Exact name of registrant as specified in its charter)

New York		16-0971022
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

368 Pleasant View Drive
Lancaster, New York		14086
(Address of principal executive offices)		(Zip code)

(716) 684-8060

(Registrant's telephone number, including area code)

Not Applicable

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock par value $.01 per share	EEI	Nasdaq Stock Market

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐ No ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Exchange Act Rule 12b-2). (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer ~~(Do not check if a smaller reporting company)~~	☐	Smaller reporting company	☑
		Emerging growth company	☐

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

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

At ~~April~~November 30, 2019 ~~3,110,130~~3,138,323 shares of Registrant's Class A Common Stock (par value $.01) and ~~1,205,005~~1,191,678 shares of Registrant’s Class B Common Stock (par value $.01) were outstanding.

~~EXPLANATORY NOTE REGARDING RESTATEMENTS~~

As previously disclosed in the Current Report on Form 8-K filed by Ecology and Environment Inc. (“EEI” or the “Company”) with the Securities and Exchange Commission (the “SEC”) on December 12, 2018, the Audit Committee of the Board of Directors (the “Audit Committee”) ~~concluded that the Company~~’~~s consolidated financial statements and related reports filed with the SEC for periods ended prior to July 31, 2018 should no longer be relied upon due to errors related to accounting for EEI~~’~~s investment in Gestion Ambiental Consultores S.A. (~~“~~GAC~~”~~) since 1999. The Company had previously included GAC~~’s financial statements in consolidated financial statements filed with the SEC prior to July 31, 2018. In December 2018, the Company determined that, although it had a majority ownership interest in GAC, it did not have a controlling interest in GAC’~~s operations due to lack of continuous control over the activities of GAC~~’~~s board of directors and senior management team. As a result, the Company~~’~~s net investment in GAC should have been accounted for using the equity method of accounting.~~

The financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2018 included a restated consolidated balance sheet at July 31, 2017, and restated consolidated statements of operations, comprehensive income, cash flows and shareholders’ equity for the fiscal years ended July 31, 2017 and 2016. This Quarterly Report on Form 10-Q includes restated unaudited condensed consolidated statements of operations, comprehensive income and cash flows for the three and six months ended January 27, 2018. In addition, tables related to revenues, operating expenses and income taxes for the three and six months ended January 27, 2018 included in Item 2 of this Quarterly Report on Form 10-Q have also been restated.

~~Collectively, the adjustments necessary to deconsolidate GAC~~’~~s unaudited financial statements and correctly account for the Company~~’~~s investment in GAC under the equity method of accounting are referred to as the~~ “~~GAC Deconsolidation Adjustments~~.” In addition to the GAC Deconsolidation Adjustments, previously filed financial statements for the quarter ended October 28, 2017 were also adjusted for correction of other errors in the financial statements and disclosures that were deemed to be immaterial on an individual basis and in the aggregate for the quarter (the “~~Out of Period Adjustments~~”~~). Specific impacts of the GAC Deconsolidation Adjustments and Out of Period Adjustments on various financial statement line items are summarized in Note 2 of the unaudited~~ ~~condensed~~ ~~consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.~~

~~Internal Controls and Disclosure Controls Considerations~~

~~In connection with control deficiencies related to the errors outlined above, and other control deficiencies identified by management, our Acting Principal Executive Officer (the~~ “~~Acting PEO~~”~~) and Acting Chief Financial Officer (the~~ “~~Acting CFO~~”) determined that there were deficiencies in our internal control over financial reporting that, in the aggregate, represented material weaknesses at July 31, 2018. Accordingly, our Acting PEO and Acting CFO have concluded that the Company’s disclosure controls and procedures and internal control over financial reporting were not effective at July 31, 2018. Refer to Part I, Item 4 of this Quarterly Report on Form 10-Q for a description of the control deficiencies identified by management and management’~~s plan to remediate those deficiencies.~~

~~Page~~ 2 ~~of 37~~

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Ecology and Environment Inc.

Condensed Consolidated Balance Sheets

Unaudited

(amounts in thousands, except share data)

	January 26, 2019			July 31, 2018			November 2, 2019			July 31, 2019

Assets

Current assets:
Cash and cash equivalents	$	11,017		$	13,496		$	10,022		$	13,344
Investment securities available for sale		1,512			1,497			1,582			1,577
Contract receivables, net		25,946			25,615			26,123			25,087
Income tax receivable		1,627			1,230			1,045			912
Other current assets		2,539			1,752			2,518			2,078

Total current assets		42,641			43,590			41,290			42,998

Property, buildings and equipment, net of accumulated depreciation of $17,250 and $16,799, respectively		3,589			3,870
Property, buildings and equipment, net of accumulated depreciation of $17,193 and $17,066, respectively								3,026			3,253
Operating lease right of use assets								5,771			-
Deferred income taxes		788			789			2,008			2,130
Equity method investment		2,289			2,058			1,684			1,658
Other assets		2,222			2,522			1,637			1,771

Total assets	$	51,529		$	52,829		$	55,416		$	51,810

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable	$	6,108		$	5,635		$	5,310		$	6,099
Lines of credit		222			-			200			284
Accrued payroll costs		4,915			6,066			6,440			6,661
Current portion of long-term debt and capital lease obligations		45			54
Current portion of operating lease liabilities								1,754			-
Current portion of long-term debt								35			41
Customer deposits		2,851			3,191			4,287			3,551
Other accrued liabilities		1,435			1,382			1,146			1,386

Total current liabilities		15,576			16,328			19,172			18,022

Income taxes payable		-			-
Deferred income taxes		-			-
Long-term debt and capital lease obligations		34			54
Commitments and contingencies (Note 13)		-			-
Operating lease liabilities								4,041			-
Long-term debt								7			13
Commitments and contingencies (Note 14)								-			-

Shareholders' equity:
Preferred stock, par value $.01 per share (2,000,000 shares authorized; no shares issued)		-			-			-			-
Class A common stock, par value $.01 per share (6,000,000 shares authorized; 3,102,654 and 3,041,911 shares issued, respectively)		31			30
Class B common stock, par value $.01 per share; (10,000,000 shares authorized; 1,291,071 and 1,351,814 shares issued, respectively)		13			14
Class A common stock, par value $.01 per share (6,000,000 shares authorized; 3,202,047 and 3,192,990 shares issued, respectively)								32			32
Class B common stock, par value $.01 per share; (10,000,000 shares authorized; 1,191,678 and 1,200,735 shares issued, respectively)								12			12
Capital in excess of par value		17,629			17,558			16,998			16,964
Retained earnings		20,539			20,973			17,160			18,687
Accumulated other comprehensive loss		(1,893	)		(1,885	)		(2,273	)		(2,098	)
Treasury stock, at cost (Class A common: 13,789 and 15,789 shares, respectively; Class B common: 64,801 shares at both dates)		(884	)		(907	)
Treasury stock, at cost (Class A common stock: 63,724 and 64,823 shares, respectively)								(729	)		(729	)

Total Ecology and Environment, Inc. shareholders' equity		35,435			35,783
Total Ecology and Environment Inc. shareholders' equity								31,200			32,868
Noncontrolling interests		484			664			996			907

Total shareholders' equity		35,919			36,447			32,196			33,775

Total liabilities and shareholders' equity	$	51,529		$	52,829		$	55,416		$	51,810

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Page~~ 3

Page 1 of 27 ~~of 37~~

Ecology and Environment Inc.

Condensed Consolidated Statements of Operations

Unaudited

(amounts in thousands, except share data)

Three Months Ended Six Months Ended

January 26,
2019

January 27,
2018
(Restated)

January 26,
2019

January 27,
2018
(Restated)

Gross revenue $ 20,252 $ 21,289 $ 42,004 $ 47,394

Cost of professional services and other direct operating expenses 7,774 7,966 15,908 16,584
Subcontract costs 3,619 4,429 8,193 10,778
Selling, general and administrative expenses 9,452 9,483 18,652 19,265
Depreciation and amortization 264 259 541 519

(Loss) income from operations (857 ) (848 ) (1,290 ) 248

Income from equity method investment 171 221 231 239
Net interest income (expense) 45 (4 ) 98 (2 )
Net foreign exchange gain (loss) (15 ) (25 ) 8 (20 )
Other income (expense) (19 ) 12 9 12

(Loss) income before income tax provision (675 ) (644 ) (944 ) 477
Income tax (benefit) provision (365 ) (116 ) (519 ) 317

Net (loss) income (310 ) (528 ) (425 ) 160

Net loss (income) attributable to noncontrolling interests 1 9 (4 ) (91 )

Net (loss) income attributable to Ecology and Environment Inc. $ (309 ) $ (519 ) $ (429 ) $ 69

Net (loss) income per common share: basic and diluted $ (0.07 ) $ (0.12 ) $ (0.10 ) $ 0.02

Weighted average common shares outstanding: basic and diluted 4,315,135 4,301,604 4,314,543 4,301,604

	Three Months Ended
	November 2, 2019			October 27, 2018

Gross revenue	$	22,213		$	21,752

Cost of professional services and other direct operating expenses		9,543			8,134
Subcontract costs		3,472			4,574
Selling, general and administrative expenses		10,715			9,200
Depreciation and amortization		234			277

Loss from operations		(1,751	)		(433	)

Income from equity method investment		79			60
Net interest income		59			54
Net foreign exchange gain		1			23
Other income		18			26

Loss before income tax benefit		(1,594	)		(270	)
Income tax benefit		(194	)		(155	)

Net loss		(1,400	)		(115	)

Net income attributable to noncontrolling interests		(127	)		(5	)

Net loss attributable to Ecology and Environment Inc.	$	(1,527	)	$	(120	)

Net loss per common share: basic and diluted	$	(0.35	)	$	(0.03	)

Weighted average common shares outstanding: basic and diluted		4,329,858			4,313,930

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Page~~ 4

Page 2 of 27 ~~of 37~~

Ecology and Environment Inc.

Condensed Consolidated Statements of Comprehensive Income

Unaudited

(amounts in thousands)

Three Months Ended Six Months Ended

January 26,
2019

January 27,
2018
(Restated)

January 26,
2019

January 27,
2018
(Restated)

Net (loss) income including noncontrolling interests $ (310 ) $ (528 ) $ (425 ) $ 160
Foreign currency translation adjustments 47 51 (80 ) 37
Unrealized investment losses, net - (13 ) - (16 )

Comprehensive (loss) income (263 ) (490 ) (505 ) 181

Comprehensive (income) loss attributable to noncontrolling interests 8 (29 ) 63 (123 )

Comprehensive (loss) income attributable to Ecology and Environment, Inc. $ (255 ) $ (519 ) $ (442 ) $ 58

	Three Months Ended
	November 2, 2019			October 27, 2018

Net loss including noncontrolling interests	$	(1,400	)	$	(115	)
Foreign currency translation adjustments		(214	)		(127	)

Comprehensive loss		(1,614	)		(242	)
Comprehensive (income) loss attributable to noncontrolling interests		(88	)		55

Comprehensive loss attributable to Ecology and Environment Inc.	$	(1,702	)	$	(187	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Page~~ 5

Page 3 of 27 ~~of 37~~

Ecology and Environment Inc.

Condensed Consolidated Statements of Cash Flows

Unaudited

(amounts in thousands)

							Three Months Ended
	Six Months Ended						November 2, 2019			October 27, 2018
	January 26, 2019			January 27, 2018 (Restated)
Cash flows from operating activities:
Net (loss) income	$	(425	)	$	160
Adjustments to reconcile net income to net cash provided by operating activities:
Net loss							$	(1,400	)	$	(115	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		541			519			234			277
Provision for deferred income taxes		(6	)		(92	)
Deferred income tax provision								31			32
Share based compensation expense		127			70			34			153
Gain on sale of assets and investment securities		(2	)		(1	)		-			(1	)
Net provision for (recovery of) contract adjustments		137			(35	)
Net bad debt (recovery) expense		(187	)		(98	)
Net (recovery) provision for contract adjustments								(104	)		23
Net bad debt expense (recovery)								94			(19	)
Changes in:
- contract receivables		(247	)		6,823			(1,300	)		(1,204	)
- other current assets		(916	)		(150	)		(490	)		(945	)
- income tax receivable		(381	)		668			(114	)		84
- equity method investment		(231	)		(239	)		(79	)		(60	)
- operating lease right of use assets								(5,771	)		-
- other non-current assets		277			36			121			282
- accounts payable		1,322			(1,485	)		123			1,999
- accrued payroll costs		(1,162	)		(740	)		(163	)		(624	)
- income taxes payable		-			302			-			3
- customer deposits		(345	)		558
- current portion of operating lease liabilities								1,754			-
- contract liabilities								790			226
- operating lease liabilities								4,041			-
- other accrued liabilities		43			(216	)		(201	)		43
Net cash (used in) provided by operating activities		(1,455	)		6,080			(2,400	)		154

Cash flows from investing activities:
Purchase of property, buildings and equipment		(259	)		(415	)		(76	)		(140	)
Proceeds from sale of equipment		2			1
(Purchase) sale of investment securities		(16	)		7
Proceeds from sale of property, buildings and equipment								35			2
Purchase of investment securities								(8	)		(41	)
Net cash used in investing activities		(273	)		(407	)		(49	)		(179	)

Cash flows from financing activities:
Dividends paid		(863	)		(860	)		(865	)		(863	)
Repayment of debt		(29	)		(358	)
Net borrowings under lines of credit		210			66
Repayment of long-term debt and capital lease obligations								(9	)		(15	)
Net (repayments) borrowings under lines of credit								(62	)		1
Distributions to noncontrolling interests		(116	)		(192	)		(6	)		(4	)
Net cash used in financing activities		(798	)		(1,344	)		(942	)		(881	)

Effect of exchange rate changes on cash and cash equivalents		49			5			59			35

Net (decrease) increase in cash, cash equivalents and restricted cash		(2,477	)		4,334
Net decrease in cash, cash equivalents and restricted cash								(3,332	)		(871	)
Cash, cash equivalents and restricted cash at beginning of period		13,746			13,135			13,592			13,746

Cash, cash equivalents and restricted cash at end of period	$	11,269		$	17,469		$	10,260		$	12,875

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	8		$	31		$	-		$	4
Income taxes		300			12			57			30
Supplemental disclosure of non-cash items:
Proceeds from capital lease obligations		-			33
Acquisition of noncontrolling interest of subsidiaries								(7	)		-

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Page~~ 6

Page 4 of 27 ~~of 37~~

Ecology and Environment Inc.

Notes to Condensed Consolidated Financial Statements

1.	Organization and Basis of Presentation

Ecology and Environment Inc., (“EEI”) was incorporated in 1970 as a global broad-based environmental consulting firm whose underlying philosophy is to provide professional services worldwide so that sustainable economic and human development may proceed with acceptable impact on the environment. During the ~~six months~~quarter ended ~~January 26,~~November 2, 2019, EEI and its subsidiaries (collectively, the “Company”) included ~~six~~five active wholly-owned and majority-owned operating subsidiaries located in ~~four~~three countries (the United States of America (the “U.S.”), Brazil ~~Peru,~~ and ~~Ecuador)~~Peru), and one majority-owned equity investment in Chile. The Company’s staff is comprised of individuals representing numerous scientific, engineering, health, and social disciplines working together in multidisciplinary teams to provide innovative environmental solutions. The majority of employees hold bachelor’s and/or advanced degrees in such areas as chemical, civil, mechanical, sanitary, soil, structural and transportation engineering, biology, geology, hydrogeology, ecology, urban and regional planning and oceanography. The Company’s client list includes governments, industries, multinational corporations, organizations, and private companies.

The Company prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of such information. All such adjustments are of a normal recurring nature.

Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), including a description of significant accounting policies, have been condensed or omitted pursuant to SEC rules and regulations. Therefore, these financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, ~~2018~~2019 filed with the SEC (the ~~“2018~~“2019 Annual Report”). Other than new or revised accounting policies resulting from the adoption of new accounting pronouncements described in Note 32 of these condensed consolidated financial statements, the accounting policies followed by the Company for preparation of the consolidated financial statements included in the ~~2018~~2019 Annual Report were also followed for this quarterly report. The condensed consolidated results of operations for the three ~~and six~~ months ended ~~January 26,~~November 2, 2019 are not necessarily indicative of the results for any subsequent period or the entire fiscal year ending July 31, ~~2019.~~2020.

2.	~~Restatement of Unaudited Condensed Consolidated Financial Statements~~

~~As previously disclosed in the Current Report on Form 8-K filed by the Company with the SEC on December 12, 2018, the Audit Committee of the Board of Directors (the “Audit Committee”) determined~~ ~~that the Company~~’~~s previously issued financial statements for quarterly periods prior to July 31, 2018 can no longer be relied upon due to errors related to accounting for EEI~~’~~s investment in Gestion Ambiental Consultores S.A. (~~“~~GAC~~”) since 1999. The Company intends to prospectively amend financial statements for the quarters ended October 28, 2017, January 27, 2018 and April 28, 2018 when it files its Quarterly Reports on Form 10-Q for the corresponding quarters during the fiscal year ending July 31, 2019. As a result, the accompanying unaudited condensed consolidated financial statements include restated unaudited condensed consolidated statements of operations, comprehensive income, cash flows and shareholders’ ~~equity for the fiscal quarter and six months ended January 27, 2018.~~

~~The Company had previously included GAC~~’s financial statements in consolidated financial statements filed with the SEC prior to July 31, 2018. In December 2018, the Company determined that, although it had a majority ownership interest in GAC, it did not have a controlling interest in GAC’~~s operations due to lack of continuous control over the activities of GAC~~’~~s board of directors and senior management team. As a result, the Company~~’~~s net investment in GAC should have been accounted for using the equity method of accounting.~~

~~Collectively, the adjustments necessary to deconsolidate GAC~~’~~s unaudited financial statements and correctly account for the Company~~’~~s investment in GAC under the equity method of accounting are referred to as the~~ “~~GAC Deconsolidation Adjustments~~.” For the three months ended January 27, 2018, the GAC Deconsolidation Adjustments resulted in decreases of $3.2 million and $0.3 million in consolidated gross revenue and income before income tax provision, respectively, and had no impact on net income attributable to EEI. For the six months ended January 27, 2018, the GAC Deconsolidation Adjustments resulted in decreases of $5.3 million and $0.4 million in consolidated gross revenue and income before income tax provision, and had no impact on net income attributable to EEI.

~~Page~~ 7 ~~of 37~~

In addition to the GAC Deconsolidation Adjustments, previously filed financial statements for the quarter and six months ended October 28, 2017 were also adjusted for correction of other errors in the financial statements and disclosures that were deemed to be immaterial on an individual basis and in the aggregate for those reporting periods (the “~~Out of Period Adjustments~~”). For the three months ended January 27, 2018, the Out of Period Adjustments resulted in decreases of $0.6 million and less than $0.1 million of consolidated gross revenue and income before income tax provision, respectively, and an increase of $0.2 million of net income attributable to EEI. For the six months ended January 27, 2018, the Out of Period Adjustments resulted in increases of $0.5 million, less than $0.1 million and $0.3 million of consolidated gross revenue, income before income tax provision and net income attributable to EEI, respectively.

The “As Previously Reported” amounts in the tables below represent the amounts reported in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended January 26, 2018, filed with the SEC on March 13, 2018.

~~Ecology and Environment Inc.~~

~~Condensed Consolidated Statements of Operations~~

~~(amounts in thousands, except share data)~~

Three Months Ended January 27, 2018

As
Previously
Reported

GAC
Deconsolidation
Adjustments

Out of Period
Adjustments
Restated

Gross revenue $ 25,083 $ (3,154 ) $ (640 ) $ 21,289

Direct cost of professional services and other direct operating expenses 9,078 (1,112 ) - 7,966
Subcontract costs 5,769 (731 ) (609 ) 4,429
Selling, general and administrative expenses 10,228 (745 ) - 9,483
Depreciation and amortization 268 (9 ) - 259

Income (loss) from operations (260 ) (557 ) (31 ) (848 )

Income from equity method investment - 221 - 221
Net interest income (expense) (9 ) 5 - (4 )
Net foreign exchange (loss) gain (29 ) 4 - (25 )
Other income (expense) 12 - - 12

Income (loss) before income tax provision (286 ) (327 ) (31 ) (644 )
Income tax provision 311 (148 ) (279 ) (116 )

Net (loss) income (597 ) (179 ) 248 (528 )

(Income) loss attributable to noncontrolling interests (171 ) 179 1 9

Net (loss) income attributable to Ecology and Environment Inc. $ (768 ) $ - $ 249 $ (519 )

Net (loss) income per common share: basic and diluted $ (0.18 ) $ (0.12 )

Weighted average common shares outatanding: basic and diluted 4,301,604 4,301,604

~~Page~~ 8 ~~of 37~~

Six Months Ended January 27, 2018

As
Previously
Reported

GAC
Deconsolidation
Adjustments

Out of Period
Adjustments
Restated

Gross revenue $ 52,165 $ (5,266 ) $ 495 $ 47,394

Direct cost of professional services and other direct operating expenses 18,559 (1,975 )
- 16,584
Subcontract costs 11,498 (1,190 )
470 10,778
Selling, general and administrative expenses 20,737 (1,472 )
- 19,265
Depreciation and amortization 537 (18 )
- 519

Income (loss) from operations 834 (611 ) 25 248

Income from equity method investment - 239 - 239
Net interest income (expense) (14 ) 12 - (2 )
Net foreign exchange (loss) gain (26 ) 6 - (20 )
Other income (expense) 12 - - 12

Income (loss) before income tax provision 806 (354 ) 25 477
Income tax provision 755 (160 ) (278 ) 317

Net (loss) income 51 (194 ) 303 160

(Income) loss attributable to noncontrolling interests (286 ) 194 1 (91 )

Net (loss) income attributable to Ecology and Environment Inc. $ (235 ) $ - $ 304 $ 69

Net (loss) income per common share: basic and diluted $ (0.05 ) $ 0.02

Weighted average common shares outatanding: basic and diluted 4,301,604 4,301,604

~~Page~~ 9 ~~of 37~~

~~Ecology and Environment Inc.~~

~~Condensed Consolidated Statements of Comprehensive Income~~

~~(amounts in thousands)~~

Three Months Ended January 27, 2018

As
Previously
Reported

GAC
Deconsolidation
Adjustments

Out of Period
Adjustments
Restated

Net income including noncontrolling interests $ (597 ) $ (179 ) $ 248 $ (528 )
Foreign currency translation adjustments 166 (115 ) - 51
Unrealized investment (losses) gains, net (13 ) - - (13 )

Comprehensive income (444 ) (294 ) 248 (490 )
Comprehensive (income) loss attributable to noncontrolling interests (264 ) 235 - (29 )

Comprehensive income attributable to EEI $ (708 ) $ (59 ) $ 248 $ (519 )

Six Months Ended January 27, 2018

As
Previously
Reported

GAC
Deconsolidation
Adjustments

Out of Period
Adjustments
Restated

Net income including noncontrolling interests $ 51 $ (194 ) $ 303 $ 160
Foreign currency translation adjustments 195 (158 ) - 37
Unrealized investment (losses) gains, net (16 ) - - (16 )

Comprehensive income 230 (352 ) 303 181
Comprehensive (income) loss attributable to noncontrolling interests (393 ) 270 - (123 )

Comprehensive income attributable to EEI $ (163 ) $ (82 ) $ 303 $ 58

~~Page~~ 10 ~~of 37~~

~~Ecology and Environment Inc.~~

~~Condensed Consolidated Statement of Cash Flows~~

~~(amounts in thousands)~~

Six Months Ended January 27, 2018

As
Previously
Reported

Impact of
GAC
Deconsolidation

Other
Adjustments
Restated

Cash flows from operating activities:
Net income $ 51 $ (194 ) $ 303 $ 160
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 537 (18 ) - 519
Provision for deferred income taxes 436 (266 ) (262 ) (92 )
Share based compensation expense - - 70 70
(Gain) loss on sale of assets and investment securities (1 ) - - (1 )
Net recovery of contract adjustments (35 ) - - (35 )
Net bad debt (recovery) expense (130 ) 32 - (98 )
Changes in:
- contract receivables 7,248 261 (686 ) 6,823
- other current assets (300 ) 5 145 (150 )
- income tax receivable 543 142 (17 ) 668
- equity method investment - (239 ) - (239 )
- other non-current assets 60 (13 ) (11 ) 36
- accounts payable (1,996 ) 69 442 (1,485 )
- accrued payroll costs (640 ) (100 ) - (740 )
- income taxes payable 294 8 - 302
- customer deposits 506 52 - 558
- other accrued liabilities (250 ) 34 - (216 )
Net cash provided by (used in) operating activities 6,323 (227 ) (16 ) 6,080

Cash flows from investing activities:
Purchase of property, building and equipment (425 ) 10 - (415 )
Proceeds from sale of building and equipment 1 - - 1
Purchase of investment securities 7 - - 7
Net cash (used in) provided by investing activities (417 ) 10 - (407 )

Cash flows from financing activities:
Dividends paid (860 ) - - (860 )
Repayment of debt (358 ) - - (358 )
Net borrowings (repayment) of lines of credit (152 ) 218 - 66
Distributions to noncontrolling interests (192 ) - - (192 )
Net cash (used in) provided by financing activities (1,562 ) 218 - (1,344 )

Effect of exchange rate changes on cash and cash equivalents 20 (24 ) 9 5

Net increase (decrease) in cash, cash equivalents and restricted cash 4,364 (23 ) (7 ) 4,334
Cash, cash equivalents and restricted cash at beginning of period 13,343 (208 ) - 13,135

Cash, cash equivalents and restricted cash at end of period $ 17,707 $ (231 ) $ (7 ) $ 17,469

3.	Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) establishes changes to U.S. GAAP in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs when they are issued by FASB. ASUs listed below were either adopted by the Company during its current fiscal year or will be adopted as each ASU becomes effective during future reporting periods. ASUs not listed below were assessed to be not applicable to the Company’s operations or are expected to have minimal impact on the Company’s consolidated financial position or results of operations.

~~Page~~ 11 ~~of 37~~

Accounting Pronouncements Adopted During the ~~Six~~Three Months Ended ~~January 26, 2019~~November 2

In May 2014, FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09, as amended by subsequent ASUs that amended and clarified the guidance in ASU 2014-09, forms the basis for FASB ASC Topic 606 (“ASC Topic 606”), which superseded previous authoritative U.S. GAAP guidance regarding revenue recognition. The Company adopted ASC Topic 606 effective August 1, 2018. Refer to Note 6 of these condensed consolidated financial statements for additional disclosures regarding the Company’s adoption of ASC Topic 606.

In January 2016, FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. In February 2018, FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, which clarified certain aspects of the guidance issued in ASU 2016-01. Under the new guidance, entities are no longer able to classify equity investments as either trading or available for sale (“AFS”), and may no longer recognize unrealized holding gains and losses in other comprehensive income on equity securities that were classified as AFS under previous U.S. GAAP. The Company adopted the applicable provisions of ASU 2016-01 effective August 1, 2018 by recording a cumulative effect adjustment of less than $0.1 million to beginning retained earnings and beginning accumulated other comprehensive income on the condensed consolidated balance sheets. The cumulative effect adjustment is also separately reported on the condensed consolidated statements of shareholders’ equity.

In August 2016, FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). The amendments included in this update provide guidance regarding eight specific cash flow classification issues that are not specifically addressed in previous U.S. GAAP, only one of which was deemed applicable to the Company’s cash flow reporting. Issue 6 of ASU 2016-15 requires that reporting entities elect an accounting policy to classify distributions received from equity method investees using one of two possible approaches:

the “cumulative earnings approach,” under which, subject to certain limitations, distributions received from equity investees are considered returns on investment and classified as cash inflows from operating activities; or

the “nature of the distribution approach,” under which distributions received from equity investees should be classified on the basis of the nature of the activity or activities of the investee that generated the distribution as either a return on investment (classified as a cash inflow from operating activities) or a return of investment (classified as a cash inflow from investing activities).

~~The Company adopted the provisions of ASU 2016-15 effective August 1, 2018 and elected the “cumulative earnings approach.”~~

~~The Company received $0.2 million of dividends from its equity method investee during the six months ended January 26, 2019 that are included in cash flows from operating activities.~~

~~Accounting Pronouncements Not Yet Adopted as of January 26, 2019~~

In March 2016, FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The main difference between previous U.S. GAAP and ASU 2016-02 as(together with subsequent ASUs that amended ~~by subsequent ASUs,~~and clarified the guidance in ASU 2016-02) is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. ASU 2016-02 provides specific guidance for determining whether a contractual arrangement contains a lease, lease classification by lessees and lessors, initial and subsequent measurement of leases by lessees and lessors, sale and leaseback transactions, transition, and financial statement disclosures. ASU 2016-02 requires entities to use a modified retrospective approach to apply its guidance, and includes a number of optional practical expedients that entities may elect to apply. ASU 2016-02 will be effective for theThe Company ~~beginning August 1, 2019. Management is currently assessing~~adopted the provisions of ASU ~~2016-02.~~2016-02 effective August 1, 2019, using the modified retrospective approach under which comparative period information is not restated. The Company ~~anticipates that~~elected certain practical expedients allowed in ASU 2016-02 which permit the Company to: (i) not reassess whether existing contracts are or contain leases; (ii) not reassess the lease classification of any existing leases; (iii) not reassess initial direct costs for any existing leases; and (iv) not separate lease and non-lease components for all classes of underlying assets. The Company also made an accounting policy election to not record leases with an initial term of twelve months or less on the balance sheet for all classes of underlying assets.

Page 5 of 27

On the effective date, the Company recognized new right-of-use assets and corresponding lease liabilities associated with operating leases of approximately $6.2 million. The adoption of ASU 2016-02 ~~will result in the addition of~~did not have a material ~~right-of-use assets and lease liabilities to the Company’s consolidated balance sheet in addition to expanding required disclosures. Management has not yet estimated the~~ impact ~~of ASU 2016-02~~ on the Company’s ~~consolidated statements~~results of operations ~~and cash flows.~~or liquidity. Refer to Note 9 of these condensed consolidated financial statements for additional disclosures regarding Leases.

Accounting Pronouncements Not Yet Adopted as of November 2, 2019

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326) (“ASU 2016-13”). The amendments included in this update affect entities holding financial assets, including trade receivables and investment securities available for sale, that are not accounted for at fair value through net income. ASU 2016-13, as amended by subsequent updates that amended and clarified the guidance in ASU 2016-13, requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The amendments included in this update also provide guidance for measurement of expected credit losses and for presentation of increases or decreases of expected credit losses on the statement of operations. ASU ~~No.~~ 2016-13 ~~will~~originally was to be effective for the Company beginning August 1, 2020. ~~Early adoption is permitted~~In November 2019, FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”). ASU 2019-10 revised the effective date of ASU 2016-13 for the Company ~~beginning~~to August 1, ~~2019.~~2023. Management is currently assessing the provisions of ASU 2016-13 and has not yet estimated its impact on the Company’s consolidated financial statements.

~~Page~~ 12 ~~of 37~~

In January 2017, FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The amendments included in this update simplify the subsequent measurement of goodwill by revising the steps required during the registrant’s annual goodwill impairment test. ~~This accounting standard update will~~ASU 2017-04 originally was to be effective for the Company beginning August 1, ~~2021.~~2021, but ASU 2019-10 revised the effective date of ASU 2017-04 for the Company to August 1, 2023. Management is currently assessing the provisions of ASU 2017-04 and has not yet estimated its impact on the Company’s consolidated financial statements.

3.	Agreement and Plan of Merger

On August 28, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WSP Global Inc., a Canadian corporation (“WSP”), and Everest Acquisition Corp., a New York corporation and an indirect wholly owned subsidiary of WSP (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”) with the Company continuing as the surviving corporation.

Under the terms of the Merger Agreement, at the Effective Time (as defined in the Merger Agreement), each share of the Company’s Class A common stock, $0.01 par value per share and Class B common stock, $0.01 par value per share (collectively, the “Company Shares”), issued and outstanding immediately prior to the Effective Time, (other than shares (i) held by the Company (or held in the Company’s treasury), (ii) held by any wholly owned subsidiary of the Company, (iii) held by WSP, Merger Sub or any other wholly owned subsidiary of WSP or (iv) held by holders of Class B common stock who have made a proper demand for appraisal of the shares in accordance with Section 623 of the New York Business Corporation Law) but including shares that are, as of the Effective Time, unvested and subject to restrictions, will be converted into the right to receive $15.00 in cash, without interest and subject to any required tax withholding. In addition, the Merger Agreement provides that record holders of Company Shares as of the close of business on the last business day prior to the Effective Time, including any shares that are then unvested and subject to restrictions, will receive a one-time special dividend from the Company of up to $0.50 in cash per share to be paid shortly after closing (the “Special Dividend”). The amount of the Special Dividend is subject to pro rata reduction if certain expenses incurred by the Company in connection with the Merger exceed $3.05 million in the aggregate, as further described in the Merger Agreement.

The consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including: (i) the absence of an order, injunction or law issued by a court or governmental authority of competent jurisdiction that makes the consummation of the Merger illegal; (ii) the absence of legal proceedings brought by a governmental authority of competent jurisdiction seeking to restrain or prohibit the Merger; (iii) the clearance of the Merger by the Committee on Foreign Investment in the United States without the imposition of any burdensome conditions, as defined in the Merger Agreement; and (iv) subject to certain materiality qualifications, the continued accuracy of the Company’s representations and warranties and continued compliance by the Company with covenants and obligations (to be performed at or prior to the closing of the Merger).

If the Merger Agreement is terminated in certain circumstances, the Company may be required to pay WSP a termination fee of $4.0 million or reimburse WSP for certain expenses up to $1.75 million.

Page 6 of 27

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 28, 2019. Additional information about the Merger and the Merger Agreement is set forth in the Company’s definitive proxy statement filed with the SEC on October 8, 2019 and the definitive proxy statement supplement filed with the SEC on November 7, 2019.

On November 20, 2019, the Company held a special meeting of the Company’s stockholders at which a proposal to adopt the Merger Agreement was approved by the requisite vote of the Company’s stockholders, as more fully described in the Company’s Current Report on Form 8-K/A filed with the SEC on December 4, 2019.

During the quarter ended November 2, 2019, the Company’s U.S. operations recorded approximately $1.5 million of expenses in selling, general and administrative expenses related to the Merger.

4.	Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash are summarized in the following table.

	Balance at				November 2, 2019		July 31, 2019
	January 26, 2019		July 31, 2018		(in thousands)
	(in thousands)
Cash and cash equivalents	$	11,017	$	13,496	$	10,022	$	13,344
Restricted cash included in other assets		252		250
Restricted cash (included in other assets)						238		248
Total cash, cash equivalents and restricted cash	$	11,269	$	13,746	$	10,260	$	13,592

The Company considers all liquid instruments purchased with a maturity of three months or less to be cash equivalents. Money market funds of $0.2 million and less than $0.1 ~~million and $0.4~~ million were included in cash and cash equivalents at ~~January 26,~~November 2, 2019 and July 31, ~~2018,~~2019, respectively. Restricted cash included in other assets represents collateral for pending litigation matters in Brazil that are not expected to be resolved within one year from the balance sheet date.

5.	Fair Value of Financial Instruments

The Company’s financial assets or liabilities are measured using inputs from the three levels of the fair value hierarchy. The Company classifies assets and liabilities within the fair value hierarchy based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company has not elected a fair value option on any assets or liabilities. The three levels of the hierarchy are as follows:

Level 1 Inputs – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Generally, this includes debt and equity securities ~~and derivative contracts~~ that are traded on an active exchange market (e.g., New York Stock Exchange) as well as certain U.S. Treasury and U.S. Government and agency mortgage-backed securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2 Inputs – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, credit risks, etc.) or can be corroborated by observable market data.

Level 3 Inputs – Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use.

The Company monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the ~~Company reports the~~ transfer ~~as of~~is reported at the beginning of the reporting period. ~~The Company evaluated the significance of transfers between levels based upon the nature of the financial instrument.~~ There were no transfers in or out of levels 1, 2 or 3 ~~respectively~~ during the ~~six~~three months ended ~~January~~November 2, 2019 or October 27, ~~2018 or the fiscal year ended July 31, 2017.~~2018.

The carrying amount of cash, cash equivalents and restricted cash approximated fair value at ~~January 26,~~November 2, 2019 and July 31, ~~2018.~~2019. These assets were classified as level 1 instruments at both dates.

Page 7 of 27

Investment securities ~~available for sale~~ of ~~$1.5~~$1.6 million at ~~January 26,~~November 2, 2019 and July 31, ~~2018~~2019 primarily included mutual funds invested in U.S. municipal bonds, which the Company may immediately redeem without prior notice. These mutual funds are valued at the ~~net asset value (“NAV”)~~NAV of shares held by the Company at period end as a practical expedient to estimate fair value. These mutual funds are deemed to be actively traded, are required to publish their daily NAV and are required to transact at that price.

~~Page~~ 13 ~~of 37~~

~~Prior to August 1, 2018,~~The Company recorded unrealized investment losses or gains ~~or losses related to investment securities available for sale were recorded~~of less than $0.1 million in other income on the consolidated ~~balance sheets~~statement of operations during the three months ended November 2, 2019 and statements of comprehensive income. Subsequent to adoption of ASU 2016-01 effective August 1, 2018 (refer to Note 3 of these condensed consolidated financial statements), unrealized gains or losses related to investment securities available for sale are recorded in the consolidated statements of operations. The cost basis of securities sold is based on the specific identification method.October 27, 2018. The Company did not record any sales of investment securities during the ~~six~~three months ended ~~January 26,~~November 2, 2019 and ~~January~~October 27, 2018.

Long-term debt consists of bank loans and capitalized equipment leases. Lines of credit consist of borrowings for working capital requirements. ~~Based on the relative immateriality of consolidated debt and line of credit borrowings, management believes that the~~The carrying amount of these liabilities approximated fair value at ~~January 26,~~November 2, 2019 and July 31, ~~2018.~~2019. These liabilities were classified as level 2 instruments at both dates.

~~There were no financial instruments classified as level 3 at January 26, 2019 and January 27, 2018.~~

6.	Revenue and Contract Receivables, net

~~Adoption of ASC Topic 606~~

~~The Company adopted ASC Topic 606 effective August 1, 2019.~~ ~~Gross~~Substantially all the Company's revenue ~~for reporting periods beginning after July 31, 2018~~ is recognized under ASC Topic 606. Gross revenue for previous reporting periods was recognized in accordance with historic accounting under U.S. GAAP, as summarized in revenue recognition policies included in the Company’s 2018 Annual Report.

The Company adopted ASC Topic 606 using the modified retrospective method. As a practical expedient allowed under ASC Topic 606, the Company applied the new guidance only to contracts that were not completed as of the date of initial application. The Company did not record any cumulative effect adjustment to retained earnings as of August 1, 2019, and ~~did not record any material adjustment to gross revenue for the three or six months ended January 26, 2019 as a result of applying the guidance in ASC Topic 606.~~

~~Revenue Recognition under ASC Topic 606~~

~~The Company recognizes substantially all of its revenue~~derived from environmental consulting work, which is principally derived from the sale of labor ~~hours under environmental consulting contracts.~~hours. Revenue reflected in the Company's consolidated statements of operations ~~represents~~represent services rendered for which the Company maintains a primary contractual relationship with its customers. Included in revenue are certain services outside the Company's normal operations ~~that~~which the Company has elected to subcontract to other contractors.

In accordance with ASC Topic 606, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenue when (or as) the Company satisfies a performance obligation. The Company recognizes the vast majority of its contractual revenue over time, as services are rendered and performance obligations are satisfied, because of the continuous transfer of control to the customer, and because the Company generally maintains the right to remuneration for efforts already expended under its contracts even if a customer terminates the contract. The Company's contracts with customers generally include payment terms that range from 30-90 days from the billing date.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for revenue recognition. The Company allocates a contract’s transaction price to each distinct performance obligation and recognizes revenue when, or as, the performance obligation is satisfied. Predominantly, the Company’s ~~contracts have a single performance obligation because the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts.~~

~~The Company performs its~~ consulting work is performed under a mix of time and materials, fixed price and cost-plus contracts.

The Company accounts for time and material contracts over the period of performance, predominately based on labor hours incurred. Under ~~these types of~~time and materials contracts, there is no predetermined fee. Instead, the Company negotiates hourly billing rates and charges the clients based upon actual hours expended on a project. In addition, any direct project expenditures are passed through to the client and are typically reimbursed. Time and materials contracts may contain “not to exceed” provisions that effectively cap the amount of revenue that the Company can bill to the client. In order to record revenue that exceeds the billing cap, the Company must obtain approval from the client for expanded scope or increased pricing.

The Company ~~recognizes revenue under~~accounts for fixed price contracts ~~using the proportional performance method, under which~~over time, based on progress is determined ~~based on~~by the ratio of efforts expended to date in proportion to total efforts expected to be expended over the life of a contract. ~~The proportional performance~~This revenue recognition method requires the use of estimates and judgment regarding a project’s expected revenue and the extent of progress towards completion. The Company makes periodic estimates of progress towards project completion by analyzing efforts expended to date, plus an estimate of the amount of ~~efforts~~effort expected to ~~expend that we expect to incur~~be incurred until the completion of the project. Revenue is then calculated on a cumulative basis (project-to-date) as the proportion of efforts-expended. The revenue for the current period is calculated as cumulative revenue less project revenue already recognized. If an estimate of efforts expended at completion on any contract indicates that a loss will be incurred, the entire estimated loss is charged to operations in the period the loss becomes evident.

Cost-plus contracts provide for payment of allowable incurred ~~costs,~~efforts expended, to the extent prescribed in the contract, plus fees that ~~we record~~are recorded as revenue. These contracts establish an estimate of total ~~cost~~efforts to be expended and an invoicing ceiling that the contractor may not exceed without the approval of the client. Revenue earned from cost-plus contracts is recognized over the period of performance.

Substantially all of the Company's cost-plus contracts are with federal governmental agencies and, as such, are subject to audits after contract completion. Government audits have been completed and final rates have been negotiated through fiscal year ~~2014.~~2017. The Company ~~recorded~~records an allowance for project disallowances in other accrued liabilities for potential disallowances resulting from government ~~audits of $0.7 million in other accrued liabilities at January 26, 2019 and July 31, 2018. Adjustments to allowances~~audits. Allowances for project disallowances are recorded as adjustments to revenue when the amounts are estimable. Resolution of these amounts is dependent upon the results of government audits and other formal contract ~~closeout~~close-out procedures.

~~Contract modifications are common in the performance the Company’s contracts, and typically result from~~Change orders can occur when changes in scope ~~specifications, design, performance, sites,~~are made after project work has begun and can be initiated by either the Company or ~~period~~its clients. Claims are amounts in excess of ~~completion. In most cases,~~the agreed contract ~~modifications are~~price which the Company seeks to recover from a client for ~~services~~customer delays and/or errors or unapproved change orders that are ~~not distinct,~~in dispute. The Company recognizes costs related to change orders and ~~therefore,~~claims as incurred. Revenue and profit are ~~accounted for as part of the existing contract. Revenue is~~ recognized on ~~contract modifications~~change orders when it is probable that the ~~modification~~change order will be approved, and the amount can be reasonably estimated. Revenue is recognized only up to the amount of costs incurred on contract claims when realization is probable, estimable and reasonable support from the customer exists.

~~Cost of professional services~~The Company expenses all bid and proposal and other ~~direct operating expenses, which includes employee labor and fringe expenses and out~~pre-contract costs as incurred. Out of pocket expenses such as travel, meals, ~~and~~ field supplies, ~~represent~~ and other costs ~~incurred~~billed direct to contracts are included in ~~connection with~~both revenue ~~recognized under client contracts.~~ and cost of professional services. Sales and cost of sales ~~recognized by~~within the Company’s South American operations exclude value added tax (VAT) assessments by governmental authorities, which the Company collects from its customers and remits to governmental authorities.

~~The Company expenses all bid and proposal and other pre-contract costs as incurred.~~

~~Page~~ 14Page 8 of 27 ~~of 37~~

~~Contract Receivables, net and Contract Assets~~

~~Contract receivables, net are summarized in the following table.~~

January 26,
2019

July 31,
2018

(in thousands)
Contract Receivables:
Billed $ 12,578 $ 12,905
Unbilled 14,602 13,994
Total contract receivables 27,180 26,899
Allowance for doubtful accounts (1,234 ) (1,284 )
Contract receivables, net $ 25,946 $ 25,615

Billed contract receivables represent amounts billed to clients in accordance with contracted terms but not collected as of the end of the reporting period. Billed contract receivables may include: (i) amounts billed for revenue from efforts expended and fees that have been earned in accordance with contractual terms; and (ii) progress billings in accordance with contractual terms that include revenue not yet earned as of the end of the reporting period. ~~The Company anticipates that substantially all billed contract receivables will be collected over the next twelve months.~~ ~~Billed contract receivables included contractual retainage balances of $0.8 million and $1.4 million at January 26, 2019 and July 31, 2018, respectively.~~

Unbilled contract receivables, which represent an unconditional right to payment subject only to the passage of time, represent amounts billable to clients in accordance with contracted terms that have not been billed as of the end of the reporting period. Unbilled contract receivables that are not expected to be billed and collected within one year from the balance sheet date are reported in other assets on the condensed consolidated balance sheets.

The Company reduces contract receivables by recording an allowance for doubtful accounts to account for the estimated impact of collection issues resulting from a client’s inability or unwillingness to pay valid obligations to the Company. The resulting provision for doubtful accounts is recorded within selling, general and administrative expenses on the condensed consolidated statements of operations.

Contract Receivables, net and Contract Assets

Contract receivables, net are summarized in the following table.

	November 2, 2019			July 31, 2019
	(in thousands)
Contract Receivables:
Billed	$	12,437		$	12,405
Unbilled		14,708			13,686
Total contract receivables		27,145			26,091
Allowance for doubtful accounts		(1,022	)		(1,004	)
Contract receivables, net	$	26,123		$	25,087

The Company anticipates that substantially all billed contract receivables will be collected over the next twelve months. Billed contract receivables included contractual retainage balances of $0.8 million at November 2, 2019 and July 31, 2019. Management anticipates that the unbilled contract receivables and retainage balances at November 2, 2019 will be substantially billed and collected within one year.

The Company may record contract assets for the right to receive consideration from customers when that right is conditional based on future performance under a contract. Contract assets are transferred to billed contract receivables when the right to consideration becomes unconditional. The Company did not record any contract assets at ~~January 26,~~November 2, 2019 or July 31, ~~2018.~~2019.

At January 26, 2019 and July 31, 2018, management identified $0.3 million and $0.5 million, respectively, of contract receivables, net of related allowance for doubtful accounts, which are not expected to be collected within one year. These receivable balances are included in other assets on the accompanying condensed consolidated balance sheets.

~~Page~~ 15 ~~of 37~~

Allowance for Doubtful Accounts

Activity within the allowance for doubtful accounts is summarized in the following table.

	Three Months Ended						Six Months Ended						Three Months Ended
	January 26, 2019			January 27, 2018 (Restated)			January 26, 2019			January 27, 2018 (Restated)			November 2, 2019			October 27, 2018
	(in thousands)												(in thousands)

Balance at beginning of period	$	1,300		$	2,033		$	1,284		$	2,044		$	1,004		$	1,284
Provision for doubtful accounts during the period		54			59			70			92			97			27
Write-offs and recoveries of allowance recorded in prior periods		(120	)		(190	)		(120	)		(234	)		(79	)		(11	)
Balance at end of period	$	1,234		$	1,902		$	1,234		$	1,902		$	1,022		$	1,300

Page 9 of 27

Contract Receivable Concentrations

Contract receivables and the allowance for doubtful accounts are summarized in the following table.

	January 26, 2019				July 31, 2018				November 2, 2019				July 31, 2019
	Total Billed and Unbilled Contract Receivables		Allowance for Doubtful Accounts		Total Billed and Unbilled Contract Receivables		Allowance for Doubtful Accounts		Total Billed and Unbilled Contract Receivables		Allowance for Doubtful Accounts		Total Billed and Unbilled Contract Receivables		Allowance for Doubtful Accounts
	(in thousands)								(in thousands)

U.S. operations	$	22,171	$	539	$	21,580	$	569	$	21,121	$	528	$	20,211	$	489
South American operations		5,009		695		5,319		715		6,024		494		5,880		515
Totals	$	27,180	$	1,234	$	26,899	$	1,284	$	27,145	$	1,022	$	26,091	$	1,004

The Company’s South American operations have historically maintained a higher level of allowance for doubtful accounts than its U.S. operations, due to uncertain or unstable local economies that adversely impact certain of our South American clients. The allowance for doubtful accounts for the Company’s South American operations represented ~~14%~~9% of related contract receivables at ~~January 26,~~November 2, 2019 and July 31, 2019, compared towith 2% for U.S. operations at the ~~Company’s U.S. operations. Unstable local economies that adversely impacted certain of our South American clients in recent years demonstrated signs of stabilizing during fiscal year 2018.~~same dates. Management continues to monitor trends and events that may adversely impact the realizability of recorded receivables from our South American clients.

~~Page~~ 16 ~~of 37~~

Disaggregation of Revenues

The following table provides a summary of the Company’s gross revenue, disaggregated by operating segment and contract type.

	Three Months Ended				Six Months Ended				Three Months Ended
	January 26, 2019		January 27, 2018 (Restated)		January 26, 2019		January 27, 2018 (Restated)		November 2, 2019		October 27, 2018

Gross revenue from time and materials contracts:
U.S. operations	$	9,732	$	8,837	$	18,988	$	18,788	$	9,965	$	9,257
South American operations		-		-		-		-		40		-
Total gross revenue from time and materials contracts	$	9,732	$	8,837	$	18,988	$	18,788	$	10,005	$	9,257

Gross revenue from fixed price contracts:
U.S. operations	$	5,803	$	2,758	$	9,415	$	7,088	$	3,650	$	3,612
South American operations		1,091		4,905		4,832		10,175		4,395		3,741
Total gross revenue from fixed price contracts	$	6,894	$	7,663	$	14,247	$	17,263	$	8,045	$	7,353

Gross revenue from cost-plus contracts:
U.S. operations	$	3,626	$	4,789	$	8,768	$	11,343	$	4,163	$	5,142
South American operations		-		-		1		-		-		-
Total gross revenue from cost-plus contracts	$	3,626	$	4,789	$	8,769	$	11,343	$	4,163	$	5,142

Gross revenue from all contracts:
U.S. operations	$	19,161	$	16,384	$	37,171	$	37,219	$	17,778	$	18,011
South American operations		1,091		4,905		4,833		10,175		4,435		3,741
Consolidated gross revenue	$	20,252	$	21,289	$	42,004	$	47,394	$	22,213	$	21,752

Customer Deposits

Customer deposits of $4.3 million and $3.6 million at November 2, 2019 and July 31, 2019, respectively, represent cash advances received from customers ~~to be applied to~~for future services.

~~Remaining Performance Obligations~~

The Company’s remaining performance obligations under its current contracts, also known as firm backlog, represent a measure of the total dollar value of work be performed on contracts that are awarded, funded, and in progress. The Company had approximately $66.5 million in remaining performance obligations as of January 26, 2019, of which it expects to recognize $52.6 million (79%) within the next twelve months.

The projects included in firm backlog are subject to cancellations, scope adjustments, foreign exchange fluctuations and project deferrals that may affect the volume or expected timing of revenue recognition. A significant portion of the Company’s revenue is generated from projects awarded under master service agreements with clients. In these instances, only the current unfinished projects are included in our backlog.

7.	Variable Interest Entities and Equity Method Investment

Variable Interest Entities (“VIE”)

The Company’s majority owned subsidiaries are deemed to be VIEs when, on a stand-alone basis, they lack sufficient capital to finance the activities of the VIE. The Company consolidates investments in VIEs if the Company is the primary beneficiary of the VIE. The Company uses a qualitative approach to determine if the Company is the primary beneficiary of the VIE, which considers factors that indicate the Company has significant influence and control over the activities that most significantly impact the VIE’s economic performance. These factors include representation on the investee’s board of directors, management representation, authority to make decisions, substantive participating rights of the minority shareholders and ownership interest.

~~Page~~ 17

Page 10 of 27 ~~of 37~~

~~As of January 26,~~At November 2, 2019 and July 31, ~~2018,~~2019, the Company consolidated one majority owned subsidiary that was deemed to be a VIE. The financial position of this VIE as of ~~January 26,~~November 2, 2019 and July 31, ~~2018~~2019 is summarized in the following table.

	January 26, 2019			July 31, 2018			November 2, 2019			July 31, 2019
	(in thousands)						(in thousands)

Current assets	$	2,525		$	2,359		$	3,226		$	3,549
Noncurrent assets		696			878			1,952			781
Total assets	$	3,221		$	3,237		$	5,178		$	4,330

Current liabilities	$	5,168		$	5,408		$	5,246		$	5,728
Noncurrent liabilities		23			32			7			12
Total liabilities		5,191			5,440			5,253			5,740
Total Ecology and Environment Inc. shareholder’s equity		(864	)		(1,051	)		253			(708	)
Noncontrolling interests shareholders’ equity		(1,106	)		(1,152	)		(328	)		(702	)
Total shareholders’ equity		(1,970	)		(2,203	)		(75	)		(1,410	)
Total liabilities and shareholders’ equity	$	3,221		$	3,237		$	5,178		$	4,330

Total gross revenue of the consolidated VIE was ~~$5.0~~$2.7 million and ~~$4.6~~$2.4 million for the ~~six~~three months ended ~~January 26,~~November 2, 2019 and ~~January 27,~~October 28, 2018, respectively. With the exception of restricted cash of ~~$0.3~~$0.2 million included in noncurrent assets at ~~January 26,~~November 2, 2019 and July 31, 2018, ~~(refer to Note 4),~~ all assets of the VIE were available for the general operations of the VIE.

Equity Method Investment

VIEs for which the Company is not the primary beneficiary, and other investee companies over which the Company does not influence or control the activities that most significantly impact the investee company’s economic performance, are not consolidated and are accounted for under the equity method of accounting. Under the equity method of accounting, an investee company's accounts are not reflected within the Company's consolidated balance sheets and statements of operations. The Company's share of the earnings of the investee company is reported as earnings from equity method investment in the Company's consolidated statements of operations. The Company's carrying value in an equity method investee is reported as equity method investment on the Company's consolidated balance sheets. The Company's carrying value in an equity method investee is reduced by the Company’s share of dividends declared by an investee company.

If the Company's carrying value in an equity method investee company is reduced to zero, no further losses are recorded in the Company's consolidated financial statements unless the Company guaranteed obligations of the investee company or has committed additional funding. When the investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

The Company’s equity method investment ~~in GAC~~ had a carrying value of ~~$2.3 million and $2.1~~$1.7 million at ~~January 26,~~November 2, 2019 and July 31, ~~2018, respectively.~~2019. The Company’s ownership percentage was ~~55.1%~~52.48% at both dates. The equity method investment ~~in GAC~~ is included within the Company’s South American operating segment. Activity recorded for the Company’s equity method investment ~~during the six months ended January 26, 2019 and January 27, 2018~~ is summarized in the following table.

	Six Months Ended				Three Months Ended
	January 26, 2019		January 27, 2018 (Restated)		November 2, 2019			October 27, 2018
	(in thousands)				(in thousands)

Equity investment carrying value at beginning of period	$	2,058	$	1,464	$	1,658		$	2,058
GAC net income attributable to EEI		231		239
Equity investee net income attributable to EEI						79			60
EEI’s portion of other comprehensive loss recorded by the equity investee						(53	)		---
Equity investment carrying value at end of period	$	2,289	$	1,703	$	1,684		$	2,118

The financial position as of ~~January 26, 2019 and July 31, 2018~~the equity method investee is summarized in the following table.

~~Page~~ 18 ~~of 37~~

Noncurrent liabilities

Total Ecology and Environment Inc. shareholder’s equity

Noncontrolling interests shareholders’ equity

Total shareholders’ equity

Total liabilities and shareholders’ equity

The equity method investee’s results of ~~GAC’s~~ operations ~~for the six months ended January 26, 2019 and January 27, 2018~~ are summarized in the following table.

Direct cost of services and subcontract costs

Income from operations

Net income attributable to EEI

Unsecured lines of credit are summarized in the following table.

The Company’s U.S. operations are supported by two line of credit arrangements:

$19.0 million available line of credit at ~~October 27, 2018;~~November 2, 2019 and July 31, 209; no outstanding cash advances ~~as of January 26,~~at November 2, 2019 or July 31, ~~2018;~~2019; letters of credit of less than $0.1 million were outstanding at ~~January 26,~~November 2, 2019 and July 31, ~~2018;~~2019; interest rate ~~on cash advances is~~ based on LIBOR plus 275 basis points; and

$13.5 million available line of credit at ~~January 26.~~November 2, 2019 and July 31, 2019; no outstanding cash advances ~~as of January 26,~~at November 2, 2019 or July 31, ~~2018;~~2019; letters of credit of less than $0.1 million ~~were~~ outstanding at ~~January 26,~~November 2, 2019 and July 31, ~~2018, respectively;~~2019; interest rate ~~on cash advances is~~ based on LIBOR plus 200 basis points.

The Company’s South American operations are supported by two line of credit arrangements:

$2.0 million available line of credit at November 2, 2019 and July 31, 2019 to support operations in Peru; no outstanding cash advances as of ~~January 26,~~$0.2 million and zero at November 2, 2019 orand July 31, ~~2018;~~2019, respectively; letters of credit of ~~$1.1~~$0.7 million and $1.0 million were outstanding at ~~January 26,~~November 2, 2019 and July 31, ~~2018,~~2019, respectively; interest rate ~~on cash advances~~ is affirmed by or negotiated with the lender annually; and

$~~1.4~~1.3 and $1.4 million available line of credit at November 2, 2019 and July 31, 2019, respectively to support operations in Brazil; ~~$0.2 million of~~outstanding cash advances ~~were outstanding as~~ of ~~January 26. 2019;~~zero and $0.3 million at November 2, 2019 and July 31, 2019, respectively; letters of credit of $0.6 million were outstanding at ~~January 26,~~November 2, 2019 and July 31, ~~2018;~~2019; interest rate ~~on cash advances is~~ based on a Brazilian government economic index.

~~Page~~ 19

Page 12 of 27 ~~of 37~~

The Company's leases are classified as operating leases and consist mostly of real estate leases. For leases with terms greater than twelve months at lease commencement, the Company recognizes a right of use asset and a corresponding lease liability. The initial right of use asset and corresponding lease liability are recognized at the present value of remaining lease payments over the lease term. Because the Company has elected to not separate lease and non-lease components, lease payments include variable costs paid to the landlord for common area maintenance, real estate taxes, insurance, and other operating expenses. Leases with an initial term of twelve months or less are not recorded on the Company's condensed consolidated balance sheet. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term.

The Company's leases have lease terms ranging from one to six years, some of which include options to extend or terminate the lease. The exercise of lease renewal options is at the Company's sole discretion. When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term. The Company's lease agreements do not contain material residual value guarantees or any material restrictive covenants.

As of November 2, 2019, the Company does not have any significant additional operating leases that have not yet commenced.

Significant Assumptions of Judgements

The discount rate implicit within each lease is generally not readily determinable, therefore, the Company uses its estimated incremental borrowing rate in determining the present value of lease payments. The incremental borrowing rate is determined based on the Company’s recent debt issuances, lease term, and the currency in which lease payments are made.

Significant assumptions are provided in the following table.

	As Of November 2, 2019

Weighted-average remaining lease term (in years)		2.56
Weighted average discount rate		5.17	%

Amounts Recognized in the Financial Statements

Balance sheet classification of right of use assets and lease liabilities are presented in the following table.

	As Of November 2, 2019
	(in thousands)

Right of use assets (included in non-current assets)	$	5,771
Lease liabilities:
Current	$	1,754
Non-current		4,041
Total lease liabilities	$	5,795

Operating lease expense of $0.6 million for the three months ending November 2, 2019 is included in selling, general and administrative expenses on the condensed consolidated statements operations. Short-term lease expense, sublease income, and variable lease expenses were not material for the three months ending November 2, 2019.

Maturities of Operating Lease Liabilities

Maturities of operating lease liabilities as of November 2, 2019 are provided in the following table.

Fiscal Year Ending July 31	As Of November 2, 2019
	(in thousands)

Remainder of fiscal year 2020	$	1,610
2021		1,880
2022		1,384
2023		928
2024		453
Thereafter		59
Total undiscounted lease payments		6,314
Less: imputed interest		(519	)
Present value of lease liabilities	$	5,795

During interim reporting periods, the effective tax rate may be impacted by changes in the mix of forecasted income from the U.S. and foreign jurisdictions where the Company operates, by changes in tax rates within those jurisdictions, or by significant unusual or infrequent items that could change assumptions used in the calculation of the income tax provision.

The ~~estimated~~Company’s effective tax rate ~~decreased to 55.0%~~was a benefit of 12.2% and 57.4% for the ~~six~~three months ended ~~January 26,~~November 2, 2019 ~~from 66.5% for the six months ended January~~and October 27, ~~2018.~~2018, respectively. The ~~decrease in the estimated~~ effective tax rate ~~resulted~~for the three months ended November 2, 2019 was less than the statutory U.S. federal rate of 21% due mainly ~~from changes in U.S. corporate~~to the following factors:

Continued application of unfavorable permanent tax adjustments pertaining to global low-taxed intangible income ~~tax regulations included~~ in the ~~Tax Cuts~~U.S. resulting from tax reform legislation enacted during fiscal year 2018; and ~~Jobs Act enacted in December 2017 (the “Tax Act”), which included:~~

~~A reduction~~

Income from operations in Peru are not taxed in the Company’s ~~U.S. corporate income~~ tax ~~rate~~provision due to ~~21% for the six months ended January 26, 2019, compared with~~ a ~~blended rate of 26% for the six months ended January 27, 2018.~~

~~Certain one-time tax items, including revaluation of~~valuation allowance recorded against deferred tax assets and liabilities and the effect of a new territorial tax system, that increased the Company’s federal income tax expense by a combined $0.4 million for the six-months ended January 27, 2018. The Company did not record any similar or other unusual adjustments to federal income tax expense during the six months ended January 26, 2019.assets.

~~10.~~11.

Shareholders' Equity

The following ~~tables provide reconciliations~~table provides a reconciliation of the changes in consolidated shareholders’ equity for the three months ended January 26, 2019 and January 27, 2018. Amounts for the three months ended January 27, 2018 have been restated for the GAC Deconsolidation Adjustments and Out of Period Adjustments described in Note 2.November 2, 2019.

	Three Months Ended January 26, 2019																		Three Months Ended November 2, 2019
	Class A Common Stock		Class B Common Stock		Capital in Excess of Par Value		Retained Earnings			Accumulated Other Accumulated Income (Loss)			Treasury Stock			Noncontrolling Interests			Class A Common Stock		Class B Common Stock		Capital in Excess of Par Value		Retained Earnings			Accumulated Other Accumulated Income (Loss)			Treasury Stock			Noncontrolling Interests

Balance at October 27, 2018	$	31	$	13	$	17,595	$	20,848		$	(1,947	)	$	(884	)	$	605
Balance at July 31, 2019																				32		12		16,964		18,687			(2,098	)		(729	)		907

Net income		-		-		-		(309	)		-			-			(1	)
Net (loss) income																				-		-		-		(1,527	)		-			-			127
Foreign currency translation adjustment		-		-		-		-			54			-			(7	)		-		-		-		-			(175	)		-			(39	)
Share-based compensation expense		-		-		34		-			-			-			-			-		-		34		-			-			-			-
Distributions to noncontrolling interests		-		-		-		-			-			-			(112	)		-		-		-		-			-			-			(6	)
Purchase of additional noncontrolling interests		-		-		-		-			-			-			(1	)																	7

Balance at January 26, 2019	$	31	$	13	$	17,629	$	20,539		$	(1,893	)	$	(884	)	$	484
Balance at November 2, 2019																			$	32	$	12	$	16,998	$	17,160		$	(2,273	)	$	(729	)	$	996

The following ~~tables provide reconciliations~~table provides a reconciliation of the changes in consolidated shareholders’ equity for the ~~six~~three months ended ~~January 26, 2019 and January~~October 27, 2018. ~~Amounts for the six months ended January 27, 2018 have been restated for the GAC Deconsolidation Adjustments and Out of Period Adjustments described in Note 2.~~

~~Page~~ 20 ~~of 37~~

Six Months Ended January 26, 2019

Class A
Common
Stock

Class B
Common
Stock

Capital in
Excess of
Par Value

Retained
Earnings

Accumulated
Other
Accumulated
Income (Loss)

Treasury
Stock

Noncontrolling
Interests

Balance at July 31, 2018 $ 30 $ 14 $ 17,558 $ 20,973 $ (1,885 ) $ (907 ) $ 664
Cumulative effect of adoption of ASU 2016-01 - - - (5 ) 5 - -
Balance at July 31, 2018 (Adjusted) 30 14 17,558 20,968 (1,880 ) (907 ) 664

Net income - - - (429 ) - - 4
Foreign currency translation adjustment - - - - (13 ) - (67 )
Conversion of Class B common stock to Class A common stock 1 (1 ) - - - - -
Issuance of stock under stock award plan - - 4 - - 23 -
Share-based compensation expense - - 67 - - - -
Distributions to noncontrolling interests - - - - - - (116 )
Purchase of additional noncontrolling interests - - - - - - (1 )

Balance at January 26, 2019 $ 31 $ 13 $ 17,629 $ 20,539 $ (1,893 ) $ (884 ) $ 484

Six Months Ended January 27, 2018

Class A
Common
Stock

Class B
Common
Stock

Capital in
Excess of
Par Value

Retained
Earnings

Accumulated
Other
Accumulated
Income (Loss)

Treasury
Stock

Noncontrolling
Interests

Balance at July 31, 2017 (Restated) $ 30 $ 14 $ 17,570 $ 23,005 $ (1,795 ) $ (1,037 ) $ 947

Net income - - - 69 - - 91
Foreign currency translation adjustment - - - - 5 - 32
Unrealized investment losses, net - - - - (16 ) - -
Share-based compensation expense - - 71 - - - -
Distributions to noncontrolling interests - - - - - - (192 )

Balance at January 27, 2018 (Restated) $ 30 $ 14 $ 17,641 $ 23,074 $ (1,806 ) $ (1,037 ) $ 878

	Class A Common Stock		Class B Common Stock			Capital in Excess of Par Value		Retained Earnings			Accumulated Other Accumulated Income (Loss)			Treasury Stock			Noncontrolling Interests

Balance at July 31, 2018	$	30	$	14		$	17,558	$	20,973		$	(1,885	)	$	(907	)	$	664
Cumulative effect of adoption of ASU 2016-01		-		-			-		(5	)		5			-			-
Balance at July 31, 2018 (Adjusted)		30		14			17,558		20,968			(1,880	)		(907	)		664

Net (loss) income		-		-			-		(120	)		-			-			5
Foreign currency translation adjustment		-		-			-		-			(67	)		-			(60	)
Conversion of Class B common stock to Class A common stock		1		(1	)		-		-			-			-			-
Issuance of stock under stock award plan		-		-			4		-			-			23			-
Share-based compensation expense		-		-			33		-			-			-			-
Distributions to noncontrolling interests		-		-			-		-			-			-			(4	)

Balance at October 27, 2018	$	31	$	13		$	17,595	$	20,848		$	(1,947	)	$	(884	)	$	605

Class A and Class B Common Stock

The relative rights, preferences and limitations of the Company's Class A and Class B Common Stock are summarized as follows: Holders of Class A ~~shares~~Common Stock are entitled to elect 25% of the Board of Directors so long as the number of outstanding Class A ~~shares~~Common Stock is at least 10% of the combined total number of outstanding Class A and Class B ~~common shares.~~Common Stock. Holders of Class A ~~common shares~~Common Stock have one-tenth the voting power of Class B ~~common shares~~Common Stock with respect to most other matters.

In addition, holders of Class A ~~shares~~Common Stock are eligible to receive dividends in excess of (and not less than) those paid to holders of Class B ~~shares.~~Common Stock. Holders of Class B ~~shares~~Common Stock have the option to convert at any time, each share of Class B Common Stock into one share of Class A Common Stock. Upon sale or transfer, shares of Class B Common Stock will automatically convert into an equal number of shares of Class A Common Stock, except that sales or transfers of Class B Common Stock to an existing holder of Class B Common Stock or to an immediate family member will not cause such shares to automatically convert into Class A Common Stock.

Restrictive Shareholder Agreement

Messrs. Gerhard J. Neumaier (deceased), Frank B. Silvestro, Ronald L. Frank, and Gerald A. Strobel entered into a Stockholders’ Agreement dated May 12, 1970, as amended January 24, 2011, which governs the sale of certain shares of ~~EEI’s~~EEI common stock (now classified as Class B Common Stock) owned by them, certain children of those individuals and any such shares subsequently transferred to their spouses and/or children outright or in trust for their benefit upon the demise of a signatory to the Agreement (“Permitted Transferees”). The Agreement provides that prior to accepting a bona fide offer to purchase some or all of their shares of Class B Common Stock governed by the Agreement, that the selling party must first allow the other signatories to the Agreement (not including any Permitted Transferee) the opportunity to acquire on a pro rata basis, with right of over-allotment, all of such shares covered by the offer on the same terms and conditions proposed by the offer.

Concurrently with the execution and delivery of the Merger Agreement, Frank B. Silvestro, Ronald L. Frank, Gerald A. Strobel, Marshall A. Heinberg, Michael C. Gross, Michael El-Hillow, the Gerhard J. Neumaier Testamentary Trust, Justin C. Jacobs and Mill Road Capital II, L.P. (the “Supporting Stockholders”) entered into voting and support agreements with WSP (the “Voting Agreements”) with respect to all Company Shares and other Subject Securities (as defined in the Voting Agreements) beneficially owned or owned of record by the Supporting Stockholders (the “Voting Agreement Shares”). Upon the closing of the transaction contemplated by the Merger Agreement, the Stockholders’ Agreement and the Voting Agreements shall terminate.

The Company paid $0.9 million of cash dividends during the ~~six~~three months ended ~~January 26,~~November 2, 2019 and ~~January~~October 27, 2018 that were declared and accrued in prior periods.

~~Page~~ 21 ~~of 37~~

Stock Repurchase Plan

In August 2010, the Company’s Board of Directors approved a program for repurchase of 200,000 shares of Class A ~~common stock~~Common Stock (the “Stock Repurchase Program”). As of ~~April 28, 2018,~~November 2, 2019, the Company had repurchased 122,918 shares of Class A ~~stock,~~Common Stock, and 77,082 shares had yet to be repurchased under the Stock Repurchase Program. The Company did not acquire any Class A shares under the Stock Repurchase Program during the three months ended ~~October 27~~November 2, 2019~~, 2018~~ or October 2827, 2018~~, 2017.~~.

Noncontrolling Interests

The Company discloses noncontrolling interests as a separate component of consolidated shareholders’ equity on the accompanying condensed consolidated balance sheets. Earnings and other comprehensive income (loss) are separately attributed to both the controlling and noncontrolling interests. The Company calculates earnings per share based on net income (loss) attributable to the Company’s controlling interests.

The Company considers acquiring additional interests in majority owned subsidiaries when noncontrolling shareholders express their intent to sell their interests. The Company settles and records acquisitions of noncontrolling interests at amounts that approximate fair value. Purchases of noncontrolling interests are recorded as reductions of shareholders’ equity on the condensed consolidated statements of shareholders’ equity.

~~As of July 31, 2018, the~~ The Company ~~held an 87.88% ownership~~did not acquire additional interest in ~~Lowham-Walsh Engineering & Environment Services, LLC (“Lowham”). In~~ any of its majority-owned subsidiaries during the three months ended November 2, 2019 or October 27, 2018 ~~the Company purchased all remaining noncontrolling interest in Lowham for less than $0.1 million, thereby increasing its ownership interest in Lowham to 100%~~.

Accumulated Other Comprehensive Loss

~~The components of accumulated~~Accumulated other comprehensive loss ~~are summarized in the following table.~~

January 26,
2019

July 31,
2018

(in thousands)

Unrealized net foreign currency translation losses

$
(1,893
)

$
(1,880
)
Unrealized net investment (losses) gains on available for sale investments

---

(5
)
Total accumulated other comprehensive loss

$
(1,893
)

$
(1,885
)
is comprised of $2.3 million and $2.1 million of unrealized net foreign currency translation losses at November 2, 2019 and July 31, 2019, respectively.

~~11.~~12.

Earnings Per Share

~~The Company calculates basic~~Basic and diluted earnings per share (“EPS”) are computed by dividing the net income attributable to ~~EEI’s~~EEI common shareholders by the weighted average number of common shares outstanding for the period. After consideration of all the rights and privileges of the Class A and Class B stockholders ~~summarized~~(defined in Note 11 ~~in particular the right~~ of the holders of the Class B common stock to elect no less than 75% of the Board of Directors making it highly unlikely that the Company will pay a dividend on Class A common stock in excess of Class B common stock,these condensed consolidated financial statements), the Company allocates undistributed earnings between the ~~two~~ classes ~~of stock~~ on a one-to-one basis when computing earnings per share. As a result, basic and fully diluted earnings per Class A and Class B share are equal amounts.

The Company has determined that its unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities. These securities ~~shall be~~are included in the computation of earnings per share pursuant to the two-class method. ~~The resulting impact was to include~~As a result, unvested restricted shares are included in the weighted average shares outstanding calculation.

~~Page~~ 22 ~~of 37~~

The computation of earnings per share is included in the following table.

(in thousands, except share and per share amounts)

Weighted-average common shares outstanding - basic and diluted

Distributed earnings per share - basic and diluted

Undistributed losses per share - basic and diluted

Net loss per common share - basic and diluted

Undistributed (losses) earnings per share - basic and diluted

Net income per common share - basic and diluted

~~12.~~13.

Segment Reporting

Management generally assesses operating performance and makes strategic decisions based on the geographic regions in which the Company does business. The Company reports separate operating segment information for its U.S. and South American operations. Gross revenue, net income (loss) attributable to EEI and total assets by operating segment are summarized in the following tables.

	Three Months Ended
	November 2, 2019		October 27, 2018
	(in thousands)

Gross revenue:
U.S. operations	$	17,778	$	18,011
South American operations		4,435		3,741
Total	$	22,213	$	21,752

Gross revenue from U.S. federal government contracts was $2.9 million and $4.4 million for the three months ended January 26, 2019 and January 27, 2018, respectively, and $6.0 million and $8.0 million for the six months ended January 26, 2019 and January 27, 2018, respectively.

(a)

Includes depreciation and amortization expense of $0.1 million and $0.2 million for the three months ended ~~January 26,~~November 2, 2019 and ~~January~~October 27, 2018, ~~and $0.4 million for the six months ended January 26, 2019 and January 27, 2018.~~respectively.

(b)

Includes depreciation and amortization expense of $0.1 million for the three months ended ~~January 26,~~November 2, 2019 and ~~January~~October 27, ~~2018, and $0.2 million and $0.1million for the six months ended January 26, 2019 and January 27, 2018, respectively.~~2018.

South American operations

~~Page~~ 23 ~~of 37~~

Gross revenue from U.S. federal government contracts was $3.5 million and $3.1 million for the three months ended November 2, 2019 and October 27, 2018, respectively.

~~13.~~14.

Commitments and Contingencies

From time to time, the Company is a named defendant in legal actions arising out of the normal course of business. The Company is not a party to any pending legal proceeding, the resolution of which the management believes will have a material adverse effect on the Company’s results of operations, financial condition or cash flows, or to any other pending legal proceedings other than ordinary, routine litigation incidental to its business. The Company maintains liability insurance against risks arising out of the normal course of business.

On February 4, 2011, the Chico Mendes Institute of Biodiversity Conservation of Brazil (the “Institute”) issued a Notice of Infraction to ecology and environment do brasil Ltda. (“E&E Brazil”), a majority-owned consolidated subsidiary of EEI. The Notice of Infraction concerned the taking and collecting of wild animal specimens without authorization by the competent authority and imposed a fine of approximately 0.5 million ~~Reais~~Reals against E&E Brazil. The Institute also filed Notices of Infraction against four employees of E&E Brazil alleging the same claims and imposed fines against those individuals that, in the aggregate, were equal to the fine imposed against E&E Brazil. No claim has been made against EEI.

E&E Brazil has filed court claims appealing the administrative decisions of the Institute for E&E Brazil’s employees that: (a) deny the jurisdiction of the Institute; (b) state that the Notice of Infraction is constitutionally vague; and (c) affirmatively state that E&E Brazil had obtained the necessary permits for the surveys and collections of specimens under applicable Brazilian regulations and that the protected conservation area is not clearly marked to show its boundaries. The claim of violations against one of the four employees was dismissed. The remaining three employees have fines assessed against them that are being appealed through the federal courts. Violations against E&E Brazil are pending agency determination. At ~~January 26,~~July 31, 2019, the Company recorded a reserve of approximately $0.4 million in other accrued liabilities related to these claims.

~~Subsequent Events~~

~~Staff Reduction Programs~~

~~In December 2018,~~On October 8 and 14, 2019, two complaints challenging the Merger were filed in the United States District Court for the Southern District of New York, captioned Jordan Rosenblatt v. Ecology & Environment, Inc., et al. and Randall Meidenbauer v. Ecology & Environment Inc. et al., respectively. The Rosenblatt complaint was filed as a putative class action on behalf of the public shareholders of the Company, ~~began~~while the Meidenbauer complaint was filed as an individual action on behalf of the named plaintiff only. Both complaints name as defendants the Company and the members of the Company’s Board of Directors. The Rosenblatt complaint generally alleges violations of federal securities laws with respect to ~~notify affected employees~~purported disclosure deficiencies in the preliminary proxy statement for the Merger that the Company filed with the SEC on September 26, 2019, and the Meidenbauer complaint generally alleges violations of federal securities laws with respect to purported disclosure deficiencies in the definitive proxy statement for the Merger that the Company filed with the SEC on October 8, 2019 (the “Definitive Proxy Statement”). The complaints seek various forms of relief, including a ~~voluntary retirement program. In February~~preliminary injunction preventing the Company from proceeding with the stockholder meeting or the consummation of the Merger until the alleged material information omitted from the Definitive Proxy Statement is disclosed, rescission of the Merger if it is consummated, damages, attorneys’ fees and expenses. On October 31, 2019, the Company ~~began~~received a demand letter from an additional stockholder alleging violations of federal securities laws with respect to ~~notify affected employees~~purported disclosure deficiencies in the Definitive Proxy Statement and threatening to file a lawsuit unless certain supplemental disclosures were made by the Company regarding the Merger.

On November 7, 2019, E&E filed a supplement to the Definitive Proxy Statement disclosing, among other things, certain additional information in the sections “The Merger—Background of ~~an involuntary separation program. These programs (collectively,~~ the ~~“Staff Reduction Programs”~~Merger”, “The Merger— Opinion of E&E’s Financial Advisor” and “The Merger— Certain Unaudited Prospective Financial Information” (the “Responsive Disclosures”) ~~are being implemented~~in response to the two complaints and the demand letter and solely for the purpose of mooting the allegations contained therein. In light of the Responsive Disclosures, counsel for each of the plaintiffs who had filed the complaints and sent the demand letter informed counsel for the Company that they considered their claims to be moot, and would voluntarily dismiss their complaints (or, in the case of the plaintiff that submitted a demand letter, would refrain from filing a complaint), subject in each case to the plaintiff’s right to seek a mootness fee. For the avoidance of doubt, the Company denies the allegations of the two complaints and demand letter, denies any violations of law, and denies any obligation to pay a mootness fee or other compensation in connection with ~~a corporate restructuring plan.~~the Responsive Disclosures. The Company ~~management anticipates~~believes that the ~~combined effect~~Definitive Proxy Statement disclosed all material information required to be disclosed therein and denies that the Responsive Disclosures are material or are otherwise required to be disclosed. The Company disclosed the Responsive Disclosures following discussions with counsel for plaintiffs and the stockholder from whom the Company received the demand letter and solely to avoid the expense and distraction of litigation. Nothing in the Responsive Disclosures shall be deemed an admission of the ~~Staff Reduction Programs and other expense reduction initiatives will result in annual pre-tax cost savings~~legal necessity or materiality under applicable law of ~~greater than $6.0 million. These activities are expected to result in pre-tax charges and cash expenditures~~any of ~~approximately $1.0 million during~~ the fiscal year ending July 31, 2019, consisting primarily of employee severance and termination benefits. These initiatives were substantially completed by April 30, 2019 and are expected to be completed by July 31, 2019.

~~Sale of Majority Owned Subsidiary~~Responsive Disclosures.

~~In February 2019, the Company consummated the sale~~

Page 18 of its majority interest in a consolidated subsidiary located in Ecuador. The cash proceeds and loss from the sale to noncontrolling shareholders, both recorded in February 2019, were less than $0.1 million and $0.1 million, respectively. The sold subsidiary did not represent a material portion of the Company’s consolidated assets, shareholders’ equity, gross revenue or net income attributable to EEI for any previously reported period, and management does not expect that the sale of this subsidiary will have a material impact on the Company’s results of operations, financial position or cash flows for future reporting periods.

~~Page~~ 24 ~~of 37~~

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

References in this Quarterly Report on Form 10-Q (the “Quarterly Report”) to “EEI” refer to Ecology and Environment Inc., a New York corporation. References to “the Company,” “we,” “us,” “our,” or similar terms refer to EEI together with its consolidated subsidiaries.

Agreement and Plan of Merger

On August 28, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WSP Global Inc., a Canadian corporation (“WSP”), and Everest Acquisition Corp., a New York corporation and an indirect wholly owned subsidiary of WSP (“Merger Sub”). Pursuant to the Merger Agreement, Merger Sub will merge with and into the Company(the “Merger”) with the Company continuing as the surviving corporation.

If the Merger Agreement is terminated in certain circumstances, the Company may be required to pay WSP a termination fee of $4.0 million or reimburse WSP for certain expenses up to $1.75 million.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on August 28, 2019. Additional information about the Merger and the Merger Agreement is set forth in the Company’s definitive proxy statement filed with the SEC on October 8, 2019 and the proxy supplement filed on November 7, 2019.

During the quarter ended November 2, 2019, the Company’s U.S. operations recorded approximately $1.5 million of expenses in selling, general and administrative expenses related to the Merger.

Executive Overview

~~Management~~EEI was incorporated in February 1970 as a global broad-based environmental consulting firm with an underlying philosophy of providing professional services in the regions it serves so that sustainable economic and human development may proceed with acceptable impact on the environment. Our management generally assesses operating performance and makes strategic decisions based on the geographic regions in which we do business. During the quarter ended November 2, 2019, EEI had direct and indirect ownership in four significant active wholly owned and majority-owned operating subsidiaries in three countries (the United States of America, Brazil and Peru), and one majority-owned equity investment in Chile. We report separate operating segment information for our ~~United States (“~~U.S.”) and South American operations.

Page 19 of 27

Our significant active subsidiaries ~~during the six months ended January 26,~~as of November 2, 2019 are listed in the following table.

Name	Percentage of Subsidiary Capital Stock Owned by the Company				Operating Segment

Consolidated Subsidiaries:
Ecology & Environment Engineering, Inc.	~~100.00%~~	100.00	%		United States
Walsh Environmental, LLC	~~100.00%~~	100.00	%		United States
Gustavson Associates, LLC	~~83.60%~~	83.60	%		United States
Walsh Peru, S.A. Ingenieros y Cientificos Consultores (“Walsh Peru”)	~~74.78%~~	74.78	%		South America
ecology and environment do brasil Ltda. (“E&E Brazil”)	~~72.00%~~	72.00	~~South America~~
~~Servicios Ambientales Walsh, S.A. (“Walsh Ecuador”)~~ ~~(a)~~	~~51.00%~~%		South America

Majority-Owned Equity ~~Investment:~~Investment (a):
Gestión Ambiental Consultores S.A. (“GAC”)		~~(b)~~52.48	%	~~55.10%~~		South America

~~(a)~~

~~The Company’s investment in Walsh Ecuador was sold to minority shareholders effective February 1, 2019~~

~~(b)~~

~~EEI’s equity investment in GAC is reported as an “equity method investment” on the consolidated balance sheets,~~EEI’s equity investment in GAC is reported as an “equity method investment” on the condensed consolidated balance sheets. EEI’s share of GAC’s earnings is reported as “income from equity method investment” on the condensed consolidated statements of operations, and as a component of the South American operating segment. ~~EEI’s share of GAC’s earnings is reported as “income from equity method investment” on the consolidated statements of operations.~~

The following table includes selected financial information by operating segment for the three months ended November 2, 2019 and October 27, 2018 ~~and October 28, 2017~~ (the first quarters of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively). Refer to “Results of Operations” below for additional commentary regarding the Company’s revenues and expenses for these reporting periods.

	Three Months Ended										Three Months Ended
	January 26, 2019		January 27, 2018 (Restated)		$ Change			% Change			November 2, 2019			October 27, 2018			$ Change			% Change
	($ in thousands)										($ in thousands)
U.S. operations:
Gross revenue	$	16,303	$	16,384	$	(81	)		---	%	$	17,778		$	18,011		$	(233	)		(1	)%
Gross revenue less subcontract costs		13,400		13,577		(177	)		(1	)%		15,096			14,200			896			6	%
Cost of professional services and other direct operating expenses		6,145		6,396		(251	)		(4	)%
Direct cost of professional services and other direct operating expenses												7,553			6,496			1,057			16	%
Gross margin		7,255		7,181		74			1	%		7,543			7,704			(161	)		(2	)%
Selling, general and administrative expenses		7,835		7,745		89			1	%		9,197			7,836			1,361			17	%
Net income (loss) attributable to EEI												(1,669	)		(107	)		(1,562	)		(a)	%

South American operations:
Gross revenue	$	3,949	$	4,905	$	(956	)		(19	)%	$	4,435		$	3,741		$	694			19	%
Gross revenue less subcontract costs		3,233		3,283		(50	)		(2	)%		3,645			2,978			667			22	%
Cost of professional services and other direct operating expenses		1,629		1,570		59			4	%
Direct cost of professional services and other direct operating expenses												1,990			1,638			352			21	%
Gross margin		1,604		1,713		(109	)		(6	)%		1,655			1,340			315			24	%
Selling, general and administrative expenses		1,617		1,738		(121	)		(7	)%		1,518			1,364			154			11	%
Income from equity method investment		171		221		(50	)		(23	)%		79			60			19			32	%
Net income (loss) attributable to EEI												142			(13	)		155			(a)	%

Consolidated totals:									��
Gross revenue	$	20,252	$	21,289	$	(1,037	)		(5	)%	$	22,213		$	21,752		$	461			2	%
Gross revenue less subcontract costs		16,633		16,860		(227	)		(1	)%		18,741			17,178			1,563			9	%
Cost of professional services and other direct operating expenses		7,774		7,966		(192	)		(2	)%
Direct cost of professional services and other direct operating expenses												9,543			8,134			1,409			17	%
Gross margin		8,859		8,894		(35	)		---	%		9,198			9,044			154			2	%
Selling, general and administrative expenses		9,452		9,483		(32	)		---	%		10,715			9,200			1,515			16	%
Income from equity method investment		171		221		(50	)		(23	)%		79			60			19			32	%
Net income (loss) attributable to EEI												(1,527	)		(120	)		(1,407	)		(a)	%

(a)

percentage change not relevant due to relatively immaterial amounts reported for three months ended October 27, 2018.

~~Page~~ 25 ~~of 37~~

Six Months Ended

January 26,
2019

January 27,
2018
(Restated)

$
Change

%
Change

($ in thousands)

U.S. operations:
Gross revenue $ 34,313 $ 37,219 $ (2,906 ) (8 )%
Gross revenue less subcontract costs 27,599 29,767 (2,168 ) (7 )%
Cost of professional services and other direct operating expenses 12,641 13,413 (772 ) (6 )%
Gross margin 14,958 16,354 (1,396 ) (9 )%
Selling, general and administrative expenses 15,673 16,057 (384 ) (2 )%

South American operations:
Gross revenue $ 7,691 $ 10,175 $ (2,484 ) (24 )%
Gross revenue less subcontract costs 6,212 6,849 (637 ) (9 )%
Cost of professional services and other direct operating expenses 3,267 3,171 96 3 %
Gross margin 2,945 3,678 (733 ) (20 )%
Selling, general and administrative expenses 2,979 3,208 (229 ) (7 )%
Income from equity method investment 231 239 (8 ) (3 )%

Consolidated totals:
Gross revenue $ 42,004 $ 47,394 $ (5,390 ) (11 )%
Gross revenue less subcontract costs 33,811 36,616 (2,805 ) (8 )%
Cost of professional services and other direct operating expenses 15,908 16,584 (676 ) (4 )%
Gross margin 17,903 20,032 (2,129 ) (11 )%
Selling, general and administrative expenses 18,652 19,265 (613 ) (3 )%
Income from equity method investment 231 239 (8 ) (3 )%

We reported a consolidated net loss of $0.3 million ($0.07 per share) for the quarter ended January 26, 2019, compared with a consolidated net loss of $0.5 million ($0.12 per share) for the second quarter of the prior fiscal year. For the six months ended January 26, 2019 and January 27, 2018, we reported a consolidated net loss of $0.4 million ($0.10 per share) and consolidated net income of $0.1 million, respectively. Net (loss) income by operating segment is summarized in the following table.

Three Months Ended Six Months Ended

January 26,
2019

January 27,
2018
(Restated)

January 26,
2019

January 27,
2018
(Restated)

(in thousands)

Net (loss) income attributable to EEI:
U.S. operations (a)
$ (294 ) $ (480 ) $ (402 ) $ (176 )
South American operations (b)
(15 ) (39 ) (27 ) 245
Total $ (309 ) $ (519 ) $ (429 ) $ 69

Gross margin represents gross revenue less subcontract costs and direct cost of ~~professional services and other direct operating expenses.~~ ~~The Company generally earns a higher gross margin from its U.S. operations than gross margin earned from its South American operations.~~services. As a percentage of gross revenue, the consolidated gross margin percentage of ~~43.7% and 42.6%~~41.4% for the first quarter ~~and six months ended January 26, 2019, respectively, increased~~of fiscal year 2020 decreased slightly from the ~~same periods~~first quarter of the prior ~~fiscal year, due mainly to~~year. The current period increase in project related expenses (as a ~~higher~~ percentage of ~~consolidated~~prior year project related expenses) exceeded the increase in gross revenue ~~being generated from~~less subcontract costs in our U.S. ~~operations.~~operating segment.

Page 20 of 27

Results of Operations

Gross Revenue and Gross Revenue less Subcontract Costs

Gross revenue for our operating segments is summarized by contract type ~~is summarized~~ in the following table.

~~Page~~ 26 ~~of 37~~

Three Months Ended Six Months Ended

January 26,
2019

January 27,
2018
(Restated)

January 26,
2019

January 27,
2018
(Restated)

(in thousands)

Time and materials $ 9,629 $ 8,833 $ 18,897 $ 18,765
Fixed price 6,997 7,667 14,339 17,286
Cost-plus 3,626 4,789 8,768 11,343
Consolidated gross revenue $ 20,252 $ 21,289 $ 42,004 $ 47,394

	Three Months Ended
	November 2, 2019		October 27, 2018

Gross revenue from time and materials contracts:
U.S. operations	$	9,965	$	9,257
South American operations		40		-
Total gross revenue from time and materials contracts	$	10,005	$	9,257

Gross revenue from fixed price contracts:
U.S. operations	$	3,650	$	3,612
South American operations		4,395		3,741
Total gross revenue from fixed price contracts	$	8,045	$	7,353

Gross revenue from cost-plus contracts:
U.S. operations	$	4,163	$	5,142
South American operations		-		-
Total gross revenue from cost-plus contracts	$	4,163	$	5,142

Gross revenue from all contracts:
U.S. operations	$	17,778	$	18,011
South American operations		4,435		3,741
Consolidated gross revenue	$	22,213	$	21,752

Gross revenue less subcontract costs is a key metric utilized by management for operational monitoring and decision-making. References to “revenue” in the following commentary refer to gross revenue less subcontract costs, which is summarized by operating segment in the following ~~tables.~~table.

Three Months Ended
Operating Segment
January 26,
2019

January 27,
2018
(Restated)

$
Change

%
Change

($ in thousands)

U.S. operations $ 13,400 $ 13,577 $ (177 ) (1
)%

South American operations:
Chile 1,082 1,506 (424 ) (28
)%
Brazil 2,197 1,747 450 26 %
Other (46 ) 30 (76 ) ---
(a)
Total South American operations 3,233 3,283 (50 ) (2
)%

Consolidated gross revenue less subcontract costs $ 16,633 $ 16,860 $ (227 ) (1
)%

	Six Months Ended											Three Months Ended
Operating Segment	January 26, 2019			January 27, 2018 (Restated)		$ Change			% Change			November 2, 2019		October 27, 2018		$ Change			% Change
	($ in thousands)

U.S. operations	$	27,599		$	29,767	$	(2,168	)		(7	)%	$	15,096	$	14,200	$	896			6	%

South American operations:
Peru		1,995			3,254		(1,259	)		(39	)%		1,167		912		255			28	%
Brazil		4,225			3,552		673			19	%		2,478		2,028		450			22	%
Other		(8	)		43		(51	)		---	(a)		---		38		(38	)		---	(a)
Total South American operations		6,212			6,849		(637	)		(9	)%		3,645		2,978		667			22	%

Consolidated gross revenue less subcontract costs	$	33,811		$	36,616	$	(2,805	)		(8	)%	$	18,741	$	17,178	$	1,563			9	%

(a)

Percent change is not relevant because of the relatively immaterial amounts for all periods presented.

Revenue, net represents gross revenue recognized for the services provided to our clients, adjusted for the impacts of cost overruns or settlements recorded upon completion and close out of a project. Revenue, net less subcontract costs is a key metric utilized by management for operational monitoring and decision-making. References to “revenues” in the following commentary refer to revenue, net less subcontract costs from the table above.

Consolidated revenues decreased slightly during the current quarter and the first half of fiscal year 2018, as lower revenues from U.S. operations were offset by significantly higher revenues from subsidiary operations in South America.

Revenue from our U.S. operations ~~decreased 1%~~increased 6% during ~~the second quarter and decreased 7% during first six months of fiscal year 2019 compared with the same periods of the prior fiscal year.~~

~~Page~~ 27 ~~of 37~~

Cost of Professional Services and Other Direct Operating Expenses

Six Months Ended
Operating Segment
January 26,
2019

January 27,
2018
(Restated)

$
Change

%
Change

($ in thousands)

U.S. operations $ 12,641 $ 13,413 $ (772 ) (6
)%

South American operations:
Peru 720 1,088 (368 ) (34
)%
Brazil 2,526 2,055 471 23 %
Other 21 28 (7 ) ---
(a)
Total South American operations 3,267 3,171 96 3 %

Consolidated cost of professional services and other direct operating expenses $ 15,908 $ 16,584 $ (676 ) (4
)%

(a)

Percent change is not relevant because of the relatively immaterial amounts for all periods presented.

Consolidated ~~Cost~~cost of professional services and other direct operating expenses increased ~~2% and decreased 4%~~17% during the ~~second~~current quarter ~~and first six months of fiscal year 2019, respectively,~~ compared with the same ~~periods of the prior~~period last year. Higher direct costs in our U.S. and Brazilian operations were ~~more than offset by lower costs in the U.S. and Peru. These fluctuations in direct operating expenses generally correspond with increases or decreases in~~due mainly to higher project ~~revenue.~~

revenues.

~~Page~~ 28 ~~of 37~~

Selling, General and Administrative Expenses

Three Months Ended
Operating Segment
January 26,
2019

January 27,
2018
(Restated)

$
Change

%
Change

($ in thousands)

U.S. operations $ 7,835 $ 7,745 $ 89 1 %

South American operations:
Peru 728 857 (129 ) (15
)%
Brazil 841 861 (20 ) (2
)%
Other 48 20 28 ---
(a)
Total South American operations 1,617 1,738 (121 ) (7
)%

Consolidated selling, general and administrative expenses $ 9,452 $ 9,483 $ (32 ) --- %

(a)

Percent change is not relevant because of the relatively immaterial amounts for all periods presented.

Selling, general and administrative expenses increased ~~1% and decreased 2%~~ 17% during the ~~second~~first quarter ~~and first six months~~ of fiscal year ~~2019, respectively,~~2020 compared with the same ~~periods~~quarter last year. During the quarter ended November 2, 2019, our U.S. operations recorded approximately $1.5 million of ~~the prior year.~~ ~~In response~~expenses related to the trend of lack of revenue growth and erosion of profits during recent fiscal years, management implemented a restructuring plan that includes a reduction in workforce and other expense reductions during the second half of fiscal year 2019. Refer to “Corporate Reorganization and Staff Reduction Programs Initiated in Fiscal Year 2019” below for additional commentary.Merger.

Selling, general and administrative expenses in our Brazilian operations ~~decreased 2%~~increased 28% during the ~~second~~first quarter of fiscal year ~~2019 and was relatively unchanged during the first six months of fiscal year 2019,~~2020 compared with the same ~~periods of the prior~~quarter last year. In local currency, staff and other costs increased ~~28%~~26% due to increased project proposal activity and increased general and administrative costs to support higher project volumes and expanded operations. ~~Strengthening of the U.S. dollar compared to the Brazilian Real significantly offset the increases in expenses due to expanded operations.~~

~~Page~~ 29 ~~of 37~~

Income from Equity Method Investment

Direct cost of services and subcontract costs

Income from operations

Net income attributable to EEI

During interim reporting periods, ~~the~~our effective tax rate may be impacted by changes in the mix of forecasted income from the U.S. and foreign jurisdictions where ~~the Company operates,~~we operate, by changes in tax rates within those jurisdictions, or by significant unusual or infrequent items that could change assumptions used in the calculation of the income tax provision.

following factors:

~~A reduction our~~

Continued application of unfavorable permanent tax adjustments pertaining to global low-taxed intangible income in the U.S. ~~corporate income~~resulting from tax ~~rate to 21% for the six months ended January 26, 2019, compared with a blended rate of 26% for the six months ended January 27, 2018.~~reform legislation enacted during fiscal year 2018; and

~~Certain one-time~~

Income from operations in Peru are not taxed in the Company’s tax ~~items, including revaluation of~~provision due to a valuation allowance recorded against deferred tax assets and liabilities and the effect of a new territorial tax system, that increased our federal income tax expense by a combined $0.4 million for the six-months ended January 27, 2018. We did not record any similar or other unusual adjustments to federal income tax expense during the six months ended January 26, 2019.assets.

Taxable income from operations in ~~Fiscal Year 2019~~Brazil which are taxed at a 34% rate, which is higher that the U.S. statutory federal rate.

In response to a lack of revenue growth and erosion of profits during recent fiscal years, we implemented a restructuring plan for our U.S. operations during the quarter ended January 31, 2019, with the overall objective of achieving profitable growth (the “Corporate Restructuring Plan”). The Corporate Restructuring Plan includes work streams to address the following broad objectives for U.S. operations:

~~Simplifying the business organizational structure;~~

~~Improving the efficiency of the technical organization and delivery model;~~

~~Developing an improved marketing and sales strategy; and~~

~~Reducing operating expenses.~~

~~Page~~ 30 ~~of 37~~

In December 2018, we began a process for notifying affected employees of voluntary retirement and involuntary separation programs (collectively, the “Staff Reduction Programs”) being implemented in connection with the Corporate Restructuring Plan. We expect to reduce our U.S. operations workforce by more than 10% by July 31, 2019 as a direct result of the Staff Reduction Programs, resulting in approximately $6 million of anticipated annual reduction of salary and fringe expenses. We also expect these actions to result in approximately $1.0 million of pre-tax charges and cash expenditures recorded during the second half of fiscal year 2019, consisting primarily of employee severance and termination benefits. These initiatives were substantially completed by April 30, 2019 and are expected to be completed by July 31, 2019.

We paid $0.9 million of dividends during the first quarter of fiscal year 2020 that were declared during the prior quarter. Our Board of Directors considers the approval dividends to our shareholders on a discretionary basis based on various operating parameters, including available cash balances, results of current operations and projections of future operating results and cash flows. ~~Excluding~~

During the ~~payment~~first quarter of ~~$0.9~~fiscal year 2019, our U.S. operations incurred and paid approximately $1.5 million of ~~dividends~~expenses related to ~~shareholders that~~the Merger.

A decline in revenue and profits from our ~~Board of Directors approved~~U.S. operations during fiscal year 2019 had a detrimental impact on ~~a discretionary basis,~~ cash ~~decreased $1.6 million~~generated from operating activities during the ~~period.~~first quarter of fiscal year 2020.

Higher revenue from our Peruvian operations during the first quarter of fiscal year 2020 required initial resource outlays on new projects that have not yet been billed to and collected from our clients.

The Tax Act resulted in a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries of approximately $0.5 million, which will be paid, without incurring interest, by July 31, 2019.

~~Page~~ 31 ~~of 37~~

Firm backlog by operating segment is summarized in the following table.

Page 24 of ~~fiscal year 2019. The increase in firm backlog for our South American operations during the same period was the result of significant new orders that outpaced completion of projects.~~27

Critical Accounting Policies and Use of Estimates

Update to ~~Revenue Recognition~~Leases Accounting Policy

In ~~May 2014,~~March 2016, FASB issued ASU ~~No. 2014-09, Revenue from Contracts~~2016-02. The main difference between previous U.S. GAAP and ASU 2016-02 (together with ~~Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09, as amended by~~ subsequent ASUs that amended and clarified the guidance in ASU ~~2014-09, forms~~2016-02) is the ~~basis~~recognition of lease assets and lease liabilities by lessees for ~~FASB ASC Topic 606 (“ASC Topic 606”), which superseded~~those leases classified as operating leases under previous ~~authoritative~~ U.S. ~~GAAP guidance regarding revenue recognition.~~ GAAP. The Company adopted ~~ASC Topic 606~~the provisions of ASU 2016-02 effective August 1, ~~2018.~~2019, using the modified retrospective approach. The adoption of ASU 2016-02 did not have a material impact on the results of operations or liquidity for the Company’s U.S. or South American operations. On the effective date, the recognized new right-of-use assets and corresponding lease liabilities associated with operating leases of approximately $6.2 million. Refer to Notes 32 and 69 of the accompanying condensed consolidated financial statements ~~included in Item 1 of this Form 10-Q~~ for additional ~~disclosures~~information regarding ~~the~~our adoption of ASU ~~2014-09 and our revenue recognition accounting policy.~~2016-02.

Inflation did not have a material impact on our business during the ~~six months~~quarters ended ~~January 26,~~November 2, 2019 or ~~January~~October 27, 2018 because a significant amount of our contracts are either cost based or contain commercial rates for services that are adjusted annually.

~~Page~~ 32 ~~of 37~~

We had outstanding letters of credit drawn under our lines of credit to support operations of ~~$1.7~~$1.3 million and $1.6 million at ~~January 26,~~November 2, 2019 and July 31, ~~2018.~~2019, respectively. Other than these letters of credit, we did not have any off-balance sheet arrangements as of ~~January 26,~~November 2, 2019 or July 31, ~~2018.~~2019.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

determining the appropriate application of accounting standards when assessing whether the Company’s investments in subsidiaries should be consolidated or accounted for under the equity method of accounting;

~~ascertaining and disclosing the appropriate accounting policies, including the effects of non-standard provisions, for revenue recognition related to the Company’s fixed-price service contracts;~~

~~establishing appropriate cutoff procedures for appropriate revenue and expense recognition.~~

We will assess our current accounting staff and identify the need to train existing staff resources regarding technical accounting topics and related disclosure requirements that are pertinent to the Company’s operations, including those relating to consolidation, equity method and revenue recognition standards. We will also consider adding new staff resources and/or engaging third-party advisors that have adequate expertise and experience with pertinent U.S. GAAP requirements.

We will assess our policies and processes to determine controls required to appropriately address technical accounting topics and establish cutoff for recognition of revenues and expenses. Once determined, we will implement any needed enhancements and/or additional procedures and controls.

~~Page~~ 33 ~~of 37~~

~~The design and execution of any new or enhanced controls noted above will be periodically tested by the Company’s Internal Auditor.~~

~~Other than certain controls added or improved to address the material weaknesses described above, no~~No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended ~~January 26,~~November 2, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Page~~ 34 ~~of 37~~

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even effective internal control over financial reporting can only provide reasonable assurance of achieving their control objectives.

Item 1.

Legal Proceedings

Item 2.

Changes in Securities and Use of Proceeds

	January 26, 2019		July 31, 2018		November 2, 2019		July 31, 2019
	(in thousands)				(in thousands)

Current assets	$	5,017	$	5,713	$	5,233	$	5,671
Noncurrent assets		755		501		1,173		1,215
Total assets	$	5,772	$	6,214	$	6,406	$	6,886

Current liabilities	$	1,631	$	2,620	$	2,758	$	3,232
Noncurrent liabilities		939		593		793		847
Total liabilities		2,570		3,213		3,551		4,079
Total Ecology and Environment Inc. shareholder’s equity		1,840		1,678		1,830		1,806
Noncontrolling interests shareholders’ equity		1,362		1,323		1,025		1,001
Total shareholders’ equity		3,202		3,001		2,855		2,807
Total liabilities and shareholders’ equity	$	5,772	$	6,214	$	6,406	$	6,886

	January 26, 2019		July 31, 2018		November 2, 2019		July 31, 2019
	(in thousands)				(in thousands)

Outstanding cash advances	$	222	$	---
Outstanding cash advances reported as lines of credit					$	200	$	284
Outstanding letters of credit		1,697		1,668		1,338		1,635
Total amounts used under lines of credit		1,919		1,668		1,538		1,919
Remaining amounts available under lines of credit		33,988		36,832		34,311		34,015
Total approved unsecured lines of credit	$	35,907	$	38,500
Total unsecured lines of credit					$	35,849	$	35,934

	Three Months Ended January 27, 2018
	As Previously Reported			GAC Deconsolidation Adjustments			Out of Period Adjustments			Restated

Gross revenue	$	25,083		$	(3,154	)	$	(640	)	$	21,289

Direct cost of professional services and other direct operating expenses		9,078			(1,112	)		-			7,966
Subcontract costs		5,769			(731	)		(609	)		4,429
Selling, general and administrative expenses		10,228			(745	)		-			9,483
Depreciation and amortization		268			(9	)		-			259

Income (loss) from operations		(260	)		(557	)		(31	)		(848	)

Income from equity method investment		-			221			-			221
Net interest income (expense)		(9	)		5			-			(4	)
Net foreign exchange (loss) gain		(29	)		4			-			(25	)
Other income (expense)		12			-			-			12

Income (loss) before income tax provision		(286	)		(327	)		(31	)		(644	)
Income tax provision		311			(148	)		(279	)		(116	)

Net (loss) income		(597	)		(179	)		248			(528	)

(Income) loss attributable to noncontrolling interests		(171	)		179			1			9

Net (loss) income attributable to Ecology and Environment Inc.	$	(768	)	$	-		$	249		$	(519	)

Net (loss) income per common share: basic and diluted	$	(0.18	)							$	(0.12	)

Weighted average common shares outatanding: basic and diluted		4,301,604									4,301,604

	Six Months Ended January 27, 2018
	As Previously Reported			GAC Deconsolidation Adjustments			Out of Period Adjustments			Restated

Gross revenue	$	52,165		$	(5,266	)	$	495		$	47,394

Direct cost of professional services and other direct operating expenses		18,559			(1,975	)		-			16,584
Subcontract costs		11,498			(1,190	)		470			10,778
Selling, general and administrative expenses		20,737			(1,472	)		-			19,265
Depreciation and amortization		537			(18	)		-			519

Income (loss) from operations		834			(611	)		25			248

Income from equity method investment		-			239			-			239
Net interest income (expense)		(14	)		12			-			(2	)
Net foreign exchange (loss) gain		(26	)		6			-			(20	)
Other income (expense)		12			-			-			12

Income (loss) before income tax provision		806			(354	)		25			477
Income tax provision		755			(160	)		(278	)		317

Net (loss) income		51			(194	)		303			160

(Income) loss attributable to noncontrolling interests		(286	)		194			1			(91	)

Net (loss) income attributable to Ecology and Environment Inc.	$	(235	)	$	-		$	304		$	69

Net (loss) income per common share: basic and diluted	$	(0.05	)							$	0.02

Weighted average common shares outatanding: basic and diluted		4,301,604									4,301,604

	Six Months Ended January 27, 2018
	As Previously Reported			Impact of GAC Deconsolidation			Other Adjustments			Restated

Cash flows from operating activities:
Net income	$	51		$	(194	)	$	303		$	160
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		537			(18	)		-			519
Provision for deferred income taxes		436			(266	)		(262	)		(92	)
Share based compensation expense		-			-			70			70
(Gain) loss on sale of assets and investment securities		(1	)		-			-			(1	)
Net recovery of contract adjustments		(35	)		-			-			(35	)
Net bad debt (recovery) expense		(130	)		32			-			(98	)
Changes in:
- contract receivables		7,248			261			(686	)		6,823
- other current assets		(300	)		5			145			(150	)
- income tax receivable		543			142			(17	)		668
- equity method investment		-			(239	)		-			(239	)
- other non-current assets		60			(13	)		(11	)		36
- accounts payable		(1,996	)		69			442			(1,485	)
- accrued payroll costs		(640	)		(100	)		-			(740	)
- income taxes payable		294			8			-			302
- customer deposits		506			52			-			558
- other accrued liabilities		(250	)		34			-			(216	)
Net cash provided by (used in) operating activities		6,323			(227	)		(16	)		6,080

Cash flows from investing activities:
Purchase of property, building and equipment		(425	)		10			-			(415	)
Proceeds from sale of building and equipment		1			-			-			1
Purchase of investment securities		7			-			-			7
Net cash (used in) provided by investing activities		(417	)		10			-			(407	)

Cash flows from financing activities:
Dividends paid		(860	)		-			-			(860	)
Repayment of debt		(358	)		-			-			(358	)
Net borrowings (repayment) of lines of credit		(152	)		218			-			66
Distributions to noncontrolling interests		(192	)		-			-			(192	)
Net cash (used in) provided by financing activities		(1,562	)		218			-			(1,344	)

Effect of exchange rate changes on cash and cash equivalents		20			(24	)		9			5

Net increase (decrease) in cash, cash equivalents and restricted cash		4,364			(23	)		(7	)		4,334
Cash, cash equivalents and restricted cash at beginning of period		13,343			(208	)		-			13,135

Cash, cash equivalents and restricted cash at end of period	$	17,707		$	(231	)	$	(7	)	$	17,469

	Six Months Ended January 26, 2019
	Class A Common Stock		Class B Common Stock			Capital in Excess of Par Value		Retained Earnings			Accumulated Other Accumulated Income (Loss)			Treasury Stock			Noncontrolling Interests

Balance at July 31, 2018	$	30	$	14		$	17,558	$	20,973		$	(1,885	)	$	(907	)	$	664
Cumulative effect of adoption of ASU 2016-01		-		-			-		(5	)		5			-			-
Balance at July 31, 2018 (Adjusted)		30		14			17,558		20,968			(1,880	)		(907	)		664

Net income		-		-			-		(429	)		-			-			4
Foreign currency translation adjustment		-		-			-		-			(13	)		-			(67	)
Conversion of Class B common stock to Class A common stock		1		(1	)		-		-			-			-			-
Issuance of stock under stock award plan		-		-			4		-			-			23			-
Share-based compensation expense		-		-			67		-			-			-			-
Distributions to noncontrolling interests		-		-			-		-			-			-			(116	)
Purchase of additional noncontrolling interests		-		-			-		-			-			-			(1	)

Balance at January 26, 2019	$	31	$	13		$	17,629	$	20,539		$	(1,893	)	$	(884	)	$	484

Fiscal Year ~~2018~~2019 Reporting Month	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs

August ~~2018~~2019	---	---	---	77,082
September ~~2018~~2019	---	---	---	77,082
October ~~2018~~	~~---~~	~~---~~	~~---~~	~~77,082~~
~~November 2018~~	~~---~~	~~---~~	~~---~~	~~77,082~~
~~December 2018~~	~~---~~	~~---~~	~~---~~	~~77,082~~
~~January~~ 2019	---	---	---	77,082

	(a)	31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
		32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
		32.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


	(b)	The Company filed a Current Report on Form 8-K on September 19, 2018 to announce the appointment of the Company’s Chairman of the Board, Marshall A. Heinberg, as Interim Executive Chairman, and the appointment of Todd Musterait as President of United States Operations.

	~~(c)~~	The Company filed a Current Report on Form 8-K on November ~~2, 2018~~20, 2019 (the “Original Report”) to announce that, at a special meeting of stockholders held by the Company on November 20, 2019 (the “Special Meeting”), the Company’s stockholders approved the following proposals: (i) a proposal to adopt the Agreement and Plan of Merger, dated as of August 28, 2019 (the “Merger Agreement”), by and among WSP Global Inc., a Canadian corporation, Everest Acquisition Corp., a New York corporation and indirect wholly owned subsidiary of WSP Global Inc. and the Company (the “Merger Agreement Proposal”); (ii) a proposal to approve, on an advisory (non-binding) basis, the compensation ~~arrangements for Marshall A. Heinberg, Interim Executive Chairman,~~that may be paid or become payable to E&E’s named executive officers that is based on or otherwise relates to the merger contemplated by the Merger Agreement; and ~~Todd Musterait, President~~(iii) a proposal to approve an adjournment of ~~United States Operations.~~the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes at the time of the Special Meeting to approve the Merger Agreement Proposal.


	~~(d)~~(c)	The Company filed a Current Report on Form ~~8-K~~8-K/A on ~~November 16, 2018~~December 4, 2019 to ~~announce that~~amend an immaterial, typographical error included in the ~~Company received, as expected, a formal notification from~~Original Report. This correction was immaterial and did not impact the ~~Listing Qualifications Department~~outcome of the ~~Nasdaq Stock Market (“Nasdaq”) stating that~~vote as previously disclosed in the ~~Company is not in compliance with the requirements for continued listing under Nasdaq Listing Rule 5250(c)(1) because it did not file its 2018 Annual Report on a timely basis.~~

	~~(e)~~	The Company filed a Current Report on Form 8-K on December 12, 2018 to announce: (i) development and rollout of an organizational restructuring plan, which includes a reduction of workforce, that is expected to result in $5.0 million to $6.5 million of annual pre-tax cost savings: and (ii) the conclusion reached by the Company’s Audit Committee that the Company’s consolidated financial statements and related reports filed with the Securities and Exchange Commission (the “SEC”) for periods ended prior to July 31, 2018 should no longer be relied upon due to errors related to accounting for an investment in an entity in which the Company holds a majority economic interest.

	~~(f)~~	The Company filed a Current Report on Form 8-K on December 14, 2018 to announce that the Company had received, as expected, a formal notification from the Listing Qualifications Department of Nasdaq stating that the Company is not in compliance with the requirements for continued listing under Nasdaq Listing Rule 5250(c)(1) because it did not file its Quarterly Report on Form 10-Q for the period ended October 27, 2018, and because the Company remains delinquent in filing its Annual Report on Form 10-K for the fiscal year ended July 31, 2018. The Company was given 60 calendar days from the due date for the 2018 Annual Report, or until January 14, 2019, either to file the Delinquent Filings with the SEC or to submit a plan to regain compliance.

	~~(g)~~	The Company filed a Current Report on Form 8-K on December 16, 2018 to announce that Gerard A. Gallagher III, who served as the Company’s Chief Executive Officer since 2015, was leaving the Company effective December 17, 2018.

	~~(h)~~	The Company filed a Current Report on Form 8-K on January 16, 2019 to announce that the Company submitted a compliance plan to Nasdaq to support its request for an extension of time to regain compliance with the Nasdaq continued listing requirements.

	~~(i)~~	The Company filed a Current Report on Form 8-K on February 7, 2019 to announce that the Company received a letter from Nasdaq granting the Company’s request for an exception to Nasdaq Listing Rule 5250(c)(1) (the “Rule”) in order to allow the Company to regain compliance with the Rule. Under the terms of the exception, the Company must file its outstanding annual and quarterly reports with the SEC, as well as any future delinquent quarterly SEC reports, on or before May 13, 2019.

	~~(j)~~	The Company filed a Current Report on Form 8-K on March 26, 2019 to announce that the Company had received, as expected, of a formal notification from the Listing Qualifications Department of Nasdaq stating that the Company continues not to be in compliance with the requirements for continued listing under Nasdaq Listing Rule 5250(c)(1) because it did not file its Quarterly Report on Form 10-Q for the period ended January 26, 2019.

	~~(k)~~	The Company filed a Current Report on Form 8-K on April 1, 2019 to announce that the Company submitted a letter to Nasdaq reaffirming its intention to take all necessary steps to achieve compliance with Nasdaq continued listing requirements no later than May 13, 2019.

	~~(l)~~	The Company filed a Current Report on Form 8-K on April 16, 2019 to announce that : (i) Fred J. McKosky, Technical Operations Director, declared his intention to retire shortly after the end of the Company’s fiscal year ending July 31, 2019; and (ii) Kurt Zmich was promoted to Senior Vice President of Operations effective April 11, 2019, replacing Mr. McKosky as the Company’s principal operating officer.

	~~(m)~~	The Company filed a Current Report on Form 8-K on May 14, 2019 to announce that: (i) the Company was unable to meet the May 13, 2019 extended deadline granted by Nasdaq to file its Annual Report on Form 10-K for the fiscal year ended July 31, 2018 and its Quarterly Reports on Form 10-Q for the periods ended October 27, 2018 and January 26, 201; and (ii) the Company’s Chief Administrative Officer, JoAnn Shea, resigned her position effective May 17, 2019.

	~~(n)~~	~~The Company filed a Current Report on Form 8-K on May 16, 2019 to announce that~~ the Company received on May 13, 2019, as expected, a formal determination letter from Nasdaq stating that the Company did not meet the terms of the exception that was previously granted by Nasdaq in order to allow the Company to regain compliance with Nasdaq Listing Rule 5250(c)(1).

		~~Ecology and Environment Inc.~~ECOLOGY AND ENVIRONMENT INC.

Date:	~~May 31,~~December 17, 2019	~~By:~~	/s/ Peter F. Sorci
			Peter F. Sorci
			Acting Chief Financial Officer