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 ~~September~~March 30, ~~2023~~2024

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

Commission File No. 001-14217

ENGlobal Corporation

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of

incorporation or organization)

88-0322261

(I.R.S. Employer Identification No.)

11740 Katy Fwy – Energy Tower III, 11^th11th floor

Houston, TX

77079

(Address of principal executive offices)

(Zip code)

(281) 878-1000

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		ENG		NASDAQ

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 shortened period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

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

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	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 ☒

As of ~~November 13, 2023,~~May 9, 2024, the registrant had outstanding ~~40,998,947~~5,156,583 shares of common stock, par value $0.001 per share.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED ~~SEPTEMBER~~MARCH 30, ~~2023~~2024

TABLE OF CONTENTS

		Page Number

Part I.	Financial Information	3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September~~March 30, ~~2023~~2024 and ~~September 24, 2022~~April 1, 2023	3

	Unaudited Condensed Consolidated Balance Sheets at ~~September~~March 30, ~~2023~~2024 and December ~~31, 2022~~30, 2023	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September~~March 30, 2024 qnd April 1, 2023 ~~and September 24, 2022~~	5

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three ~~and Nine~~ Months Ended ~~September~~March 30, ~~2023~~2024 and ~~September 24, 2022~~April 1, 2023	6

	Notes to Unaudited Interim Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1917

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2723

Item 4.	Controls and Procedures	2723

Part II.	Other Information	2825

Item 1.	Legal Proceedings	2825

Item 1A.	Risk Factors	2825

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3026

Item 3.	Defaults Upon Senior Securities	3026

Item 4.	Mine Safety Disclosures	3026

Item 5.	Other Information	3026

Item 6.	Exhibits	3127

	Signatures	3228

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ENGlobal Corporation

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share data)

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended
	September 30, 2023			September 24, 2022			September 30, 2023			September 24, 2022			March 30, 2024			April 1, 2023
Operating revenues	$	9,450		$	13,056		$	32,381		$	31,777		$	6,528		$	13,193
Operating costs		7,613			12,392			32,748			30,439			6,064			15,015
Gross profit (loss)		1,837			664			(367	)		1,338			464			(1,822	)

Selling, general and administrative expenses		2,512			2,920			10,850			8,653			2,017			4,416
Operating loss		(675	)		(2,256	)		(11,217	)		(7,315	)		(1,553	)		(6,238	)

Other income (expense):
Other income, net		3			5			52			36			222			3
Interest expense, net		(27	)		(63	)		(158	)		(166	)		(43	)		(72	)
Loss from continuing operations before income taxes		(699	)		(2,314	)		(11,323	)		(7,445	)
Loss from operations before income taxes														(1,374	)		(6,307	)

Provision for federal and state income taxes		22			21			66			43			22			22

Net loss		(721	)		(2,335	)		(11,389	)		(7,488	)		(1,396	)		(6,329	)

Basic and diluted loss per common share:	$	(0.02	)	$	(0.07	)	$	(0.29	)	$	(0.21	)	$	(0.27	)	$	(1.33	)

Basic and diluted weighted average shares used in computing loss per share:		40,830			35,802			39,591			35,492			5,156			4,773

See accompanying notes to unaudited interim condensed consolidated financial statements.

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ENGlobal Corporation

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except share and per share amounts)

	September 30, 2023			December 31, 2022			March 30, 2024			December 30, 2023
ASSETS
Current Assets:
Cash	$	1,488		$	3,464		$	1,077		$	615
Trade receivables, net of allowances of $4,336 and $2,129		7,504			7,644
Trade receivables, net of allowances of $3,227 and $4,336								3,999			6,432
Prepaid expenses and other current assets		247			1,580			698			992
Payroll taxes receivable		102			1,547			102			102
Contract assets		4,716			4,934			3,602			3,296
Total Current Assets		14,057			19,169			9,478			11,437
Property and equipment, net		1,634			1,757			895			1,360
Goodwill		720			720			720			720
Other assets
Right-of-use asset		7,022			8,072			4,762			5,079
Deposits and other assets		280			305			184			191
Total Other Assets		7,302			8,377			4,946			5,270
Total Assets	$	23,713		$	30,023		$	16,039		$	18,787

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current Liabilities:
Accounts payable	$	7,086		$	4,454		$	6,152		$	7,005
Accrued compensation and benefits		2,616			2,002			1,753			1,445
Current portion of leases		1,626			1,849
Current portion of operating leases								1,890			1,726
Current portion of finance leases								148			263
Contract liabilities		1,866			956			976			1,195
Other current liabilities		277			1,134			643			977
Credit Agreement		1,018			—
Revolving Credit Facility		—			1,661
Short-term debt								—			1,047
Total Current Liabilities		14,489			12,056			11,562			13,658

Long-term debt								1,272			—
Long-term unearned revenue		388			425			363			375
Long-term leases		6,731			7,217
Long-term operating leases								5,383			5,761
Long-term finance leases								305			548
Total Liabilities		21,608			19,698			18,885			20,342
Commitments and Contingencies (Note 8)
Stockholders’ Equity:
Common stock - $0.001 par value; 75,000,000 shares authorized; 40,998,947 shares issued and outstanding at September 30, 2023 and 35,800,617 shares issued and outstanding at December 31, 2022		41			36
Common stock - $0.001 par value; 75,000,000 shares authorized; 5,156,583 shares issued and outstanding at March 30, 2024 and December 30, 2023								5			5
Additional paid-in capital		61,214			58,050			61,459			61,354
Accumulated deficit		(59,150	)		(47,761	)		(64,310	)		(62,914	)
Total Stockholders’ Equity		2,105			10,325
Total Liabilities and Stockholders’ Equity	$	23,713		$	30,023
Total Stockholders’ Deficit								(2,846	)		(1,555	)
Total Liabilities and Stockholders’ Deficit							$	16,039		$	18,787

See accompanying notes to unaudited interim condensed consolidated financial statements.

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ENGlobal Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(amounts in thousands)

	For the Nine Months Ended						For the Three Months Ended
	September 30, 2023			September 24, 2022			March 30, 2024			April 1, 2023
Cash Flows from Operating Activities:
Net loss	$	(11,389	)	$	(7,488	)	$	(1,396	)	$	(6,329	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		450			691			224			153
Share-based compensation expense		202			165			105			50
Loss on disposal of fixed assets		287			—
Impairment of ROU asset		197			—
Gain on disposal of fixed assets								(26	)		—
Changes in current assets and liabilities:
Trade accounts receivable		140			(2,375	)		2,433			209
Contract assets		218			(1,643	)		(306	)		(878	)
Other current assets		2,803			1,369			301			888
Accounts payable		2,632			1,564			(853	)		1,858
Accrued compensation and benefits		614			13			308			1,076
Contract liabilities		910			(834	)		(219	)		(53	)
Income taxes payable		10			(8	)		22			22
Other current liabilities, net		(904	)		64			(368	)		(125	)
Net cash used in operating activities	$	(3,830	)	$	(8,482	)
Net cash provided by (used in) operating activities							$	225		$	(3,129	)

Cash Flows from Investing Activities:
Asset acquisition, net of cash acquired		—			(971	)
Property and equipment acquired		(277	)		(291	)		—			(108	)
Net cash used in investing activities	$	(277	)	$	(1,262	)
Proceeds from sale of property and equipment								369			—
Net cash provided by (used in) investing activities							$	369		$	(108	)

Cash Flows from Financing Activities:
Common stock and warrants issued, net		2,962			—
At-the-market offering costs		—			(97	)
Issuance of common stock and warrants, net								—			2,974
Payments on finance leases		(188	)		(233	)		(85	)		(70	)
Payoff of finance leases								(272	)		—
Proceeds from Credit Agreement		1,018			—			225			—
Payments on revolving credit facility, net		(1,661	)		536
Net cash provided by financing activities	$	2,131		$	206
Payments on revolving credit facility								—			(769	)
Net cash provided by (used in) financing activities							$	(132	)	$	2,135
Net change in cash		(1,976	)		(9,538	)		462			(1,102	)
Cash at beginning of period		3,464			19,202			615			3,464
Cash at end of period	$	1,488		$	9,664		$	1,077		$	2,362

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	158		$	167		$	43		$	66
Fair value of warrants at issuance date	$	2,782		$	—		$	—		$	2,782
Right of use assets obtained in exchange for new operating lease liability	$	524		$	4,864
Right of use assets obtained in exchange for new financing lease liability	$	289		$	—		$	—		$	289
Cash paid during the period for income taxes (net of refunds)	$	55		$	51
Asset acquisition, common stock issued	$	—		$	525
Asset acquisition, contingent consideration	$	—		$	1,380

See accompanying notes to unaudited interim condensed consolidated financial statements.

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~~ENGlobal Corporation~~ENGLOBAL CORPORATION AND SUBSIDIARIES

~~Condensed Consolidated Statements of Stockholders’ Equity~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(amounts in thousands)

For the Three Months Ended

September 30, 2023

September 24, 2022

Common Stock

Balance at beginning of period

$ 40

$ 36

Common stock issued

1

—

Balance at the end of the period

41

36

Additional Paid-in Capital

Balance at beginning of period

61,101

57,972

At-the-market offering costs

—

(30 )
Share-based compensation - employees

113

54

Balance at end of period

61,214

57,996

Accumulated Deficit

Balance at beginning of period

(58,429 )

(34,400 )
Net loss

(721 )

(2,335 )
Balance at end of period

(59,150 )

(36,735 )

Total Stockholders’ Equity

$ 2,105

$ 21,297

							For the Three Months Ended
	For the Nine Months Ended						March 30, 2024			April 1, 2023
	September 30, 2023			September 24, 2022
Common Stock
Balance at beginning of period	$	36		$	35		$	5		$	4
Common stock issued		5			1			—			—
Balance at the end of the period		41			36
Balance at end of period							$	5		$	4
Additional Paid-in Capital
Balance at beginning of period		58,050			57,403		$	61,354		$	58,086
Proceeds from common stock issued, net		180			525			—			188
Fair value of warrants at issuance date		2,782			—			—			2,782
At-the-market offering costs		—			(97	)
Share-based compensation - employees		202			165
Share-based compensation								105			50
Balance at end of period		61,214			57,996		$	61,459		$	61,106

Accumulated Deficit
Balance at beginning of period		(47,761	)		(29,247	)	$	(62,914	)	$	(47,761	)
Net loss		(11,389	)		(7,488	)		(1,396	)		(6,329	)
Balance at end of period		(59,150	)		(36,735	)	$	(64,310	)	$	(54,090	)

Total Stockholders’ Equity	$	2,105		$	21,297
Total Stockholders’ Equity (Deficit)							$	(2,846	)	$	7,020

See accompanying notes to unaudited interim condensed consolidated financial statements.

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ENGLOBAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of ENGlobal Corporation (which may be referred to as “ENGlobal,” the “Company,” “we,” “us,” or “our”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these condensed financial statements do not include all of the information or note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP. These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December ~~31, 2022,~~30, 2023, included in the Company’s ~~2022~~2023 Annual Report on Form 10-K filed with the SEC.

The condensed financial statements included herein are unaudited for the ~~three- and nine-month~~three-month periods ended ~~September~~March 30, ~~2023~~2024 and ~~September 24, 2022,~~April 1, 2023, and in the case of the condensed balance sheet as of December ~~31, 2022~~30, 2023 have been derived from the audited financial statements of the Company. These financial statements reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary to fairly present the results for the periods presented.

The Company has assessed subsequent events through the date of filing of these condensed financial statements with the SEC and believes that the disclosures made herein are adequate to make the information presented herein not misleading.

We had no items of other comprehensive income in any period presented; therefore, no other components of comprehensive income are presented.

For our fiscal year ~~2023,~~2024, all four quarters will be comprised of 13 weeks each.

Reverse Stock Split – We effected a one-for-eight reverse split of our common stock on November 30, 2023. There was no net effect on total stockholders’ equity, and the par value per share of our common stock remained at $0.001 per share after the reverse stock split. All references made to share or per share amounts in the accompanying condensed consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the reverse stock split.

NOTE 2 – ACCOUNTING STANDARDS

The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) as of January 1, 2023. We adopted the standard using a modified retrospective approach which did not have a material impact on our financial position, results of operations, or cash flows.

Revenue Recognition – Our revenue is comprised of engineering, procurement and construction management services and sales of fabricated systems and integrated control systems that we design and assemble. ~~The majority of our~~Our services are provided under time-and-material and fixed-price contracts. Some time-and-material contracts may have limits. Revenue is not recognized over these limits until authorization by the client has been received.

A majority of sales of fabrication and assembled systems are under fixed-price contracts. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

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We generally recognize revenue over time as we perform because of continuous transfer of control to the customer. Our customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not have an alternative use to the Company. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or service to be provided, which measures the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. We generally use the cost-to-cost method on the labor portion of a project for revenue recognition to measure progress of our contracts because it best depicts the transfer of control to the customer which occurs as we consume the materials on the contracts. Therefore, revenues and estimated profits are recorded proportionally as labor costs are incurred.

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Under the typical payment terms of our fixed-price contracts, the customer pays us progress payments. These progress payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. The customer may retain a small portion of the contract price until completion of the contract. Revenue recognized in excess of billings is recorded as a contract asset on the balance sheet. Amounts billed and due from our customers are classified as receivables on the balance sheet. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer should we fail to adequately complete some or all of our obligations under the contract. For some contracts we may receive advance payments from the customer. We record a liability for these advance payments in contract liabilities on the balance sheet. The advance payment typically is not considered a significant financing component because it is used to meet working capital demand that can be higher in the early stages of a contract and to protect us from the other party failing to adequately complete some or all of its obligations under the contract.

To determine proper revenue recognition for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single performance obligation or whether a single contract should be accounted for as more than one performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. For most of our contracts, we provide a significant service of integrating a complex set of tasks and components into a single project. Hence, the entire contract is accounted for as one performance obligation. Less commonly, we may provide distinct goods or services within a contract in which case we separate the contract into more than one performance obligation. If a contract is separated into more than one performance obligation, we allocate the total transaction price to each performance obligation in an amount based on the estimated relative standalone selling price of the promised goods or services underlying each performance obligation and use the expected cost plus margin approach to estimate the standalone selling price of each performance obligation. Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to variables and requires significant judgment. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.

Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Most of our contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase or a reduction of revenue) on a cumulative catch-up basis.

We have a standard, monthly process in which management reviews the progress and execution of our performance obligations. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities and the related changes in estimates of revenues and costs. The risks and opportunities include management’s judgment about the ability and cost to achieve the schedule, technical requirements, and other contractual requirements. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the availability of materials, the length of time to complete the performance obligation, execution by our subcontractors, the availability and timing of funding from our customer and overhead cost rates, among other variables.

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Based on this analysis, any adjustments to revenue, operating costs and the related impact to operating income are recognized as necessary in the period they become known. These adjustments may result from positive performance and may result in an increase in operating income during the performance of individual performance obligations if we determine we will be successful in mitigating risks surrounding the technical, schedule and cost aspects of those performance obligations or realizing related opportunities. When estimates of total costs to be incurred exceed total estimates to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss becomes known. Likewise, these adjustments may result in a decrease in operating income if we determine we will not be successful in mitigating these risks or realizing related opportunities. Changes in estimates of net revenue, operating costs and the related impact to operating income are recognized monthly on a cumulative catch-up basis, which recognizes in the current period the cumulative effect of the changes on current and prior periods based on a performance obligation’s percentage of completion. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations.

Related Parties – The Company entered into the Credit Agreement (as defined below) and the Amended Credit Agreement (as defined below) with Alliance 2000, Ltd., a Texas limited partnership (“Alliance”), the family limited partnership of the Company’s Chairman and Chief Executive Officer, William A. Coskey, P.E. We apply provisions of subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. The disclosures include: a) the nature of the relationship(s) involved; b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Property and Equipment –Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Depreciation expense for the three months ended March 30, 2024 was $120 thousand, compared to $130 thousand for the three months ended April 1, 2023. The Company also recognized a net gain of $26 thousand from the sale of property and equipment. The proceeds from the sale of property and equipment were $369 thousand.

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NOTE 3 – REVENUE RECOGNITION

Our revenue by contract type was as follows (dollars in thousands):

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022		March 30, 2024		April 1, 2023
Fixed-price revenue	$	7,079	$	10,037	$	23,596	$	24,136	$	4,147	$	10,437
Time-and-material revenue		2,371		3,019		8,785		7,641		2,381		2,756
Total Revenue		9,450		13,056		32,381		31,777	$	6,528	$	13,193

NOTE 4 – CONTRACT ASSETS AND CONTRACT LIABILITIES

Our contract assets consist of unbilled amounts typically resulting from sales under long-term contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Our contract liabilities consist of advance payments and billings in excess of costs incurred.

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Costs, estimated earnings and billings on uncompleted contracts consisted of the following (dollars in thousands):

September 30, 2023

December 31, 2022

Costs incurred on uncompleted contracts

$ 26,942

$ 59,298

Estimated earnings on uncompleted contracts

4,211

4,464

Earned revenues

31,153

63,762

Less: billings to date

28,303

59,784

Net costs and estimated earnings in excess of billings (billings in excess of costs) on uncompleted contracts

$ 2,850

$ 3,978

Contract assets

$ 4,716

$ 4,934

Contract liabilities

(1,866 )

(956 )
Net contract assets

$ 2,850

$ 3,978

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	March 30, 2024			December 30, 2023
Costs incurred on uncompleted contracts	$	18,276		$	23,318
Estimated earnings on uncompleted contracts		781			3,602
Earned revenues		19,057			26,920
Less: billings to date		16,431			24,819
Net costs in excess of billings on uncompleted contracts	$	2,626		$	2,101

Costs and estimated earnings in excess of billings on uncompleted contracts	$	3,602		$	3,296
Billings in excess of costs and estimated earnings on uncompleted contracts		(976	)		(1,195	)
Net costs in excess of billings on uncompleted contracts	$	2,626		$	2,101

NOTE 5 – DEBT

The components of debt were as follows (dollars in thousands):

September 30, 2023

December 31, 2022

Revolving Credit Facility (1)

$ —

$ 1,661

Credit Agreement (2)

1,018

—

Priority Agreement (3)

—

—

Amount due within one year

1,018

1,661

Total long-term debt

$ —

$ —

	March 30, 2024		December 30, 2023
Credit Agreement (1)		1,272		1,047
Total debt		1,272		1,047
Amount due within one year		—		1,047
Total long-term debt	$	1,272	$	—

	(1)	On May 21, 2020 (the “Closing Date”), the Company and its wholly owned subsidiaries, ENGlobal U.S., Inc. and ENGlobal Government Services, Inc. (collectively, the “Borrowers”) entered into a Loan and Security Agreement (the “Revolving Credit Facility”) with Pacific Western Bank dba Pacific Western Business Finance, a California state-chartered bank (the “Lender”), pursuant to which the Lender agreed to extend credit to the Borrowers in the form of revolving loans (each a “Loan” and collectively, the “Loans”) in the aggregate amount of up to $6.0 million, which amount was subsequently reduced to $1.0 million on March 27, 2023, to $750,000 on May 22, 2023, and then to $500,000 on June 16, 2023 (the “Maximum Credit Limit”).

		~~On June 15, 2023, the Company repaid in full all indebtedness outstanding under the Revolving Credit Facility. The Revolving Credit Facility was closed on June 15, 2023.~~

	~~(2)~~	On June 15, 2023, the Company entered into athe Credit Agreement (the “Credit Agreement”) with Alliance, ~~2000, Ltd., a Texas limited partnership (“Alliance”),~~ pursuant to which Alliance ~~has~~ agreed, subject to certain terms and conditions, to extend up to two term loans in the aggregate principal amount of $1,250,000 to the ~~Company (collectively, the “Term Loans”).~~Company. In connection with entering into the Credit Agreement, (i) the Company and its subsidiaries, ENGlobal U.S., Inc., a Texas corporation, ENGlobal Government Services, Inc., a Texas corporation, and ENGlobal Technologies, LLC, a Texas limited liability company (collectively, the “Guarantors”), entered into a security agreement granting a security interest in favor of Alliance on substantially all of the Company’s and Guarantors’ assets to secure all of the indebtedness and other obligations owed to Alliance under the Credit Agreement and (ii) the Guarantors entered into a continuing guaranty pursuant to which the Guarantors guaranteed the payment of all indebtedness owed to Alliance.

		The Credit Agreement provides for an initial term loan of $1,000,000 and, under certain conditions, an additional term loan of $250,000. During the one-year term of the loan, the Company will make interest-only payments on a quarterly basis. The loan carries an annual interest rate of 8.5% and has an origination fee of 0.5%, payable upon maturity.

		~~The~~On April 24, 2024, the Company entered into an Amended and Restated Credit Agreement ~~matures on June 15, 2024.~~(the “Amended Credit Agreement”) with Alliance pursuant to which the parties amended and restated the Credit Agreement to, among other things, (i) modify the existing term loans in the aggregate original principal amount of $1,200,000 (the “Term Loans”) to (a) extend the maturity date to July 2, 2025, and (b) reduce the applicable interest rate from 8.5% to 8.0% per annum, and (ii) provide a revolving credit facility (the “Line of Credit”) of up to the lesser of (a) the Borrowing Base (as defined below) and (b) $1,000,000. The borrowing base (the “Borrowing Base”) will be an amount equal to up to 95% of Eligible Receivables (as defined in the Amended Credit Agreement) as determined by Alliance from time to time, less any reserves established by Lender in its sole discretion from time to time.

	~~(3)~~	~~On March 27, 2023, the Company entered into an invoice factoring agreement with FundThrough USA, Inc. (the “Priority Agreement”).~~ The ~~agreement provides the flexibility to receive funds early for a subset of customers at a discount rate of 2.75% to 8.25% depending~~Amended Credit Agreement matures on ~~the length of payment terms with the customer. As of September 30, 2023, the Company had factored $0.0 million outstanding receivables through the Priority Agreement.~~July 2, 2025.

The future scheduled maturities of our debt are (in thousands):

Credit Agreement

2023

$ —

2024

1,018

2025 and thereafter

—

$ 1,018

	Credit Agreement

2024	$	—
2025		1,272
Thereafter		—
	$	1,272

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NOTE 6 – SEGMENT INFORMATION

Our operating segments are strategic business units that offer our services and products to customers in their respective ~~industry segments.~~industries. The operating performance ~~of our segments~~ is regularly reviewed with operational leaders in charge of these segments, the Chief Executive Officer (“CEO”), the Chief Financial Officer (“CFO”) and others. This group represents the chief operating decision maker (“CODM”) for ENGlobal.

~~We have identified four strategic markets where we have a long history of delivering project solutions~~Our three operating segments are: (i) Automation, (ii) Engineering, and ~~can provide complete project execution. These four targeted markets include: (i) Energy & Renewables, (ii) Automation,~~ (iii) ~~Oil, Gas, and Petrochemicals, and (iv)~~ Government Services.

Within the Energy & Renewables group, our focus is to design and build production facilities for hydrogen and associated products, together with converting existing production facilities to produce products from renewable feedstock sources. These projects often utilize technologies that are more fuel efficient, and therefore reduce the associated carbon footprint of the facility. Our scope of work on these projects will typically include front-end development, engineering, procurement, mechanical fabrication, automation and commissioning services, and may be performed in conjunction with a construction partner.

Our Automation group provides the design and programming of automated control systems as well as designs, fabricates, integrates and commissions modular systems that include remote instrumentation control stations, on-line process analytical data, continuous emission monitoring, and electric power distribution. Often these packaged systems are housed in a fabricated metal enclosure, modular building or freestanding metal rack, which are commonly included in our scope of work. We provide automation engineering, procurement, fabrication, systems integration, programing and on-site commissioning services to our clients for both new and existing facilities.

Our ~~Oil, Gas, and Petrochemicals~~Engineering group focuses on providing engineering, procurement, construction, ~~management,~~ and automation services as well as fabricated products to downstream refineries and petrochemical facilities as well as midstream pipeline, storage and other transportation related companies. These services are often applied to small capital improvement and maintenance projects within refineries and petrochemical facilities. For our transportation clients, we work on facilities that include pumping, compression, gas processing, metering, storage terminals, product loading and blending systems. ~~In addition, this group designs, programs and maintains supervisory control and data acquisition (“SCADA”) systems for our transportation clients.~~ This group also provides engineering, fabrication and automation services to clients who have operations in the U.S. oil and gas exploration and development markets. The operations are usually associated with the completion, purification, storage and transmission of the oil and gas from the well head to the terminal or pipeline destination.

Our Government Services group provides services related to the engineering, design, installation and maintenance of automated fuel handling and tank gauging systems for the U.S. military across the globe.

We have two reportable segments: Commercial and Government Services. Our ~~Energy & Renewables,~~Engineering and Automation ~~and Oil, Gas, and Petrochemical~~ groups are aggregated into one reportable segment, Commercial.

~~Revenues,~~Our corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately as Corporate expenses.

Revenue, operating income, ~~and~~ identifiable assets, capital expenditures and depreciation for each segment are set forth in the following table. The amount identified as Corporate includes those activities that are not allocated to the operating segments and ~~includes~~include costs related to business development, executive functions, finance, accounting, safety, human resources and information ~~technology.~~technology that are not specifically identifiable with the segments.

Segment information is as follows (dollars in thousands):

	Commercial			Government Services			Corporate			Consolidated
For the three months ended March 30, 2024:
Revenue	$	4,389			2,139			—			6,528
Gross profit		350			114			—			464
Gross profit margin		8.0	%		5.3	%					7.1	%
SG&A		720			106			1,191			2,017
Operating profit (loss)		(370	)		8			(1,191	)		(1,553	)
Other income, net											222
Interest expense, net											(43	)
Tax expense											(22	)
Net loss											(1,396	)

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~~Segment information is as follows (dollars in thousands):~~

Commercial

Government Services

Corporate

Consolidated

For the three months ended September 30, 2023:

Revenue

$ 5,862

3,588

—

9,450

Gross profit

323

1,514

—

1,837

Gross profit margin

5.5 %

42.2 %

19.4 %
SG&A

1,203

161

1,148

2,512

Operating profit (loss)

(880 )

1,353

(1,148 )

(675 )
Other income, net

3

Interest expense, net

(27 )
Tax expense

(22 )
Net loss

(721 )

Commercial

Government Services

Corporate

Consolidated

For the three months ended September 24, 2022:

Revenue

$ 10,229

2,827

—

13,056

Gross profit (loss)

(368 )

1,032

—

664

Gross profit (loss) margin

(3.6 )%

36.5 %

5.1 %
SG&A

1,572

164

1,184

2,920

Operating profit (loss)

(1,940 )

868

(1,184 )

(2,256 )
Other income, net

5

Interest expense, net

(63 )
Tax expense

(21 )
Net loss

(2,335 )

Commercial

Government Services

Corporate

Consolidated

For the nine months ended September 30, 2023:

Revenue

$ 25,124

7,257

—

32,381

Gross profit (loss)

(2,479 )

2,112

—

(367 )
Gross profit (loss) margin

(9.9 )%

29.1 %

(1.1 )%
SG&A

6,448

438

3,964

10,850

Operating profit (loss)

(8,927 )

1,674

(3,964 )

(11,217 )
Other income, net

52

Interest expense, net

(158 )
Tax expense

(66 )
Net loss

(11,389 )

Commercial

Government Services

Corporate

Consolidated

For the nine months ended September 24, 2022:

Revenue

$ 24,835

6,942

—

31,777

Gross profit (loss)

(591 )

1,929

—

1,338

Gross profit (loss) margin

(2.4 )%

27.8 %

4.2 %
SG&A

4,668

554

3,431

8,653

Operating profit (loss)

(5,259 )

1,375

(3,431 )

(7,315 )
Other income, net

36

Interest expense, net

(166 )
Tax expense

(43 )
Net loss

(7,488 )

~~Table of Contents~~

	Commercial			Government Services			Corporate			Consolidated
For the three months ended April 1, 2023:
Revenue	$	11,835			1,358			—			13,193
Gross loss		(1,602	)		(220	)		—			(1,822	)
Gross loss margin		(13.5	)%		(16.2	)%					(13.8	)%
SG&A		2,746			136			1,534			4,416
Operating loss		(4,348	)		(356	)		(1,534	)		(6,238	)

Other income, net											3
Interest expense, net											(72	)
Tax expense											(22	)
Net loss											(6,329	)

Total assets by segment are as follows (dollars in thousands):

Total Assets by Segment	As of September 30, 2023		As of December 31, 2022		As of March 30, 2024		As of December 30, 2023
	(dollars in thousands)				(dollars in thousands)
Commercial	$	14,940	$	19,526	$	8,799	$	11,740
Government Services		4,940		2,032		4,221		3,780
Corporate		3,833		8,465		3,019		3,267
Consolidated	$	23,713	$	30,023	$	16,039	$	18,787

NOTE 7 – FEDERAL AND STATE INCOME TAXES

The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). Under ASC 740-270 we estimate an annual effective tax rate based on year-to-date operating results and our projection of operating results for the remainder of the year. We apply this annual effective tax rate to the year-to-date operating results. If our actual results differ from the estimated annual projection, our estimated annual effective tax rate can change affecting the tax expense for successive interim results as well as the estimated annual tax expense results. Certain states are not included in the calculation of the estimated annual effective tax rate because the underlying basis for the tax is related to revenues and not taxable income. Amounts for Texas margin taxes are reported as income tax expense.

The Company applies a more likely than not recognition threshold for all tax uncertainties. The FASB guidance for uncertain tax positions only allows the recognition of those tax benefits, based on their technical merits that are greater than 50 percent likelihood of being sustained upon examination by the taxing authorities. Management has reviewed the Company’s tax positions and determined there are no uncertain tax positions requiring recognition in the financial statements. U.S. federal tax returns prior to 2018 and Texas margins tax returns prior to 2017 are closed. Generally, the applicable statues of limitations are three to four years from their filings.

The Company recorded income tax expense of $22 thousand for the three months ended ~~September~~March 30, ~~2023~~2024 as compared to income tax expense of ~~$21~~$22 thousand for the three months ended ~~September 24, 2022.~~April 1, 2023. The effective income tax rate for the three months ended ~~September~~March 30, ~~2023~~2024 was ~~(3.2)~~(1.6)% as compared to ~~(0.9)%~~0.4% for the three months ended September 24, 2022. The Company recorded income tax expense of $66 thousand for the nine months ended September 30, 2023 as compared to $43 thousand for the nine months ended September 24, 2022. The effective income tax rate for the nine months ended September 30, 2023 and September 24, 2022 was (0.6)%.April 1, 2023. The effective tax rate differed from the federal statutory rate of 21% primarily due to the effect of the valuation allowances related to the expected unrealized deferred tax asset generated by the current year benefit.

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NOTE 8 – COMMITMENTS AND CONTINGENCIES

From time to time, ENGlobal or one or more of its subsidiaries ismay be involved in various legal proceedings or ismay be subject to claims that arise in the ordinary course of business alleging, among other things, claims of breach of contract or negligence in connection with the performance or delivery of goods and/or services. The outcome of any such claims or proceedings cannot be predicted with certainty. ~~Management~~

On March 12, 2024, ENGlobal U.S. Inc. was served with a lawsuit by VEnergy Industrial Park I, LLC (the “Plaintiff”). The lawsuit is ~~not aware~~pending in the County Court of ~~any pending or threatened lawsuits or proceedings that are expected~~Waller County, Texas (the “Court”). The Plaintiff is seeking monetary damages of $1.3 million for a breach of lease cause of action. We disagree with the Plaintiff’s claims and expect to petition the Court with affirmative defenses. However, litigation is inherently uncertain, and an adverse outcome could have a material ~~effect~~impact on our financial ~~position, results of operations or liquidity.~~condition.

We carry a broad range of insurance coverage, including general and business automobile liability, commercial property, professional errors and omissions, workers’ compensation insurance, directors’ and officers’ liability insurance and a general umbrella policy, all with standard self-insured retentions/deductibles. We also provide health insurance to our employees (including vision and dental) ~~which is~~, and are partially self-funded for these claims. Provisions for expected future payments are accrued based on our experience, and specific stop loss levels provide protection for the Company. We believe we have adequate reserves for the self-funded portion of our insurance policies. We are not aware of any material litigation or claims that are not covered by these policies or which are likely to materially exceed the Company’s insurance limits.

NOTE 9 – LEASES

The Company leases land, office ~~and shop~~ space and equipment. Arrangements are assessed at inception to determine if a lease exists and ~~with the adoption of ASC 842, “Leases,”~~ right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of lease payments over the lease term. Because the Company’s leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate at the inception of a lease to calculate the present value of lease payments. The Company has elected to apply the short-term lease exception for all asset classes, excluding lease liabilities from the balance sheet and recognizing the lease payments in the period they are incurred.

~~At the beginning~~The components of ~~the third quarter, the Company decided to stop self-performing certain low margin services~~lease expense are as part of the restructuring of its overall business model. Accordingly, the Company evaluated the ongoing value of its shop leases that were used to support these services. Based on this evaluation, the Company determined that one of the right-of-use assets associated with these leases, with a carrying amount of $0.2 million, was no longer recoverable and was written down to $0.follows (amounts in thousands):

		Three Months Ended
	Financial Statement Classification	March 30, 2024		April 1, 2023
Finance leases:
Amortization expense	SG&A Expense	$	31	$	54
Interest expense	Interest expense, net		10		13
Total finance lease expense			41		67

Operating leases:
Operating costs	Operating costs		11		435
Selling, general and administrative expenses	SG&A Expense		453		590
Total operating lease expense			464		1,025
Total lease expense		$	505	$	1,092

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~~The components of lease expense were as follows (dollars in thousands):~~

Three Months Ended

Nine Months Ended

Financial Statement Classification

September 30, 2023

September 24, 2022

September 30, 2023

September 24, 2022

Finance leases:

Amortization expense

SG&A Expense

$ 61

$ 53

$ 176

$ 159

Interest expense

Interest expense, net

13

11

39

33

Total finance lease expense

74

64

215

192

Operating leases:

Operating costs

Operating costs

23

86

710

189

Selling, general and administrative expenses

SG&A Expense

691

543

1,900

1,420

Total operating lease expense

714

629

2,610

1,609

Total lease expense

$ 788

$ 693

$ 2,825

$ 1,801

Supplemental balance sheet information related to leases was as follows (dollars in thousands):

	Financial Statement Classification	September 30, 2023		December 31, 2022		Financial Statement Classification	March 30, 2024		December 30, 2023
ROU Assets:
Operating leases	Right of use asset	$	7,022	$	8,072	Right of use asset	$	4,762	$	5,079
Finance leases	Property and equipment, net		863		761	Property and equipment, net		495		795
Total ROU Assets:		$	7,885	$	8,833		$	5,557	$	5,874

Lease liabilities:
Current liabilities
Operating leases	Current portion of leases	$	1,353	$	1,638	Current portion of operating leases	$	1,889	$	1,726
Finance leases	Current portion of leases		273		211	Current portion of finance leases		149		263
Noncurrent Liabilities:
Operating leases	Long-term leases		6,141		6,669	Long-term operating leases		5,383		5,761
Finance leases	Long-term leases		590		548	Long-term finance leases		305		548
Total lease liabilities		$	8,357	$	9,066		$	7,726	$	8,298

The weighted average remaining lease term and weighted average discount rate were as follows:

	At ~~September~~March 30, ~~2023~~2024
Weighted average remaining lease term (years)
Operating leases		~~6.8~~6.4
Finance leases		~~3.4~~3.1
Weighted average discount rate
Operating leases		~~10.8~~9.9	%
Finance leases		~~9.6~~13.4	%

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Maturities of operating lease liabilities as of ~~September~~March 30, ~~2023~~2024 are as follows (dollars in thousands):

Years ending:

Operating leases

Finance leases

Total

2023 (remaining months)

291

82

373

2024

1,691

301

1,992

2025

1,395

264

1,659

2026

918

234

1,152

2027 and thereafter

4,108

74

4,182

Total lease payments

8,403

955

9,358

Less: imputed interest

(909 )

(92 )

(1,001 )
Total lease liabilities

7,494

$ 863

$ 8,357

~~NOTE 10 – EMPLOYEE RETENTION CREDIT~~

Pursuant to the CARES Act, the Company is eligible for an employee retention credit subject to certain criteria. Since there is no US GAAP guidance for for-profit business entities that receive government assistance that is not in the form of a loan, an income tax credit or revenue from a contract with a customer, we determined the appropriate accounting treatment by analogy to other guidance. We accounted for the employee retention credit by analogy to International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, of International Financial Reporting Standards (IFRS).

Under an IAS 20 analogy, a business entity would recognize the employee retention credit on a systematic basis over the periods in which the entity recognizes the payroll expenses for which the grant (i.e., tax credit) is intended to compensate when there is reasonable assurance (i.e., it is probable) that the entity will comply with any conditions attached to the grant and the grant (i.e., tax credit) will be received.

We have accounted for the $1.7 million and $1.4 million employee retention credits in the first and third quarters of 2021, respectively, as other income on the statement of operations and as a receivable on the balance sheet. As of September 30, 2023, we have received refunds for all of the employee retention credits.

Years ending:	Operating leases			Finance leases			Total

2024 (remaining months)		1,653			140			1,793
2025		1,395			155			1,550
2026		920			151			1,071
2027		951			64			1,015
2028 and thereafter		3,157			13			3,170
Total lease payments		8,076			523			8,599
Less: imputed interest		(804	)		(69	)		(873	)
Total lease liabilities		7,272		$	454		$	7,726

NOTE 11 – STOCKHOLDERS’ EQUITY

On January 11, 2022, the Company entered into a sales agreement (the “ATM Agreement”) with Lake Street Capital Markets, LLC (“Lake Street”) pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $30 million to or through Lake Street, as sales agent, from time to time, in an “at the market offering”. The Company is not obligated to make any sales under the agreement and any determination by the Company to do so will be dependent, among other things, on market conditions and the Company’s capital raising needs.

On February 1, 2023, we entered into a securities purchase agreement (the “RDO Purchase Agreement”) providing for the sale and issuance by the Company to a single institutional investor of ~~3,971,000~~496,375 shares (the “Shares”) of the Company’s common stock at an offering price of ~~$0.85~~$6.80 per Share in a registered direct ~~offering pursuant to a registration statement on Form S-3 filed with the SEC on January 29, 2021 (the “Registration Statement”).~~offering. Concurrently with the sale of the Shares and pursuant to the RDO Purchase Agreement, the Company also sold and issued in a private placement, for no additional consideration to the investor, warrants to purchase up to ~~3,971,000~~496,375 shares of the Company’s common stock (the “Warrants”). The net proceeds to the Company from the offerings were approximately $3.0 million after deducting the placement agent’s fees and related offering expenses, and excluding the proceeds, if any, from the exercise of the Warrants. The Company ~~intends to use~~used the net proceeds of the offering for working capital and general corporate purposes. The sale of the Shares pursuant to the RDO Purchase Agreement has reduced the amount of securities that we may sell in a primary offering pursuant to the Registration Statement, including pursuant to the ATM Agreement. We recorded the fair value of the warrants issued within additional paid-in capital. The warrants may be exercised by physical settlement or net share settlement, determined by the holder.

In 2023, we issued stock-based compensation in the form of non-vested restricted stock awards to certain employees, directors, and officers. We apply the provisions of ASC Topic 718 “Compensation – Stock Compensation” (“ASC 718”) and recognize compensation expense over the applicable service period for all stock-based compensation based on the grant date fair value of the award. For the three months ended March 30, 2024, we recognized share-based compensation expense of $105 thousand, compared to $50 thousand for the three months ended April 1, 2023.

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NOTE 12 – LIQUIDITY

We define liquidity as our ability to pay liabilities as they become due, fund business operations and meet monetary contractual obligations. Our primary sources of liquidity are cash on hand, internally generated funds ~~sales of common stock pursuant to the ATM Agreement,~~ and borrowings under the ~~Credit Agreement which matures on June 15, 2024.~~

~~As of September 30, 2023, the outstanding borrowings under the Credit Agreement were $1.0 million. As of September 30, 2023, we were in compliance with all of the covenants under the~~Amended Credit Agreement. ~~For additional information on the Credit Agreement, see Part I, Item 1, Note 5 –~~ ~~Debt~~.

On ~~March 27,~~June 15, 2023, the Company entered into ~~an invoice factoring agreement~~the Credit Agreement with ~~FundThrough USA, Inc. (the “Priority Agreement”). The agreement provides~~Alliance, pursuant to which Alliance agreed, subject to certain terms and conditions, to extend up to two term loans in the ~~flexibility~~aggregate principal amount of $1,250,000 to ~~receive funds early for a subset of customers at a discount rate of 2.75% to 8.25% depending on~~ the ~~length of payment terms with the customer. As of September 30, 2023, no receivables were factored through the Priority Agreement.~~Company.

On ~~January 11, 2022,~~April 24, 2024, the Company entered into the ~~ATM~~Amended Credit Agreement with ~~Lake Street pursuant to~~Alliance that modified the Credit Agreement. The modification includes adding a Line of Credit which the Company may offer and sell shares of the Company’s common stock having an aggregate offering price of up to $30 million to or through Lake Street, as sales agent, from time to time, in an “at the market offering”. The Company is not obligated to make any sales under the agreement and any determination byallows the Company to do so will be dependent, among other things, on market conditions and the Company’s capital raising needs. The Registration Statement, including the accompanying prospectus and related prospectus supplements relatedborrow up to the ~~“at~~lesser of (i) the ~~market offering,” is subject to~~Borrowing Base (as defined in the provisions of General Instruction I.B.6 of Form S-3, which provides that we may not sell securities in a public primary offering with a value exceeding one-third of our public float in any twelve-month period unless our public float is at least $75 million. As of September 26, 2023, the Company’s public float (i.e., the aggregate market value of its outstanding equity securities held by non-affiliates) was approximately $10.8 million, based on the closing price per share of the Company’s common stock as reported on the Nasdaq Capital Market on September 26, 2023, as calculated in accordance with General Instruction I.B.6 of Form S-3. In addition, during the 12 calendar month period that ends on the date of the filing of this Report, we had offered and sold approximately $3.4 million of our common stock pursuant to the Registration Statement. If our public float meetsAmended Credit Agreement ), or exceeds $75 million at any time, we will no longer be subject to the restrictions set forth in General Instruction I.B.6 of Form S-3, at least until the filing of our next Section 10(a)(3) update as required under the Securities Act.(ii) $1,000,000.

On February 1, 2023, we entered into the RDO Purchase Agreement providing for the sale and issuance by the Company to a single institutional investor of the Shares, ~~of the Company’s common stock,~~ at an offering price of ~~$0.85~~$6.80 per Share in a registered direct ~~offering pursuant to the Registration Statement.~~offering. Concurrently with the sale of the Shares and pursuant to the RDO Purchase Agreement, the Company also sold and issued in a private placement, for no additional consideration to the investor, the ~~Warrants to purchase up to 3,971,000 shares of the Company’s common stock.~~Warrants. The ~~net~~gross proceeds to the Company from the offerings were approximately ~~$3.0~~$3.4 million ~~after~~before deducting the placement agent’s fees and related offering expenses, and excluding the proceeds, if any, from the exercise of the Warrants. The Company ~~intends to use~~used the net proceeds of the offering for working capital and general corporate purposes. ~~The sale~~

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We have had to extend the ~~Shares pursuant~~payment terms for our suppliers beyond our standard terms. In some cases, we have signed an agreement stipulating scheduled payment dates and amounts to provide assurance to the ~~RDO Purchase Agreement has reduced~~supplier that the balance will be paid in full. The payment terms for these arrangements are between a few weeks and 12 months depending on various factors such as amount, age, and how critical they are to our on-going operations. As of ~~securities that we may sell in~~March 30, 2024, approximately $1.1 million of our trade payables have a ~~primary offering pursuant to the Registration Statement, including pursuant to the ATM Agreement.~~payment schedule agreement.

Our recurring losses, negative cash flows from operating activities, need for additional financing and the uncertainties surrounding our ability to obtain such financing, raise substantial doubt about our ability to continue as a going concern. We have limited cash on hand and will need additional working capital to fund our planned operations. We are subject to significant risks and uncertainties, including failing to secure additional capital to fund our planned operations or failing to profitably operate the business. We intend to raise funds through various potential sources, such as equity or debt financings; however, we can provide no assurance that such financing will be available on acceptable terms, or at all. If adequate financing is not available or we do not achieve profitability and positive cash flows from operating activities, we may be required to significantly curtail or cease our ~~operations.~~operations, and our business would be jeopardized.

Cash and the availability of cash could be materially restricted if (1) outstanding invoices billed are not collected or are not collected in a timely manner, (2) circumstances prevent the timely internal processing of invoices, (3) we lose one or more of our major customers or our major customers significantly reduce the amount of work requested from us, (4) we are unable to win new projects that we can perform on a profitable basis or (5) we are unable to reverse our use of cash to fund losses.

~~Table of Contents~~

Our Board of Directors continues to review strategic transactions, which could include strategic acquisitions, mergers, reverse mergers, the issuance or buyback of public shares, or the purchase or sale of specific assets, in addition to other potential actions aimed at increasing shareholder value. The Company does not intend to disclose or comment on developments related to its review unless and until the Board has approved a specific transaction or otherwise determined that further disclosure is appropriate. There can be no assurance that the ~~Board’s~~Board's strategic review will result in any transaction, or any assurance as to its outcome or timing.

NOTE 13 – ~~FAIR VALUE MEASUREMENTS~~SUBSEQUENT EVENTS

In accordance with ASC ~~820, Fair Value Measurements~~Topic 855, Subsequent Events, which establishes general standards of accounting for and ~~Disclosures, establishes a three-tier fair value hierarchy~~disclosure of events that ~~prioritizes~~occur after the ~~inputs used in measuring fair value as follows:~~

	·	~~Level 1 - Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.~~

	·	~~Level 2 - Observable inputs other than quoted prices in active markets that are either directly or indirectly observable.~~

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

The Company measures the fair value of its warrants to purchase up to 3,971,000 shares of the Company’s common stock issued in connection with the RDO Purchase Agreement using a Black-Scholes model, which requires the use of several inputs, including the underlying stock price, exercise price, risk free rate, expected volatility, and time to expiration. The inputs used in the Black-Scholes model are classified as Level 2 inputs in the fair value hierarchy.

~~The following table provides a summary of the assumptions used in the Black-Scholes model to estimate the fair value of the warrants at issuance date of February 6, 2023:~~

Assumptions used:

Total

Stock price

$ 0.87

Exercise price

$ 0.95

Risk free rate

3.65 %
Annualized volatility

107.89 %
Time to expiration

5.50

The Company considers these assumptions to be reasonable, based on the historical performance of the underlying stock and other market factors. However, actual results may differ from these estimates. We recorded the $2.8 million fair value of the warrants in additional paid-in capital on the issuance date. As the warrants are classified in equity, remeasurement is not required unless reclassification from equity is required. The warrant contract is reassessed at each balance sheet date ~~for~~but before financial statements are issued, the ~~appropriate classification.~~

~~NOTE 14 – RELATED PARTY TRANSACTIONS~~Company evaluated subsequent events and transactions that occurred after March 30, 2024, the balance sheet date, up to the date that the financial statements were available to be issued. As a result, the following transactions were identified as subsequent events as of March 30, 2024.

On ~~June 15, 2023,~~April 24, 2024, the Company entered into the Amended Credit Agreement with Alliance the family limited partnership of the Company’s Chairman and Chief Executive Officer, William A. Coskey, P.E. The Credit Agreement provides for an initial term loan of $1,000,000 and, under certain conditions, an additional term loan of $250,000. During the one-year term of the loan, the Company will make interest-only payments on a quarterly basis. The loan carries an annual interest rate of 8.5% and has an origination fee of 0.5%, payable upon maturity.

In connection with entering into the Credit Agreement, the Company and its subsidiaries, entered into a Security Agreement granting a security interest in favor of Alliance on substantially all of the Company’s and Guarantors’ assets to secure all of the indebtedness and other obligations owed to Alliance under the Credit Agreement and the Guarantors entered into a Continuing Guaranty pursuant to which the ~~Guarantors guaranteed~~parties amended and restated the ~~payment~~Credit Agreement to, among other things, (i) modify the existing term loans in the aggregate original principal amount of ~~all indebtedness owed~~$1,200,000 to ~~Alliance.~~

~~Alliance is~~(a) extend the ~~beneficial owner~~maturity date to July 2, 2025, and (b) reduce the applicable interest rate from 8.5% to 8.0% per annum, and (ii) provide a revolving credit facility of more than 22% of the Company’s issued and outstanding common stock and is controlled by William A. Coskey, P.E., the Company’s Chairman and Chief Executive Officer. In accordance with the charter of the Company’s Audit Committee and the Company’s policy on related party transactions, the loan documents and the resulting transactions were reviewed and approved by the Company’s Audit Committee and determined in good faith to be on terms no less favorableup to the ~~Company than could~~lesser of (a) the Borrowing Base (as defined below) and (b) $1,000,000. The borrowing base (the “Borrowing Base”) will be ~~obtained~~an amount equal to up to 95% of Eligible Receivables (as defined in the Amended Credit Agreement) as determined by Alliance from ~~unrelated third parties and fair~~time to ~~the Company~~time, less any reserves established by Alliance in its sole discretion from ~~a financial point of view, and were approved by all of the disinterested members of the Company’s Board of Directors.~~time to time.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain information contained in this Quarterly Report on Form 10-Q, as well as other written and oral statements made or incorporated by reference from time to time by the Company and its representatives in other reports, filings with the Securities and Exchange Commission (the “SEC”), press releases, conferences or otherwise, may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). This information includes, without limitation, statements concerning the Company’s future financial position and results of operations, planned capital expenditures, business strategy and other plans for future operations, the future mix of revenues and business, customer retention, project reversals, commitments and contingent liabilities, future demand and industry conditions. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Generally, the words “anticipate,” “believe,” “estimate,” “expect,” “may” and similar expressions, identify forward-looking statements, which generally are not historical in nature. Actual results could differ materially from the results described in the forward-looking statements due to the risks and uncertainties set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, the specific risk factors identified under Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December ~~31, 2022,~~30, 2023, and those described from time to time in our future reports filed with the SEC.

The following discussion is qualified in its entirety by, and should be read in conjunction with, the Company’s financial statements, including the notes thereto, included in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended December ~~31, 2022.~~30, 2023.

Overview

ENGlobal Corporation ~~(which may be referred to as “ENGlobal,” the “Company,” “we,” “us” or “our”), incorporated in the State of Nevada in June 1994,~~ is a leading provider of innovative, delivered project solutions primarily to the energy industry. We deliver these solutions to our clients by combining our vertically-integrated engineering and professional project execution services with our automation and systems integration ~~expertise and fabrication capabilities.~~expertise. We believe our vertically-integrated strategy allows us to differentiate our company from most of our competitors as a ~~full-service~~full service provider, thereby reducing our clients’ dependency on and coordination of multiple vendors and improving control over their project ~~costs~~cost and schedules. Our strategy and positioning has also allowed the Company to pursue larger scopes of work centered around many different types of modularized engineered systems.

We ~~focus on four strategic markets where we~~ have a long history of delivering project solutions and can provide complete project execution and have focused our business development teams on communicating these offerings to ~~their clients. These four targeted markets include:~~our clients which include (i) ~~Renewables,~~Engineering, (ii) Automation, ~~(iii) Oil, Gas,~~ and ~~Petrochemicals, and (iv)~~(iii) Government Services.

We have made significant reductions in our overhead structure as part of the internal business reorganization that we started in the first quarter of 2023. These cost reductions were primarily in headcount across all segments to better align the number of administrative staff needed to support our current volume of work and re-organize our corporate structure. We continue to evaluate our ~~SG&A~~ headcount and will reduce it as necessary to better align our costs with the volume of the business. ~~We have also started and are continuing efforts to reduce our rent and insurance costs to bring our total SG&A costs in line with that of a company our size.~~

Our Board of Directors continues to review strategic transactions, which could include strategic acquisitions, mergers, reverse mergers, the issuance or buyback of public shares, or the purchase or sale of specific assets, in addition to other potential actions aimed at increasing shareholder value. The Company does not intend to disclose or comment on developments related to its review unless and until the Board has approved a specific transaction or otherwise determined that further disclosure is appropriate. There can be no assurance that the Board’s strategic review will result in any transaction, or any assurance as to its outcome or timing.

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Critical Accounting Policies Update

Our critical accounting policies are further disclosed in Note 2 to the consolidated financial statements included in our ~~2022~~2023 Annual Report on Form 10-K.

Goodwill - Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired and liabilities assumed. Goodwill is not amortized but rather is tested and assessed for impairment annually, or more frequently if certain events or changes in circumstance indicate the carrying amount may exceed fair value. The annual test for goodwill impairment is performed in the fourth quarter of each year.

The Company compares its fair value of a reporting unit and the carrying value of the reporting unit to measure goodwill impairment. Fair value was determined by applying discounted cash flows of the operating unit after allocation of certain corporate overhead. Estimating the cash flow of the operating unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others. It is possible that changes in market conditions, economy, facts, circumstances, judgments and assumptions used in estimating the fair value could change, resulting in possible impairment of goodwill in the future.

Results of Operations

In the course of providing our time-and-material services, we routinely provide materials and equipment and may provide construction management services on a subcontractor basis. Generally, these materials, equipment and subcontractor costs are passed through to our clients and reimbursed, along with small handling fees, which in general are at margins lower than those of our normal core business. In accordance with industry practice and generally accepted accounting principles, all such costs and fees are included in revenue. The material purchases and the use of subcontractor services can vary significantly from quarter to quarter; therefore, changes in revenue and gross profit, SG&A expense and operating income as a percentage of revenue may not be indicative of the Company’s core business trends.

Segment operating SG&A expense includes management and staff compensation, office costs such as rents and utilities, depreciation, amortization, travel, and other expenses generally unrelated to specific client contracts, but directly related to the support of a segment’s operations. Corporate SG&A expenses include finance, accounting, human resources, business development, legal and information technology which are unrelated to specific projects but which are incurred to support the Company’s activities.

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Comparison of the three months ended ~~September~~March 30, ~~2023~~2024 versus the three months ended ~~September 24, 2022~~April 1, 2023

The following table, for the three months ended ~~September~~March 30, ~~2023~~2024 versus the three months ended ~~September 24, 2022,~~April 1, 2023, provides relevant financial data that is derived from our consolidated statements of operations (amounts in thousands except per share data).

	Commercial			Government Services			Corporate			Consolidated					Commercial			Government Services			Corporate			Consolidated
For the three months ended September 30, 2023:
For the three months ended March 30, 2024:
Revenue	$	5,862		$	3,588		$	—		$	9,450		100.0	%	$	4,389		$	2,139		$	—		$	6,528		100.0	%
Gross profit		323			1,514			—			1,837		19.4	%		350			114			—			464		7.1	%
SG&A		1,203			161			1,148			2,512		26.6	%		720			106			1,191			2,017		30.9	%
Operating income (loss)		(880	)		1,353			(1,148	)		(675	)	(7.1	)%		(370	)		8			(1,191	)		(1,553	)	(23.8	)%
Other income, net											3														222
Interest expense, net											(27	)													(43	)
Tax expense											(22	)													(22	)
Net loss										$	(721	)	(7.6	)%										$	(1,396	)	(21.4	)%
Basic and diluted loss per share										$	(0.02	)												$	(0.27	)

	Commercial			Government Services			Corporate			Consolidated					Commercial			Government Services			Corporate			Consolidated
For the three months ended September 24, 2022:
For the three months ended April 1, 2023:
Revenue	$	10,229		$	2,827		$	—		$	13,056		100.0	%	$	11,835		$	1,358		$	—		$	13,193		100.0	%
Gross profit (loss)		(368	)		1,032			—			664		5.1	%
Gross loss																(1,602	)		(220	)		—			(1,822	)	(13.8	)%
SG&A		1,572			164			1,184			2,920		22.4	%		2,746			136			1,534			4,416		33.5	%
Operating income (loss)		(1,940	)		868			(1,184	)		(2,256	)	(17.3	)%
Operating loss																(4,348	)		(356	)		(1,534	)		(6,238	)	(47.3	)%
Other income, net											5														3
Interest expense, net											(63	)													(72	)
Tax expense											(21	)													(22	)
Net loss										$	(2,335	)	(17.9	)%										$	(6,329	)	(48.0	)%
Basic and diluted loss per share										$	(0.07	)												$	(0.17	)

	Commercial			Government Services			Corporate			Consolidated					Commercial			Government Services			Corporate			Consolidated
Year Over Year Increase (Decrease) in Operating Results:
Revenue	$	(4,367	)	$	761		$	—		$	(3,606	)	(27.6	)%	$	(7,446	)	$	781		$	—		$	(6,665	)	(50.5	)%
Gross profit (loss)		691			482			—			1,173		176.7	%		1,952			334			—			2,286		(125.5	)%
SG&A		(369	)		(3	)		(36	)		(408	)	(14.0	)%		(2,026	)		(30	)		(343	)		(2,399	)	(54.3	)%
Operating income (loss)		1,060			485			36			1,581		(70.1	)%		3,978			364			343			4,685		(75.1	)%
Other income, net											(2	)													219
Interest expense, net											36														29
Tax expense											(1	)													—
Net loss										$	1,614		(69.1	)%										$	4,933		(77.9	)%
Basic and diluted loss per share										$	0.05													$	(0.07	)

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~~Comparison of the nine months ended September 30, 2023 versus the nine months ended September 24, 2022~~

The following table, for the nine months ended September 30, 2023 versus the nine months ended September 24, 2022, provides relevant financial data that is derived from our consolidated statements of operations (amounts in thousands except per share data).

Commercial

Government Services

Corporate

Consolidated

For the nine months ended September 30, 2023:

Revenue

$ 25,124

$ 7,257

$ —

$ 32,381

100.0 %
Gross profit (loss)

(2,479 )

2,112

—

(367 )

(1.1 )%
SG&A

6,448

438

3,964

10,850

33.5 %
Operating income (loss)

(8,927 )

1,674

(3,964 )

(11,217 )

(34.6 )%
Other income, net

52

Interest expense, net

(158 )

Tax expense

(66 )

Net loss

$ (11,389 )

(35.2 )%
Basic and diluted loss per share

$ (0.29 )

Commercial

Government Services

Corporate

Consolidated

For the nine months ended September 24, 2022:

Revenue

$ 24,835

$ 6,942

$ —

$ 31,777

100.0 %
Gross profit (loss)

(591 )

1,929

—

1,338

4.2 %
SG&A

4,668

554

3,431

8,653

27.2 %
Operating income (loss)

(5,259 )

1,375

(3,431 )

(7,315 )

(23.0 )%
Other income, net

36

Interest expense, net

(166 )

Tax expense

(43 )

Net loss

$ (7,488 )

(23.6 )%
Basic and diluted loss per share

$ (0.21 )

Commercial

Government Services

Corporate

Consolidated

Year Over Year Increase (Decrease) in Operating Results:

Revenue

$ 289

$ 315

$ —

$ 604

1.9 %
Gross loss

(1,888 )

183

—

(1,705 )

(127.4 )%
SG&A

1,780

(116 )

533

2,197

25.4 %
Operating loss

(3,668 )

299

(533 )

(3,902 )

53.3 %
Other income, net

16

Interest expense, net

8

Tax expense

(23 )

Net loss

$ (3,901 )

52.1 %
Basic and diluted loss per share

$ (0.08 )

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Revenue – Revenue decreased ~~$3.6~~$6.7 million to ~~$9.5~~$6.5 million from ~~$13.1~~$13.2 million, or a decrease of ~~27.6%~~50.5%, for the three months ended ~~September~~March 30, ~~2023~~2024 as compared to the three months ended ~~September 24, 2022.~~April 1, 2023. Our ~~2023~~2024 revenue for the Commercial segment decreased primarily due to ~~a large project that ended in 2022 without subsequent renewal, partially offset by project awards with new customers for projects that were completed during the third quarter of 2023.~~our decision to stop self-performing fabrication, construction and field services. Our ~~2023~~2024 revenue for the Government Services segment increased primarily due to one new ~~projects awards.~~

Revenue increased $0.6 million to $32.4 million from $31.8 million, or an increase of 1.9%, for the nine months ended September 30, 2023 as compared to the nine months ended September 24, 2022. The increase is primarily due to the completion of several projects from new customers within our Commercial segmentproject that started in the ~~2023 period.~~second quarter of 2023.

Gross Profit (Loss) – Gross profit (loss) margin increased ~~14.3%~~20.9% to ~~19.4%~~7.1% from ~~5.1%~~(13.8)% for the three months ended ~~September~~March 30, ~~2023~~2024 as compared to the three months ended ~~September 24, 2022.~~April 1, 2023. The increase in gross profit ~~(loss) margin is primarily attributable to a change order awarded to our Government Services group to cover excess material purchases on a large project.~~

~~Gross profit (loss) margin decreased 5.3% to (1.1)% from 4.2% for the nine months ended September 30, 2023 as compared to the nine months ended September 24, 2022. The decrease in gross profit (loss)~~ margin is primarily attributable to the ~~inefficient use~~reduction of ~~personnel~~indirect costs of $1.4 million and ~~equipment~~the decision to complete projects where we were unable to secure additional change orders to cover costs, partially offset by a change order awarded to our Government Services group to cover excess material purchases on a large project.stop self-performing fabrication, construction and field services.

Selling, General and Administrative Expense – SG&A expenses decreased ~~$0.4~~$2.4 million for the three months ended ~~September~~March 30, ~~2023~~2024 as compared to the three months ended ~~September 24, 2022~~April 1, 2023 due primarily to ~~a $0.7~~$0.8 million ~~decrease in salaries and burden expense and a~~of labor savings, $0.1 million ~~decrease in travel expense, partially offset by a $0.2~~of rent savings, and $1.1 million ~~increase in legal fees and a $0.2 million impairment~~ of ~~an ROU asset related to one of our shop leases.~~

~~SG&A expenses increased by $2.2 million for the nine months ended September 30, 2023 as compared to the nine months ended September 24, 2022 due to a $2.2 million~~ bad debt ~~reserve~~expense recorded ~~during the 2023 period with no comparable occurrence~~ in 2022, a $0.3 million increase in facility expense as we moved our fabrication shop to a new location, a $0.2 million impairment of an ROU asset related to one of our shop leases, a $0.2 million increase in legal expense, a $0.1 million increase in computer software and hardware expense, a $0.1 million increase in accounting fees, and a $0.1 million increase in early payment fees, partially offset by a decrease in salary expense of $1.0 million and a decrease in travel expense of $0.1 million.

~~Other Income (Expense), Net –~~ ~~Other income, net of expense, decreased $2 thousand for the three months ended September 30, 2023 as compared to the three months ended September 24, 2022.~~

~~Other income, net of expense, increased $16 thousand for the nine months ended September 30, 2023 as compared to the nine months ended September 24, 2022.~~2023.

Interest Expense, net – Interest expense is incurred primarily in connection with ~~our~~the previous revolving credit facility, the current Credit Agreement (defined below) and our finance leases. Our interest expense decreased ~~$36~~$29 thousand to $43 thousand for the three months ended ~~September~~March 30, ~~2023~~2024 from ~~$63~~$72 thousand for the three months ended ~~September 24, 2022.~~

~~Our interest expense decreased to $158 thousand for the nine months ended September 30, 2023 from $166 thousand for the nine months ended September 24, 2022.~~April 1, 2023.

Tax Expense – Tax expense is incurred primarily for our state franchise taxes. We recorded income tax expense of $22 thousand for each of the three months ended ~~September~~March 30, ~~2023 compared to income tax expense of $21 thousand for the three months ended September 24, 2022.~~2024 and April 1, 2023.

~~We recorded income tax expense of $66 thousand for the nine months ended September 30, 2023 compared to $43 thousand for the nine months ended September 24, 2022.~~

~~Table of Contents~~

Net Income (Loss) – Net loss for the three months ended ~~September~~March 30, ~~2023~~2024 was ~~$0.7~~$1.4 million, or a ~~$1.6~~$4.9 million decrease from a net loss of ~~$2.3~~$6.3 million for the three months ended ~~September 24, 2022,~~April 1, 2023, primarily as a result of the ~~change order awarded~~decision to ~~our Government Services group to cover excess material purchases on~~stop self- performing fabrication, construction and field services, and a ~~large project and the decreased~~decrease in selling, general, and administrative ~~expense, partially offset by inefficient execution~~expenses of ~~projects which resulted in a decreased gross profit (loss) margin.~~

Net loss for the nine months ended September 30, 2023 was $11.4 million, or a $3.9 million increase from net loss of $7.5 million for the nine months ended September 24, 2022, primarily as a result of a $1.6 million loss in the construction and field services business, $0.7 million of underutilized personnel expense, a $2.2 million increase in bad debt reserve, and increased facility costs of $0.3 million primarily related to our Brookshire fabrication shop, partially offset by the change order awarded to our Government Services group to cover excess material purchases on a large project.$2.4 million.

Liquidity and Capital Resources Overview

The Company defines liquidity as ~~its~~our ability to pay ~~its~~ liabilities as they become due, fund business operations and meet monetary contractual obligations. Our primary sources of liquidity are cash on hand, internally generated funds, ~~sales of common stock pursuant to the ATM Agreement (defined below),~~ and borrowings under the Amended Credit ~~Agreement which matures on June 15, 2024.~~Agreement. We had cash of approximately ~~$1.5~~$1.1 million at ~~September~~March 30, ~~2023~~2024 and ~~$3.5~~$0.6 million at December ~~31, 2022.~~30, 2023. Our working capital as of ~~September~~March 30, ~~2023~~2024 was ~~$(0.4)~~($2.1) million versus ~~$7.1~~($2.2) million as of December ~~31, 2022.~~30, 2023.

On June 15, 2023, we entered into a Credit Agreement (the “Credit Agreement”) with Alliance 2000, Ltd., a Texas limited partnership (“Alliance”), pursuant to which Alliance agreed, subject to certain terms and conditions, to extend up to two term loans in the aggregate principal amount of $1,250,000 to us. During the one-year term of the term loans, the Company made interest-only payments on a quarterly basis. The term loans carried an annual interest rate of 8.5% and had an origination fee of 0.5%, payable upon maturity. As of ~~September~~March 30, ~~2023, the outstanding borrowings under the Credit Agreement were $1.0 million. As of September 30, 2023,~~2024, we were in compliance with all of the covenants under the Credit Agreement. ~~For additional information on~~As of March 30, 2024, we had outstanding borrowings of $1.2 million under the Credit Agreement, ~~see Part I, Item 1, Note 5 –~~ ~~Debt~~.

with additional borrowing capacity of $50,000 at the lender’s discretion. On ~~January 11, 2022, we~~April 24, 2024, the Company entered into ~~a sales agreement (the “ATM Agreement”)~~the Amended Credit Agreement with ~~Lake Street Capital Markets, LLC (“Lake Street”)~~Alliance pursuant to which ~~we may offer~~the parties amended and ~~sell shares~~restated the Credit Agreement to, among other things, (i) modify the existing term loans in the aggregate original principal amount of $1,200,000 to (a) extend the ~~Company’s common stock having an aggregate offering price~~maturity date to July 2, 2025, and (b) reduce the applicable interest rate from 8.5% to 8.0% per annum, and (ii) provide a revolving credit facility of up to ~~$30 million~~the lesser of (a) the Borrowing Base (as defined below) and (b) $1,000,000. The borrowing base (the “Borrowing Base”) will be an amount equal to ~~or through Lake Street,~~up to 95% of Eligible Receivables (as defined in the Amended Credit Agreement) as ~~sales agent,~~determined by Alliance from time to time, less any reserves established by Alliance in ~~an “at the market offering”. The Company is not obligated~~its sole discretion from time to make any sales under the agreement and any determination by the Company to do so will be dependent, among other things, on market conditions and the Company’s capital raising needs. The Company’s registration statement on Form S-3 (the “Registration Statement”) filed with the SEC on January 29, 2021, including the accompanying prospectus and related prospectus supplements related to the “at the market offering”, is subject to the provisions of General Instruction I.B.6 of Form S-3, which provides that we may not sell securities in a public primary offering with a value exceeding one-third of our public float in any twelve-month period unless our public float is at least $75 million. As of September 26, 2023, the Company’s public float (i.e., the aggregate market value of its outstanding equity securities held by non-affiliates) was approximately $10.8 million, based on the closing price per share of the Company’s common stock as reported on the Nasdaq Capital Market on September 26, 2023, as calculated in accordance with General Instruction I.B.6 of Form S-3. In addition, during the 12 calendar month period that ends on the date of the filing of this Report, we had offered and sold approximately $3.4 million of our common stock pursuant to the Registration Statement. If our public float meets or exceeds $75 million at any time, we will no longer be subject to the restrictions set forth in General Instruction I.B.6 of Form S-3, at least until the filing of our next Section 10(a)(3) update as required under the Securities Act.time.

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Our recurring losses, negative cash flows from operating activities, need for additional financing and the uncertainties surrounding our ability to obtain such financing, raise substantial doubt about our ability to continue as a going ~~concern, as discussed in Part II, Item 8, Note 1.~~concern. We have limited cash on hand and will need additional working capital to fund our planned operations. We are subject to significant risks and uncertainties, including failing to secure additional capital to fund our planned operations or failing to profitably operate the business. We intend to raise funds through various potential sources, such as equity or debt financings; however, we can provide no assurance that such financing will be available on acceptable terms, or at all. If adequate financing is not available or we do not achieve profitability and positive cash flows from operating activities, we may be required to significantly curtail or cease our operations, and our business would be jeopardized.

~~Table of Contents~~

Cash Flows from Operating Activities

Operating activities ~~used $3.8~~provided $0.2 million of cash for the ~~nine~~three months ended ~~September~~March 30, 2024 and used $3.1 million of cash for the three months ended April 1, 2023. The primary drivers of our cash provided by operations for the three months ended March 30, 2023 were a decrease in trade receivable of $2.4 million, an increase in accrued compensation and benefits of $0.3 million, a decrease in other current assets of $0.3 million, depreciation and amortization of $0.2 million, and share-based compensation of $0.1 million, partially offset by cash used in operations to fund our operating loss of $1.4 million, a decrease in trade payables of $0.9 million, an increase in contract assets net of contract liabilities of $0.5 million, and an increase in other current liabilities of $0.4 million.

The primary drivers of our cash used in operations for the ~~nine~~three months ended ~~September 30,~~April 1, 2023 were our operating loss of ~~$11.4~~$6.3 million ~~and~~primarily as a ~~decrease~~result of ~~other current liabilities of $0.9 million, partially offset by cash provided by a decrease in other current assets of $2.8 million,~~ an increase in trade payables of $2.6 million, a decrease in contract assets net of contract liabilities of $1.1 million, $1.2 million from other components of working capital, an increase in accrued compensation and benefits of $0.6 million, and a decrease in trade receivables of $0.1 million.

Operating activities used $8.5 million of cash for the nine months ended September 24, 2022. The primary drivers of our cash used in operations for the nine months ended September 24, 2022 were our netgross loss, ~~of $7.5 million,~~ an increase in contract assets net of contract liabilities of ~~$2.5~~$0.9 million, and ~~an increase in trade receivables~~a decrease of ~~$2.4~~other current liabilities of $0.1 million, partially offset by cash provided from ~~a decrease~~an increase in trade payables of ~~$1.6~~$1.9 million, an increase in accrued compensation and benefits of $1.1 million, a decrease in other current assets of ~~$1.4~~$0.9 million, a decrease of trade receivables of $0.2 million, and ~~$0.9~~$0.1 million from other components of working capital.

Cash Flows from Investing Activities

Investing activities ~~used~~provided cash of ~~$0.3~~$0.4 million for the ~~nine~~three months ended ~~September~~March 30, 2024 from the sale of personal property and equipment. Investing activities used $0.1 million for the three months ended April 1, 2023 ~~primarily~~ for the purchase of personal property and equipment.

~~Investing activities used cash of $1.3 million for the nine months ended September 24, 2022 primarily related to the Calvert acquisition in addition to the purchase of personal property and equipment.~~

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Cash Flows from Financing Activities

Financing activities ~~provided $2.1~~used $0.1 million of cash for the ~~nine~~three months ended ~~September~~March 30, 2024 primarily due to payment made on finance leases partially offset by the net proceeds received from the Credit Agreement. Financing activities provided $2.4 million of cash for the three months ended April 1, 2023 primarily due to proceeds ~~received from~~provided by the issuance of common stock under the RDO Purchase Agreement, net of issuance costs, ~~and the Credit Agreement entered into during the second quarter of 2023,~~ partially offset by cash used for payments for our finance leases and payments under the ~~Revolving Credit Facility. The Revolving Credit Facility was repaid during~~revolving credit facility due to the ~~second~~reduced credit limit effective in the first quarter of 2023.

Financing activities provided cash of $0.2 million of cash for the nine months ended September 24, 2022 primarily from the Revolving Credit Facility, partially offset by costs associated with the ATM Agreement and payments for our finance leases.

~~Table of Contents~~

Contractual Obligations

The Company is obligated to make future cash payments under the Amended Credit Agreement, operating leases, finance leases, and other liabilities. Amounts below are undiscounted and may differ from balances reflected on the financial statements. The table below sets forth certain information about our contractual obligations as of ~~September~~March 30, ~~2023~~2024 (in thousands):

	Payment Due by Fiscal Period										Payment Due by Fiscal Period
	2023		2024		2025		2026		2027 and thereafter		2024		2025		2026		2027		2028 and thereafter
Operating and finance leases	$	373	$	1,992	$	1,659	$	1,152	$	4,182	$	1,793	$	1,550	$	1,071	$	1,015	$	3,170
Credit Agreement		—		1,018		—		—		—
Amended Credit Agreement												—		1,272		—		—		—
Other liabilities⁽¹⁾												296		—		—		—		—
Total	$	373	$	3,010	$	1,659	$	1,152	$	4,182	$	2,089	$	2,822	$	1,071	$	1,015	$	3,170

(1) Other liabilities includes short-term notes payable.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Disclosure~~The Company’s disclosure controls and procedures are ~~controls and other procedures of a registrant~~ designed to ensure that information required to be disclosed by the ~~registrant~~Company in ~~the~~ reports ~~that it files~~filed or ~~submits~~submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is ~~properly~~ recorded, processed, summarized, and reported within the time periods specified in the ~~SEC~~SEC’s rules and forms. ~~Disclosure~~The Company’s disclosure controls and procedures ~~include processes~~are also designed to ~~accumulate and evaluate relevant information and communicate~~ensure such information is accumulated and communicated to ~~a registrant’s~~ management, including ~~its Chief Executive Officer~~the principal executive and ~~Chief Financial Officer,~~principal financial officers, as appropriate to allow ~~for~~ timely decisions regarding required ~~disclosure.~~disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance that control objectives are attained.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the ~~design and operation of our~~Company’s disclosure controls and procedures as of ~~September~~March 30, ~~2023,~~2024, as required by Rule 13a-15 of the Exchange Act. Based onupon this evaluation, the ~~evaluation described above, our~~Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~September~~March 30, ~~2023, our~~2024, the disclosure controls and procedures were not effective ~~insofar as they are designed to ensure that information required to be disclosed by us~~because of the material weaknesses in the ~~reports that we file or submit~~Company’s internal control over financial reporting described below.

Material Weaknesses in Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange ~~Act~~Act.

A material weakness is ~~recorded, processed, summarized and reported, within~~a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the ~~time periods specified in~~Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the ~~SEC’s rules and forms and that such information is accumulated and communicated to our~~preparation of the Company’s 2023 Annual Report, the Company’s management, including ~~our~~its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s internal control over financial reporting as of December 30, 2023, and identified the material weaknesses described below that continue to exist as of March 30, 2024.

Specifically, (i) the Company did not have sufficient resources in place with the appropriate training and knowledge of internal control over financial reporting in order to ~~allow~~ensure the operating effectiveness; (ii) the Company did not perform an adequate continuous risk assessment over financial reporting to identify and analyze risks of financial misstatement due to errors, and implement necessary changes to internal controls impacted by changes in the business, organizational structure and reduction in personnel over the last twelve months; and (iii) the Company did not have an effective information and communication process that ensured variances and anomalies were communicated to the appropriate personnel on a timely ~~decisions regarding required disclosure.~~basis in order to investigate and take corrective action to prevent the error.

Accordingly, the Company did not follow established appropriate control activities through policies and procedures to mitigate risk to the achievement of the Company’s financial reporting objectives, as follows:

	·	The Company’s management review controls did not operate effectively, including the completeness and accuracy of the data used in the operation of the control, to ensure change orders and contract values were properly entered into the accounting system; and
	·	The Company’s reconciliation controls did not operate effectively to timely record on-line payments, other electronic bank transactions, and unprocessed credit card payments to suppliers.

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These material weaknesses resulted in several material and immaterial misstatements that were corrected prior to the issuance of the consolidated financial statements.

The Company believes that, notwithstanding the material weaknesses mentioned above, the unaudited consolidated financial statements contained in this Quarterly Report on Form 10-Q present fairly, in all material respects, the consolidated balance sheets, statements of operations, stockholders’ equity (deficit), and cash flows of the Company and its subsidiaries in conformity with generally accepted accounting principles in the United States as of the dates and for the periods stated in this Quarterly Report on Form 10-Q.

Remediation Plan and Status

The Company has implemented the following plan of action and will continue to evaluate and adjust remediation actions as needed to ensure the elements of the remediation plan remain appropriate and are sustainable. The elements of the remediation plan include:

The Company did not have effective controls over the accuracy of change orders to ensure they were properly entered into the accounting system and the associated contract values were accurately reported in the accounting system as of December 30, 2023. As of March 30, 2024, we have taken the following actions to remediate the material weakness.

	o	Communicated and trained those in charge of updating contract values in the proper procedure for entering change orders in the accounting system for lump sum contracts.
	o	Communicated to those involved in the monthly forecasting process the importance of communicating to the accounting department any deviation from the expected contract value.
	o	Educated the personnel responsible for setting up projects and entering changes to contract values in the accounting system on how the data they input is used to calculate and recognize revenue on lump sum projects.
	o	Changed the system procedure for calculating revenue from task level to project level on lump sum contracts.
	o	Developed a monthly report to identify contract value changes and assign the responsibility of confirming changes to contract values are valid change orders to another person that is not responsible for entering change orders.

The Company did not follow established control procedures to (i) timely record on-line payments and other electronic bank transactions, and (ii) reconcile unprocessed credit card payments to suppliers as of December 30, 2023. As of March 30, 2024, we have taken the following actions to remediate the material weakness.

	o	Discontinued the supplier credit card program.
	o	Changed when the Company records on-line payments from a month-end process to an interim process, i.e., as they are made.
	o	Re-assigned the responsibility of confirming that all on-line payments have been recorded in the accounts payable subledger at month-end to the accounts payable clerk.
	o	Re-assigned the preparer and approver roles for the bank reconciliations to provide more oversight by the Chief Financial Officer.
	o	Established a more structured review process to ensure the timely recording of all reconciling items.

The Company believes that the actions listed above have provided the appropriate remediation of the material weaknesses identified as of December 30, 2023. Due to the nature of the remediation process and the need for sufficient time after implementation to evaluate and test the design and effectiveness of the controls, no assurance can be made as to when the remediation actions have been operating effectively for a sufficient period of time. The material weakness will be considered fully remediated when the Company concludes that the controls have been operating for a sufficient amount of time and the design and effectiveness of the controls are validated by management.

Changes in Internal Control over Financial Reporting

NoExcept as described above in “Remediation Plan and Status”, there have been no changes in ~~our~~the Company’s internal control over financial reporting ~~occurred~~ during the ~~three months~~quarter ended ~~September~~March 30, ~~2023,~~2024 that have materially affected, or are reasonably likely to materially affect, ~~our~~the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, ENGlobal or one or more of its subsidiaries may be involved in various legal proceedings or may be subject to claims that arise in the ordinary course of business alleging, among other things, claims of breach of contract or negligence in connection with the performance or delivery of goods and/or services. The outcome of any such claims or proceedings cannot be predicted with certainty. AsExcept as described in Note 8—Commitments and Contingencies to our unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, as of the date of this ~~filing, management is not aware~~Quarterly Report on Form 10-Q, no legal proceedings are pending against us that we believe individually or collectively could have a materially adverse effect upon our financial condition, results of ~~any such claims against the Company~~operations, or ~~any subsidiary business entity.~~ cash flows.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December ~~31, 2022,~~30, 2023, which outline factors that could materially affect our business, financial condition or future results, and the additional risk factors below. ~~These risks are not~~You should be aware that the ~~only risks facing our Company. Additional risks~~occurrence of any of the events described in these risk factors and ~~uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect~~elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, financial ~~conditions or operating results.~~condition and results of operations and that upon the occurrence of any of these events, the trading price of our common stock could decline. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of this Quarterly Report on Form 10-Q.

Substantial doubt about our ability to continue as a going concern exists. Our ~~audited~~unaudited financial statements for the period ended ~~December 31, 2022~~March 30, 2024 were prepared on the assumption that we would continue as a going concern. Those financial statements ~~and the accompanying opinion of our auditor~~ expressed a substantial doubt about our ability to continue as a going concern. Those ~~audited~~ financial statements did not include any adjustments that might result from the outcome of this uncertainty. Our recurring losses, negative cash flows from operating activities, need for additional financing and the uncertainties surrounding our ability to obtain such financing, raise substantial doubt about our ability to continue as a going concern. We have limited cash on hand and will need additional working capital to fund our planned operations. We are subject to significant risks and uncertainties, including failing to secure additional capital to fund our planned operations or failing to profitably operate the business. We intend to raise funds through various potential sources, such as equity or debt financings; however, we can provide no assurance that such financing will be available on acceptable terms, or at all. If adequate financing is not available or we do not achieve profitability and positive cash flows from operating activities, we may be required to significantly curtail or cease our operations, and our business would be jeopardized.

~~Table of Contents~~

Our ability to continue as a going concern is also subject to, among other factors, our ability to collect receivables from our clients when due and to invoice our customers in a timely manner. Under the typical payment terms of our fixed-price contracts, the customer pays us progress payments. These progress payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. If these events or milestones are delayed, it will negatively impact the timing of our cash receipts, which affects our ability to pay our employees and suppliers. If we are not able collect our receivables when due from our clients, our cash flow will be negatively impacted which could lead to us not being able to meet our current obligations.

~~We do not have material~~Our limited borrowing capacity under our Amended Credit Agreement, which matures on ~~June 15, 2024, which~~July 2, 2025, may limit our ability to finance operations or engage in other business activities, which could have a material impact on our financial condition.As of ~~September 30, 2023,~~April 24, 2024, we have outstanding borrowings of ~~$1.0~~$1.2 million under the Amended Credit Agreement, which matures on ~~June 15, 2024.~~July 2, 2025. The terms of the Amended Credit Agreement ~~allow~~provide for a revolving credit facility of up to the lesser of (a) the borrowing base and (b) $1,000,000, with the borrowing base being in an ~~additional term loan~~amount equal to up to 95% of ~~$0.3 million at~~Eligible Receivables (as defined in the ~~lender’s discretion.~~Amended Credit Agreement) as determined by the lender from time to time, less any reserves established by the lender in its sole discretion from time to time. The limited ~~availability~~borrowing capacity under the Amended Credit Agreement may limit our ability to finance operations or engage in other business activities, which could have a material impact on our financial condition.

~~The COVID–19 pandemic has adversely affected and could continue to adversely affect our business, financial condition and results of operations.~~Our business is dependent upon the willingness and ability of our customers to conduct transactions with us. The COVID–19 pandemic has caused severe disruptions in the worldwide economy, including the global demand for oil and natural gas. The prolonged nature of the COVID–19 pandemic has resulted, and may continue to result, in a significant decrease in business and/or has caused, and may in the future cause, our customers to be unable to meet existing payment or other obligations to us, particularly in the event of a resurgence of COVID–19 in our market areas. The COVID–19 pandemic may also negatively impact the availability of our key personnel necessary to conduct our business as well as the business and operations of third-party service providers who perform critical services for our business. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the impact on our business, financial condition and results of operations remains uncertain and difficult to predict. If COVID–19 resurgences or if the response to contain the COVID-19 pandemic is unsuccessful, we could experience a material adverse effect on our business, financial condition, and results of operations.

~~If we are unable to collect our receivables, our results of operations and cash flows could be adversely affected.~~ Our business depends on our ability to successfully obtain payment from our clients of the amounts they owe us for work performed and materials supplied. In the ordinary course of business, we extend unsecured credit to our customers. We may also agree to allow our customers to defer payment on projects until certain milestones have been met or until the projects are substantially completed, and customers typically withhold some portion of amounts due to us as retainage. As of September 30, 2023, we had projects that totaled less than $0.1 million in retainage. We bear the risk that our clients will pay us late or not at all. Though we evaluate and attempt to monitor our clients’ financial condition, there is no guarantee that we will accurately assess their creditworthiness. To the extent the credit quality of our clients deteriorates or our clients seek bankruptcy protection, our ability to collect receivables and our results of operations could be adversely affected. Even if our clients are credit-worthy, they may delay payments in an effort to manage their cash flow. Financial difficulties or business failure experienced by one or more of our major customers has had and could, in the future, continue to have a material adverse effect on both our ability to collect receivables and our results of operations.

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Our backlog is subject to unexpected adjustments and cancellations and is, therefore, an uncertain indicator of our future revenue or earnings. As of ~~September~~March 30, ~~2023,~~2024, our backlog was ~~approximately $15.5 million which was a decrease of $4.9 million from $20.4 million as of December 31, 2022.~~$10.8 million. We expect a majority of this backlog to be completed ~~within the next 12 months.~~in 2024. We cannot assure investors that the revenue projected in our backlog will be realized or, if realized, will result in profits. Projects currently in our backlog may be canceled or may remain in our backlog for an extended period of time prior to project execution and, once project execution begins, it may occur unevenly over the current and multiple future periods. In addition, project terminations, suspensions or reductions in scope occur from time to time with respect to contracts reflected in our backlog, reducing the revenue and profit we actually receive from contracts reflected in our backlog. Future project cancellations and scope adjustments could further reduce the dollar amount of our backlog in addition to the revenue and profits that we actually earn. The potential for cancellations and adjustments to our backlog are exacerbated by economic conditions, particularly in our chosen area of concentration, the energy industry. The ~~energy industry has experienced a sustained period of low crude~~markets for oil and natural gas ~~prices~~have been volatile which ~~has reduced~~can exacerbate the potential for cancellations and adjustments to our ~~clients’ activities~~backlog from our clients in the ~~energy~~oil and natural gas industry.

~~Table of Contents~~

~~Our cash balance at financial institutions may exceed Federal Deposit Insurance Corporation (“FDIC”) insured amounts.~~ Our cash balances, including funds on deposit with financial institutions, are subject to certain limitations imposed by the FDIC. The FDIC provides deposit insurance coverage up to the maximum limit for each depositor, per insured bank. The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, for each ownership category. Due to the FDIC deposit insurance limits, we may be exposed to the risk of loss on any excess cash balances that exceed the deposit insurance amount. This risk arises from the possibility of financial institutions with whom we have deposits becoming insolvent or unable to honor withdrawal requests, resulting in potential losses on uninsured portions of our cash holdings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth certain information with respect to repurchases of our common stock for the ~~third~~first quarter of ~~2023:~~2024:

Period

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs (1)

Maximum Number (or
Approximate Dollar Value)
of Shares That May Yet be
Purchased Under Plans or
Programs (1)

July 2, 2023 to July 29, 2023

—

—

—

$ —

July 30, 2023 to September 2, 2023

—

—

—

$ —

September 3, 2023 to September 30, 2023

—

—

—

$ —

Total

—

—

1,290,460

$ 425,589

Period

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs (1)

Maximum
Number (or
Approximate
Dollar Value)
of Shares
That May
Yet be
Purchased
Under
Plans or
Programs (1)

December 31, 2023 to January 27, 2024

—

—

—

$ —

January 28, 2024 to March 2, 2024

—

—

—

$ —

March 3, 2024 to March 30, 2024

—

—

—

$ —

Total

—

—

161,308

$ 425,589

(1)
On April 21, 2015, the Company announced that its Board of Directors had authorized the repurchase of up to $2.0 million of the Company’s common stock from time to time through open market or privately negotiated transactions, based on prevailing market conditions. The Company is not obligated to repurchase any dollar amount or specific number of shares of common stock under the repurchase program, which may be suspended, discontinued or reinstated at any time. The stock repurchase program was suspended on May 16, 2017 and was reinstated on December 19, 2018. As of ~~September~~March 30, ~~2023,~~2024, the Company had purchased and retired ~~1,290,460~~161,308 shares at an aggregate cost of $1.6 million under this repurchase program. Management does not intend to repurchase any shares in the near future.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None~~Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the fiscal quarter ended March 30, 2024, no director or officer (as defined in Rule 16a-1(f) of the Securities Exchange Act) of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 105-1 trading arrangements as each term is defined in Item 408(a) of Regulation S-K.

3026
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ITEM 6. EXHIBITS

Incorporated by Reference to:

Incorporated by Reference to:
Exhibit
No.

Description

Form or
Schedule

Exhibit
No.

Filing
Date with
SEC

SEC
File
Number

Description

Form or
Schedule

Exhibit
No.

Filing
Date with
SEC

SEC
File
Number

3.1

Restated Articles of Incorporation of Registrant dated January 29, 2021

8-K

3.1

1/29/2021

001-14217

Restated Articles of Incorporation of Registrant dated January 29, 2021

8-K

3.1

1/29/2021

001-14217

3.2

Second Amended and Restated Bylaws of Registrant dated April 14, 2016

8-K

3.1

4/15/2016

001-14217

Second Amended and Restated Bylaws of Registrant dated April 14, 2016

8-K

3.1

4/15/2016

001-14217

3.3

Amendment to Article Fourth of ENGlobal’s Restated Articles of Incorporation, filed on June 29, 2023

8-K

3.1

7/3/2023

001-14217

Amendment to Article Fourth of ENGlobal’s Restated Articles of Incorporation, filed June 29, 2023

8-K

3.1

7/2/23

001-14217

3.4

Certificate of Amendment to the Restated Articles of Incorporation of ENGlobal Corporation

8-K

3.1

12/1/2023

001-14217

4.1

Form of Common Stock Purchase Warrant

8-K

4.1

2/3/2023

001-14217

Registrant’s specimen common stock certificate

S-3

4.1

10/31/2005

333-29336

*10.1

First Amendment to Sublease Agreement between FMC Technologies, Inc. and ENGlobal U.S., Inc. dated August 22, 2023

4.2

Form of Common Stock Purchase Warrant

8-K

4.1

2/3/2023

001-14217

*10.2

Fourteenth Amendment to the Lease Agreement between Oral Roberts University and ENGlobal U.S., Inc. dated September 1, 2023

10.1

Amended and Restated Credit Agreement, dated as of April 24, 2024, by and between ENGlobal Corporation, as borrower, and Alliance 2000, Ltd., as lender

8-K

10.1

4/25/24

001-14217

*31.1

Certifications Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934 for the Third Quarter 2019

Certifications Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934 for the Third Quarter 2019

*31.2

Certifications Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934 for the Third Quarter 2019

Certifications Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934 for the Third Quarter 2019

**32.1

Certification Pursuant to Rule 13a – 14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Third Quarter 2019

Certification Pursuant to Rule 13a – 14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Third Quarter 2019

*101.ins

Inline XBRL instance document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document

Inline XBRL instance document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document

*101.sch

Inline XBRL taxonomy extension schema document

Inline XBRL taxonomy extension schema document

*101.cal

Inline XBRL taxonomy extension calculation linkbase document

Inline XBRL taxonomy extension calculation linkbase document

*101.def

Inline XBRL taxonomy extension definition linkbase document

Inline XBRL taxonomy extension definition linkbase document

*101.lab

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Inline XBRL taxonomy extension label linkbase document

*101.pre

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Inline XBRL taxonomy extension presentation linkbase document

*104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith
** Furnished herewith

3127
Table of Contents

SIGNATURE

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

Dated: ~~November 13, 2023~~May 9, 2024

ENGlobal Corporation

By:
/s/ Darren W. Spriggs

Darren W. Spriggs

Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)

3228

	September 30, 2023		December 31, 2022
Revolving Credit Facility (1)	$	—	$	1,661
Credit Agreement (2)		1,018		—
Priority Agreement (3)		—		—
Amount due within one year		1,018		1,661
Total long-term debt	$	—	$	—

	Credit Agreement

2023	$	—
2024		1,018
2025 and thereafter		—
	$	1,018

		Three Months Ended				Nine Months Ended
	Financial Statement Classification	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Finance leases:
Amortization expense	SG&A Expense	$	61	$	53	$	176	$	159
Interest expense	Interest expense, net		13		11		39		33
Total finance lease expense			74		64		215		192

Operating leases:
Operating costs	Operating costs		23		86		710		189
Selling, general and administrative expenses	SG&A Expense		691		543		1,900		1,420
Total operating lease expense			714		629		2,610		1,609
Total lease expense		$	788	$	693	$	2,825	$	1,801

Assumptions used:	Total

Stock price	$	0.87
Exercise price	$	0.95
Risk free rate		3.65	%
Annualized volatility		107.89	%
Time to expiration		5.50

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under Plans or Programs (1)
July 2, 2023 to July 29, 2023		—		—		—	$	—
July 30, 2023 to September 2, 2023		—		—		—	$	—
September 3, 2023 to September 30, 2023		—		—		—	$	—
Total		—		—		1,290,460	$	425,589

Dated: ~~November 13, 2023~~May 9, 2024
	ENGlobal Corporation

	By:	/s/ Darren W. Spriggs
		Darren W. Spriggs
		Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)