Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2017March 31, 2024

OR

Commission File No. 000-30351

DEEP DOWN,KOIL ENERGY SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:(281) (281) 517-5000

Not applicableN/A

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

Securities registered pursuant to Section 12(b) of the Act: None

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, and (2) has been subject to such filing requirements for the past 90 days.   þ☒ Yes¨   ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesþ ☒ No¨ ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

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 ¨. Yes ☐ No  þ☒

At November 14, 2017,May 6, 2024, there were 13,436,24312,188,202shares outstanding of Common Stock, par value $0.001 per share.share.

IMPORTANT INFORMATION REGARDING THIS FORM 10-Q

Unless otherwise indicated, references to “Koil Energy Solutions, Inc.,” “Koil Energy,” “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q (“Report”) refer collectively to Deep Down,Koil Energy Solutions, Inc., a Nevada corporation, (“Deep Down”), and its directlydirect and indirectly wholly-ownedindirect wholly owned subsidiaries.

Deep Down is the parent company to the following directly and indirectly wholly-owned subsidiaries: Deep Down, Inc., a Delaware corporation (“Deep Down Delaware”); Deep Down International Holdings, LLC, a Nevada limited liability company (“DDIH”); and Deep Down Brasil - Solucoes em Petroleo e Gas, Ltda, a Brazilian limited liability company (“Deep Down Brasil”).

Our current operations are primarily conducted under Deep Down Delaware.  In addition to our strategy of continuing to grow and strengthen our operations, including by expanding our services and products in response to our customers’ demands, we intend to continue to seek strategic acquisitions of complementary service providers, product manufacturers and technologies that are focused primarily on supporting deepwater and ultra-deepwater offshore exploration, development and production of oil and gas reserves and other maritime operations.

Readers should consider the following information as they review this Report:

Forward-Looking Statements

The statements contained or incorporated by reference in this Report that are not historical facts are “forward-looking statements” (as such term is defined in the Private Securities Litigation Reform Act of 1995), within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include any statement that may project, indicate or imply future results, events, performance or achievements. The forward-looking statements contained herein are based on current expectations that involve a number of risks and uncertainties. These statements can be identified by the use of forward-looking terminology such as “believes,” “expect,” “may,” “will,” “should,” “intend,” “plan,” “could,” “estimate”“estimate,” or “anticipate,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties.

Given the risks and uncertainties relating to forward-looking statements, investors should not place undue reliance on such statements. Forward-looking statements included in this Report speak only as of the date of this Report and are not guarantees of future performance. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such expectations may prove to be incorrect. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements. The risks and uncertainties mentioned previously relate to, among other matters, the following:

Document Summaries

Descriptions of documents and agreements contained in this Report are provided in summary form only, and such summaries are qualified in their entirety by reference to the actual documents and agreements filed as exhibits to our Annual Report on Form 10-K for the year ended December 31, 2016,2023, other periodic and current reports we have filed with the SEC, or this Report.

Access to Filings

Access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments thereto, filed with or furnished to the SEC pursuant to Section 13(a) of the Exchange Act, as well as reports filed electronicallyby our executive officers and directors pursuant to Section 16(a) of the Exchange Act, may be obtained through our website (http://www.deepdowncinc.com)(www.koilenergy.com) as soon as reasonably practicable after we, or our executive officers and directors, have filed or furnished such material with the SEC. The contents of our website are not, and shall not be deemed to be, incorporated into this Report.

TABLE OF CONTENTS

PART I.I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

DEEP DOWN,KOIL ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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

DEEP DOWN,KOIL ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

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

KOIL ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

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

DEEP DOWN,KOIL ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except per share amounts)

Basis of Presentation

Unless otherwise indicated, the terms “Koil Energy Solutions, Inc.”, “Koil Energy”, “Company”, “we”, “our” and “us” are used in this Report to refer to Koil Energy Solutions, Inc., a Nevada corporation (“Koil Energy Nevada”), and its directly wholly owned subsidiary, Koil Energy Solutions, Inc., a Delaware corporation (“Koil Energy Delaware”). The accompanying unauditedcondensedconsolidated financial statements of Deep Down,Koil Energy Solutions, Inc. and its directly and indirectly wholly-owned subsidiaries (“Deep Down,” “we,” “us” or the “Company”) were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC” or the “Commission”) pertaining to interim financial information and instructions to Form 10-Q. As permitted under those rules, certain footnotesnotes or other financial information that are normally required by United States generally accepted accounting principles (“US GAAP”) can be condensed or omitted. Therefore, these statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 31, 2017 with the Commission.2023.

Preparation of financial statements in conformity withUS GAAPrequires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosed amounts of contingent assets and liabilities, and the reported amounts of revenues and expenses. If the underlying estimates and assumptions upon which the financial statements are based change in future periods, then the actual amounts may differ from those included in the accompanying unaudited condensed consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Liquidity

The Company’s cash on hand was $1,978 and working capital was $3,300 as of March 31, 2024. As of December 31, 2023, cash on hand and working capital was $2,030 and $2,565, respectively. The Company generally depends on cash on hand, cash flows from operations, and potential opportunistic sales of property, plant and equipment (“PP&E”) to satisfy its liquidity needs.

The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, and potential sales of PP&E. Given the inherent volatility in oil prices and global economic activity, the Company cannot predict this with certainty. To mitigate this uncertainty, the Company exercises discipline when making capital investments and pursues opportunistic cost containment initiatives, which can include workforce alignment, limiting overhead spending, and limiting research and development efforts to only critical items. Additionally, on May 24, 2023, the Company entered into a Purchase and Sale Agreement/Security Agreement with Zions Bancorporation, N.A., d/b/a Amegy Bank Business Credit (“Amegy”), which provides for Koil Energy from time to time to sell its accounts receivable and other rights to payment to Amegy, subject to Amegy’s right to approve or reject future accounts receivable and other rights proposed for sale, in its sole discretion. Any receivables sold shall bear an interest rate computed as Wall Street Journal Prime Rate (“Prime Rate”) plus 2.00%. The Prime Rate has a floor and at no time shall it be less than 8.00% for the purposes of this agreement. At March 31, 2024, the Company had one factored invoice outstanding with Amegy in the amount of $332.

Principles of Consolidation

The unaudited condensed consolidated financial statements presented herein include the accounts of Deep Down, Inc.Koil Energy for the three months ended March 31, 2024 andits directly and indirectly wholly-owned subsidiaries. 2023. All intercompany transactions and balances have been eliminated.

Segments

For the quartersthree months ended September 30, 2017March 31, 2024 and 2016, we had2023, the Company’s operations were organized as one reportable segment and one operating and reporting segment, Deep Down Delaware.

Recently Issued Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This update provides a five-step approach to be applied to all contracts with customers and requires expanded disclosures about the nature, amount, timing and uncertainty of revenue (and the related cash flows) arising from customer contracts, significant judgments and changes in judgments used in applying the revenue model and the assets recognized from costs incurred to obtain or fulfill a contract. The effective date for this standard was deferred in July 2015 and will now be effective for us beginning January 1, 2018. The standard provides for different application methods during adoption. We are currently in the process of evaluating the potential impact this new pronouncement will have on our financial statements. We are reviewing our existing contracts to identify any that may be impacted by this standard, and evaluating new contracts we are negotiating to ensure compliance with this standard. We have not completed our full evaluation and therefore cannot conclude whether the pronouncement will have a significant impact on our financial statements at this time, but we expect requirements of this standard to significantly enhance our revenue disclosures. We currently anticipate that we will utilize the modified retrospective method of adoption, however, this expectation may change following the completion of our evaluation of the impact of this pronouncement on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The amendments in this update require, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The amendments are effective for us beginning January 1, 2019. We do not anticipate the adoption of ASU 2016-02 will have a material effect on our results of operations, however we are still evaluating the impact on our financial position.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except per share amounts)

In October 2016, the FASB issued ASU No. 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” This update requires that income tax consequences are recognized on an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in this ASU are effective for us on January 1, 2018. We are currently evaluating the impact of this ASU on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations.” This new ASU clarified the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard is effective for us January 1, 2018 and will be applied prospectively. We are currently evaluating the impact of our pending adoption of the new standard, but do not expect it to have a material impact on our consolidated financial position or results of operations.

In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets” (“ASU 2017-05”). This update clarifies the scope of accounting for the derecognition or partial sale of nonfinancial assets to exclude all businesses and nonprofit activities. ASU 2017-05 also provides a definition for in-substance nonfinancial assets and additional guidance on partial sales of nonfinancial assets. We are currently evaluating the effect of ASU No. 2017-05 on our consolidated financial statements and will adopt ASU 2017-05 in conjunction with ASU 2014-09 on January 1, 2018.

In May 2017, the FASB issued ASU No. 2017-09, “Scope of Modification Accounting” (“ASU 2017-09”), which amends the scope of modification accounting for share-based payment arrangements. This update clarifies when a change to the terms or conditions of a share-based payment award should be accounted for as a modification. An entity should account for the effects of a modification unless the fair value, vesting conditions and classification, as an entity instrument or a liability instrument, of the modified award are the same before and after a change to the terms or conditions of the share-based payment award. The new standard is effective for us January 1, 2018. We do not expect ASU 2017-09 to have a material impact on our consolidated financial position or results of operations.

The components of billings, costs and estimated earnings on uncompleted contracts are summarized below:

The balance in costs and estimated earnings in excess of billings on uncompleted contracts at September 30, 2017 and December 31, 2016 consisted primarily of earned but unbilled revenues related to fixed-price projects.

The balance in billings in excess of costs and estimated earnings on uncompleted contracts at September 30, 2017 and December 31, 2016 consisted primarily of unearned billings related to fixed-price projects.

segment.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousandsIn February 2016, the FASB issued ASU 2016-02, Leases (“ASC Topic 842”). Under this guidance, lessees are required to recognize on the balance sheet a lease liability and a right-of-use (“ROU”) asset for all leases, except per share amounts)for short-term leases with terms of twelve months or less. The lease liability represents the lessee’s obligation to make lease payments arising from a lease and will initially be measured as the present value of the lease payments. The ROU asset represents the lessee’s right to use a specified asset for the lease term and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs.

ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term and include options to extend or terminate the lease when they are reasonably certain to be exercised. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at the lease commencement date. Lease agreements with lease and non-lease components are generally accounted for as a single lease component. The Company’s operating lease expense is recognized on a straight-line basis over the lease term and a portion is recorded in cost of sales, and the remainder is recorded in selling, general and administrative expenses. The accounting for some leases may require significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rate to utilize in our net present value calculation of lease payments for lease agreements which do not provide an implicit rate, and assessing the likelihood of renewal or termination options and impairment.

At the inception of a lease, Koil Energy evaluates the agreement to determine whether the lease will be accounted for as an operating or finance lease. The term of the lease used for such an evaluation includes renewal option periods only in instances in which the exercise of the renewal option can be reasonably assured, and if the contract contains a substantial penalty for failure to renew or extend the lease, it could lead the Company to conclude it has a significant economic incentive to extend the lease beyond the base rental period.

The Company leases land, buildings, and certain equipment under non-cancellable operating leases. We lease office, indoor manufacturing, warehouse, and operating space in Houston, Texas and lease storage space in Mobile, Alabama to house our 3,400 metric ton and 3,500 metric ton carousel systems. We classify our leases related to certain office furniture and computer equipment as finance leases. The Company elects to apply the short-term lease exception; therefore, the Company will not record an ROU asset or corresponding lease liability for leases with an initial term of twelve months or less that are not reasonably certain of being renewed and instead will recognize a single lease cost allocated over the lease term, generally on a straight-line basis. The Company elects to apply the practical expedient to not separate lease components from non-lease components and instead account for both as a single lease component for all asset classes.

Most leases include one or more options to renew, with renewal terms that can extend the lease term on a monthly, annual or longer basis. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements is limited by the expected lease term unless there is a transfer of title or purchase option that is reasonably certain of being exercised.

The Company elects to not capitalize any lease in which the estimated value of the underlying asset at the commencement date is less than the Company’s capitalization threshold. A lease would need to qualify for the low value exception based on various criteria.

As of March 31, 2024, the Company does not have any subleases.

The following tables present information about our operating and finance leases: 

The components of our lease expense were as follows: 

The lease term and discount rate for our operating and finance leases were as follows: 

Present value of lease liabilities:

Revenues are recognized when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. To determine the proper revenue recognition method for our customer contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or 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 the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period.

For most of our fixed price contracts, the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project or capability even if that single project results in the delivery of multiple units. Hence, the entire contract is accounted for as one performance obligation. 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.

Disaggregation of Revenue

The following table presents our revenues disaggregated by fixed price and service contracts. Sales taxes are excluded from revenues.

Fixed price contracts

For fixed price contracts, we generally recognize revenue over time as we perform because of continuous transfer of control to the customer. This continuous transfer of control to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. In our fixed price contracts, the customer either controls the work in process or we deliver products with no alternative use to the Company and have rights to payment for work performed to date plus a reasonable profit as evidenced by contractual termination clauses.

Because of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. We generally use the cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred.

Contracts are often modified to account for changes in contract specifications and requirements. We consider a contract modification 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 in or a reduction of revenue) on a cumulative catch-up basis.

We have a company-wide standard and disciplined quarterly estimate at completion 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. Changes in estimates of net sales, cost of sales and the related impact to operating income are recognized quarterly 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. When estimates of total costs to be incurred exceed total estimates of revenue to be earned on a performance obligation related to fixed price contracts, a provision for the entire loss on the performance obligation is recognized in the period the loss is estimated.

Service Contracts

We recognize revenue for service contracts measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred over time when the services are rendered to the customer on a daily basis. Specifically, we recognize revenue as the services are provided as we have the right to invoice the customer for the services performed. Services are billed on a monthly basis. Payment terms for services are usually 30 days from invoice receipt but have increased to 45, 60, or 90 days depending on the customer.

Contract balances

Costs and estimated earnings in excess of billings on uncompleted contracts arise when revenues are recorded based on the extent of progress towards completion but cannot be invoiced under the terms of the contract. Such amounts are invoiced upon completion of contractual milestones. Billings in excess of costs and estimated earnings on uncompleted contracts arise when milestone billings are permissible under the contract, but the related costs have not yet been incurred. All contract costs are recognized currently on jobs formally approved by the customer and contracts are not shown as complete until virtually all anticipated costs have been incurred and the risk of loss has passed to the customer.

Assets related to costs and estimated earnings in excess of billings on uncompleted contracts, as well as liabilities related to billings in excess of costs and estimated earnings on uncompleted contracts, have been classified as current. The contract cycle for certain long-term contracts may extend beyond one year; thus, complete collection of amounts related to these contracts may extend beyond one year though such long-term contracts include contractual milestone billings as discussed above. At March 31, 2024 and December 31, 2023, there were no contracts with terms that extended beyond one year.

The following table summarizes our contract assets, which are “Costs and estimated earnings in excess of billings on uncompleted contracts” and our contract liabilities, which are “Billings in excess of costs and estimated earnings on uncompleted contracts”. 

The contract asset and liability balances at March 31, 2024 and December 31, 2023 consisted primarily of revenue related to fixed-price projects.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and excludes unexercised contract options, potential orders, and any remaining performance obligations for any sales arrangements that had not fully satisfied the criteria to be considered a contract with a customer pursuant to the requirements of Accounting Standards Codification 606.

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses.

Many of our services contracts are short-term in nature with a contract term of one year or less. For those contracts, we have utilized the practical expedient exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

Additionally, our payment terms are short-term in nature with settlements of one year or less. We have, therefore, utilized the practical expedient exempting the Company from adjusting the promised amount of consideration for the effects of a significant financing component given that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Further, in many of our service contracts, we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of our performance completed to date (for example, a service contract in which we bill a fixed amount for each hour of service provided). For those contracts, we have utilized the practical expedient allowing us to recognize revenue in the amount for which we have the right to invoice.

Accordingly, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

The components of net property,Property, plant and equipment are summarized below:consisted of the following: 

Depreciation expense for the three months ended March 31, 2024 was $144.

From 2008 through June 30, 2016, we maintained a credit facility (the “Facility”) with Whitney Bank.  In March 2016, we paid all borrowings under the Facility with proceeds received from the sale of our Channelview location.Following the expiration of the Facility on June 30, 2016, we no longer have any credit facilities available to us.

Share-based Compensation Plan

We have a share-based compensation plan, the “2003 Directors, Officers and Consultants Stock Option, Stock Warrant and Stock Award Plan” (the “Plan”). Awards of common stock and options to purchase common stock granted under the Plan have vesting periods of three years and options are exercisable for two years once fully vested. Share-based compensation expense related to awards is based on the fair value at the date of grant, and is recognized over the requisite expected service period, net of estimated forfeitures. Under the Plan, the total number of options permitted is 15 percent of issued and outstanding common shares.

Summary of Nonvested Shares of Restricted Stock

On May 2, 2017, we granted 30 shares of restricted stock to an independent director. These shares have a fair value grant price of $1.15 per share, based on the closing price of our common stock on that day. These shares vest over three years in equal tranches on the grant date anniversary, subject to continued service on our Board of Directors. We are amortizing the related share-based compensation of $33 over the three-year requisite service period.

For the nine months endedSeptember 30, 2017 and 2016, we recognized a total of $101 and $309, respectively, of share-based compensation expense related to restricted stock awards, which is included in selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.operations and additional paid-in capital in the accompanying unaudited condensed consolidated balance sheets.

On March 6, 2024, the Company granted 300 shares of restricted stock and an option to purchase 300 shares of our common stock to our newly appointed Chief Executive Officer (“CEO”). The restricted shares have a fair value grant price, and the option has an exercise price, of $0.56 per share, based on the closing price of our common stock on that day. Fair value of the stock options was $0.35 per share at the date of grant. These shares and options vest over three years in equal tranches on the anniversaries of the grant date. The related share-based compensation is being amortized over the three-year requisite service period, and the Company recognized a total of $5 in compensation expense for these grants for the three months ended March 31, 2024.

During the three months ended March 31, 2024 and 2023, the Company recognized a total of $19 and $24 of share-based compensation expense, respectively. The unamortized estimated fair value of nonvested sharesstock options was $112 and $24 at March 31, 2024 and December 31, 2023, respectively. The unamortized estimated fair value of nonvested restricted stock awards was $73$103 and $0 atSeptember 30, 2017. These costs are expected to be recognized as expense over a weighted-average period of 0.30 years. March 31, 2024 and December 31, 2023, respectively.

On May 23, 2016, our Board of Directors authorized a repurchase program (the “Repurchase Program”) under which we were originally authorized to repurchase up to $1,000 of our outstanding stock. Subsequently, on March 29, 2017, our Board of Directors authorized a renewal and extension of the Repurchase Program for an additional $1,000 until March 31, 2018. The purchases could be made from time to time in the open market, through privately negotiated transactions and Rule 10b5-1 trading plans in accordance with applicable laws, rules and regulations. The Repurchase Program was funded from cash on hand and cash provided by operating activities. As of September 30, 2017, we had exhausted the Repurchase Program. As of the date of this report no decisions have been made on any further stock repurchases. The average price per share of treasury stock throughSeptember 30, 2017 was $1.02. Treasury shares are accounted for using the cost method. During the three months ended March 31, 2024, 300 shares of treasury stock were utilized for the restricted stock granted to our CEO.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except per share amounts)

Income tax expense during interim periods is based on applying the estimated annual effective income tax rate to interim period operations. The estimated annual effective income tax rate may vary from the statutory rate due to the impact of permanent items relative to our pre-tax income, as well as by any valuation allowance recorded. We employ an asset and liability approach that results in the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial basis and the tax basis of those assets and liabilities. A valuation allowance is established when it is more likely than not that some of the deferred tax assets will not be realized. Although our future projections indicate that we may be able to realize some of these deferred tax assets, due to the degree of uncertainty of these projections, atSeptember 30, 2017At March 31, 2024 and December 31, 20162023, management has recorded a full deferred tax asset valuation allowance.

Employment Agreement

Our CEO is employed under an employment agreement containing severance provisions. In the event of termination of the CEO’s employment for any reason, the CEO will be entitled to receive all accrued, unpaid salary and vacation time through the date of termination and all benefits to which the CEO is entitled or vested under the terms of all employee benefit and compensation plans, agreements, and arrangements in which the CEO participates as of the date of termination.

In addition, subject to executing a general release in favor of the Company, the CEO will be entitled to receive certain severance payments in the event his employment is terminated by the Company “other than for cause” or by the CEO with “good reason.” These severance payments include: (i) a lump sum in cash equal to one time the CEO’s annual base salary; (ii) a lump sum in cash equal to a pro rata portion of the annual bonus payable for the period in which the date of termination occurs based on the actual performance under the Company’s annual incentive bonus arrangement, but no less than fifty percent of the CEO’s annual base salary; and (iii) if the CEO’s termination occurs prior to the date that is twelve months following a change of control, then each and every share option, restricted share award and other equity-based award that is outstanding and held by the CEO shall immediately vest and become exercisable.

Litigation

From time to time, we are involved inthe Company is party to various legal proceedings arising fromin the normalordinary course of business. As of the date of this Report, we wereThe Company expenses or accrues legal costs as incurred and is not involved in any material legal proceedings.

Operating Leasesproceedings as of the date of these financial statements.

We lease certain offices, facilities, equipment and vehicles under non-cancellable operating and capital leases expiring at various dates through 2023.

Basic earnings per share (“EPS”) is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income (loss) by the weighted-average number of common shares and dilutive effect of common stock equivalents (warrants, nonvested stock awards and stock options) outstanding duringusing the period. Dilutedtreasury method.

In each relevant period, the net income used in the basic and diluted EPS reflectscalculations is the potential dilution that could occur if options to purchase common stock were exercised for sharessame. The following table reconciles the weighted-average basic number of common stockshares outstanding and all nonvested stock awards vest.the weighted-average diluted number of common shares outstanding for the purpose of calculating basic and diluted EPS.

At September 30, 2017

Under the provisions of the Coronavirus Aid, Relief, and 2016,Economic Security Act (the “CARES Act”) signed into law on March 27, 2020 and the subsequent extension of the CARES Act, the Company was eligible for a refundable employee retention credit subject to certain criteria. Since there were potentially dilutive securities outstanding, but they wereare no generally accepted accounting principles for for-profit business entities that receive government assistance that is not taken into consideration in calculating diluted EPS becausethe 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. The Company 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 were losses, so including them would have been anti-dilutive.is reasonable assurance (i.e., it is probable) that the entity will comply with any conditions attached to the grant and the grant will be received.

The Company recognized a $650 employee retention credit as other income on its consolidated statement of operations for the year ended December 31, 2021. The Company filed for refunds of the employee retention credits and on October 10, 2023, received a $344 refund for the employee retention credit filed for the first quarter of 2021. As of March 31, 2024 and December 31, 2023, the Company has a $323 employee retention tax credit receivable balance recorded on its condensed consolidated balance sheet.

On May 24, 2023, Koil Energy entered into a Purchase and Sale Agreement/Security Agreement (“Factoring Agreement”) with Amegy, which provides for the Company from time to time to sell its accounts receivable and other rights to payment to Amegy. Amegy has the right to approve or reject future accounts receivable or other rights to payment proposed for sale under the Factoring Agreement in its sole discretion.

The purchase price for the receivables shall be the gross amount of the invoice minus the discount. The “discount” means 15% of the gross amount of an invoice that is generated by the rendering of services or selling of goods on a time and materials basis, and 25% of the gross amount of an invoice that is generated by the rendering of services or selling of goods on a milestone billing basis.

Amegy has the right to charge back any receivable to Koil Energy, and Koil Energy has the obligation to repurchase such receivable, if (a) the receivable is not paid to Amegy within 90 days from the invoice date, at which time it will be deemed to be in dispute, (b) any dispute arises with respect to such receivable, (c) Koil Energy or Amegy discovers or determines that any representation or warranty made by Koil Energy in the Factoring Agreement or in any document executed in connection with the Factoring Agreement (the “Purchase Documents”) is false or misleading, or (d) Koil Energy breaches any covenant or agreement contained in the Factoring Agreement or in any Purchase Document or is otherwise in default thereof.

The receivables sold shall bear interest at a rate equal to the Wall Street Journal Prime Rate (“Prime Rate”) plus 2.00%. The Prime Rate has a floor and at no time shall it be less than 8.00% for the purposes of the Factoring Agreement.

We have evaluated subsequent events through the date the condensed consolidated financial statements were filed with the SEC.

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

(Amounts in thousands except per share amounts)

The following discussion and analysis provides information that management believes is relevant for an assessment and understanding of ourKoil Energy’s results of operations and financial condition. This information should be read in conjunction with ourthe Company’s audited historical consolidated financial statements, which are included in ourthe Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with2023 and which is available on the SecuritiesSEC’s website, and Exchange Commission (“SEC”) on March 31, 2017 and ourthe Company’s unaudited condensed consolidated financial statements, and notes thereto, included with this Quarterly Report on Form 10-Q (“Report”) in Part I. Item 1. “Financial Statements.” and is available on the SEC’s website.

General

We areKoil Energy is an oilfieldenergy services company specializing in complex deepwaterthat provides equipment and ultra-deepwater oil production distribution system support services servingto the worldwideworld’s energy and offshore explorationindustries. The Company provides innovative solutions to complex customer challenges presented between the production facility and production industry. Ourthe energy source. Koil Energy's core services and technological solutions include distribution system installation support and engineering services, umbilical terminations, loose-tube steel flying leads, buoyancy products and services, remotely operated vehicles (“ROVs”) and toolings. Werelated services. Additionally, Koil Energy's experienced professionals can support subsea engineering, manufacturing, installation, commissioning, and maintenance projects through specialized, highly experiencedlocated anywhere in the world. The Company’s solutions are engineered and manufactured primarily for major integrated, large independent, and foreign national energy companies in offshore areas throughout the world. These products are often developed in direct response to customer requests for solutions to critical needs in the field. The Company primarily serves the offshore oil and gas market; however, the Company’s product offerings and service teamscapabilities are based on core competencies that are indifferent to energy source and engineered technological solutions.can be applied to additional markets, including offshore wind, offshore wave energy, hydrogen, and liquefied natural gas.

In Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all dollar and share amounts are in thousands of dollars and shares, respectively, unless otherwise indicated.

Industry and Executive Outlook

Three years into the downturn in oil prices, the industry has largely come to terms with the lower prices, and adjusted accordingly. So much so, that the recent slight uptick in prices is giving rise to optimism about the future. However, even without increases in prices, oil companies have modified their strategies to manage their operations with the lower prices, with projects being executed at breakeven prices as low as $50 a barrel.

One key strategy being employed across theThe energy services industry is dependent on the increased usecapital and operating expenditure programs of strategic partnerships. Whether betweenenergy companies. The decision for operators to either progress or cut back their exploration, drilling, and production operations is substantially driven by the overall condition of the energy industry. Particularly, the oil and gas operatorsindustry has historically been characterized by fluctuations in commodity prices, which are driven by a variety of market forces. Per the International Energy Agency’s March 2024 Oil Market Report, demand is expected to increase by 1.3 million barrels per day in 2024. Additionally, we believe a convergence of economic, geopolitical, trade and their suppliers, or between suppliers who serve different steps alongpolicy factors has exacerbated the value chain, these partnerships are realizing increased value dueissue of years of underinvestment in upstream hydrocarbon production and appears to have returned the alignment of incentives, while spreading project risks.focus to increasing production. As a result, the Company anticipates global offshore oil production to continue its pivotal role in meeting the world’s energy demands this year.

While we are disheartened by delays in some key projects we expect to be working on, and the resulting disappointing results, we are cautiously optimistic that partnerships we are pursuing will provide material benefits for us in 2018 and beyond, even as we continue to engage with our existing and new customers on their projects. We are especially looking to take advantage of such partnerships to pursue opportunities in international markets, where there is an increase in the focus on local content regulations, in order to enhance local capacity.

We are continuing to engage in more discussions with different customers on what is commonly referred to as brownfield work, which is where operators seek to derive further benefit from their existing infrastructure, rather than develop new fields. We continue to view this as a growth opportunity for us, especially as a mitigation for continued delays in new projects, and are making concerted efforts to enhance our market position in this area.

Our balance sheet continues to be strong, we continue to evaluate opportunities to optimize our cost structure, and we are continuing to engage with our customers as they make plans for their projects in 2018 and beyond. Through these efforts we remain strongly committed to creating the most value for our customers, shareholders and employees.

Results of Operations

Three Months Ended September 30, 2017March 31, 2024 Compared to Three Months Ended September 30, 2016March 31, 2023

Revenues.Revenues Revenues

The 56% increase in revenues was primarily driven by an overall increase in fixed price contracts partially offset by a decrease in service contract activity when compared to revenues for the three months ended September 30, 2017 were $3,470 compared to revenues of $9,165 for the three months ended September 30, 2016. The $5,695, or 62 percent, decrease was primarily the result of delays in the commencement of certain customer projects, and fewer projects in process in 2017, coupled with the commencement of procurement and manufacturing activities on certain customer orders that resulted in higher than normal revenues in the three month period ended September 30, 2016.March 31, 2023.

Cost of Sales

Gross profit. GrossThe increase in gross profit was primarily driven by increased revenues. The decrease in gross profit as a percentage of sales was mainly due to incurring higher materials costs associated with the increase in fixed price contracts.

The Company records depreciation expense related to revenue-generating property, plant and equipment as cost of sales, which totaled $116 and $126 for the three months ended September 30, 2017March 31, 2024 and 2023, respectively.

Selling, general and administrative expenses

The decrease in selling, general, and administrative expenses (“SG&A”) was $1,034, or 30 percent of revenues, comparedprimarily due to $3,297, or 36 percent of revenues,lower administrative payroll expense, advertising expense, research and development expense, and rental expense related to the Company’s short-term lease for furniture at the Company’s operating facility.

The Company records depreciation expense related to administrative property, plant and equipment and intellectual property as SG&A, which totaled $28 and $26 for the three months ended September 30, 2016. The $2,263 decrease in gross profit, or 6 percent decrease in gross profit percentage respectively, was due to lower revenues in the three months ended September 30, 2017.March 31, 2024 and 2023, respectively.

Selling, general and administrative expenses.Adjusted EBITDASelling, general and administrative (“SG&A”) expenses were $2,264, or 65 percent of revenues, for the three months ended September 30, 2017 compared to $2,210, or 24 percent of revenues, for the three months ended September 30, 2016. The $54 increase in 2017 resulted primarily from labor costs directed to SG&A activities due to lower manufacturing and/or service activities.

Other income (expense). During the three months ended September 30, 2017, we recognized a gain on the sale of property, plant and equipment of $559 related to the sale of one of our ROVs.There was no gain or loss on the sale of property, plant and equipment during the three months ended September 30, 2016.

Modified EBITDA. Our managementManagement evaluates ourCompany performance based on a non-GAAP measure that is not in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which consists of earnings (net income or loss) available to common shareholdersstockholders before net interest expense,income, income taxes, depreciation and amortization, non-cash share-based compensation expense, equity in net income or loss of joint venture, non-cash impairments, depreciationnon-cash gains or losses on the sale of property, plant and amortization,equipment (“PP&E”), other non-cash items and one-time charges (“ModifiedAdjusted EBITDA”). This measure may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with US GAAP.companies. The measure should not be considered in isolation or as a substitute for operating income or loss, net income or loss, cash flows provided by operating, investing, or financing activities, or other cash flow data prepared in accordance with US GAAP. The amounts included in the ModifiedAdjusted EBITDA calculation, however, are derived from amounts included in the accompanying unaudited condensed consolidated statements of operations.

We believe ModifiedAdjusted EBITDA is a useful to investors in evaluating our operating performance because it is widely used to measure of a company’s operating performance, which can vary substantially from company to company depending upon accounting methods and book value of assets, financing methods, capital structure and the method by which assets were acquired. It helps investors more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest);, asset base (primarily depreciation and amortization);, and actions that do not affect liquidity (share-based compensation expense, equity in net income or loss of joint venture)expense) from our operating results; andresults. Additionally, it helps investors identify items that are within our operational control. Depreciation and amortization charges, while a component of operating income, are fixed at the time of the asset purchase or acquisition in accordance with the depreciable lives of the related asset and as such are not a directly controllable period operating charge.

The following is a reconciliation of net income (loss) to ModifiedAdjusted EBITDA (EBITDA loss) for the three months ended September 30, 2017March 31, 2024 and 2016:2023:

Modified EBITDA loss was ($863) for the three months ended September 30, 2017 compared to Modified EBITDA of $1,492 for the three months ended September 30, 2016. The $2,355 decrease in Modified EBITDA was due primarily to the decrease in net income, which was driven by the previously discussed decreased revenues, as well as the gain on sale of assets during the 2017 period.

Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Revenues. Revenues for the nine months ended September 30, 2017 were $14,458 compared to revenues of $19,489 for the nine months ended September 30, 2016. The $5,031, or 26 percent, decrease was primarily a result of project delays and fewer projects in process in 2017, coupled with the previously discussed above average activity levels in the same period in 2016.

Gross Profit. Gross profit for the nine months ended September 30, 2017 was $6,341, or 44 percent of revenues, compared to gross profit of $6,672, or 34 percent of revenues, for the nine months ended September 30, 2016. Though we had a slight decrease of $331 in gross profit, we maintained higher margins as a percentage of revenues, due to a larger proportion of higher margin service work, as well as the resolution of an outstanding customer issue, during the nine months ended September 30, 2017.

Selling, general and administrative expenses.SG&A expenses for the nine months ended September 30, 2017 were $6,995, or 48 percent of revenues, compared to $7,376, or 38 percent of revenues, for the nine months ended September 30, 2016. The $381 decrease in 2017 resulted primarily due to a reduction in certain SG&A salaries and rent expense incurred in 2016, related to the sale and move from our Channelview location in 2016, as well as a decrease in our legal expenses.

Equity in net income of joint venture. During the nine months ended September 30, 2017, we recorded $94 of equity in net income of joint venture, related to net income, for the year ended December 31, 2016, of Cuming Flotation Technologies, LLC, in which we previously owned a 20 percent interest.

Other income (expense). During the nine months ended September 30, 2017, we recognized a gain on the sale of property, plant and equipment of $574 primarily related to the sale of one of our ROVs, while during the nine months ended September 30, 2016, we recognized a gain on the sale of property, plant and equipment of $1,070 related to the sale of our Channelview location.

Modified EBITDA. As noted above, our management evaluates our performance based on Modified EBITDA.  This measure may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. The measure should not be considered in isolation or as a substitute for operating income or loss, net income or loss, cash flows provided by operating, investing or financing activities, or other cash flow data prepared in accordance with GAAP. The amounts included in the Modified EBITDA calculation, however, are derived from amounts included in the accompanying condensed consolidated statements of operations.

The following is a reconciliation of net loss to Modified$644 increase in Adjusted EBITDA for the nine months ended September 30, 2017 and 2016:

Modified EBITDA for the nine months ended September 30, 2017 was $507 compared to Modified EBITDA of $587 for the nine months ended September 30, 2016.  The $80 decrease was primarily due to the decrease in gain on sale of assets, the decrease in share-based compensation, anddriven by gross profit improvement associated with the increase in net loss in 2017fixed price contracts during the three months ended March 31, 2024 as compared to 2016.the three months ended March 31, 2023.

Liquidity and Capital Resources

OverviewAs an offshore energy services provider, our revenues, profitability, cash flows, and future rate of growth are generally dependent on the condition of the global oil and gas industry and our customers’ ability to invest capital for offshore exploration, drilling and production, and maintenance of offshore drilling and production facilities. Oil and gas prices and the level of offshore drilling and production activity have historically been characterized by significant volatility. At times, we enter into large, fixed-price contracts which may require significant lead time and investment. A decline in offshore drilling and production activity could result in lower contract volume or delays in significant contracts, which could negatively impact our earnings and cash flows. Our earnings and cash flows could also be negatively affected by delays in payments by significant customers or delays in the completion of our contracts for any reason.

Historically, we have supplemented the financing of our capital needs through debt and equity financings.

From 2008 through June 30, 2016, we maintained a credit facility (the “Facility”) with Whitney Bank. In March 2016, we paid all borrowings under the Facility with proceeds received from the sale of our Channelview location.Following the expiration of the Facility on June 30, 2016, we no longer have any credit facilities available to us.

As a result of cash we expect to generate from operations, we believe weThe Company believes it will have adequate liquidity to meet its future operating requirements. We are generally dependent on our operatingcash flows from operations to fund our working capital requirements, and the uncertainties noted above create risks that we may not achieve our planned earnings or cash flow from operations. On May 24, 2023, the Company entered into a Purchase and Sale Agreement/Security Agreement with Zions Bancorporation, N.A., d/b/a Amegy Bank Business Credit (“Amegy”), which provides for the foreseeable future.Koil Energy from time to time to sell its accounts receivable and other rights to payment to Amegy, subject to Amegy’s right to approve or reject future accounts receivable and other rights proposed for sale, in its sole discretion. The balance of accounts receivable sold to Amegy as of March 31, 2024 was $332.

InflationThe principal liquidity needs of the Company are to fund ongoing operations, working capital, and Seasonalitycapital expenditures. During the three months ended March 31, 2024, the Company reported a $52 decrease in cash. The Company used $307 of net cash in operating activities, primarily driven by net changes in operating assets and liabilities of $1,067. This was partially offset by net income of $576 and other adjustments of $184 to reconcile net income to net cash used in operating activities, which includes items such as non-cash lease expense, share-based compensation, and depreciation and amortization. The Company used $10 of net cash for investing activities, primarily to fund capital expenditures. The Company also generated $265 of net cash from financing activities, primarily driven by proceeds received from short-term borrowings.

We do not believe that our operations are significantly impactedDuring the three months ended March 31, 2023, the Company reported a $834 decrease in cash. The Company used $674 of net cash from operating activities, primarily driven by inflation. Our business is not significantly seasonalchanges in nature.operating assets and liabilities of $1,015 and a net loss of $97. This was partially offset by other adjustments of $438 to reconcile net loss to net cash provided by operating activities. The Company used $78 of net cash for investing activities, primarily to fund capital expenditures. The Company also used $82 of net cash in financing activities for principal payments made under its finance lease obligations.

Off-Balance Sheet Arrangements

Off-Balance Sheet Arrangements

We haveThe Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on ourits financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates used in ourthe financial statements relate to revenue recognition where we use percentage-ofthe Company measures progress towards completion accounting on our largea cost-to-cost basis for fixed-price contracts, the allowance for doubtful accounts, and the valuation allowance for deferred income tax assets. These estimates require judgments, which we baseare based on historical experience and on various other assumptions, as well as specific circumstances. Estimates may change as new events occur, additional information becomes available or operating environments change.

Refer to Part II. Item 2.7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the year ended December 31, 20162023 for a discussion of our critical accounting policies and estimates.

Allowance for Credit Losses

The estimation of anticipated credit losses that may be incurred as we work through the invoice collection process with our customers requires us to make judgments and estimates regarding our customers’ ability to pay amounts due. We monitor our customers’ payment history and current credit worthiness, if needed, to determine that collectability is reasonably assured. We provide an allowance for credit losses based by reviewing each accounts receivable balance with respect to a debtor’s ability to make payments. We also evaluate historical loss rates as well as consider forward-looking factors specific to the debtors, the overall economic environment, and management expectations to determine expected losses. When certain accounts are determined to require an allowance, they are expensed by a provision for bad debts in that period. At March 31, 2024 and 2023, we estimated the allowance for credit losses requirement to be $0, and there were no charges to bad debt expense for the three months ended March 31, 2024 and 2023. We believe that our allowance for credit losses is adequate to cover the anticipated credit losses under current conditions; however, uncertainties regarding changes in the financial condition of our customers, either adverse or positive, could impact the amount and timing of any additional credit losses that may be required.

Recently Issued Accounting Standards

Except as set forth inRefer to Note 1 toin Part II. Item 8. “Financial Statements and Supplemental Data,” in our unaudited condensed consolidated financial statements, management has not yet determined whetherAnnual Report on Form 10-K for the year ended December 31, 2023 for a discussion of recently issued accounting standards, which are not yet effective, will have a material impact on our condensed consolidated financial statements upon adoption.standards.

Share Repurchase Program

On May 23, 2016, our Board of Directors authorized a repurchase program (the “Repurchase Program”) under which we may repurchase up to $1,000 of our outstanding stock. Subsequently, on March 29, 2017, our Board of Directors authorized a renewal and extension of the Repurchase Program for an additional $1,000 until March 31, 2018. The purchases may be made from time to time in the open market, through privately negotiated transactions and Rule 10b5-1 trading plans in accordance with applicable laws, rules and regulations. The Repurchase Program was funded from cash on hand and cash provided by operating activities.

As of September 30, 2017, we had exhausted the Repurchase Program. As of the date of this Report no decisions have been made on any further stock repurchases.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.   

The Company’s disclosure controls and procedures are designed to ensure that such information required to be disclosed by the Company in reports filed or submitted under the Exchange Act as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the principal executive and the principal financial officer, as appropriate to allow timely decisions regarding required 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 disclosure controls and procedures are designed to provide such reasonable assurance.assurance.

The Company’s management, with the participation of the principal executive and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2017,March 31, 2024, as required by Rule 13a-15(e) of the Exchange Act. Based uponon that evaluation, the principal executive and the principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2017.

Management’s Report on Internal Control Over Financial Reporting.   The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Although the internal controls over financial reporting were not audited, the Company’s management, including the principal executive and principal financial officer, assessed the effectiveness of internal controls over financial reporting as ofSeptember 30, 2017, based on criteria issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) entitled“Internal Control-Integrated Framework.” Upon evaluation, the Company’s management has concluded that the Company’s internal controls over financial reporting were effective as ofSeptember 30, 2017.March 31, 2024.

Changes in Internal Control Over Financial Reporting.   Reporting

The Company’s management, with the participation of the principal executive and principal financial officer, have concluded there were no changes in internal control over financial reporting during the fiscal quarterthree months ended September 30, 2017.March 31, 2024.

PART II. – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS5. OTHER INFORMATION

From time to time we are involved in legal proceedings arising from the normal course of business. As of the date of this Report, we were not involved in any material legal proceedings.

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

The table below summarizes information about our purchases of common stock, based on trade date, duringDuring the quarter ended September 30, 2017:March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6. EXHIBITS

Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

SIGNATURES

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

INDEX TO EXHIBITS

* Filed or furnished herewith.