American Electric Technologies Inc (Form: 10-Q, Received: 11/14/2017 13:03:36)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2017

☐	TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File No. 000-24575

AMERICAN ELECTRIC TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Florida		59-3410234
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

1250 Wood Branch Park Drive, Suite 600, Houston, TX 77079

(Address of principal executive offices)

(713) 644-8182

(Registrant’s telephone number)

* * * * * * * * * * * * * * * * * * * * * *

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S. 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). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-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 ☐ No ☒

As of November 6, 2017 the registrant had 8,669,650 shares of its Common Stock outstanding.

AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

FORM 10-Q Index

For the Quarterly Period Ended September 30, 2017

		Page
	Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2017 and 2016	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2017 and 2016	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
	Part II. Other Information
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25
Signatures		27

P ART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

	September 30,			December 31,
	2017			2016
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	1,098		$	1,618
Restricted short-term investments		50			507
Accounts receivable-trade, net of allowance of $89 and $204 at September 30, 2017 and December 31, 2016		7,822			6,717
Inventories, net of allowance of $134 and $60 at September 30, 2017 and December 31, 2016		1,169			1,181
Cost and estimated earnings in excess of billings on uncompleted contracts		7,477			5,829
Prepaid expenses and other current assets		233			349
Total current assets		17,849			16,201
Property, plant and equipment, net		6,936			7,298
Advances to and investments in foreign joint ventures		10,546			10,663
Retainage receivable		772			649
Intangibles		476			527
Other assets		107			46
Total assets	$	36,686		$	35,384
Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Revolving line of credit	$	-		$	1,500
Current portion of long-term note payable		-			300
Short-term note payable		238			-
Accounts payable and other accrued expenses		11,528			9,798
Accrued payroll and benefits		1,188			1,093
Billings in excess of costs and estimated earnings on uncompleted contracts		3,003			208
Total current liabilities		15,957			12,899
Long-term note payable, net		6,132			3,900
Deferred compensation		225			260
Deferred income taxes		2,805			2,824
Total liabilities		25,119			19,883
Convertible preferred stock:
Redeemable convertible preferred stock, Series A, net of discount of $576 at September 30, 2017 and $617 at December 31, 2016; $0.001 par value, 1,000,000 shares authorized, issued and outstanding at September 30, 2017 and December 31, 2016		4,424			4,383
Stockholders’ equity:
Common stock; $0.001 par value, 50,000,000 shares authorized, 8,799,948 and 8,499,508 shares issued and 8,619,066 and 8,335,968 shares outstanding at September 30, 2017 and December 31, 2016		9			8
Treasury stock, at cost 180,882 and 163,540 shares at September 30, 2017 and December 31, 2016		(916	)		(863	)
Additional paid-in capital		13,277			12,613
Accumulated other comprehensive income		272			(2	)
Retained Deficit; including accumulated statutory reserves in equity method investments of $2,887 at September 30, 2017 and December 31, 2016		(5,499	)		(638	)
Total stockholders’ equity		7,143			11,118
Total liabilities, convertible preferred stock and stockholders’ equity	$	36,686		$	35,384

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

American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Unaudited

(in thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net sales	$	13,268		$	8,673		$	34,258		$	28,415
Cost of sales		12,192			9,124			32,922			27,549
Gross margin		1,076			(451	)		1,336			866
Operating expenses:
Research and development		55			145			237			864
Selling and marketing		646			466			1,952			1,759
General and administrative		1,125			1,587			3,116			3,914
Total operating expenses		1,826			2,198			5,305			6,537
Loss from operations		(750	)		(2,649	)		(3,969	)		(5,671	)
Net equity income from foreign joint ventures’ operations:
Equity income from foreign joint ventures’ operations		98			215			284			367
Foreign joint ventures’ operations related expenses		(67	)		(53	)		(195	)		(202	)
Net equity income from foreign joint ventures’ operations		31			162			89			165
Loss from operations and net equity income from foreign joint ventures’ operations		(719	)		(2,487	)		(3,880	)		(5,506	)
Other income (expense):
Interest expense and other, net		(332	)		(78	)		(797	)		200
Income (loss) before income taxes		(1,051	)		(2,565	)		(4,677	)		(5,306	)
Provision for (benefit from) income taxes		(11	)		59			(83	)		50
Net income (loss) before dividends on redeemable convertible preferred stock		(1,040	)		(2,624	)		(4,594	)		(5,356	)
Dividends on redeemable convertible preferred stock		(89	)		(89	)		(267	)		(265	)
Net income (loss) attributable to common stockholders	$	(1,129	)	$	(2,713	)	$	(4,861	)	$	(5,621	)
Earnings (loss) per common share:
Basic	$	(0.13	)	$	(0.33	)	$	(0.57	)	$	(0.68	)
Diluted	$	(0.13	)	$	(0.33	)	$	(0.57	)	$	(0.68	)
Weighted - average number of common shares outstanding:
Basic		8,598,461			8,327,009			8,478,848			8,294,268
Diluted		8,598,461			8,327,009			8,478,848			8,294,268

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

American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

	Three Months Ended September 30,
	2017			2016
Net income (loss) before dividends on redeemable convertible preferred stock	$	(1,040	)	$	(2,624	)
Other comprehensive income:
Foreign currency translation gain (loss), net of deferred income taxes of ($89) and $21 for the three months ended September 30, 2017 and 2016		172			(41	)
Total comprehensive income (loss)	$	(868	)	$	(2,665	)

	Nine Months Ended September 30,
	2017			2016
Net income (loss) before dividends on redeemable convertible preferred stock	$	(4,594	)	$	(5,356	)
Other comprehensive income:
Foreign currency translation gain (loss), net of deferred income taxes of ($142) and $54 for the nine months ended September 30, 2017 and 2016		274			(106	)
Total comprehensive income (loss)	$	(4,320	)	$	(5,462	)

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

American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Unaudited

(in thousands)

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities:
Net income (loss)	$	(4,594	)	$	(5,356	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Deferred income tax provision (benefit)		(162	)		(97	)
Equity income (loss) from foreign joint ventures’ operations		(284	)		(367	)
Depreciation and amortization		640			660
Stock based compensation		280			366
Gain on fixed asset disposal		-			(75	)
Bad debt expense		45			100
Obsolete inventory expense		66			35
Deferred compensation costs		(36	)		(33	)
Amortization of debt issuance costs		59			-
Change in operating assets and liabilities:
Accounts receivable		(1,496	)		(360	)
Inventories		(54	)		(180	)
Costs and estimated earnings in excess of billings on uncompleted contracts		(1,389	)		(3,049	)
Prepaid expenses and other current assets		61			79
Accounts payable		2,116			3,817
Billings in excess of costs and estimated earnings on uncompleted contracts		2,795			(1,288	)
Accrued liabilities and other current liabilities		(127	)		188
Net cash provided by (used in) operating activities		(2,080	)		(5,560	)
Cash flows from investing activities:
Proceeds from sale of property and equipment and other assets		-			309
Purchases of property, plant and equipment and other assets		(219	)		(572	)
Proceeds from foreign joint ventures' operations dividends		781			589
Redemption (purchase) of certificates of deposit		457			-
Net cash provided by (used in) from investing activities		1,019			326
Cash flows from financing activities:
Proceeds from sale of common stock, preferred stock, and warrants		10			13
Treasury stocks purchase		(53	)		(71	)
Preferred stock cash dividend		-			(150	)
Proceeds from long-term notes payable		7,000			-
Proceeds from short-term notes payable		200			-
Payments on revolving credit facility		(1,500	)		457
Payments on long-term notes payable		(4,200	)		(150	)
Payments on short-term notes payable		(500	)		-
Payments of debt issuance costs		(427	)		-
Net cash provided by (used in) financing activities		530			99
Effect of exchange rate on cash		11			49
Net increase (decrease) in cash and cash equivalents		(520	)		(5,086	)
Cash and cash equivalents, beginning of period		1,618			7,989
Cash and cash equivalents, end of period		1,098			2,903
Supplemental disclosures of cash flow information:
Interest paid	$	611		$	162
Non-cash investing and financing transactions:
Issuance of shares of common stock on accrued preferred dividends payables	$	375		$	-

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

AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of American Electric Technologies, Inc. and its wholly-owned subsidiaries (“AETI”, “the Company”, “our”, “we”, “us”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and include all adjustments which, in the opinion of management, are necessary for fair financial statement presentation. All adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The statements should be read in conjunction with the Company’s consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed on March 30, 2017. All dollar amounts disclosed in the footnotes are stated in thousands.

2. Earnings per Common Share

Basic earnings per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of common stock outstanding for the three and nine months ended September 30, 2017 and 2016 .

Diluted earnings per share is computed by dividing net income (loss) attributable to common stockholders, by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, (2) the dilutive effect of the assumed exercise of convertible instruments and (3) the dilutive effect of the exercise of stock options and other stock units to our common stock.

For the three and nine months ended September 30, 2017, common stock equivalents from convertible instruments, stock options and other stock units have been excluded from the calculation of weighted average diluted shares because all such instruments were anti-dilutive.

The following table sets forth the computation of basic and diluted weighted average common shares.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Weighted average basic shares		8,598,461		8,327,009		8,478,848		8,294,268
Dilutive effect of preferred stock, warrants, stock options and restricted stock units		-		-		-		-
Total weighted average diluted shares		8,598,461		8,327,009		8,478,848		8,294,268

3. Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017). AETI is evaluating the impact of ASU 2014-09 and currently expects that the standard will not have a material impact on the Company’s consolidated financial statements other than enhanced disclosures related to the disaggregation of revenues from contracts with customers, the Company’s performance obligations and any significant judgments. AETI intends to adopt the new standard using the modified retrospective method at the date of adoption.

In July 2015, the FASB issued ASU No. 2015-11. Inventory (Topic 330): Simplifying the Measurement of Inventory, which is intended to converge U.S. GAAP on this topic with International Financial Reporting Standards (“IFRS”). ASU No. 2015-11 focuses on the premeasurement of inventory measured using any method other than LIFO, for example, average cost. Inventory within the scope of ASU No. 2015-11 is required to be measured at the lower of cost and net realizable value. When evidence exists that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. That loss may be required, for example, due to damage, physical deterioration, obsolescence, changes in price levels, or other causes. For public business entities, the amendments in ASU No. 2015-11 are effective for fiscal years beginning after December 15,

2016, including interim periods within those fiscal years. The adoption of ASU No. 2015-11 did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU No. 2016-01 requires (1) an entity to measure equity instruments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (2) entities to use the exit price notation when measuring the fair value of financial instruments for disclosure purposes; (3) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset; and (4) elimination of the requirement to disclose the methods and significant assumptions used to estimate fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU No. 2016-01 is effective for fiscal years beginning after December 15, 2017 with early adoption permitted. Management is currently evaluating the future impact of ASU No. 2016-01 on the Company’s consolidated financial position, results of operations and disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to 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. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. 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 modified retrospective approach would not require any transition accounting for leases expiring before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently evaluating the future impact of ASU No. 2016-02 on the Company’s consolidated financial position, results of operations and disclosures.

In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, to clarify two aspects of Topic 606: (i) identifying performance obligations; and (ii) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for ASU No. 2016-10 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-10 on the Company’s consolidated financial position, results of operations and disclosures. Please refer to ASU No. 2014-09 above.

In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. ASU No. 2016-12 provides narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. The amendment also provides a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers and are expected to reduce the judgment necessary to comply with Topic 606. The effective date and transition requirements for ASU No. 2016-12 are the same as the effective date and transition requirements for ASU No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-12 on the Company’s consolidated financial position, results of operations and disclosures. Please refer to ASU No. 2014-09 above.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU No. 2016-13 eliminates the probable initial recognition threshold in current U.S. GAAP and, instead, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU No. 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU No. 2016-13 is effective for annual periods beginning after December 15, 2019, with early application permitted in annual periods beginning after December 15, 2018. The amendments of ASU No. 2016-13 should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Management is currently evaluating the future impact of ASU No. 2016-13 on the Company’s consolidated financial position, results of operations and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU No. 2016-15 addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU No. 2016-15 is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. Management does not expect the adoption of ASU No. 2016-15 to have a significant impact on the Company’s consolidated financial position, results of operations and disclosures because it on affects presentation of specific items within the cash flow statement.

In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. ASU No. 2016-20 allows entities not to make quantitative disclosures about remaining performance obligations in certain cases and require entities that use any of the new or previously existing optional exemptions to expand their qualitative disclosures. The amendment also clarifies narrow aspects of ASC 606, including contract modifications, contract costs, and the balance sheet classification of items as contract assets versus receivables, or corrects unintended application of the guidance. The effective date and transition requirements for ASU No. 2016-20 are the same as the effective date and transition requirements for ASU

No. 2014-09. Management is currently evaluating the future impact of ASU No. 2016-20 on the Company’s consolidated financial position, results of operations and disclosures. Please refer to ASU No. 2014-09 above.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU No. 2017-01 clarifies 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 a business or as acquisitions (or disposals) of assets. ASU No. 2017-01 is effective for annual periods beginning after December 15, 2018, with early adoption permitted under certain circumstances. The amendments of ASU No. 2017-01 should be applied prospectively as of the beginning of the period of adoption. Management is currently evaluating the future impact of ASU No. 2017-01 on the Company’s consolidated financial position, results of operations and disclosures.

In January 2017, the FASB issued ASU No. 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings. The amendments in this update relate to disclosures of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU No. 2016-13, Financial Instruments – Credit Losses, ASU No. 2016-02, Leases, and ASU No. 2014-09, Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. ASU No. 2017-03 is effective upon issuance and did not have a significant impact on the Company’s consolidated financial position, results of operations and disclosures.

4. Investments in Foreign Joint Ventures

We have interests in two joint ventures, outside of the United States of America (“U.S.”) which are accounted for using the equity method:

BOMAY Electric Industries Company, Ltd. (“BOMAY”), in which the Company holds a 40% interest, Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation) holds a 51% interest, and AA Energies, Inc., holds a 9% interest. BOMAY was formed in 2006 in China with a term of 12 years and will expire in 2018. The term of the joint venture may be extended upon agreement of all parties. In such case, the joint venture shall apply for the extension to the relevant Chinese authority six months before expiry of the venture. The company is working with our Joint Venture partners on extending the joint venture. At this time, AETI has no indication that the joint venture will not be extended beyond the 2018 expiration date; and,

M&I Electric Far East, Ltd. ("MIEFE”), in which the Company currently owns 41% of the joint venture with our joint venture partner, Sonepar, owning 51% and MIEFE’s general manager owning the remaining 8%. In 2016, due to market conditions, the business suspended current operations and the investment in MIEFE was written down to zero excluding foreign currency translation.

Sales to joint ventures totaled $0.00 and $0.02 for the three months ended September 30, 2017 and 2016. Sales to joint ventures totaled $0.01 million and $0.07 million for the nine months ended September 30, 2017 and 2016.

Summary (unaudited) financial information of our foreign joint ventures in U.S. dollars was as follows at September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016 (in thousands):

	BOMAY				MIEFE
	2017		2016		2017			2016
Assets:
Total current assets	$	53,015	$	47,700	$	179		$	425
Total non-current assets		3,532		3,589		16			17
Total assets	$	56,547	$	51,289	$	195		$	442
Liabilities and equity:
Total liabilities	$	29,726	$	24,196	$	258		$	551
Total joint ventures’ equity		26,821		27,093		(63	)		(109	)
Total liabilities and equity	$	56,547	$	51,289	$	195		$	442

	Three Months Ended September 30,
	BOMAY				MIEFE
	2017		2016		2017		2016

Revenue	$	6,076	$	5,557	$	46	$	307
Gross Profit	$	1,160	$	1,582	$	10	$	133
Earnings	$	245	$	537	$	11	$	121


	Nine Months Ended September 30,
	BOMAY				MIEFE
	2017		2016		2017		2016

Revenue	$	17,225	$	29,544	$	80	$	1,147
Gross Profit	$	3,805	$	4,844	$	22	$	451
Earnings	$	709	$	1,602	$	51	$	(498	)

The following is a summary of activity in investments in foreign joint ventures for the nine months ended September 30, 2017 (unaudited):

	September 30, 2017
	BOMAY**			MIEFE			TOTAL
	(in thousands)
Investments in foreign joint ventures:
Balance at December 31, 2016	$	10,450		$	213		$	10,663
Equity in earnings (loss) in 2017		284			-		$	284
Dividend distributions in 2017		(781	)		-		$	(781	)
Foreign currency translation adjustment		382			(2	)	$	380
Investments, end of period	$	10,335		$	211		$	10,546

Components of investments in foreign joint ventures:
Investment in joint ventures	$	2,033		$	14		$	2,047
Undistributed earnings		7,816			(14	)	$	7,802
Foreign currency translation		486			211		$	697
Investments, end of period	$	10,335		$	211		$	10,546

Accumulated statutory reserves of $2.89 million in equity method investments at both September 30, 2017 and December 31, 2016, are included in AETI’s consolidated retained earnings. In accordance with the People’s Republic of China, (“PRC”), regulations on enterprises with foreign ownership, an enterprise established in the PRC with foreign ownership is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends.

Under the equity method of accounting, the Company’s share of the joint ventures’ operations’ earnings or loss is recognized in the condensed consolidated statements of operations as equity income (loss) from foreign joint ventures’ operations. Joint venture income increases the carrying value of the joint venture investment and joint venture losses, as well as dividends received from the joint ventures, reduce the carrying value of the investment.

The Company reviews its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable or the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment. Based on this analysis, there was no indication of impairment.

5. Notes Payable

Senior Secured Term Note

On March 23, 2017, the Company and its subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC (collectively, the “Sellers”) issued and sold to HD Special-Situations III, L.P. (the “Purchaser”) a $7.00 million principal amount Senior Secured Term Note (the “Note”) with principal of $0.50 million due and paid on June 30, 2017 with the balance due 48

months after issuance for cash at par pursuant to a Note Purchase Agreement (the “Purchase Agreement”). Proceeds from the sale of the Note were used to fully repay and terminate the Company’s prior revolving credit facilities with approximately $1.00 million being available for the Company’s working capital and general business purposes.

The Note bears interest at 11.5% per annum payable monthly in arrears. The Note is secured by a first-priority lien on substantially all existing and after-acquired personal property assets and real estate owned by the Sellers (with certain exceptions) and is subject to covenants restricting the Company’s ability to incur debt, grant liens, pay dividends, engage in transactions with affiliates and other customary covenants for financing of this type (subject to certain exceptions). The Note is subject to an interest “make-whole” provision such that any prepayment of the principal thereunder in excess of $1.50 million (the “Prepayment Threshold”) within one year of the date of issuance (the “Make-Whole Period”) shall be subject to the payment of a prepayment premium, on the date of such prepayment, in an amount based on an interest rate of 11.5% per annum of the prepayment amount in excess of the Prepayment Threshold for the portion of the Make-Whole Period that will remain after the date that the prepayment is made. After the one year Make- Whole Period the Note may be prepaid in part or in full with no penalty.

The Purchase Agreement contains representations and affirmative, negative and financial covenants usual and customary for financing of this type, including covenants that place conditions upon the Company’s ability to merge or consolidate with other companies, sell any material part of their business or property, incur liens, and pay dividends on, make distributions on or redeem their equity interests. Other covenants in the Purchase Agreement require the Company to maintain minimum monthly revenue, maintain minimum monthly EBITDA, maintain minimum monthly cash on hand, maintain a minimum monthly debt service coverage ratio, maintain a maximum debt-to-EBITDA ratio, maintain a minimum monthly collateral coverage ratio and obtain consent of the Purchaser for certain capital expenditAs of September 30, 2017, the Company was not in compliance with the minimum monthly EBITDA covenant but was granted a waiver for the period. There can be no assurances that covenants can be met in the future and if not met, waivers can be obtained. In the event that the Company fails to meet covenants in the future, the Company may not be able to obtain the necessary waivers or amendments to remain in compliance with the Purchase Agreement and the Purchaser may declare a default and cause all of the Company’s outstanding indebtedness under the Purchase Agreement to become immediately due and payable or otherwise subject to an additional rate of 4.0% per annum and scheduled amortization of principal.

As of September 30, 2017, the Company was not in compliance with the minimum monthly EBITDA covenant but was granted a waiver for the period. There can be no assurances that covenants can be met in the future and if not met, waivers can be obtained. In the event that the Company fails to meet covenants in the future, the Company may not be able to obtain the necessary waivers or amendments to remain in compliance with the Purchase Agreement and the Purchaser may declare a default and cause all of the Company’s outstanding indebtedness under the Purchase Agreement to become immediately due and payable or otherwise subject to an additional rate of 4.0% per annum and scheduled amortization of principal.

On November 13, 2017, the Company entered into an agreement modifying the terms of its Senior Secured Term Note. The modification included a waiver of the EBITDA covenant violation as of September 30, 2017 and revisions to the original revenue and EBITDA covenants along with the requirement of minimum principal reductions of $30,000 per month beginning in April 2018. In consideration for the modified terms, the Company issued 500,000 warrants to purchase the Company’s common stock at an exercise price of $2.26 which expire in November 2023.

On June 6, 2017, the Company’s subsidiary, M&I Brazil, entered into a Loan Agreement with the former chairman of AETI. The Loan Agreement provides the Company with a $0.30 million loan facility of which $0.20 million is drawn and is outstanding as of September 30, 2017 and with any balance outstanding due June 7, 2018. Under the loan agreement, the interest rate on the loan facility is 10.0%, per annum, payable each quarter. The loan facility is secured by the assets held by M&I Brazil.

6. Inventories

Inventories consisted of the following at September 30, 2017 (unaudited) and December 31, 2016 (in thousands):

	September 30, 2017			December 31, 2016
Raw materials	$	595		$	513
Work-in-process		708			728
		1,303			1,241
Less: allowance		(134	)		(60	)
Total inventories	$	1,169		$	1,181

7. Income Taxes

The tax provision for the three and nine months ended September 30, 2017 and 2016 reflect a 34% U.S. tax rate related to the equity in earnings from foreign joint ventures’ operations, net of dividends received and taxes paid on dividends from China, resulting in an effective rate of 1% and 2%, respectively.

8. Fair Value of Financial Instruments and Fair Value Measurements

The carrying amounts of cash and cash equivalents, trade accounts receivable and accounts payable approximate fair value as of September 30, 2017 and December 31, 2016 because of the relatively short maturity of these instruments.

The carrying amount of our long-term note payable approximates fair value as the interest rate on the note is based on a market rate.

9. Redeemable Convertible Preferred Stock and Common Stock

Redeemable Convertible Preferred Stock

In conjunction with the issuance of the Redeemable Convertible Preferred Stock, Series A in May 2012, warrants to purchase 325,000 shares of our common stock (the “Warrants”) were issued.

The initial value allocated to the Warrants was recognized as a discount on the Series A Convertible Preferred Stock, with a corresponding charge to additional paid-in capital. The discount related to the Warrants is accreted to retained earnings through the scheduled redemption date of the redeemable Series A Convertible Preferred Stock. Discount accretion totaled $0.01 million for the three months ended September 30 for both 2017 and 2016 . Discount accretion totaled $0.04 million for the nine months ended September 30 for both 2017 and 2016.

The Series A Convertible Preferred Stock accrues cumulative dividends at a rate of 6% per annum payable quarterly in cash or with our Common Stock, at the option of the Company, based on the then current liquidation market price value of the Series A Convertible Preferred Common Stock which is currently $5.00 per share. Quarterly dividends not paid in cash or Common Stock accumulate without interest and must be fully paid before any dividend or other distribution can be paid on or declared and set apart for the Common Stock or conversion of the Series A Convertible Preferred Stock to Common Stock. At September 30, 2017 and December 31, 2016, the company had accrued but unpaid dividends totaling $0.08 million and $0.23 million, respectively, which is included in accounts payable and other accrued expenses in the condensed consolidated balance sheet. For the nine months ended September 30, 2017, a total of 198,416 common shares have been issued as payment of accrued preferred dividends in accordance with the terms of the preferred stock agreement.

On or after April 30, 2017, the holders of a majority of the outstanding shares of the Series A Convertible Preferred Stock may require the Company to redeem the Series A Convertible Preferred Stock at a redemption price equal to the lessor of (i) the liquidation preference per share (initially $5.00 per share, subject to adjustments for certain future equity transactions defined in the Securities Purchase Agreement) and (ii) the fair market value of the Series A Convertible Preferred Stock per share, as determined in good faith by the Company’s Board of Directors. As of September 30, 2017 and December 31, 2016, the redemption price per share was $5.00 in both years. The redemption price, plus any accrued and unpaid dividends, shall be payable in 36 equal monthly installments plus interest at an annual rate of 6%.

In connection with the issuance of the Company’s senior secured Term Note, described in Note 5, the Company has agreed with the Purchaser of the Term Note and the holder of the Preferred Stock (the “Holder”) not to declare, authorize or pay any cash dividends on the Preferred Stock until the earlier of (i) March 22, 2018, or (ii) the date the obligations under the Note Purchase Agreement have been paid in full (the “Standstill Period”), without the prior written consent of the Purchaser. Following the expiration of the Standstill Period, for so long as the obligations under the Note Purchase Agreement remain outstanding, the Company may, at its sole discretion, declare, authorize or pay dividends in cash on the Preferred Stock so long as no event of default exists under the Term Note or would result therefrom. The Holder also agreed that it shall not exercise its rights to require the Company to redeem any of the Preferred Stock during the Standstill Period. Following the expiration of the Standstill Period, so long as the obligations under the Note Purchase Agreement remain outstanding, the Holder may compel the Company to redeem shares of Preferred Stock provided no event of default exists under the Term Note or would result from such redemption. In consideration for the Holder’s consent to the foregoing restrictions on the payment of cash dividends on or redemption of the Preferred Stock, the Company entered into an agreement with the Holder (the “Repricing Agreement”) on August 1, 2017. Pursuant to the Repricing Agreement, each share of Series A Preferred Stock will be initially convertible, at the option of the holder, into one (1) share of common stock at a conversion price of $2.26 per share of common stock, so that the Series A Preferred Stock sold to the Holder are currently convertible into an aggregate of 2,212,389 shares of common stock. In addition, Pursuant to the Repricing Agreement, the Series A Warrants sold to the Holder will be exercisable for 125,000 shares of common stock at an initial exercise price of $2.72 per share and the Series B Warrants sold to the Holder will be exercisable for 200,000 shares of common stock at an initial exercise price of $3.17 per share.

In order to comply with the rules of the NASDAQ Stock Market, the Repricing Agreement prohibits the issuance of more than 19.99% of our common stock or voting power outstanding to the Holder as of the date of the Repricing Agreement without stockholder approval. The Company has agreed to seek the approval of its stockholders as soon as practicable. In the event that stockholder approval is received and the Holder were to convert all of its Series A Preferred Stock into common stock and exercised all of its Common Stock Purchase Warrants for cash, the Holder would be issued more than 19.99% of our common stock and voting power as of the date of the Repricing Agreement.

This agreement was approved by a committee of the Board of Directors comprised solely of independent dire ctors.

Common Stock

For the nine months ended September 30, 2017, the Company issued a total of 260,163 shares of common stock. The Company issued 198,416 shares of common stock as payment of accrued preferred dividends, as noted above, with the remaining 61,747 shares issued in connection with the Company’s Employee Stock Purchase Plan and upon vesting of restricted stock units.

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

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in the Form 10-Q and the consolidated financial statements included in the 2016 Annual Report on Form 10-K filed on March 30, 2017. Historical results and percentage relationships set forth in the condensed consolidated statements of operations and cash flows, including trends that might appear, are not necessarily indicative of future operations or cash flows.

FORWARD-LOOKING STATEMENTS

Except for historical and factual information, this document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements that address activities, events or developments that we expect, believe or anticipate will or may occur in the future, such as predictions of business outlook and future financial performance. All forward-looking statements are based on assumptions made by us based on our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances.

These statements, including statements regarding our capital needs, business strategy, expectations and intentions, are subject to numerous risks and uncertainties, many of which are beyond our control, including our ability to maintain key products’ sales or effectively react to other risks including those discussed in Part I, Item 1A, Risk Factors, of our 2016 Annual Report on Form 10-K filed on March 30, 2017. We urge you to consider that statements that use the terms “believe,” “do not believe,” “anticipate,” “expect,” “plan,” “estimate,” “intend” and similar expressions are intended to identify forward-looking statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

BUSINESS

The Company was incorporated on October 21, 1996 as a Florida corporation. On May 15, 2007, we completed a business combination (the “M&I Merger”) with M&I Electric Industries, Inc. (“M&I”), a Texas corporation, and changed our name to American Electric Technologies, Inc. (“AETI”). M&I Electric was originally founded in 1946. Our principal executive offices are located at 1250 Wood Branch Park Drive, Suite 600, Houston, Texas 77079 and our telephone number is 713-644-8182.

Our corporate structure currently consists of American Electric Technologies, Inc., which owns 100% of M&I Electric Industries, Inc. including its wholly-owned subsidiaries, South Coast Electric Systems, LLC (“SCES”) and M&I Electric Brazil Sistemas e Servicios em Energia LTDA (“M&I Brazil”). The manufacturing operations of SCES were sold on June 24, 2016. AETI has retained the entity along with the existing service organization.

Products and Services

We have provided custom-designed power distribution, power conversion, and automation and control systems for our customers since 1946. Our products are used to safely distribute and control the flow of electricity from a power generation source (e.g. a diesel generator, turbine or the utility grid) to whatever mechanical device utilizes the power (drilling machinery, motors, other process equipment, the utility grid, etc.) at low and medium voltages.

Our power distribution products include low and medium voltage switchgear that provides power distribution and protection for electrical systems from electrical faults. Our products include traditional low voltage and medium voltage switchgear, and our IntelliSafe™ medium voltage arc-resistant switchgear designed to increase end-user safety in case of an arc-flash explosion. IntelliSafe™ is designed for the downstream oil & gas sector, process industries and the power generation market, and was designed to be the safest arc-resistant product on the market. IntelliSafe™ meets key industry specifications and certifications. Our products are suitable for both American National Standards Institute (“ANSI”) and International Electrotechnical Commission (“IEC”) markets. Other power distribution products in our solution set include low voltage and medium voltage motor control centers, bus ducts, fuse and switch products, and other related power distribution equipment. We also purchase and integrate third party products into turnkey solutions per our customer specifications including items such as battery backup power systems and transformers.

Our power conversion solutions include alternating current variable frequency drive (“AC VFD”) systems, analog systems and digital silicon controlled rectifier (“SCR”) products , that are used to adjust the speed and torque of an electric motor to match various user applications, primarily in the land and offshore drilling and marine vessel markets.

Our power distribution and control products are generally custom-designed to our customers’ specific requirements, and we do not maintain an inventory of such products.

We have the technical expertise to provide our solutions in compliance with a number of applicable industry standards such as National Electrical Manufacturers Association (“NEMA”) and ANSI or IEC equipment to meet American Bureau of Shipping (“ABS”), United States Coast Guard (“USCG”), Lloyd’s Register, a provider of marine certification services, and Det Norske Veritas (a leading certification body/registrar for management systems certification services) standards.

Our automation and control solutions are designed for the management and control of power in a customer’s application. The DrillAssist™ is a control system that enables the management of a land and offshore drilling rig’s operations. DrillAssist™ includes auto-drill capabilities and a driller’s chair and cabin where the drilling rig operator manages the rig. The Company’s Vessel Management system is a packaged control platform for management of vessel operations.

Our Power Distribution Centers (“PDC”) are used to house our power distribution and power conversion products. Our PDCs can be manufactured over 100 ft. long and 40 ft. wide. The Company also manufactures VFD and SCR houses for land drilling and driller’s cabins for land and offshore deployment.

We provide a variety of electrical services including the commissioning and maintenance of our customers’ full electrical power infrastructure. We provide low and medium voltage start-up/commissioning, preventative maintenance, emergency call out services, and breaker and switchgear refurbishment services.

We offer a full range of electrical and instrumentation construction and installation services to our markets. These services include new construction as well as electrical and instrumentation turnarounds, maintenance and renovation projects. Applications include installation of switchgear, AC and DC motors, drives, motor controls, lighting systems and high voltage cable.

The principal markets that we serve include:

•

Power generation and distribution – the Company provides “turn-key” power delivery solutions for the power generation and distribution market sectors.

•

The Company works with engine-generator manufacturers and dealers, turbine manufacturers, Engineering, Procurement and Construction (“EPC”) firms, and other electrical engineering service companies to provide electric power delivery products and solutions. The Company also provides products and services for renewable power generation including biomass, geothermal and other renewable energy projects.

•

The Company designs, manufactures, commissions and maintains our equipment for implementation in base-load, peaking power, cogeneration, and substation transmission facilities worldwide.

•

Oil & gas – the Company provides “turn-key” power delivery solutions for the upstream, midstream and downstream oil and natural gas sectors.

•

Upstream oil and gas refers to the exploration and production of oil and natural gas. The Company serves customers in the land drilling, offshore drilling, land-based production, and offshore production segments of the market.

•

Midstream oil and gas is primarily related to oil & gas transportation, including oil & gas pipelines and compression and pumping stations. The Company also has a customer base in natural gas fractionation (separation), cryo, natural gas to liquids, and other natural gas related plants.

•

Downstream oil and gas includes oil refining and petrochemical plants, as well as Liquefied Natural Gas (LNG) plants, export facilities, and storage facilities.

•

Marine and industrial

•

Marine applications includes blue water vessels such as platform supply vessels (PSV), offshore supply vessels (OSV), tankers and other various work boats, typically up to 300 ft. in length. The Company also provides solutions to brown water vessels such as barges, dredges and other river and inland water vessels.

•

Industrial, including non-oil & gas industrial markets such as steel, paper, heavy commercial, and other non-oil & gas applications.

Foreign Operations

We have three primary models for conducting our international business.

First, in Brazil, we have a wholly-owned subsidiary, M&I Electric Brazil, with offices in Rio de Janeiro, Macaé and Belo Horizonte to serve this market. The M&I Electric Brazil team focuses primarily on services for the oil and gas, marine vessel, power generation and broad industrial market segments in Brazil.

Second, in certain international markets, we sell through foreign sales agents that we have appointed in energy regions around the world. Many of these international partners also provide local service and support for our products in those overseas markets.

Finally, where local market conditions dictate, we have formed joint venture operations with local partners in markets such as China, where we can partner with the primary end-customer in that market, or there are local content requirements or a competitive advantage to using local manufacturing.

We currently have interests in two joint ventures outside of the U. S. which are accounted for on the equity method.

•

M&I Electric Far East, Ltd. (“MIEFE”), in which the Company holds a 41% interest; MIEFE’s general manager holds an 8% interest and, Sonepar of France, holds a 51% interest. In 2016, due to market conditions, the business suspended current operations and the investment in MIEFE was written down to zero excluding foreign currency translation.

Locations

Our Company headquarters are located in Houston, Texas. We have domestic facilities and sales offices in Houston and Beaumont, Texas. We also have a service operation in Houma, Louisiana.

We operate M&I Electric Brazil as a wholly-owned subsidiary with three locations (Macaé, Rio de Janiero and Belo Horizonte) in Brazil to offer our services to the Brazil oil & gas, marine vessel, power generation and broad industrial markets.

We also have minority interests in foreign joint ventures which have facilities in Xian, China and Singapore.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have adopted various critical accounting policies that govern the application of accounting principles generally accepted in the United States of America (“U.S. GAAP”) in the preparation of our condensed consolidated financial statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.

Certain accounting policies involve significant estimates and assumptions by us that have a material impact on our condensed consolidated financial condition or operating performance. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of our condensed consolidated financial statements. We do not have off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”, nor do we have any “variable interest entities”.

Inventories – Inventories are stated at the lower of cost or market, with material value determined using an average cost method. Inventory costs for work-in-process include direct material, direct labor, production overhead and outside services. Indirect overhead is apportioned to work-in-process based on direct labor incurred.

Allowance for Obsolete and Slow-Moving Inventory – The Company regularly reviews the value of inventory on hand using specific aging categories, and records a provision for obsolete and slow-moving inventory based on historical usage and estimated future usage. As actual future demand or market conditions may vary from those projected, adjustments to our inventory

reserve may be required. Based on this assessment at September 30, 2017 and December 31, 2016, management believes the inventory reserve is adequate.

Allowance for Doubtful Accounts – The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. The estimate is based on management’s assessment of the collectability of specific customer accounts and includes consideration for credit worthiness and the financial condition of those specific customers. The Company also reviews historical experience with the customer, the general economic environment and the aging of receivables. The Company records an allowance to reduce receivables to the amount that is reasonably believed to be collectible. Based on this assessment at September 30, 2017 and December 31, 2016 , management believes the allowance for doubtful accounts is adequate.

Revenue Recognition – The Company reports earnings from fixed-price and modified fixed-price long-term contracts on the percentage-of-completion method. Earnings are accrued based on the ratio of costs incurred to total estimated costs. Costs include direct material, direct labor, and job related overhead. However, for our manufacturing activities we have determined that labor incurred, rather than total costs incurred, provides an improved measure of percentage-of-completion. For contracts with anticipated losses, estimated losses are charged to operations in the period such losses are determined. A contract is considered complete when all costs, except insignificant items, have been incurred and the project has been accepted by the customer. Revenue from non-time and material jobs of a short-term nature (typically less than one month) is recognized on the completed-contract method after considering the attributes of such contracts. This method is used because these contracts are typically completed in a short period of time and the financial position and results of operations do not vary materially from those which would result from use of the percentage-of-completion method. The asset, “Work-in-process,” which is included in inventories, represents the cost of labor, material, and overhead on jobs accounted for under the completed-contract method. For contracts accounted for under the percentage-of-completion method, the asset, “Costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenue recognized in excess of amounts billed and the liability, “Billings in excess of costs and estimated earnings on uncompleted contracts,” represents billings in excess of revenue recognized.

Foreign Currency Gains and Losses – Foreign currency translations are included as a separate component of comprehensive income. The Company has determined the local currency of its foreign joint ventures and foreign subsidiary, M&I Brazil, to be the functional currency. In accordance with ASC 830, the assets and liabilities of the foreign equity investees and M&I Brazil, denominated in foreign currency, are translated into United States dollars at exchange rates in effect at the consolidated balance sheet date and net sales and expenses are translated at the average exchange rate for the period. Related translation adjustments are reported as comprehensive income, net of deferred income taxes, which is a separate component of stockholders’ equity, whereas gains and losses resulting from foreign currency transactions are included in results of operations.

Federal Income Taxes – The liability method is used in accounting for federal income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Our ability to realize the deferred tax assets are evaluated annually and a valuation allowance is provided if it is more likely than not that the deferred tax assets will not give rise to future benefits in the Company’s tax returns.

Contingencies – The Company records an estimated loss from a loss contingency when information indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. Contingencies are often resolved over long time periods, are based on unique facts and circumstances, and are inherently uncertain. The Company regularly evaluates the current information that is available to determine whether such accruals should be adjusted or other disclosures related to contingencies are required. The ultimate resolution of these matters, individually or in the aggregate, is not likely to have a material impact on the Company’s consolidated financial position or results of operations.

During the quarter, the Company's business operations in Houston and Beaumont Texas were adversely impacted by Hurricane Harvey. Although the company’s facilities did not sustain any damage, operations were temporarily idled, delaying the schedules of customer projects resulting in a $2.5 million revenue impact. The Company maintains business interruption insurance and has filed a business interruption claim. It is anticipated that any proceeds resulting from this business interruption claim would be recorded no earlier than Q4 2017.

Equity Income from Foreign Joint Ventures’ Operations – The Company accounts for its investments in foreign joint ventures’ using the equity method. Under the equity method, the Company records its pro-rata share of foreign joint ventures’ income or losses and adjusts the basis of its investment accordingly. Dividends received from the joint ventures, if any, are recorded as reductions to the investment balance.

Carrying Value of Joint Venture Investments – The Company reviews its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable or the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment . Based on the most recent review at September 30, 2017 and December 31, 2016 , management believes the carrying value of investments in foreign joint ventures is recoverable.

Business Outlook

Although the global energy market experienced a significant decline in 2015 and 2016 due to reduced oil and gas prices, the Company believes it has several potential areas of opportunity heading into 2018.

First, the Company believes the availability of low cost natural gas in the United States is a big growth driver. Environmental and political pressure on utilities to move away from coal-fired power generation plants to natural gas based power plants will continue, enabling a strong market opportunity for new power plant projects for the Company. Low cost natural gas also creates opportunities in the midstream and downstream oil and gas market, where pipelines, gas processing plants, storage terminals and other infrastructure enable increased petrochem and LNG export facilities to begin production.

Second, the Company sees continuing opportunities for its IntelliSafe™ medium voltage arc-resistant switchgear. Designed for the downstream oil and gas and the power generation and distribution sectors, IntelliSafe enables the Company to differentiate on safety for these new critical customer projects.

Next, the Company believes that the recent oil price stability creates opportunities for the company to grow its land and offshore drilling and production business for both products and services.

Internationally, the Company believes our global energy markets in China will remain flat at 2017 levels into 2018. There is still uncertainty in the Brazil market as the political and economic challenges facing Brazil continue to slow energy investments.

The Company ended the quarter with a backlog of $23.53 million, which is an increase of approximately $0.86 million from the end of the second quarter and an increase of $10.03 million from December 31, 2016. We closely monitor our backlog and order activity and continue to adjust our cost structure and expenditures as conditions require. This backlog will be recognized in revenue during the remainder of 2017 and 2018.

The Company continues to review its business and depending on cash needs may raise cash in the form of debt, equity, or a combination of both, subject to lender approval. However, there can be no assurance that additional capital can be obtained or that it can be obtained at terms that are favorable to us and our existing stockholders.

OVERALL RESULTS OF OPERATIONS

The following table represents revenue and income (loss) from consolidated operations and net equity income from foreign joint ventures’ operations, for the periods indicated (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net sales	$	13,268		$	8,673		$	34,258		$	28,415
Cost of sales		12,192			9,124			32,922			27,549
Gross margin		1,076			(451	)		1,336			866

Operating expenses:
Research and development		55			145			237			864
Selling and marketing		646			466			1,952			1,759
General and administrative		1,125			1,587			3,116			3,914
Total operating expenses		1,826			2,198			5,305			6,537

Loss from operations		(750	)		(2,649	)		(3,969	)		(5,671	)

Net equity income from foreign joint ventures’ operations:
Equity income from foreign joint ventures’ operations		98			215			284			367
Foreign joint ventures’ operations related expenses		(67	)		(53	)		(195	)		(202	)
Net equity income from foreign joint ventures’ operations		31			162			89			165

Loss from operations and net equity loss from foreign joint ventures’ operations	$	(719	)	$	(2,487	)	$	(3,880	)	$	(5,506	)

Sales to foreign joint ventures are made on an arm’s length basis. See Footnote 4 in notes to condensed consolidated financial statements for detailed financial information on the foreign joint ventures.

Non-U.S GAAP Financial Measures

A non-U.S. GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable U.S. GAAP measure. Please see the Company’s Annual Report on Form 10-K for 2016 filed on March 30, 2017 for a more in-depth

discussion of this indicator, earnings before interest, taxes, depreciation and amortization (“EBITDA”). Management believes it is useful in evaluating operating performance.

Non-U.S. GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with U.S. GAAP.

The table below shows the reconciliation of net income (loss) attributable to common stockholders to “EBITDA” for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net income (loss) attributable to common stockholders	$	(1,129	)	$	(2,713	)	$	(4,861	)	$	(5,621	)
Add: Depreciation and amortization		204			216			640			660
Interest expense		282			70			620			173
Provision for (benefit from) income taxes		(11	)		59			(83	)		50
Dividend on redeemable preferred stock		89			89			267			265
EBITDA	$	(565	)	$	(2,279	)	$	(3,417	)	$	(4,473	)

Backlog

The order backlog at September 30, 2017 and June 30, 2017 was $23.53 million and $22.67 million, respectively. This backlog will be recognized in revenue during the remainder of 2017 and 2018.

Business Sector Disclosures

Our financial results are reported in our three major market sectors. These sectors are Oil & Gas; Power Generation & Distribution and Marine & Other Industrial. The products we manufacture and the services we provide are consistent in application within all the sectors. This information is supplemental and provided to allow investors to follow our future trends in marketing to various customer groups.

	For the Three Months Ended September 30, 2017 and 2016
	(in thousands)
2017	Oil & Gas			Power Generation & Distribution			Marine & Other Industrial			Total
Revenue	$	12,233		$	499		$	536		$	13,268
Gross Profit		1,121			(22	)		(23	)		1,076
Gross Profit as % of Revenue		9	%		-4	%		-4	%		8	%

2016
Revenue	$	3,639		$	3,275		$	1,759		$	8,673
Gross Profit		292			(942	)		199			(451	)
Gross Profit as % of Revenue		8	%		-29	%		11	%		-5	%

	For the Nine Months Ended September 30, 2017 and 2016
	(in thousands)
2017	Oil & Gas			Power Generation & Distribution			Marine & Other Industrial			Total
Revenue	$	26,663		$	4,647		$	2,948		$	34,258
Gross Profit		1,910			(321	)		(253	)		1,336
Gross Profit as % of Revenue		7	%		-7	%		-9	%		4	%


2016
Revenue	$	14,376		$	9,184		$	4,855		$	28,415
Gross Profit		1,080			(735	)		521			866
Gross Profit as % of Revenue		8	%		-8	%		11	%		3	%

Three Months Ended September 30, 2017 as Compared with the Three Months Ended September 30, 2016

Revenue and Gross Profit

Revenues increased 53%, or $4.60 million, to $13.27 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. This growth was driven by the company’s continued sales progress in penetrating the midstream and downstream oil & gas market and increased orders for the company’s IntelliSafe™ medium voltage arc-resistant switchgear. In the quarter, the company saw a 64% increase in revenues recognized from the previously announced technical products backlog. The Company’s operations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $2.45 million in lost revenue for the quarter.

Gross profit increased 339%, or $1.53 million, to $1.08 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. Gross profit as a percentage of revenues increased to 8% in the three months ended September 30, 2017, compared to (5%) in the three months ended September 30, 2016. This increase was primarily attributable to the increased revenue in both our technical products and services businesses in the quarter. The Company’s operations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $0.49 million in reduced gross profit for the quarter.

Research and Development Costs

Research and development costs decreased by 62%, or $0.09 million, to $0.06 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016. This reduction is primarily related to the completion of the IntelliSafe™ medium voltage arc resistant switchgear product R&D efforts during 2016.

Selling and Marketing Expenses

Selling and marketing costs increased by 39%, or $0.18 million, to $0.65 million for the three months ended September 30, 2017, compared to the three months ended September 30, 2016, due to expanded sales and marketing efforts in the oil and gas sector. Selling and marketing expenses, as a percentage of revenues, remained at 5% during the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

General and Administrative Expenses

General and administrative expenses decreased by 29%, or $0.46 million, to $1.13 million during the three months ended September 30, 2017, when compared to the three months ended September 30, 2016, primarily due to M&A costs of $0.21 million and higher employee benefits of $0.29 million for the prior period. General and administrative expenses, as a percentage of revenues, decreased to 8% during the three months ended September 30, 2017, compared to 18% during the three months ended September 30, 2016.

Foreign Joint Venture Equity Income

Net equity from foreign joint venture operations decreased by 81%, or $0.13 million, to $0.03 million during the three months ended September 30, 2017, when compared to the three months ended September 30, 2016. The decrease is primarily due to a decrease in performance by our BOMAY joint venture in China.

Other Income (Expense)

Interest expense and other income (expense) increased $0.25 million to $0.33 million during the three months ended September 30, 2017, when compared to the three months ended September 30, 2016, due to increase interest expense of $0.28 million from new financing in 2017. Interest expense and other income (expense), as a percentage of revenues, decreased to 3% during the three months ended September 30, 2017 compared to 1% during the three months ended September 30, 2016.

Income Tax Provision

The benefit from income taxes for the three months ended September 30, 2017 was $0.01 million which reflects the provision from taxes on our earnings from our foreign joint ventures net of dividends received, calculated using a tax rate of 34%.

Net Income (Loss) Attributable to Common Stockholders

In the three months ended September 30, 2017, we recorded a net loss attributable to common stockholders of ($1.13) million, or ($0.13) of basic earnings per common share, compared to net loss attributable to common stockholders of ($2.71) million or ($0.33) of basic earnings per common share, in the three months ended September 30, 2016. See Note 2, Earnings per Common Share, in the accompanying notes to condensed consolidated financial statements.

Nine Months Ended September 30, 2017 as Compared with the Nine Months Ended September 30, 2016

Revenue and Gross Profit

Revenues increased 21%, or $5.84 million, to $34.26 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016. This growth was driven by the company’s continued sales progress in penetrating the

midstream and downstream oil & gas market and increased orders for the company’s IntellSafe™ medium voltage arc-resistant switchgear. The majority of the revenue growth came from backlog booked in the 1st half of 2017. The Company’s ope rations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $2.45 million revenue negative impact in the third quarter of 2017.

Gross profit increased 54%, or $0.47 million, to $1.34 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016 . Gross profit as a percentage of revenues increased to 4% in the nine months ended September 30, 2017, compared to 3% in the nine months ended September 30, 2016. This increase was primarily attributable to the corresponding increase in revenue for the period. The Company’s operations in Beaumont were temporarily idled as a result of Hurricane Harvey with an estimated $0.49 million in reduced gross profit.

Research and Development Costs

Research and development costs decreased by 73%, or $0.63 million to $0.24 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, This reduction is primarily related to the completion of the IntelliSafe™ medium voltage arc resistant switchgear product R&D efforts during 2016.

Selling and Marketing Expenses

Selling and marketing costs increased by 11%, or $0.20 million to $1.95 million for the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016, due to expanded sales and marketing efforts in the oil and gas sector. Selling and marketing expenses as a percentage of revenues, decreased to 6% during the nine months ended September 30, 2017, compared to 7% during the nine months ended September 30, 2016.

General and Administrative Expenses

General and administrative expenses decreased by 20%, or $0.80 million, to $3.12 million during the nine months ended September 30, 2017, when compared to the nine months ended September 30, 2016, primarily due to the reversal of bad debt reserves previously accrued during the nine months ended September 30, 2017 and M&A costs of $0.21 million and higher employee benefits of $0.29 million for the prior period. General and administrative expenses as a percentage of revenues, decreased to 9% during the nine months ended September 30, 2017, compared to 14% during the nine months ended September 30, 2016.

Foreign Joint Venture Equity Income

Net equity from foreign joint venture operations decreased by 46%, or $0.08 million to $0.09 million during nine months ended September 30, 2017, when compared to the nine months ended September 30, 2016. The decrease is primarily due to a decrease in performance by our BOMAY joint venture in China.

Other Income (Expense)

Interest expense and other income increased $1.00 million to $0.80 million during the nine months ended September 30, 2017, when compared to the nine months ended September 30, 2016, primarily due to the gain on sale of South Coast Electric Systems manufacturing operations and the BP settlement from the 2010 gulf oil spill during 2016. Interest expense increased by $0.62 million from new financing in 2017. Interest expense and other income, as a percentage of revenues, increased to 2% during the nine months ended September 30, 2017 compared to 1% during the nine months ended September 30, 2016.

Income Tax Provision

The benefit from income taxes for the nine months ended September 30, 2017 was $0.08 million which reflects the net benefit from taxes on our earnings from our foreign joint ventures net of dividends received, calculated using a tax rate of 34% and taxes paid on dividends from China.

Net Income (Loss) Attributable to Common Stockholders

In the nine months ended September 30, 2017, we recorded a net loss attributable to common stockholders of ($4.86) million, or ($0.57) of basic earnings per common share, compared to loss of ($5.62) million, or ($0.68) of basic earnings per common share, in the nine months ended September 30, 2016. See Note 2, Earnings per Common Share, in the accompanying notes to the condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

	September 30, 2017			December 31, 2016
	(in thousands except percentages and ratios)
Working capital	$	1,892		$	3,302
Current ratio	1.1 to 1			1.3 to 1
Debt as a percent of total capitalization		46	%		26	%

Notes Payable

On March 23, 2017 the Company entered into a $7.00 million Senior Secured Term Note with a third-party lender. The Note is payable in monthly interest only payments in arrears at a fixed rate of 11.5%. Principal of $0.50 million was paid on June 30, 2017 with the balance due March 23, 2021.

The Company continues to monitor its liquidity position closely and depending on the business needs may raise cash in the form of debt, equity or a combination of both, subject to lender approval. However, there can be no assurance that additional capital can be obtained or that it can be obtained at terms that are favorable to us and our existing stockholders.

Operating Activities

During the nine months ended September 30, 2017, the Company used cash of $2.08 million in operations as compared to using $5.56 million for the same period in 2016. This was primarily the result of the net loss from operations and a net increase in cash generated from advanced payments on two uncompleted projects as of September 30, 2017.

Investing Activities

During the nine months ended September 30, 2017, the Company’s investing activities provided cash of $1.02 million compared to providing $0.33 million for the comparable period in 2016. This was primarily the result of dividends received of $0.78 million from the BOMAY joint venture and $0.46 million from the release of certificates of deposit pledged as collateral on a customer contract.

Financing Activities

During the nine months ended September 30, 2017, the Company’s financing activities provided cash of $0.53 million compared to providing $0.10 million in the comparable period in 2016. The increase is primarily attributable to $0.97 million in net proceeds from the issuance of debt.

I TEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

The markets in which we participate are capital intensive and cyclical in nature. The volatility in customer demand in several of these markets is greatly driven by the change in the price of oil and gas. These factors influence the release of new capital projects by our customers, which are traditionally awarded in competitive bid situations. Coordination of project start dates is matched to the customer requirements and projects may take a number of months to complete. Schedules also may change during the course of any particular project. For more information please see Item 2 of the Management Discussion and Analysis – Business Outlook.

Liquidity Risk

Our inability to borrow additional funds could negatively impact future working capital, capital expenditures, and acquisitions in addition to fulfilling our obligations and operating the business. While we would seek alternative funding sources through both debt and equity raises, there is no assurance that additional capital can be obtained or that it can be obtained at terms that are favorable to us and our existing stockholders.

As of September 30, 2017, we had cash and cash equivalents of $1.10 million and total outstanding debt of $6.37 million. The Company had no availability for additional borrowings under our credit agreements. In the event that the Company fails to meet covenants in the future, the Company may not be able to obtain the necessary waivers or amendments to remain in compliance with the Purchase Agreement and the Purchaser may declare a default and cause all of the Company’s outstanding indebtedness under the Purchase Agreement to become immediately due and payable.

Interest Rate Risk

Our interest rate sensitive items do not subject us to material risk exposures. Our senior secured term Note has a fixed interest rate of 11.50%.

Foreign Currency Transaction Risk

The Company operates a subsidiary in Brazil and maintains equity method investments in its Singapore and Chinese joint ventures, MIEFE and BOMAY, respectively. The functional currencies of the Brazil subsidiary and the joint ventures are the Brazilian Real, Singapore Dollar and the Chinese Yuan, respectively. Investments are translated into United States Dollars at the exchange rate in effect at the end of each quarterly reporting period. The resulting translation adjustment is recorded as accumulated other comprehensive income, net of tax, in our condensed consolidated balance sheets. In the current nine months, this item increased from $0.00 million at December 31, 2016 to $0.27 million at September 30, 2017 due principally to the strengthening of the Brazilian Real and the Chinese Yuan versus the United States Dollar.

Other than the aforementioned items, we do not believe we are exposed to significant foreign currency exchange risk because most of our net sales and purchases are denominated in United States Dollars.

Commodity Price Risk

We are subject to commodity price risk from fluctuating market prices of certain raw materials. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We endeavor to recoup these price increases from our customers on an individual contract basis to avoid operating margin erosion. Although historically we have not entered into any contracts to hedge commodity risk, we may do so in the future. Commodity price changes can have a material impact on our prospective earnings and cash flows. Copper, steel and aluminum represent a significant element of our material cost. Significant increases in the prices of these materials could reduce our estimated operating margins if we are unable to recover such increases from our customers.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Accounting Officer, of the effectiveness of our disclosure controls and procedures as of September 30, 2017. Based on this evaluation, our Principal Executive Officer and Principal Accounting Officer concluded that the disclosure controls and procedures were effective as of September 30, 2017.

There were no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

P ART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company becomes involved in various legal proceedings and claims in the normal course of business. In management’s opinion, the ultimate resolution of these matters will not have a material effect on our financial position or results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes during the period ended September 30, 2017 in the risk factors as set forth in item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.

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

Our loan agreement prohibits the payment of cash dividends on our common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

On November 13, 2017 the Company and its subsidiaries, M&I Electric Industries, Inc. and South Coast Electric Systems, LLC, entered into a Transaction Modification Agreement with HD Special-Situations III, LP (the “Lender”). The Transaction Modification Agreement relates to the term loan which was originally reported in the Company’s Current Report on Form 8-K filed March 27, 2017.

The principal terms of the modification are:

1. The Senior Secured Term Note was amended and restated to reflect a reduction in the principle amount to $6,500,000 from $7,000,000 reflecting the prior repayment of $500,000 by the Company and a new requirement for monthly principle amortization of $30,000 beginning April 2018.

2. The financial covenants related to required minimum three month revenues and EBITA, minimum monthly debt service coverage ratios and maximum monthly debt/EBITA ratios were modified as of October 2017.

3. Current non-compliance with financial covenants were waived.

4. A five year warrant to purchase 500,000 shares of Company common stock for $2.26 per share, including cashless exercise rights, was issued to the Lender. Certain rights for registration of the shares underlying the warrant were provided to the Lender in a Registration Rights Agreement.

The foregoing descriptions of the Transaction Modification Agreement, Amended and Restated Secured Term Note and Warrant to Purchase Common Stock and Registration Rights Agreement are summaries and are qualified in their entirety by reference to the definitive documents filed as exhibits to this Quarterly Report on Form 10-Q and incorporated herein by this reference.

ITEM 6. EXHIBITS

(a) Index to Exhibits

Exhibit No.		Exhibit Description
10.1		Transaction Modification Agreement dated November 13, 2017 among Registrant, M&I Electric Industries, Inc., South Coast Electric Systems, LLC and HD Special-Situations III, LP.
10.2		Amended and Restated Senior Secured Term Loan dated November 13, 2017 in the amount of $6,500,000 issued to HD Special-Situations III, LP.
10.3		Warrant to Purchase Common Stock dated November 13, issued to HD Special-Situations III, LP.
10.4		Registration Rights Agreement dated November 13, 2017 between Registrant and HD Special-Situations III, LP.
31.1		Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer.
31.2		Rule 13a-14(a) / 15d-14(a) Certification of Principal Accounting Officer.

Exhibit No.		Exhibit Description
32.1		Section 1350 Certifications of Principal Executive Officer and Principal Financial Officer.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

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.

Date: November 14, 2017

AMERICAN ELECTRIC TECHNOLOGIES, INC.

By:	/s/ Charles M. Dauber
Charles M. Dauber
President and Chief Executive Officer (Principal Executive Officer)

By:	/s/ William B. Brod
William B. Brod
Chief Financial Officer (Principal Financial Officer)

Exhibit 10.1

TRANSACTION MODIFICATION AGREEMENT

This Transaction Modification Agreement (the “Agreement”) is made and entered into on November 13, 2017, by and among American Electric Technologies, Inc., a Florida corporation (“AETI”), M&I Electric Industries, Inc., a Texas corporation (“M&I”), South Coast Electric Systems, LLC, a Delaware limited liability company (“SCES”), and HD Special-Situations III, LP, a Delaware limited partnership (the “Lender”).

Recitals

A. AETI, M&I and SCES (each sometimes referred to individually as a “Borrower” and collectively as the “Borrowers”) and the Lender have previously entered into a Note Purchase Agreement dated March 23, 2017 (the “NPA”), in connection with a loan of $7 ,000,000 from the Lender to the Borrowers evidenced by the Borrower’s joint issuance of a Senior Secured Term Note in the initial principal amount of $7,000,000.00 (the “Existing Note”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the NPA.

B. Since April 2017, the Borrowers have not been in compliance with the minimum monthly EBITDA requirements under Schedule 4(g) to the NPA( the “Current Financial Breaches”).

C. Concurrent with the execution and deli very of this Agreement, (i) the Borrowers and the Lender desire to replace the Existing Note with an Amended and Restated Senior Secured Term Note in the principal amount of $6,500,000.00 in the form attached as Exhibit A (the “New Note”), (ii) AETI desires to issue to the Lender, and the Lender desires to purchase, a Warrant to Purchase Common Stock in the form attached as Exhibit B (the “Warrant”), (iii) AETI and the Lender desire to enter into a Registration Rights Agreement in the form attached as Exhibit C (the “Registration Rights Agreement”) with respect to the shares issuable upon exercise of the Warrant (the “Warrant Shares”) and (iv) the Borrowers and the Lender desire to amend the NPA and provide for certain other agreements to the extent specified herein.

NOW, THEREFORE, in consideration of their respective promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereby agree as follows:

1. Waiver of the Current Financial Breaches . The Lender hereby waives any defaults with respect to the NPA and/or any other Closing Document that exist at the date of this Agreement that are solely the result of the Current Financial Breaches.

2. Issuance of the New Note and the Warrant; Additional Closing Documents .

(a) Issuance of the New Note . At the closing of this Agreement (the “TMA Closing”), the Borrowers shall jointly issue the New Note to the Lender in return for the

Lender’s cancellation of the Existing Note as provided in Section 10 below.

(b) Issuance of the Warrant . At the TMA Closing, AETI shall issue the Warrant to the Lender in consideration of (i) the Lender not imposing default interest in connection with the Current Financial Breaches, (ii) the Lender not requiring an amendment fee in connection with this Agreement and (iii) the Lender’s payment of One Hundred Dollars ($100.00) (the “Cash Payment”) to AETI by wire transfer of immediately available funds.

(c)

The TMA Closing Date . The date of the TMA Closing (the “TMA Closing Date”) shall be November 13, 2017, or such other date as the parties may mutually agree in writing. On or before the TMA Closing Date, (i) the Borrowers shall have delivered to the Lender (A) an original of this Agreement, (B) the original New Note and (C) such other items as may be required by this Agreement or any of the other documents specified herein, each duly authorized and executed by each of the Borrowers and/or any other parties thereto (other than the Lender) (collectively, the “Borrowers’ Closing Documents”), (ii) AETI shall have delivered to the Lender (A) the original Warrant, (B) an original of the Registration Rights Agreement and (C) such other items as may be required by this Agreement or any of the other documents specified herein, each duly authorized and executed by AETI and/or any other parties thereto (other than the Lender) (collectively, the “AETI Closing Documents”) and (iii) the Lender shall have delivered to the Borrowers or AETI, as appropriate, the Cash Payment and executed originals of those Borrowers’ Closing Documents and AETI Closing Documents (collectively, the “TMA Closing Documents”) that are to be signed by the Lender.

3.	Amendments to the NPA .

(a) Replacement of Schedule 4(g) . Effective as of November 1, 2017, Schedule 4(g) to the NPA is deleted in its entirety and replaced with Schedule 4(g) in the form attached hereto.

(b) Temporary Suspension of the DSCR Requirement . Effective as of November 1, 2017, imposition of the DSCR requirement in Schedule 4(g) to the NPA is suspended through June 30, 2018.

(c)	Temporary Suspension of the Debt/EBITDA Ratio Requirement . Effective as of November 1, 2017, imposition of the debt/EBITDA ratio requirement in Schedule 4(g) to the NPA is suspended through August 31, 2018.

4. The Lender’s Representations and Warranties . The Lender represents and warrants to the Borrowers, and agrees, that all of the representations and warranties of the Lender in Section 2 of the NPA are true and correct as of the TMA Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), with (i) the term “Note” therein being expanded to include the Note, the Warrant and the Warrant Shares and (ii) the term “Closing Documents” therein being expanded to include the TMA Closing Documents. The foregoing notwithstanding, the Lender’s representations and warranties in Section 2(f) of the NPA are qualified to take into account the potential transfer or resale of the Warrant Shares pursuant to the Registration Rights Agreement.

5. The Borrowers’ Representations and Warranties . Each Borrower represents and warrants to the Lender, and agrees, that, except for defaults with respect to the NPA and/or any other Closing Document that exist at the date of this Agreement that are solely the result of the Current Financial Breaches, all of the representations and warranties of the Borrowers in Section 3 of the NPA are true and correct as of the TMA Closing Date as though made at that time (except for representations and warranties that speak as of a specific date). For purposes of this Section, Section 3 of the NPA is modified to expand the term “Closing Documents” to include the TMA Closing Documents.

6. AETI’s Representations and Warranties . AETI represents and warrants to the Lender, and agrees, as follows:

(a) AETI has the requisite corporate power and authority to issue and sell the Warrant and the Warrant Shares in accordance with the terms hereof and the Warrant, as the case may be. AETI also has the requisite corporate power and authority to enter into and perform its obligations under the Warrant and the Registration Rights Agreement, and its execution, delivery and performance of the Warrant and the Registration Rights Agreement and its consummation of the transactions contemplated thereby, have been duly authorized by its board of directors and no other consent or authorization of AETI, its board of directors, its shareholders, or any other individual or entity, is required in connection therewith. The Warrant and the Registration Rights Agreement have been duly and validly authorized, executed and delivered by AETI and constitute its valid and binding obligation enforceable against it in accordance with the terms thereof, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

(b) The Warrant Shares are duly authorized and reserved for issuance and, upon issuance in accordance with the terms of the Warrant, shall be validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issuance thereof, and will not be subject to preemptive rights or other similar rights that have not been previously waived.

7. Additional Covenants .

(a) Reservation of Warrant Shares . AETI shall at all times have authorized and reserved for issuance that amount of shares which is sufficient to provide for the issuance of all of the Warrant Shares. Prior to the complete exercise or expiration of the Warrant, AETI shall not reduce the amount of shares reserved for issuance upon exercise of the Warrant without the written consent of the Lender, except for a reduction which affects all of AETI’s outstanding shares proportionately. If at any date AETI shall not have authorized and reserved for issuance that amount of shares which is sufficient to provide for the issuance of all of the Warrant Shares which could then be issued, within ninety (90) days of such date AETI shall call and hold a special meeting of its shareholders (or arrange for a written consent of its shareholders) for the sole purpose of increasing its authorized and unissued shares to an amount sufficient to correct such deficiency. In connection with such a meeting, AETI shall use its best efforts to cause its management to (i) recommend to shareholders that they vote in favor of such increase in the number of authorized and unissued shares and (ii) vote all of their shares in favor of such increase. Such remedy shall be in addition to all other rights and

remedies available to the Lender under the TMA Closing Documents, as well as any other rights or remedies afforded by law or equity.

(b) Expense Reimbursement . Upon written request (whether made before or after the TMA Closing Date), the Borrowers shall pay, or reimburse the Lender for (i) all reasonable out-of-pocket attorney’s fees and expenses incurred by the Lender in connection with this Agreement and (ii) any other amounts for which the Lender is entitled to reimbursement under any Closing Document or TMA Closing Document that has not yet been paid or reimbursed by the Borrowers.

8. Conditions to the Borrowers’ Obligations . The obligations of each Borrower herein are subject to the satisfaction, on or before the TMA Closing Date, of each of the following conditions; provided, however, that these conditions are for the Borrowers’ sole benefit and may be waived in writing by the Borrowers at any time in their sole discretion:

(a) Execution and Delivery of Documents . The Lender shall have (i) executed each of the TMA Closing Documents to the extent required thereby and (ii) delivered originals of such documents or signature pages thereof, together with such other items as may be required by this Agreement, to the Borrowers or AETI, as appropriate.

(b) Delivery of the Cash Payment . AETI shall have received the Cash Payment.

(c) Accuracy and Performance . The representations and warranties of the Lender herein shall be true and correct as of the date made and as of the TMA Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Lender shall have performed, satisfied and complied with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Lender at or prior to the TMA Closing Date.

(d) No Restrictions or Prohibitions . No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered or issued by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which restricts or prohibits the consummation of any of the transactions contemplated herein.

9. Conditions to the Lender’s Obligations . The obligations of the Lender herein are subject to the satisfaction, on or before the TMA Closing Date, of each of the following conditions; provided, however, that these conditions are for the sole benefit of the Lender and may be waived by the Lender at any time in its sole discretion:

(a) No Material Adverse Effect; Payments . There shall have been no Material Adverse Effect (except to the extent that any of the Current Financial Breaches may be considered to have created a Material Adverse Effect), and the Borrowers shall have paid or caused the payment of all amounts for which the Lender has presented a request for payment pursuant to Section 7(b) above.

(b) Execution and Deliv ery of Documents . Each Borrower and each other individual or entity (other than the Lender) who is required to execute the TMA Closing Documents shall have (i) executed each of the TMA Closing Documents to the extent required thereby and (ii) delivered to the Lender originals of such documents, together with such other items as may be required by this Agreement.

(c) Accuracy and Performance . The representations and warranties of the Borrowers herein shall be true and correct as of the date made and as of TMA Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Borrowers shall have performed, satisfied and complied with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by them at or prior to the TMA Closing Date, including obtaining all consents and approvals required for each of them to enter into and consummate the TMA Closing Documents.

(d) No Restrictions or Prohibitions . No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, or issued by any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which restricts or prohibits the consummation of any of the transactions contemplated herein.

10. Cancellation of the Existing Note . Within five business days after the Lender’s receipt of the New Note, it shall return the original Existing Note to AETI marked “Cancelled” across the face thereof.

11. Governing Law; Miscellaneous Provisions . All of the provisions contained in Section 8 of the NPA are incorporated herein by reference, with the term “Note” being replaced with “New Note” and the term “Closing Documents” being expanded to include the TMA Closing Documents.

12. Ratification of Remaining Terms . Except as expressly modified by this Agreement or any of the other TMA Closing Documents, all of the terms and provisions of the NPA (including all Schedules thereto) and the other Closing Documents shall remain in full force and effect.

IN WITNESS WHEREOF, the Borrowers and the Lender have caused this Agreement to be duly executed by their respective authorized persons on the date first written above.

The Borrowers:

	AMERICAN ELECTRIC TECHNOLOGIES, INC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO
Date: November 13, 2017		By:	/s/ William B. Brod
			William B. Brod

			Senior Vice President and CFO
	M&I ELECTRIC INDUSTRIES, INC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO
Date: November 13, 2017		By:	/s/ William B. Brod
			William B. Brod
			Senior Vice President and CFO
	SOUTH COAST ELECTRIC SYSTEMS, LLC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO
Date: November 13, 2017		By:	/s/ William B. Brod
			William B. Brod
			Senior Vice President and CFO

The Lender :

LIST OF EXHIBITS AND SCHEDULES

Exhibit A Amended and Restated Senior Secured Term Note

Exhibit B Warrant to Purchase Common Stock

Exhibit C Registration Rights Agreement

Schedule 4(g)

SCHEDULE 4(g)

Minimum


	Maximum
	3-Month	3-Month
Month	Revenue	EBITDA	Cash	DSCR	CCR	Debt/EBITDA
Oct-17	N/A	N/A	$500,000	N/A	1.90x	N/A
Nov-17	$12,488,997	$ (176,487)	$500,000	N/A	1.90x	N/A
Dec-17	$11,739,212	$ (51,932)	$500,000	N/A	1.90x	N/A
Jan-18	$10,721,231	$ (281,570)	$500,000	N/A	1.90x	N/A
Feb-18	$ 9,512,566	$ (267,828)	$500,000	N/A	1.90x	N/A
March-18	$11,758,236	$ ( 77,319)	$500,000	N/A	1.90x	N/A
April-18	$13,752,955	$ 344,027	$500,000	N/A	2.05x	N/A
May-18	$16,627,255	$ 890,180	$500,000	N/A	2.05x	N/A
June-18	$16,163,140	$ 771,666	$500,000	N/A	2.05x	N/A
July-18	$14,908,081	$ 464,474	$500,000	1.0x	2.05x	N/A
August-18	$16,138,136	$ 636,993	$500,000	1.5x	2.05x	N/A
Sept-18	$17,435,691	$ 881,931	$500,000	1.5x	2.05x	3.5x
Oct-18	$19,838,625	$1,337,412	$500,000	1.5x	2.25x	3.5x
Nov-18	$19,400,438	$1,315,773	$500,000	1.5x	2.25x	3.5x
Dec-18	$18,339,375	$1,090,708	$500,000	1.5x	2.25x	3.5x

Exhibit 10.2

THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE “LAWS”). THE SECURITY MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITY UNDER THE APPLICABLE LAWS OR (II) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE APPLICABLE LAWS.

DATE OF ISSUANCE: As of March 23, 2017

$6,500,000.00

AMERICAN ELECTRIC TECHNOLOGIES, INC.,

M&I ELECTRIC INDUSTRIES, INC.

AND

SOUTH COAST ELECTRIC SYSTEMS, LLC

AMENDED AND RESTATED SENIOR SECURED TERM NOTE

This Amended and Restated Senior Secured Term Note (the “ Note ”) is jointly issued by American Electric Technologies, Inc., a Florida corporation, M&I Electric Industries, Inc., a Texas corporation, and South Coast Electric Systems, LLC, a Delaware limited liability company (each a “ Borrower ;” collectively, the “ Borrowers ”), pursuant to that certain Note Purchase Agreement (the “NPA”) dated March 23, 2017, and that certain Transaction Modification Agreement (the “TMA”) dated concurrently herewith, in each case by and among the Borrowers and HD Special-Situations III, LP (the “ Lender ”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the NPA and the TMA.

1. Payment Obligation .

(a) For value received, the Borrowers jointly and severally promise to pay to the Lender or its permitted successors and assigns as to this Note (collectively, the “ Holder ”), (i) the principal amount of Six Million Five Hundred Thousand Dollars ($6,500,000.00) and (ii) interest on the outstanding principal amount at the rate of eleven and a half percent (11.5%) per annum (the “ Rate ”), payable as described below. The principal amount of this Note, together with all accrued and unpaid interest, shall be due and payable forty-eight (48) months after the “Date of Issuance” shown above (the “ Maturity Date ”); provided , however , that:

(i) the Maturity Date may be extended up to two (2) times by twelve (12) months each time, in each case upon the written consent of the Holder and the Borrowers, in their sole discretion;

(ii) that in the event of the occurrence of an Event of Default, including any Event of Default based on a failure to meet the CCR required by the NPA, the Borrowers shall collectively pay monthly principal amortization payments on this Note that are the greater of (A) seventy-five percent (75%) of the monthly Free Cash Flow (as defined below) or (B) Seventy-five Thousand Dollars ($75,000.00), such payments to continue until the Event of Default has been cured or waived or all principal with respect to this Note has been paid in full. For purposes of the foregoing, “Free Cash Flow” shall mean AETI’s consolidated EBITDA (in accordance with GAAP) during the applicable (i.e. preceding) month, minus interest, capital expenditures not to exceed $83,333.00 for any month during 2017 and any calendar year thereafter, and cash taxes paid for that month, all determined on a consolidated basis. During such time as payments are owed by the Borrowers under this clause (ii), the Borrowers shall calculate such Free Cash Flow and shall collectively pay such amount as is owed under this clause within five (5) business days (as defined in the NPA) after the end of the succeeding month. Such remedy shall be in addition to all other rights and remedies available to the Holder under the Closing Documents, as well as any other rights or remedies afforded by law or equity; and

(iii)concurrent with the interest payment due hereunder for the month of April 2018 and continuing with each monthly interest payment thereafter until this Note has been paid in full, the Borrower shall also amortize the principal amount of this Note b y including a payment of at least Thirty Thousand Dollars ($30,000.00).

(b) Interest on this Note in the amount of Nineteen Thousand Four Hundred Seventy-five and 81/100 Dollars ($19,475.81), representing pro-rated interest for the period from the Closin g Date through March 31, 2017, shall be pre-paid by the Borrowers upon execution hereof (which pre-payment shall be non-refundable); thereafter, monthly interest on the outstanding principal amount of this Note shall be due and payable monthly in arrears on the first business day of each month during the period that this Note remains outstanding, commencing on May 1, 2017. Accrual of interest on the outstanding principal amount shall commence on the “Date of Issuance” shown above and shall continue until full payment of the outstanding principal amount has been made or duly provided for.

(c) The Borrowers may prepay all or any portion of the outstanding principal amount of this Note at any time upon thirty (30) days prior written notice to the Holder. I f one or more prepayments aggregating in excess of $1,500,000.00 (the “Prepayment Threshold ”) are made on this Note within one year of the Date of Issuance (the “ Make-Whole Period ”), the prepayment which causes the Prepayment Threshold to be exceeded shall be accompanied by a make-whole payment equivalent to a 11.5% annual yield on the pre-paid amount that is in excess of the Prepayment Threshold for the portion of the Make-Whole Period that will remain after the date that the prepayment is made (with such calculation to exclude any fees paid to the Holder). For example, if $3,750,000.00 of the principal amount of this Note is paid in full exactly six months

after the Date of Issuance (leaving six months left in the Make-Whole Period), the make-whole paymen t required by this paragraph shall be $158,125.00. Any amortization payment required under any provision of this Note shall not be considered a “prepayment” for purposes of this paragraph.

2. Provisions as to Payment .

(a) Payments on this Note are payable to the Holder in whose name this Note (or one or more successor Notes) is registered on the records of the Borrowers regarding registration and transfer of this Note (the “ Note Register ”); provided , however , that the Borrowers’ obligations to a transferee of this Note arise only if such transfer is made in accordance with the terms and conditions of the NPA.

(b) Payments on this Note are payable in immediately available funds in currency of the United States of America at the address last appear ing on the Note Register of the Borrowers as designated in writing by the Holder hereof from time-to-time. The Borrowers shall collectively pay the outstanding principal amount and all accrued and unpaid interest due upon this Note on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note appearing of record as of the fifth business day prior to the Maturity Date and addressed to such Holder at the last address appearing on the Note Register. The forwarding of such funds shall constitute full payment of all outstanding principal and accrued interest hereunder and shall satisfy and discharge the liability for principal and interest on this Note to the extent of such payment plus any amounts so deducted or withheld. Unless otherwise expressly provided herein, all payments shall be credited first to reimburse the Holder for any cost or expense reimbursable hereunder, then to the payment of accrued interest, and finally to the payment of principal.

3. Transfer of Note; Restrictions .

(a) The Holder understands and acknowledges by its acceptance hereof that (i) this Note has not been, and is not being, registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred except as provided in the NPA and (ii) no Borrower or any other individual or entity is under any obligation to register this Note under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. By acceptance of this Note, the Holder agrees to be subject to and bound by all of the agreements between the Borrowers and the Lender set forth in the NPA.

(b) Prior to presentation of this Note for transfer, the Borrowers and any agent of the Borrowers may treat the person in whose name this Note is duly registered on the Note Register as the Holder hereof for the purpose of receiving payments as herein provided and for all other purposes, whether or not this Note be overdue, and no Borrower or any such agent shall be affected or bound by notice to the contrary.

4. Obligations of the Borrowers Herein Are Unconditional . The Borrowers’ joint and several obligations to repay this Note at the time, place, interest rate and in the currency hereinabove stated is absolute and unconditional. This Note and all other instruments now or hereafter issued in replacement of this Note on the same or similar terms are direct obligations of

each of the Borrowers.

5. Waiver of Demand, Presentment, etc. To the extent permitted by law, the Borrowers hereby expressly waive demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the timely payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for herein. No delay or omission of the Holder in exercising any right or remedy hereunder shall constitute a waiver of any such right or remedy. A waiver on one occasion shall not operate as a bar to, or waiver of, any such right or remedy on any future occasions.

6. Attorneys’ Fees; Reimbursable Expenses . In the event it should become necessary for the Holder to engage counsel to enforce this Note, the Borrowers jointly and severally agree to pay the reasonable attorneys’ fees and costs of the Holder, irrespective of whether suit is brought, including, without limitation, any and all pre-judgment and post-judgment attorneys’ fees and costs incurred (including, without limitation, fees and costs reasonably incurred in connection with any matter arising under Title 11 of the United States Code). In addition, the Borrowers jointly and severally agree to pay for all of the Holder’s other reasonable and customary out-of-pocket costs incurred in connection with the enforcement of this Note, including, without limitation, all of the Holder’s consultants’ fees, appraisers’ fees, accountants’ fees, and trustee’s fees.

7. Events of Default . Each of the following shall constitute an “Event of Default” under this Note:

(a) the Borrowers shall fail to make timely payment of any amount of principal or interest then due and owing under this Note or any Borrower shall itself provide the Holder with written notice that one or more of the Borrowers has failed to perform or observe any term, condition, agreement or obligation under any of the Closing Documents;

(b) except as covered by clause (a) above, a Borrower shall fail to make timely payment of any amount then due and owing under any of the Closing Documents to which it is a party, and the sa me shall continue uncured for a period of three (3) business days after the date payment became due;

(c) except as covered by clause (a) above, any of the representations or warranties made by a Borrower in any of the Closing Documents, or in any certifi cate or other written statement heretofore or hereafter furnished by or on behalf of a Borrower in connection with any of the Closing Documents, shall be false or misleading in any material respect at the time made and the Holder shall have provided written notice to that Borrower of the alleged misrepresentation or breach of warranty and the same shall continue uncured for a period of fifteen (15) business days after the Borrower’s receipt of such written notice;

(d) if a Borrower shall fail to perfo rm or observe, in any material respect, any term,

condition, agreement or obligation under any of the Closing Documents not covered by clause (a), (b) or (c) above and the Holder shall have provided written notice to that Borrower of the alleged failure a nd the same shall continue uncured for a period of thirty (30) days after the Borrower’s receipt of such written notice, unless such default cannot reasonably be cured within such thirty (30) day period, in which case, no Event of Default shall be deemed t o have occurred so long as the Borrower commences to cure such default within such thirty (30) day period and diligently pursues such cure to completion within sixty (60) days of the Borrower’s receipt of such written notice;

(e) a Borrower shall (i) be come insolvent, (ii) admit in writing its inability to pay its debts generally or as they become due, (iii) make an assignment for the benefit of creditors or commence proceedings for its dissolution or (iv) apply for, or consent to the appointment of, a trustee, liquidator, or receiver for all or a substantial part of its property or business;

(f) a trustee, liquidator or receiver shall be appointed for a Borrower, or for a substantial part of its property or business, without its consent and such appoin tment is not discharged within sixty (60) days after such appointment;

(g) any governmental agency, or any court of competent jurisdiction at the instance of any governmental agency, shall assume custody or control of the whole or any substantial portio n of the assets of a Borrower and such custody or control shall not be released within sixty (60) days thereafter;

(h) any final money judgment, writ of attachment, or similar process in excess of Two Hundred Fifty Thousand Dollars ($250,000) in the agg regate (and not covered by insurance) shall be entered against a Borrower, or any of its assets, and shall remain unpaid, unvacated, unbonded or unstayed for a period of thirty (30) business days after the entry date thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained;

(i) bankruptcy, reorganization, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against a Borrower and, if instituted against a Borrower, shall not be dismissed within sixty (60) days after such institution, or a Borrower shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations of, or default in answering a petition filed in, any such proceeding;

(j) the occurrence of any event of default or other event triggering acceleration of, or a right to accelerate, any indebte dness by a Borrower, or any of its subsidiaries, under any note, agreement or other instrument, whether such indebtedness now exists or is hereafter created, if such indebtedness is not subject to a subordination agreement with the Holder and the principal amount of such indebtedness exceeds, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000); or

(k) the Holder reasonably believes that there has been a material adverse change in (i) any of the assets, liabilities, sales, fina ncial condition, business or operations of the Borrowers

and their subsidiaries (taken as a whole), (ii) the Borrowers’ ability (taken as a whole) to repay this Note or (iii) the Holder’s rights and remedies under the Closing Documents.

At any time during the occurrence of an Event of Default, and in each and every such case, unless such Event of Default shall have been cured or waived in writing by the Holder, in its sole discretion (which waiver in one instance shall not be deemed to be a waiver in another instance or for any other prior or subsequent Event of Default), at the option of the Holder and in the Holder’s sole discretion, the Holder may immediately accelerate the maturity hereof, whereupon all principal and accrued interest hereunder shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by the Borrowers (anything herein or in any other instrument to the contrary notwithstanding) and the Holder may immediately enforce any and all of its rights and remedies provided herein or in any of the other applicable Closing Documents, or any other rights or remedies afforded by law or equity. During the continuance of an Event of Default, the Rate shall automatically increase by four percent (4.0%), which shall be imposed retroactively to the first day of the month in which the Event of Default was reported until the first date thereafter upon which there shall be no Event of Default. For avoidance of doubt, if an Event of Default occurred in January and such Event of Default is disclosed in the Borrowers’ monthly financial statements delivered to the Lender on February 15, then the default rate of interest provided for herein shall apply to the outstanding principal of this Note as of February 1 through the first date thereafter upon which there shall be no Event of Default.

8. Security . Repayment of this Note is secured by the Security Agreements, the Deed of Trust, the Pledge Agreement and/or any other agreements now or hereafter entered into by a Borrower or any other individual or entity to secure and/or guarantee the payment of this Note. Therefore, an Event of Default under the terms of this Note shall be grounds for enforcement of the Holder’s rights under the Security Agreements, the Deed of Trust, the Pledge Agreement and/or any such other agreements.

9. Enforceability; Maximum Interest Rate .

(a) In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope o r otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note shall not in any way be affected or impaired thereby.

(b) Notwithstanding anything to the contrary contained in this Note, the Borrowers shall not be obligated to pay, and the Holder shall not be entitled to charge, collect, receive, reserve or take interest (“interest ” being defined, for purposes of this paragraph, as the aggregate of all charges which constitute interest under applicable law that are contracted for, charged, reserved, received or paid under this Note) in excess of the maximum rate allowed by applicable law (the “ Maximum Lawful Rate ”). During any period of time in which the Rate exceeds such Maximum Lawful Rate, interest shall accrue and be payable only at such Maximum Lawful Rate; provided , however , that if at any time thereafter the Rate is less than the Maximum Lawful Rate, the Borrowers shall, to the extent permitted by law, continue to pay interest to the account of the Holder at the Maximum Lawful Rate until such time as the total interest received by the

Holder is equal to the total interest whic h the Holder would have received had the Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate payable for the account of the Holder shall be the Rate unless and until the Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply. In no event shall the total interest received by the Holder exceed the amount which the Holder could lawfully have received had the interest been calculated for the term during which th e Holder actually received interest from the Borrowers at the Maximum Lawful Rate. If the Holder has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance hereof or to other amounts (other than interest) payable hereunder to the Holder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be repaid by the Holder to the Borrowers. For purposes of this Section, the term “applicable law” shall mean the laws of California (without giving effect to applicable principles of conflict of law), and to the extent controlling, laws of the United States of America.

10. Entire Agreement . This Note, together with the other applicable Closing Documents and any exhibits or schedules attached thereto, and any addenda to any of the foregoing, constitute the full and entire understanding between the Borrowers and the Holder with respect to the subject matter hereof and thereof and supersede all prior negotiations, agreements and understandings, written or oral, with respect to such subject matter. No provision of this Note shall be amended, waived, discharged or terminated other than by a written instrument signed by the Borrowers and the Holder.

11. Governing Law . This Note shall be governed by and construed in accordance with the laws of California without giving effect to applicable principles of conflict of law.

12. Headings . The headings of this Note are for convenience of reference and shall not form a part of, or affect the interpretation of, this Note.

13. Successors and Permitted Assigns . The Borrowers shall not assign any of their rights or obligations hereunder and any such assignment shall be absolutely void. Subject to the transfer restrictions contained in the NPA, the Holder may assign and/or participate any of its interest in this Note to any individual or entity. Each reference herein to powers or rights of the Holder shall also be deemed a reference to the same power or right of such assignees, to the extent of the interest assigned to them. All the covenants, agreements, representations and warranties contained in this Note shall bind the Borrowers and the Holder and their respective administrators, distributees, successors and permitted assigns, including any individual or entity to whom the Holder has granted a participation interest in this Note.

14. No Strict Construction . The Borrowers agree that they have had sufficient opportunity to review and comment on the provisions of this Note. As a result, any uncertainty or ambiguity existing herein shall not be interpreted against the Borrowers or the Holder.

15. Waiver of Jury Trial . THE BORROWERS AND THE HOLDER EACH WAIVE, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS NOTE.

IN WITNESS WHEREOF, the Borrowers have caused this Note to be duly executed by their authorized persons as of the D ate of Issuance.

The Borrowers:

	AMERICAN ELECTRIC TECHNOLOGIES, INC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO
Date: November 13, 2017		By:	/s/ William B. Brod
			William B. Brod
			Senior Vice President and CFO
	M&I ELECTRIC INDUSTRIES, INC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO
Date: November 13, 2017		By:	/s/ William B. Brod
			William B. Brod
			Senior Vice President and CFO
	SOUTH COAST ELECTRIC SYSTEMS, LLC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO
Date: November 13, 2017		By:	/s/ William B. Brod
			William B. Brod
			Senior Vice President and CFO

Exhibit 10.3

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE (COLLECTIVELY, THE “LAWS”). THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE APPLICABLE LAWS OR (II) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED DUE TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE APPLICABLE LAWS.

AMERICAN ELECTRIC TECHNOLOGIES, INC.

WARRANT TO PURCHASE COMMON STOCK

Warrant No. Number of Shares: 500,000

Date of Issuance: November 13, 2017

American Electric Technologies, Inc., a Florida corporation (the “Company”), hereby certifies that, for value received, HD Special-Situations III, LP, a Delaware limited partnership, and its permitted assigns, as the registered holder hereof (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant to Purchase Common Stock (the “Warrant”), at any time after the date of issuance shown above (the “Date of Issuance”), but not after 5:00 P.M. California time on the Expiration Date (as defined herein), Five Hundred Thousand (500,000) fully paid and nonassessable shares of Common Stock (as defined herein) of the Company (each a “Warrant Share” and collectively the “Warrant Shares”) at a purchase price (the “Warrant Exercise Price”) equal to $2.26 per share. Both the number of Warrant Shares purchasable hereunder and the Warrant Exercise Price are subject to adjustment as provided in Section 10 below.

Section 1. Definitions .

(a) The following terms used in this Warrant shall have the following meanings:

“ Common Stock ” means (i) the Company’s $0.001 par value common stock and (ii) any capital stock into which such common stock shall have been changed or any capital stock resulting from a reclassification of such common stock.

“ Expiration Date ” means the date which is five (5) years from the Date of Issuance or, if such date falls on a Saturday, Sunday or other day on which banks are required or authorized to be closed in the State of California (a “Holiday”), the next succeeding date that is not a Holiday.

“ Market Price ” means the average of the closing stock prices for the Common Stock for the ten trading days immediately prior to the date on which a Notice of Exercise is delivered to the Company, as reported on the trading market on which the Common Stock may then be quoted, if any such trading market may exist.

“ Note Purchase Agreement ” shall mean the Note Purchase Agreement dated March 23, 2017, by and among the Company, M&I Electric Industries, Inc., South Coast Electric Systems, LLC and HD Special-Situations III, LP.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ TMA ” shall mean the Transaction Modification Agreement dated concurrently herewith by and among the Company, M&I Electric Industries, Inc., South Coast Electric Systems, LLC and HD Special-Situations III, LP.

(b) Other definitional provisions:

(i) Except as otherwise specified herein, all references herein (A) to the Company shall be deemed to include the Company’s successors and (B) to any applicable law shall be deemed references to such applicable law as the same may be amended or supplemented from time to time.

(ii) When used in this Warrant, unless otherwise specified in a particular instance, the words “herein,” “hereof ,” and “hereunder,” and words of similar import, shall refer to this Warrant as a whole and not to any specific provision of this Warrant, and the word “Section” shall refer to Sections of this Warrant unless otherwise specified.

(iii) Whenever the co ntext so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa.

(iv) When used in this Warrant, “transfer” shall include any disposition of this Warrant or any Warrant Shares, or o f any interest in either thereof, which would constitute a sale thereof within the meaning of the Securities Act or applicable state securities laws.

(v)Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the No te Purchase Agreement and/or the TMA.

Section 2. Exercise of this Warrant.

(a) Subject to the terms and conditions hereof, this Warrant may be exercised by Holder, as a whole or in part (except that this Warrant shall not be exercisable as to a fractional share), at any time prior to 5:00 p.m. California time on the Expiration Date. The rights represented by this Warrant shall be exercised by Holder by (i) delivery of a written notice in the form attached hereto (a “Notice of Exercise”) of Holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares as to which the

Warran t is being exercised in immediately available funds (either by wire transfer or a certified or cashier’s check drawn on a United States bank) and (iii) the surrender of this Warrant, properly endorsed, at the principal office of the Company (or at such oth er agency or office of the Company as the Company may designate by notice to Holder). The Company shall pay any issuance or transfer taxes that are applicable to any exercise of this Warrant.

(b) In addition, at any time prior to 5:00 p.m. on the Expiration Date, and notwithstanding anything to the contrary contained in this Warrant, at such time as the Market Price per share of the Common Stock exceeds the Warrant Exercise Price, this Warrant may be exercised by presentation and surrender of this Warrant to the Company in a cashless exercise, including a written calculation of the number of Warrant Shares to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying the Warrant Exercise Price, Holder shall surrender this Warrant for, and the Company shall issue in respect thereof, the number of Warrant Shares determined by multiplying the number of Warrant Shares to which Holder would otherwise be entitled by a fraction, the numerator of which shall be determined by subtracting the Warrant Exercise Price from the then current Market Price per share of Common Stock, and the denominator of which shall be the then current Market Price per share of Common Stock.

(c) Any Warrant Shares shall be deemed to be issued to Holder, as the record owner of such Warrant Shares, as of the date on which this Warrant shall have been surrendered, the completed Notice of Exercise shall have been delivered, and payment (or notice of an election to effect a Cashless Exercise) shall have been made for such Warrant Shares as set forth above, irrespective of the date of delivery of such share certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are properly closed, such person shall be deemed to have become the holder of such Warrant Shares at the opening of business on the next succeeding date on which the stock transfer books are open. For each exercise of the rights represented by this Warrant in compliance with this Section 2, a certificate or certificates for the Warrant Shares so purchased, registered in the name of, or as directed by, Holder, shall be delivered to, or as directed by, Holder within five (5) business days after such rights shall have been so exercised.

(d) Unless this Warrant shall have expired or shall have been fully exercised, upon an exercise of this Warrant the Company shall issue a new Warrant identical in all respects to this Warrant except that it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise, less the number of Warrant Shares with respect to which this Warrant is exercised (or, in the case of a Cashless Exercise, the number of shares to which Holder would otherwise have been entitled).

(e) In the case of any dispute with respect to an exercise, the Company shall promptly issue such number of Warrant Shares as are not disputed in accordance with this Section. If such dispute only involves the number of Warrant Shares receivable by Holder under a Cashless Exercise, the Company shall submit the disputed calculations to an independent accounting firm reasonably acceptable to Holder within fifteen (15) business days of receipt of the Notice of Exercise. The accountant shall review the calculations and notify the Company and Holder of the

results no later than fifteen (15) business days from the date it receives the disputed calculations. The accountant’s

calculation shall be deemed conclusive absent manifest error. The Company shall then issue the appropriate number of shares of Common Stock in accordance with this Section.

Section 3. Covenants as to Common Stock . The Company covenants and agrees that all Warrant Shares which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company shall at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights then represented by this Warrant and that the par value of said shares will at all times be less than or equal to the applicable Warrant Exercise Price. The representations, warranties and covenants of the Company set forth in Sections 6 and 7 of the TMA are hereby incorporated into this Warrant by reference and such provisions shall survive the repayment of the Note and other amounts due under the Note Purchase Agreement and/or the TMA.

Section 4. Taxes . The Company shall not be required to pay any tax or taxes attributable to the initial issuance of the Warrant Shares or any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of Holder or any permitted transferee of this Warrant.

Section 5. Warrant Holder Not Deemed a Stockholder . No Holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issuance of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to Holder of the Warrant Shares which Holder is then entitled to receive upon the due exercise of this Warrant. Notwithstanding the foregoing, the Company shall provide Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the delivery thereof to the stockholders.

Section 6. No Limitation on Corporate Action . No provisions of this Warrant and no right or option granted or conferred hereunder shall in any way limit, affect or abridge the exercise by the Company of any of its corporate rights or powers to recapitalize, amend its Articles of Incorporation, reorganize, consolidate or merge with or into another corporation, transfer all or any part of its property or assets, or exercise any other of its corporate rights and powers.

Section 7. Representations of Holder . By the acceptance of this Warrant, Holder represents that (i) it is acquiring this Warrant and the Warrant Shares for its own account for investment only and not with a view towards, or in connection with, the public sale or distribution thereof and (ii) it is an “accredited investor” as such term is defined in Rule 501(a) of Regulation

D pr omulgated by the Securities and Exchange Commission under the Securities Act. Upon exercise of this Warrant, Holder shall, if requested by the Company, confirm the foregoing representations in writing, in a form satisfactory to the Company. If Holder can not make such representations because they would be factually incorrect, it shall be a condition to Holder's exercise of this Warrant that the Company

receive such other representations as the Company considers reasonably necessary to assure it that the issuance of the Warrant Shares shall not violate any federal or applicable state securities laws.

Section 8. Representations of the Company . The Company represents that it has the requisite power and authority to issue and sell this Warrant and perform it obligations under this Warrant in accordance with its terms. The Company’s execution, delivery and performance of this Warrant have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its stockholders, or any other individual or entity, is required. This Warrant (i) has been duly and validly authorized, executed and delivered by the Company and (ii) constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

Section 9. Restrictions on Transfer . Holder understands that (i) this Warrant and the Warrant Shares have not been and are not being registered under the Securities Act or any state securities laws (other than as described in the Registration Rights Agreement entered into concurrently herewith (the “Registration Rights Agreement”)), and may not be offered for sale, sold, assigned or transferred except as provided in the TMA and the Registration Rights Agreement, and (ii) neither the Company nor any other individual or entity is under any obligation to register such securities (other than as described in the Registration Rights Agreement) under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

Section 10. Adjustments .

(a) Reclassification, Reorganization and Certain Other Transactions . In case of any reclassification, capital reorganization or other change of outstanding shares of the Common Stock, or in case of any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock), the Company shall cause effective provision to be made so that Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of this Warrant immediately prior to such reclassification, capital reorganization or other change, consolidation or merger. The foregoing provisions shall similarly apply to successive reclassifications, capital reorganizations and other changes of outstanding shares of Common Stock and to successive consolidations or mergers. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Company’s Board of Directors acting in good faith.

(b) Dividends and Stock Splits . If and whenever the Company shall effect a stock divide nd, a stock split, a stock combination, or a reverse stock split of the Common Stock, the number of Warrant Shares purchasable hereunder and the Warrant Exercise Price shall be proportionately adjusted in the manner determined by the Company's Board of Dir ectors acting in good faith. The number of shares, as so adjusted, shall be rounded to the nearest whole number and the Warrant Exercise Price shall be rounded to the nearest tenth of a cent.

Section 11. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant is lost, stolen or destroyed, the Company shall, on receipt of an indemnification undertaking reasonably satisfactory to the Company, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen or destroyed. In the event Holder asserts such loss, theft or destruction of this Warrant, the Company may require Holder to post a bond issued by a surety reasonably satisfactory to the Company with respect to the issuance of such new Warrant.

Section 12. Notices. Any and all communications required or permitted to be provided hereunder shall be in writing and shall be given and deemed effective as provided in the Note Purchase Agreement. The addresses for such communications shall be as provided in the Note Purchase Agreement or such other addresses as may most recently have been designated in writing.

Section 13. Miscellaneous. This Warrant and any provision hereof may be changed, waived, discharged, or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be governed by and interpreted under the laws of the State of Florida, without regard to the principles of conflict of laws. Headings are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. This Warrant shall be binding upon the Company and its successors and shall inure to the benefit of Holder and its successors and permitted assigns.

Section 14. Waiver of Jury Trial . THE PARTIES EACH WAIVE, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS WARRANT.

Section 15. Effect of Expiration Date . This Warrant, in all events, shall be wholly void and of no effect after 5:00 p.m. California time on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Sections 9 and 14 shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its duly authorized officers as of the Date of Issuance.

The Company:

	AMERICAN ELECTRIC TECHNOLOGIES, INC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber

NOTICE OF EXERCISE

AMERICAN ELECTRIC TECHNOLOGIES, INC.

The undersigned hereby exercises the right to purchase the number of Warrant Shares covered by the Warrant attached hereto as specified below according to the conditions thereof and herewith makes payment of $ (unless effected by a Cashless Exercise in accordance with the terms of the Warrant), which constitutes the aggregate Warrant Exercise Price of such Warrant Shares pursuant to the terms and conditions of the Warrant.

(i) The undersigned agrees not to offer, sell, transfer or otherwise dispose of any Common Stock obtained upon exercise of the Warrant except under circumstances that will not result in a violation of the 1933 Act or applicable state securities laws.

(ii) The undersigned requests that the stock certificates for the Warrant Shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to the terms of the Warrant in the name of Holder and delivered to the undersigned at the address set forth below.

Dated: , _____.

____________________________ (Name of Holder)

By: ___________________________

Title:

Address: ___________________________________

___________________________________

Number of Warrant Shares being purchased for cash: ________________________

Number of Warrant Shares being purchased by Cashless Exercise: ________________________

Exhibit 10.4

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “Agreement”) is made and entered into on November 13, 2017, by and between American Electric Technologies, Inc., a Florida corporation (the “Company”), and HD Special-Situations III, LP, a Delaware limited Partnership (the “Lender”).

Recitals

A. Pursuant to a Transaction Modification Agreement entered into by and among the Company, M&I Electric Industries, Inc., South Coast Electric Systems, LLC and the Lender concurrently herewith (the “TMA”), the Company is iss uing to the Lender a Warrant to Purchase Common Stock exercisable for certain Warrant Shares.

B. In connection with the issuance of the Warrant, the Company has agreed to grant to the Lender certain registration rights with respect to the Warrant Sha res on the terms set forth herein.

C. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the TMA and/or the Note Purchase Agreement dated March 23, 2017, by and among the Company, M&I Electric Industries, Inc., S outh Coast Electric Systems, LLC and HD Special-Situations III, LP (the “NPA”).

Agreements

NOW, THEREFORE, in consideration of their respective promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Lender hereby agree as follows:

1. Definitions . As used in this Agreement, the following terms shall have the specified meanings:

“ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, “control,” when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing.

“ Business Day ” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of California are authorized or required by law or other government actions to close.

“ Commission ” means the Securities and Exchange Commission.

“ Common Stock ” means the Company’s $0.001 par value common stock.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Holder ” or “ Holders ” means the holder or holders, as the case may be, from time-to-time of the Registrable Securities.

“ Person ” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“ Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“ Prospectus ” means the prospectus included in a registration statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such registration statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus.

“ Registrable Securities ” means (i) the Warrant Shares, (ii) any shares issuable upon any stock split, stock dividend, recapitalization or similar event with respect to the Warrant Shares and (iii) any other dividend or other distribution with respect to, conversion or exchange of, or in replacement of, the Warrant Shares.

“ Rule 144 ” means Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“ Rule 158 ” means Rule 158 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Warrant Shares ” means the shares of Common Stock issuable upon exercise of the

Warrant.

2. Registration .

(a) Piggy-Back Registration .

(i) If at any time when there is not already an effective registration statement covering the Registrable Securities, the Company shall decide (but without any obligation to do so) to prepare and file with the Commission a registration statement relating to an offering for its own account of any of its equity securities or the account of other holders of any of its equity securities, other than on Form S-4 or Form S-8 (or their then equivalents relating to equity securities to be issued solely in connection with the acquisition of an entity or business, or equity securities issuable in connection with stock option or other employee benefit plans or a registration in which the only stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered, or any registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Company shall send to each Holder written notice of such decision. If, within fifteen days after receipt of such notice, a Holder does not request in writing to the Company that some or all of such Holder’s Registrable Securities be removed from such registration statement, then the Company shall thereafter use its reasonable best efforts to cause all Registrable Securities which are held by each Holder to be included in such registration on the same terms and conditions as the securities otherwise being sold in such registration, subject to the Company’s right to exclude a Holder as set forth below; provided, however, that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each selling Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay expenses in accordance with Section 5 hereof) and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities being registered pursuant to this Section 2(a) for the same period as the delay in registering such other securities.

(ii) In the case of an underwritten public offering, if the man aging underwriter(s) should reasonably object to the inclusion of the Registrable Securities in such registration statement, then if the Company, after consultation with the managing underwriter(s), should reasonably determine that the inclusion of the Registrable Securities would materially adversely affect the offering contemplated in such registration statement, and based on such determination recommends inclusion in such registration statement of fewer or none of the Registrable Securities of a Holder, then (A) if the Company after consultation with the underwriter(s) recommends the inclusion of fewer Registrable Securities, the number of Registrable Securities of the Holders included in such registration statement shall be reduced pro-rata among such Holders (based upon the number of Registrable Securities requested to be included in the registration), or (B) if the Company after consultation with the underwriter(s) recommends the inclusion of none of the Registrable Securities, none of the Registrable

S ecurities of any Holder shall be included in such registration statement; provided, however, that if securities are being offered for the account of other Persons as well as the Company, any reduction in the offering of Registrable Securities by the managi ng underwriter(s) shall occur only after the securities being offered for the account of other Persons has been reduced

to zero; and further provided, however, that in the event of a conflict of the foregoing provisions of this paragraph with the contractual registration rights of other Persons in effect prior to the date hereof (the “Prior Registration Rights”) the Prior Registration Rights shall govern the outcome of such conflict.

(b) Right to Terminate Piggy-Back Registration . The Company shall have the right to terminate or withdraw any registration initiated by it under Section 2(a) above prior to or following the effectiveness of such registration, whether or not any Holder has Registrable Securities included in such registration.

(i) Subject to Section 2(d) below, a Holder may, at any time, request in writing that the Company prepare a registration statement under the Securities Act covering all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415. The Company shall prepare such registration statement and file it with the Commission as expeditiously as reasonably possible after its receipt of such request and shall use commercially reasonable efforts to cause the registration statement to be declared effective under the Securities Act as expeditiously as reasonably possible after the filing thereof and, subject to Section 2(d) below, to keep the registration statement continuously effective under the Securities Act until the earlier of (i) the date when all Registrable Securities covered by the registration statement have been sold or (ii) two years after the date the registration statement was declared effective by the Commission (the “Effectiveness Period”). If at any time during the Effectiveness Period (i) the maximum number of shares of Common Stock issuable upon exercise of the Warrant exceeds (A) the number of shares of Common Stock initially registered in respect of the Warrant minus (B) the number of shares of Common Stock, if any, already sold pursuant to the registration statement and (ii) such excess exists for a period of more than ten Business Days in any 30-day period, the Company shall be required to file an amendment to the registration statement (or an additional registration statement) with respect to such excess shares within ten Business Days after such conditions have been met (except where the Company’s audited financial statements are stale, in which case within 100 days after such conditions have been met), and the Company shall thereafter use commercially reasonable efforts to cause such amendment or additional registration statement to be declared effective by the Commission as soon as possible.

(ii) The rights granted to the Holders by this paragraph may be exercised as to only one registration statement.

(d) Delay in Filing, Effectiveness or Use . Anything in this Agreement to the contrary notwithstanding, if (i) there is material non-public information regarding the Company which the Company’s Board of Directors (the “Board”) reasonably determines not to be in the Company’s best interest to disclose and which the Company is not otherwise required to disclose or (ii) there is a significant business opportunity (including, but not limited to, the acquisition or

disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction, available to the Company which the Board reasonably determines not to be in the Company’s be st interest to disclose and which the Company would be required to disclose in the registration statement, then, upon written notice to each Holder, the Company may postpone or

suspend the filing, effectiveness or use of a registration statement for a period not to exceed 30 consecutive days; provided, however, that the Company may not postpone or suspend its obligations under Section 2(c) for more than 60 days in the aggregate during any twelve-month period.

(e) “Market Stand-Off” Agreement . Each Holder hereby agrees that, if requested by the Company or the representative of the underwriters of Registrable Securities of the Company, such Holder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Registrable Securities of the Company held by such Holder (other than those included for sale in the registration or acquired in the Company’s first firm commitment underwritten public offering of its Common Stock registered and declared effective under the Securities Act or in the open market thereafter) for a period specified by the representative of the underwriters of equity securities of the Company not to exceed 180 days (or such longer period as the underwriters or the Company shall request in order to facilitate compliance with NASD Rule 2711 or NYSE Member Rule 472 or any successor or similar rule or regulation) following the effective date of a registration statement of the Company filed under the Securities Act; provided that the same lock-up is agreed to by all directors and officers of the Company and shareholders individually owning more than 5% of the Company’s outstanding Common Stock purchased from the Company. Any discretionary waiver or termination of the restrictions of such agreements by the Company or representatives of the underwriters shall apply to the Holders, pro rata, based on their percentage equity ownership in the Company.

(f) Exemption From Registration Requirements . The foregoing provisions of this Section 2 notwithstanding, the Company shall not be required to register any Registrable Securities pursuant to this Section 2 if (i) such Registrable Securities are eligible for sale pursuant to Rule 144 and (ii) upon presentation of the appropriate legal opinion and other documentation typically required for the sale of restricted securities under Rule 144, the Company acts promptly in allowing (or causing its stock transfer agent to allow) the sale of such Registrable Securities.

3. Registration Procedures. If and whenever the Company effects the registration of any Registrable Securities, the Company shall:

(a) Initial Filing . Not less than five Business Days prior to the filing of the registration statement or any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated therein by reference), (i) furnish to each selling Holder copies of all such documents proposed to be filed, which documents (other than those incorporated by reference) will be subject to the review of each such selling Holder and (ii) at the request of a selling Holder, and subject to the execution of a confidentiality agreement in form and substance reasonably satisfactory to the Company, cause the Company’s officers, directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of counsel to such selling Holder, to conduct a

rea sonable investigation within the meaning of the Securities Act.

(b) Related Matters . Notify each Holder of Registrable Securities to be sold and any counsel therefor as promptly as possible (and, in the case of clause (i)(A) below, not less than five Business Days prior to such filing) (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a registration statement is proposed to be filed, (B) when the Commission

notifies the Company whether there will be a “review” of such registration statement and whenever the Commission comments in writing on such registration statement and (C) with respect to a registration statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a registration statement or Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a registration statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose and (v) of the occurrence of any event that makes any statement made in a registration statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a registration statement, Prospectus or other documents so that, in the case of such registration statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(c) Incorporation of Certain Matters . If requested by the Holders of a majority of the Registrable Securities, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to a registration statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated therein.

(d) Copies . To the extent requested by any Holder, provide to each Holder and any counsel therefor, without charge, at least one conformed copy of each registration statement and each amendment thereto (including financial statements and schedules, documents incorporated or deemed to be incorporated therein by reference, and all exhibits), such documents to be provided promptly after their filing with the Commission.

(e) Delivery . Promptly deliver to each Holder and any counsel therefor, without charge, as many copies of the Prospectus or Prospectuses and each amendment or supplement thereto as they may reasonably request; and the Company hereby consents to the use of each such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offer and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

(f) Blue Sky Matters . (A) Prior to any public offering of the Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the selling Holders

and any counsel therefor in connection with the registration or qualification (or exemption from such registration or qualification) of such Re gistrable Securities for offer and sale under the securities laws (the “Blue Sky laws”) of such jurisdictions within the United States as any Holder reasonably requests in writing and (B) perform or do any and all other acts or things necessary or advisab le to enable the disposition in such jurisdictions of those Registrable Securities covered by a registration statement; provided, however, that the Company shall not be required to qualify generally to do

business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject.

(g) Preparation of Certificates . Cooperate with each Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to a registration statement, which certificates shall be free of all restrictive legends, and cause such certificates to be in such denominations and registered in such names as each Holder may request at least two Business Days prior to any sale of Registrable Securities.

(h) Misrepresentation . Upon the occurrence of any event contemplated by Section 3(b)(v), as promptly as possible, prepare a supplement or amendment, including a post-effective amendment, to the registration statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither such registration statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(i) Listing and Quotation . Use its commercially reasonable efforts to cause all Registrable Securities offered by a registration statement to be quoted on any securities exchange, quotation system or other market on which similar securities issued by the Company are then listed or quoted.

(j) Rule 158 . Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any twelve-month period (or 90 days after the end of any twelve-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the registration statement.

4.	Additional Matters .

(a) Holder Information . In connection with a registration statement, each selling Holder shall be required to furnish to the Company information regarding such Holder and the distribution of such Registrable Securities as is required by law to be disclosed in the registration statement, and the Company may exclude from such registration the Registrable Securities of any such Holder who fails to furnish such information within a reasonable time prior to the filing of such registration statement or any supplemented Prospectus and/or amended registration statement.

(b) Reference to Holder . If a registration statement refers to any Holder by name as the holder of any securities of the Company, then such Holder shall have the right to require the deletion of the reference to such Holder in any amendment or supplement to the registration statement that is filed subsequent to the time that such reference ceases to be required by the Securities Act.

(c) Holder Covenants . Each Holder covenants and agrees that (i) it will not sell any Registrable Securities under a registration statement until it has received copies of the Prospectus as then amended or supplemented as contemplated in Section 3(g) and notice from the Company that such registration statement and any post-effective amendments thereto have become effective as contemplated by Section 3(c) and (ii) it and its officers, directors and Affiliates, if any, will comply with the prospectus delivery requirements of the Securities Act as applicable to them in connection with the sale of Registrable Securities pursuant to such registration statement.

(d) Discontinuance . Each Holder agrees by its acquisition of Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in clauses (ii) through (v) of Section 3(b) or suspension of the use of a registration statement with respect to any of its Registrable Securities, such Holder will immediately discontinue disposition of such Registrable Securities under the registration statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended registration statement contemplated by Section 3(h), or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or registration statement.

5. Registration Expenses All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company upon receipt of a detailed invoice, whether or not a registration statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to a registration statement; provided, however, that all underwriting discounts and selling commissions applicable to the Registrable Securities shall be borne by the Holders selling such Registrable Securities, in proportion to the number of Registrable Securities sold by each such Holder. Such fees and expenses shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made by or with each securities exchange, quotation system or other market on which Registrable Securities are required hereby to be listed or quoted, (B) with respect to filings required to be made with the Commission and (C) in compliance with applicable Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel for each Holder in connection with Blue Sky law qualifications of the Registrable Securities and any determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the Holders of a majority of Registrable Securities may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for the Registrable Securities and of printing Prospectuses, if the printing of Prospectuses is requested by the Holders of a majority of the Registrable Securities included in the registration statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and fees and disbursements, not to exceed $5,000, of a single counsel for the Holders, (v) Securities Act liability insurance, if the Company so desires such insurance and (vi) fees and expenses of all other Persons retained by the Company in

connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company’s independent public accountants (including any costs associated with the delivery by independent publ ic accountants of a comfort letter or comfort letters). In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limi tation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, and the fees and

expenses incurred in connection with the listing or quoting of the Registrable Securities on any securities exchange, quotation system or other market on which Registrable Securities are required to be listed or quoted. If the Holders are required to pay any registration expenses, such expenses shall be borne by the holders of securities (including Registrable Securities) requesting such registration in proportion to the number of shares for which registration was requested.

6. Indemnification .

(a) Indemnification by the Company . To the extent permitted by law, the Company shall, notwithstanding any termination of this Agreement, defend, indemnify and hold harmless each Holder, each officer, director, manager, owner, agent and employee of each Holder, each Person who controls any Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and each officer, director, manager, owner, agent and employee of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, reasonable costs (including, without limitation, costs of investigation, preparation and reasonable attorneys’ fees actually incurred) and expenses (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in a registration statement or any Prospectus or any amendment or supplement thereto, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder which was furnished in writing to the Company by such Holder expressly for use therein, (ii) such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder for use in the registration statement or such Prospectus or in any amendment or supplement thereto or (iii) the use by such Holder of an outdated or defective prospectus (without any Company provided supplement correcting such outdated or defective prospectus) after the Company has notified such Holder in writing that such prospectus is suspended from use, outdated or defective. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an Indemnified Party and shall survive the transfer of Registrable Securities by a Holder.

(b) Indemnification by Holders . To the extent permitted by law, each Holder shall, severally and not jointly, defend, indemnify and hold harmless the Company, the Company’s directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent

permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon any untrue statement of a material fact contained in a registration statement, any Prospectus or any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated the rein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that (i) such untrue statement or om ission

is contained in or omitted from any information so furnished in writing by such Holder to the Company specifically for inclusion in such registration statement or such Prospectus or an amendment or supplement thereto, (ii) such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in such registration statement or such Prospectus or any amendment or supplement thereto or (iii) the use by such Holder of an outdated or defective prospectus (without any Company provided supplement correcting such outdated or defective prospectus) after the Company has notified such Holder in writing that such prospectus is suspended from use, outdated or defective. Notwithstanding anything to the contrary contained herein, a Holder shall be liable under this Section 6(b) for only that amount which does not exceed the net proceeds to such Holder as a result of the sale of Registrable Securities pursuant to such registration statement.

(c) Conduct of Indemnification Proceedings . If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses, (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding following receipt of notice and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding or (iii) the named parties to any such Proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent both the Indemnified Party and the Indemnifying Party (in which case, if the Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). If the Indemnifying Party is not entitled to, or elects not to, assume the defense of a claim, it will not be obligated to pay the fees and expenses of more than one counsel (and any necessary local counsel) with respect to such claim. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior

written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement does not include any admission of liability or wrongdoing and does include an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Ind emnified Party, as incurred, within 30 Business Days of written notice thereof

to the Indemnifying Party (regardless of whether it is ultimately determined that the Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require the Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that the Indemnified Party is not entitled to indemnification hereunder).

(d) Contribution . If a claim for indemnification under Section 6(a) or 6(b) is unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying, Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 6(c), any reasonable attorneys’ or other reasonable fees or expenses incurred in connection with any Proceeding to the extent there would have been indemnification for such fees or expenses if the indemnification provided in this Section was available in accordance with its terms. Notwithstanding anything to the contrary contained herein, a Holder shall be liable or required to contribute under this Section 6(d) for only such amount as does not exceed the net proceeds to such Holder as a result of the sale of Registrable Securities pursuant to the registration statement. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in this paragraph. No Person guilty of fraudulent misrepresentation (within the meaning provided in the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The indemnity and contribution agreements contained in this Section are in addition to any liability that an Indemnifying Party may have to an Indemnified Party.

7. Rule 144 . For so long as any Holder owns any Registrable Securities, the Company agrees to timely file (or obtain extensions in respect thereof and file within the applicable extension period) all reports required to be filed by the Company pursuant to Section 13 or 15(d) of the Exchange Act. In addition, as long as any Holder owns any Warrant Shares, if the Company is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act,

it will prepare and furnish to each Holder and make publicly available in a timely fashion the information specified in Rule 144. The Company further agrees that it will take such further action as any Holder may reasonably request to the extent required from time-to-time to enable each Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemption provided by Rule 144. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with the foregoing requirements.

8. Miscellaneous .

(a) Remedies . In the event of a breach by the Company or any Holder of any of their obligations under this Agreement, each non-breaching party, in addition to being entitled to exercise all rights granted by law or under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. The Company and the Lender also acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

(b) No Inconsistent Agreements . Neither the Company nor any of its Affiliates has, as of the date hereof, entered into and currently in effect, nor shall the Company or any of its Affiliates on or after the date of this Agreement enter into, any agreement with respect to its securities that is inconsistent with the rights granted to each Holder in this Agreement or otherwise conflicts with the provisions hereof, except for registration rights provisions disclosed in a Schedule to the NPA. Except for registration rights provisions disclosed in a Schedule to the NPA, neither the Company nor any of its Affiliates has previously entered into any agreement currently in effect granting any registration rights with respect to any of its securities to any Person. Without limiting the generality of the foregoing, without the written consent of the Lender and the Holders of a majority of the then outstanding Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of each Holder and are not otherwise in conflict with the provisions of this Agreement. The foregoing notwithstanding, this Section 8(b) shall not prohibit the Company from entering into any agreements concerning the registration of securities on Form S-8 or Form S-4.

(c) Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, shall not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof shall not be given, unless the same shall be in writing and signed by the Company and the applicable Holder. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates generally to the rights of the Holders may be given by Holders of at least a majority of the

Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, waived, modified, or supplemented except in accorda nce with the provisions of the immediately preceding sentence.

(d) Notices . Any and all communications required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective as provided in the NPA. The addresses for such communications shall be as provided in the NPA or such other address or addresses as a party may most recently have designated in writing to the other party hereto.

(e) Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. The Company may not assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the Holders. The Lender may assign its rights hereunder in the manner and to the Persons as permitted herein and in the NPA.

(f) Assignment of Registration Rights . The rights of each Holder hereunder, including the right to have the Company register for resale Registrable Securities in accordance with the terms of this Agreement, shall be automatically assignable by each Holder to any transferee of such Holder of all or a portion of the Warrant and/or the Registrable Securities if: (i) the Holder agrees in writing with the transferee to assign such rights and a copy of such agreement is furnished to the Company, (ii) the Company is furnished with written notice of (A) the name and address of such transferee or assignee and (B) the securities with respect to which such registration rights are being transferred or assigned, (iii) following such transfer or assignment the further disposition of such securities by the transferee or assignees is restricted under the Securities Act and applicable state securities laws, (iv) the transferee agrees in writing with the Company to be bound by all of the provisions of this Agreement and (v) such transfer shall have been made in accordance with the applicable requirements of the NPA and applicable federal and state securities laws. The rights to assignment shall apply to each Holder and to their subsequent successors and assigns.

(g) Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) such document with the same force and effect as if such facsimile signature were the original thereof.

(h) Governing Law . This Agreement shall be governed by and interpreted in accordance with the laws of the State of California without regard to the principles of conflict of laws. The parties hereto agree that a final, non-appealable judgment in any suit or proceeding with respect to this Agreement shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner. The parties also agree that the exclusive venue for resolution of any case or controversy arising out of or in connection with this Agreement shall be San Francisco County, California, and each party submits to the jurisdiction of any state or federal court in San Francisco County, California, and waives any objection that any action brought in such court was brought in an inconvenient forum.

(i) Cumulative Remedies . No provision of this Agreement providing for any specific remedy to a party shall be construed to limit such party to the specific remedy described, and that

any other remedy that would otherwise be available to such party at law or in equity shall also be available. The parties also intend that the rights and remedies hereunder be cumulat ive, so that exercise of any one or more of such rights or remedies shall not preclude the later or concurrent exercise of any other rights or remedies.

(j) Severability . If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

(k) Headings; Interpretation . The headings of this Agreement are for convenience of reference and shall not form a part of, or affect the interpretation of, this Agreement. As used herein, (i) the neuter gender includes the masculine or feminine and the singular number includes the plural, and vice versa, as the context may require and (ii) unless the context clearly requires otherwise, the words “herein,” “hereunder” and “hereby,” shall refer to this entire Agreement and not only to the Section or paragraph in which such word appears. If any date specified herein falls upon a Saturday, Sunday or public or legal holidays, the date shall be construed to mean the next Business Day following such Saturday, Sunday or public or legal holiday. Each party intends that this Agreement be deemed and construed to have been jointly prepared by the parties. As a result, the parties agree that any uncertainty or ambiguity existing herein shall not be interpreted against either of them.

(l) No Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

IN WITNESS WHEREOF, the Lender and the Company have caused this Agreement to be duly executed by their respective authorized persons on the date first written above.

The Company:

	AMERICAN ELECTRIC TECHNOLOGIES, INC.

Date: November 13, 2017		By:	/s/ Charles M. Dauber
			Charles M. Dauber
			President and CEO
Date: November 13, 2017		By:	/s/ William B. Brod
			William B. Brod
			Senior Vice President and CFO

The Lender:

Managing Member

Exhibit 31.1

CERTIFICATIONS

I, Charles M. Dauber, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Electric Technologies, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 14, 2017

By:		/s/ Charles M. Dauber
		Charles M. Dauber Principal Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, William B. Brod, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of American Electric Technologies, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 14, 2017

By:		/s/ William B. Brod
		William B. Brod Principal Financial Officer

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles M. Dauber, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of American Electric Technologies, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of American Electric Technologies, Inc.

November 14, 2017

By:		/s/ Charles M. Dauber
		Charles M. Dauber Principal Executive Officer

I, William B. Brod, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of American Electric Technologies, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of American Electric Technologies, Inc.

November 14, 2017

By:

/s/ William B. Brod

William B. Brod

Principal Financial Officer