Risk Factors Dashboard
Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.
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ITEM 1A. RISK FACTORS
cybersecurity incidents, we employ a multi-layered approach that has been integrated into our overall risk management systems and processes which includes, among other things: conducting proactive privacy and cybersecurity reviews of systems and applications, auditing applicable data policies, conducting employee training, monitoring emerging laws and regulations related to data protection and information security and continuously improving controls and implementing appropriate changes. During this process, the following factors, among others, are considered: likelihood and severity of risk, impact on the Company and others if a risk materializes, feasibility and cost of controls, and impact of controls on operations and others. Specific controls that are used to some extent include endpoint threat detection and response (EDR), identity and access management (IAM), privileged access management (PAM), logging and monitoring involving the use of security information and event management (SIEM), multi-factor authentication (MFA), firewalls and intrusion detection and prevention, and vulnerability and patch management.
The Global Director of Information Technology (GDIT) is the management position with primary responsibility for the development, operation, and maintenance of our information security program for the Business Services segment. The GDIT has over 25 years of experience as a security professional, and has completed the Prince 2 risk management certification at the practitioner level. Responsibilities of this role include management of third-party vendors, ensuring data interactions with outside parties, adhering to IT security best practices, and ensuring that all devices within the Business Services segment IT infrastructure are appropriately secured and managed. Responsibilities also encompass communication to senior management and future IT strategy and security planning for all segments, which may include outsourcing of certain responsibilities.
The Company’s compliance committee and counsel are informed of all security incidents and are tasked with ensuring appropriate remediation activities are implemented. Results of audits and material security incidents are presented to the Board of Directors on a quarterly basis.
The following risk factors and other information included in this Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
Risks Related to Our Business and Industry
Our business is sensitive to global economic conditions and fluctuations, including inflation, interest rates, and geopolitical uncertainty, which may reduce demand for our services and adversely affect our costs, profitability, and liquidity.
Our operations and results of operations are affected by global economic conditions in the markets in which we operate. Clients’ demand for our Building Solutions, Business Services, and Energy Services may fluctuate widely in response to changes in economic conditions, including slower employment growth, reductions in hiring, reduced labor demand, reduced demand for construction products and materials, reduced demand for oil producing equipment, and overall economic uncertainty. In particular, demand for our RPO and contracting services is closely tied to labor market conditions and workforce expansion by our clients. Periods of slower employment growth, hiring freezes, or workforce reductions may directly reduce demand for these services.
Geopolitical events, including political divisions, the war in Ukraine, the war in Iran, other conflicts in the Middle East, U.S./China trade tensions, and the use or threatened use of tariffs, have contributed to economic, market, political, and regulatory uncertainty in certain of our markets. Global concerns such as pandemics, wars, or other sources of instability may
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also result in social, economic, and labor disruption, negatively impacting customer demand, supply chains, labor markets, and financial markets.
In recent periods, global economic conditions have included elevated inflation, rising or sustained high interest rates, currency volatility, and increased economic uncertainty. Inflationary pressures have increased our costs for labor, raw materials, transportation, and other inputs, and have also contributed to wage inflation and increased operating costs across our business. In an inflationary environment, we may be unable to increase prices at a rate sufficient to offset these higher costs, which could adversely affect our margins, profitability, and cash flows. Higher interest rates may also increase our borrowing costs, reduce client spending, and limit access to capital markets, which could further reduce demand for our products and services.
Because certain of our operating costs are fixed or semi-fixed in the short term, adverse economic conditions may have a disproportionate impact on our financial condition and results of operations. We cannot predict the timing, duration, or severity of adverse economic conditions, and any sustained deterioration in global economic conditions or labor markets could materially adversely affect our business, financial condition, results of operations, and cash flows.
Our operating results may be adversely affected by changes in the cost and availability of commodities, materials, and equipment, including as a result of trade tariffs, supply‑chain disruptions, and market conditions, which could increase costs and reduce demand for our products and services.
Our operating results, particularly within our Building Solutions and Energy Services segments, depend on the cost and availability of raw materials, commodities, and equipment used in the manufacture, sale, or leasing of our products. Many of the commodities and materials we use are imported or exported, and their prices and availability may fluctuate significantly due to changes in global supply and demand, transportation costs, energy prices, and conditions in the financial and housing markets.
Trade policies, including the use or threatened use of tariffs, import duties, quotas, or other trade restrictions, may disrupt global trade and supply chains. To the extent the commodities and materials we use become subject to tariffs or similar measures, our procurement costs could increase and market availability could be constrained. We may be unable to recover such increased costs from customers without adversely affecting demand, which could materially adversely affect our margins, results of operations, financial condition, and cash flows. In addition, disruptions in global trade may negatively impact our customers, which could reduce demand for our products and services.
Certain of our operating companies rely heavily on specific materials, including dimensional lumber and wood sheet products such as plywood and oriented strand board, the prices of which are subject to significant market volatility. Limited availability of raw materials or manufactured products that we lease or sell, whether due to supply‑chain disruptions, market conditions, or regulatory factors, may require us to seek alternative suppliers at higher costs or may constrain our production and delivery capabilities.
If we are unable to pass increased material, commodity, transportation, or equipment costs through to customers, or if reduced availability of materials limits our ability to meet customer demand, our revenues, earnings, and cash flows could be adversely affected. These risks may be exacerbated during periods of economic uncertainty or volatility in global trade and commodity markets.
Our business depends on uninterrupted service to clients.
Our operations depend on our ability to protect our facilities, inventory, materials, machinery, transportation, computer and telecommunication equipment, and software systems against damage or interruption from fire, power loss, cyber-attacks, sabotage, telecommunications interruption, weather conditions, natural disasters, and other similar events. Additionally, severe weather can cause our employees or contractors to miss work and interrupt delivery of our service and products, potentially resulting in a loss of revenue. While interruptions of these types that have occurred in the past have not caused material disruption, it is not possible to predict the type, severity, or frequency of interruptions in the future or their impact on our business.
Our Business Services revenue can vary because our clients often run bid processes for RPO functions and can terminate their relationship with us at any time with limited or no penalty.
Our RPO business is significantly affected by our clients’ hiring needs and their views of their future prospects. Clients may, on very short notice, terminate, reduce, or postpone their recruiting assignments with us and, therefore, affect
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demand for our services. This could have a material adverse effect on our business, financial condition, and results of operations. These fluctuations could have a material adverse effect on our financial position and results of operations.
In addition, many of our larger clients run regular bid processes for their RPO requirements, requiring us to compete for new opportunities with existing clients. Even if our client relationships remain strong, we are repeatedly subject to open bid processes for new business or prior to the renewal of existing business. If we fail to meet the criteria set by our clients for new opportunities or for the renewal of existing services that we provide, or if our competitors are able to offer comparable service levels at reduced cost, our business may suffer.
We are subject to particular risks associated with real estate ownership, which could result in unanticipated losses or expenses.
Our business is subject to many risks that are associated with the ownership of real estate. Risks that are associated with real estate acquisition and ownership include, without limitation, the following: general liability, property and casualty losses, some of which may be uninsured; the inability to purchase or sell our assets rapidly due to the illiquid nature of real estate and the real estate market; leases which are not renewed or are renewed at lower rental amounts at expiration; the default by a tenant or guarantor under any lease; costs relating to maintenance and repair of our facilities and the need to make expenditures due to changes in governmental regulations, such as the Americans with Disabilities Act or remediation of unknown environmental hazards; and acts of God and acts of terrorism affecting our properties. Other risks that are associated with real estate acquisition and ownership include, without limitation, the following:•general liability, property and casualty losses, some of which may be uninsured;•the inability to purchase or sell our assets rapidly due to the illiquid nature of real estate and the real estate market;•leases which are not renewed or are renewed at lower rental amounts at expiration;•the default by a tenant or guarantor under any lease;•costs relating to maintenance and repair of our facilities and the need to make expenditures due to changes in governmental regulations, such as the Americans with Disabilities Act or remediation of unknown environmental hazards; and•acts of God and acts of terrorism affecting our properties.
We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals.
We have been engaged in strategic initiatives to maximize long-term stockholder value, to improve our cost structure and efficiency, and to increase our selling efforts and the development of new business, as well as to consider potential additional businesses that we believe could be beneficial and create value for our stockholders. We cannot provide any assurance that we will be able to successfully execute these or other strategic initiatives or that we will be able to execute these initiatives on our expected timetable. We may not be successful in refocusing our core business and obtaining operational efficiencies or replacing revenues lost as a result of these strategic initiatives.
Our quarterly and annual financial results and revenue are difficult to predict and are likely to fluctuate from period to period; no single quarter is predictive of future periods’ results.
We have historically experienced seasonality in all of our businesses and downturns based on the changing U.S. economy.
The revenues from our Business Services segment fluctuate quarter to quarter primarily due to the vacation periods during the first quarter in the Asia Pacific region and the third quarter in the Americas and EMEA regions. Demand for our services is typically lower during traditional vacation periods when clients and candidates are on vacation.
The revenues from our Building Solutions segment fluctuate quarter to quarter primarily due to weather conditions which in the 4th and 1st quarter may effect demand but also our ability to promptly and efficiently transport products.
The revenues from our Energy Services segment may fluctuate primarily due to sensitivity in the drilling industry where changes in economic conditions, especially those that effect oil prices, and the availability of financing may affect the demand for our products.
Adverse changes in any of these conditions could decrease demand and pricing for new projects in the areas in which we operate or result in customer cancellations of pending contracts, and decrease demand for future contracts, which could result in a decrease in our revenues in particular periods.
We cannot predict with certainty the overall trajectory of the industries we work in or the duration of trends due to changes in conditions that are beyond our control. These conditions include, but are not limited to rising interest rates; economic recession or downturn; changes in demographics and population migration that impair the demand for new housing; changes in oil prices that effect demand for drilling equipment and transportation costs across all our businesses; labor issues such as shortages and rising costs of labor; and; tax law changes.
Our growth strategy includes acquisitions and dispositions, but we may not realize the anticipated benefits of these transactions, which could adversely affect our business, financial condition, and results of operations.
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As part of our growth strategy, we may pursue acquisitions of businesses that we believe can complement or expand our current operations, and we may also sell businesses from time to time. Acquisition and disposition activities involve numerous risks and uncertainties. We may incur unforeseen liabilities, costs, or asset impairments in connection with acquired or divested businesses, and with respect to any businesses we sell, we would no longer benefit from the cash flows they generated. There can be no assurance that proceeds from dispositions, if any, will be reinvested in a manner that generates anticipated returns. There can be no assurance that our responsive actions will insulate us from liability associated with any detected compliance concerns.
Acquisitions involve significant complexities, including risks associated with the acquired businesses’ past operations, loss of customers, unanticipated regulatory or compliance requirements, integration of personnel, human resource programs, information systems and ERP platforms, internal controls, and the potential impact of compliance with the Sarbanes‑Oxley Act of 2002. We may also experience general underperformance of acquired businesses relative to expectations, as well as unanticipated expenses or liabilities.
The benefits we expect to achieve from acquisitions depend largely on our ability to successfully integrate acquired businesses in an efficient and timely manner and to realize anticipated synergies. We may not be able to integrate acquired businesses smoothly or successfully, integration efforts may take longer or cost more than expected, and anticipated synergies or other benefits may be delayed, reduced, or not realized at all. Failure to achieve expected benefits could result in diminished operating performance and could require us to record impairment charges related to goodwill or other acquired assets.
In addition, the process of evaluating, negotiating, and integrating acquisitions or executing dispositions may divert management’s attention from our existing operations and disrupt our business. We cannot provide assurance that we will identify suitable acquisition or disposition opportunities, successfully complete any transactions, or realize the expected benefits of any strategic transactions. Any of these risks could materially adversely affect our business, financial condition, and results of operations.
Our profitability and growth may depend on the success of our operating businesses which include Buildings Solutions and construction related products, global Business Services, and drilling products and other Energy Services, which businesses are subject to a variety of business risks and uncertainties.
Any evaluation of our operating businesses and our prospects must be considered in light of the risks and uncertainties stated above, as well as the following: the ability to maintain our relationships with our existing clients; the ability to attract new clients; and the ability to maintain or generate the amount of cash required to operate the operating businesses. If we are unable to address these risks, our business, results of operations, and prospects could suffer.
We may make financial investments in other businesses that may lose value.
As we look for the best ways to deploy our capital and maximize our returns for our businesses and stockholders, we may make financial investments in other businesses or processes for purposes of enhancing our supply chain, creating financial returns, strategic developments, or other purposes. These investments may be speculative in nature, and there is no guarantee that we will experience a financial return and we may lose our entire principal balance if not successful.
Our long-term results depend upon our ability to improve existing products and services and develop, introduce, and market new products and services successfully.
Our business is dependent on the continued improvement of our existing products and services and our development of new products and services utilizing our current or other potential future technology. As we introduce new products and services or refine, improve, or upgrade versions of existing products and services, we cannot predict the level of market acceptance or the amount of market share these products and services will achieve, if any. As we introduce new products and services or refine, improve or upgrade versions of existing products and services, we cannot predict the level of market acceptance or the amount of market share these products and services will achieve, if any. We cannot be certain that we will not experience material delays in the introduction of new products or services in the future. We cannot assure you that we will not experience material delays in the introduction of new products or services in the future.
We generally sell our products and services in industries that are characterized by rapid technological changes, frequent new product introductions, and changing industry standards. If we do not develop new products and services and product enhancements based on technological innovation on a timely basis, our products and services may become obsolete over time and our revenues, cash flow, profitability, and competitive position may suffer. Even if we successfully innovate and develop new products, services and product enhancements, we may incur substantial costs in doing so, and our profitability may suffer.
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Our business is highly dependent on a limited number of significant customers and distribution relationships, and the loss, reduction, or non‑renewal of these relationships, could materially adversely affect our revenues, financial condition, and results of operations.
A significant portion of our revenue is derived from a limited number of customers. In addition, a limited number of customers have represented a significant portion of our accounts receivable. Our business depends on the continuation of these customer relationships, as well as our ability to replace or expand revenues through new customer development. The loss of any significant customer, a material reduction in business from such customers, or a deterioration in the financial condition of these customers could materially adversely affect our revenues, financial condition, and results of operations.
Our customer relationships generally do not provide long‑term volume commitments. In our Business Services segment, clients’ demand for our services is significantly influenced by their hiring needs and their views of future business prospects. Clients may terminate, reduce, or postpone engagements on short notice and often with limited or no penalty. In addition, many of our larger Business Services clients regularly conduct competitive bid processes for staffing and related services, requiring us to compete for renewals and new engagements even where existing relationships remain strong. If we are unable to successfully compete in these bid processes or meet evolving client requirements, our revenues and results of operations could be materially adversely affected.
Our Building Solutions and Energy Services segments are similarly dependent on customer demand for products, equipment, and machinery, which may fluctuate based on market conditions. In addition, certain of our operating companies rely on independent dealers and contractors to distribute and sell products. These dealers and contractors may also sell competing products, may terminate their relationships with us on short notice, or may experience financial or operational difficulties due to industry, economic, demographic, or seasonal factors. If we are unable to maintain existing dealer and contractor relationships or establish relationships with new, financially stable partners, demand for our products could decline.
If we are unable to replace lost or reduced business from existing customers, successfully compete for renewals and new engagements, or maintain effective distribution relationships, our revenues, cash flows, and results of operations could be materially adversely affected, and the market price of our common stock could decline.
Our markets are highly competitive.
The markets for our services are highly competitive. Our markets are characterized by pressures to provide high levels of service, incorporate new capabilities and technologies, accelerate job completion schedules, and reduce prices. Furthermore, we face competition from a number of sources. These sources include, with respect to our segments, as follows: (i) For our Business Services segment, other executive search firms and professional search, staffing, and consulting firms; (ii) For our Buildings Solutions segment, other modular builders, stick builders, and lumber and material suppliers; and (iii) For our Energy Services segment, other drilling and machinery providers. Several of our competitors have greater financial and marketing resources than we do. Due to competition, we may experience reduced margins on our services, loss of market share and loss of customers. If we are not able to compete effectively with current or future competitors as a result of these and other factors, our business, financial condition, and results of operations could be materially adversely affected.
Other than our AI services, within our Building Solutions, Business Services, and Energy Services segments we have little to no significant proprietary technology that would preclude or inhibit competitors from entering the markets in which we engage. We cannot provide assurance that existing or future competitors will not develop or offer services that provide significant performance, price, creative, or other advantages over our services. In addition, we believe that, with continuing development of information technology, the industries in which we compete may attract new competitors. Specifically, the increased use of web-based and mobile technology may attract technology-oriented companies to the recruitment industry. We cannot provide assurance that we will be able to continue to compete effectively against existing or future competitors. Any of these events could have a material adverse effect on our business, financial condition, and results of operations. These fluctuations could have a material adverse effect on our financial position and results of operations.
Due to the nature of our businesses, many of our expenses are fixed costs and if there are decreases in demand for products, it may adversely affect operating results.Due to the nature of our business, many of our expenses are fixed costs and if there are decreases in demand for products, it may adversely affect operating results.
Many of our expenses, particularly those relating to properties, capital equipment, and certain manufacturing overhead items, and labor costs are fixed in the short term. Within the Building Solutions and Energy Solutions segments Reduced demand for products and services causes fixed production costs to be allocated across reduced production volumes, which may adversely affect gross margins and profitability.
If we are unable to maintain costs at an acceptable level, our operations could be adversely impacted.
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Our ability to reduce costs in line with our revenues is important for the improvement of our profitability. Efforts to improve our efficiency could be affected by several factors including turnover, client demands, market conditions, continued increases in inflation, changes in laws, and availability of talent. If we fail to realize the expected benefits of these cost reduction initiatives, this could have an adverse effect on our financial condition and results of operations.
We have had periods of negative cash flows and operating losses that may recur in the future.
We have experienced negative cash flows and reported operating and net losses in previous years. We cannot provide any assurance that we will have positive cash flows or operating profitability in the future, particularly to the extent the global economy slows down or enters recession, or inflation increases. If our revenue declines or if operating expenses exceed our expectations, we may not be profitable and may not generate positive operating cash flows.
The impact of the Russian invasion of Ukraine, and the US-Iran war, on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.
The short and long-term implications of Russia’s invasion of Ukraine, and the war between the US and Iran are difficult to predict at this time. We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the U.S. and several European and Asian countries; along with the war in Iran, may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers. Such risks include, but are not limited to, adverse effects on macro-economic conditions, including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our product prices; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial condition.
Risks Related to Indebtedness
Our credit facilities may restrict our operating flexibility in the future.
All our businesses in the Building Solutions and Energy Solutions segments are supported by credited facilities. See Note 9 – Debt to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
We may enter into additional credit facilities in the future that contain various restrictions and covenants that restrict our operating flexibility including borrowings limited to eligible receivables; lenders’ ability to impose restrictions, such as payroll or other reserves; limitations on payments of dividends by our subsidiaries to us, which may restrict our ability to pay dividends to our stockholders; restrictions on our ability to make additional borrowings, or to consolidate, merge, or otherwise fundamentally change our ownership; limitations on capital expenditures, investments, dispositions of assets, guarantees of indebtedness, permitted acquisitions, and repurchases of stock; and limitations on certain intercompany payments of expenses, interest, and dividends. Acquisitions involve many complexities, including, but 15not limited to, risks associated with the acquired business’ past activities, loss of customers, regulatory changes that are not anticipated, difficulties in integrating personnel and human resource programs, integrating ERP systems and other infrastructures, general underperformance of the business under our control versus the prior owners, unanticipated expenses and liabilities, and the impact on its internal controls of compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002. As a result, the realization of anticipated synergies or benefits from acquisitions may be delayed or substantially reduced, and could potentially result in the impairment of our investment in these businesses.
These restrictions and covenants could have adverse consequences for investors, including restrictions on our ability to incur additional debt financing for future working capital or capital expenditures, a lesser ability for us to take advantage of significant business opportunities, such as acquisition opportunities, the potential need for us to undertake equity transactions, which may dilute the ownership of existing investors, and our inability to react to market conditions by selling lesser-performing assets. In addition, our payment of principal and interest on any future indebtedness would reduce our cash available for operations.
In addition, a default, amendment, or waiver in any of our debt facilities or lending arrangements or a future agreement to avoid a default may result in higher rates of interest and could impact our ability to obtain additional borrowings. Finally, debt incurred under some of our debt facilitates have a variable rate, which may fluctuate upward. Any increase in interest expense could reduce the funds available for operations.
In addition, many of the credit facilities are guaranteed by the Company, an event of default wherein a guaranty exists could impact the financial condition or other operations, and the credit facilities of those other businesses that have no or a different lending facility.
If we are unable to generate or borrow sufficient cash to make payments on our indebtedness, our financial condition would be materially harmed, our business could fail, and stockholders may lose all of their investment.
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To the extent we incur indebtedness in the future, our ability to make scheduled payments on or to refinance our obligations will depend on our financial and operating performance, which will be affected by economic, financial, competitive, and other factors, some of which are beyond our control. We cannot assure you that our business will generate sufficient cash flow from operations to service our indebtedness or to fund our other liquidity needs. If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our indebtedness on or before maturity or sell certain of our assets. We cannot assure you that we will be able to restructure or refinance any of our indebtedness on commercially reasonable terms, if at all, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.
Certain of our historical credit facilities have been based on eligible accounts receivable or inventory and may include lender‑imposed reserves, borrowing base limitations, and restrictions on intercompany payments or dividends. Amendments, waivers, or defaults under such facilities could result in increased borrowing costs, additional restrictions on operations, or reduced liquidity, which could materially adversely affect our business and financial condition.
Any indebtedness incurred by the Company could restrict our operations and make us more vulnerable to adverse economic conditions.
Any indebtedness we incur in the future could have important consequences for us and our stockholders. Our indebtedness could: increase our vulnerability to adverse economic and competitive pressures in our industry; place us at a competitive disadvantage compared to our competitors that have less debt; limit our flexibility in planning for, or reacting to, changes in our business and our industry; and limit our ability to borrow additional funds on terms that are acceptable to us or at all. In addition, our indebtedness could:•increase our vulnerability to adverse economic and competitive pressures in our industry;•place us at a competitive disadvantage compared to our competitors that have less debt;•limit our flexibility in planning for, or reacting to, changes in our business and our industry; and•limit our ability to borrow additional funds on terms that are acceptable to us or at all.
Other Risks Related to Our Business
Our investment strategy subjects us to risks.
From time to time, we make investments as part of our growth plans. Investments may not perform as expected because they are dependent on a variety of factors, including our ability to effectively integrate new personnel and operations, our ability to sell new services, and our ability to retain existing or gain new clients.
Additionally, our international operations may also be adversely affected by political events, trade wars, domestic or international terrorist events, hostilities or complications due to natural, nuclear, war or other disasters, including the ongoing Russian invasion of Ukraine and the conflicts in the Middle East. These or any further political or governmental developments or health concerns in the U.S. and foreign countries in which we operate could result in social, economic, and labor instability, as well as affect demand for our services. These uncertainties could have a material adverse effect on the continuity of our business and our results of operations and financial condition.
We depend on our key management personnel.
Our success depends to a significant extent on our senior management team. The loss of the services of one or more key senior management team members could have a material adverse effect on our business, financial condition, and results of operations. In addition, if one or more key employees join a competitor or form a competing company, the resulting loss of existing or potential clients could have a material adverse effect on our business, financial condition, and results of operations. The Company also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to health concerns. Although the Company has business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective.
Failure to attract and retain qualified personnel, management and advisors could negatively impact our business, financial condition, and results of operations.
Our ability to implement our business objectives and serve our customers depends upon our ability to attract and retain highly skilled professionals, management and advisors who possess the skills and experience necessary to operate our business, as well as personnel who meet the staffing requirements of our clients. In addition, our ability to execute our strategy requires that we retain and recruit personnel, management and advisors with experience in our businesses.
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We must continually evaluate and upgrade our base of available qualified personnel to keep pace with changing client needs and emerging technologies. Competition for qualified professionals with proven skills is intense amidst the widespread U.S. labor shortage, and the demand for these individuals is expected to remain strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available to us in sufficient numbers with the current market conditions. There can be no assurance that, even if our revenue increases, our future operations will result in net income attributable to common stockholders. As such, we may be required to adjust our budget to account for pressures to increase wages in order to compete for skilled personnel. If we are unable to attract the necessary qualified personnel for our clients and our business, it may have a negative impact on our business, financial condition, and results of operations. If we are unable to obtain insurance, or if our insurance is inadequate to cover claims, our cash reserves and other assets could be negatively impacted.
We face risks in collecting our accounts receivable.
In virtually all of our businesses, we invoice customers after providing services and products, which creates accounts receivable. Delays or defaults in payments owed to us could have a significant adverse impact on our business, financial condition, and results of operations. Factors that could cause a delay or default include, but are not limited to, global economic conditions, business failures, and turmoil in the financial and credit markets.
In certain situations, we provide our services to clients under a contractual relationship with a third-party, rather than directly to the client. In those circumstances, the third-party is typically responsible for aggregating billing information, collecting receivables from the client, and paying suppliers or subcontractors once funds are received from the client. In the event that the client has paid the third-party for our services and products and we are unable to collect from the third-party, we may be exposed to financial losses.
Due to the nature of the work we perform, we may be subject to significant liability claims and disputes.Due to the nature of the work we and our subsidiaries perform, we may be subject to significant liability claims and disputes.
Our operating companies and wholly owned subsidiaries, particularly our building solutions and energy segments, engage in services that can result in substantial injury or damages that may expose us to legal proceedings, investigations and disputes. For example, in the ordinary course of our business, we may be involved in legal disputes regarding personal injury and wrongful death claims, employee or labor disputes, professional liability claims, and general commercial disputes, as well as other claims. An unfavorable legal ruling against us or our subsidiaries could result in substantial monetary damages. Although we have adopted a range of insurance, risk management, safety, and risk avoidance programs designed to reduce potential liabilities, there can be no assurance that such programs will protect us fully from all risks and liabilities. If we sustain liabilities that exceed our insurance coverage or for which we are not insured, it could have a material adverse impact on our results of operations and financial condition.
Our ability to utilize net operating loss carryforwards may be limited.
Our ability to use our U.S. federal and state net operating loss carryforwards (“NOLs”) and other tax attributes to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income, and we cannot predict with certainty when, or whether, we will generate sufficient taxable income to use all of our NOLs, or other tax attributes. Unused U.S. federal NOLs arising in taxable years beginning before January 1, 2018, may be carried forward to the earlier of the next subsequent twenty tax years to offset future taxable income, if any. Under current federal tax law, U.S. federal NOLs incurred in taxable years beginning after December 31, 2017, can be carried forward indefinitely, but the ability to use such U.S. federal NOLs to offset taxable income in taxable years beginning after December 31, 2017, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to current U.S. federal tax law.
As of December 31, 2025, we had U.S. federal and state NOLs of approximately $215.4 million which may be available to offset future U.S. federal income. Our U.S. federal and state NOLs incurred in taxable years beginning prior to January 1, 2018 of approximately $183.6 million expire beginning in 2026 while U.S. federal NOLs incurred in taxable years beginning after December 31, 2017 of approximately $31.8 million will have an indefinite carryforward period, subject to annual limitations. Our NOL carryforwards are subject to review and possible adjustment by the U.S. federal and state tax authorities.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If an ownership change occurs and our ability to use our net operating loss carryforwards is materially limited, it would harm our future operating results by effectively increasing our future tax obligations.
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Our goodwill and other long-lived assets are subject to potential impairment that could negatively impact our earnings.
A significant portion of our assets consists of goodwill and other long-lived assets, the carrying value of which may be reduced if we determine that those assets are impaired. If actual results differ from the assumptions and estimates used in our goodwill and long-lived asset valuation calculations, we could incur impairment charges, which could negatively impact our earnings. See Note 5 – Acquisitions to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
We review our reporting units for potential goodwill impairment annually or more often if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In addition, we test the recoverability of long-lived assets if events or circumstances indicate the carrying values may not be recoverable. Recoverability of long-lived assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. We conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations. There are numerous risks that may cause the fair value of a reporting unit to fall below its carrying amount and/or the value of long-lived assets to not be recoverable, which could lead to the measurement and recognition of goodwill and/or long-lived asset impairment. These risks include, but are not limited to, significant negative variances between actual and expected financial results, lowered expectations of future financial results, failure to realize anticipated synergies from acquisitions, adverse changes in the business climate, and the loss of key personnel. If we are not able to achieve projected performance levels, future impairments could be possible, which could negatively impact our earnings.
Risks Related to our Common Stock and Preferred Stock
The market price of our common and preferred stock may be volatile, and the value of your investment could decline significantly.
The market price of our common stock has been, and we expect it to continue to be, volatile. The prices at which our shares of common stock trade depend upon a number of factors, including our historical and anticipated operating results, our financial situation, announcements of new products by us or our competitors, history of timely dividend payments, our ability or inability to raise the additional capital we may need and the terms on which we raise it, and general market and economic conditions. Some of these factors are beyond our control. Broad market fluctuations may lower the market price of our common stock and affect the volume of trading in our stock, regardless of our financial condition, results of operations, business, or prospects. It is impossible to assure you that the market price of our shares of common stock will not fall in the future.
Our common stock has a low trading volume and shares available under our equity compensation plans could affect the trading price of our common stock.
Our common stock historically has had a low trading volume. Any significant sales of our common stock may cause volatility in our stock price. We also have registered shares of common stock that we may issue under our employee benefit plans or from our treasury stock. Accordingly, these shares can be freely sold in the public market upon issuance, subject to restrictions under the securities laws. If any of these stockholders, or other selling stockholders, cause a large number of securities to be sold in the public market without a corresponding demand, the sales could reduce the trading price of our common stock. One or more stockholders holding a significant amount of our common stock might be able to significantly influence matters requiring approval by our stockholders, possibly including the election of directors and the approval of mergers or other business combination transactions.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, the price and trading volume of our securities could decline.
The trading market for our securities will be influenced by the research and reports that industry or securities analysts publish about us or our business. We currently have two securities and industry analysts providing research coverage. In the event that any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our operating results fail to meet the expectations of analysts, the price of our securities would likely decline. In the event if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, the price of our securities would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our securities to decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price or trading volume of our securities to decline25The protective amendment contained in our Restated Certificate of Incorporation, which is intended to help preserve the value of certain income tax assets, primarily tax net operating loss carryforwards, may have unintended negative effects.•The protective amendment contained in our Restated Certificate of Incorporation, which is intended to help preserve the value of certain income tax assets, primarily NOLs, may have unintended negative effects.
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Payment of dividends on our Common Stock is prohibited unless we have declared and paid (or set apart for payment) full accumulated dividends on the Series A Preferred Stock, which also has a significant liquidation value.
Unless full cumulative dividends on our Preferred Stock have been, or contemporaneously are, declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than a dividend in shares of Common Stock or other shares of stock ranking junior to the Series A Preferred Stock (as to dividends and upon liquidation) may be declared and paid or declared and set apart for payment on our Common Stock, nor may any shares of Common Stock be redeemed, purchased or otherwise acquired for any consideration by us.Unless full cumulative dividends on our preferred stock have been, or contemporaneously are, declared and paid or declared and a sum sufficient for the payment thereof is set apart for payment for all past dividend periods, no dividends (other than a dividend in shares of common stock or other shares of stock ranking junior to the Series A Preferred Stock (as defined herein) as to dividends and upon liquidation) may be declared and paid or declared and set apart for payment on our common stock, nor may any shares of common stock be redeemed, purchased or otherwise acquired for any consideration by us. To the extent dividends are not paid on our Preferred Stock, cumulative dividends accrue as part of the liquidation value of our Preferred Stock, which has a liquidation value of $10.00 per share at issuance. To the extent dividends are not paid on our preferred stock, cumulative dividends accrue as part of the liquidation value of our preferred stock, which has a liquidation value of $10.00 per share at issuance. Dividends on our Preferred Stock are payable out of amounts legally available therefor at a rate equal to 10.0% per annum per $10.00 of stated liquidation preference per share, or $1.00 per share of our Preferred Stock per year. Dividends on our preferred stock are payable out of amounts legally available therefor at a rate equal to 10.0% per annum per $10.00 of stated liquidation preference per share, or $1.00 per share of our preferred stock per year. Dividends on our Preferred Stock are only payable in cash. Dividends on our preferred stock are only payable in cash. As of December 31, 2025, there were 2,370 shares of our Series A Preferred Stock outstanding, and all cumulative dividends due pursuant to its terms have been paid.
If we fail to pay dividends on our Series A Preferred Stock for six or more consecutive quarters, holders of our Series A Preferred Stock will be entitled to elect two additional directors to our board of directors.
To the extent dividends are not paid on the Series A Preferred Stock in accordance with their terms, cumulative dividends will accrue as part of the liquidation value of the Series A Preferred Stock. Whenever dividends on any shares of Series A Preferred Stock are in arrears for six or more consecutive quarters, then the holders of those shares together with the holders of all other series of preferred stock equal in rank with the Series A Preferred Stock upon which like voting rights have been conferred and are exercisable, will be entitled to vote separately as a class for the election of a total of two additional directors to our board of directors. Holders of our common stock will not be entitled to vote for or against such additional directors. Holders of our common stock will not be entitled to vote no such additional directors.
We have a history of annual net losses attributable to common stockholders which may continue and which may negatively impact our ability to achieve our growth initiatives.
Our total stockholders’ equity may decline from time to time. There can be no assurance that, even if our revenue increases, our future operations will result in net income attributable to common stockholders. Our failure to increase our revenues or improve our gross margins will harm our business. We may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, our gross margins fail to improve or our operating expenses exceed our expectations, our operating results will suffer. The prices we charge for our products and services may decrease, which would reduce our revenues and harm our business. If we are unable to sell our products at acceptable prices relative to our costs, or if we fail to develop and introduce on a timely basis new products from which we can derive additional revenues, our financial results will suffer.
Regulatory and Compliance Risks
We face risks related to our international operations.
Our Business Services segment conducts direct operations in sixteen countries and face both translation and transaction risks related to foreign currency exchange. For the year ended December 31, 2025, approximately 80% of our Business Services segment revenue was earned outside of the U.S. Our financial results could be materially affected by a number of factors particular to international operations. These include, but are not limited to, difficulties in staffing and managing international operations, operational issues such as longer customer payment cycles and greater difficulties in collecting accounts receivable, changes in tax laws or other regulatory requirements, issues relating to uncertainties of laws and enforcement relating to the regulation and protection of intellectual property, and currency fluctuation. If we are forced, or determine, to discontinue or restructure any of our international operations, we could incur material costs to close down such operations, which could adversely affect our results of operations and financial condition.
Regarding the foreign currency risk inherent in international operations, the results of our local operations are reported in the applicable foreign currencies and then translated into U.S. dollars at the applicable foreign currency exchange rates for inclusion in our financial statements. In addition, we generally pay operating expenses in the corresponding local currency. Because of devaluations and fluctuations in currency exchange rates or the imposition of limitations on conversion of foreign currencies into U.S. dollars, we are subject to currency translation exposure on the revenue and income of our operations in addition to economic exposure. Our consolidated U.S. dollar cash balance could be lower because a significant amount of cash
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is generated outside of the U.S. This risk could have a material adverse effect on our business, financial condition, and results of operations.
We spend considerable time and money complying with federal and state laws, regulations, and other rules which may fluctuate, and if we are unable to fully comply with such laws, regulations, and other rules, we could face substantial penalties.•We spend considerable time and money complying with federal and state laws, regulations, and other rules which may fluctuate based on healthcare policy, and if we are unable to fully comply with such laws, regulations, and other rules, we could face substantial penalties.
Our businesses are subject to various federal, state and local laws and regulations.Our Construction businesses are subject to various federal, state and local laws and regulations. In recent years, a number of new laws and regulations have been adopted, and there has been expanded enforcement of certain existing laws and regulations by federal, state, and local agencies. These laws and regulations, and related interpretations and enforcement activity, may change as a result of a variety of factors, including political, economic or social events. Changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations governing minimum wage or living wage requirements; the classification of exempt and non-exempt employees; the distinction between employees and contractors; other wage, labor or workplace regulations; healthcare; safety and health; data protection and cybersecurity; the sale and pricing of some of our products; transportation; logistics; supply chain transparency; taxes; unclaimed property; energy costs and consumption; or environmental matters could increase our costs of doing business or impact our operations. Changes in, expanded enforcement of, or adoption of new federal, state or local laws and regulations governing minimum wage or living wage requirements; the classification of exempt and non-exempt employees; the distinction between employees and contractors; other wage, labor or workplace regulations; healthcare; data protection and cybersecurity; the sale and pricing of some of our products; transportation; logistics; supply chain transparency; taxes; unclaimed property; energy costs and consumption; or environmental matters could increase our costs of doing business or impact our operations.
We maintain a compliance program to identify and correct any compliance issues and remain in compliance with all applicable laws, to train employees, to audit and monitor our operations, and to achieve other compliance goals. Like most companies with compliance programs, we occasionally discover compliance concerns. In such cases, we take responsive action, including corrective measures when necessary. There can be no assurance that our responsive actions will insulate us from liability associated with any detected compliance concerns.
If our past or present operations are found to be in violation of any of the laws, regulations, rules, or policies described above or the other laws or regulations to which we or our customers are subject, we may be subject to civil and criminal penalties, damages, fines, or the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment, or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business, and damage our reputation. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, regulations, rules, and policies, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security, and fraud laws may prove costly.
We may be exposed to employment-related claims, legal liability, and costs from clients, employees, and regulatory authorities that could adversely affect our business, financial condition, or results of operations, and our insurance coverage may not cover all of our potential liability.
We are in the business of employing people and placing them in the workplaces of our businesses and other businesses. Risks relating to these activities include claims of misconduct or negligence on the part of our employees; claims by our employees of discrimination or harassment directed at them, including claims relating to actions of our clients; claims related to the employment of illegal aliens or unlicensed personnel; claims for payment of workers’ compensation and other similar claims; claims for violations of wage and hour requirements; claims for entitlement to employee benefits; claims of errors and omissions of our temporary employees; claims by taxing authorities related to our independent contractors and the risk that such contractors could be considered employees for tax purposes; claims by candidates that we place for wrongful termination or denial of employment; claims related to our non-compliance with data protection laws, which require the consent of a candidate to transfer resumes and other data; claims related to the recruitment process; and claims by our clients relating to our employees’ misuse of client proprietary information, misappropriation of funds, other misconduct, criminal activity or similar claims. These risks may not be fully covered by insurance and could result in significant costs, reputational harm, or operational disruption.
We may incur fines and other losses or negative publicity with respect to these problems. In addition, some or all of these claims may give rise to litigation, which could be time-consuming to our management team, costly, and could have a negative effect on our business. In some cases, we have agreed to indemnify our clients against some or all of these types of liabilities. We cannot assure that we will not experience these problems in the future, that our insurance will cover all claims, or that our insurance coverage will continue to be available at economically feasible rates.
Our future earnings could be reduced as a result of the imposition of licensing or tax requirements or new regulations that prohibit, or restrict certain types of services we offer in the U.S. and foreign countries.
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Our future earnings could be reduced if additional regulatory requirements are imposed in the countries in which we operate. The countries in which we operate may create additional regulations that prohibit or restrict the types of services that we currently provide;
•impose new or additional benefit requirements; require us to obtain additional licensing to provide building solutions, business services, energy services, or investments; impose new or additional restrictions on movements between countries;
•increase taxes, such as sales or value-added taxes, payable by our operating companies;
•increase the number of various tax and compliance audits relating to a variety of regulations, including wage and hour laws, unemployment taxes, workers’ compensation, immigration, and income, value-added, and sales taxes; or
•revise transfer pricing laws or successfully challenge our transfer prices, which may result in higher foreign taxes or tax liabilities or double taxation of our foreign operations.
Any future regulations that make it more difficult or expensive for us to continue to provide our services may have a material adverse effect on our business, financial condition and results of operations.
Provisions in our organizational documents and Delaware law will make it more difficult for someone to remove current management and to acquire control of us.
Our certificate of incorporation and bylaws contain provisions that may make it more difficult for a third party to acquire control of us in a transaction not approved by our Board of Directors, including transactions in which stockholders might otherwise receive a premium for their shares over then-current market prices. These provisions could also limit the ability of stockholders to approve transactions they may deem to be in their best interests, discourage bids at a premium over the market price of our common stock, adversely affect the market price of our common stock, and delay or prevent changes in incumbent management.
For example, our certificate of incorporation and bylaws authorize our Board of Directors to issue shares of preferred stock in one or more series without further stockholder approval, which could be used to deter or delay a takeover attempt. Our bylaws also require stockholders to provide advance notice of any stockholder nominations of directors or proposals for new business to be considered at stockholder meetings, and provide that vacancies on our Board of Directors may be filled by the remaining directors then in office, which may limit stockholders’ ability to influence the composition of the Board.
In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a business combination with an “interested stockholder” for a period of three years following the time that such stockholder becomes an interested stockholder, unless the transaction or the acquisition of stock that resulted in the stockholder becoming an interested stockholder is approved by the board of directors or specified stockholder approval requirements are satisfied. These provisions, individually or together, could deter or delay a potential acquisition, proxy contest, or other change in control, even if such a transaction might be beneficial to our stockholders.
The protective amendment contained in our Restated Certificate of Incorporation, which is intended to help preserve the value of certain income tax assets, primarily tax net operating loss carryforwards, may have unintended negative effects.•The protective amendment contained in our Restated Certificate of Incorporation, which is intended to help preserve the value of certain income tax assets, primarily NOLs, may have unintended negative effects.
Pursuant to Sections 382 and 383 of the Code, use of our NOLs may be limited by an “ownership change” as defined under Section 382 of the Code and the Treasury Regulations thereunder. In order to protect our significant NOLs, we filed an amendment to our certificate of incorporation (the “Restated Certificate of Incorporation”) (as amended and extended, the “Protective Amendment”) with the Delaware Secretary of State on May 5, 2015. The Protective Amendment was approved by our stockholders at our 2021 Annual Meeting of Stockholders held on October 21, 2021, and further extended with the approval of our stockholders at our 2024 Annual Meeting of Stockholders held on October 10, 2024, and is in effect until July 31, 2027, unless further extended or it terminates pursuant to its terms. In order to protect our significant NOLs, we filed an amendment to our certificate of incorporation (the “Restated Certificate of Incorporation”) (as amended and extended, the “Protective Amendment”) with the Delaware Secretary of State on May 5, 2015. The Protective Amendment was approved by our stockholders at our 2021 Annual Meeting of Stockholders held on October 21, 2021.The Protective Amendment is designed to assist us in protecting the long-term value of our accumulated NOLs by limiting certain transfers of our common stock.
The Protective Amendment is designed to assist us in protecting the long-term value of our accumulated NOLs by limiting certain transfers of our common stock. The Protective Amendment’s transfer restrictions generally restrict any direct or indirect transfers of the common stock if the effect would be to increase the direct or indirect ownership of the common stock by any person from less than 4.99% to 4.99% or more of the common stock, or increase the percentage of the common stock owned directly or indirectly by a person owning or deemed to own 4.99% or more of the common stock. Any direct or indirect
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transfer attempted in violation of the Protective Amendment will be void as of the date of the prohibited transfer as to the purported transferee.
The Protective Amendment also requires any person attempting to become a holder of 4.99% or more of our common stock to seek the approval of our board of directors. This may have an unintended “anti-takeover” effect because our board of directors may be able to prevent any future takeover. Similarly, any limits on the amount of stock that a stockholder may own could have the effect of making it more difficult for stockholders to replace current management. Additionally, because the Protective Amendment may have the effect of restricting a stockholder’s ability to dispose of or acquire our common stock, the liquidity and market value of our common stock might suffer.
Our stockholder rights plan, or “poison pill,” includes terms and conditions which could discourage a takeover or other transaction that stockholders may consider favorable.
On October 15, 2018, stockholders of record at the close of business on that date received a dividend of one right (a “Right”) for each outstanding share of common stock.On June 2, 2021, stockholders of record at the close of business on that date received a dividend of one right (a “Right”) for each outstanding share of common stock. Each Right allows its holder to purchase from the Company one one-hundredth of a share of the Company’s Series B Junior Participating Preferred Stock (“Series B Preferred Stock”) for a purchase price of $3.50. Each fractional share of Series B Preferred Stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of common stock. Prior to exercise, however, a Right does not give its holder any dividend, voting or liquidation right.
The Rights Agreement imposes a significant penalty upon any person or group that acquires 4.99% or more (but less than 50%) of our then-outstanding common stock without the prior approval of our board of directors. A person or group that acquires shares of our common stock in excess of the applicable threshold, subject to certain limited exceptions, is called an “Acquiring Person.” Any rights held by an Acquiring Person are void and may not be exercised. The Rights will not be exercisable until the earlier of ten days after a public announcement by us that a person or group has become an Acquiring Person and ten business days (or a later date determined by our board of directors) after a person or group begins a tender or an exchange offer that, if completed, would result in that person or group becoming an acquiring person. On the date (if any) that the Rights become exercisable (the “Distribution Date”), each Right would allow its holder to purchase one one-hundredth of a share of Preferred Stock for a purchase price of $3.50. In addition, if a person or group becomes an Acquiring Person after the Distribution Date or already is an Acquiring Person and acquires more shares after the Distribution Date, all holders of Rights, except the Acquiring Person, may exercise their rights to purchase a number of shares of the common stock (in lieu of preferred stock) with a market value of twice the Exercise Price, upon payment of the purchase price. On the date (if any) that the Rights become exercisable (the “Distribution Date”), each Right would allow its holder to purchase one one-thousandth of a share of Preferred Stock for a purchase price of $12.00. In addition, if a person or group becomes an Acquiring Person after the Distribution Date or already is an Acquiring Person and acquires more shares after the Distribution Date, all holders of Rights, except the Acquiring Person, may exercise their rights to purchase a number of shares of the common stock (in lieu of preferred stock) with a market value of twice the Exercise Price, upon payment of the purchase price.
The Rights will expire on the earliest of (i) the close of business on October 15, 2027, or such earlier date as of which the Board determines that this Agreement is no longer necessary for the preservation of Tax Benefits, (ii) the time at which the Rights are redeemed as provided in Section 23, (iii) the time at which all exercisable Rights are exchanged as provided in Section 24, (iv) the close of business on the effective date of the repeal of Section 382 of the Code or any successor or replacement provision if the Board determines that this Agreement is no longer necessary for the preservation of Tax Benefits, and (v) the close of business on the first day of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward.
The Rights have certain anti-takeover effects, including potentially discouraging a takeover that stockholders may consider favorable. The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by the board of directors.
As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze and compare our results of operations and financial prospects.
Currently, we are a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. As a “smaller reporting company,” we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.
Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditor provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.
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Changing rules, public disclosure regulations and stakeholder expectations on environmental, social and corporate governance (“ESG”) related matters and diversity, equity and inclusion (“DEI”) related matters expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business.
Following the decision of the U.S. Supreme Court in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College, 600 U.S. 181 (2023) and the current administration, companies have begun to pull back from ESG and DEI initiatives in response to a changing legal and political climate. On January 21, 2025, the U.S. President issued an executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” mandating among other things that federal contractors cease any “affirmative action” in violation of civil rights law and calling on the Attorney General to produce and deliver a report containing “recommendations for enforcing Federal civil-rights laws and taking other appropriate measures to encourage the private sector to end illegal discrimination and preferences, including DEI.” As a result of these developments, companies must re-examine their DEI programs to ensure that do not run afoul of the law and risk enforcement action from the U.S. Department of Justice. In addition, in recent years “anti-ESG” sentiment has gained momentum across the U.S., with several states and Congress having proposed or enacted “anti-ESG” policies, legislation, or initiatives or issued related legal opinions.
If any of our clients fail to adequately address these developments, as a provider of staffing services, we may be exposed to risks to our business and potential reputational harm to the extent that our clients face investigations and enforcement actions stemming from their DEI or ESG policies. In addition, we and our clients may incur additional compliance costs in relation to the new legal and political landscape on ESG and DEI issues, which may adversely affect our business. Stakeholders also may have very different views on where our ESG and sustainability focus should be placed, including differing views of regulators in various jurisdictions in which we operate. Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal or state ESG laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in reputational harm, loss of investor confidence, legal and regulatory proceedings against us and, materially adversely affect our business, reputation, results of operations, financial condition, and stock price.
We rely on our information systems, and if we lose our information processing capabilities or fail to further develop our technology, our business could be adversely affected.
Our success depends in large part upon our ability to store, retrieve, process, and manage substantial amounts of information, including our client and candidate databases. To achieve our strategic objectives and to remain competitive, we must continue to develop and enhance our information systems. This may require the acquisition of equipment and software and the development, either internally or through independent consultants, of new proprietary software. If we are unable to design, develop, implement, and utilize, in a cost-effective manner, information systems that provide the capabilities necessary for us to compete effectively, or if we experience any interruption or loss of our information processing capabilities, for any reason, this could adversely affect our business, financial condition, and results of operations.
Because we operate in an international environment, we are subject to greater cyber-security risks and incidents due to our broader and more distributed network footprint. Some of these threats may include attacks from foreign governments. While we continue to employ resources to monitor our systems and protect our infrastructure, any unauthorized access or use of information, virus or similar breach or disruption to our systems could result in disrupted operations, loss of information, damage to our reputation and customer relationships, and other significant liabilities, any of which could materially harm our business.
We also use mobile devices, social networking, and other online activities to connect with our candidates, clients, and business partners. While we have implemented measures to prevent security breaches and cyber incidents, our measures may not be effective, and any security breaches or cyber incidents could adversely affect our business, financial condition, and results of operations.
Data security and integrity are important to our businesses, and cybersecurity incidents, including but not limited to breaches, unauthorized access, or disclosure of confidential information, could result in a material loss of business, regulatory enforcement, substantial legal liability, and significant harm to our reputation, any of which could have a material adverse effect on our business, financial condition and results of operations.
Improper access to, misappropriation, destruction or disclosure of confidential, personal or proprietary data could result in significant harm to our reputation or the reputation of any of the businesses we own. We collect, store and transmit a large amount of confidential information on hundreds of millions of businesses, including financial information and personal
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information, as well as certain consumer information and credit information. We operate in an environment of significant risk of cybersecurity incidents, whether from unintentional events or deliberate attacks by third parties or insiders, which may exploit sophisticated methods or obscure vulnerabilities.
One of our significant responsibilities is to maintain the security and privacy of our employees’ and clients’ confidential and proprietary information and the confidential information about clients’ employees’ compensation, health and benefits information and other personally identifiable information. Material failures, inadequacies, or interruptions in our information technology could result in substantial costs and losses, and similar events affecting third-party vendors could disrupt the products or services they provide to us or our customers.
We rely on commercially available systems, software, tools, and monitoring, as well as other applications and internal procedures and personnel, to safeguard confidential information. While we take various actions, and we incur significant costs, to maintain and protect the operation and security of our information technology and systems, they may not prevent all breaches, system malfunctions, or unauthorized access. Security incidents, including cyberattacks, viruses, fraud schemes, and similar schemes can create significant system disruptions, shutdowns, fraudulent transfer of assets, or unauthorized disclosure of confidential information. Security breaches, computer viruses, attacks by hackers, online fraud schemes, and similar breaches can create significant system disruptions, shutdowns, fraudulent transfer of assets, or unauthorized disclosure of confidential information. For example, in April 2019, we became aware that we had been a victim of criminal fraud commonly referred to as “business email compromise fraud.” The incident involved the impersonation of one of our officers and improper access to his email, wherein the transfer by us of funds to a third-party account almost occurred.
Despite defensive measures, our exposure remains heightened due to the evolving nature of threats, advances in computing, new cryptographic techniques, and increasingly sophisticated methods such as phishing or social engineering. Any failure to maintain security, or similar failures by third-party vendors critical to our operations, could result in financial losses, operational interruptions, reputational harm, defaults under contracts, liability claims, or regulatory penalties, any of which could materially and adversely affect our business, financial condition, and results of operations. Failure to effectively manage system vulnerabilities or maintain and upgrade safeguards may lead to unexpected costs or increased susceptibility to unauthorized access.
Issues relating to the use of new and evolving technologies, such as Artificial Intelligence (“AI”) and Machine Learning (“ML”) present challenges for our business and may result in liability.
A quickly evolving social, legal and regulatory environment may cause us to incur increased operational and compliance costs, including increased research and development costs, or divert resources from other development efforts, to address potential issues related to usage of AI and ML. As with many cutting-edge innovations, AI and ML present new risks and challenges, and existing laws and regulations may apply to us in new ways, the nature and extent of which are difficult to predict. We incorporate AI and ML into our offerings for use cases that could potentially impact civil, privacy, or employment benefit rights. Failure to adequately address issues that may arise with such use cases could negatively affect the adoption of our solutions and subject us to reputational harm, regulatory action, or legal liability, which may harm our financial condition and operating results. Potential government regulation related to AI, including relating to ethics and social responsibility, may also increase the burden and cost of compliance and research and development. Employees, customers, or customers’ employees who are dissatisfied with our public statements, policies, practices, or solutions related to the development and use of AI and ML may express opinions that could introduce reputational or business harm, or legal liability.
In addition, our operating businesses may be disrupted by new emergent tools that threaten our established business practices. If our clients invest heavily in obtaining or designing and implementing their own systems for recruitment using AI and ML, they may have reduced demand for our services. It is too early to determine the extent to which AI and ML may impact our business, but it is possible that these tools may negatively impact our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.ITEM 1A. CYBERSECURITY
Risk Management and Strategy
We identify and address cybersecurity threats and risks related to our business using an interdisciplinary approach that includes assessments primarily by our management, IT team and legal department. To defend against, detect and respond to
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The cybersecurity-control principles that form the basis of our cybersecurity program are informed by the National Institute of Standards and Technology Cybersecurity Framework. Our management performs an annual review of third-party service providers ’ SOC reports to verify appropriate controls are in place. Our Business Services segment undergoes an annual audit to ensure compliance with ISO 27001 controls.
In 2025, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. In addition, security controls, no matter how well designed or implemented, may only mitigate and not fully eliminate risks. And events, when detected by security tools or third parties, may not always be immediately understood or acted upon. Despite our ongoing efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced undetected cybersecurity incidents.
Additionally, cybersecurity risks and threats that could have a material impact on the Company are discussed further in the Item 1A Risk Factors. Those sections of Item 1A should be read in conjunction with this Item 1C.
Cybersecurity Governance
Cybersecurity is an important part of our risk management processes and is an area of focus for our board of directors and management. Our board of directors, as a whole, has oversight responsibility for our strategic and operational risks, and ensures that appropriate risk mitigation strategies are implemented by managemen t. Our audit committee assists the board of directors with this responsibility by periodically reviewing and discussing our risk assessment and risk management practices, including cybersecurity risks, with members of our management team, which is responsible for the assessment and management of cybersecurity risks.
In addition, we have retained an external consultant to serve as our internal audit function and to support our cybersecurity risk management and governance practices. Our consultant has substantial experience in cybersecurity risk management and information technology, including security, compliance, systems and programming and reports to our audit committee and our board of directors on any appropriate items.
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