What changed in this filing

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Item 1A. Risk Factors

2022-03-10 compared with 2021-03-11 · 45 added, 26 removed, 248 unchanged (22% of the section changed)

6 unchanged sentences

Additional risks not currently known to us or that we currently deem to be immaterial may also adversely affect our business, financial condition or results of operations.

Past financial performance should not be considered to be a reliable indicator of future financial performance, and investors should not use historical trends to anticipate results or trends in future periods.

Past financial performance should not be considered to be a reliable indicator of future financial performance, and investors or prospects should not use historical trends to anticipate results or trends in future periods.

Risks Related to Our Company and Our Business

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Our business is subject to risks associated with geographic market concentration.

Geographic revenue in excess of 10% of our consolidated revenue in fiscal year 2020 and the related percentage for fiscal years 2019 and 2018 was generated in the following areas:

Geographic revenue in excess of 10% of our consolidated revenue from continuing operations in fiscal year 2021 and the related percentage for fiscal years 2020 and 2019 was generated in the following areas:

2021 2020 2019

Maryland 11 % 11 % 11 %

Massachusetts 14 % 1 % 2 %

Tennessee 12 % 16 % 18 %

1 unchanged sentence

Consequently, weakness in economic conditions in these regions could have a material adverse effect on our financial position and results of future operations.

Our business remains subject to risks related to the COVID-19 pandemic

The continually changing situation of the COVID-19 outbreak has impacted demand for the Company’s services, disrupted the Company’s operations and may continue to do so.

The COVID-19 outbreak emerged as a serious threat to the health and economic well-being of the Company’s clients, candidates, team members, and the overall economy.

At various times during the outbreak, many counties, states and countries took dramatic action including, without limitation, ordering all nonessential workers to stay home, mandating the closure of schools and nonessential business premises and imposing isolation measures on large portions of the population.

These measures, while intended to protect human life, had serious adverse impacts on domestic and foreign economies and may do so in the future if they are continued or reintroduced.

The COVID-19 pandemic has created significant uncertainty and volatility in the Company’s business.

Initially it caused a dramatic increase in unemployment in the United States and mandated business closures and slowing economic activity reduced the use of temporary workers and reduced businesses’ recruitment of new team members resulting in less demand for the Company’s services.

During 2021, however, demand for workers and the Company’s services increased as economic activity recovered, worksites reopened, and many business sought to restore or expand workforces that had shrunk during the course of the pandemic.

There can be no assurance, however, that this increased demand for workers and the Company’s services will be sustained.

Furthermore, the emergence of new variants of the coronavirus or of other illnesses may cause a rapid deterioration of economic conditions and the financial and credit markets, which could have a material adverse impact on the Company’s business, financial condition, results of operations and cash flows.

The Company has transitioned a significant number of the Company’s team member population to a remote work environment in an effort to mitigate the spread of COVID-19.

This transition to remote working and the spread of COVID-19 may negatively impact the availability of key personnel necessary to conduct the Company’s business and the business and operations of the Company’s third-party service providers who perform critical services for the Company’s business.

This transition to remote working has also increased the Company’s vulnerability to risks related to the Company’s computer and communications hardware and software systems and exacerbated certain related risks, including risks of phishing and other cybersecurity attacks.

The Company is continuing to monitor the spread of COVID-19, including the emerging variants of the disease, and related risks, including risks related to efforts to mitigate the disease’s spread.

The rapid development and fluidity of the situation, however, precludes any prediction as to its ultimate impact on us.

The emergence of new variants of the coronavirus or of other illnesses may adversely impact global economies and financial markets resulting in an economic downturn that would likely impact demand for the Company’s services.

While the Company has navigated the COVID-19 pandemic thus far, its continuation or worsening may have a negative impact on the Company’s business.

Any of the above factors, or other cascading effects of the COVID-19 pandemic that are not currently foreseeable, could materially increase the Company’s costs, severely negatively impact the Company’s revenue, net income, and other results of operations, and impact the Company’s liquidity position.

The duration of any such impacts cannot be predicted, and such impacts may also have the effect of heightening many of the other material risks the Company faces.

Government imposed vaccine mandates could have a material adverse impact on our business and results of operation s

In September 2021, President Biden announced two executive orders related to vaccine mandates that would impact the Company's operations in the United States.

The first executive order-- the OSHA Vaccination and Testing Emergency Temporary Standard (“ETS”) — was blocked by a stay of enforcement by the United States Supreme Court on January 13, 2022.

On January 25, 2022, the Department of Labor withdrew the ETS;

however, OSHA could still pursue a vaccine mandate through the regular federal rulemaking process.

A second Executive Order on Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors (“EO 14042”) would apply to the Company as a federal contractor and subcontractor.

EO 14042 is also subject to legal challenges and is currently subject to a nationwide injunction during the pendency of federal court proceedings.

At this time, it is unclear, among other things, if or when any federal vaccine mandates may go into effect.

Further, state and local governments in the United States and in international jurisdictions where we operate may implement vaccine mandates (currently New York City has a mandate) and it is not clear if such mandates will go into effect or stay in effect;

whether any will apply to all team members or only to team members who work in the office;

and how compliance will be documented.

Should such mandates apply to us, we may be required to implement a requirement that all of our team members get vaccinated, subject to limited exceptions.

At this time the Company does not have a vaccine requirement.

Currently, it is not possible to predict the impact that a federal vaccine mandate, any other vaccine mandate, or a vaccine requirement should we elect to adopt one, will have on us or on our workforce.

Any vaccine requirement or vaccine mandate, if implemented, may result in team members attrition;

however, any failure to implement a vaccine requirement or mandate may also result in team members attrition or resistance to returning to onsite work, either of which could materially and adversely affect our business and results of operations.

A downturn of the U.S.

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Acquisitions and new business initiatives may not be successful.

We expect to continue making acquisitions and entering into new business initiatives as part of our long-term business strategy.

We expect to continue making acquisitions and entering into new business initiatives, including, but not limited to, dispositions, joint ventures, and strategic investments, as part of our long-term business strategy.

These acquisitions and new business initiatives involve significant challenges and risks, including that they may not advance our business strategy, that we may not realize a satisfactory return on our investment, that we may experience difficulty in integrating operations, or diversion of management’s attention from our other business.

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In accordance with generally accepted accounting principles, we are required to review our goodwill and intangible assets for impairment at least annually.

Our goodwill and intangibles assets were $32.1 million and $33.8 million, respectively, at the end of fiscal year 2020.

Our goodwill and intangibles assets from continuing operations were $29.1 million and $33.6 million, respectively, at the end of fiscal year 2021.

An unfavorable evaluation could cause us to write-off these assets in future periods.

65 unchanged sentences

Notwithstanding the reduction in the corporate income tax rate, the overall impact of these changes on our results of operations will likely evolve as new regulations and interpretations relating to the TCJA are implemented.

In addition, various political figures have pledged their support to overturning or modifying key aspects of the TCJA which could further increase the uncertainty relating to the impact of this or any future tax legislation on our results of operations.

In addition, various political figures have pledged their support to

overturning or modifying key aspects of the TCJA which could further increase the uncertainty relating to the impact of this or any future tax legislation on our results of operations.

Natural disasters and unusual weather conditions, pandemic outbreaks, terrorist acts, global political events and other serious catastrophic events could disrupt business and otherwise materially adversely affect our business and financial condition.

With operations in many states, we are subject to numerous risks outside of our control, including risks arising from natural disasters, such as fires, earthquakes, hurricanes, floods, tornadoes, unusual weather conditions, pandemic outbreaks and other health emergencies, terrorist acts or disruptive political events, or similar disruptions that could materially adversely affect our business and financial performance.

Our operations are heavily dependent on the ability of team members, field talent and consultants to travel from business to business and from location to location.

Our operations are often dependent on the ability of team members, field talent and consultants to travel from business to business and from location to location.

Any public health emergencies, including a real or potential pandemic such as those caused by the avian flu, SARS, Ebola, COVID-19, or even a particularly virulent flu, could decrease demand for our workforce solutions and our ability to offer them.

1 unchanged sentence

Although we cannot predict such events or their consequences, these events could materially adversely affect our stock price, reputation, business and financial condition.

Our business, results of operations, and financial condition have been and may continue to be adversely impacted in material respects by the COVID-19 pandemic, and future adverse impacts could be material and difficult to predict.

Our business, results of operations, and financial condition have been, and may continue to be, adversely impacted in material respects by COVID-19 and by related government actions, non-governmental organization recommendations, and public perceptions, all of which have led and may continue to lead to disruption in global economic and labor markets.

These effects have had a significant impact on our business, including reduced demand for our workforce solutions, early terminations or reductions in projects, and hiring freezes, and a shift of a majority of our workforce to remote operations, all of which have contributed to a decline in revenues and other significant adverse impacts on our financial results.

Other potential impacts of COVID-19 may include continued or expanded closures or reductions of operations with respect to our client partners’ operations or facilities, the possibility our client partners will not be able to pay for our workforce solutions, or that they will attempt to defer payments owed to us, either of which could materially impact our liquidity, the possibility that the uncertain nature of the pandemic may not yield the increase in certain of our workforce solutions that we have historically observed during periods of economic downturn, and the possibility that various government-sponsored programs to provide economic relief may be inadequate.

Further, we may continue to experience adverse financial impacts, some of which may be material, if we cannot offset revenue declines with cost savings through expense-related initiatives, human capital management initiatives, or otherwise.

As a result of these observed and potential developments, we expect our business, results of operations, and financial condition to continue to be negatively affected.

We continue to observe the impact of the COVID-19 outbreak on our consolidated operating results, our candidate and field talent supply chain, and our client partners demand in all segments.

We expect that the social distancing measures, the changing operational status of our client partners, production levels at client partners facilities, and general business uncertainty will continue to effect demand in all our segments.

Risks Related to Our Information Technology, Cybersecurity and Data Protection

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If all or any of the foregoing risks occur, it would have a material adverse effect on our company.

Our common stock has been traded on the NYSE since November 14, 2019 and was traded on the NYSE American since October 27, 2014, and we cannot predict whether an active trading market for our common stock will continue.

We cannot predict whether an active trading market for our common stock will continue.

Even if an active trading market continues, the market price of our common stock may remain volatile.

9 unchanged sentences

• sales of significant amounts of our common stock;

• being in the Russell 2000 Index;

• general economic or political conditions in the United States or elsewhere.

19 unchanged sentences

Failure of our control systems to prevent and detect errors or fraud could materially adversely impact us.

During the quarter ended June 28, 2020, management identified a deficiency in our internal controls over financial reporting, which is related to the quantitative assessment of impairment of goodwill and intangible assets.

Management has determined that the aggregate impact of this deficiency resulted in a material weakness.

The material weakness did not result in any identified misstatements in the current period consolidated financial statements, nor in any restatements of consolidated financial statements previously reported by us, and there were no changes in previously released financial results.

For a discussion of our internal controls over financial reporting and a description of the identified material weakness, see Part II, Item 9A Controls and Procedures of this Annual Report on Form 10-K.

We cannot be sure we will pay dividends in the foreseeable future, and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

Prior to December 19, 2014, we had not paid cash dividends on our common stock.

While we have declared and paid dividends for the prior twenty-five quarterly periods, we are limited in our ability to pay dividends by our credit agreement, and therefore, we cannot be certain if we will pay any cash dividends to holders of our common stock in the foreseeable future.

While we have declared and paid dividends for the prior twenty-nine quarterly periods, we are limited in our ability to pay dividends by our credit agreement, and therefore, we cannot be certain if we will pay any cash dividends to holders of our common stock in the foreseeable future.

Any future determination with respect to the payment of dividends will be at the discretion of our board of directors and will be dependent upon, among other things, our financial condition, results of operations, capital requirements, the terms of our then existing indebtedness, contractual restrictions, future prospects, general economic conditions and other factors considered relevant by our board of directors.

19 unchanged sentences

Our certificate of incorporation contains provisions that have the same effect as Section 203, except that they generally provide that Taglich Private Equity LLC, Taglich Brothers, Inc.

or any of their respective affiliates or associates, including any investment funds or portfolio companies managed by any of the

foregoing, or any other person with whom any of the foregoing act as a group for the purpose of acquiring, voting or disposing of our shares, or any person that becomes an interested stockholder as a result of a transfer of 5% or more of our voting stock by the forgoing persons to such person, will be excluded from the “interested stockholder” definition in our certificate of incorporation and will therefore not be subject to the restrictions set forth therein that have the same effect as Section 203.

or any of their respective affiliates or associates, including any investment funds or portfolio companies managed by any of the foregoing, or any other person with whom any of the foregoing act as a group for the purpose of acquiring, voting or disposing of our shares, or any person that becomes an interested stockholder as a result of a transfer of 5% or more of our voting stock by the forgoing persons to such person, will be excluded from the “interested stockholder” definition in our certificate of incorporation and will therefore not be subject to the restrictions set forth therein that have the same effect as Section 203.

While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our board of directors, they could enable the board of directors to hinder or frustrate a transaction that some, or a majority, of the stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors