What changed in this filing

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Item 1A. Risk Factors

2020-12-07 compared with 2019-12-06 · 106 added, 65 removed, 153 unchanged (53% of the section changed)

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Our business, results of operations or financial condition could be materially and adversely affected by any of these risks, and the value of your investment may decrease due to any of these risks.

Risks Relating to Our Common Stock

Existence of a controlling shareholder.

A majority of our outstanding common stock is owned by Tontine.

Based on a Form 4 filed by Tontine on October 3, 2019 , Tontine owns approximately 58 percent of the Company’s outstanding common stock.

As a result, Tontine can control most of our affairs, including the election of our directors, who in turn appoint executive management and can control most actions requiring the approval of shareholders, including the adoption of amendments to our corporate charter and approval of any potential merger or sale of all or substantially all assets, segments, or the Company itself.

This control also gives Tontine the ability to bring matters to a shareholder vote that may not be in the best interest of our other shareholders or stakeholders.

Additionally, Tontine is in the business of investing in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us or act as suppliers or customers of the Company.

Pursuant to a resale shelf registration statement filed by the Company, Tontine has the ability to resell any or all of its registered shares from time to time in one or more offerings as long as the registration statement remains effective and the Company remains eligible to use it, as described further in the registration statement and in any prospectus supplement filed in connection with an offering pursuant to the shelf registration statement.

Tontine’s sale of all or any portion of its shares could result in a change of control of the Company, which would trigger the change of control provisions in a number of our material agreements, including our credit facility, bonding agreements with our sureties, and our executive severance plan, as well as the exercisability of the purchase rights under our NOL Rights Plan.

Our common stock has less liquidity than many other stocks listed on the NASDAQ Global Market.

Historically, the trading volume of our common stock has been relatively low when compared to other companies listed on the NASDAQ Global Market or other stock exchanges.

While we have experienced increased liquidity in our stock during recent years compared with historical levels, we cannot say with certainty that a more active and liquid trading market for our common stock will continue to develop.

Because of this, it may be more difficult for shareholders to sell a substantial number of shares for the same price at which shareholders could sell a smaller number of shares.

We may issue additional shares of common stock or convertible securities that will dilute the percentage ownership interest of existing stockholders and may dilute the book value per share of our common stock.

Our authorized capital includes 100,000,000 shares of common stock and 10,000,000 shares of preferred stock.

As of September 30, 2019 , we had 22,049,529 shares of common stock issued, 21,165,011 shares of common stock outstanding and no shares of preferred stock issued or outstanding.

We have reserved for issuance 21,750 shares of common stock underlying options that are exercisable at a weighted average price of $ 6.35 per share.

In addition, as of September 30, 2019 , we had the ability to issue 824,676 shares of common stock, including upon the exercise of options, as future grants under our existing equity compensation plans.

Although we currently do not have any intention of issuing additional common stock (other than pursuant to our equity compensation plans), we may do so in the future in order to meet our capital needs.

Subject to applicable NASDAQ Listing Rules, our Board of Directors generally has the authority, without action by or vote of the stockholders, to issue all or part of any authorized but unissued shares of common stock for any corporate purpose.

We may seek additional equity capital in the future as we develop our business and expand our operations.

Any issuance of additional shares of common stock or convertible securities will dilute the percentage ownership interest of our stockholders and may dilute the book value per share of our common stock.

Substantial sales of our common stock could adversely affect our stock price.

Most of Tontine's shares are registered for resale on a shelf resale registration statement filed by the Company with the SEC.

Sales of a substantial number of shares of our common stock by holders of our common stock, including Tontine or the perception that such sales could occur, could adversely affect the market price of our common stock by introducing a large number of shares into the market.

Such sales, or the perception that such sales could occur, could cause the market price of our common stock to decline.

We cannot predict whether future sales of our common stock, or the availability of our common stock for sale, will adversely affect the market price for our common stock or our ability to raise capital by offering equity securities.

Risks Relating to the Operations of our Business

The highly competitive nature of our industries could affect our profitability by reducing our profit margins.

With respect to electrical contracting services, the industries in which we compete are highly fragmented and are served by many small, owner-operated private companies.

The Coronavirus Disease 2019 ("COVID-19") pandemic has adversely impacted and could have a materially adverse impact on our business, including our financial condition, cash flows and results of operations.

The COVID-19 pandemic and related governmental responses have caused, and are likely to continue to cause, significant volatility in financial markets, and have raised the prospect of an extended global recession.

Public health problems resulting from COVID-19 and precautionary measures instituted by governments and businesses to mitigate its spread, including travel restrictions, curfews and "stay at home" orders, have contributed to a prolonged slowdown in the global economy, have disrupted global supply chains, have adversely impacted the businesses of the Company’s customers and suppliers, and have disrupted the Company’s operations.

There is no assurance that the outbreak will not have a material adverse impact on the future results of the Company.

Potential risks associated with the COVID-19 pandemic include:

• Government travel restrictions, curfews, “stay at home” orders, and other safety concerns related to COVID-19 have caused some of our customers to close job sites temporarily or delay the start dates of new projects and the awarding of new projects.

Because much of our revenue is generated by our employees working at customer sites, our revenue will be reduced if a significant number of our customer sites close, or if customers reduce or eliminate the presence of third-party contractors and service providers, such as our employees.

Further, a general economic downturn could reduce the demand for our services.

Any cancellations, delays or losses of projects may significantly reduce our revenues and harm our operating performance.

• The COVID-19 pandemic could disrupt our operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others on our job sites or in our facilities, or due to quarantines.

The COVID-19 pandemic could also impact members of our Board, resulting in absenteeism from the meetings of the directors or committees of the directors, and make it difficult to convene the quorums of the full Board or its committees needed to conduct meetings for the management of our affairs.

• Certain of our customers may experience financial difficulties, including bankruptcy or insolvency, as a result of a decline in the economy relating to COVID-19.

If our customers suffer significant financial difficulty, they may be unable to pay amounts due to us in a timely manner or at all, which could have a material adverse effect on our ability to collect on

receivables and our results of operations.

It is possible that customers may contest their contractual obligations to us under bankruptcy laws or otherwise.

Further, we may have to negotiate significant discounts and/or extended financing terms with such customers in such a situation.

If we are unable to collect upon our accounts receivable as they come due in an efficient and timely manner, our business, results of operations and financial condition may be materially adversely affected.

The highly competitive nature of our industries could affect our profitability by reducing our revenues or profit margins.

With respect to contracting services, the industries in which we compete are highly fragmented and are generally served by many small, owner-operated private companies.

There are also several large private regional companies and a small number of large public companies from which we face competition in these industries.

In the future, we could also face competition from new competitors entering these markets because certain segments, such as our electrical contracting services, have a relatively low barrier for entry while other segments, such as our services for mission critical infrastructure, have attractive characteristics.

Some of our competitors offer a greater range of services, including mechanical construction, facilities management, plumbing and heating, ventilation and air conditioning services.

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The failure to bid and be awarded projects, cancellations of projects or delays in project start dates could affect our ability to deploy our assets profitably.

Further, when we are awarded contracts, we face additional risks that could affect whether, or when, work will

Further, when we are awarded contracts, we face additional risks that could affect whether, or when, work will begin.

We could experience a decrease in profitability if we are unable to replace canceled, completed or expired contracts with new work.

Our inability to carry out plans and strategies as expected, including our inability to identify and complete acquisitions that meet our investment criteria in furtherance of our corporate strategy or the subsequent underperformance of those acquisitions, may adversely impact our future growth.

Our corporate strategy involves creating shareholder value through acquiring or investing in stand-alone platform companies based in North America or acquiring businesses that we believe will strategically complement our existing business segments.

While we believe that acquisitions will provide an opportunity to expand into new end-markets and diversify our revenue and profit streams, potential acquisitions in new industries could result in changes in our operations from those historically conducted by us and introduce the requirement for new controls.

Our corporate strategy involves creating shareholder value through acquiring businesses that we believe will strategically complement our existing business segments or acquiring or investing in stand-alone platform companies based in North America.

While we believe that acquisitions will provide an opportunity to expand into new or related services, products, end-markets or geographic areas and diversify our revenue and profit streams, potential acquisitions could result in changes in our operations from those historically conducted by us and introduce the requirement for new controls.

Alternatively, our failure to diversify from existing markets may limit our future growth.

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Many of our customers depend on the availability of credit to purchase our services or electrical and mechanical products.

In the past, when the general level of economic activity has been reduced from historical levels, certain of our customers have delayed or cancelled projects or capital spending, thereby reducing our revenues and profitability.

General concerns about the fundamental soundness of the economy may cause customers to defer projects, even if they have credit available to them.

Prolonged uncertainties in, or the return of, constrained credit market conditions could have adverse effects on our customers, which would adversely affect our financial condition and results of operations.

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Those bonds guarantee the customer that we will perform under the terms of a contract and that we will pay subcontractors and vendors.

We obtain surety bonds from two primary

surety providers;

however, there is no commitment from these providers to guarantee our ability to issue bonds for projects as they are required.

We obtain surety bonds from two primary surety providers;

however, there is no commitment from these providers to guarantee our ability to issue bonds for projects as

they are required.

Our ability to access this bonding capacity is at the sole discretion of our surety providers.

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Due to seasonality and differing regional economic conditions, our results may fluctuate from period to period.

Our business is subject to seasonal variations in operations and demand that affect the construction business, particularly in the Residential and Commercial & Industrial segments, as well as seasonal variations in the industries in which Infrastructure Solutions participates.

Untimely weather delay from rain, heat, ice, cold or snow can not only delay our work but can negatively impact our schedules and profitability by delaying the work of other trades on a construction site.

Our business is subject to seasonal variations in operations and demand that affect the construction business, particularly in the Residential and Commercial & Industrial segments.

Untimely weather delay from rain, heat, ice, cold or snow may not only delay our work but may negatively impact our schedules and profitability by delaying the work of other trades on a construction site.

Our quarterly results may also be affected by regional economic conditions that affect the construction market.

In particular, a prolonged period of weak demand in the oil and gas industry could dampen the housing market in certain regions, resulting in reduced demand for the services provided by our Residential segment.

In particular, a prolonged period of weak demand in the oil and gas industry or increased regulatory restrictions on the industry could dampen the housing market in certain regions, resulting in reduced demand for the services provided by our Residential segment.

Infrastructure Solutions’ revenues from industrial services may be affected by the timing of scheduled outages at its industrial customers’ facilities, by weather conditions with respect to projects conducted outdoors, by data center construction, and by changes in spending in public infrastructure, power and steel markets.

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We may experience difficulties in managing our billings and collections.

Our billings under fixed price contracts in our electrical contracting business are generally based upon achieving certain milestones and will be accepted by the customer once we demonstrate those milestones have been met.

Our billings under fixed price contracts in our contracting business are generally based upon achieving certain milestones and will be accepted by the customer once we demonstrate those milestones have been met.

If we are unable to demonstrate compliance with billing requests, or if we fail to issue a project billing, our likelihood of collection could be delayed or impaired, which, if experienced across several large projects, could have a material adverse effect on our results of operations.

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Our current insurance coverage may not be adequate, and we may not be able to obtain insurance at acceptable rates, or at all.

We maintain insurance coverage in part because some of our contracts require us to carry certain levels of insurance coverage, which is common in the industries in which we operate.

Our third-party insurance is subject to deductibles for which we establish reserves.

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Any increases in our latent defect claims and litigation could place pressure on the profitability of the Residential and Commercial & Industrial segments of our business.

Interruptions in the proper functioning of our information systems, or security breaches of our information systems or confidential data, could disrupt operations and cause increases in costs and/or decreases in revenues.

As our Company continues to increase its dependence on information technology systems, networks, and infrastructure to conduct its day to day operations, the proper functioning and security of our information technology environment are critical to the successful operation of our business.

Although our information systems, networks and infrastructure are protected through physical and software safeguards, our information technology environment is still vulnerable to natural disasters, power losses, telecommunication failures, deliberate intrusions and other cyber security risks, and other problems, which could cause a loss of data, release of personally identifiable information or release of confidential customer information among other items.

If critical information systems fail or are otherwise unavailable or confidential information is released, our business operations could be adversely affected.

Disruptions to the proper functioning of our information technology systems or security breaches of our critical data, sensitive information or information technology systems could disrupt operations and cause increases in costs, decreases in revenues and/or harm to our reputation.

Our Company continues to increase its dependence on information technology systems, networks, and infrastructure to conduct our day to day operations and manage the way we provide services to our customers.

Disruptions to our information technology systems or our failure to adequately protect critical data, sensitive information, and information technology systems could materially affect our business or result in harm to our reputation.

Our critical accounting, project management, estimating, and financial information systems, some of which are third-party platforms, all rely on the proper functioning and security of our information technology environment and are critical to the successful operation of our business.

We also collect and retain information about our customers, stockholders, vendors, and employees, with the expectation by such third parties being that we will adequately protect such information.

Although our information technology systems, networks and infrastructure are protected through physical and software safeguards, our information technology environment is still vulnerable to natural disasters, power losses, telecommunication failures, deliberate intrusions, inadvertent user misuse or error, computer viruses, malicious code, ransomware attacks, acts of terrorism and other cyber security risks, which could cause a loss of critical data, or release of sensitive information.

If critical information systems fail or are otherwise unavailable, or if sensitive information is released, our business operations could be adversely affected.

We may be required to conduct environmental remediation activities, which could be expensive and inhibit the growth of our business and our ability to maintain profitability, particularly in our Infrastructure Solutions business.

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Our operations depend on the continued efforts of our executive officers, senior management and management personnel at our segments.

We cannot guarantee that any member of management at the corporate or subsidiary level will continue in their capacity for any particular period of time.

As a service organization, relationships with significant customers can be dependent on certain employees within our organization, and our ability to meet our contractual obligations to our customers and support our growth strategy may be limited by our ability to retain and train necessary personnel.

We cannot guarantee that any member of management at the corporate or subsidiary level will continue in their capacity for any particular period of time, and there is significant competition in our industry for managerial personnel.

We have a severance plan in place that covers certain of our senior leaders;

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Additionally, we generally do not maintain key man life insurance for members of our management.

We also may be constrained in hiring and retaining qualified employees due to historically low unemployment rates and general labor shortages in our industries.

We also may be constrained in hiring and retaining qualified employees due to general labor shortages in our industries.

Continued labor constraints may limit our ability to grow and may limit our profitability due to the impact of rising wages.

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Should a change in ownership occur, all NOLs incurred prior to the change in ownership would be subject to limitation imposed by Internal Revenue Code Section 382, which would substantially reduce the amount of NOL currently available to offset taxable income.

The Company maintains an NOL Rights Plan, which was designed to deter an acquisition of the Company’s stock in excess of a threshold amount that could trigger an ownership change within the meaning of Internal Revenue Code Section 382.

The Company maintains an NOL Rights Plan, which is designed to deter an acquisition of the Company’s stock in excess of a threshold amount that could trigger a change in ownership within the meaning of Internal Revenue Code Section 382.

The NOL Rights Plan is designed to dilute the ownership of such an acquirer through the offering of rights to the Company’s other stockholders that will become exercisable upon the acquirer’s purchase of the Company’s stock in excess of the threshold amount.

We can make no assurances the NOL Rights Plan will be effective in deterring an ownership change or protecting or realizing NOLs.

We can make no assurances the NOL Rights Plan will be effective in deterring a change in ownership or protecting or realizing NOLs.

We have adopted tax positions that a taxing authority may view differently.

If a taxing authority differs with our tax positions, our results may be adversely affected.

Our effective tax rate and cash paid for taxes are impacted by the tax positions that we have adopted.

Our effective tax rate, cash paid for taxes and the availability of our NOLs are impacted by the tax positions that we have adopted.

Taxing authorities may not always agree with the positions we have taken.

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We have recognized deferred tax assets based upon our estimates of future taxable income, and we may recognize tax expense if there is a reduction in the statutory tax rate or if future taxable income is lower than our estimates.

As of September 30, 2019 , we have a net deferred tax asset of $40.9 million on our Consolidated Balance Sheet, of which $39.0 million is attributable to NOLs.

As of September 30, 2020, we have a net deferred tax asset of $33.8 million on our Consolidated Balance Sheets, of which $22.6 million is attributable to NOLs.

To realize the full benefit of this deferred tax asset attributable to NOLs, we must generate sufficient taxable income within the applicable carry forward period to offset against NOLs.

Under accounting principles generally accepted in the United States of America ("GAAP"), we are required to assess whether we believe the benefit of the deferred tax asset is more likely than not to be realized based on our expectation of generating sufficient future taxable income, and we are required to record a valuation allowance, or offset, against our deferred tax asset based on the portion of the deferred tax asset that we believe is not more likely than not to be realized.

Under GAAP, we are required to assess whether we believe the benefit of the deferred tax asset is more likely than not to be realized based on our expectation of generating sufficient future taxable income, and we are required to record a valuation allowance, or offset, against our deferred tax asset based on the portion of the deferred tax asset that we believe is not more likely than not to be realized.

If we are unable to generate sufficient taxable income in the future to utilize our NOLs, then we could be required to record valuation allowances, resulting in an increase in income tax expense and a reduction of our consolidated net income.

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Any further decrease in the federal statutory tax rate or other changes in federal tax statutes could also cause a reduction in the economic benefit of the NOL currently available to us and a corresponding reduction in the amount of our recorded deferred tax assets.

To fund our working capital requirements and service any debt we may incur, we may require a significant amount of cash.

To fund our working capital requirements, complete acquisitions and service any debt we may incur, we may require a significant amount of cash.

Our ability to generate cash depends on many factors that are beyond our control.

Our ability to make payments on and to refinance any indebtedness we may incur and to fund working capital requirements will depend on our ability to generate cash in the future.

Our ability to continue to grow our business, including through acquisitions and the funding of working capital requirements, as well as our ability to make payments on or refinance any indebtedness we may incur, will depend on our ability to generate cash in the future.

This is subject to our operational performance, as well as general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot provide assurance that our business will generate sufficient cash flow from operations or asset sales or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to service any debt we may incur or to fund our other liquidity needs.

We cannot provide assurance that our business will generate sufficient cash flow from operations or asset sales or that future borrowings will be available to us under our credit facility in an amount sufficient to enable us to complete acquisitions, to service any debt we may incur or to fund our other liquidity needs.

We may need to refinance our credit facility on or before maturity.

We cannot provide assurance that we will be able to refinance our credit facility on commercially reasonable terms or at all.

provide assurance that we will be able to refinance our credit facility on commercially reasonable terms or at all.

Our inability to access capital on commercially reasonable terms could have a material adverse effect on our business.

We have restrictions and covenants under our credit facility and the failure to meet these covenants, including liquidity and other financial requirements, could result in a default under our credit facility.

We may not be able to remain in compliance with the covenants in our credit facility, including financial covenants which, among other things, require minimum levels of liquidity and require us to maintain a specified fixed charge coverage ratio as defined under our credit facility.

A failure to fulfill the terms and requirements of our credit facility may result in a default under our credit agreement and acceleration of any indebtedness we may incur, as well as a default under one or more of our material agreements, any of which could have a material adverse effect on our ability to conduct our operations and our financial condition.

Negative conditions in the credit and capital markets may adversely impact our ability to operate our business.

In the past, the level of demand from our customers for our services has been adversely impacted by slowdowns in our customers' industries as well as in the economy in general.

A number of economic factors, including financing conditions for our customers' industries, have, in the past, adversely affected our customers and their ability or willingness to fund expenditures.

Many of our customers depend on the availability of credit to help finance their capital and maintenance projects.

At times, tightened availability of credit and changes in interest rates that affect the cost of construction financing and mortgages has negatively impacted the ability of existing and prospective customers to obtain sufficient financing and fund projects we might otherwise perform.

As a result, our customers may defer such projects for an unknown, and perhaps lengthy, period.

Any such deferrals would inhibit our growth and would adversely affect our results of operations.

In a weak economic environment, particularly in a period of restrictive credit markets, we may experience greater difficulties in collecting payments from, and negotiating change orders and/or claims with, our customers due to, among other reasons, a diminution in our ultimate customers’ access to the credit markets.

If clients delay in paying or fail to pay a significant amount of our outstanding receivables, or we fail to successfully negotiate a significant portion of our change orders and/or claims with customers, it could have an adverse effect on our liquidity, results of operations, and financial position.

We have restrictions and covenants under our credit agreement and the failure to meet these covenants, including liquidity and other financial requirements, could result in a default under our credit agreement.

We may not be able to remain in compliance with the covenants in our credit agreement, including financial covenants which, among other things, require minimum levels of liquidity and require us to maintain a specified fixed charge coverage ratio as defined under our credit agreement.

A failure to fulfill the terms and requirements of our credit agreement may result in a default under our credit agreement and acceleration of any indebtedness we may incur, as well as a default under one or more of our material agreements, any of which could have a material adverse effect on our ability to conduct our operations and our financial condition.

Our use of percentage-of-completion accounting could result in a reduction or elimination of previously reported profits, and we may be adversely impacted by new accounting, control and operating procedures.

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GAAP accounting requires that goodwill attributable to each of our reporting units be tested at least annually, or when changes in circumstance indicate the carrying value of our reporting units may not be recoverable.

Factors that could lead to impairment of goodwill include significant adverse changes in the business climate, declines in the financial condition of our business, and actual or projected operating results affecting our company as a whole or affecting any particular reporting unit.

At September 30, 2020, we had recorded $54 million of goodwill on our Consolidated Balance Sheets, net of a $7.0 million impairment recognized within our Commercial & Industrial segment during the year ended September 30, 2020.

Factors that could lead to impairment of current goodwill in the future include significant adverse changes in the business climate, declines in the financial condition of our business, and actual or projected operating results affecting the Company as a whole or affecting any particular reporting unit.

On an ongoing basis, we expect to perform impairment tests at least annually as of September 30.

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We cannot assure that we will not have future impairment adjustments to our recorded goodwill.

The phase-out, replacement or unavailability of LIBOR could affect interest rates under our revolving credit facility, as well as our ability to obtain future debt financing on favorable terms.

We are subject to interest rate risk on floating interest rate borrowings under our revolving credit facility.

Borrowings under our revolving credit facility use LIBOR as a benchmark for establishing the interest rate.

In July 2017, the Financial Conduct Authority (the regulatory authority over LIBOR) stated that it would phase out LIBOR as a benchmark after 2021 to allow for an orderly transition to an alternative reference rate.

Our revolving credit facility provides for a mechanism to amend the facility to reflect the establishment of an alternative rate of interest upon the occurrence of certain events related to the phase-out of LIBOR.

However, we have not yet pursued any technical amendment or other contractual alternative to address this matter and are currently evaluating the impact of the potential replacement of the LIBOR interest rate.

In the United States, the Alternative Reference Rates Committee has proposed the Secured Overnight Financing Rate (“SOFR”) as an alternative to LIBOR for use in contracts that are currently indexed to U.S.

dollar LIBOR and has proposed a market transition plan to SOFR.

It is not presently known whether SOFR or any other alternative reference rates that have been proposed will attain market acceptance as replacements of LIBOR.

In addition, the overall financial markets may be disrupted as a result of the phase-out or replacement of LIBOR.

Uncertainty as to the nature of such phase out and selection of an alternative reference rate, together with disruption in the financial markets, could have a material adverse effect on our financial condition, results of operations and cash flows, and may adversely affect our ability to obtain future debt financing on favorable terms.

Risks Relating to Our Common Stock

Existence of a controlling shareholder.

A majority of our outstanding common stock is owned by Tontine, and Jeffrey Gendell, founder and managing member of Tontine, serves as our Chief Executive Officer and as Chairman of our Board of Directors.

Based on an amended Schedule 13D filed by Tontine with the SEC on October 9, 2020, Tontine owns approximately 56 percent of the Company’s outstanding common stock.

This control also gives Tontine the ability to bring matters to a shareholder vote that may not be in the best interest of our other shareholders or stakeholders.

Tontine’s sale of all or any portion of its shares could result in a change of control of the Company, which would trigger the change of control provisions in a number of our material agreements, including our credit agreement, bonding agreements with our sureties, and our executive severance plan, as well as the exercisability of the purchase rights under our NOL Rights Plan.

Our common stock has less liquidity than many other stocks listed on the NASDAQ Global Market.

Historically, the trading volume of our common stock has been relatively low when compared to other companies listed on the NASDAQ Global Market or other stock exchanges.

Because of this, it may be more difficult for shareholders to sell a substantial number of shares for the same price at which shareholders could sell a smaller number of shares.

We may issue additional shares of common stock, preferred stock or convertible securities that will dilute the percentage ownership interest of existing stockholders and may dilute the book value per share of our common stock.

Our authorized capital includes 100,000,000 shares of common stock and 10,000,000 shares of preferred stock.

As of September 30, 2020, we had 22,049,529 shares of common stock issued, 20,762,395 shares of common stock outstanding and no shares of preferred stock issued or outstanding.

As of September 30, 2020, we had the ability to issue 928,669 shares of common stock, including upon the exercise of options, as future grants under our existing equity compensation plans.

Although we currently do not have any intention of issuing additional common stock (other than pursuant to our equity compensation plans) or preferred stock, we may do so in the future in order to meet our capital needs.

We may seek additional equity capital in the future as we develop our business and expand our operations.

Any issuance of additional shares of common stock, preferred stock, or

convertible securities will dilute the percentage ownership interest of our stockholders and may dilute the book value per share of our common stock.

Substantial sales of our common stock could adversely affect our stock price.

Most of Tontine's shares are registered for resale on a resale shelf registration statement filed by the Company with the SEC.

Sales of a substantial number of shares of our common stock by holders of our common stock, including Tontine, or the perception that such sales could occur, could adversely affect the market price of our common stock by introducing a large number of shares into the market.

Such sales, or the perception that such sales could occur, could cause the market price of our common stock to decline.

General Risks

Our internal controls over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur.

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Because of the inherent limitations in a cost-effective control system, misstatements due to error could occur without being detected.

We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.

We are subject to interest rate risk on floating interest rate borrowings under our revolving credit facility.

Borrowings under our revolving credit facility use London Interbank Offering Rate (“LIBOR”) as a benchmark for establishing the interest rate.

In July 2017, the Financial Conduct Authority (the regulatory authority over LIBOR) stated they will plan for a phase out of regulatory oversight of LIBOR after 2021 to allow for an orderly transition to an alternative reference rate.

Although the full impact of the transition away from LIBOR, including the discontinuance of LIBOR publication and the adoption of a replacement rate for LIBOR, remains unclear, these changes may have an adverse impact on our financing costs and any floating rate indebtedness we may incur.

Unresolved Staff Comments

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