What changed in this filing

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Item 1A. Risk Factors

2025-03-11 compared with 2024-03-11 · 61 added, 26 removed, 269 unchanged (24% of the section changed)

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You should understand that it is not possible to predict or identify all risk factors that could impact us.

For example, the COVID-19 pandemic has had a dramatic negative impact on the health of citizens of many countries, and resulted in major disruptions in economies and markets around the world, including our key markets.

In addition, it is unclear what effects the on-going war between Russia and Ukraine and the conflict in the Middle East between Israel and Hamas are likely to have on the world economy and certain of our target markets, including particularly the oil and gas market, in the near and long term.

In addition, macroeconomic factors such as inflation, unemployment, and interest rates, amongst others, will impact our business.

For example, it is unclear what effects the on-going war between Russia and Ukraine and the conflict in the Middle East between Israel and Hamas are likely to have on the world economy and certain of our target markets, including particularly the oil and gas market, in the near and long term.

In addition, macroeconomic factors such as inflation, unemployment, interest rates, and tariffs or trade barriers (including recent U.S.

tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions take by such countries) amongst others, will impact our business.

Accordingly, you should not consider the following to be a complete discussion of all risks and uncertainties pertaining to us and our common stock.

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In addition, it is unclear what the continued effects the war between Russia and Ukraine and the conflict in the Middle East between Israel and Hamas are likely to have on the world economy and certain of our target markets, including particularly the oil and gas market, in the near and long term.

However, during 2022, we experienced unfavorable foreign currency exchange impacts as it relates to our European operations.

Additionally, the Russian-Ukrainian war continues to create disruptions in the oil and gas market and the supply chain in general, which is resulting in some disruption to our business operations.

Our European operations are currently experiencing increased costs associated with higher energy costs, among others, due in part to the Russian-Ukrainian war.

However, the on-going war between Russia and Ukraine continues to create disruptions in the oil and gas market and the supply chain in general, which is resulting in some disruption to our business operations.

Our European operations are currently experiencing increased costs associated with higher energy costs, among

others, due in part to the on-going war between Russia and Ukraine.

We may also experience increased costs associated with tariffs or trade barriers (including recent U.S.

tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions taken by such countries).

We may be affected by climate change and market or regulatory responses to climate change

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Our primary operations outside the United States are in Canada, Germany, France, the United Kingdom, the Netherlands, and Brazil.

We also have operations in Belgium, Greece and India.

We also have operations in Belgium, Greece, India and Mexico.

There are numerous risks inherent in doing business in international markets, including:

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• restrictions or limitations on outsourcing contracts or services abroad;

• the imposition of domestic and international tariffs, trade barriers and other trade restrictions;

• restrictions or limitations on the repatriation of funds, or tax consequences on the non-repatriation of overseas operationally generated funds;

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This concentration pertains almost exclusively to our North America segment, which accounted for 81%, 82% and 83% of our revenues for the years ended December 31, 2024, 2023 and 2022, respectively.

These customers are primarily in the oil and gas sector.

These customers are primarily in the oil and gas

Generally, our customers do not have an obligation to make purchases from us and may stop ordering our products and services or may terminate existing orders or contracts at any time with little or no financial penalty.

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In addition, while we are being investigated, we may be required to suspend work on the projects associated with our alleged noncompliance, resulting in loss of profits or customers, and damage to our reputation.

Many of our customers have strict requirements concerning safety or loss time occurrences and if we are unable to meet these requirements it could result in lost

Many of our customers have strict requirements concerning safety or loss time occurrences and if we are unable to meet these requirements it could result in lost revenues.

In the future, governmental agencies may seek to change current regulations or impose additional regulations on our business.

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We and/or our subsidiaries currently have International Organization for Standardization (ISO) 9001:2008 certification, ISO 14001:2004 certification and OHSAS 18001:2007 certification.

In addition, we currently have Nadcap (formerly National Aerospace and Defense Contractors Accreditation Program) and similar certifications for certain of our locations.

In addition, we currently have Nadcap and similar certifications for certain of our locations.

We continually review our NDT solutions for compliance with the requirements of industry specification standards and the Nadcap special processes quality requirements.

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While we do have insurance, our insurance coverage does not cover non-payment by customers and may not be adequate to cover the damages from any of the prior referenced claims, forcing us to bear these uninsured damages directly, which could harm our operating results and may result in additional expenses and possible loss of revenues.

An accident or incident for which we are found partially or fully responsible, even if fully insured, or even an incident at a customer or site for which we provide services although we were found not to be responsible, may also result in negative publicity, which would harm our reputation among our customers and the public, cause us to lose existing and future contracts or make it more difficult for us to compete effectively, thereby significantly harming our operating performance.

An accident or incident for which we are found partially or fully responsible, even if fully insured, or even an incident at a customer or site for which we provide services although we were

found not to be responsible, may also result in negative publicity, which would harm our reputation among our customers and the public, cause us to lose existing and future contracts or make it more difficult for us to compete effectively, thereby significantly harming our operating performance.

In addition, the occurrence of an accident or incident might also make it more expensive or extremely difficult for us to insure against similar events in the future.

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Through Project Phoenix, we have been exploring ways to improve profitability and Adjusted EBITDA, through meaningful margin improvement and sustained cost savings.

We have completed most phases of the project, wherein efficiency and profitability opportunities were identified, actionable initiatives were validated, and many of these actions have been implemented prospectively.

We have completed most phases of the project in 2023, wherein efficiency and profitability opportunities were identified, actionable initiatives were validated, and many of these actions have been implemented prospectively throughout 2024.

Project Phoenix has resulted in significant cost reductions, primarily through headcount reductions, more efficient workflows, and streamlining of processes, and also led to developing and initiating action plans to increase revenue.

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In addition, because the asset protection solutions industry is evolving, we could lose insight into trends that may be emerging, which would further harm our competitive position by making it difficult to predict and respond to customer needs.

If the market for our asset protection solutions does not continue to develop, our ability to grow our business would be limited and we might not be able to maintain profitability.

If the market for our asset protection

solutions does not continue to develop, our ability to grow our business would be limited and we might not be able to maintain profitability.

If we cannot convince our customers of the advantages and value of our advanced NDT services, we could lose large contracts or suffer lower profit margin.

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repayment or the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us,

We believe that it is probable, based on the New Credit Agreement (as defined herein), that we will be able to comply

We believe that it is probable, based on the Credit Agreement (as defined herein), that we will be able to comply

with the financial covenants in our existing credit agreement and that sufficient credit remains available under the credit agreement to meet our liquidity needs.

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our current debt levels and restrictions related to the debt covenants in our credit facility, we do not expect to make any

acquisitions in 2024 other than small acquisitions with the banks’ approval.

acquisitions in 2025 other than small acquisitions with the approval of the lenders under our Credit Agreement.

Currency exchange rate fluctuations in various currencies in which we do business, especially the Euro and the U.S.

dollar, could have a material adverse effect on our business, results of operations and financial condition.

Most of our revenues are denominated in U.S.

dollars, with the remaining amounts largely in euros, British pound sterling, the Brazilian Real, the Canadian Dollar and the Indian rupee.

We have foreign currency exposure related to our operations in foreign locations and our foreign currency exposure arises primarily from the translation of our foreign subsidiaries’ financial statements into U.S.

The exchange rates between the euro and other currencies in which we incur costs or receive revenues, on the one hand, and the U.S.

dollar, on the other hand, have changed substantially in recent years and may fluctuate substantially in the future.

See Item 7A-“Quantitative and Qualitative Disclosures about Market Risk.”

Our results of operations have been adversely affected and could be further adversely affected by certain movements in exchange rates, particularly if the foreign currencies in which we incur expenses appreciate against the U.S.

dollar or if the foreign currencies in which we receive revenues depreciate against the U.S.

For example, a portion of our annual sales and operating costs are denominated in British Pound Sterling and we have exposure related to sales and operating costs increasing or decreasing based on changes in currency exchange rates.

Dollar increases in value against these foreign currencies, the value in U.S.

Dollars of the assets and liabilities originally recorded in these foreign currencies will decrease.

Conversely, if the U.S.

Dollar decreases in value against these foreign currencies, the value in U.S.

Dollars of the assets and liabilities originally recorded in these foreign currencies will increase.

Thus, increases and decreases in the value of the U.S.

Dollar relative to these foreign currencies have a direct impact on the value in U.S.

Dollars of our foreign currency denominated

assets and liabilities, even if the value of these items has not changed in their original currency.

We do not currently enter into forward exchange contracts to hedge exposures denominated in foreign currencies.

We may consider entering into hedging or forward exchange contracts in the future, as sales in international currencies increase due to growth in our International segment.

We face risks regarding our information technology and security.

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Risks Related to Our Common Stock

A significant stockholder has significant influence over the direction of our business.

The family of our late founder and Chairman Emeritus has significant influence over the direction of our business.

The concentrated ownership of our common stock may prevent other stockholders from influencing significant corporate decisions.

Vahaviolos, our fo under and Chairman Emeritus, owns approximately 6% of our outstanding common stock, his three adult children own an additional 6%, in the aggregate, and a grantor retained annuity trust he created, for which his daughter is the sole trustee, owns approximately 22%.

As a result, Dr.

Vahaviolos and his family have significant control over the Company and they have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation, and any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions.

This concentration of ownership could be disadvantageous to other stockholders with differing interests from Dr.

Vahaviolos and his family.

Vahaviolos, our late fo under and Chairman Emeritus, who passed away on February 6, 2025, owned at the time of his passing, approximately 6% of our outstanding common stock, his three adult children owned, at the time of his passing an additional 6%, in the aggregate, and a grantor retained annuity trust he created, for which his daughter is the sole trustee, owned approximately 22% at the time of his passing.

As a result, the family of Dr.

Vahaviolos has significant control over the Company and they have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation, and any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions.

This concentration of ownership could be disadvantageous to other stockholders with differing interests from the family of Dr.

We currently have no plans to pay dividends on our common stock.

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These provisions:

• allow the authorized number of directors to be changed only by resolution of our board of directors;

• require that vacancies on the board of directors, including newly created directorships, be filled only by a majority vote of directors then in office;

• authorize our board of directors to issue, without stockholder approval, preferred stock that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our board of directors;

• allow the authorized number of directors to be changed only by resolution of our Board;

• require that vacancies on the Board, including newly created directorships, be filled only by a majority vote of directors then in office;

• authorize our Board to issue, without stockholder approval, preferred stock that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our Board;

• require that stockholder actions must be effected at a duly called stockholder meeting by prohibiting stockholder action by written consent;

• prohibit cumulative voting in the election of directors, which may otherwise allow holders of less than a majority of stock to elect some directors;

• establish advance notice requirements for stockholder nominations to our board of directors or for stockholder proposals that can be acted on at stockholder meetings and limit the right to call special meetings of stockholders to the Chairman of our board, our Chief Executive Officer, our board of directors acting pursuant to a resolution adopted by a majority of directors or our Secretary upon the written request of stockholders entitled to cast not less than 35% of all the votes entitled to be cast at such meeting.

• establish advance notice requirements for stockholder nominations to our Board or for stockholder proposals that can be acted on at stockholder meetings and limit the right to call special meetings of stockholders to the Chairman of our board, our Chief Executive Officer, our Board acting pursuant to a resolution adopted by a majority of directors or our

Secretary upon the written request of stockholders entitled to cast not less than 35% of all the votes entitled to be cast at such meeting.

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a prescribed period of time.

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During the year ended December 31, 2023, we recognized goodwill impairment charges of $13.8 million within the International reporting units.

Future deterioration in industry or economic conditions in which we operate, including increased inflationary costs, energy costs, labor costs, social pressures and disruptions in Europe, the Middle East or elsewhere as a result of the war between Russia and Ukraine and the conflict between Israel and Hamas, disruptions to our business, not effectively integrating acquired businesses, macroeconomic factors or other factors, may cause impairment charges to our goodwill in future periods.

Future deterioration in industry or economic conditions in which we operate, including increased inflationary costs, costs associated with proposed tariffs or other trade restrictions, energy costs, labor costs, social pressures and disruptions in Europe, the Middle East or elsewhere as a result of the war between Russia and Ukraine and the conflict between Israel and Hamas, disruptions to our business, not effectively integrating acquired businesses, macroeconomic factors or other factors, may cause impairment charges to our goodwill in future periods.

We are subject to privacy and data security/protection laws in the jurisdictions in which we operate and may be exposed to substantial costs and liabilities associated with such laws and regulations.

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Although we obligate our employees to confidentiality, we cannot be certain that these obligations will be honored or enforceable in all circumstances.

Social, political and economic changes or instability, or other circumstances beyond our control could affect our business operations.

Our business may be adversely affected by social, political and economic instability, unrest or disruption, including legal, regulatory and policy changes by a new presidential administration in the U.S., protests, demonstrations, strikes, riots, civil disturbance, disobedience, insurrection, or social and other political unrest.

Such events may result in restrictions, curfews or other actions and give rise to significant changes in regional and global economic conditions and cycles, which may adversely affect our financial condition and operations.

Changes in federal policy, including tax policies, and at regulatory agencies occur over time through policy and personnel changes following elections, which can lead to changes involving the level of oversight and focus on certain industries and corporate entities.

The nature, timing, and economic and political effects of potential changes to the current legal and regulatory frameworks affecting the industries in which we operate remain highly uncertain.

Additionally, changes in federal policy that affect the geopolitical landscape, such as the imposition of tariffs and changes to U.S.

trade policy, have, and could in the future, lead to adverse effects on the U.S.

domestic economy and our business operations.

We may require additional capital to support business growth, which might not be available.

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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