What changed in this filing

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Item 1A. Risk Factors

2023-03-14 compared with 2022-03-16 · 150 added, 184 removed, 192 unchanged (63% of the section changed)

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Risks Related to Market Conditions

The COVID-19 pandemic and related economic repercussions have had, and are expected to continue to have, a significant impact on our business, and depending on the duration of the pandemic and its effect on the oil and gas industry, could have a material adverse effect on our business, liquidity, consolidated results of operations, and consolidated financial condition.

Widespread public health crises, epidemics and pandemics , and the related threat of recession and other economic repercussions have had, and may continue to have, a significant impact on our business, and depending on its continued effects on the oil and gas industry, could have a material adverse effect on our business, liquidity, consolidated results of operations, and consolidated financial condition.

Our clients in the oil and gas industry have historically accounted for a substantial portion of our revenues.

The COVID-19 pandemic and related economic repercussions have created significant volatility, uncertainty and turmoil in the oil and gas industry in the past two years.

Since the onset of the pandemic in early 2020, these events have directly affected our business and have exacerbated the potential negative impact from many of our risks, including those relating to the worldwide demand for oil and natural gas, our clients’ capital spending and trends in oil and natural gas prices.

In addition, the pandemic and efforts to mitigate its spread have resulted in logistical challenges to our operations, including travel restrictions that prevent our personnel from commuting to certain facilities and job sites.

These logistical challenges could increase if the pandemic worsens or persists.

Oil demand during 2020 and 2021 was substantially less than demand in 2019 as a result of the virus and corresponding measures taken around the world to mitigate its spread.

Though demand began to increase during the latter part of 2021, a worsening of the virus could result in an increase in mitigation efforts and a reduction in demand for oil and gas and our services and products.

Given the nature and significance of the events described above, we are not able to enumerate all related potential risks to our business;

however, we believe that in addition to the impacts described above, other current and potential impacts of these recent events include, but are not limited to:

greater supply chain disruption, which could have an adverse impact on volumes and make it more difficult for us to serve our clients;

liquidity challenges, including impacts related to delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies;

notices from customers, suppliers, and other third parties arguing that their non-performance under our contracts with them is permitted as a result of force majeure or other reasons;

cybersecurity issues, as digital technologies may become more vulnerable and experience a higher rate of cyberattacks in the current environment of remote connectivity;

litigation risk and possible loss contingencies related to COVID-19 and its impact, including with respect to commercial contracts, employee matters, and insurance arrangements;

infections and quarantining of our employees and the personnel of our customers, suppliers, and other third parties in areas in which we operate;

actions undertaken by national, regional, and local governments and health officials to contain COVID-19 or treat its effects;

and structural shift in the global economy and its demand for oil and natural gas as a result of changes in the way people work, travel, and interact, or in connection with a global recession or depression.

Given the dynamic nature of these events, we cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist or any changes in their severity, the full extent of the impact they will have on our business, liquidity, results of operations, and financial condition or the pace or extent of any recovery.

To the extent COVID-19 adversely affects our business, liquidity, results of operations, and financial condition, it may also have the effect of heightening other risks.

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The economic environment may affect client demand for our services.

Future economic and political uncertainty may reduce the availability of liquidity and credit and, in many cases, reduce demand for our clients’ products.

W idespread public health crises, epidemics and pandemics , threat of recession and related economic repercussions created significant volatility, uncertainty and turmoil in the oil and gas industry during 2022 and 2021 and continue to disrupt the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.

While the effects of the COVID-19 outbreak recently appear to be lessening significantly, widespread public health crises, epidemics and pandemics spreading throughout the U.S.

and globally could result in significant disruptions.

The global economy, our markets and our clients’ businesses have been, and may continue to be, materially and adversely affected by widespread public health crises, epidemics and pandemics .

The threat of recession on the economic environment may affect client demand for our services.

The threat of recession on our economic environment and political uncertainty may reduce the availability of liquidity and credit and, in many cases, reduce demand for our clients’ products.

Disruption of the credit markets could also adversely affect our clients’ ability to finance ongoing maintenance and new capital projects, resulting in contract cancellations or suspensions, capital project delays, repurposing of infrastructure, and infrastructure closures.

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Extended periods of low prices for crude oil can have a material adverse impact on our results of operations, financial condition and liquidity.

While we continue to expand our market presence in the areas of aerospace and defense, construction, chemical processing, manufacturing, power generation, and public infrastructure, among other industries, economic downturns within the oil and gas industry including crude oil prices have, and could continue to, result in reduction in demand for our services.

While we continue to expand our market presence in the areas of aerospace and defense, construction, chemical processing, manufacturing, power generation, and public infrastructure, among other industries, economic downturns within the oil and gas industry including falling crude oil prices, have resulted in, and could in the future, result in reduction in demand for our services.

Our revenues are heavily dependent on certain industries.

Sales of our services are dependent on clients in certain industries, particularly the refining and petrochemical industries.

As we have experienced in the past, and as we expect to occur in the future, downturns characterized by diminished demand for services in these industries as well as potential changes due to consolidation or changes in client businesses or governmental regulations, could have a material impact on our results of operations, financial position or cash flows.

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operations, financial position or cash flows.

Certain clients have employees represented by unions and could be subject to temporary work stoppage which could impact our activity level.

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We may fail to generate sufficient revenue, operating margin or other value to justify our investments in such new client markets, thereby harming our ability to generate revenue.

If we cannot regain compliance with the NYSE’s continuing listing requirements and rules, the NYSE may delist our common stock, which could negatively affect our company, the price of our common stock and your ability to sell our common stock.

On February 2, 2022, we were notified by the NYSE that the average closing price of our common stock, over a prior 30 consecutive trading day period was below $1.00 per share, which is the minimum average closing price per share required to maintain listing on the NYSE under Section 802.01C of the NYSE Listed Company Manual.

We have a period of six months following the receipt of the notice to regain compliance with the minimum share price requirement, with the possibility of extension at the discretion of the NYSE.

In order to regain compliance, on the last trading day in any calendar month during the cure period, our common stock must have:

(i) a closing price of at least $1.00 per share;

and (ii) an average closing price of at least $1.00 per share over the 30 trading day period ending on the last trading day of such month.

If we fail to regain compliance with Section 802.01C of the NYSE Listed Company Manual by the end of the cure period, our common stock will be subject to the NYSE’s suspension and delisting procedures.

We are closely monitoring the closing share price of our common stock and are considering all available options.

We intend to regain compliance with the NYSE listing standards by pursuing measures that are in the best interests of the Company and our shareholders, including potentially through the consummation of a reverse stock split, subject to Board of Director and shareholder approval.

Ukraine Conflict .

The Company does not have employees or operations in Russia or Ukraine.

Sanctions and other trade controls imposed by the United States and other governments in response to Russia’s military operations in Ukraine could impact our supply chain and our clients’ businesses in future periods.

While it is difficult to estimate the impact of current or future sanctions on the Company’s business and financial position, these sanctions could adversely impact the Company’s sales, cost of procuring raw materials, or distribution costs in future periods.

We may not be able to meet the NYSE’s continued listing requirements and rules, and the NYSE may delist our common stock, which could negatively affect our company, the price of our common stock and our shareholders’ ability to sell our common stock and may lead to potential events of default on existing debt instruments.

The NYSE has several listing requirements set forth in the NYSE Listed Company Manual.

For example, Section 802.01C of the NYSE Listed Company Manual requires that our common stock trade at a minimum average closing price of $1.00 per share over a consecutive 30 trading day period.

Section 802.01B of the NYSE Listed Company Manual requires that either our average global market capitalization (inclusive of common and preferred equity) or our total shareholders’ equity exceed $50.0 million.

On June 17, 2022, we were notified by the NYSE that we were no longer in compliance with the NYSE continued listing standards set forth in Section 802.01B of the NYSE Listed Company Manual due to the fact that our average global market capitalization over a consecutive 30 trading-day period was less than $50.0 million and, at the same time, our shareholders’ equity was less than $50.0 million.

If our average global market capitalization over a consecutive 30 trading-day period drops below $15.0 million, the NYSE will initiate delisting proceedings.

As required by the NYSE, we notified the NYSE of our intent to cure the deficiency and restore our compliance with the NYSE continued listing standards.

In accordance with applicable NYSE procedures, on August 1, 2022 we submitted a plan advising the NYSE of the definitive actions we have taken and are taking that would bring us into compliance with NYSE continued listing standards within 18 months of receipt of the written notice.

The NYSE accepted the plan and our common stock will continue to be listed and traded on the NYSE during the 18-month period from June 17, 2022, subject to our compliance with other NYSE continued listing standards and continued periodic review by the NYSE of our progress with respect to our plan.

On November 2, 2022, we were notified by the NYSE that the average closing price of our common stock, over a prior 30 consecutive trading day period was below $1.00 per share.

We had a period of six months following the receipt of the notice to regain compliance with the minimum share price requirement, with the possibility of extension at the discretion of the NYSE.

On November 2, 2022 our shareholders approved a proposal to authorize the Board to implement the Reverse Stock Split (as defined below), which became effective on December 21, 2022.

On January 3, 2023, we were notified by the NYSE that we had regained compliance with the minimum share price continued listing standard.

Although we have regained compliance with Section 802.01C of the NYSE Listed Company Manual within the cure period, there is no assurance that we will remain in compliance with Section 802.01C of the NYSE Listed Company Manual or other NYSE continued listing standards in the future.

A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock;

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and causing us reputational harm with investors, our employees, and parties conducting business with us.

A delisting of our common stock could constitute a “fundamental change” under the terms of our 5.00% Convertible Notes due 2023 (the “Notes”), requiring us to make an offer to repurchase the Notes at par.

A delisting of our common stock could constitute a “fundamental change” under the terms of our 5.00% Convertible Notes due 2023 (the “Notes”), requiring us to make an offer to

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repurchase the Notes at par.

There can be no assurance we would have sufficient funds available to us to repurchase the Notes if required to do so.

Failure to repurchase the Notes also could cause a cross-default under our 2022 ABL Credit Facility and Term Loans, which would permit the holders of the indebtedness to accelerate the maturity thereof and proceed against their collateral and could have a material adverse effect on our business and financial condition.

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Risks Related to Our Operations

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We depend on our proprietary technologies and information, many of which are no longer subject to patent protection.

In addition to patent protection, we rely significantly upon trade secret laws to protect our proprietary technologies.

We regularly enter into confidentiality agreements with our key employees, clients, potential clients and other third parties and limit access to and distribution of our trade secrets and other proprietary information.

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The competition for these individuals is intense.

Due to the impacts of COVID-19, we implemented cost reductions and organizational changes which increases our risk of losing key skilled employees.

Furthermore, once the economic environment and demand for our services has recovered, we will be under pressure to re-hire or onboard employees during a time when there could be a significant demand for skilled labor.

Due to the impacts of COVID-19 and economic uncertainty, we implemented cost reductions and organizational changes which increases our risk of losing key skilled employees.

As the economic environment and demand for our services recovers, we will be under pressure to re-hire or onboard employees during a time when there could be a significant demand for skilled labor.

The loss of these individuals, or failure to attract new employees, could adversely affect our ability to perform our obligations on our clients’ projects or maintenance and consequently could negatively impact the demand for our products and services.

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Poor safety performance may limit or eliminate potential revenue streams, including from many of our largest clients, and may materially increase our operating costs, including increasing our required insurance deductibles, self-insured retention and insurance premium costs.

Additional impairments of our goodwill, impairments of our intangible and other long-lived assets, and changes in the estimated useful lives of intangible assets could have a material adverse impact on our results of operations and financial condition.

As a result of past acquisitions, goodwill and other intangible assets comprise a significant portion of our total assets.

As of December 31, 2021, our goodwill and intangible assets totaled $25.2 million and $89.9 million, respectively.

We assess or test goodwill for impairment at least annually in accordance with Generally Accepted Accounting Principles in the U.S.

(“GAAP”), while our other long-lived assets, including our finite-lived intangible assets, are tested for impairment when

Additional impairments of our intangible and other long-lived assets, and changes in the estimated useful lives of intangible assets could have a material adverse impact on our results of operations and financial condition.

As a result of past acquisitions, intangible assets comprise a significant portion of our total assets.

As of December 31, 2022, our intangible

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circumstances indicate that the carrying amount may not be recoverable.

A decrease in our market capitalization or profitability or unfavorable changes in market, economic and industry conditions all would increase the risk of impairment.

We have three reporting units and perform a goodwill impairment test at a reporting unit level on an annual basis on December 1 of each year and, as discussed above, whenever there are sufficient indicators that the carrying value of a reporting unit exceeds its fair value.

As a result of revenue and earnings declines and sustained declined in our stock price through September 30, 2021, we determined that a triggering event had occurred as it was more likely than not that the carrying values of our reporting units exceeded their fair values.

Our revenue growth and profitability are influenced by several industry trend factors, including end markets capital spending levels, supply and demand levels and technology.

With oil prices and demand increasing, refiners (represents approximately 40% of our customers) are recovering;

however, capital expenditures have not fully recovered resulting in lower current activity and pricing pressure for our products and services.

Accordingly, we performed a quantitative assessment of the fair value of goodwill as of September 30, 2021.

Based upon our impairment assessment, we determined the carrying amount of our MS reporting unit exceeded the fair value.

As a result, we recorded $55.8 million in goodwill impairment charges on our MS reporting unit during the three months ended September 30, 2021.

The fair value of the Quest Integrity reporting unit exceeded its carrying value at September 30, 2021.

Our IHT reporting unit has no goodwill associated as it was determined to be fully impaired on March 31, 2020.

For our annual goodwill impairment test as of December 1, 2021, we elected to perform a quantitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of our reporting unit was less than its carrying value as of the test date.

Based on the quantitative assessment, we concluded that the carrying amount of our Quest Integrity reporting unit exceeded the fair value.

As a result, we recorded $8.8 million in goodwill impairment charges on our Quest Integrity reporting unit during the three months ended December 31, 2021.

assets totaled $75.4 million.

Our long-lived assets, including our finite-lived intangible assets, are tested for impairment when circumstances indicate that the carrying amount may not be recoverable.

A decrease in our market capitalization or profitability or unfavorable changes in market, economic and industry conditions would increase the risk of impairment.

GAAP requires that we evaluate the useful lives of our intangible assets subject to amortization each reporting period.

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To the extent the revised useful life of an intangible asset is less than originally estimated, our future amortization expense will increase, which could have a material impact on our results of operations and financial condition.

Improvements in operating results from expected savings in operating costs from workforce reductions and other cost saving and business improvement initiatives may not be realized in the estimated amounts, may take longer to be realized, or could be realized only for a limited period.

In 2017 through the first quarter of 2021, we developed and implemented a project known as OneTEAM, an assessment of all aspects of our business, including international operations, for improvement and cost saving opportunities.

In January 2021, we announced a new strategic organizational structure to better position ourselves for the recovery after the COVID-19 pandemic, continue service diversification, and enhance client value.

Improvements in operating results from expected savings in operating costs from workforce reductions and other cost saving and business improvement initiatives may not be realized, may take longer to be realized, or could be realized only for a limited perio d.

Since January 2021, we have implemented a new strategic organizational structure and reduced our operating costs through headcount reductions and other steps to better position ourselves for the recovery after the COVID-19 pandemic and to continue service diversification, and enhance client value.

These organizational changes resulted in restructuring charges and other cost saving opportunities.

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Our profitability depends heavily on our ability to make accurate estimates.

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trade disputes and tariffs, currency fluctuations, inflation pressures or our suppliers' or subcontractors' inability to perform could result in substantial losses, as such changes adversely affect the revenues recognized on each project.

Additionally, we may incur significant costs in excess of estimates due to changes to any work orders requested by our clients materially changing the scope of work to be completed by us.

Inaccurate estimates, or changes in other circumstances, such as unanticipated technical problems, difficulties obtaining permits or approvals, changes in local laws or labor conditions, weather delays, cost of raw materials, trade disputes and tariffs, currency fluctuations, inflation pressures or our suppliers’ or subcontractors’ inability to perform could result in substantial losses, as such changes adversely affect the revenues and profitability recognized on each project.

Current and future inflationary volatility driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies as well as the ongoing military conflict between Russia and Ukraine could further impact our ability to make accurate estimates, which could have an adverse impact on our business, cash flows and profitability.

Additionally, we may incur significant costs in excess of estimates due to changes to work orders requested by our clients that materially change the scope of work to be completed by us.

Our services are usually performed pursuant to purchase orders issued under written client agreements.

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Our international business operations may include projects in countries where corruption is prevalent.

Although we have, and continue to, implement and enforce policies and procedures designed to ensure compliance with the U.S.

Foreign Corrupt Practices Act and the United Kingdom Bribery Act, there can be no assurance that all of our employees, contractors or agents, including those representing us in countries where practices which violate such anti-corruption laws may be customary, will not take actions in violation of our policies and procedures.

Although we have implemented continue to and enforce policies and procedures designed to ensure compliance with the U.S.

Foreign Corrupt Practices Act and the United Kingdom Bribery Act, there can be no assurance that all of our

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employees, contractors or agents, including those representing us in countries where practices which violate such anti-corruption laws may be customary, will not take actions in violation of our policies and procedures.

Any violation of foreign or U.S.

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Business acquisitions and divestitures entail risk for investors.

From time to time, we seek growth through strategic acquisitions while also evaluating our portfolio for potential divestitures in, or complementary to, the specialty maintenance and specialty industrial services, including inspection, engineering assessment and mechanical services to complement, diversify or rationalize our existing business.

From time to time, we seek growth through strategic acquisitions while also evaluating our portfolio for potential divestitures in the specialty maintenance and specialty industrial services, including inspection, engineering assessment and mechanical services to complement, diversify or rationalize our existing business.

We may also acquire other businesses that enhance our services or geographic scope and/or divest certain businesses or service offerings to rationalize our operations and take advantage of strategic opportunities.

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If we are unable to collect amounts owed to us, or retain amounts paid to us, our cash flows would be reduced and we could experience losses.

We would also

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recognize losses with respect to any receivables that are impaired as a result of our clients’ financial difficulties or bankruptcies.

We would also recognize losses with respect to any receivables that are impaired as a result of our clients’ financial difficulties or bankruptcies.

The risk of loss may increase for capital projects where we provide services over a longer period of time.

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While we have robust internal controls, policies and procedures, and employee training and compliance programs to deter prohibited practices, they may not be effective in preventing employees, contractors or agents from violating or circumventing such internal policies or from material violations of applicable laws and regulations.

Increasing scrutiny and changing expectations from investors, customers and other market participants with respect to sustainability or environmental, social and governance (“ESG”) matters may impose additional costs on us or expose us to reputational or other risks .

Companies across all industries and around the globe are facing increasing scrutiny relating to their ESG policies, initiatives and activities by investors, lenders, regulators, customers and other market participants.

While we have policies and initiatives in place related to our ESG practices, the recent increased focus on ESG matters may impact our access to capital, as investors and lenders may reconsider their capital investment allocation as a result of their assessment of our ESG practices.

Further, regulatory requirements related to ESG continue to evolve and may increase our costs of compliance.

If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters as

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they continue to evolve or if we are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a regulatory or legal requirement to do so, we may suffer reputational damage.

While we may create and publish voluntary disclosures regarding ESG matters from time to time, certain statements in those voluntary disclosures are based on hypothetical expectations and assumptions that may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.

Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and lack of an established, single approach to identifying, measuring and reporting on many ESG issues.

In addition, organizations that provide rating information to investors on ESG matters may assign unfavorable ratings to Team or our industries, which may lead to negative investor sentiment and the diversion of investment to other companies or industries, which could have a negative impact on our stock price and our costs of capital.

To the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations.

Such ESG matters may also impact our customers, which may result in reduced demand for certain of our products and services.

Risks Related to Financing Our Business

We may not be able to continue as a going concern.

The audit opinion and notes that accompany our consolidated financial statements for the year ended December 31, 2022, disclose a “going concern” qualification to our ability to continue in business.

The accompanying consolidated financial statements have been prepared under the assumption that we will continue as a going concern.

We have suffered recurring operating losses related to COVID-19 and the related economic repercussions and difficult market conditions.

Prior to the recent financing transactions discussed below, the Company required additional liquidity to continue its operations over the next twelve months.

During 2022, revenues and margins continued to be pressured by inflationary costs including labor, materials, and transportation resulting in further operating losses.

As of December 31, 2022, we were in compliance with our debt covenants;

however, our financial forecasts as of December 31, 2022 indicated insufficient cash flows from operations to address our near-term liquidity needs and maintain compliance with our debt covenants within one year following the date that our consolidated financial statements are issued.

As discussed further in Note 12 – Debt , during 2022, the Company executed a number of amendments to its debt instruments, including amendments to our 2022 ABL Credit Facility, Subordinated Term Loan Credit Agreement, Notes and Term Loan Credit Agreement and entered into a new Substitute Insurance Reimbursement Facility Agreement.

Such amendments and agreement provided improved liquidity and runway to execute on business turnaround plans, support working capital needs and pursue potential strategic alternatives.

While such amendments and agreements provided us with additional funding to meet our near-term liquidity needs and included a waiver of our debt covenants through June 30, 2023, there can be no assurance that (i) our lenders will provide additional waivers or amendments in the event of future non-compliance with our debt covenants, or other possible events of default that could happen, or (ii) that we will generate adequate liquidity to fund our operations, or to satisfy the obligations under our Notes and potential acceleration of debt maturities that may become due.

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Following the various amendments and agreement, we evaluated the Company’s liquidity within one year after the date of issuance of our consolidated financial statements to determine if there is substantial doubt about the Company’s ability to continue as a going concern.

In the preparation of this liquidity assessment, we applied judgment to estimate the projected cash flows of the Company, including the following:

(i) projected cash outflows, (ii) projected cash inflows, and (iii) excess availability level under the Company’s existing debt arrangements.

The cash flow projections were based on known or planned cash requirements for operating and financing costs and include management’s best estimate regarding future customer activity levels, pricing for its services and for its supplies and other factors.

Actual results could vary significantly from those projections.

We do not believe, based on the Company’s forecast, that current working capital, cash flow from operations, and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants (as amended), and satisfy the Company’s obligations, specifically with respect to the Notes described below, as they come due within one year after the date of issuance of these consolidated financial statements.

Full disclosure of the going concern qualification appears in the notes to the financial statements, see Note 1 – Summary of Significant Accounting Policies and Practices .

We are subject to risks associated with indebtedness under our credit facilities, including the risk of failure to maintain compliance with financial covenants, the risk of being unable to make interest and principal payments when due and the risk of rising interest rates.

Additionally, due to our significant debt and high leverage there could be a negative impact on our financing options and liquidity position.

Additionally, our significant debt and high leverage could have a negative impact on our financing options and liquidity position.

We have a significant amount of debt as discussed below, and our overall leverage and the terms of our financing arrangements could:

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If we do not generate enough cash to pay our debt service obligations, we may be required to refinance all or part of our debt, sell assets, borrow more money or raise additional equity capital.

On December 18, 2020, we entered into an asset-based credit agreement (the “Credit Agreement”) led by Citibank, N.A., as agent, which provides for available borrowings up to $150.0 million (the “ABL Facility”).

The ABL Facility matures and all outstanding amounts become due and payable on December 18, 2024.

However, if our Notes, which mature on August 1, 2023, have an aggregate principal amount of $10.0 million (updated from $50.0 million to $10.0 million as part of the Third Amendment to the Term Loan) or more outstanding 120 days prior to their maturity date (the “Trigger Date”), or if there are Notes in an aggregate principal amount of less than $10.0 million outstanding and we do not have sufficient excess availability of more than 20% under the ABL Facility on the Trigger Date, the ABL Facility will terminate on the Trigger Date.

On December 7, 2021, the Company entered into Amendment No.

2 (the “ABL Amendment No.

2”) to the Credit Agreement.

ABL Amendment No.

2, among other things, (i) revises the applicable margin to 4.25% for LIBOR rate advances, (ii) provides that at all times beginning on the effective date of the ABL Amendment No.

2 and ending on the date Citibank shall have received and approved the borrowing base certificate for the calendar month ending December 31, 2021, the borrowing base shall not exceed the lesser of (a) the borrowing base calculated as set forth in the borrowing base certificate for the calendar month ending December 31, 2021 and (b) $108,500,000, (iii) establishes an interest reserve account for certain payments due under the Term Loan Credit Agreement, (iv) provides that after giving effect to any borrowing and any disbursements to be made by the Company with the proceeds of such borrowing, within one business day of such borrowing, the Company and its U.S.

subsidiaries may not have more than $5.0 million cash on hand, (v) provides for weekly variance testing to be delivered to Citibank, (vi) requires the Company to have used all of the proceeds borrowed under the Subordinated Term Loan Credit Agreement prior to borrowing under the Credit Agreement, and (vii) increases the amount of subordinated debt available to be incurred by the Company to account for (a) the additional $27.5 million borrowed under the Subordinated Term Loan Credit Agreement, (b) any additional amount borrowed under the Subordinated Term Loan Credit Agreement not to exceed $75.0 million in the aggregate, and (c) the payment of interest in the form of payment-in-kind interest with respect to the Initial Term Loans (as defined in the Subordinated Term Loan Credit Agreement).

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The ABL Facility contains customary conditions to borrowings, events of default and covenants.

In the event that our excess availability is less than the greater of (i) $15.0 million and (ii) 10.00% of the lesser of (1) the current borrowing base and (2) the commitments under the ABL Facility then in effect, a consolidated fixed charge coverage ratio of at least 1.00 to 1.00 must be maintained.

Upon the occurrence of certain events of default, an additional 2.0% interest maybe required on the outstanding loans under the ABL Facility.

On February 11, 2022, we entered into a new credit agreement with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent, (“Eclipse”) (such agreement, the “ABL Credit Agreement”).

Available funding commitments to us under the ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $130.0 million to be provided by certain affiliates of Eclipse (the “Revolving Credit Loans”), with a $35.0 million sublimit for swingline borrowings and a $26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $35.0 million (the “Delayed Draw Term Loans”) to be provided by Corre Partners Management, LLC and certain of its affiliates (“Corre”) (collectively, the “ABL Credit Facility”).

The ABL Credit Facility matures and all outstanding amounts become due and payable on February 11, 2025, however, the ABL Credit Facility is subject to the Trigger Date as defined above.

The proceeds of the loans under the ABL Credit Facility were used to, among other things, pay off the amounts owed under the Credit Agreement, which was repaid and terminated in full on February 11, 2022.

Revolving Credit Loans bear interest through maturity at a variable rate based upon an annual rate of a LIBOR Rate (or a Base Rate (as defined below) if the LIBOR Rate is unavailable for any reason), plus an applicable margin (“LIBOR Rate Loan” and “Base Rate Loan”, respectively).

The “Base Rate” is defined as a fluctuating interest rate equal to the greatest of (1) the federal funds rate plus 0.50%, (2) Wells Fargo Bank, National Association’s prime rate, and (3) the one-month LIBOR Rate.

The “applicable margin” is defined as a rate of 3.15%, 3.40% or 3.65% for Base Rate Loans with a 2.00% Base Rate floor and a rate of 4.15%, 4.40% or 4.65% for LIBOR Rate Loans with a 1.00% LIBOR floor, in each case depending on the amount of EBITDA as of the most recent measurement period, as reported in a monthly compliance certificate.

The Delayed Draw Term Loans shall bear interest through maturity at a rate of the LIBOR Rate plus 10.0%, with a 1.00% LIBOR floor.

The fee for undrawn revolving amounts is 0.50% and the fee for undrawn Delayed Draw Term Loan amounts is 3.00%.

Interest under the ABL Credit Facility is payable monthly.

We will also be required to pay customary letter of credit fees, as necessary.

The Company may make voluntary prepayments of the loans under the ABL Credit Facility from time to time, subject, in the case of the Delayed Draw Term Loans, to certain conditions.

Mandatory prepayments are also required in certain circumstances, including with respect to the Delayed Draw Term Loan, if the ratio of aggregate value of the collateral under the ABL Credit Facility to the sum of the delayed draw term loans plus revolving facility usage outstanding is less than 130%.

Amounts repaid may be re-borrowed, subject to compliance with the borrowing base and the other conditions set forth in the ABL Credit Agreement, subject, in the case of the Delayed Draw Term Loans to a maximum of four such borrowings in any 12-month period.

Certain permanent repayments of the ABL Credit Facility loans are subject to the payment of a premium of 2.00% during the first year of the facility, 1.00% during the second year of the facility, and 0.50% in the last year of the facility.

The ABL Credit Agreement contains customary conditions to borrowings and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of certain debt.

The ABL Credit Agreement also requires that we will not exceed $20.0 million in unfinanced capital expenditures in any calendar year;

provided that this requirement will not apply if we maintain a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

In addition, the ABL Credit Agreement includes customary events of default, the occurrence of which may require that we pay an additional 2.0% interest on the outstanding loans under the ABL Credit Agreement.

On December 18, 2020, we also entered into a credit agreement with Atlantic Park Strategic Capital Fund, L.P., as agent, and APSC Holdco II, L.P.

(“APSC”), as lender (the “Term Loan Credit Agreement”), pursuant to which we borrowed a $250.0 million term loan (the “Term Loan”).

The Term Loan matures, and all outstanding amounts become due and payable on December 18, 2026, provided that certain conditions could result in an earlier maturity, including if the Notes have an aggregate principal amount outstanding of $10.0 million or more on the Trigger Date, in which case the Term Loan will terminate on the Trigger Date.

On February 11, 2022, we entered into Amendment No.

6 (the “Sixth Amendment”) to the Term Loan Credit Agreement.

The Sixth Amendment, among other things and subject to the terms thereof, (i) permits the entry into the ABL Credit Agreement, (ii) permits certain interest payments due under the Term Loan Credit Agreement to be paid in kind, (iii) permits certain asset sales and requires certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amends the financial covenants, such that the maximum net leverage ratio of 7.00 to 1.00 will not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $20.0 million in unfinanced capital expenditures in any calendar year;

provided, that this unfinanced capital expenditures requirement will not apply if the Company maintains a net leverage ratio of less than or equal to 4.00 to 1.00 as of the end of the second and fourth fiscal quarter of each calendar year.

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On November 9, 2021, we entered into a credit agreement (the “Subordinated Term Loan Credit Agreement”) with Corre Credit Fund, LLC (“Corre Fund”), as agent, and the lenders party thereto providing for an unsecured $50.0 million delayed draw subordinated term loan facility (the “Subordinated Term Loan”).

Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $22.5 million on November 9, 2021, and an additional $27.5 million on December 8, 2021.

The Subordinated Term Loan matures, and all outstanding amounts become due and payable, on the earlier of December 31, 2026 and the date that is two weeks later than the maturity or full repayment of the Term Loan.

The stated interest rate on the Subordinated Term Loan is 12%.

On February 11, 2022, we entered into Amendment No.

5 (the “Corre Amendment 5”) to the Subordinated Term Loan Credit Agreement with the lenders from time to time party thereto (including Corre), and Cantor Fitzgerald Securities, as agent.

The Corre Amendment 5, among other things, (i) provides for an additional commitment of $10.0 million in subordinated delayed draw term loans to be available for borrowing by the Company until July 1, 2022, (ii) permits the entry into the ABL Credit Facility, (iii) permits certain asset sales and requires certain related mandatory prepayments, subject to an applicable prepayment premium, and (iv) amends the financial covenants, such that the maximum net leverage ratio of 7.00 to 1.00 will not be tested until the fiscal quarter ending March 31, 2023, and the Company is not permitted to exceed $20.0 million in unfinanced capital expenditures in any calendar year;

Our ability to maintain compliance with the financial covenants is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

The effects of the COVID-19 pandemic and the related economic repercussions could have a significant adverse effect on our financial position and business condition, as well as our clients and suppliers.

Additionally, these events may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, and affect our future need or ability to borrow under our ABL Credit Facility.

Full disclosure of our debt appears under Item 7 – Liquidity, Capital Resources and Going Concern, Note 1 – Summary of Significant Accounting Policies and Practice, and Note 12 – Debt .

Our ability to maintain compliance with the financial covenants pursuant to the debt instruments we are party to is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.

Additionally, these risks and uncertainties may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, and affect our future need or ability to borrow under our 2022 ABL Credit Facility.

In addition to our current sources of funding our business, the effects of such events may impact our liquidity or our need to revise our allocation or sources of capital, implement further cost reduction measures and/or change our business strategy.

Although the COVID-19 pandemic and related economic repercussions could have a broad range of effects on our liquidity sources, the effects will depend on future developments and cannot be predicted at this time.

We rely primarily on cash flows from our operations to make required interest and principal payments on our debt.

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If our lenders accelerate the repayment of debt, there is no assurance that we could refinance such debt on terms favorable to us or at all.

Our ABL Facility and Term Loan bear interest at variable market rates.

Our 2022 ABL Credit Facility and Term Loan bear interest at variable market rates.

If market interest rates increase, our interest expense and cash flows could be adversely impacted.

Based on borrowings outstanding at December 31, 2021, an increase in market interest rates of 100 basis points would increase our interest expense and decrease our operating cash flows by approximately $3.1 million on an annual basis.

Our ABL Credit Facility and Term Loan restrict our ability to, among other items, incur additional indebtedness, engage in mergers, acquisitions and dispositions and alter the business conducted by us.

These restrictions could adversely affect our ability to operate our businesses and may limit our ability to take advantage of potential business opportunities as they arise.

We may not be able to continue as a going concern.

We have suffered recurring operating losses related to the COVID pandemic, related economic repercussions, and difficult market conditions and prior to the Recent Financing Transactions discussed below, the Company required additional liquidity to continue its operations over the next twelve months.

During the year, revenues and margins continued to decline against forecast along with margin pressures from inflationary costs including labor, materials, and transportation resulting in further operating losses.

As of December 31, 2021, we are in compliance with our debt covenants;

however, our financial forecasts as of December 31, 2021 indicated insufficient cash flows from operations to address our near-term liquidity needs and maintain compliance with our debt covenants within one year following the date that our financial statements are issued.

As discussed in Note 1 – Recent Financing Transactions, on February 11, 2022, the Company successfully closed on financing transactions that provided improved liquidity and runway to execute on the business turnaround, support working capital needs and pursue potential strategic alternatives.

Following the Recent Financing Transactions, we evaluated the Company’s liquidity within one year after the date of issuance of these consolidated financial statements to determine if there is substantial doubt about the Company’s ability to continue as a going concern.

In the preparation of this liquidity assessment, we applied judgment to estimate the projected cash flows of the Company, including the following:

(i) projected cash outflows, (ii) projected cash inflows, and (iii) excess availability level under the Company’s existing debt arrangements.

The cash flow projections were based on known or planned cash requirements for operating and financing costs.

We believe, based on the

Based on borrowings outstanding as of December 31, 2022, an increase in market interest rates of 100 basis points would increase our interest expense and decrease our operating cash flows by approximately $1.3 million on an annual basis.

Our 2022 ABL Credit Facility, Term Loan and Subordinated Term Loan restrict our ability to, among other items, incur additional indebtedness, engage in mergers, acquisitions and dispositions and alter the business conducted by us.

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Company’s forecast, that current working capital and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants, and satisfy the Company’s obligations as they come due within one year after the date of issuance of these financial statements.

While the Recent Financing Transactions provide us with additional funding to meet our near-term liquidity needs and included a waiver of our debt covenants through March 31, 2023, there can be no assurance that (i) our lenders will provide additional waivers or amendments in the event of future non-compliance with our debt covenants, or other possible events of default that could happen, or (ii) that we will generate adequate liquidity to fund our operations, or to satisfy the obligations under our convertible debt and potential acceleration of debt maturities that may become due on April 3, 2023 related to the Trigger Date.

The accounting method for our convertible debt securities may have a material effect on our reported financial results.

On July 31, 2017 we issued $230.0 million principal amount of 5.00% Convertible Senior Notes due 2023 in a private offering.

In December 2020, we retired $136.9 million par value of our Notes for $135.5 million, excluding accrued interest, using proceeds from the Term Loan and borrowings under the ABL Facility.

As of December 31, 2021, the principal amount of Notes outstanding was $93.1 million.

Convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method if we have the ability and intent to settle in cash, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount and if the effect would be dilutive.

Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.

We cannot be sure that we will be able to demonstrate the ability or intent to settle the Notes in cash in any future reporting period.

Additionally, the Financial Accounting Standards Board (“FASB”) has recently issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which will eliminate the use of the treasury stock method to calculate diluted earnings per share.

We expect to adopt ASU 2020-06 beginning January 1, 2022, at which time we would utilize the if-converted method, which would require us to assume the Notes would be settled entirely in shares of common stock for purposes of calculating diluted earnings per share, if the effect would be dilutive.

In such case, our diluted earnings per share would be adversely affected.

restrictions could adversely affect our ability to operate our businesses and may limit our ability to take advantage of potential business opportunities as they arise.

Transactions relating to our convertible debt securities may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock.

The Notes are convertible into 189,682 shares of common stock.

Upon conversion, we may settle the Notes in cash or in shares of common stock or a combination of cash and shares of common stock, in each case, at our election.

If the Notes are converted, our current intent is to settle the principal amount of the Notes in cash and settle the remainder of our conversion obligation by issuing shares of common stock;

Upon conversion or maturity, we may settle the Notes in cash or in shares of common stock or a combination of cash and shares of common stock, in each case, at our election.

If the Notes are converted, our current intent is to settle the principal amount of the Notes in cash;

however, we cannot guarantee that we will have sufficient funds available to us at the time of any such conversions in order to effect settlement in that manner.

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Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

Our largest stockholder owns a meaningful percentage of our outstanding equity securities, which could limit the ability of other stockholders to influence corporate matters .

Our largest stockholder beneficially owned approximately 37.6% of the total voting power held by stockholders of our outstanding common stock as of March 10, 2023 (including PIPE Shares, as defined below, and shares issuable upon exercise of certain Warrants, as defined below, held by our largest stockholder in each case).

As a result, this stockholder may be able to exert influence over our affairs and policies.

This concentrated ownership could limit the ability of the remaining stockholders to influence corporate matters, and the interests of the large stockholders may not coincide with our interests or the interests of the remaining stockholders.

The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control.

Risks Related to Information Systems

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Any such access, inappropriate disclosure of confidential or proprietary information or other loss of information, including our data being breached at third-party providers, could result in legal claims or proceedings, liability or financial loss under laws that protect the privacy of personal information, disruption of our operations with increases in costs and decline in revenues, damage to intellectual property or our product development programs and damage to our reputation, which could adversely affect our business.

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Furthermore, we and our third-party providers rely on electronic communications and information system to conduct our operations.

We and our third-party providers have been, and may continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate bank accounting information, passwords, or other personal information or to introduce viruses or other malware to our information systems.

We currently maintain an insurance related to cybersecurity breaches and are exploring a range of steps to enhance our security protections and prevent future unauthorized activity.

Furthermore, we and our third-party providers rely on electronic communications and information systems to conduct our operations.

We and our third-party providers have been, and may continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate bank account information, passwords, or other personal information or to introduce viruses or other malware to our information systems.

We currently maintain insurance related to cybersecurity breaches and are exploring a range of steps to enhance our security protections and prevent future unauthorized activity.

Though we endeavor to mitigate these threats, cyber-attacks against us or our third-party providers and business partners remain a serious issue.

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Fortunately, our cybersecurity posture continued to improve in 2022.

One of the legacy ERP systems was migrated into the Company’s main US ERP system, and several aging applications on our externally facing firewalls were upgraded.

However, a number of other ERP systems are out of vendor support with no assurance that our security efforts will be effective or that security breaches would not be damaging.

Several cybersecurity areas were automated, including a significant increase in automation of system patching.

Additionally, the company's attack surface was reduced by blocking remote logins from known high risk countries and physical logins by non-company devices at major company locations.

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

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

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Risks Related to Regulations

Fluctuations in our effective tax rate and our tax obligations could adversely affect our financial results.

Unanticipated fluctuations in our effective tax rate and our tax obligations, changes in legislation or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial results.

We are subject to taxes in the U.S.

and in various foreign jurisdictions.

Significant judgment is required in determining our worldwide income tax provision, which includes assessing the restrictions on tax credits, offset gains or repatriation of cash proceeds, tax assets and accruals for other taxes, and there are many transactions and calculations where the ultimate tax determination is uncertain.

Our effective income tax rate could be adversely affected by our profit levels, changes in our business, reorganization of our business and operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the elections we make, changes in applicable tax laws or interpretations of existing tax laws or changes in the valuation allowance for deferred tax assets, as well as other factors.

We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax liabilities against us.

There are many transactions and calculations where the ultimate tax determination is uncertain.

Our future effective income tax rates could be subject to volatility or adversely affected by our profit levels, changes in our business, reorganization of our business and operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the elections we make or changes in the valuation allowance for deferred tax assets, as well as other factors.

Additionally, the Organization for Economic Cooperation and Development’s (“OECD”) Base Erosion and Profit Shifting (“BEPS”) project has resulted in considerable new reporting obligations worldwide as OECD member countries have implemented its guidance.

The OECD continues to publish guidance pursuant to BEPS and other projects which, if adopted by member countries, may affect our tax positions in many of the countries in which we do business.

Our future effective tax rates could also be adversely affected by changes in tax laws, both domestically and internationally, or the interpretation of application thereof.

From time to time, the U.S.

Congress and foreign, state and local governments consider legislation that could increase our effective tax rate.

On August 16, 2022, legislation commonly known as the Inflation Reduction Act (the “IRA”) was signed into law.

Among other things, the IRA includes a 1% excise tax on corporate stock repurchases, applicable to repurchases after December 31, 2022, as well as a new 15% corporate alternative minimum tax based on book income.

We are in the process of evaluating the potential impacts of the IRA on us.

Our analysis of the effect of the IRA on us is ongoing and incomplete, and it is possible that the IRA (or implementing regulations, which have not yet been issued, and initial guidance, which was issued on December 27, 2022) could adversely impact our current and deferred federal tax liability.

We cannot determine whether, or in what form, other future tax legislation will ultimately be enacted or what impact any such legislation could have on our profitability.

We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income or other tax liabilities against us.

Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles, and interpretations could have a material effect on our operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited .

On February 2, 2022, the Company entered into a Section 382 Rights Agreement (the “Section 382 Rights Agreement”) with Computershare Trust Company, N.A., as rights agent, to facilitate our ability to preserve our net operating losses and certain other tax attributes.

As of December 31, 2022, we had net operating loss carryforwards for U.S.

federal income tax purposes of $104.2 million.

Of this amount, $3.7 million expires in various dates through 2037 and $100.5 million has an indefinite carryforward period.

The Company’s ability to use its net operating losses and other tax attributes would be substantially limited if it experiences an “ownership change,” as such term is defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

A company generally experiences an ownership change if the percentage of the value of its stock owned by certain “5-percent shareholders,” as such term is defined in Section 382 of the Code, increases by more than 50 percentage points over a rolling three-year period.

Similar rules may apply under state tax laws.

Our ability to use net operating losses to reduce future taxable income and liabilities may also be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future.

The Section 382 Rights Agreement is intended to reduce the likelihood of an ownership change under Section 382 of the Code by deterring any Person (as such term is defined in the Section 382 Rights Agreement) or group of affiliated or associated Persons from acquiring beneficial ownership of 4.9% or more of our outstanding common shares.

Notwithstanding the foregoing, even if the Section 382 Rights Agreement deters an ownership change, it is possible that we will not generate taxable income in time to use such net operating losses before their expiration, or at all.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), as modified by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, among other things, includes changes to the rules governing our U.S.

federal net operating losses.

Net operating losses arising in tax years beginning after December 31, 2017 are subject to an 80% of taxable income limitation (as calculated before taking the net operating losses into account) for tax years beginning after December 31, 2020.

In addition, net operating losses arising in tax years 2018, 2019, and 2020 are subject to a five-year carryback and indefinite carryforward, while net operating losses arising in tax years beginning after December 31, 2020 also are subject to indefinite carryforward but cannot be carried back.

Not all states conform to the Tax Act or CARES Act and some states have varying conformity to the Tax Act or CARES Act.

In future years, if and when a net deferred tax asset is recognized related to our net operating losses, the changes in the carryforward/carryback periods as well as the new limitation on use of net operating losses may significantly impact our valuation allowance assessments for net operating losses generated after December 31, 2017.

As such there is a risk that due to regulatory changes, such as suspensions on the use of net operating losses or other unforeseen developments, our existing net operating losses could expire or otherwise be unavailable to reduce future income tax liabilities, including for state

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tax purposes.

For these reasons, we may not be able to utilize some portion of our net operating losses even if we attain profitability.

Our operations and properties are subject to extensive environmental, health and safety regulations.

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In addition, the modification or interpretation of existing environmental, health and safety laws or regulations, the more vigorous enforcement of existing laws or regulations, or the adoption of new laws or regulations may also negatively impact industries in which our clients operate, which in turn could have a negative impact on us.

Climate change legislation or regulations restricting emissions of “greenhouse gases” could result in reduced demand for our services and products.

Our business is subject to risks arising from climate change, including climate change legislation or regulations restricting emissions of “greenhouse gases,” changes in consumer preferences and technology and physical impacts of climate change, all of which could have a negative impact on our business and results of operations.

There has been an increased focus in the last several years on climate change in response to findings that emissions of carbon dioxide, methane and other greenhouse gases present an endangerment to public health and the environment.

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and other parts of the world that are focused on restricting the emission of greenhouse gases.

The new Presidential administration has also emphasized its intention to actively pursue its policy goals of addressing global climate change through significant economy-wide reductions in greenhouse gases and hastening the transition from carbon-based energy sources.

The adoption of new or more stringent legislation or regulatory programs limiting

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greenhouse gas emissions from clients, particularly those in refining and petrochemical industries, for whom we provide repair and maintenance services, or reducing the demand for those clients’ products, could in turn affect demand for our products and services.

Some of our clients are modifying their plants and facilities in efforts to better align their operations and products with these energy transition issues, but there is no assurance that such modified facilities will require the same level of services and product that we currently provide.

Finally, some scientists have concluded that increasing greenhouse gas concentrations in the atmosphere may produce physical effects, such as increased severity and frequency of storms, droughts, floods and other climate events.

Such climate events have the potential to adversely affect our operations or those of our clients, which in turn could have a negative effect on us.

The current Presidential administration has also emphasized its intention to actively pursue its policy goals of addressing global climate change through significant economy-wide reductions in greenhouse gases and hastening the transition from carbon-based energy sources.

The adoption of new or more stringent legislation or regulatory programs limiting greenhouse gas emissions from clients, particularly those in refining and petrochemical industries, for whom we provide repair and maintenance services, or reducing the demand for those clients’ products, could in turn affect demand for our products and services.

Similarly, changing consumer preferences for goods or services relating to alternative sources of energy or emissions reductions and technological advances in fuel economy and energy generation devices or other technological advances could materially affect our clients, which in turn could negatively impact demand for our services and adversely affect our results of operations, financial condition, and liquidity.

Additionally, some of our clients are modifying their plants and facilities and may adopt new technology in efforts to better align their operations and products with energy transition issues, but there is no assurance that such modified facilities or technological advancements will require the same level of services and products that we currently provide.

In addition, our manufacturing centers use electricity generated by burning fossil fuels, which releases carbon dioxide.

Increased energy or compliance costs and expenses as a result of any increased legal or regulatory requirements to limit and/or track GHG emissions may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our products.

Finally, most scientists have concluded that increasing greenhouse gas concentrations in the atmosphere may produce physical effects of climate change, such as increased severity and frequency of storms, droughts, floods and other climate events.

Such climate events have the potential to adversely affect our operations or those of our clients or suppliers, which in turn could have a negative effect on us, including by adversely impacting our results of operations, financial condition and cash flows.

Such events, if increasing in their severity and frequency, may also adversely affect our ability to insure against the risks associated with such events, thus leading to greater financial risk for us in the conduct of our operations against the backdrop of such events.

The United Kingdom’s (the “U.K.”) departure from the European Union (the “EU”) could adversely affect us.

On January 31, 2020, the U.K.

departed from the EU (commonly referred to as “Brexit”) and the effects of the United Kingdom’s departure from the EU have been and are expected to continue to be far-reaching.

The outcome of Brexit caused volatility in global stock markets and foreign currency exchange rate fluctuations and uncertainty about the terms and impact of Brexit may continue to do so in the future.

Brexit could adversely affect U.K., regional European and worldwide economic and market conditions and could contribute to instability in global financial and foreign exchange markets, including volatility in the value of the British Pound and Euro, which in turn could adversely affect our clients, particularly in the U.K.

Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, Brexit and the perceptions as to its potential impact may continue to adversely affect business activity and economic conditions.

It could also lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.

determines which EU laws to replace or replicate.

Any potential negative effects and the full extent to which our business, results of operations, financial condition, and cash flows could be adversely affected by Brexit is uncertain.

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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In addition, the payment of potentially significant fines or penalties in the event of a breach or other privacy and information security laws, as well as the negative publicity associated with such a breach, could damage our reputation and adversely impact product demand and client relationships.

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Risks Related to Legal Liability

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Most of the legal proceedings against us arise out of the normal course of performing services at client facilities, and include claims for workers’ compensation, personal injury and property damage.

Legal proceedings can be

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expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome.

Legal proceedings can be expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome.

An unsuccessful defense of a liability claim could have an adverse effect on our business, results of operations, financial position or cash flows.

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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