Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Other than noted below, there have been no material changes to the risk factors disclosed in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 10, 2021.
Transportation challenges as a result of the COVID-19 pandemic and related supply impacts have caused, and may continue to cause, significant delays and additional costs, which could have a material adverse effect on DBMG’s results of operations or financial condition.
COVID-19 has caused supply chain challenges related to labor shortages and supply chain disruptions, which may create significant delays in DBMG’s ability to complete projects. The receipt of material from impacted areas has been slowed or disrupted and DBMG’s suppliers are expected to face similar challenges in fulfilling orders. In addition, reductions in the number of ocean carrier voyages, ocean freight capacity issues, congestion at major international gateways and other economic factors continue to persist worldwide due to COVID-19 and worldwide supply impacts as there is much greater demand for shipping and reduced capacity and equipment, which has resulted in recent price increases per shipping container. In addition, in the United States, trucking costs have risen dramatically due to driver shortages and increased labor costs, as well as new federal and state safety, environmental and labor regulations. These changes, as well as COVID-19 related state and local restrictions on domestic trucking and the operation of distribution centers, may disrupt DBMG’s supply chain, which may result in a delay in the completion of DBMG’s projects and cause it to incur significant additional costs. Although DBMG may attempt to pass on certain of these increased costs to its customers, it may not be able to pass all of these cost increases on to its customers. As a result, DBMG’s margins may be adversely impacted by such cost increases. These supply chain disruptions and transportation challenges could have a material adverse effect on DBMG’s results of operations or financial condition.
The utilization of our tax losses and certain other tax attributes could be substantially limited if we experience an “ownership change” for federal income tax purposes.
As of September 30, 2021, we had approximately $170.3 million of federal net operating loss carryforwards (“NOLs”) and $175.3 million of Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder (the "Code") Section 163(j) interest limitation carryforwards available to offset our future taxable income, which NOLs will begin to expire in 2034. Pursuant to the Code Sections 382 and 383, use of our NOLs and certain other tax attributes may be limited by an “ownership change” within the meaning of Code Section 382 and applicable Treasury Regulations. If a corporation undergoes an “ownership change,” which is generally defined as an increase of more than 50% of the value of a corporation’s stock owned by certain “5-percent shareholders” (as such term is defined in Internal Revenue Code Section 382) over a rolling three-year period, the corporation’s ability to use its pre-change NOLs and certain other pre-change tax attributes to offset its post-change income or taxes may be limited.
On August 30, 2021, the Company entered into a Tax Benefits Preservation Plan (the "Plan"). The Plan is intended to help protect the Company's ability to use its tax net operating losses and other certain tax assets ("Tax Benefits") by deterring an "ownership change," as defined under the Code, by a person or group of affiliated or associated persons from acquiring beneficial ownership of 4.9% or more of the outstanding common shares. This may adversely affect the marketability of our common stock by discouraging any individual, firm, corporation, partnership or other person or group of affiliated or associated persons from acquiring beneficial ownership of 4.9% or more shares of our common stock then outstanding. In addition, although the Rights Agreement is intended to reduce the likelihood of an ownership change that could adversely affect utilization of our NOLs, there is no assurance that the Plan will prevent all transfers that could result in such an ownership change. We may experience ownership changes in the future as a result of subsequent shifts in our common stock ownership, some of which may be outside of our control. If the Company were to experience an ownership change as defined in Code Section 382, its ability to utilize these tax attributes would be substantially limited.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
64
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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