Steel Connect (STCN)

Risks

• The divestiture of our Direct Marketing segment may not achieve the intended benefits and changes our exposures to other risks and uncertainties.
• Our future results of operations are solely dependent on the operations of our Supply Chain business segment and will differ materially from our previous results.
• Changes in our relationships with significant clients, including the loss or reduction in business from one or more of them, could have a material adverse impact on our business.
• If the demand for supply chain management services decline, or if we are unable or do not effectively integrate new or emerging industry trends into our services and offerings, our revenue and results of operations could be adversely affected.
• Because most of our contracts do not contain minimum purchase requirements and we sell primarily on a purchase order basis, we are subject to uncertainties and variability in demand by clients, which could decrease revenue materially and adversely affect our financial results.
• The COVID-19 pandemic has adversely affected, and is expected to continue to pose risks, to our business, results of operations, financial condition and cash flows, and other epidemics or outbreaks of infectious diseases may have a similar impact.
• Our business is subject to intense competition.
• Our operating results may fluctuate due to a number of factors, many of which are beyond our control, causing volatility in the price of our common stock.
• The funds held for clients may be subject to credit risk, impairment, misappropriation or theft, and any such incident could result in harm to our clients and damage to our brand.
• A decline in our key business sectors or a reduction in consumer demand generally could have a materially adverse effect on our business.
• We must maintain adequate levels of inventory in order to meet client needs, which presents risks to our financial position and operating results.
• We may have problems raising or accessing capital we need in the future.
• We may encounter problems in our efforts to increase operational efficiencies.
• Loss of essential employees or an inability to recruit and retain personnel could have a significant negative impact on our business.
• We may not be able to identify, manage, complete and integrate acquisitions and achieve anticipated synergies and benefits.
• We conduct business outside of the U.S., which exposes the Company to additional risks not typically associated with companies that operate solely within the U.S.
• Our business in Mainland China faces specific risks.
• The physical or intellectual property of our clients may be damaged, misappropriated, stolen or lost while in our possession, subjecting us to potential litigation and other adverse consequences.
• A significant disruption in, or breach in security of, our technology systems could adversely affect our business.
• Litigation pending against us could materially impact our business and results of operations.
• We may be unable to realize the benefits of our net operating loss carry-forwards and other tax benefits (collectively, "NOLs").
• There may be adverse effects on the value of your investment from our use of the Protective Amendment and Tax Plan.
• We are subject to federal, state and foreign tax audits, which could result in the imposition of liabilities that may or may not have been reserved, and changes in our provision for income taxes.
• We may be subject to state sales taxes that we have not paid, or collected from our customers or reserved for on our financial statements, which could materially and adversely affect our business, financial condition and operating results.
• Changes in tax rates, laws or regulations, including U.S. government tax reform, could have a negative impact on the results of future operations.
• Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
• SPH Group Holdings LLC and its affiliates own a majority of the voting power of our capital stock and have significant influence over our corporate decisions.
• Members of our Board also have significant interests in Steel Holdings and its affiliates, which may create conflicts of interest.
• There can be no assurance that the proposed Merger between us and Steel Holdings will be approved and ultimately consummated.
• Our Board may choose to effect a reverse split of the issued and outstanding shares of our common stock at the ratio of one-for-ten, the effects of which we cannot predict with certainty and which may be materially adverse to the value of your investment in our common stock.
• RISKS RELATED TO OUR INDEBTEDNESS
• Our indebtedness could restrict our operations and make us more vulnerable to adverse economic conditions.
• Changes in reference interest rates could adversely affect our results from operations and financial condition.
• An increase in our effective tax rate may adversely impact our results of operations.