ENGLOBAL CORP

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 30, 2023, which outline factors that could materially affect our business, financial condition or future results, and the additional risk factors below. You should be aware that the occurrence of any of the events described in these risk factors and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, financial condition and results of operations and that upon the occurrence of any of these events, the trading price of our common stock could decline. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern within one year after the issuance date of this Quarterly Report on Form 10-Q.

Substantial doubt about our ability to continue as a going concern exists. Our unaudited financial statements for the period ended June 29September 28, 2024 were prepared on the assumption that we would continue as a going concern. Those financial statements expressed a substantial doubt about our ability to continue as a going concern. Those financial statements did not include any adjustments that might result from the outcome of this uncertainty. Our recurring losses, negative cash flows from operating activities, need for additional financing and the uncertainties surrounding our ability to obtain such financing, raise substantial doubt about our ability to continue as a going concern. We have limited cash on hand and will need additional working capital to fund our planned operations. We are subject to significant risks and uncertainties, including failing to secure additional capital to fund our planned operations or failing to profitably operate the business. We intend to raise funds through various potential sources, such as equity or debt financings; however, we can provide no assurance that such financing will be available on acceptable terms, or at all. If adequate financing is not available or we do not achieve profitability and positive cash flows from operating activities, we may be required to significantly curtail or cease our operations, and our business would be jeopardized.

Our ability to continue as a going concern is also subject to, among other factors, our ability to collect receivables from our clients when due and to invoice our customers in a timely manner. Under the typical payment terms of our fixed-price contracts, the customer pays us progress payments. These progress payments are based on quantifiable measures of performance or on the achievement of specified events or milestones. If these events or milestones are delayed, it will negatively impact the timing of our cash receipts, which affects our ability to pay our employees and suppliers. If we are not able collect our receivables when due from our clients, our cash flow will be negatively impacted which could lead to us not being able to meet our current obligations.

Our limited inability to borrowing capacity any amounts under our Amended Credit Agreement, which matures on July 2, 2025, maywill limit our ability to finance operations or engage in other business activities, which could have a material impact on our financial condition. As of June 29September 28, 2024, we have outstanding borrowings of $2.3 million under the Amended Credit Agreement, which matures on July 2, 2025. The terms of the Amended Credit Agreement provide for a revolving credit facility of up to the lesser of (a) the borrowing base and (b) $1,000,000, with the borrowing base being in an amount equal to up to 95% of Eligible Receivables (as defined in the Amended Credit Agreement) as determined by the lender from time to time, less any reserves established by the lender in its sole discretion from time to time. As of June 29September 28, 2024, we had$30 thousand available to and the date of the filing of this Quarterly Report on Form 10-Q, we do not have any borrow ing capacity under the revolving credit fac. Our inability. The limited to borrowing capacity any amounts under the Amended Credit Agreement maywill limit our ability to finance operations or engage in other business activities, which could have a material impact on our financial condition.

Our backlog is subject to unexpected adjustments and cancellations and is, therefore, an uncertain indicator of our future revenue or earnings. As of June 29September 28, 2024, our backlog was approximately $7.76.9 million. We expect a majority of this backlog to be completed within the next 12 months. We cannot assure investors that the revenue projected in our backlog will be realized or, if realized, will result in profits. Projects currently in our backlog may be canceled or may remain in our backlog for an extended period of time prior to project execution and, once project execution begins, it may occur unevenly over the current and multiple future periods. In addition, project terminations, suspensions or reductions in scope occur from time to time with respect to contracts reflected in our backlog, reducing the revenue and profit we actually receive from contracts reflected in our backlog. Future project cancellations and scope adjustments could further reduce the dollar amount of our backlog in addition to the revenue and profits that we actually earn. The potential for cancellations and adjustments to our backlog are exacerbated by economic conditions, particularly in our chosen area of concentration, the energy industry. The markets for oil and natural gas have been volatile which can exacerbate the potential for cancellations and adjustments to our backlog from our clients in the oil and natural gas industry.

We are not currently in compliance with Nasdaqs continued listing requirements. If we are unable to comply with Nasdaqs continued listing requirements, our common stock could be delisted, which could negatively affect the price of our common stock and liquidity and reduce our ability to raise capital. Our common stock is currently listed on Nasdaq. Nasdaq has established certain quantitative criteria and qualitative standards that companies must meet to remain listed for trading on this market. On November 27, 2023, we received written notice from Nasdaq indicating that we are not in compliance with Listing Rule 5550(b) for continued listing due to our failure to maintain a minimum of $2,500,000 in stockholders equity. Nasdaq also determined that we did not meet the alternatives of market value of listed securities or net income from continuing operations for continued listing. The Company subsequently submitted a plan to regain compliance and based on such submission, Nasdaq granted the Company an extension of time until May 27, 2024 to regain compliance with Listing Rule 5550(b).

On May 30, 2024, the Company received written notice from Nasdaq notifying the Company that the Nasdaq staff had determined that the Company did not meet the terms of the extension. The Company requested an appeal of this determination before a Nasdaq Hearings Panel (the Panel). At the Panel hearing, which was held on July 25, 2024, the Company presented a strategic plan to regain compliance with the applicable Nasdaq listing requirements. Pending tThe Panels deci granted an extension,  until November 26, 2024 for the Companys common stock to regain compliance will conth the applicable Nasdaq listinue to trade on Nasdaq. There can be no assurance that tg requirements. The Panel, however, reserved the right to reconsider the terms of the extension based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of the Companys plan will be accepted bycommon stock on Nasdaq inadvisable or unwarranted. While the Companys common stock will continue to trade on Nasdaq during the Panel orextension, there can be no assurance that, if it is, t the Company will be able to regain compliance with the applicable Nasdaq listing requirements. I

Any delisting of the Companys common stock is delisted, it from Nasdaq, including as a result of its inability to regain compliance with Listing Rule 5550(b), could be more difficult to buy or sell adversely affect the Companys ability to attract new investors, reduce the liquidity of its outstanding shares of common stock, reduce its ability to raise additional capital, reduce the Companyprice at which its common stock or to obtain accurate quotatrades, result in negative publicity and increase the transactions, and the price of the  costs inherent in trading such shares with overall negative effects for the Companys stockholders. The Companys  cannot assure its investors that its common stock could suffer a materi, if delisted from Nasdaq, will be listed on another national decline. Dsecurities exchange or quoted on an over-the-counter quotation system. In addition, delisting coof the Companys common stock could also impair deter broker-dealers from making a market in or othe rwise seeking or generating interest in the Companys ability to raise capital.common stock and might deter certain institutions and persons from investing in the Companys securities at all. For these reasons and others, delisting could adversely affect the Companys business, financial condition and liquidity.