Hudson Highland Group Inc.
Annual Report 2014

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D. C. 20549 FORM 10-KxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2014oroTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission file number: 000-50129 HUDSON GLOBAL, INC.(Exact name of registrant as specified in its charter) Delaware 59-3547281(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 560 Lexington Avenue, New York, New York 10022(Address of principal executive offices) (Zip Code)(212) 351-7300(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $0.001 par value The NASDAQ Stock Market LLCPreferred Share Purchase Rights The NASDAQ Stock Market LLCIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Securities Act. Yes o No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit to post such flies). Yes x No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “largeaccelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filero Accelerated filerxNon-accelerated filero Smaller reporting companyoIndicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xThe aggregate market value of the voting common stock held by non-affiliates of the registrant was approximately $120,702,000 based on the closing price of the Common Stock onthe NASDAQ Global Select Market on June 30, 2014.Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.Class Outstanding on January 31, 2015Common Stock - $0.001 par value 33,541,799DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement for the 2015 Annual Meeting of Stockholders are incorporated by reference into Part III.Table of Contents PagePART IITEM 1.BUSINESS1ITEM 1A.RISK FACTORS3ITEM 1B.UNRESOLVED STAFF COMMENTS9ITEM 2.PROPERTIES10ITEM 3.LEGAL PROCEEDINGS10ITEM 4.MINE SAFETY DISCLOSURES10PART IIITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES12ITEM 6.SELECTED FINANCIAL DATA14ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS15ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK39ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA40ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES77ITEM 9A.CONTROLS AND PROCEDURES77PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE78ITEM 11.EXECUTIVE COMPENSATION78ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS78ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE79ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES79PART IVITEM 15.EXHIBITS, FINANCIAL STATEMENTS SCHEDULES80 SIGNATURES86 EXHIBIT INDEX87PART IITEM 1. BUSINESSHudson Global, Inc. (the “Company” or “Hudson”, “we”, “us” and “our”) provides highly specialized professional-level recruitment and related talentsolutions worldwide. Core service offerings include Permanent Recruitment, Temporary Contracting, Recruitment Process Outsourcing (“RPO”) and TalentManagement solutions. Hudson has approximately 1,800 employees and operates in 18 countries with three reportable geographic business segments:Hudson Americas, Hudson Asia Pacific, and Hudson Europe.For the year ended December 31, 2014, the amounts and percentage of the Company’s total gross margin from the three reportable segments were asfollows: Gross Margin Amount PercentageHudson Americas $20,757 9%Hudson Asia Pacific 93,014 42%Hudson Europe 109,074 49%Total $222,845 100%The Company's core service offerings include those services described below:Permanent Recruitment: Offered on both a retained and contingent basis, Hudson's Permanent Recruitment services leverage the Company's 1,200consultants, supported by the Company's specialists in the delivery of its proprietary methods to identify, select and engage the best-fit talent for criticalclient roles.Temporary Contracting: In Temporary Contracting, Hudson provides a range of project management, interim management and professional contractstaffing services. These services draw upon a combination of specialized recruiting and project management competencies to deliver a wide range ofsolutions. Hudson-employed professionals - either individually or as a team - are placed with client organizations for a defined period of time based onspecific business need.RPO: Hudson RPO delivers both permanent recruitment and temporary contracting outsourced recruitment solutions tailored to the individual needs ofprimarily mid-to-large-cap multinational companies. Hudson RPO's delivery teams utilize state-of-the-art recruitment process methodologies and projectmanagement expertise in their flexible, turnkey solutions to meet clients' ongoing business needs. Hudson RPO services include complete recruitmentoutsourcing, project-based outsourcing, contingent workforce solutions and recruitment consulting.Talent Management Solutions: Featuring embedded proprietary talent assessment and selection methodologies, Hudson's Talent ManagementSolutions capability encompasses services such as talent assessment (utilizing a variety of competency, attitude and experiential testing), interview training,executive coaching, employee development and outplacement.On November 7, 2014, the Company completed the sale of substantially all of the assets and liabilities of its Legal eDiscovery business in the UnitedStates and United Kingdom. The Company no longer has operations in the Legal eDiscovery business. In addition, the Company ceased operations inSweden, which was included within the Hudson Europe segment during the third quarter of 2014. The Company concluded that the divestiture of its LegaleDiscovery business and the cessation of operations in Sweden meet the criteria for discontinued operations set forth in the Financial Accounting StandardsBoard ("FASB") Accounting Standards Codification ("ASC") No. 205, "Presentation of Financial Statements." The Company reclassified its discontinuedoperations for all periods presented and has excluded the results from continuing operations and from segment results for all periods presented. CLIENTSThe Company's clients include small to large-sized corporations and government agencies. For the year ended December 31, 2014, there wereapproximately 300 Hudson Americas clients (as compared to approximately 390 in 2013), 2,300 Hudson Asia Pacific clients (as compared to 2,100 in 2013)and 3,570 Hudson Europe clients (as compared to 3,060 in 2013). During 2014, the Company exited the Legal eDiscovery business in the U.S. and U.K.markets as well as its operations in Sweden, which consisted of approximately 155 clients, 20 clients, and 70 clients, respectively. During 2014, no singleclient, accounted for more than 10% of the Company's total revenue. As of December 31, 2014, no single client accounted for more than 10% of theCompany's total outstanding accounts receivable.- 1 -EMPLOYEESThe Company employs approximately 1,800 people worldwide. In most jurisdictions, the Company's employees are not represented by a labor union orcovered by a collective bargaining agreement. The Company regards its relationships with its employees as satisfactory.SALES AND MARKETINGThe majority of Hudson's employees include approximately 1,200 client-facing consultants, who sell its portfolio of services to its existing client baseof approximately 6,100 companies and to prospective client organizations. The Company's consultant population has deep expertise in specific functionalareas and industry sectors, and provides broad-based recruitment and solution services based on the needs of the client. The Company serves several largemultinational companies in its client base and its consultants are partnering with colleagues around the world to sell its services across geographicboundaries.COMPETITIONThe markets for the Company's services and products are highly competitive. There are few barriers to entry, so new entrants occur frequently, resultingin considerable market fragmentation. Companies in this industry compete on a number of parameters including degree and quality of candidate and positionknowledge, industry expertise, service quality, and efficiency in completing assignments. Typically, companies with greater strength in these parametersgarner higher margins.SEGMENT AND GEOGRAPHIC DATAFinancial information concerning the Company's reportable segments and geographic areas of operation is included in Note 17 of the Notes toConsolidated Financial Statements contained in Item 8 of this Form 10-K.AVAILABLE INFORMATIONWe maintain a Web site with the address www.hudson.com. We are not including the information contained on our Web site as part of, or incorporatingit by reference into, this report. Through our Web site, we make available free of charge (other than an investor's own Internet access charges) our annualreports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to these reports in a timely manner after we providethem to the Securities and Exchange Commission.- 2 -ITEM 1A. RISK FACTORSThe following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks anduncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deemimmaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, results of operations, and cash flowscould be materially adversely affected.Our operations will be affected by global economic fluctuations.Clients' demand for our services may fluctuate widely with changes in economic conditions in the markets in which we operate. Those conditionsinclude slower employment growth or reductions in employment, which directly impact our service offerings. We have limited flexibility to reduce expensesduring economic downturns due to some overhead costs that are fixed in the short-term. Furthermore, we may face increased pricing pressures during theseperiods. For example, in prior economic downturns, many employers in our operating regions reduced their overall workforce to reflect the slowing demandfor their products and services.We may not be able to successfully execute our strategic initiatives or meet our long-term financial goals.We have been engaged in strategic initiatives to refocus on our core business to maximize long-term stockholder value, to improve our cost structureand efficiency and to increase our selling efforts and developing new business. We cannot provide any assurance that we will be able to successfully executethese or other strategic initiatives or that we will be able to execute these initiatives on our expected timetable. We may not be successful in refocusing ourcore business and obtaining operational efficiencies or replacing revenues lost as a result of these strategic initiatives.Our operating results fluctuate from quarter to quarter; no single quarter is predictive of future periods' results.Our operating results fluctuate quarter to quarter primarily due to the vacation periods during the first quarter in the Asia Pacific region and the thirdquarter in the Americas and Europe regions. Demand for our services is typically lower during traditional national vacation periods when clients andcandidates are on vacation.Our revenue can vary because our clients can terminate their relationship with us at any time with limited or no penalty.We focus on providing professional mid-level personnel on a temporary assignment-by-assignment basis, which clients can generally terminate at anytime or reduce their level of use when compared to prior periods. Our professional recruitment business is also significantly affected by our clients' hiringneeds and their views of their future prospects. These factors can also affect our RPO business. Clients may, on very short notice, terminate, reduce orpostpone their recruiting assignments with us and, therefore, affect demand for our services. This could have a material adverse effect on our business,financial condition and results of operations.Our markets are highly competitive.The markets for our services are highly competitive. Our markets are characterized by pressures to provide high levels of service, incorporate newcapabilities and technologies, accelerate job completion schedules and reduce prices. Furthermore, we face competition from a number of sources. Thesesources include other executive search firms and professional search, staffing and consulting firms. Several of our competitors have greater financial andmarketing resources than we do. Due to competition, we may experience reduced margins on our services, loss of market share and our customers. If we arenot able to compete effectively with current or future competitors as a result of these and other factors, our business, financial condition and results ofoperations could be materially adversely affected.We have no significant proprietary technology that would preclude or inhibit competitors from entering the mid-level professional staffing markets. Wecannot provide assurance that existing or future competitors will not develop or offer services that provide significant performance, price, creative or otheradvantages over our services. In addition, we believe that, with continuing development and increased availability of information technology, the industriesin which we compete may attract new competitors. Specifically, the increased use of the Internet may attract technology-oriented companies to theprofessional staffing industry. We cannot provide assurance that we will be able to continue to compete effectively against existing or future competitors.Any of these events could have a material adverse effect on our business, financial condition and results of operations.- 3 -We have had periods of negative cash flows and operating losses that may recur in the future.We have experienced negative cash flows and reported operating and net losses in the past. For example, we had operating and net losses for the yearsended December 31, 2014, 2013 and 2012. We cannot provide any assurance that we will have positive cash flows or operating profitability in the future,particularly to the extent the global economy continues to recover slowly from the global economic downturn. If our revenue declines or if operatingexpenses exceed our expectations, we may not be profitable and may not generate positive operating cash flows.Our credit facilities restrict our operating flexibility.Our credit facilities contain various restrictions and covenants that restrict our operating flexibility including:•borrowings limited to eligible receivables;•lenders' ability to impose restrictions, such as payroll or other reserves;•limitations on payments of dividends;•restrictions on our ability to make additional borrowings, or to consolidate, merge or otherwise fundamentally change our ownership;•limitations on capital expenditures, investments, dispositions of assets, guarantees of indebtedness, permitted acquisitions and repurchasesof stock; and•limitations on certain intercompany payments of expenses, interest and dividends. These restrictions and covenants could have adverse consequences for investors, including the consequences of our need to use a portion of our cashflow from operations for debt service, rather than for our operations, restrictions on our ability to incur additional debt financing for future working capital orcapital expenditures, a lesser ability for us to take advantage of significant business opportunities, such as acquisition opportunities, the potential need for usto undertake equity transactions which may dilute the ownership of existing investors, and our inability to react to market conditions by selling lesser-performing assets.In addition, a default, amendment or waiver to our credit facilities to avoid a default may result in higher rates of interest and could impact our ability toobtain additional borrowings. Finally, debt incurred under our credit facilities bears interest at variable rates. Any increase in interest expense could reducethe funds available for operations.Extensions of credit under our existing agreements are permitted based on a borrowing base, which is an agreed percentage of eligible accountsreceivable, less required reserves, applicable letters of credit and outstanding borrowings. If the amount or quality of our accounts receivable deteriorates,then our ability to borrow under these credit facilities will be directly affected. Furthermore, our credit agreement with Westpac Banking Corporation doesnot have a stated maturity date and can be terminated by Westpac Banking Corporation upon 90 days' written notice. We cannot provide assurance that wewill be able to borrow under these credit facilities if we need money to fund working capital or other needs.If sources of liquidity are not available or if we cannot generate sufficient cash flows from operations, then we may berequired to obtain additional sources of funds through additional operating improvements, capital markets transactions, asset sales or financing from thirdparties, or a combination thereof and, under certain conditions, such transactions could substantially dilute the ownership of existing stockholders. Wecannot provide assurance that the additional sources of funds will be available, or if available, would have reasonable terms.Our investment strategy subjects us to risks.From time to time, we make investments as part of our growth plans. Investments may not perform as expected because they are dependent on a varietyof factors, including our ability to effectively integrate new personnel and operations, our ability to sell new services, and our ability to retain existing orgain new clients. Furthermore, we may need to borrow more money from lenders or sell equity or debt securities to the public to finance future investmentsand the terms of these financings may be adverse to us.- 4 -We face risks related to our international operations.We conduct operations in 18 countries and face both translation and transaction risks related to foreign currency exchange. For the year endedDecember 31, 2014, approximately 91% of our gross margin was earned outside of the United States ("U.S"). Our financial results could be materially affectedby a number of factors particular to international operations. These include, but are not limited to, difficulties in staffing and managing internationaloperations, operational issues such as longer customer payment cycles and greater difficulties in collecting accounts receivable, changes in tax laws or otherregulatory requirements, issues relating to uncertainties of laws and enforcement relating to the regulation and protection of intellectual property, andcurrency fluctuation. If we are forced to discontinue any of our international operations, we could incur material costs to close down such operations.Regarding the foreign currency risk inherent in international operations, the results of our local operations are reported in the applicable foreigncurrencies and then translated into U.S. dollars at the applicable foreign currency exchange rates for inclusion in our financial statements. In addition, wegenerally pay operating expenses in the corresponding local currency. Because of devaluations and fluctuations in currency exchange rates or the impositionof limitations on conversion of foreign currencies into U.S. dollars, we are subject to currency translation exposure on the revenue and income of ouroperations in addition to economic exposure. Our consolidated U.S. dollar cash balance could be lower because a significant amount of cash is generatedoutside of the U.S. This risk could have a material adverse effect on our business, financial condition and results of operations.We depend on our key management personnel.Our success depends to a significant extent on our senior management team. The loss of the services of one or more key senior management teammember could have a material adverse effect on our business, financial condition and results of operations. In addition, if one or more key employees join acompetitor or form a competing company, the resulting loss of existing or potential clients could have a material adverse effect on our business, financialcondition and results of operations.Failure to attract and retain qualified personnel could negatively impact our business, financial condition and results of operations.Our success also depends upon our ability to attract and retain highly-skilled professionals who possess the skills and experience necessary to meet thestaffing requirements of our clients. We must continually evaluate and upgrade our base of available qualified personnel to keep pace with changing clientneeds and emerging technologies. Furthermore, a substantial number of our contractors during any given year may terminate their employment with us andaccept regular staff employment with our clients. Competition for qualified professionals with proven skills is intense, and demand for these individuals isexpected to remain strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available to us in sufficientnumbers. If we are unable to attract the necessary qualified personnel for our clients, it may have a negative impact on our business, financial condition andresults of operations.We face risks in collecting our accounts receivable.In virtually all of our businesses, we invoice customers after providing services, which creates accounts receivable. Delays or defaults in payments owedto us could have a significant adverse impact on our business, financial condition and results of operations. Factors that could cause a delay or defaultinclude, but are not limited to, global economic conditions, business failures, and turmoil in the financial and credit markets.In certain situations, we provide our services to clients under a contractual relationship with a third-party vendor manager, rather than directly to theclient. In those circumstances, the third-party vendor manager is typically responsible for aggregating billing information, collecting receivables from theclient and paying staffing suppliers once funds are received from the client. In the event that the client has paid the vendor manager for our services and weare unable to collect from the vendor manager, we may be exposed to financial losses.If we are unable to maintain costs at an acceptable level, our operations could be adversely impacted.Our ability to reduce costs in line with our revenues is important for the improvement of our profitability. Efforts to improve our efficiency could beaffected by several factors including turnover, client demands, market conditions, changes in laws, and availability of talent. If we fail to realize the expectedbenefits of these cost reduction initiatives, this could have an adverse effect on our financial condition and results of operations.- 5 -We rely on our information systems, and if we lose our information processing capabilities or fail to further develop our technology, our businesscould be adversely affected.Our success depends in large part upon our ability to store, retrieve, process, and manage substantial amounts of information, including our client andcandidate databases. To achieve our strategic objectives and to remain competitive, we must continue to develop and enhance our information systems. Thismay require the acquisition of equipment and software and the development, either internally or through independent consultants, of new proprietarysoftware. If we are unable to design, develop, implement and utilize, in a cost-effective manner, information systems that provide the capabilities necessaryfor us to compete effectively, or if we experience any interruption or loss of our information processing capabilities, for any reason, this could adversely affectour business, financial condition and results of operations.As we operate in an international environment, we are subject to greater cyber-security risks and incidents. We also use mobile devices, socialnetworking and other online activities to connect with our candidates, clients and business partners. While we have implemented measures to preventsecurity breaches and cyber incidents, our measures may not be effective and any security breaches or cyber incidents could adversely affect our business,financial condition and results of operations.Our business depends on uninterrupted service to clients.Our operations depend on our ability to protect our facilities, computer and telecommunication equipment and software systems against damage orinterruption from fire, power loss, cyber attacks, sabotage, telecommunications interruption, weather conditions, natural disasters and other similar events.Additionally, severe weather can cause our employees or contractors to miss work and interrupt delivery of our service, potentially resulting in a loss ofrevenue. While interruptions of these types that have occurred in the past have not caused material disruption, it is not possible to predict the type, severity orfrequency of interruptions in the future or their impact on our business.We may be exposed to employment-related claims, legal liability and costs from clients, employers and regulatory authorities that couldadversely affect our business, financial condition or results of operations, and our insurance coverage may not cover all of our potential liability.We are in the business of employing people and placing them in the workplaces of other businesses. Risks relating to these activities include:•claims of misconduct or negligence on the part of our employees;•claims by our employees of discrimination or harassment directed at them, including claims relating to actions of our clients;•claims related to the employment of illegal aliens or unlicensed personnel;•claims for payment of workers' compensation and other similar claims;•claims for violations of wage and hour requirements;•claims for entitlement to employee benefits;•claims of errors and omissions of our temporary employees;•claims by taxing authorities related to our independent contractors and the risk that such contractors could be considered employees for taxpurposes;•claims by candidates that we place for wrongful termination or denial of employment;•claims related to our non-compliance with data protection laws, which require the consent of a candidate to transfer resumes and other data;and•claims by our clients relating to our employees' misuse of client proprietary information, misappropriation of funds, other misconduct,criminal activity or similar claims.- 6 -We are exposed to potential claims with respect to the recruitment process. A client could assert a claim for matters such as breach of a blockingarrangement or recommending a candidate who subsequently proves to be unsuitable for the position filled. Similarly, a client could assert a claim fordeceptive trade practices on the grounds that we failed to disclose certain referral information about the candidate or misrepresented material informationabout the candidate. Further, the current employer of a candidate whom we place could file a claim against us alleging interference with an employmentcontract. In addition, a candidate could assert an action against us for failure to maintain the confidentiality of the candidate's employment search or foralleged discrimination or other violations of employment law by one of our clients.We may incur fines and other losses or negative publicity with respect to these problems. In addition, some or all of these claims may give rise tolitigation, which could be time-consuming to our management team, costly and could have a negative effect on our business. In some cases, we have agreedto indemnify our clients against some or all of these types of liabilities. We cannot assure that we will not experience these problems in the future, that ourinsurance will cover all claims, or that our insurance coverage will continue to be available at economically-feasible rates.It is possible that we may still incur liabilities associated with certain pre-spin off activities with Monster Worldwide, Inc. ("Monster"). Under the termsof our Distribution Agreement with Monster, these liabilities generally will continue to be retained by us. If these liabilities are significant, the retainedliabilities could have a material adverse effect on our business, financial condition and results of operations. However, in some circumstances, we may haveclaims against Monster, and we will make a determination on a case by case basis.Our ability to utilize net operating loss carry-forwards may be limited.The Company has U.S. net operating loss carry-forwards (“NOLs”) that expire through 2034. Section 382 of the U.S. Internal Revenue Code imposes anannual limitation on a corporation's ability to utilize NOLs if it experiences an “ownership change.” In general terms, an ownership change may result fromtransactions increasing the ownership of certain stockholders in the stock of a corporation by greater than 50% over a three-year period. The Company hasexperienced ownership changes in the past. Ownership changes in our stock, some of which are outside of our control, could result in a limitation in ourability to use our NOLs to offset future taxable income, could cause U.S. Federal income taxes to be paid earlier than otherwise would be paid if suchlimitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs.There may be volatility in our stock price.The market price for our common stock has fluctuated in the past and could fluctuate substantially in the future. For example, during 2014, the marketprice of our common stock reported on the NASDAQ Global Select Market ranged from a high of $4.33 to a low of $2.69. Factors such as generalmacroeconomic conditions adverse to workforce expansion, the announcement of variations in our quarterly financial results or changes in our expectedfinancial results could cause the market price of our common stock to fluctuate significantly. Further, due to the volatility of the stock market generally, theprice of our common stock could fluctuate for reasons unrelated to our operating performance. Our future earnings could be reduced as a result of the imposition of licensing or tax requirements or new regulations that prohibit, or restrictcertain types of employment services we offer.In many jurisdictions in which we operate, the provision of temporary staffing is heavily regulated. For example, governmental regulations can restrictthe length of contracts of contract employees and the industries in which they may be used. In some countries, special taxes, fees or costs are imposed inconnection with the use of contract workers. The countries in which we operate may:•create additional regulations that prohibit or restrict the types of employment services that we currently provide;•impose new or additional benefit requirements;•require us to obtain additional licensing to provide staffing services;•impose new or additional visa restrictions on movements between countries;•increase taxes, such as sales or value-added taxes, payable by the providers of staffing services;- 7 -•increase the number of various tax and compliance audits relating to a variety of regulations, including wage and hour laws, unemploymenttaxes, workers' compensation, immigration, and income, value-added and sales taxes; or•revise transfer pricing laws or successfully challenge our transfer prices, which may result in higher foreign taxes or tax liabilities or doubletaxation of our foreign operations.Any future regulations that make it more difficult or expensive for us to continue to provide our staffing services may have a material adverse effect onour business, financial condition and results of operations.Provisions in our organizational documents and Delaware law will make it more difficult for someone to acquire control of us.Our certificate of incorporation and by-laws and the Delaware General Corporation Law contain several provisions that make it more difficult to acquirecontrol of us in a transaction not approved by our Board of Directors, including transactions in which stockholders might otherwise receive a premium fortheir shares over then current prices, and that may limit the ability of stockholders to approve transactions that they may deem to be in their best interests.Although our Board of Directors has proposed that our stockholders vote at our 2015 annual meeting of stockholders to eliminate some of these provisions,our certificate of incorporation and by-laws currently include provisions: •dividing our Board of Directors into three classes to be elected on a staggered basis, one class each year;•authorizing our Board of Directors to issue shares of our preferred stock in one or more series without further authorization of ourstockholders;•requiring that stockholders provide advance notice of any stockholder nomination of directors or any of new business to be considered atany meeting of stockholders;•permitting removal of directors only for cause by a super-majority vote of our stockholders;•providing that vacancies on our Board of Directors will be filled by the remaining directors then in office;•requiring that a super-majority vote of our stockholders be obtained to amend or repeal specified provisions of our certificate ofincorporation or by-laws; and•eliminating the right of stockholders to call a special meeting of stockholders or take action by written consent without a meeting ofstockholders. In addition, Section 203 of the Delaware General Corporation Law generally provides that a corporation may not engage in any business combinationwith any interested stockholder during the three-year period following the time that the stockholder becomes an interested stockholder, unless a majority ofthe directors then in office approve either the business combination or the transaction that results in the stockholder becoming an interested stockholder orspecified stockholder approval requirements are met.- 8 -In February 2005, our Board of Directors adopted a Rights Agreement between the Company and a rights agent (the "2005 Rights Agreement") anddeclared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of our common stock payable upon the close of business onFebruary 28, 2005 to the stockholders of record on that date. On January 15, 2015, our Board of Directors approved an amendment and restatement of the2005 Rights Agreement by adopting an Amended and Restated Rights Agreement (the "Rights Agreement") between the Company and a rights agent. TheBoard adopted the Rights Agreement in an effort to protect stockholder value by attempting to diminish the risk that the Company's ability to use its netoperating losses ("NOLs") to reduce potential future Federal income tax obligations may become substantially limited. Each Right entitles the registeredholder to purchase from us one one-hundredth (1/100th) of a share of our Series A Junior Participating Preferred Stock (“Preferred Shares”) at a price of $8.50per one one-hundredth of a Preferred Share, subject to adjustment. If any person becomes a 4.99% or more stockholder of the Company, then each Right(subject to certain limitations) will entitle its holder to purchase, at the Right's then current exercise price, a number of shares of common stock of theCompany or of the acquirer having a market value at the time of twice the Right's per share exercise price. The Company's Board of Directors may redeem theRights for $0.001 per Right at any time prior to the time when the Rights become exercisable. The Rights will expire on the earliest of (i) the date of theCompany’s 2015 annual meeting of stockholders if the Company’s stockholders do not approve the Rights Agreement at the 2015 annual meeting ofstockholders, (ii) January 15, 2018, (iii) the time at which the Rights are redeemed as described above, (iv) the time at which the Rights are exchangedpursuant to the terms of the Rights Agreement, (v) the repeal of Section 382 of the Internal Revenue Code if the Board determines that the Rights Agreementis no longer necessary for the preservation of the Company’s NOLs, and (vi) the beginning of a taxable year of the Company to which the Board determinesthat no NOLs may be carried forward. The Rights may have certain anti-takeover effects. The Rights may cause substantial dilution to any person or groupthat attempts to acquire the Company without the approval of the Board. As a result, the overall effect of the rights may be to render more difficult ordiscourage a merger, tender offer or other business combination involving the Company that is not supported by the Board. Proxy contests and any other actions of activist stockholders could have a negative effect on our business.The Company experienced a proxy contest from activist stockholders in connection with its 2014 annual meeting of stockholders. If further proxycontests or any other dissident stockholder activities ensue, then our business could be adversely affected because responding to proxy contests, litigationand other actions by dissident stockholders can be costly and time-consuming, disrupt our operations and divert the attention of management and ouremployees. In addition, perceived uncertainties as to our future direction may result in the loss of potential business opportunities and harm our ability toattract new investors and clientsand to retain and attract experienced management and employees. Also, we may experience a significant increase in legalfees, administrative and associated costs incurred in connection with responding to a proxy contest or related action. These actions could also cause our stockprice to experience periods of volatility or stagnation.ITEM 1B. UNRESOLVED STAFF COMMENTSNone.- 9 -ITEM 2. PROPERTIESAll of the Company's operating offices are located in leased premises. Our principal executive office is located at 560 Lexington Avenue, New York,New York, where we occupy space under a lease expiring in March 2017 with approximately 9,000 aggregate square feet.Hudson Americas maintains 6 leased locations with approximately 45,000 aggregate square feet. Hudson Asia Pacific maintains 16 leased locationswith approximately 150,000 aggregate square feet. Hudson Europe maintains 28 leased locations with approximately 199,000 aggregate square feet. Allleased space is considered to be adequate for the operation of its business, and no difficulties are foreseen in meeting any future space requirements.ITEM 3. LEGAL PROCEEDINGSThe Company is involved in various legal proceedings that are incidental to the conduct of its business. The Company is not involved in any pendingor threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition or results ofoperations.ITEM 4. MINE SAFETY DISCLOSURESNot applicable.- 10 -EXECUTIVE OFFICERS OF THE REGISTRANTThe following table sets forth certain information, as of February 25, 2015, regarding the executive officers of Hudson Global, Inc.: Name Age TitleManuel Marquez Dorsch 56 Chairman and Chief Executive OfficerStephen A. Nolan 54 Executive Vice President, Chief Financial Officer and Corporate ControllerArthur Curcuru 33 Senior Vice President, FinanceNeil J. Funk 63 Vice President, Internal AuditThe following biographies describe the business experience of our executive officers:Manuel Marquez Dorsch has served as Chairman and Chief Executive Officer since 2011, with overall responsibility for the Company's growth strategy,operational execution and performance. Mr. Marquez has over 20 years of experience in senior leadership positions. Most recently, from 2007 to 2010, hewas the chief executive officer of Amper S.A., a leading defense, homeland security and telecom services company in Spain with approximately 1,200employees. Prior to joining Amper, Mr. Marquez spent 15 years in the recruitment industry with Spencer Stuart, an international leader in executive searchconsulting services. He joined Spencer Stuart in 1991 and co-founded one of the firm's first specialized industry practices, High Technology. In 1995, he wasasked to lead the European Telecommunications Practice. From 1997 to 2000, he was the Managing Partner responsible for the Spanish market. From 2000 to2005, he was a member of the global executive team of Spencer Stuart responsible for the firm's operations in Europe, India and South Africa. Mr. Marquezbegan his professional career at IBM in 1981. He later joined Digital Equipment Corporation in 1989, as marketing and sales director for its Spanishsubsidiary.Stephen A. Nolan has served as Executive Vice President, Chief Financial Officer and Corporate Controller since 2013, with overall responsibility forthe Company's accounting, finance, treasury, IT and related risk management functions. Mr. Nolan has more than 30 years of experience in finance,operations and strategic planning. From 2004 to 2012, he served as the Chief Financial Officer at Adecco Group North America, a $5 billion staffing andhuman capital division of the global workforce solutions company, Adecco S.A. Previously, Mr. Nolan served as Chief Financial Officer North America forDHL Global Forwarding from 2001 until 2004. Prior to that, he served in a variety of finance and strategic development roles, including 15 years at ReckittBenckiser Inc., a global household, health and personal care products company. Mr. Nolan is a Chartered Accountant and began his career as Audit Seniorwith PricewaterhouseCoopers in Ireland.Arthur Curcuru has served as Senior Vice President, Finance since May 1, 2014 with responsibilities in the Company's corporate developments andstrategic actions. Prior to joining the Company, Mr. Curcuru was employed at KPMG LLP, a multi-national auditing and consulting firm for approximately10 years since 2004, most recently as a Senior Manager in its audit practice.Neil J. Funk has served as Vice President, Internal Audit since joining the Company in 2003. Prior to joining the Company, Mr. Funk was a SeniorManager at Deloitte & Touche LLP, a multi-national auditing and consulting firm, from 2000 until 2003. During 2000, before joining Deloitte & Touche,Mr. Funk was with Prudential Financial, Inc., a large insurance company, specializing in personal financial planning. Before joining Prudential Financial,Inc., Mr. Funk was District Audit Manager for PRG-Schultz, Inc., a recovery audit company, based in Atlanta, Georgia from 1997 until 2000. Executive officers are elected by, and serve at the discretion of, the Board of Directors. There are no family relationships between any of our directors orexecutive officers.- 11 -PART IIITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMARKET FOR COMMON STOCKThe Company's common stock was listed for trading on the NASDAQ Global Select Market during 2014 under the symbol "HSON." On January 31,2015, there were approximately 541 holders of record of the Company's common stock.The following is a list by fiscal quarter of the market prices of the Company's common stock. Market Price High Low2014 Fourth quarter $3.84 $2.69Third quarter $4.06 $3.49Second quarter $4.33 $3.33First quarter $4.17 $3.312013 Fourth quarter $4.27 $3.06Third quarter $3.38 $2.11Second quarter $3.92 $2.10First quarter $4.90 $3.56We have never declared or paid cash dividends on our common stock, and we currently do not intend to declare or pay cash dividends on our commonstock. Any payment of cash dividends will depend upon our financial condition, capital requirements, earnings and other factors deemed relevant by ourBoard of Directors. In addition, the terms of our credit agreement restrict us from paying dividends and making other distributions.ISSUER PURCHASES OF EQUITY SECURITIESThe Company's purchases of its common stock during the fourth quarter of fiscal 2014 were as follows:Period Total Number ofShares Purchased Average PricePaid per Share Total Number ofShares Purchased as Part of PubliclyAnnounced Plansor Programs Approximate Dollar Value of Sharesthat May Yet BePurchased Underthe Plans or Programs (a)October 1, 2014 - October 31, 2014 — — — 6,792,000November 1, 2014 - November 30, 2014 — — — 6,792,000December 1, 2014 - December 31, 2014 (b) 2,216 $3.10 — 6,792,000Total 2,216 $3.10 — 6,792,000(a)On February 4, 2008, the Company announced that its Board of Directors authorized the repurchase of a maximum of $15 million of the Company'scommon stock. The Company has repurchased 1,491,772 shares for a total cost of approximately $8.2 million under this authorization.(b)Consisted of shares of restricted stock withheld from employees upon the vesting of such shares to satisfy employees' minimum income taxwithholding requirements.- 12 -The following information in this Item 5 of this Annual Report on Form 10-K is not deemed to be “soliciting material” or to be “filed” with the SEC orsubject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, andwill not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to theextent we specifically incorporate it by reference into such a filing. PERFORMANCE INFORMATIONThe following graph compares on a cumulative basis changes since December 31, 2009 in (a) the total stockholder return on the Company's commonstock with (b) the total return on the Russell 2000 Index and (c) the total return on the companies in a peer group selected in good faith by the Company, ineach case assuming reinvestment of dividends. Such changes have been measured by dividing (x) the difference between the price per share at the end of andthe beginning of the measurement period by (y) the price per share at the beginning of the measurement period. The graph assumes $100 was invested onDecember 31, 2009 in the Company's common stock, the Russell 2000 Index and the peer group consisting of Resources Connection, Inc., Kelly Services,Inc., Kforce, Inc., and CDI Corporation. The returns of each component company in the peer group have been weighted based on each company's relativemarket capitalization on December 31, 2014. December 31, 2009 2010 2011 2012 2013 2014HSON $100.00 $122.74 $100.84 $94.32 $84.63 $65.26RUSSELL 2000 INDEX $100.00 $125.31 $118.47 $135.81 $186.07 $192.63PEER GROUP $100.00 $129.06 $93.05 $113.16 $158.13 $153.97- 13 -ITEM 6. SELECTED FINANCIAL DATAThe following table shows selected financial data of the Company that has been adjusted to reflect the classification of certain businesses asdiscontinued operations. The data has been derived from, and should be read together with, the Consolidated Financial Statements and corresponding notesand “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in Items 7 and 8 of this Form 10-K. Year Ended December 31, 2014 2013 2012 2011 2010 (dollars in thousands, except per share data)SUMMARY OF OPERATIONS (a): Revenue $581,192 $562,572 $655,875 $780,927 $682,145Gross margin $222,845 $209,429 $257,793 $314,253 $273,664Business reorganization and integration expense $3,789 $5,440 $7,506 $720 $1,625Operating income (loss) $(17,486) $(27,152) $(10,094) $5,928 $(7,349)Income (loss) from continuing operations $(15,786) $(30,211) $(7,222) $3,623 $(5,118)Income (loss) from discontinued operations, net of income taxes $2,592 $(184) $1,887 $7,286 $433Net income (loss) $(13,194) $(30,395) $(5,335) $10,909 $(4,685)Basic income (loss) per share from continuing operations $(0.48) $(0.93) $(0.22) $0.11 $(0.17)Basic net income (loss) per share $(0.40) $(0.94) $(0.17) $0.35 $(0.16)Diluted income (loss) per share from continuing operations $(0.48) $(0.93) $(0.22) $0.11 $(0.17)Diluted net income (loss) per share $(0.40) $(0.94) $(0.17) $0.34 $(0.16)OTHER FINANCIAL DATA: Net cash provided by (used in) operating activities $(17,840) $2,513 $13,159 $13,396 $(15,658)Net cash provided by (used in) investing activities $16,731 $(2,557) $(8,272) $(6,584) $1,140Net cash provided by (used in) financing activities $(1,256) $(497) $(4,274) $1,639 $7,578BALANCE SHEET DATA: Current assets $118,921 $134,323 $157,412 $181,923 $172,087Total assets $139,672 $158,829 $193,468 $216,546 $205,834Current liabilities $67,117 $69,818 $67,168 $90,515 $93,760Total stockholders’ equity $59,257 $74,385 $106,541 $107,357 $93,278OTHER DATA: EBITDA (loss) (b) $(11,725) $(20,471) $(3,788) $11,885 $4,459(a)Effective November 9, 2014, the Company completed the sale of substantially all of the assets and certain liabilities of the Legal eDiscoverybusiness in the U.S and U.K. to Document Technologies, LLC and DTI of London Limited. In addition, the Company ceased its operations inSweden within the Hudson Europe segment during the third quarter of 2014. The results of operations of the Legal eDiscovery business and theCompany's operations in Sweden have been reclassified to discontinued operations for all periods presented and has been excluded from continuingoperations in accordance with the provisions of ASC 205-20-45, “Reporting Discontinued Operations." See Note 3 included in Item 8 of this Form10-K for additional information.(b)SEC Regulation S-K 229.10(e)1(ii)(A) defines EBITDA as earnings before interest, taxes, depreciation and amortization. EBITDA is presented toprovide additional information to investors about the Company's operations on a basis consistent with the measures that the Company uses tomanage its operations and evaluate its performance. Management also uses this measurement to evaluate working capital requirements. EBITDAshould not be considered in isolation or as a substitute for operating income and net income prepared in accordance with generally acceptedaccounting principles or as a measure of the Company's profitability. See Note 17 to the Consolidated Financial Statements for further EBITDAsegment and reconciliation information.- 14 -ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with theConsolidated Financial Statements and the notes thereto, included in Item 8 of this Form 10-K. This MD&A contains forward-looking statements. Please see“FORWARD-LOOKING STATEMENTS” for a discussion of the uncertainties, risks and assumptions associated with these statements. This MD&A also usesthe non-generally accepted accounting principle measure of earnings before interest, taxes, depreciation and amortization (“EBITDA”). See Note 17 to theConsolidated Financial Statements for EBITDA segment reconciliation information.This MD&A includes the following sections:•Executive Overview•Results of Operations•Liquidity and Capital Resources•Contingencies•Critical Accounting Policies•Recent Accounting Pronouncements•Forward-Looking StatementsExecutive OverviewThe Company has deep expertise in recruiting professional talent across all management disciplines in a wide range of industries, matching clients andcandidates to address client needs on a part time, full time and interim basis. The Company provides those services as an independent third party and throughthe provision of outsourced services as a function of its Recruitment Process Outsourcing (RPO) business. The Company also provides expert guidance andservices in the areas of talent assessment, leadership development and transition management through its Talent Management business, leveraging theproprietary tools and techniques developed by its in-house Research & Development division based in Belgium. With operations in 18 countries, andrelationships with specialized professionals around the globe, the Company brings a strong ability to match talent with opportunities by assessing, recruiting,developing and engaging the best and brightest people for the Company's clients.The Company combines broad geographic presence, proprietary tools and methodologies, world-class talent solutions and a tailored, consultativeapproach to help businesses and professionals achieve maximum performance. To accelerate the implementation of the Company's strategy, we have engagedin the following initiatives:•Investing in the core businesses and practices that present the greatest potential for profitable growth.•Further improving the Company’s cost structure and efficiency of its support functions and infrastructure.•Building and differentiating the Company's brand through its unique talent solutions offerings. - 15 -Discontinued OperationsEffective November 9, 2014, the Company completed the sale of substantially all of the assets and certain liabilities of the Legal eDiscovery business inthe U.S and U.K. to Document Technologies, LLC and DTI of London Limited for $23.0 million in cash, and recorded a gain of $11.3 million in connectionwith the sale. The divestiture is a significant component of the Company’s previously announced efforts to focus on its core business lines and growthopportunities. In addition, the Company ceased its operations in Sweden within the Hudson Europe segment during the third quarter of 2014.The Company's divestiture of its Legal eDiscovery business and exit of operations in Sweden accounted for $5.5 million and $1.1 million of operatinglosses for the year ended December 31, 2014, respectively, which have been reclassified to discontinued operations for all periods presented and have beenexcluded from continuing operations and from segment results for all periods presented in accordance with the provisions of ASC 205-20-45 “ReportingDiscontinued Operations”. See Note 3 included in Item 8 of this Form 10-K for additional information.Current Market ConditionsEconomic conditions in most of the world's major markets remain mixed. Most of the economies in Continental Europe have experienced slower growthor GDP declines in recent months. Civil unrest in Hong Kong has had an adverse impact on business conditions there. If the current market conditions persist,the Company may experience diminished operating performance. The Company closely monitors the economic environment and business climate in itsmarkets and responds accordingly. At this time, the Company is unable to accurately predict the outcome of these events or changes in general economicconditions and their effect on the demand for the Company's services.Financial PerformanceThe Company has showed progress in its financial performance from continuing operations on its path towards delivering sustained profitability. On ayear-over-year basis, the Company experienced improvements in revenue, gross margin and EBITDA in 2014 as compared to 2013. These improvements wereled by growth in Asia Pacific benefiting from double-digit percentage revenue and gross margin growth in the RPO practice. The Company experiencedmixed revenue results in Europe, as the U.K. and parts of Continental Europe faced challenges, resulting in a revenue decrease of 1.0% on a constant currencybasis. However, the Company reported a growth in gross margin of 3.2% on a constant currency basis due to strong results in higher margin businesses suchas permanent recruitment and talent management. EBITDA as compared to 2013 improved significantly as a result of the gross margin improvements andimpact of cost savings initiatives enacted during 2014 through the Company's restructuring programs.The following is a summary of the highlights for the years ended December 31, 2014, 2013 and 2012. These should be considered in the context of theadditional disclosures in this MD&A.•Revenue was $581.2 million for the year ended December 31, 2014, compared to $562.6 million for 2013, an increase of $18.6 million, or 3.3%.◦On a constant currency basis, the Company's revenue increased $19.9 million, or 3.5%. Of this increase, $13.9 million was in permanentrecruitment revenue (up 12.3% compared to 2013) and $5.3 million was in talent management revenue (up 14.0% compared to 2013).Revenue was $562.6 million for the year ended December 31, 2013, compared to $655.9 million for 2012, a decrease of $93.3 million, or 14.2%.◦On a constant currency basis, the Company's revenue decreased $79.2 million, or 12.4%. Of this decrease, $42.0 million was incontracting revenue (down 9.4% compared to 2012), $28.7 million was in permanent recruitment revenue (down 20.3% compared to2012) and $6.9 million was in talent management revenue (down 15.3% compared to 2012).- 16 -•Gross margin was $222.8 million for the year ended December 31, 2014, compared to $209.4 million for 2013, an increase of $13.4 million, or6.4%.◦On a constant currency basis, gross margin increased $14.7 million, or 7.1%. Of this increase, $13.8 million was in permanent recruitmentgross margin (up 12.4% compared to 2013) and $3.8 million was in talent management gross margin (up 11.8% compared to 2013). Theincrease was partially offset by a decrease of $2.6 million in contracting gross margin (down 4.0% compared to 2013).Gross margin was $209.4 million for the year ended December 31, 2013, compared to $257.8 million for 2012, a decrease of $48.4 million, or18.8%.◦On a constant currency basis, gross margin decreased $44.3 million, or 17.5%. Of this decrease, $28.1 million was in permanentrecruitment gross margin (down 20.3% compared to 2012), $9.9 million was in contracting gross margin (down 13.2% compared to2012) and $5.4 million was in talent management gross margin (down 14.5% compared to 2012).•Selling, general and administrative expenses and other non-operating income (expense) (“SG&A and Non-Op”) was $230.1 million for the yearended December 31, 2014, compared to $223.1 million for 2013, an increase of $7.0 million, or 3.1%. ◦On a constant currency basis, SG&A and Non-Op increased $8.3 million, or 3.8%. SG&A and Non-Op, as a percentage of revenue, was39.6% for the year ended December 31, 2014, compared to 39.5% for 2013.SG&A and Non-Op were $223.1 million for the year ended December 31, 2013, compared to $254.1 million for 2012, a decrease of $31.0 million,or 12.2%. ◦On a constant currency basis, SG&A and Non-Op decreased $27.6 million, or 11.1%. SG&A and Non-Op, as a percentage of revenue, was39.7% for the year ended December 31, 2013, compared to 38.9% for 2012.•Business reorganization expenses were $3.8 million for the year ended December 31, 2014, compared to $5.4 million for 2013, a decrease of $1.7million on both a reported and constant currency basis.Business reorganization expenses were $5.4 million for the year ended December 31, 2013, compared to $7.5 million for 2012, a decrease of $2.1million, or $2.3 million on constant currency basis.•For the year ended December 31, 2014, the Company recorded $0.7 million of charges for impairment of long-lived assets as compared to $1.3million in 2013. See "Long-lived Assets and Goodwill" below for further detail.•EBITDA loss was $11.7 million for the year ended December 31, 2014, compared to EBITDA loss of $20.5 million for 2013. On a constantcurrency basis, EBITDA loss decreased $8.6 million in 2014 compared to 2013.EBITDA loss was $20.5 million for the year ended December 31, 2013, compared to EBITDA loss of $3.8 million for 2012. On a constant currencybasis, EBITDA loss increased $15.7 million in 2013 compared to 2012.•Net loss was $13.2 million for the year ended December 31, 2014, compared to net loss of $30.4 million for 2013. On a constant currency basis,net loss decreased $16.4 million in 2014 compared to 2013.Net loss was $30.4 million for the year ended December 31, 2013, compared to a net loss of $5.3 million for 2012. On a constant currency basis,net loss increased $24.1 million in 2013 compared to 2012.- 17 -Long-lived Assets and GoodwillUnder Financial Accounting Standards Board ("FASB") Accounting Standard Codification (“ASC”) 360, “Property, Plant, and Equipment," theCompany is required to test a long-lived asset for impairment if circumstances indicate that its carrying value might exceed its current fair value.The Company's internal projections as of the fourth quarter of 2014 anticipates a recovery in its operating performance in 2015, but that performance incertain markets would remain challenging. The testing of long-lived assets indicated that certain long-lived assets, primarily in France and Hong Kong, wereimpaired, and accordingly, the Company recorded a charge of approximately $0.7 million under the caption of “Impairment of long-lived assets” in theCompany’s Consolidated Statements of Operations.In addition to the Company's long-lived assets impairment testing, the Company's management also tested its goodwill for potential impairment. At theconclusion of its goodwill impairment testing, the Company estimated the fair value of its China reporting unit significantly exceeded its carrying value. Assuch, the Company determined that no impairment of goodwill had taken place.Although the Company currently anticipates an improvement in its operating results for 2015, if general economic conditions in certain markets inwhich the Company operates remain weak, or if the Company’s performance does not improve, the Company may record additional impairment chargesrelated to goodwill and other long-lived assets in the future.- 18 -Constant CurrencyThe Company operates on a global basis, with the majority of its gross margin generated outside of the U.S. Accordingly, fluctuations in foreigncurrency exchange rates can affect our results of operations. For the discussion of reportable segment results of operations, the Company uses constantcurrency information. Constant currency compares financial results between periods as if exchange rates had remained constant period-over-period. TheCompany defines the term “constant currency” to mean that financial data for previously reported periods are translated into U.S. dollars using the sameforeign currency exchange rates that were used to translate financial data for the current period. The Company’s management reviews and analyzes businessresults in constant currency and believes these results better represent the Company’s underlying business trends. Changes in foreign currency exchange ratesgenerally impact only reported earnings.Changes in revenue, gross margin, SG&A and Non-Op, business reorganization expenses, operating income (loss), net income (loss) and EBITDA (loss)include the effect of changes in foreign currency exchange rates. The tables below summarize the impact of foreign currency exchange rate adjustments onthe Company’s operating results for the years ended December 31, 2014, 2013 and 2012. Year Ended December 31, 2014 2013 2012 As As Currency Constant As Currency Constant$ in thousands reported reported translation currency reported translation currencyRevenue: Hudson Americas $50,146 $51,857 $(67) $51,790 $60,015 $(183) $59,832Hudson Asia Pacific 246,873 232,748 (10,321) 222,427 288,144 (26,107) 262,037Hudson Europe 284,173 277,967 9,109 287,076 307,716 10,925 318,641Total $581,192 $562,572 $(1,279) $561,293 $655,875 $(15,365) $640,510Gross margin: Hudson Americas $20,757 $18,692 $(63) $18,629 $22,026 $(173) $21,853Hudson Asia Pacific 93,014 87,162 (3,352) 83,810 117,428 (8,966) 108,462Hudson Europe 109,074 103,575 2,144 105,719 118,339 3,786 122,125Total $222,845 $209,429 $(1,271) $208,158 $257,793 $(5,353) $252,440SG&A and Non-Op (a): Hudson Americas $20,582 $18,957 $(78) $18,879 $22,259 $(142) $22,117Hudson Asia Pacific 92,127 89,073 (3,441) 85,632 110,798 (8,549) 102,249Hudson Europe 108,613 108,564 2,167 110,731 117,760 3,975 121,735Corporate 8,797 6,530 — 6,530 3,258 — 3,258Total $230,119 $223,124 $(1,352) $221,772 $254,075 $(4,716) $249,359Business reorganization expenses: Hudson Americas $94 $448 $— $448 $877 $— $877Hudson Asia Pacific 1,322 989 (72) 917 1,285 (42) 1,243Hudson Europe 1,407 3,214 92 3,306 4,986 272 5,258Corporate 966 789 (1) 788 357 2 359Total $3,789 $5,440 $19 $5,459 $7,505 $232 $7,737Operating income (loss): Hudson Americas $870 $1,367 $(5) $1,362 $1,329 $(57) $1,272Hudson Asia Pacific (3,013) (5,883) 353 (5,530) 7,988 (474) 7,514Hudson Europe 3,112 (5,251) 18 (5,233) (140) (148) (288)Corporate (18,455) (17,385) (2) (17,387) (19,271) — (19,271)Total $(17,486) $(27,152) $364 $(26,788) $(10,094) $(679) $(10,773)Net income (loss), consolidated $(13,194) $(30,395) $803 $(29,592) $(5,335) $(131) $(5,466)EBITDA (loss) from continuingoperations(b): Hudson Americas $117 $(717) $15 $(702) $(1,124) $(29) $(1,153)Hudson Asia Pacific (890) (3,227) 171 (3,056) 5,354 (371) 4,983Hudson Europe (1,187) (9,197) (55) (9,252) (4,406) (464) (4,870)Corporate (9,765) (7,330) (5) (7,335) (3,612) (3) (3,615)Total $(11,725) $(20,471) $126 $(20,345) $(3,788) $(867) $(4,655) - 19 -(a)SG&A and Non-Op is a measure that management uses to evaluate the segments’ expenses, which include the following captions on theConsolidated Statements of Operations and Other Comprehensive Income (Loss): Selling, general and administrative expenses, and other income(expense), net. Corporate management service allocations are included in the segments’ other income (expense).(b)See EBITDA reconciliation in the following section.Use of EBITDA (Non-GAAP measure)Management believes EBITDA is a meaningful indicator of the Company’s performance that provides useful information to investors regarding theCompany’s financial condition and results of operations. EBITDA is also considered by management as the best indicator of operating performance and mostcomparable measure across the regions in which we operate. Management also uses this measurement to evaluate capital needs and working capitalrequirements. EBITDA should not be considered in isolation or as a substitute for operating income or net income prepared in accordance with generallyaccepted accounting principles in the U.S. (“GAAP”) or as a measure of the Company’s profitability. EBITDA is derived from net income (loss) adjusted forthe provision for (benefit from) income taxes, interest expense (income), and depreciation and amortization. The reconciliation of EBITDA to the most directly comparable GAAP financial measure is provided in the table below: Year Ended December 31,$ in thousands 2014 2013 2012Net income (loss) $(13,194) $(30,395) $(5,335)Adjustment for income (loss) from discontinued operations, net of income taxes 2,592 (184) 1,887Income (loss) from continuing operations $(15,786) $(30,211) $(7,222)Adjustments to income (loss) from continuing operations Provision for (benefit from) income taxes (2,159) 3,264 (3,109)Interest expense, net 661 554 561Depreciation and amortization expense 5,559 5,922 5,982Total adjustments from income (loss) from continuing operations to EBITDA (loss) 4,061 9,740 3,434EBITDA (loss) $(11,725) $(20,471) $(3,788) - 20 -Temporary Contracting DataThe following table sets forth the Company’s temporary contracting revenue, gross margin and gross margin as a percentage of revenue for the yearsended December 31, 2014, 2013 and 2012. Year Ended December 31, 2014 2013 2012$ in thousands As reported As reported Currencytranslation Constantcurrency As reported Currencytranslation ConstantcurrencyTEMPORARY CONTRACTING DATA (a): Temporary contracting revenue: Hudson Americas $37,816 $42,538 $— $42,538 $48,440 $— $48,440Hudson Asia Pacific 170,370 164,588 (8,032) 156,556 195,438 (19,590) 175,848Hudson Europe 199,920 200,052 7,934 207,986 216,494 8,289 224,783Total $408,106 $407,178 $(98) $407,080 $460,372 $(11,301) $449,071Temporary contracting gross margin: Hudson Americas $8,738 $9,715 $— $9,715 $10,855 $— $10,855Hudson Asia Pacific 21,412 23,359 (1,244) 22,115 30,317 (2,992) 27,325Hudson Europe 32,370 32,193 1,074 33,267 35,423 1,358 36,781Total $62,520 $65,267 $(170) $65,097 $76,595 $(1,634) $74,961Temporary contracting gross margin as a percent of temporary contracting revenue: Hudson Americas 23.11%22.84%N/A22.84% 22.41% N/A 22.41%Hudson Asia Pacific 12.57%14.19%N/A14.13% 15.51% N/A 15.54%Hudson Europe 16.19%16.09%N/A15.99% 16.36% N/A 16.36%Total 15.32%16.03%N/A15.99% 16.64% N/A 16.69% (a)Temporary contracting gross margin and gross margin as a percentage of revenue are shown to provide additional information regarding theCompany’s ability to manage its cost structure and to provide further comparability relative to the Company’s peers. Temporary contracting grossmargin is derived by deducting the direct costs of temporary contracting from temporary contracting revenue. The Company’s calculation of grossmargin may differ from those of other companies. See details in Results of Operations for further discussions of the changes in temporary contractrevenue and gross margin.- 21 -Results of Operations (Discussion of significant matters are presented below):Hudson Americas (reported currency) Revenue Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions As reported As reported As reported Hudson Americas Revenue $50.1 $51.9 $(1.7) (3.3)% $60.0 $(8.2) (13.6)% For the year ended December 31, 2014, contracting revenue decreased $4.7 million, or 11.1%, partially offset by an increase in permanent recruitment of$3.0 million, or 32.3%, as compared to 2013. The decline in contracting revenue was in the IT practice due to a lower client activities for two large customers.Substantially all of the increase in permanent recruitment revenue was attributable to growth in the Company's RPO practice through new clients acquired inthe past twelve months as well as higher activity from the Company's existing clients.For the year ended December 31, 2013, contracting revenue decreased $5.9 million, or 12.2%, and permanent recruitment revenue decreased $2.3million, or 19.5%, as compared to 2012. The decline in contracting revenue was in the IT practice due to a decrease in billable contractor volume due toclosing of certain offices as well as the exit of the financial solutions business in 2013. The decline in the permanent recruitment revenue was primarily in theRPO practice and resulted from the loss of revenue from a large client in late 2012 due to an acquisition.Gross margin Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions As reported As reported As reported Hudson Americas Gross margin $20.8 $18.7 $2.1 11.0% $22.0 $(3.3) (15.1)%Gross margin as a percentageof revenue 41.4% 36.0% N/A N/A 36.7% N/A N/AContracting gross margin as apercentage of contractingrevenue 23.1% 22.8% N/A N/A 22.4% N/A N/A For the year ended December 31, 2014, permanent recruitment gross margin increased $3.0 million, or 33.8%, partially offset by a decrease in contractinggross margin of $1.0 million, or 10.1%, as compared to 2013. The changes in gross margin were attributable to the same factors as described above forrevenue. Contracting gross margin, as a percentage of revenue, was 23.1% for the year ended December 31, 2014, as compared to 22.8% for 2013. Total grossmargin, as a percentage of revenue, increased to 41.4% for 2014, as compared to 36.0% for 2013, and was primarily due to growth in permanent recruitmentactivities from the RPO practice.For the year ended December 31, 2013, permanent recruitment gross margin decreased $2.2 million, or 19.7%, and contracting gross margin decreased$1.1 million, or 10.5%, as compared to 2012. The changes in gross margin were attributable to the same factors as described above for revenue. Contractinggross margin, as a percentage of revenue, was 22.8% for the year ended December 31, 2013, as compared to 22.4% for 2012. Total gross margin, as apercentage of revenue, decreased to 36.0% for the year ended December 31, 2013 from 36.7% in 2012 and was attributable principally to a greater extent ofdecline in permanent recruitment gross margin from the loss of revenue from a large client in late 2012 due to an acquisition.- 22 -Selling, general and administrative expenses and non-operating income (expense) (“SG&A and Non-Op”) Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in % $ in millions As reported As reported As reported Hudson Americas SG&A and Non-Op $20.6 $19.0 $1.6 8.6% $22.3 $(3.3) (14.8)%SG&A and Non-Op as apercentage of revenue 41.0% 36.6% N/A N/A 37.1% N/A N/A For the year ended December 31, 2014, SG&A and Non-Op increased as compared to the same period in 2013 due to a lower proportion of administrativeexpenses being allocated to the discontinued Legal eDiscovery business. Excluding the administrative expenses not allocated to the discontinued LegaleDiscovery business, SG&A and Non-Op expense decreased by approximately $0.8 million as compared to the same period in 2013, primarily from areduction of support staff costs. SG&A and Non-Op, as a percentage of revenue, was 41.0% for the year ended December 31, 2014, as compared to 36.6% for2013. The increase in SG&A and Non-Op, as a percentage of revenue, was due principally to a higher proportional administration costs.For the year ended December 31, 2013, SG&A and Non-Op decreased as compared to 2012. Lower gross margin-related compensation, reducedprofessional and actions taken to streamline business processes resulted in lower SG&A and Non-Op. SG&A and Non-Op, as a percentage of revenue, was36.6% for the year ended December 31, 2013, as compared to 37.1% for 2012. The decrease in SG&A and Non-Op, as a percentage of revenue, wasprincipally due to the streamlining of business processes described above.Business reorganization expensesFor the year ended December 31, 2014, business reorganization expenses were $0.1 million, as compared to $0.4 million and $0.9 million for 2013 and2012, respectively. Business reorganization expenses incurred in 2014 were primarily related to exit costs associated with an office in California. Businessreorganization expenses incurred in 2013 and 2012 were attributable to the realignment of the sales force, exiting unprofitable lines of business and thereduction of support staff costs.Operating Income and EBITDA Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions As reported As reported As reported Hudson Americas Operating income (loss): $0.9 $1.4 $(0.5) (36.4)% $1.3 $— 2.9 %EBITDA (loss) $0.1 $(0.7) $0.8 (a) $(1.1) $0.4 (36.2)%EBITDA as a percentage ofrevenue 0.2% (1.4)% N/A N/A (1.9)% N/A N/A(a) Information was not provided because the Company did not consider the change in percentage as a meaningful measure for the years in comparison.For the year ended December 31, 2014, EBITDA was $0.1 million, or 0.2% of revenue, as compared to EBITDA loss of $0.7 million, or 1.4% of revenue,for 2013. The increase in EBITDA was principally due to a greater proportional increase in RPO gross margin. Operating income was $0.9 million for the yearended December 31, 2014, as compared to $1.4 million for 2013.For the year ended December 31, 2013, EBITDA loss was $0.7 million, or 1.4% of revenue, as compared to a loss of $1.1 million, or 1.9% of revenue, for2012. The increase in EBITDA was due to lower gross margin and business reorganization expenses in 2012. Operating income was $1.4 million for the yearended December 31, 2013, as compared to $1.3 million for 2012.The difference between operating income and EBITDA (loss) for the years ended December 31, 2014, 2013 and 2012 was principally due to theinclusion of corporate management fees and depreciation in the determination of operating income.- 23 -Hudson Asia Pacific (constant currency)Revenue Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Asia Pacific Revenue $246.9 $222.4 $24.4 11.0% $262.0 $(39.6) (15.1)% For the year ended December 31, 2014, contracting revenue, permanent recruitment revenue and talent management revenue increased $13.8 million,$8.0 million and $3.4 million, or 8.8%, 15.5% and 26.5%, respectively, as compared to 2013. The Company's RPO practice was a key factor to the growth ofrevenue in this region, which increased $27.4 million, or 77.44%, primarily led by the growth in Australia. In Australia, contracting revenue, permanentrecruitment revenue and talent management revenue increased $18.8 million, $3.7 million and $3.6 million, or 15.3%, 14.8% and 35.0%, respectively, ascompared to 2013. In China, permanent recruitment revenue increased $5.1 million, or 34.9%, primarily from the accounting and finance, sales andmarketing and RPO practices.For the year ended December 31, 2013, contracting and permanent recruitment revenue decreased $19.3 million and $18.0 million, or 11.0% and 25.8%,respectively, compared to 2012. The revenue decline in Asia Pacific was primarily in Australia, where contracting and permanent recruitment revenuedeclined $19.2 million and $10.2 million, or 13.5% and 28.9%, respectively. The softening of the economic growth in China caused a reduction in thedemand in the mining & resources and the industrial & manufacturing sectors, which was primarily responsible for Australia’s revenue decline. Partiallyoffsetting these declines was RPO in Australia, which recorded an increase in contracting revenue of $11.3 million (over 100% growth). In Asia, revenuedecreased $6.7 million, or 20.4%, for the year ended December 31, 2013, as compared to 2012, primarily from Mainland China and Singapore and resultedfrom declining economic conditions in the region.Gross margin Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in % Asreported Constantcurrency Constantcurrency Hudson Asia Pacific Gross margin $93.0 $83.8 $9.2 11.0% $108.5 $(24.7) (22.7)%Gross margin as a percentageof revenue 37.7% 37.7% N/A N/A 41.4% N/A N/AContracting gross margin as apercentage of contractingrevenue 12.6% 14.1% N/A N/A 15.5% N/A N/A For the year ended December 31, 2014, permanent recruitment and talent management gross margins increased $8.0 million and $2.0 million, or 15.6%and 20.1%, respectively, as compared to 2013. Australia and China accounted for the majority of the increase in gross margins, which increased by $6.2million and $5.1 million, respectively, partially offset by declines in New Zealand and Singapore. Contracting gross margin, as a percentage of revenue, was12.6%, as compared to 14.1% for 2013. The decline in gross margin as a percentage of revenue resulted from lower margin high-volume temporarycontracting business from the RPO practice. Total gross margin, as a percentage of revenue, remained flat at 37.7%, as compared 2013. For the year ended December 31, 2013, permanent recruitment and contracting gross margins decreased $18.1 million and $5.2 million, or 26.1% and19.1%, respectively, as compared to 2012. Australia accounted for the majority of the decrease in gross margins with permanent recruitment declining by$10.3 million, or 29.5%, and contracting declining by $4.8 million, or 22.1%. Contracting gross margin, as a percentage of revenue, was 14.1%, as comparedto 15.5% in 2012. The decline in gross margin as a percentage of revenue resulted from a greater proportion of RPO contracting revenue, which generally haslower margins. Total gross margin, as a percentage of revenue, was 37.7%, as compared to 41.4% for 2012. The lower gross margin percentage wasattributable to a decline in permanent recruitment revenue.- 24 -SG&A and Non-Op Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Asia Pacific SG&A and Non-Op $92.1 $85.6 $6.5 7.6% $102.2 $(16.6) (16.3)%SG&A and Non-Op as apercentage of revenue 37.3% 38.5% N/A N/A 39.0% N/A N/A For the year ended December 31, 2014, SG&A and Non-Op increased $6.5 million, or 7.6%, as compared to 2013, primarily due to higher averageconsultant headcount (up 18%) as well as higher commission paid to consultants for higher gross margin. SG&A and Non-Op, as a percentage of revenue, was37.3% for 2014, as compared to 38.5% for 2013. The reductions in SG&A and Non-Op, as a percentage of revenue, were principally due to an increase inrevenue as well as cost savings from recent reorganization actions.For the year ended December 31, 2013, SG&A and Non-Op decreased $16.6 million, or 16.3%, as compared to 2012. Lower commissions paid as a resultof the decrease in gross margin, decreased headcount and reduced corporate management fees resulted in an overall decrease in SG&A and Non-Op for theyear ended December 31, 2013 as compared to 2012. SG&A and Non-Op, as a percentage of revenue, was 38.5% and remained largely consistent as comparedto 39.0% in 2012.Business reorganization expensesFor the year ended December 31, 2014, business reorganization expenses were $1.3 million, as compared to $0.9 million for 2013 and $1.2 million for2012. The business reorganization expenses incurred in the current year were primarily related to a change-in-estimate for office space optimization inAustralia and employee termination costs for integration of back-office support functions in Asia. Business reorganization expenses incurred in 2013 and2012 were primarily for employee termination benefits related to the reduction of back-office support functions and lease exit costs to eliminate excess realestate. Operating Income and EBITDA Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Asia Pacific Operating income (loss): $(3.0) $(5.5) $2.5 (a) $7.5 $(13.0) (173.6)%EBITDA (loss) $(0.9) $(3.1) $2.2 (a) $5.0 $(8.0) (161.3)%EBITDA as a percentage ofrevenue (0.4)% (1.4)% N/A N/A 1.9% N/A N/A(a) Information was not provided because the Company did not consider the change in percentage as a meaningful measure for the years in comparison.For the year ended December 31, 2014, EBITDA loss was $0.9 million, or 0.4% of revenue, as compared to EBITDA loss of $3.1 million, or 1.4% ofrevenue, for 2013. The decrease in EBITDA loss for the year ended December 31, 2014 was principally due to higher revenue. Operating loss for the yearended December 31, 2014 was $3.0 million, as compared to operating loss of $5.5 million for 2013.For the year ended December 31, 2013, EBITDA loss was $3.1 million, or 1.4% of revenue, as compared to EBITDA of $5.0 million, or 1.9% of revenue,for 2012. The decrease in EBITDA for the year ended December 31, 2013 was principally due to the decline in gross margin. Operating loss for the year endedDecember 31, 2013 was $5.5 million, as compared to operating income of $7.5 million for 2012.The difference between operating income (loss) and EBITDA (loss) for the years ended December 31, 2014, 2013 and 2012 was principally due to theinclusion of corporate management fees and depreciation in the determination of operating income (loss).- 25 -Hudson Europe (constant currency)Revenue Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe Revenue $284.2 $287.1 $(2.9) (1.0)% $318.6 $(31.6) (9.9)% For the year ended December 31, 2014, contracting revenue decreased $8.1 million, or 3.9%, partially offset by increases in permanent recruitment andtalent management revenue of $2.8 million and $1.9 million, 5.4% and 7.5%, respectively, as compared to 2013. The decline in contracting revenue wasprimarily from the U.K., which decreased $8.5 million, or 5.4%, as compared to 2013. The overall decrease in revenue in the U.K. resulted primarily fromdeclines in the banking & financial services sector. In Continental Europe, total revenue increased $5.5 million, or 5.7%, as compared to 2013 primarily dueto increases in talent management and permanent recruitment revenue. Talent management and permanent recruitment revenue increased $2.6 million and$2.2 million, or 11.9% and 9.3%, respectively. The growth in talent management revenue occurred primarily in Belgium from customers in the public sectorand manufacturing sector. The growth in permanent recruitment revenue occurred primarily in Belgium, led by practices in sales and marketing, engineeringand industrial, and I.T. as well as in Spain, led by customers in the health sector .For the year ended December 31, 2013, contracting, permanent recruitment and talent management revenue decreased $16.8 million, $8.6 million and$4.6 million, or 7.5%, 14.2% and 15.3%, respectively, as compared to 2012. In the U.K., contracting and permanent recruitment revenue declined $15.2million and $3.1 million, or 8.8% and 9.8%, respectively, as compared to 2012. The overall decrease in revenue in the U.K. resulted from declines in the legaland banking & financial services sectors, partially offset by an increase in transportation and the government & public sectors. In Continental Europe, totalrevenue declined $11.7 million or, 10.7%, as compared to 2012. Permanent recruitment, talent management and contracting revenue declined $5.4 million,$3.5 million and $1.6 million, or 18.8%, 13.7% and 3.0%, respectively. The decline in permanent recruitment and talent management revenue occurred inFrance, Belgium and the Central Eastern Europe ("CEE") markets. The decline in France was principally related to a management reorganization. The declinein the CEE markets resulted largely from weaker economic conditions. Belgium accounted for the entire decline in contracting revenue, which was partiallyoffset by an increase in the Netherlands where the engineering & industrial practice experienced growth.Gross margin Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe Gross margin $109.1 $105.7 $3.4 3.2% $122.1 $(16.4) (13.4)%Gross margin as a percentageof revenue 38.4% 36.8% N/A N/A 38.3% N/A N/AContracting gross margin as apercentage of contractingrevenue 16.2% 16.0% N/A N/A 16.4% N/A N/A For the year ended December 31, 2014, permanent recruitment and talent management gross margins increased $2.7 million and $1.8 million, or 5.3%and 7.9%, respectively, as compared to 2013. In the U.K., permanent recruitment gross margin increased $0.9 million, or 0.8%, for the year ended December31, 2014, as compared to 2013. In Continental Europe, talent management and permanent recruitment gross margins increased $2.0 million and $1.7million, or 9.8% and 7.6%, respectively, as compared to 2013. The increases in permanent recruitment and talent management gross margins wereattributable to the same factors as described above for revenue from Belgium and Spain. Contracting gross margin, as a percentage of revenue, remainedconsistent at 16.2% for the year ended December 31, 2014, as compared to 16.0% for 2013. Total gross margin, as a percentage of revenue, was 38.4% for theyear ended December 31, 2014, as compared to 36.8% for 2013. The improvement in total gross margin, as a percentage of revenue, was primarily related toa greater proportional increase in permanent recruitment and talent management gross margins in 2014.- 26 -For the year ended December 31, 2013, permanent recruitment and contracting gross margins decreased $7.9 million and $3.5 million, or 13.6% and9.6%, respectively, as compared to 2012. In the U.K., contracting and permanent recruitment gross margins declined $3.3 million and $2.3 million, or 12.9%and 7.9%, respectively, for the year ended December 31, 2013, as compared to 2012. In Continental Europe, permanent recruitment and talent managementgross margins decreased $5.4 million and $3.3 million, or 19.2% and 13.8%, respectively, as compared to 2012. The decreases in permanent recruitment andtalent management gross margins were attributable to the same factors as described above for revenue. Contracting gross margin, as a percentage of revenue,was 16.0% for the year ended December 31, 2013, as compared to 16.4% for 2012. Total gross margin, as a percentage of revenue, was 36.8% for the yearended December 31, 2013, as compared to 38.3% for 2012. The change in total gross margin, as a percentage of revenue, was primarily related to a greaterproportional decrease in permanent recruitment gross margin in 2013.SG&A and Non-Op Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe SG&A and Non-Op $108.6 $110.7 $(2.1) (1.9)% $121.7 $(11.0) (9.0)%SG&A and Non-Op as apercentage of revenue 38.2% 38.6% N/A N/A 38.2% N/A N/A For the year ended December 31, 2014, SG&A and Non-Op decreased by $2.1 million, or 1.9%, as compared to 2013. The decrease primarily resultedfrom reduced real estate costs in Continental Europe as well as lower staff compensation costs. SG&A and Non-Op, as a percentage of revenue, was 38.2% for2014 and remained largely consistent as compared to 38.6% for 2013.For the year ended December 31, 2013, SG&A and Non-Op decreased $11.0 million, or 9.0%, as compared to 2012. Lower gross margin-related andsupport staff compensation resulting from previous streamlining actions as well as reduced real estate costs accounted for the decrease in SG&A and Non-Opfor 2013 as compared to 2012. The lower SG&A and Non-Op expenses offset 67.1% of the decline in gross margin for 2013. SG&A and Non-Op, as apercentage of revenue, was 38.6% for the year ended December 31, 2013, as compared to 38.2% for 2011.Business reorganization expenses For the year ended December 31, 2014, business reorganization expenses were $1.4 million, as compared to $3.3 million and $5.3 million for the sameperiods in 2013 and 2012, respectively. Current year's business reorganization expenses were attributable to employee termination costs primarily inBelgium, the Netherlands, France and the U.K. Business reorganization expenses in 2013 and 2012 were principally attributable to employee terminationbenefits and lease exit costs in France and Belgium.- 27 -Operating Income and EBITDA Year Ended December 31, 2014 2013 Change inamount Change in % 2012 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe Operating income (loss): $3.1 $(5.2) $8.3 (a) $(0.3) $(4.9) 1,717.0%EBITDA (loss) $(1.2) $(9.3) $8.1 (a) $(4.9) $(4.4) (a)EBITDA (loss) as apercentage of revenue (0.4)% (3.2)% N/A N/A (1.5)% N/A N/A(a) Information was not provided because the Company did not consider the change in percentage as a meaningful measure for the years in comparison. For the year ended December 31, 2014, EBITDA loss was $1.2 million, or 0.4% of revenue, as compared to EBITDA loss of $9.3 million, or 3.2% ofrevenue, for 2013. The decrease in EBITDA loss for the year ended December 31, 2014 was principally due to higher gross margin and lower costs related toreorganization initiatives. Operating income was $3.1 million for the year ended December 31, 2014, as compared to operating loss of $5.2 million for 2013.For the year ended December 31, 2013, EBITDA loss was $9.3 million, or 3.2% of revenue, as compared to EBITDA loss of $4.9 million, or 1.5% ofrevenue, for 2012. The increase in EBITDA loss for the year ended December 31, 2013 was principally due to the decline in gross margin and impairment oflong-lived assets in the U.K. and Belgium in 2013. Operating loss was $5.2 million for the year ended December 31, 2013, as compared to operating loss of$0.3 million for 2012.The difference between operating income (loss) and EBITDA loss for the years ended December 31, 2014, 2013 and 2012 was principally due to theinclusion of corporate management fees and depreciation in the determination of operating income (loss).The following are discussed in reported currencyCorporate expenses, net of corporate management fee allocations Corporate expenses were $8.8 million for the year ended December 31, 2014, as compared to $6.5 million for 2013, an increase of $2.3 million. Theincrease was principally due to costs incurred in the current year in connection with the proxy contest for the Company's 2014 annual meeting ofstockholders and organizational strategy review of approximately $1.4 million, as well as higher support staff bonus costs. The increases were offset byreductions in support staff salary costs and discretionary expenses as a result of cost savings initiatives completed during 2014. For the year ended December31, 2013, corporate expenses were $6.5 million, as compared to $3.3 million for 2012, an increase of $3.3 million. The increase was principally due to lowermanagement fee allocations to the reportable segments in 2013 and compensation-related costs incurred in connection with the replacement of theCompany's Chief Financial Officer in 2013.For the years ended December 31, 2014, 2013 and 2012, business reorganization expenses were $1.0 million, 0.8 million and $0.4 million, respectively,and primarily consisted of employee termination benefits.Depreciation and Amortization ExpenseDepreciation and amortization expense remained consistent at $5.6 million, $5.9 million and $6.0 million for the years ended December 31, 2014, 2013and 2012, respectively.Interest ExpenseInterest expense remained consistent and was $0.7 million for the year ended December 31, 2014, as compared to $0.6 million and $0.6 million for 2013and 2012, respectively.- 28 -Provision for (Benefit from) Income Taxes The benefit from income taxes for the year ended December 31, 2014 was $2.2 million on $17.9 million of pre-tax loss, as compared to a provision forincome taxes of $3.3 million on $26.9 million of pre-tax loss for 2013. The effective tax rate for the year ended December 31, 2014 was 12.0%, as comparedto negative 12.1% for 2013. The change in the Company's effective tax rate for the year ended December 31, 2014 as compared to 2013 was primarilyattributable to the Company's current year result with lesser expense for establishment of a valuation reserve for the Company's deferred tax assets in certainforeign jurisdictions. The effective tax rate differed from the U.S. Federal statutory rate of 35% due to the inability to recognize tax benefits on losses, statetaxes, non-deductible expenses such as certain acquisition related payments, variations from the U.S. Federal statutory rate in foreign jurisdictions and taxeson repatriations of foreign profits.The provision for income taxes for the year ended December 31, 2013 was $3.3 million on $26.9 million of pre-tax income, as compared to a benefit fromincome taxes of $3.1 million on a $10.3 million pre-tax loss for 2012. The effective tax rate for the year ended December 31, 2013 was negative 12.1%, ascompared to 30.1% for 2012. The change in the Company's effective tax rate for the year ended December 31, 2013 as compared to 2012 was primarilyattributable to the Company's inability to benefit from losses in certain foreign jurisdictions in the current year and the establishment of a valuation reservefor the Company's deferred tax assets in certain foreign jurisdictions. The effective tax rate differed from the U.S.Federal statutory rate of 35% primarily due toan increase in the valuation allowance for deferred tax assets and the Company's inability to recognize tax benefits on net losses in certain foreignjurisdictions, state taxes, withholding taxes, non-deductible expenses, and foreign tax rates that vary from the U.S. Federal statutory rate.Income (Loss) from Discontinued OperationsIncome from discontinued operations was $2.6 million for the year ended December 31, 2014, as compared to loss from discontinued operations of $0.2million for 2013 and income from discontinued operations of $1.9 million in 2012. The current year result included a $11.3 million gain from the sale of theLegal eDiscovery business. The decrease in income from discontinued operations in 2014, excluding the effect of the $11.3 million gain from sale of theLegal eDiscovery business, were primarily due to the Legal eDiscovery business.Net Income (Loss)Net loss was $13.2 million for the year ended December 31, 2014, as compared $30.4 million for 2013, a decrease in net loss of $17.2 million. Basic anddiluted loss per share were both $0.40 for the year ended December 31, 2014, as compared to basic and diluted loss per share of $0.94 for 2013.Net loss was $30.4 million for the year ended December 31, 2013, as compared to net loss of $5.3 million for 2012, an increase in net loss of $25.1million. Basic and diluted loss per share were both $0.94 for the year ended December 31, 2013, as compared to $0.17 for 2012. - 29 -Liquidity and Capital Resources As of December 31, 2014, cash and cash equivalents totaled $34.0 million, as compared to $37.4 million as of December 31, 2013 and $38.7 million asof December 31, 2012. The following table summarizes the cash flow activities for the years ended December 31, 2014, 2013 and 2012: For The Year Ended December 31,(In millions) 2014 2013 2012Net cash provided by (used in) operating activities $(17.8) $2.5 $13.2Net cash provided by (used in) investing activities 16.7 (2.6) (8.3)Net cash provided by (used in) financing activities (1.3) (0.5) (4.3)Effect of exchange rates on cash and cash equivalents (1.0) (0.7) 0.7Net increase (decrease) in cash and cash equivalents (3.4) (1.3) 1.4 Cash Flows from Operating ActivitiesFor the year ended December 31, 2014, net cash used in operating activities was $17.8 million, as compared to net cash provided by operating activitiesof $2.5 million in 2013, a decrease of net cash provided by operating activities of $20.4 million. The decrease in net cash provided by operating activitiesresulted principally from an increase in accounts receivable, partially offset by lower net loss for the current year. Net cash used in operating activities fromdiscontinued operations was $10.2 million for the year ended December 31, 2014 as compared to cash provided by operating activities from discontinuedoperation of $8.3 million in 2013.For the year ended December 31, 2013, net cash provided by operating activities was $2.5 million, as compared to $13.2 million in 2012, a decrease of$10.6 million. The decrease in net cash provided by operating activities resulted principally from lower net income in the current year, and was partiallyoffset by cash collections from clients. Net cash provided by operating activities from discontinued operations was $8.3 million for the year ended December31, 2013 as compared to cash used in operating activities from discontinued operations of $0.5 million in 2012.Cash Flows from Investing ActivitiesFor the year ended December 31, 2014, net cash provided by investing activities was $16.7 million, as compared to net cash used in investing activitiesof $2.6 million in 2013, an increase in net cash provided by investing activities of $19.3 million. The increase in net cash provided by investing activitieswas principally related to the proceeds from sale of the Legal eDiscovery business and was partially offset by an increase in capital expenditures, from $2.6million in 2013 to $5.3 million in 2014. The increase in capital expenditures was primarily due to landlord-funded leasehold improvements in connectionwith newly-leased properties and costs for upgrading the Company's website for mobile device interfaces.For the year ended December 31, 2013, net cash used in investing activities was $2.6 million, as compared to $8.3 million in 2012, a decrease of $5.7million. The decrease in cash net used in investing activities was principally related to the non-recurrence of $3.9 million of landlord-funded leaseholdimprovements in connection with a newly-leased property in 2012 and reduced spending on new IT projects in 2013.Cash Flows from Financing ActivitiesFor the year ended December 31, 2014, net cash used in financing activities was $1.3 million, as compared to $0.5 million in 2013, an increase of $0.8million. The increase in net cash used in financing activities was primarily attributable to net repayments of the Company's credit facilities in 2014 ascompared to 2013.For the year ended December 31, 2013, net cash used in financing activities was $0.5 million, as compared to $4.3 million for 2012, a decrease in netcash used in financing activities of $3.8 million. The decrease in net cash used in financing activities was primarily attributable to lower usage of theCompany's credit facilities in 2013 as compared to 2012.- 30 -Credit AgreementsReceivables Finance Agreement with Lloyds Bank Commercial Finance Limited and Lloyds Bank PLCOn August 1, 2014, the Company’s U.K. subsidiary (“U.K. Borrower”) entered into a receivables finance agreement for an asset-based lending fundingfacility (the “Lloyds Agreement”) with Lloyds Bank PLC and Lloyds Bank Commercial Finance Limited (together, “Lloyds”). The Lloyds Agreementprovides the U.K. Borrower with the ability to borrow up to $23.4 million (£15.0 million). Extensions of credit are based on a percentage of the eligibleaccounts receivable less required reserves from the Company's U.K. operations. The initial term is two years with renewal periods every three monthsthereafter. Borrowings under this facility are secured by substantially all of the assets of the U.K. Borrower.The credit facility under the Lloyds Agreement contains two tranches. The first tranche is a revolving facility based on the billed temporary contractingand permanent recruitment activities in the U.K. operation ("Lloyds Tranche A"). The borrowing limit of Lloyds Tranche A is $18.7 million (£12.0 million)based on 83% of eligible billed temporary contracting and permanent recruitment receivables. The second tranche is a revolving facility that is based on theunbilled work-in-progress (as defined under the receivables finance agreement) activities in the Company's U.K. operations ("Lloyds Tranche B"). Theborrowing limit of Lloyds Tranche B is $4.7 million (£3.0 million) based on 75% of eligible work-in-progress from temporary contracting and 25% ofeligible work-in-progress from permanent recruitment activities. For both tranches, borrowings may be made with an interest rate based on a base rate asdetermined by Lloyds Bank PLC, based on the Bank of England base rate, plus 1.75%.The Lloyds Agreement contains various restrictions and covenants including (1) that true credit note dilution may not exceed 5%, measured at audit ona regular basis; (2) debt turn may not exceed 55 days over a three month rolling period; (3) dividends by the U.K. Borrower to the Company are restricted tothe value of post tax profits; and (4) at the end of each month, there must be a minimum excess availability of $3.1 million (£2.0 million).The details of the Lloyds Agreement as of December 31, 2014 were as follows:(In millions) December 31, 2014Borrowing capacity $9.5Less: outstanding borrowing —Additional borrowing availability $9.5Interest rates on outstanding borrowing 2.25%The Company was in compliance with all financial covenants under the Lloyds Agreement as of December 31, 2014.Loan and Security Agreement with Siena Lending Group LLCOn August 1, 2014, the Company and its U.S. subsidiary (“U.S. Borrower”) entered into a loan and security agreement for a credit facility (the “SienaAgreement”) with Siena Lending Group LLC ("Siena"). The Siena Agreement provides the U.S. Borrower with the ability to borrow up to $10.0 million(subject to a borrowing base and an availability block), including up to $1.0 million for the issuance of letters of credit. After the sale of the Company’s LegaleDiscovery business on November 9, 2014, the aforementioned borrowing limit was reduced to $5.0 million (subject to a borrowing base and an availabilityblock). The availability block was $2.0 million prior to the sale of the Company's Legal eDiscovery business and decreased to $1.0 million after the sale ofthe Company’s Legal eDiscovery business. The availability block will be eliminated on the date on which the U.S. Borrower notifies Siena that the U.S.Borrower’s Fixed Charge Coverage Ratio is equal to or greater than 1.1x on a trailing six month basis. Extensions of credit are based on borrowing basecalculated on a percentage of the eligible accounts receivable less required reserves related to the U.S. operations. The term of the Siena Agreement is threeyears expiring on August 1, 2017. Borrowings may be made with an interest rate based on a base rate (with a floor of 3.25%) plus 1.75%. The interest rate forletters of credit is 4.5% on face amount of each letter of credit issued and outstanding. Borrowings under the Siena Agreement are secured by substantially allof the assets of the U.S. Borrower.- 31 -The Siena Agreement contains various restrictions and covenants including (1) a requirement that the U.S. Borrower maintain a Fixed Charge CoverageRatio of equal to or greater than 1.1x after the date on which the U.S. Borrower notifies Siena that the U.S. Borrower’s Fixed Charge Coverage Ratio is equalto or greater than 1.1x on a trailing six month basis ; (2) a limit on the payment of dividends by the U.S. Borrower; (3) restrictions on the ability of the U.S.Borrower to incur additional debt, acquire, merge or otherwise change the ownership of the U.S. Borrower; (4) restrictions on investments and acquisitions;and (5) restrictions on dispositions of assets.The details of the Siena Agreement as of December 31, 2014 were as follows:(In millions) December 31, 2014Borrowing base $2.9Less: adjustments to the borrowing base Minimum availability (1.0)Outstanding letters of credits (0.5)Adjusted borrowing base 1.4Less: outstanding borrowing —Additional borrowing availability $1.4Interest rates on outstanding borrowing 5.00%The Company was in compliance with all financial covenants under the Siena Agreement as of December 31, 2014.Credit Agreement with Westpac Banking Corporation On November 29, 2011, certain Australian and New Zealand subsidiaries of the Company entered into a facility agreement with Westpac BankingCorporation and Westpac New Zealand Limited (collectively, “Westpac”). On September 30, 2013, the Company and certain of its Australian and NewZealand subsidiaries entered into a waiver letter to waive compliance with a financial covenant contained in the facility agreement at the September 30, 2013and December 31, 2013 testing dates, and on December 19, 2013, the Company and certain of its Australian and New Zealand subsidiaries entered into aDeed of Variation to the facility agreement to amend certain terms and conditions of the Facility Agreement. On December 2, 2014, the Company and certainAustralian and New Zealand subsidiaries entered into a Third Deed of Variation to amend certain terms and conditions of the facility agreement (as amended,the “Facility Agreement”).The Facility Agreement provides three tranches: (a) an invoice discounting facility of up to $8.2 million (AUD10.0 million) (“Tranche A”) for anAustralian subsidiary of the Company, which is based on an agreed percentage of eligible accounts receivable; (b) an overdraft facility of up to $1.6 million(NZD2.0 million) (“Tranche B”) for a New Zealand subsidiary of the Company; and (c) a financial guarantee facility of up to $4.1 million (AUD5.0 million)(“Tranche C”) for the Australian subsidiary.The Facility Agreement does not have a stated maturity date and can be terminated by Westpac upon 90 days written notice. Borrowings under TrancheA may be made with an interest rate based on the Invoice Finance 30-day Bank Bill Rate (as defined in the Facility Agreement) plus a margin of 1.10%.Borrowings under Tranche B may be made with an interest rate based on the Commercial Lending Rate (as defined in the Facility Agreement) plus a marginof 1.83%. Each of Tranche A and Tranche B bears a fee, payable monthly, equal to 1.50% and 0.96%, respectively, of the size of Westpac’s commitmentunder such tranche. Borrowings under Tranche C may be made incurring a fee equal to 2.10% of the face value of the financial guarantee requested. Amountsowing under the Facility Agreement are secured by substantially all of the assets of the Australian subsidiary, its Australian parent company and the NewZealand subsidiary (collectively, the “Obligors”) and certain of their subsidiaries.- 32 -The details of the Facility Agreement as of December 31, 2014 were as follows: (In millions)December 31, 2014Tranche A: Borrowing capacity$8.2Less: outstanding borrowing—Additional borrowing availability$8.2Interest rates on outstanding borrowing4.78%Tranche B: Borrowing capacity$1.6Less: outstanding borrowing—Additional borrowing availability$1.6Interest rates on outstanding borrowing8.28%Tranche C: Borrowing capacity$4.1Less: outstanding borrowing(2.5)Additional borrowing availability$1.6Interest rates on outstanding borrowing2.10% The Facility Agreement contains various restrictions and covenants applicable to the Obligors and certain of their subsidiaries, including (a) arequirement that the Obligors maintain (1) not less than the higher of 85% of the Tangible Net Worth (as defined in the Facility Agreement) of the last day ofthe previous calendar quarter and $14.3 million (AUD17.5 million); (2) a minimum Fixed Charge Coverage Ratio (as defined in the Facility Agreement) of1.5x at all other testing dates thereafter; and (3) a maximum Borrowing Base Ratio (as defined in the Facility Agreement) as of the last day of each calendarquarter of not more than 0.8; and (b) a limitation on certain intercompany payments with permitted payments outside the Obligor group restricted to adefined amount derived from the net profits of the Obligors and their subsidiaries.The Company was in compliance with all financial covenants under the Facility Agreement as of December 31, 2014.Other Credit AgreementsThe Company also has lending arrangements with local banks through its subsidiaries in the Netherlands, Belgium, and Singapore. As of December 31,2014, the Netherlands subsidiary could borrow up to $1.8 million (€1.5 million) based on an agreed percentage of accounts receivable related to itsoperations. The Belgium subsidiary had a $1.2 million (€1 million) overdraft facility as of December 31, 2014. Borrowings under the Belgium and theNetherlands lending arrangements may be made with an interest rate based on the one month EURIBOR plus a margin, and were 2.52% as of December 31,2014. The lending arrangement in the Netherlands expires annually each June, but can be renewed for one year periods at that time. The lending arrangementin Belgium has no expiration date and can be terminated with a 15 day notice period. In Singapore, the Company’s subsidiary can borrow up to $0.4 million(SGD0.5 million) for working capital purposes. Interest on borrowings under this overdraft facility is based on the Singapore Prime Rate plus 1.75%, whichwas 6.00% on December 31, 2014. The Singapore overdraft facility expires annually each August but can be renewed for one year periods at that time. Theoutstanding borrowings under the Netherlands, Belgium, and Singapore lending agreements were none as of December 31, 2014.The average monthly outstanding borrowings for the credit agreements above was $4.6 million for the year ended December 31, 2014. The weightedaverage interest rate on all outstanding borrowings for the year ended December 31, 2014 was 3.95%.The Company continues to use the aforementioned credit to support its ongoing global working capital requirements, capital expenditures and for othercorporate purposes and to support letters of credit. Letters of credit and bank guarantees are used primarily to support office leases. - 33 -Liquidity OutlookAs of December 31, 2014, the Company had cash and cash equivalents on hand of $34.0 million supplemented by additional borrowing availability of$1.4 million under the Siena Agreement and $22.6 million of additional borrowing availability under the Lloyds Agreement, the Facility Agreement andother lending arrangements in Belgium, the Netherlands and Singapore. The Company believes that it has sufficient liquidity to satisfy its needs through atleast the next 12 months, based on the Company's total liquidity as of December 31, 2014. The Company's near-term cash requirements during 2015 areprimarily related to funding operations, restructuring actions and capital expenditures. For 2015, the Company expects to make capital expenditures ofapproximately $3.0 million to $4.0 million and payments in connection with current restructuring actions of approximately $5.0 million to $6.0 million. TheCompany is closely managing its capital spending and will perform capital additions where economically prudent, while continuing to invest strategicallyfor future growth.As of December 31, 2014, $8.1 million of the Company's cash and cash equivalents noted above was held in the United States and the remainder washeld internationally, primarily in Australia ($8.1 million), the United Kingdom ($7.3 million), Mainland China ($2.5 million), Belgium ($1.9 million) and theNetherlands ($1.7 million). The majority of the Company's offshore cash is available to it as a source of funds, net of any tax obligations or assessments.Unrepatriated cumulative earnings of certain foreign subsidiaries are considered to be invested indefinitely outside of the United States, except where theCompany is able to repatriate these earnings to the United States without a material incremental tax provision. In managing its day-to-day liquidity and itscapital structure, the Company does not rely on the unrepatriated earnings as a source of funds. The Company has not provided for U.S. Federal income orforeign withholding taxes on these undistributed foreign earnings because a distribution of these foreign earnings with material incremental tax provision isunlikely to occur in the foreseeable future. It is not practicable to determine the amount of tax associated with such undistributed earnings.The Company believes that future external market conditions remain uncertain, particularly access to credit, rates of near-term projected economicgrowth and levels of unemployment in the markets in which the Company operates. Due to these uncertain external market conditions, the Company cannotprovide assurance that its actual cash requirements will not be greater in the future than those currently expected, especially if market conditions deterioratesubstantially. If sources of liquidity are not available or if the Company cannot generate sufficient cash flow from operations, the Company could be requiredto obtain additional sources of funds through additional operating improvements, capital market transactions, asset sales or financing from third parties, or acombination of those sources. The Company cannot provide assurance that these additional sources of funds will be available or, if available, would havereasonable terms.Off-Balance Sheet Arrangements.As of December 31, 2014, the Company had no off-balance sheet arrangements. Contractual Obligations.The Company has entered into various commitments that will affect its cash generation capabilities going forward. Specifically, it has entered into anumber of non-cancelable operating leases for facilities and equipment worldwide. Future contractual obligations as of December 31, 2014 were as follows(dollars in thousands) (commitments based in currencies other than U.S. dollars were translated using exchange rates as of December 31, 2014): Less than1 year 1 to 3 years 3 to 5 years More than5 years Contractual Obligation TotalOperating lease obligations $19,221 $28,369 $18,434 $6,211 $72,235Capital lease obligations 77 348 — — 425Other purchase obligations 2,123 1,042 — — 3,165Other long term liabilities (a) Reorganization expenses 5,246 595 — — 5,841Total $26,667 $30,354 $18,434 $6,211 $81,666a.The Company's non-current liabilities of $12.4 million in the Consolidated Balance Sheet as of December 31, 2014 are primarily comprised ofincome taxes, unrecognized tax benefits, deferred rent, and other various accruals. As the timing and/or amounts of any cash payment is uncertain,the related amounts have not been reflected in the table above. Reorganization expenses above included both continuing operations anddiscontinued operations initiatives.- 34 -ContingenciesFrom time to time in the ordinary course of business, the Company is subject to compliance audits by U.S. Federal, state and local and foreigngovernment regulatory, tax and other authorities relating to a variety of regulations, including wage and hour laws, unemployment taxes, workers’compensation, immigration, income, value-added and sales taxes. The Company is also subject to, from time to time in the ordinary course of business,various claims, lawsuits and other complaints from, for example, clients, candidates, suppliers, landlords for both leased and subleased properties, former andcurrent employees, and regulators or tax authorities. Periodic events and management actions such as business reorganization initiatives can change thenumber and type of audits, claims, lawsuits, contract disputes or complaints asserted against the Company. Events can also change the likelihood of assertionand the behavior of third parties to reach resolution regarding such matters.The economic conditions in the recent past have given rise to many news reports and bulletins from clients, tax authorities and other parties aboutchanges in their procedures for audits, payment, plans to challenge existing contracts and other such matters aimed at being more aggressive in the resolutionof such matters in their own favor. The Company believes that it has appropriate procedures in place for identifying and communicating any matters of thistype, whether asserted or likely to be asserted, and it evaluates its liabilities in light of the prevailing circumstances. Changes in the behavior of third partiescould cause the Company to change its view of the likelihood of a claim and what might constitute a trend. In the last twelve months, the Company has seenan increase in employee disputes arising from our business reorganization initiatives. Employment laws vary in the markets in which we operate, and in somecases, employees and former employees have extended periods during which they may bring claims against the Company. The Company is unable todetermine if the recent rise in claims represents a trend.For matters that have reached the threshold of probable and estimable, the Company has established reserves for legal, regulatory and other contingentliabilities. The Company’s reserves were $0.4 million and $0.7 million as of December 31, 2014 and 2013, respectively. Although the outcome of thesematters cannot be determined, the Company believes that none of the currently pending matters, individually or in the aggregate, will have a material adverseeffect on the Company’s financial condition, results of operations or liquidity.Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which havebeen prepared in accordance with GAAP. The preparation of financial statements in accordance with GAAP requires our management to make estimates andassumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. GAAPprovides the framework from which to make these estimates, assumptions and disclosures. We choose accounting policies within GAAP that our managementbelieves are appropriate to accurately and fairly report our operating results and financial position in a consistent manner. Our management regularly assessesthese policies in light of current and forecasted economic conditions. Our accounting policies are stated in Note 2 to our Consolidated Financial Statementsincluded in Item 8. We believe the following accounting policies are critical to understanding our results of operations and affect the more significantjudgments and estimates used in the preparation of our Consolidated Financial Statements that are inherently uncertain:Revenue RecognitionThe Company recognizes revenue for temporary services at the time services are provided and revenue is recorded on a time and materials basis.Temporary contracting revenue is reported on a gross basis when the Company acts as the principal in the transaction and is at risk for collection inaccordance with ASC 605-45, “Overall Considerations of Reporting Revenue Gross as a Principal versus Net as an Agent." The Company’s revenues arederived from its gross billings, which are based on (i) the payroll cost of its worksite employees; and (ii) a markup computed as a percentage of the payrollcost.The Company recognizes revenue for permanent placements based on the nature of the fee arrangement. Revenue generated when the Companypermanently places an individual with a client on a contingent basis is recorded at the time of acceptance of employment, net of an allowance for estimatedfee reversals. Revenue generated when the Company permanently places an individual with a client on a retained basis is recorded ratably over the periodservices are rendered, net of an allowance for estimated fee reversals.ASC 605-45-50-3 and ASC 605-45-50-4, “Taxes Collected from Customers and Remitted to Governmental Authorities,”provide that the presentation of taxes on either a gross basis (included in revenue and expense) or net basis (excluded from revenue) is an accounting policydecision. The Company collects various taxes assessed by governmental authorities and records these amounts on a net basis.- 35 -Accounts ReceivableThe Company's accounts receivable balances are composed of trade and unbilled receivables. The Company maintains an allowance for doubtfulaccounts and makes ongoing estimates as to the collectability of the various receivables. If the Company determines that the allowance for doubtful accountsis not adequate to cover estimated losses, an expense to provide for doubtful accounts is recorded in selling, general and administrative expenses. If anaccount is determined to be uncollectible, it is written off against the allowance for doubtful accounts. Management's assessment and judgment are vitalrequirements in assessing the ultimate realization of these receivables, including the current credit-worthiness, financial stability and effect of marketconditions on each customer.Income TaxesWe account for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes.” This standard establishes financialaccounting and reporting standards for the effects of income taxes that result from an enterprise's activities. It requires an asset and liability approach forfinancial accounting and reporting of income taxes.The calculation of net deferred tax assets assumes sufficient future earnings for the realization of such assets as well as the continued application ofcurrently anticipated tax rates. Included in net deferred tax assets is a valuation allowance for deferred tax assets where management believes it is more likelythan not that the deferred tax assets will not be realized in the relevant jurisdiction. If we determine that a deferred tax asset will not be realizable, anadjustment to the deferred tax asset will result in a reduction of earnings at that time. See Note 6 to the Consolidated Financial Statements for furtherinformation regarding deferred tax assets and valuation allowance.ASC 740-10-55-3, “Recognition and Measurement of Tax Positions - a Two Step Process,” provides implementation guidance related to the accountingfor uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a two-step evaluation process for a tax position taken orexpected to be taken in a tax return. The first step is recognition and the second is measurement. ASC 740 also provides guidance on derecognition,measurement, classification, disclosures, transition and accounting for interim periods. In addition, ASC 740-10-25-9 provides guidance on how to determinewhether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits.The Company's unrecognized tax benefits, if recognized in the future, would affect the annual effective income tax rate. See Note 6 to the ConsolidatedFinancial Statements for further information regarding unrecognized tax benefits. We elected to continue our historical practice of classifying applicableinterest and penalties as a component of the provision for income taxes.We provide tax reserves for Federal, state, local and international exposures relating to periods subject to audit. The development of reserves for theseexposures requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate. We assess our tax positions and record taxbenefits for all years subject to examination based upon management's evaluation of the facts, circumstances and information available at the reporting dates.For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with greaterthan 50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For those tax positions whereit is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the Consolidated Financial Statements. Whereapplicable, associated interest and penalties have also been recognized. Although the outcome relating to these exposures are uncertain, we believe that ourreserves reflect the probable outcome of known tax contingencies. In certain circumstances, the ultimate outcome of exposures and risks involves significantuncertainties which render them inestimable. If actual outcomes differ materially from these estimates, including those that cannot be quantified, they couldhave a material impact on our results of operations.Unrepatriated cumulative earnings of certain foreign subsidiaries are considered to be invested indefinitely outside of the United States, except wherethe Company is able to repatriate these earnings to the United States without a material incremental tax provision. The Company has not provided for Federalincome or foreign withholding taxes on these undistributed foreign earnings because a distribution of these foreign earnings with a material incremental taxprovision is unlikely to occur in the foreseeable future. It is not practicable to determine the amount of tax associated with such undistributed earnings. - 36 -Long-lived AssetsThe Company evaluates the recoverability of the carrying value of its long-lived assets, excluding goodwill, whenever events or changes incircumstances indicate that the carrying value may not be recoverable. Under such circumstances, the Company assesses whether the projected un-discountedcash flows of its businesses are sufficient to recover the existing unamortized cost of its long-lived assets. If the un-discounted projected cash flows are notsufficient, the Company calculates the impairment amount by discounting the cash flows using its weighted average cost of capital. The amount of theimpairment is written-off against earnings in the period in which the impairment has been determined in accordance with ASC 360-10-35, “Impairment orDisposal of Long-Lived Assets.”GoodwillUnder ASC 350-20-35, “Intangibles-Goodwill and Other, Goodwill Subsequent Measurement," the Company is required to test goodwill andindefinite-lived intangible assets for impairment on an annual basis as of October 1, or more frequently if circumstances indicate that its carrying value mightexceed its current fair value.ASC 350-20-35 requires a two-step process to identify potential goodwill impairment and to measure the amount of the impairment loss to berecognized, if applicable. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit withits carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, then goodwill of the reporting unit is not consideredimpaired and the second step of the impairment test is unnecessary. In contrast, if the carrying amount of a reporting unit exceeds its fair value, the secondstep of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any.Step two of the impairment test, if necessary, consists of determining the implied fair value of each reporting unit’s goodwill. In calculating the impliedfair value of goodwill, the fair values of the reporting units are allocated to all of the other assets and liabilities of the reporting units based on their fairvalues. The excess of the fair value of each reporting unit over the amounts assigned to its other assets and liabilities is equal to the implied fair value of itsgoodwill. The goodwill impairment is measured as the excess of the carrying amount of goodwill over its implied fair value.To estimate the fair value of a reporting unit, the Company utilizes the income approach, a valuation technique which indicates the fair value of theinvested capital of a reporting unit based on the value of the cash flows that it is expected to generate in the future. The discounted cash flow method, anapplication of the income approach, estimates the future cash flows of the reporting unit and discounts these cash flows to their present value equivalents at arate of return that considers the relative risk of achieving the cash flows and the time value of money. These cash flows indicate the fair value of the investedcapital of the reporting unit on a marketable, controlling basis.Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates andassumptions include revenue growth rates, operating margins, corporate overhead allocations, cash flow adjustments related to capital expenditures, andworking capital investments and risk-adjusted discount rates used to calculate the present value of the projected future cash flows. We base our fair valueestimates on assumptions we believe to be reasonable.Stock-Based CompensationThe Company applies the fair value recognition provisions of ASC 718, "Compensation - Stock Compensation." The Company determines the fair valueas of the grant date. Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certaincomplex and subjective assumptions, including the expected life of the stock compensation award and the Company’s Common Stock price volatility. Inaddition, determining the appropriate amount of associated periodic expense requires management to estimate the rate of employee forfeitures and thelikelihood of achievement of certain performance targets. The assumptions used in calculating the fair value of stock compensation awards and the associatedperiodic expense represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, iffactors change and the Company deems it necessary in the future to modify the assumptions it made or to use different assumptions, or if the quantity andnature of the Company’s stock-based compensation awards changes, then the amount of expense may need to be adjusted and future stock compensationexpense could be materially different from what has been recorded in the current period.- 37 -For awards with graded vesting conditions, the values of the awards are determined by valuing each tranche separately and expensing each tranche overthe required service period. The service period is the period over which the related service is performed, which is generally the same as the vesting period.The Company records stock-based compensation expense net of estimated forfeitures. The Company estimates its forfeiture rate based on historical data suchas stock option exercise activities and employee termination patterns. The Company analyzed its historical forfeiture rate, the remaining lives of unvestedawards and the amount of vested awards as a percentage of total awards outstanding. If the Company's actual forfeiture rate is materially different from itsestimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what wasrecorded in the current periods.Recent Accounting PronouncementsIn August 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-15, "Disclosure of Uncertainties about an Entity’s Ability toContinue as a Going Concern" ("ASU 2014-15"), to provide guidance on management’s responsibility to evaluate whether there is substantial doubt about acompany’s ability to continue as a going concern within one year after the date that the financial statements are issued. ASU 2014-15 also provides guidancefor related footnote disclosures. ASU 2014-15 is effective for the Company beginning on January 1, 2016 with early adoption permitted. The Company doesnot believe the impact of its pending adoption of ASU 2014-15 on the Company's consolidated financial statements will be material.In June 2014, the FASB issued ASU No. 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a PerformanceTarget Could Be Achieved after the Requisite Service Period" ("ASU 2014-12"). ASU 2014-12 requires that a performance target that affects vesting andcould be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in ASC 718,"Compensation - Stock Compensation," as it relates to such awards. ASU 2014-12 is effective for fiscal years, and interim periods within those years,beginning after December 15, 2015 with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after theeffective date or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in thefinancial statements and to all new or modified awards thereafter, with the cumulative effect of applying ASU 2014-12 as an adjustment to the openingretained earnings balance as of the beginning of the earliest annual period presented in the financial statements. Accordingly, the standard is effective for theCompany beginning on January 1, 2016. The Company does not believe the impact of its pending adoption of ASU 2014-12 on the Company's consolidatedfinancial statements will be material.In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 is acomprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer atan amount that reflects the consideration expected to be received in exchange for those goods or services. ASU 2014-09 is effective for fiscal years, andinterim periods within those years, beginning after December 15, 2016, and early adoption is not permitted. Accordingly, ASU 2014-09 is effective for theCompany beginning on January 1, 2017. The Company is currently evaluating the impact that adopting ASU 2014-09 will have on the Company's financialcondition, results of operations, and disclosures.In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (“ASU 2014-08”). ASU No. 2014-08 raises the threshold for adisposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet thedefinition of a discontinued operation. ASU 2014-08 is effective for fiscal years, and interim periods within those years, beginning on or after December 15,2014. Accordingly, the standard was effective for the Company beginning on January 1, 2015. The Company is currently reviewing the requirements of ASU2014-08, which will only impact the Company's financial statements upon the occurrence of a future disposal transaction within its scope.There have been no other new accounting pronouncements not yet effective that have significance, or potential significance, to the Company'sConsolidated Financial Statements.- 38 -FORWARD-LOOKING STATEMENTSThis Form 10-K contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private SecuritiesLitigation Reform Act of 1995. All statements other than statements of historical fact included in this Form 10-K, including statements regarding theCompany’s future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as“anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “predict,” “believe” and similar words, expressions and variations of these words andexpressions are intended to identify forward-looking statements. All forward-looking statements are subject to important factors, risks, uncertainties andassumptions, including industry and economic conditions that could cause actual results to differ materially from those described in the forward-lookingstatements. Such factors, risks, uncertainties and assumptions include, but are not limited to, (1) global economic fluctuations, (2) the Company's ability tosuccessfully execute its strategic initiatives, (3) risks related to fluctuations in the Company’s operating results from quarter to quarter, (4) the ability ofclients to terminate their relationship with the Company at any time, (5) competition in the Company’s markets, (6) the negative cash flows and operatinglosses that the Company has experienced in recent periods and may experience from time to time in the future, (7) restrictions on the Company’s operatingflexibility due to the terms of its credit facilities, (8) risks associated with the Company’s investment strategy, (9) risks related to international operations,including foreign currency fluctuations, (10) the Company’s dependence on key management personnel, (11) the Company’s ability to attract and retainhighly-skilled professionals, (12) the Company’s ability to collect its accounts receivable, (13) the Company’s ability to achieve anticipated cost savingsthrough the Company’s cost reduction initiatives, (14) the Company’s heavy reliance on information systems and the impact of potentially losing or failingto develop technology, (15) risks related to providing uninterrupted service to clients, (16) the Company’s exposure to employment-related claims fromclients, employers and regulatory authorities and limits on related insurance coverage, (17) the Company’s ability to utilize net operating loss carry-forwards,(18) volatility of the Company’s stock price, (19) the impact of government regulations, and (20) risks related to activist stockholders. These forward-lookingstatements speak only as of the date of this Form 10-K. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThe Company conducts operations in various countries and faces both translation and transaction risks related to foreign currency exchange. For theyear ended December 31, 2014, the Company earned approximately 91% of its gross margin outside the United States (“U.S.”), and it collected payments inlocal currency and paid related operating expenses in such corresponding local currency. Revenues and expenses in foreign currencies translate into higheror lower revenues and expenses in U.S. dollars as the U.S. dollar weakens or strengthens against other currencies. Therefore, changes in exchange rates mayaffect our consolidated revenues and expenses (as expressed in U.S. dollars) from foreign operations.Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resultingtranslation adjustments are recorded as a component of accumulated other comprehensive income in the stockholders’ equity section of the ConsolidatedBalance Sheets. The translation of the foreign currency into U.S. dollars is reflected as a component of stockholders’ equity and does not impact our reportednet income.As more fully described in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Company has creditagreements with Lloyds, Siena, Westpac Banking Corporation and other credit agreements with lenders in the Netherlands, Belgium, and Singapore. TheCompany does not hedge the interest risk on borrowings under the credit agreements, and accordingly, it is exposed to interest rate risk on the borrowingsunder such credit agreements. Based on our annual average borrowings, a 1% increase or decrease in interest rates on our borrowings would not have amaterial impact on our earnings.- 39 -ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATAManagement's Annual Report on Internal Control Over Financial ReportingThe management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term isdefined in Rules 13a-15(f) and 15(d)-15 (f) of the Securities Exchange Act of 1934. The Company's internal control over financial reporting is designed toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2014 using thecriteria set forth in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on this assessment, the Company's management believes that, as of December 31, 2014, the Company's internal control over financial reporting waseffective based on those criteria.The Company's independent registered public accounting firm, KPMG LLP, has issued a report on the effectiveness of the Company's internal controlover financial reporting. That report is set forth immediately following the report of KPMG LLP on the financial statements included herein.- 40 -Report of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersHudson Global, Inc.:We have audited the accompanying consolidated balance sheets of Hudson Global, Inc. and subsidiaries (Hudson Global, Inc.) as of December 31, 2014and 2013, and the related consolidated statements of operations and other comprehensive income (loss), changes in stockholders' equity, and cash flows foreach of the years in the three-year period ended December 31, 2014. In connection with our audit of the consolidated financial statements, we also haveaudited the financial statement schedules included in Item 15 of Form 10-K. These consolidated financial statements and the financial statement schedulesare the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financialstatement schedules based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hudson Global,Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31,2014, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered inrelation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hudson Global, Inc.'sinternal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2015 expressed an unqualified opinionon the effective operation of internal control over financial reporting./s/ KPMG LLPNew York, New YorkFebruary 26, 2015- 41 -Report of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersHudson Global, Inc.:We have audited Hudson Global Inc.'s and subsidiaries (Hudson Global, Inc.) internal control over financial reporting as of December 31, 2014, basedon criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO). Hudson Global, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management's Annual Report on Internal ControlOver Financial Reporting”. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.In our opinion, Hudson Global, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO).We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of Hudson Global, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations and other comprehensive income(loss), changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2014, and our report datedFebruary 26, 2015 expressed an unqualified opinion on those consolidated financial statements./s/ KPMG LLPNew York, New YorkFebruary 26, 2015- 42 -HUDSON GLOBAL, INC.CONSOLIDATED STATEMENTS OF OPERATIONSAND OTHER COMPREHENSIVE INCOME (LOSS)(in thousands, except per share amounts) Year Ended December 31, 2014 2013 2012Revenue $581,192 $562,572 $655,875Direct costs 358,347 353,143 398,082Gross margin 222,845 209,429 257,793Operating expenses: Salaries and related 176,718 169,923 193,906Office and general 48,131 49,238 54,617Marketing and promotion 5,472 4,722 5,876Depreciation and amortization 5,559 5,922 5,982Business reorganization expenses 3,789 5,440 7,506Impairment of long-lived assets 662 1,336 —Total operating expenses 240,331 236,581 267,887Operating income (loss) (17,486) (27,152) (10,094)Non-operating income (expense): Interest income (expense), net (661) (554) (561)Other income (expense), net 202 759 324Income (loss) from continuing operations before provision for income taxes (17,945) (26,947) (10,331)Provision for (benefit from) income taxes from continuing operations (2,159) 3,264 (3,109)Income (loss) from continuing operations $(15,786) $(30,211) $(7,222)Income (loss) from discontinued operations, net of income taxes 2,592 (184) 1,887Net income (loss) (13,194) (30,395) (5,335)Earnings (loss) per share: Basic and diluted Income (loss) from continuing operations $(0.48) $(0.93) $(0.22)Income (loss) from discontinued operations $0.08 $(0.01) $0.05Net income (loss) $(0.40) $(0.94) $(0.17)Weighted-average shares outstanding: Basic and diluted 32,843 32,493 32,600Comprehensive income (loss): Net income (loss) $(13,194) $(30,395) $(5,335)Other comprehensive income (loss): Foreign currency translation adjustment, net of income taxes (3,718) (3,623) 2,169Defined benefit pension plans - unrecognized net actuarial gain (loss) and prior servicecosts (credit), net of income taxes 158 260 (290)Total other comprehensive income (loss), net of income taxes (3,560) (3,363) 1,879Comprehensive income (loss) $(16,754) $(33,758) $(3,456) See accompanying notes to consolidated financial statements.- 43 -HUDSON GLOBAL, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts) December 31, 2014 2013ASSETS Current assets: Cash and cash equivalents$33,989 $37,378Accounts receivable, less allowance for doubtful accounts of $986 and $1,041, respectively74,079 76,467Prepaid and other9,604 7,960Current assets of discontinued operations1,249 12,518Total current assets118,921 134,323Property and equipment, net9,840 11,989Deferred tax assets, non-current5,648 7,124Other assets5,263 5,393Total assets$139,672 $158,829LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable$6,371 $8,899Accrued expenses and other current liabilities54,065 51,917Short-term borrowings— 476Accrued business reorganization expenses3,169 3,275Current liabilities of discontinued operations3,512 5,251Total current liabilities67,117 69,818Deferred rent and tenant improvement contributions5,899 5,333Income tax payable, non-current2,397 3,872Other non-current liabilities5,002 5,421Total liabilities80,415 84,444Commitments and contingencies Stockholders’ equity: Preferred stock, $0.001 par value, 10,000 shares authorized; none issued or outstanding— —Common stock, $0.001 par value, 100,000 shares authorized; issued 33,671 and 33,543 shares, respectively34 34Additional paid-in capital476,689 475,461Accumulated deficit(430,616) (417,422)Accumulated other comprehensive income13,613 17,173Treasury stock, 129 and 211 shares, respectively, at cost(463) (861)Total stockholders’ equity59,257 74,385Total liabilities and stockholders' equity$139,672 $158,829 See accompanying notes to consolidated financial statements. - 44 -HUDSON GLOBAL, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2014 2013 2012Cash flows from operating activities: Net income (loss)$(13,194) $(30,395) $(5,335)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization5,835 6,406 6,438Impairment of long-lived assets1,129 1,336 —Provision for (recovery of) doubtful accounts97 (13) (149)Provision for (benefit from) deferred income taxes(102) 3,140 (310)Stock-based compensation1,325 2,090 2,574Gains on sale of assets(11,333) — (558)Other, net354 562 481Changes in assets and liabilities, net of effect of dispositions: Decrease (increase) in accounts receivable(7,117) 19,442 27,144Decrease (increase) in prepaid and other assets(1,731) 1,227 3,448Increase (decrease) in accounts payable, accrued expenses and other liabilities4,213 (2,100) (22,452)Increase (decrease) in accrued business reorganization expenses2,684 818 1,878Net cash provided by (used in) operating activities(17,840) 2,513 13,159Cash flows from investing activities: Capital expenditures(5,346) (2,557) (8,647)Proceeds from sale of assets, net of disposal costs22,077 — 375Net cash provided by (used in) investing activities16,731 (2,557) (8,272)Cash flows from financing activities: Borrowings under credit agreements133,030 17,314 74,534Repayments under credit agreements(133,194) (16,856) (77,765)Repayment of capital lease obligations(500) (467) (443)Payments for deferred financing costs(454) — —Purchase of restricted stock from employees(138) (488) (600)Net cash provided by (used in) financing activities(1,256) (497) (4,274)Effect of exchange rates on cash and cash equivalents(1,024) (734) 738Net increase (decrease) in cash and cash equivalents(3,389) (1,275) 1,351Cash and cash equivalents, beginning of the period37,378 38,653 37,302Cash and cash equivalents, end of the period$33,989 $37,378 $38,653Supplemental disclosures of cash flow information: Cash payments during the period for interest$442 $235 $333Cash payments during the period for income taxes, net of refunds$970 $1,047 $2,985 See accompanying notes to consolidated financial statements. - 45 -HUDSON GLOBAL, INC.CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY(in thousands) Common stock Additionalpaid-incapital Accumulateddeficit Accumulated othercomprehensiveincome (loss) Treasurystock Total Shares Value Balance at January 1, 2012 32,697 $33 $470,786 $(381,692) $18,657 $(427) $107,357Net income (loss) — — — (5,335) — — (5,335)Other comprehensive income (loss), translationadjustments — — — — 2,169 — 2,169Other comprehensive income (loss), pensionliability adjustment — — — — (290) — (290)Purchase of restricted stock from employees (124) — — — — (600) (600)Issuance of shares for 401(k) plan contribution 124 — 12 — — 654 666Stock-based compensation 324 — 2,574 — — — 2,574Balance at December 31, 2012 33,021 $33 $473,372 $(387,027) $20,536 $(373) $106,541Net income (loss) — — — (30,395) — — (30,395)Other comprehensive income (loss), translationadjustments — — — — (3,623) — (3,623)Other comprehensive income (loss), translationadjustments — — — — 260 — 260Purchase of restricted stock from employees (132) — — — — (488) (488)Issuance of shares for 401(k) plan contribution — — — — — — —Stock-based compensation 443 1 2,089 — — — 2,090Balance at December 31, 2013 33,332 $34 $475,461 $(417,422) $17,173 $(861) $74,385Net income (loss) — — — (13,194) — — (13,194)Other comprehensive income (loss), translationadjustments — — — — (3,718) — (3,718) Other comprehensive income (loss), pensionliability adjustment — — — — 158 — 158Purchase of restricted stock from employees (36) — — — — (129) (129)Issuance of shares for 401(k) plan contribution 118 — (97) — — 527 430Stock-based compensation 128 — 1,325 — — — 1,325Balance at December 31, 2014 33,542 $34 $476,689 $(430,616) $13,613 $(463) $59,257- 46 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 1 – DESCRIPTION OF BUSINESSHudson Global, Inc. and its subsidiaries (the “Company”) are comprised of the operations, assets and liabilities of the three Hudson regional businessesof Hudson Americas, Hudson Asia Pacific, and Hudson Europe (“Hudson regional businesses” or “Hudson”). The Company provides specializedprofessional-level recruitment and related talent solutions worldwide. The Company’s core service offerings include Permanent Recruitment, TemporaryContracting, Recruitment Process Outsourcing (“RPO”) and Talent Management Solutions. As of December 31, 2014, the Company had approximately 1,800employees operating in 18 countries with three reportable geographic business segments: Hudson Americas, Hudson Asia Pacific, and Hudson Europe.The Company’s core service offerings include those services described below.Permanent Recruitment: Offered on both a retained and contingent basis, Hudson’s Permanent Recruitment services leverage its consultants,psychologists and other professionals in the development and delivery of its proprietary methods to identify, select and engage the best-fit talent for criticalclient roles.Temporary Contracting: In Temporary Contracting, Hudson provides a range of project management, interim management and professional contractstaffing services. These services draw upon a combination of specialized recruiting and project management competencies to deliver a wide range ofsolutions. Hudson-employed professionals - either individually or as a team - are placed with client organizations for a defined period of time based on aclient's specific business need.RPO: Hudson RPO delivers both permanent recruitment and temporary contracting outsourced recruitment solutions tailored to the individual needs ofprimarily mid-to-large-cap multinational companies. Hudson RPO's delivery teams utilize state-of-the-art recruitment process methodologies and projectmanagement expertise in their flexible, turnkey solutions to meet clients' ongoing business needs. Hudson RPO services include complete recruitmentoutsourcing, project-based outsourcing, contingent workforce solutions and recruitment consulting.Talent Management Solutions: Featuring embedded proprietary talent assessment and selection methodologies, Hudson’s Talent Managementcapability encompasses services such as talent assessment (utilizing a variety of competency, attitude and experiential testing), interview training, executivecoaching, employee development and outplacement.NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ofAmerica (“GAAP”). Unless otherwise stated, amounts are presented in United States of America (“U.S.”) dollars and all amounts are in thousands, except fornumber of shares and per share amounts.Certain prior year amounts have been reclassified to conform to the current year presentation for discontinued operations. See Note 3 for further detailsregarding the discontinued operations reclassification.Principles of ConsolidationThe Consolidated Financial Statements include the accounts of the Company and all of its wholly-owned and majority-owned subsidiaries. Allsignificant inter-company accounts and transactions between and among the Company and its subsidiaries have been eliminated in consolidation.- 47 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities, thedisclosures about contingent assets and liabilities, and the reported amounts of revenue and expenses. Such estimates include the value of allowances fordoubtful accounts, insurance recovery receivable, goodwill, intangible assets, and other long-lived assets, legal reserve and provision, estimated self-insuredliabilities, assumptions used in the fair value of stock-based compensation and the valuation of deferred tax assets. These estimates and assumptions arebased on management's best estimates and judgment. Management evaluates the estimates and assumptions on an ongoing basis using historical experienceand other factors, including the current economic environment, which management believes to be reasonable under the circumstances. The Company adjustssuch estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual resultscould differ significantly from those estimates.Instability in the global credit markets, the instability in the geopolitical environment in many parts of the world and other factors may continue to putpressure on global economic conditions and may in turn impact the aforementioned estimates and assumptions.Nature of Business and Credit RiskThe Company's revenue is earned from professional placement services, mid-level employee professional staffing and temporary contracting servicesand human capital services. These services are provided to a large number of customers in many different industries. The Company operates throughout NorthAmerica, the United Kingdom, Continental Europe, Australia, New Zealand and Asia. During 2014, no single client accounted for more than 10% of theCompany's total revenue. As of December 31, 2014, no single client accounted for more than 10% of the Company's outstanding accounts receivable.Financial instruments, which potentially subject the Company to concentrations of credit risk, are primarily cash and accounts receivable. TheCompany performs continuing credit evaluations of its customers and does not require collateral. The Company has not experienced significant losses relatedto receivables. Revenue RecognitionThe Company recognizes revenue for temporary services at the time services are provided and revenue is recorded on a time and materials basis.Temporary contracting revenue is reported on a gross basis when the Company acts as the principal in the transaction and is at risk for collection inaccordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 605-45, “Overall Considerations ofReporting Revenue Gross as a Principal versus Net as an Agent.” The Company's revenues are derived from its gross billings, which are based on (i) thepayroll cost of its worksite employees; and (ii) a markup computed as a percentage of the payroll cost.The Company recognizes revenue for permanent placements based on the nature of the fee arrangement. Revenue generated when the Companypermanently places an individual with a client on a contingent basis is recorded at the time of acceptance of employment, net of an allowance for estimatedfee reversals. Revenue generated when the Company permanently places an individual with a client on a retained basis is recorded ratably over the periodservices are rendered, net of an allowance for estimated fee reversals.ASC 605-45-50-3 and ASC 605-45-50-4, “Taxes Collected from Customers and Remitted to Governmental Authorities,” provide that the presentation oftaxes on either a gross basis (included in revenue and expense) or net basis (excluded from revenue) is an accounting policy decision. The Company collectsvarious taxes assessed by governmental authorities and records these amounts on a net basis.- 48 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Operating ExpensesSalaries and related expenses include the salaries, commissions, payroll taxes and employee benefits related to recruitment professionals, executivelevel employees, administrative staff and other employees of the Company who are not temporary contractors. Office and general expenses includeoccupancy, equipment leasing and maintenance, utilities, travel expenses, professional fees and provision for doubtful accounts. The Company expenses thecosts of advertising and legal costs as incurred.Stock-Based CompensationThe Company applies the fair value recognition provisions of ASC 718, "Compensation - Stock Compensation." The Company determines the fair valueas of the grant date. For awards with graded vesting conditions, the values of the awards are determined by valuing each tranche separately and expensingeach tranche over the required service period. The service period is the period over which the related service is performed, which is generally the same as thevesting period. The Company records stock-based compensation expense net of estimated forfeitures. The Company estimates its forfeiture rate based onhistorical data such as stock option exercise activities and employee termination patterns. The Company analyzed its historical forfeiture rate, the remaininglives of unvested awards and the amount of vested awards as a percentage of total awards outstanding. If the Company's actual forfeiture rate is materiallydifferent from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantlydifferent from what was recorded in the current periods.In accordance with ASC 718, the Company reflects the tax savings resulting from tax deductions in excess of income tax benefits as a financing cashflow in its Consolidated Statement of Cash Flows, when applicable.Income TaxesEarnings from the Company's global operations are subject to tax in various jurisdictions both within and outside the United States. The Companyaccounts for income taxes in accordance with ASC 740, “Income Taxes”. This standard establishes financial accounting and reporting standards for the effectsof income taxes that result from an enterprise's activities. It requires an asset and liability approach for financial accounting and reporting of income taxes.The calculation of net deferred tax assets assumes sufficient future earnings for the realization of such assets as well as the continued application ofcurrently anticipated tax rates. Included in net deferred tax assets is a valuation allowance for deferred tax assets where management believes it is more likelythan not that the deferred tax assets will not be realized in the relevant jurisdiction. If we determine that a deferred tax asset will not be realizable, anadjustment to the deferred tax asset will result in a reduction of earnings at that time. See Note 6 to the Consolidated Financial Statements for furtherinformation regarding deferred tax assets and valuation allowance.ASC 740-10-55-3, “Recognition and Measurement of Tax Positions - a Two Step Process,” provides implementation guidance related to the accountingfor uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a two-step evaluation process for a tax position taken orexpected to be taken in a tax return. The first step is recognition and the second is measurement. ASC 740 also provides guidance on derecognition,measurement, classification, disclosures, transition and accounting for interim periods. The Company provides tax reserves for U.S. Federal, state and localand international unrecognized tax benefits for all periods subject to audit. The development of reserves for these exposures requires judgments about taxissues, potential outcomes and timing, and is a subjective critical estimate. The Company assesses its tax positions and records tax benefits for all yearssubject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting dates. For those taxpositions where it is more likely than not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For those tax positions where it isnot more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associatedinterest and penalties have also been recognized. Although the outcome related to these exposures is uncertain, in management's opinion, adequateprovisions for income taxes have been made for estimable potential liabilities emanating from these exposures. In certain circumstances, the ultimateoutcome for exposures and risks involve significant uncertainties which render them inestimable. If actual outcomes differ materially from these estimates,including those that cannot be quantified, they could have material impact on the Company's results of operations.- 49 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)U.S. Federal income and foreign withholding taxes have not been provided on the undistributed earnings of foreign subsidiaries. The Company intendsto reinvest these earnings in its foreign operations indefinitely, except where it is able to repatriate these earnings to the United States without a materialincremental tax provision. The determination and estimation of the future income tax consequences in all relevant taxing jurisdictions involves theapplication of highly complex tax laws in the countries involved, particularly in the United States, and is based on the tax profile of the Company in the yearof earnings repatriation. Accordingly, it is not practicable to determine the amount of tax associated with such undistributed earnings.Earnings (Loss) Per ShareBasic earnings (loss) per share (“EPS”) are computed by dividing the Company’s net income (loss) by the weighted average number of sharesoutstanding during the period. When the effects are not anti-dilutive, diluted earnings (loss) per share are computed by dividing the Company’s net income(loss) by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options “in-the-money”and unvested restricted stock. The dilutive impact of stock options and unvested restricted stock is determined by applying the “treasury stock” method.Performance-based restricted stock awards are included in the computation of diluted earnings per share only to the extent that the underlying performanceconditions: (i) are satisfied prior to the end of the reporting period, or (ii) would be satisfied if the end of the reporting period were the end of the relatedperformance period and the result would be dilutive under the treasury stock method. Stock awards subject to vesting or exercisability based on theachievement of market conditions are included in the computation of diluted earnings per share only when the market conditions are met.Income (loss) per share calculations for each quarter include the weighted average effect for the quarter; therefore, the sum of quarterly income (loss) pershare amounts may not equal year-to-date income (loss) per share amounts, which reflect the weighted average effect on a year-to-date basis.Fair Value of Financial InstrumentsThe carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable and short-termborrowings approximate fair value because of the immediate or short-term maturity of these financial instruments.Cash and Cash EquivalentsFor financial statement presentation purposes, the Company considers all highly liquid investments having an original maturity of three months or lessas cash equivalents.Accounts ReceivableThe Company's accounts receivable balances are composed of trade and unbilled receivables. The Company maintains an allowance for doubtfulaccounts and makes ongoing estimates as to the ability to collect on the various receivables. If the Company determines that the allowance for doubtfulaccounts is not adequate to cover estimated losses, an expense to provide for doubtful accounts is recorded in office and general expenses. If an account isdetermined to be uncollectible, it is written off against the allowance for doubtful accounts. Management's assessment and judgment are vital requirements inassessing the ultimate realization of these receivables, including the current credit-worthiness, financial stability and effect of market conditions on eachcustomer.Property and EquipmentProperty and equipment are stated at cost. Depreciation is computed primarily using the straight line method over the following estimated useful lives: YearsFurniture and equipment 3 - 8Capitalized software costs 3 - 5Computer equipment 2 - 5- 50 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Leasehold improvements are amortized over the shorter of their estimated useful lives or the lease term. The amortization periods of material leaseholdimprovements are estimated at the inception of the lease term.Capitalized Software CostsCapitalized software costs consist of costs to purchase and develop software for internal use. The Company capitalizes certain incurred softwaredevelopment costs in accordance with ASC 350-40, “Intangibles Goodwill and Other: Internal-Use Software.” Costs incurred during the application-development stage for software purchased and further customized by outside vendors for the Company's use and software developed by a vendor for theCompany's proprietary use have been capitalized. Costs incurred for the Company's own personnel who are directly associated with software development arecapitalized as appropriate. Capitalized software costs are included in property and equipment.Long-Lived AssetsThe Company evaluates the recoverability of the carrying value of its long-lived assets, excluding goodwill, whenever events or changes incircumstances indicate that the carrying value may not be recoverable. Under such circumstances, the Company assesses whether the projected undiscountedcash flows of its businesses are sufficient to recover the existing unamortized cost of its long-lived assets. If the undiscounted projected cash flows are notsufficient, the Company calculates the impairment amount by discounting the cash flows using its weighted average cost of capital. The amount of theimpairment is written-off against earnings in the period in which the impairment has been determined in accordance with ASC 360-10-35, “Impairment orDisposal of Long-Lived Assets.”GoodwillASC 350-20-35,“Intangibles-Goodwill and Other, Goodwill Subsequent Measurement,” requires that goodwill not be amortized but be tested forimpairment on an annual basis, or more frequently if circumstances warrant. The Company tests goodwill for impairment annually as of October 1, or morefrequently if circumstances indicate that its carrying value might exceed its current fair value. Per the provisions of ASC 350, the Company elects to firstperform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. In thequalitative assessment, the Company considers events and circumstances such as macroeconomic conditions, industry and market considerations, costfactors, overall financial performance and the trend of cash flows, other relevant company-specific events and the ''cushion'' between a reporting unit's fairvalue and carrying amount in the recent fair value calculation. If it is concluded that it is more likely than not that the fair value of a reporting unit is lessthan its carrying value, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairmenttest is not required.The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount,including goodwill. The Company tests goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below anoperating segment (referred to as a component). A component of an operating segment is a reporting unit if the component constitutes a business for whichdiscrete financial information is available and segment management regularly reviews the operating results of that component. The Company's reportingunits are the components within the reportable segments identified in Note 17.If the fair value of a reporting unit exceeds its carrying amount, the second step of the impairment test is unnecessary. If the carrying amount of areporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. Step twocompares the implied fair value of the reporting unit's goodwill with the current carrying amount of that goodwill. If the carrying value of a reporting unit'sgoodwill exceeds its implied fair value, an impairment amount equal to the difference is recorded.- 51 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Foreign Currency TranslationThe financial position and results of operations of the Company's international subsidiaries are determined using local currency as the functionalcurrency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year-end. Statements of Operations accounts aretranslated at the average rate of exchange prevailing during each period. Translation adjustments arising from the use of differing exchange rates from periodto period are included in the accumulated other comprehensive income (loss) account in stockholders' equity, other than translation adjustments on short-term intercompany balances, which are included in other income (expense). Gains and losses resulting from other foreign currency transactions are includedin other income (expense). Intercompany receivable balances of a long-term investment nature are considered part of the Company's permanent investment ina foreign jurisdiction and the gains or losses on these balances are reported in other comprehensive income.Comprehensive Income (Loss)Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.The Company's other comprehensive income (loss) is primarily comprised of foreign currency translation adjustments, which relate to investments that arepermanent in nature, and changes in unrecognized pension and post-retirement benefit costs. To the extent that such amounts relate to investments that arepermanent in nature, no adjustments for income taxes are made.NOTE 3 – DISCONTINUED OPERATIONSEffective November 9, 2014, the Company completed the sale of substantially all of the assets and certain liabilities of its Legal eDiscovery business inthe U.S and U.K. to Document Technologies, LLC and DTI of London Limited for $23,000 in cash, and recorded a gain of $11,333 in connection with thesale excluding customary working capital adjustments. Based on the terms of the asset purchase agreement, the Company will not have any significantcontinuing involvement in the operations of the Legal eDiscovery business after the disposal transaction. The Company expects that continuing cash flowswill be eliminated within one year. In addition, the Company ceased operations in Sweden, which were included within the Hudson Europe segment, duringthe third quarter of 2014.The Company concluded that the divestiture of the Legal eDiscovery business and the cessation of operations in Sweden meet the criteria fordiscontinued operations set forth in ASC No. 205, "Presentation of Financial Statements." The Company reclassified its discontinued operations for allperiods presented and has excluded the results of its discontinued operations from continuing operations and from segment results for all periods presented.The carrying amounts of the major classes of assets and liabilities from the Legal eDiscovery business and Sweden operations included as part of thediscontinued operations were as follows: December 31, 2014 December 31, 2013 eDiscovery Sweden Total eDiscovery Sweden TotalAccounts receivable, net $— $— $— $9,143 $291 $9,434Property and equipment, net — — — 1,835 — 1,835Other assets (a) 1,156 93 1,249 1,010 239 1,249Total assets $1,156 $93 $1,249 $11,988 $530 $12,518Total liabilities $3,297 $215 $3,512 $4,159 $1,092 $5,251a.As of December 31, 2014, other assets from Legal eDiscovery consisted primarily of estimated customary working capital adjustments in connectionwith the sale of the Legal eDiscovery business.- 52 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Reported results for the discontinued operations by period were as follows: For The Year Ended December 31, 2014 eDiscovery Sweden TotalRevenue $54,620 $1,513 $56,133Gross margin 9,227 864 10,091Reorganization expenses (a) 2,861 416 3,277Impairment charges (b) 467 — 467Operating income (loss), excluding gain (loss) from sale of business (5,491) (1,087) (6,578)Other non-operating income (loss), including interest (9) (33) (42)Gain (loss) from sale of discontinued operations 11,333 — 11,333Income (loss) from discontinued operations before income taxes 5,833 (1,120) 4,713Provision (benefit) for income taxes (c) 2,121 — 2,121Income (loss) from discontinued operations $3,712 $(1,120) $2,592 For The Year Ended December 31, 2013 eDiscovery Sweden TotalRevenue $94,738 $2,817 $97,555Gross margin 18,257 2,185 20,442Reorganization expenses 849 432 1,281Operating income (loss), excluding gain (loss) from sale of business 1,704 (1,312) 392Other non-operating income (loss), including interest (46) — (46)Gain (loss) from sale of discontinued operations — — —Income (loss) from discontinued operations before income taxes 1,658 (1,312) 346Provision (benefit) for income taxes (c) 530 — 530Income (loss) from discontinued operations $1,128 $(1,312) $(184) For The Year Ended December 31, 2012 eDiscovery Sweden TotalRevenue $119,644 $2,060 $121,704Gross margin 25,294 1,778 27,072Reorganization expenses 130 145 275Operating income (loss), excluding gain (loss) from sale of business 4,500 (1,046) 3,454Other non-operating income (loss), including interest (70) (72) (142)Gain (loss) from sale of discontinued operations — — —Income (loss) from discontinued operations before income taxes 4,430 (1,118) 3,312Provision (benefit) for income taxes (c) 1,425 — 1,425Income (loss) from discontinued operations $3,005 $(1,118) $1,887a.2014 reorganization activities related to discontinued operations included elimination of 30 positions in the U.S. and Sweden as well as lease termination payments foroffices in the U.S. and the U.K.b.As a result of the divestiture of the Company's Legal eDiscovery business in the fourth quarter of 2014, the Company recorded impairment charges related to assets nolonger in use of $467 in the U.S. and U.K.- 53 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)c.Income tax expense is provided at the effective tax rate by taxing jurisdiction and differs from the U.S. statutory tax rate of 35% due to the inability of the Company torecognize tax benefits on losses in the U.S. and certain foreign jurisdictions, variations from the U.S. tax rate in foreign jurisdictions, non-deductible expenses and othermiscellaneous taxes.NOTE 4 – REVENUE, DIRECT COSTS AND GROSS MARGIN The Company’s revenue, direct costs and gross margin were as follows: For The Year Ended December 31, 2014 TemporaryContracting PermanentRecruitment Other TotalRevenue$408,106 $126,686 $46,400 $581,192Direct costs (1)345,586 2,369 10,392 358,347Gross margin$62,520 $124,317 $36,008 $222,845 For The Year Ended December 31, 2013 TemporaryContracting PermanentRecruitment Other TotalRevenue$407,178 $113,301 $42,093 $562,572Direct costs (1)341,911 $2,219 9,013 353,143Gross margin$65,267 $111,082 $33,080 $209,429 For The Year Ended December 31, 2012 TemporaryContracting PermanentRecruitment Other TotalRevenue$460,372 $144,412 $51,091 $655,875Direct costs (1)383,778 $2,811 11,493 398,082Gross margin$76,594 $141,601 $39,598 $257,793(1)Direct costs include the direct staffing costs of salaries, payroll taxes, employee benefits, travel expenses and insurance costs for the Company’scontractors and reimbursed out-of-pocket expenses and other direct costs. Other than reimbursed out-of-pocket expenses, there are no other directcosts associated with the Permanent Recruitment and Other categories. Gross margin represents revenue less direct costs. The region where servicesare provided, the mix of contracting and permanent recruitment, and the functional nature of the staffing services provided can affect gross margin.NOTE 5 – STOCK-BASED COMPENSATIONEquity Compensation PlansThe Company maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan (the “ISAP”) pursuant to which it can issue equity-basedcompensation incentives to eligible participants. The ISAP permits the granting of stock options, restricted stock, and restricted stock units as well as othertypes of equity-based awards. The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) will establish suchconditions as it deems appropriate on the granting or vesting of stock options or restricted stock. While the Company historically granted both stock optionsand restricted stock to its employees, since 2008 the Company has primarily granted restricted stock to its employees.- 54 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The Compensation Committee administers the ISAP and may designate any of the following as a participant under the ISAP: any officer or otheremployee of the Company or its affiliates or individuals engaged to become an officer or employee, consultants or other independent contractors whoprovide services to the Company or its affiliates and non-employee directors of the Company. As of December 31, 2014, there were 2,053,785 shares of theCompany’s common stock available for future issuance. All share issuances related to stock compensation plans are issued from the aforementioned stock available for future issuance under stockholderapproved compensation plans.A summary of the quantity and vesting conditions for restricted stock awards granted to its employees under the ISAP for the year ended December 31,2014 was as follows:Vesting conditions Number ofShares ofRestricted StockGranted Number ofRestricted StockUnits Granted TotalPerformance and service conditions (1) (2) 476,500 85,000 561,500Immediately vested 1,400 — 1,400Vest 100% on the third anniversary of the grant date with service conditions only 5,000 — 5,000Total shares of stock award granted 482,900 85,000 567,900(1)The performance conditions with respect to restricted stock may be satisfied as follows: (a)50% of the shares of restricted stock may be earned on the basis of performance as measured by a “Return on Gross Margin Ratio,”defined as the percentage (i) gross margin minus selling, general and administrative expenses for the year ended December 31, 2014divided by the (i)) gross margin for the year ended December 31, 2014; and(b)50% of the shares of restricted stock may be earned on the basis of performance as measured by “Net Cash Position from Operations,”defined as net cash position from operations for the year ended December 31, 2014 excluding any proceeds from divestitures.(2)To the extent shares are earned on the basis of performance, such shares will vest on the basis of service as follows:(a)33% of the shares vest on March 1, 2015;(b)33% of the shares vest on March 1, 2016; and(c)34% of the shares vest on March 1, 2017; provided that, in each case, the employee remains employed by the Company from the grantdate through the applicable service vesting date.The Company also maintains the Director Deferred Share Plan (the “Director Plan”) pursuant to which it can issue restricted stock units to its non-employee directors. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock issued under theISAP upon a director ceasing service as a member of the Board of Directors of the Company. During the year ended December 31, 2014, the Company granted90,759 restricted stock units to its non-employee directors pursuant to the Director Plan.- 55 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)For the years ended December 31, 2014, 2013 and 2012, the Company’s stock-based compensation expense related to stock options, restricted stockand restricted stock units, which are included under the caption “Salaries and related” in the accompanying Consolidated Statements of Operations and OtherComprehensive Income (Loss), were as follows: For The Year Ended December 31, 2014 2013 2012Stock options$85 $354 $704Restricted stock798 1,274 1,275Restricted stock units442 462 595Total$1,325 $2,090 $2,574Tax benefits recognized in jurisdictions where the Company has taxable income$98 $130 $105As of December 31, 2014 and 2013, unrecognized compensation expense and weighted average period over which the compensation expense isexpected to be recognized relating to the unvested portion of the Company's stock options, restricted stock, and restricted stock unit awards, in each case,based on the Company's historical valuation treatment, were as follows: As of December 31, 2014 2013 UnrecognizedExpense WeightedAverage Period inYears UnrecognizedExpense WeightedAverage Period inYearsStock options $— — $85 0.36Restricted stock $1,561 1.32 $1,527 1.76Restricted stock units $239 1.26 $162 1.36 Stock OptionsStock options granted by the Company generally expire ten years after the date of grant and have an exercise price of at least 100% of the fair marketvalue of the underlying share of common stock on the date of grant and generally vest ratably over a four-year period. Stock option assumptions are notprovided above because there were no options granted during the years ended December 31, 2014, 2013 and 2012.Changes in the Company’s stock options for the years ended December 31, 2014, 2013 and 2012 were as follows: For The Year Ended December 31, 2014 2013 2012 Number ofOptions WeightedAverageExercise Priceper Share Number ofOptions WeightedAverageExercise Priceper Share Number ofOptions WeightedAverageExercise Priceper ShareOptions outstanding at January 1,800,350 $9.15 1,238,650 $11.21 1,396,350 $11.36Granted— — — — — —Expired(43,550) 15.50 (438,300) 14.99 (157,700) 12.55Options outstanding at December 31,756,800 $8.78 800,350 $9.15 1,238,650 $11.21Options exercisable at December 31,756,800 $8.78 600,350 $10.47 838,650 $13.96The cash proceeds from the exercise of stock options, associated income tax benefits, and total intrinsic value for stock options exercised based on theclosing price of the Company's common stock were nil for the years ended December 31, 2014, 2013 and 2012.- 56 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The weighted average remaining contractual term and the aggregated intrinsic value for stock options outstanding and exercisable as of December 31,2014 and 2013 were as follows: As of December 31, 2014 2013 RemainingContractual Termin Years Aggregated IntrinsicValue RemainingContractual Termin Years Aggregated IntrinsicValueStock options outstanding 4.04 $— 4.89 $—Stock options exercisable 4.04 $— 4.07 $—Restricted StockChanges in the Company’s restricted stock for the years ended December 31, 2014, 2013 and 2012 were as follows: For The Year Ended December 31, 2014 2013 2012 Number ofShares ofRestrictedStock WeightedAverageGrant DateFair Value Number ofShares ofRestrictedStock WeightedAverageGrant DateFair Value Number ofShares ofRestrictedStock WeightedAverageGrant DateFair ValueUnvested restricted stock at January 1,997,802 $3.00 1,028,916 $4.87 1,166,082 $5.12Granted482,900 3.22 883,321 2.44 638,230 4.59Vested(182,251) 5.21 (406,158) 5.09 (461,200) 4.86Forfeited(494,452) 2.39 (508,277) 4.16 (314,196) 5.26Unvested restricted stock at December 31,803,999 $3.00 997,802 $3.00 1,028,916 $4.87The total fair value of restricted stock vested during the years ended December 31, 2014, 2013 and 2012 were as follows: For The Year Ended December 31, 2014 2013 2012Fair value of restricted stock vested $669 $1,596 $2,239Restricted Stock Units Changes in the Company’s restricted stock units arising from grants to certain employees and non-employees directors for the years ended December31, 2014, 2013 and 2012 were as follows: For The Year Ended December 31, 2014 2013 2012 Number ofShares ofRestrictedStock Unit WeightedAverageGrant-DateFair Value Number ofShares ofRestrictedStock Unit WeightedAverageGrant-DateFair Value Number ofShares ofRestrictedStock Unit WeightedAverageGrant-DateFair ValueUnvested restricted stock units at January 1,115,869 $3.65 100,000 $5.18 100,000 $5.18Granted175,759 3.40 175,860 2.90 76,023 5.13Vested(122,522) 3.86 (154,991) 3.81 (76,023) 5.13Forfeited(49,166) 2.42 (5,000) 2.42 — —Unvested restricted stock units at December31,119,940 $3.57 115,869 $3.65 100,000 $5.18- 57 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts) The total fair value of restricted stock units vested during the years ended December 31, 2014, 2013 and 2012 were as follows: For The Year Ended December 31, 2014 2013 2012Fair value of restricted stock units vested $436 $461 $390Defined Contribution Plan and Employer-matching contributionsThe Company maintains the Hudson Global, Inc. 401(k) Savings Plan (the “401(k) plan”). The 401(k) plan allows eligible employees to contribute upto 15% of their earnings to the 401(k) plan. The Company has the discretion to match employees’ contributions up to 3% of the employees' earnings througha contribution of the Company’s common stock. Vesting of the Company’s contribution occurs over a five-year period. For the years ended December 31,2014, 2013 and 2012, the Company’s expenses and contributions to satisfy the prior years’ employer-matching liability for the 401(k) plan were as follows: For The Year Ended December 31,($ in thousands, except otherwise stated) 2014 2013 2012Expense recognized for the 401(k) plan $385 $483 $635Contributions to satisfy prior years' employer-matching liability Number of shares of the Company's common stock issued (in thousands) 118 — 124Market value per share of the Company's common stock on contribution date (in dollars) $3.65 $— $5.35Non-cash contribution made for employer matching liability $430 $— $666Additional cash contribution made for employer-matching liability — 651 —Total contribution made for employer-matching liability $430 $651 $666 NOTE 6 – INCOME TAXESIncome Tax ProvisionThe domestic and foreign components of income (loss) before income taxes from continuing operations were as follows: Year ended December 31, 2014 2013 2012Domestic $(10,342) $(7,622) $(2,322)Foreign (7,603) (19,325) (8,009)Income (loss) from continuing operations before provision for income taxes $(17,945) $(26,947) $(10,331) - 58 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The provision for (benefit from) income taxes from continuing operations was as follows: Year ended December 31, 2014 2013 2012Current tax provision (benefit): U.S. Federal $(1,712) $(81) $(714)State and local (550) 126 (3,296)Foreign 205 79 1,211Total current provision for (benefit from) income taxes (2,057) 124 (2,799)Deferred tax provision (benefit): U.S. Federal — — —State and local — — —Foreign (102) 3,140 (310)Total deferred provision for (benefit from) income taxes (102) 3,140 (310)Total provision for (benefit from) income taxes from continuing operations $(2,159) $3,264 $(3,109)Tax Rate ReconciliationThe effective tax rates for the years ended December 31, 2014, 2013 and 2012 were 12.0%, negative 12.1% and 30.1%, respectively. These effective taxrates differ from the U.S. Federal statutory rate of 35% due to the inability to recognize tax benefits on losses, state taxes, non-deductible expenses such ascertain acquisition related payments, variations from the U.S. tax rate in foreign jurisdictions and taxes on repatriations of foreign profits. The following is areconciliation of the effective tax rate from continuing operations for the years ended December 31, 2014, 2013 and 2012 to the U.S. Federal statutory rate of35%: Year ended December 31, 2014 2013 2012Provision for (benefit from) continuing operations at Federal statutory rate of 35% $(6,281) $(9,431) $(3,616)State income taxes, net of Federal income tax effect (357) (2) (2,143)Change in valuation allowance (3,427) 7,949 2,545Taxes related to foreign income 5,628 949 (2,646)Nondeductible expenses and others 2,278 3,799 2,751Provision for (benefit from) income tax $(2,159) $3,264 $(3,109)- 59 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Deferred Taxes Assets (Liabilities)Deferred income taxes are provided for the tax effect of temporary differences between the financial reporting basis and the tax basis of assets andliabilities. Net deferred tax assets were included in other current assets and other assets in the accompanying Consolidated Balance Sheets. Significanttemporary differences at December 31, 2014 and 2013 were as follows: As of December 31, 2014 2013Current deferred tax assets (liabilities): Allowance for doubtful accounts $124 $201Accrued and other current liabilities 1,444 1,057Accrued compensation liabilities 2,925 1,972Current deferred tax assets (liabilities), gross, total 4,493 3,230Valuation allowance (2,900) (1,689)Total current deferred tax asset, net of valuation allowance 1,593 1,541Non-current deferred tax assets (liabilities): Property and equipment 2,152 2,217Goodwill and intangibles 7,825 10,990Accrued and other non-current liabilities 2,138 2,410Deferred compensation 2,581 2,542Tax loss carry-forwards 146,644 149,296Non-current deferred tax assets (liabilities), gross, total 161,340 167,455Valuation allowance (155,951) (160,590)Total non-current deferred tax asset (liabilities), net of valuation allowance 5,389 6,865Deferred tax assets (liabilities), net of valuation allowance, total $6,982 $8,406Net Operating Losses (“NOLs”) and Valuation AllowanceAt December 31, 2014, the Company had net NOLs for U.S. Federal tax purposes of approximately $306,579. This total includes approximately$16,584 of tax losses that were not absorbed by Monster Worldwide, Inc. ("Monster") on its consolidated U.S. Federal tax returns through the spin off of theCompany on April 1, 2003. NOLs expire at various dates through 2034. The NOL balance does not include a deduction in the amount of $5,186 attributableto stock options and restricted stock until such time as the Company recognizes the deferred tax asset associated with such deduction. The Company'sutilization of NOLs is subject to an annual limitation imposed by Section 382 of the Internal Revenue Code, which may limit our ability to utilize all of theexisting NOLs before the expiration dates. As of December 31, 2014, certain international subsidiaries had NOLs for local tax purposes of $106,017. With theexception of $98,594 of NOLs with an indefinite carry forward period as of December 31, 2014, these losses will expire at various dates through 2034, with$1,520 scheduled to expire during 2015. ASC 740-10-30-5 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will notbe realized. In making this assessment, management considers the level of historical taxable income, scheduled reversal of deferred tax liabilities, taxplanning strategies, and projected future taxable income. As of December 31, 2014, $142,444 of the valuation allowance relates to the deferred tax asset forNOLs, $116,500 of which is U.S. Federal and state, and $25,944 of which is foreign, that management has determined will more likely than not expire prior torealization. The remaining valuation allowance of $16,407 relates to deferred tax assets on U.S. and foreign temporary differences that management estimateswill not be realized due to the Company's U.S. and foreign tax losses.- 60 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Uncertain Tax Positions As of December 31, 2014 and 2013, the Company's unrecognized tax benefits, including interest and penalties, which would lower the Company’sannual effective income tax rate if recognized in the future, were as follows: As of December 31, 2014 2013Gross unrecognized tax benefits excluding interest and penalties $2,634 $3,086Reduction of unrecognized tax benefit (a) $791 $—Unrecognized tax benefits, excluding interest and penalties $1,843 $3,086Accrued interest and penalties 554 786Total unrecognized tax benefits that would impact effective tax rate $2,397 $3,872(a)In July 2013, the FASB issued ASU No. 2013-11, “Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a SimilarTax Loss, or a Tax Credit Carryforward Exists, an amendment to FASB Accounting Standards Codification Topic 740, Income Taxes" ("ASU 2013-11"). ASU 2013-11 clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financialstatements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlementis required or expected in the event the uncertain tax position is disallowed. The Company adopted the ASU 2013-11 prospectively on January 1,2014.The following table shows a reconciliation of the beginning and ending amounts of unrecognized tax benefits, exclusive of interest and penalties:Balance at January 1, 2014 $3,086Additions based on tax positions related to the current year 160Additions for tax positions of prior years —Reductions for tax positions of prior years —Settlements —Lapse of statute of limitations (431)Currency Translation (181)Balance at December 31, 2014 $2,634Estimated interest and penalties classified as part of the provision for income taxes in the Company’s Consolidated Statements of Operations and OtherComprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012 were as follows: Year ended December 31, 2014 2013 2012Expense for (benefit of) estimated interest and penalties related to unrecognized tax benefits $(150) $108 $(909)Based on information available as of December 31, 2014, it is reasonably possible that the total amount of unrecognized tax benefits could decrease inthe range of $400 to $700 over the next 12 months as a result of projected resolutions of global tax examinations and controversies and potential lapses ofthe applicable statutes of limitations.- 61 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)In many cases, the Company’s unrecognized tax benefits are related to tax years that remain subject to examination by the relevant tax authorities. Taxyears with NOLs remain open until such losses expire or the statutes of limitations for those years when the NOLs are used or expire. As of December 31,2014, the Company's open tax years remain subject to examination by the relevant tax authorities and currently under income tax examination wereprincipally as follows: YearEarliest tax years remain subject to examination by the relevant tax authorities: U.S. Federal 2011Other U.S. state and local jurisdictions 2010U.K. 2013Australia 2010Majority of other foreign jurisdictions 2009The Company believes that its tax reserves are adequate for all years subject to examination above.NOTE 7 – EARNINGS (LOSS) PER SHAREA reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share calculations were as follows: Year Ended December 31, 2014 2013 2012Earnings (loss) per share ("EPS"): EPS - basic and diluted Income (loss) from continuing operations $(0.48) $(0.93) $(0.22)Income (loss) from discontinued operations 0.08 (0.01) 0.05Net income (loss) $(0.40) $(0.94) $(0.17)EPS numerator - basic and diluted: Income (loss) from continuing operations $(15,786) $(30,211) $(7,222)Income (loss) from discontinued operations, net of income taxes 2,592 (184) 1,887Net income (loss) $(13,194) $(30,395) $(5,335)EPS denominator (in thousands): Weighted average common stock outstanding - basic 32,843 32,493 32,600Common stock equivalents: stock options and other stock-based awards (a) — — —Weighted average number of common stock outstanding - diluted 32,843 32,493 32,600(a)For the periods in which net losses are presented, the diluted weighted average number of shares of common stock outstanding did not differ fromthe basic weighted average number of shares of common stock outstanding because the effects of any potential common stock equivalents (seeNote 5 for further details on outstanding stock options, unvested restricted stock units and unvested restricted stock) were anti-dilutive andtherefore not included in the calculation of the denominator of dilutive earnings per share.- 62 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The weighted average number of shares outstanding used in the computation of diluted net income (loss) per share for the years ended December 31,2014, 2013 and 2012 did not include the effect of the following potentially outstanding shares of common stock because the effect would have been anti-dilutive: Year Ended December 31, 2014 2013 2012Unvested restricted stock 803,999 997,802 1,028,916Unvested restricted stock units 119,940 115,869 100,000Stock options 756,800 800,350 1,238,650Total 1,680,739 1,914,021 2,367,566NOTE 8 – RESTRICTED CASHA summary of the Company’s restricted cash included in the accompanying Consolidated Balance Sheets as of December 31, 2014 and 2013 was asfollows: As of December 31, 2014 2013Included under the caption "Other assets": Collateral accounts$618 $619Rental deposits802 1,195Total amount under the caption "Other assets":$1,420 $1,814Included under the caption "Prepaid and other": Client guarantees$52 $61Other123 172Total amount under the caption "Prepaid and other"$175 $233Total restricted cash$1,595 $2,047Collateral accounts primarily include deposits held under a collateral trust agreement, which supports the Company’s workers’ compensation policy.The rental deposits with banks include amounts held as guarantees for the rent on the Company’s offices in the Netherlands and rental deposit fromsubtenants in the United Kingdom ("U.K."). Client guarantees were held in banks in Belgium as deposits for various client projects. Other primarily includessocial tax payment reserves, which were held with banks for employee social tax payments required by law in the Netherlands.- 63 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 9 – PROPERTY AND EQUIPMENT, NETAs of December 31, 2014 and 2013, property and equipment, net were as follows: As of December 31, 2014 2013Computer equipment$8,806 $8,933Furniture and equipment5,352 5,438Capitalized software costs25,228 24,665Leasehold and building improvements21,368 16,794 60,754 55,830Less: accumulated depreciation and amortization50,914 43,841Property and equipment, net$9,840 $11,989The Company had expenditures of approximately $1,006 and $595 for acquired property and equipment, mainly consisting of software development,fixtures, computer equipment and leasehold improvements, which had not been placed in service as of December 31, 2014 and 2013, respectively.Depreciation expense is not recorded for such assets until they are placed in service.Impairment of Long-Lived AssetsDuring the fourth quarter of 2014, the Company experienced continued declines in the operating results of certain markets. These events were deemedto be triggering events that required the Company to perform an impairment assessment with respect to long-lived assets, primarily property and equipment.With respect to these long-lived assets, the Company estimated future cash flows over their expected life, and determined whether, on an undiscounted basis,the expected cash flows exceeded their carrying value. When the assets' carrying amount exceeds their fair value, an impairment charge is recognized in theamount by which the carrying amount exceeds the fair value of the assets. The fair values of long-lived assets are based on the Company's own judgmentsabout the assumptions that market participants would use in pricing the asset and on observable market data, when available. These measurements areclassified as Level 3 within the fair value hierarchy. For the year ended December 31, 2014, the Company recorded charges for the impairment of long-livedassets of $662 within continuing operations under the caption “Impairment of long-lived assets” in the accompanying Consolidated Statements ofOperations and Other Comprehensive Income (Loss), primarily from Hong Kong and France.Non-Cash Capital ExpendituresThe Company has acquired certain computer equipment under capital lease agreements. The current portion of the capital lease obligations areincluded under the caption “Accrued expenses and other current liabilities” in the Consolidated Balance Sheets and the non-current portion of the capitallease obligations are included under the caption “Other non-current liabilities” in the Consolidated Balance Sheets as of December 31, 2014 and 2013. Asummary of the Company’s equipment acquired under capital lease agreements was as follows: As of December 31, 2014 2013Capital lease obligation, current$77 $—Capital lease obligation, non-current$348 $—The Company acquired $557 and $0 of property and equipment under capital lease agreements for the years ended December 31, 2014 and 2013,respectively. Capital expenditures for the year ended December 31, 2014 included $1,221 of landlord-funded tenant improvements for the Company's leasedproperties in Australia.- 64 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 10 – GOODWILLThe following is a summary of the changes in the carrying value of the Company’s goodwill, which was included under the caption of Other Assets inthe accompanying Condensed Consolidated Balance Sheets, for the years ended December 31, 2014 and 2013. The goodwill is related to the Company’sacquisition of the businesses of Tong Zhi (Beijing) Consulting Service Ltd and Guangzhou Dong Li Consulting Service Ltd. Carrying Value 2014 2013Goodwill, January 1,$2,078 $2,020Currency translation(49) 58Goodwill, December 31,$2,029 $2,078On October 1, 2014 and 2013, the Company applied ASU 2011-08, “Testing Goodwill for Impairment” and performed a quantitative and qualitativeassessments, respectively, to determine whether it was more likely than not that the fair value of its China reporting unit was less than its carrying value. Atthe conclusion of its assessment, the Company determined that no impairment of goodwill existed in its China reporting unit as of October 1, 2014 and 2013.During the fourth quarter of 2014, the Company performed additional assessment with respect to goodwill and noted no negative triggering events. At theconclusion of its assessment, the Company determined that no impairment of goodwill existed in its China reporting unit as of December 31, 2014.NOTE 11 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESAs of December 31, 2014 and 2013, the Company's accrued expenses and other current liabilities consisted of the following: December 31, 2014 2013Salaries, commissions and benefits $34,390 $29,598Sales, use and income taxes 8,492 10,677Fees for professional services 1,912 1,324Rent 1,519 1,731Deferred revenue 1,167 1,635Other accruals 6,585 6,952Total accrued expenses and other liabilities $54,065 $51,917NOTE 12 – BUSINESS REORGANIZATION EXPENSESIn April 2014, the Company engaged AlixPartners, LLP, (“AlixPartners”) to assist management in a comprehensive assessment of the Company’sorganization and operations. In July 2014, in conjunction with the AlixPartners' review, the Company's Board of Directors (the “Board”) approved a programto restructure and realign the Company's cost base with current and anticipated future market conditions. At that time, the Board approved a $7,000 plan ofreorganization at the regional and corporate level (the “2014 Plan”), with such charge to be increased as appropriate depending on the timing of otherstrategic actions, such as the sale of the Company's Legal eDiscovery business and formulation of action plans. Following the sale of the Company’s LegaleDiscovery business effective on November 9, 2014, the Company determined that additional restructuring actions were appropriate to align the Company’scost base with its operations. Accordingly, in December 2014, the Board approved an increase of $4,100 for additional actions under the 2014 Plan andDiscontinued Operations Exit Plan, consisting of actions for optimizations of existing real estate, including certain real estate related to the Company’sformer Legal eDiscovery business which was recorded as discontinued operations (see Note 3 for further detail).- 65 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The Board previously approved other reorganization plans in 2012, 2009, 2008, and 2006 (“Previous Plans”) to streamline the Company’s supportoperations and included actions to reduce support functions to match them to the scale of the business, to exit underutilized properties and to eliminatecontracts for certain discontinued services. These actions resulted in costs for lease termination payments, employee termination benefits and contractcancellations.For the year ended December 31, 2014, restructuring charges associated with these initiatives primarily included employee separation costs for theelimination of 16 positions in Asia Pacific under the 2012 reorganization plan; employee separation costs for the elimination of 41 positions in Asia Pacific,Europe, the Americas and U.S. Corporate under the 2014 Plan; and lease termination payments for rationalized offices in the U.S. and Australia under the2012 reorganization plan. The headcount reductions identified in these actions are expected to be completed in fiscal 2015. The payments include, but arenot limited to, salaries, social pension fund payments, health care and unemployment insurance costs to be paid to or on behalf of the affected employees.The lease termination payments are expected to continue through the remaining lease terms.Business reorganization expenses for the years ended December 31, 2014, 2013 and 2012 for the 2014 Plan and the Previous Plans, collectively, were asfollows: Year Ended December 31, 2014 2013 2012Business reorganization expenses from continuing operations Previous Plans $1,140 $5,440 $7,5062014 Plan 2,649 — —Total business reorganization expenses from continuing operations $3,789 $5,440 $7,506 The following table contains amounts for Changes in Estimate, Additional Charges, and Payments related to prior restructuring plans that were incurredor recovered during the year ended December 31, 2014. The amounts for Changes in Estimate and Additional Charges are classified as businessreorganization expenses in the Company’s Consolidated Statements of Operations and Other Comprehensive Income (Loss). Amounts in the “Payments”column represent primarily the cash payments associated with the reorganization plans. Changes in the accrued business reorganization expenses for the yearended December 31, 2014 were as follows: December 31, 2013 Changes inEstimate AdditionalCharges Payments December 31, 2014Lease termination payments$2,297 $774 $128 $(1,207) $1,992Employee termination benefits1,430 — 2,764 (2,422) 1,772Other associated costs19 — 123 (142) —Total$3,746 $774 $3,015 $(3,771) $3,764 Lease Termination PaymentsThe business reorganization expenses incurred for lease termination for the years ended December 31, 2014, 2013 and 2012 by segment were asfollows:Lease termination payments for the year endedDecember 31, Hudson Hudson Hudson Americas Asia Pacific Europe Corporate Total2014 $91 $771 $40 $— $9022013 $(22) $445 $713 $— $1,1362012 $179 $613 $2,491 $— $3,283- 66 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Employee Termination BenefitsThe business reorganization expenses incurred for employee termination benefits for the years ended December 31, 2014, 2013 and 2012 by segmentwere as follows:Employee termination benefits for the year endedDecember 31, Hudson Hudson Hudson Americas Asia Pacific Europe Corporate Total2014 $3 $510 $1,285 $966 $2,7642013 $470 $505 $2,120 $790 $3,8852012 $681 $674 $2,394 $359 $4,108Contract Cancellation CostsThe business reorganization expenses incurred for contract cancellation costs for the years ended December 31, 2014, 2013 and 2012 by segment wereas follows:Contract Cancellation Costs for the year endedDecember 31, Hudson Hudson Hudson Americas Asia Pacific Europe Corporate Total2014 $— $40 $83 $— $1232013 $— $37 $381 $— $4182012 $16 $(2) $101 $— $115NOTE 13 – COMMITMENTS AND CONTINGENCIESLeasesThe Company leases facilities and equipment under operating leases that expire at various dates through 2027. Some of the operating leases provide forincreasing rents over the term of the lease. Total rent expense under these leases is recognized ratably over the lease terms. As of December 31, 2014, futureminimum lease commitments under non-cancelable operating leases, which will be expensed as primarily in office and general expenses, were as follows:2015 $19,2212016 16,5632017 11,8062018 10,6212019 7,813Thereafter 6,211 $72,235Rent and related expenses for operating leases of facilities and equipment recorded under the caption “Office and general” in the accompanyingConsolidated Statements of Operations were $14,834, $16,801, and $18,982 for the years ended December 31, 2014, 2013 and 2012, respectively.Commitments based in currencies other than U.S. dollars were translated using exchange rates as of December 31, 2014.- 67 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Asset Retirement Obligations The Company has certain asset retirement obligations that are primarily the result of legal obligations for the removal of leasehold improvements andrestoration of premises to their original condition upon termination of leases. The current portion of asset retirement obligations are included under thecaption “Accrued expenses and other current liabilities” in the Consolidated Balance Sheets. The non-current portion of asset retirement obligations areincluded under the caption “Other non-current liabilities” in the Consolidated Balance Sheets. The Company’s asset retirement obligations that are includedin the Consolidated Balance Sheets as of December 31, 2014 and 2013 were as follows: As of December 31, 2014 2013Total asset retirement obligations$2,461 $2,509Consulting and Employment AgreementsThe Company has entered into various consulting, and employment agreements with certain key members of management. These agreements generally(i) are one year in length, (ii) contain restrictive covenants, (iii) under certain circumstances, provide for compensation and subject to providing the Companywith a release, severance payments, and (iv) are automatically renewed annually unless either party gives sufficient notice of termination.Litigation and Complaints The Company is subject, from time to time, to various claims, lawsuits, contracts disputes and other complaints from, for example, clients, candidates,suppliers, landlords for both leased and subleased properties, former and current employees, and regulators or tax authorities arising in the ordinary course ofbusiness. The Company routinely monitors claims such as these, and records provisions for losses when the claim becomes probable and the amount due isestimable. Although the outcome of these claims cannot be determined, the Company believes that the final resolution of these matters will not have amaterial adverse effect on the Company’s financial condition, results of operations or liquidity.For matters that have reached the threshold of probable and estimable, the Company has established reserves for legal, regulatory and other contingentliabilities. The Company’s reserves were $376 and $745 as of December 31, 2014 and 2013, respectively. NOTE 14 – CREDIT AGREEMENTSCredit Agreement with RBS Citizens Business Capital The Company and certain of its North American and U.K. subsidiaries ("Loan Parties") had a senior secured revolving credit facility (as amended, the“Revolver Agreement”) with RBS Citizens Business Capital, a division of RBS Asset Finance, Inc. (“RBS”). The Revolver Agreement expired on August 5,2014. On August 1, 2014, the Company entered into two credit facilities with Lloyds Bank PLC and Lloyds Bank Commercial Finance Ltd and SienaLending Group, LLC to replace the Revolver Agreement.Receivables Finance Agreement with Lloyds Bank Commercial Finance Limited and Lloyds Bank PLCOn August 1, 2014, the Company’s U.K. subsidiary (“U.K. Borrower”) entered into a receivables finance agreement for an asset-based lending fundingfacility (the “Lloyds Agreement”) with Lloyds Bank PLC and Lloyds Bank Commercial Finance Limited (together, “Lloyds”). The Lloyds Agreementprovides the U.K. Borrower with the ability to borrow up to $23,369 (£15,000). Extensions of credit are based on a percentage of the eligible accountsreceivable less required reserves from the Company's U.K. operations. The initial term is two years with renewal periods every three months thereafter.Borrowings under this facility are secured by substantially all of the assets of the U.K. Borrower.- 68 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The credit facility under the Lloyds Agreement contains two tranches. The first tranche is a revolving facility based on the billed temporary contractingand permanent recruitment activities in the U.K. operation ("Lloyds Tranche A"). The borrowing limit of Lloyds Tranche A is $18,695 (£12,000) based on83% of eligible billed temporary contracting and permanent recruitment receivables. The second tranche is a revolving facility that is based on the unbilledwork-in-progress (as defined under the receivables finance agreement) activities in the U.K. operation ("Lloyds Tranche B"). The borrowing limit of LloydsTranche B is $4,674 (£3,000) based on 75% of eligible work-in-progress from temporary contracting and 25% of eligible work-in-progress from thepermanent recruitment. For both tranches, borrowings may be made with an interest rate based on a base rate as determined by Lloyds Bank PLC, based onthe Bank of England base rate, plus 1.75%.The Lloyds Agreement contains various restrictions and covenants including (1) that true credit note dilution may not exceed 5%, measured at audit ona regular basis; (2) debt turn may not exceed 55 days over a three month rolling period; (3) dividends by the U.K. Borrower to the Company are restricted tothe value of post tax profits; and (4) at the end of each month, there must be a minimum excess availability of $3,116 (£2,000).The details of the Lloyds Agreement as of December 31, 2014 were as follows: December 31, 2014Borrowing capacity $9,539Less: outstanding borrowing —Additional borrowing availability $9,539Interest rates on outstanding borrowing 2.25%The Company was in compliance with all financial covenants under the Lloyds Agreement as of December 31, 2014.Loan and Security Agreement with Siena Lending Group LLCOn August 1, 2014, the Company and its U.S. subsidiary (“U.S. Borrower”) entered into a loan and security agreement for a credit facility (the “SienaAgreement”) with Siena Lending Group LLC ("Siena"). The Siena Agreement provides the U.S. Borrower with the ability to borrow up to $10,000 (subject toa borrowing base and an availability block), including up to $1,000 for the issuance of letters of credit. After the sale of the Company’s Legal eDiscoverybusiness on November 9, 2014, the aforementioned borrowing limit was reduced to $5,000 (subject to a borrowing base and an availability block). Theavailability block was $2,000 prior to the sale of the Company's Legal eDiscovery business and decreased to $1,000 after the sale of the Company's LegaleDiscovery business. The availability block will be eliminated on the date on which the U.S. Borrower notifies Siena that the U.S. Borrower’s Fixed ChargeCoverage Ratio is equal to or greater than 1.1x on a trailing six month basis. Extensions of credit are based on borrowing base calculated on a percentage ofthe eligible accounts receivable less required reserves related to the U.S. operations. The term of the Siena Agreement is three years expiring on August 1,2017. Borrowings may be made with an interest rate based on a base rate (with a floor of 3.25%) plus 1.75%. The interest rate for letters of credit is 4.5% onface amount of each letter of credit issued and outstanding. Borrowings under the Siena Agreement are secured by substantially all of the assets of the U.S.Borrower.The Siena Agreement contains various restrictions and covenants including (1) a requirement that the U.S. Borrower maintain a Fixed Charge CoverageRatio of equal to or greater than 1.1x after the date on which the U.S. Borrower notifies Siena that the U.S. Borrower’s Fixed Charge Coverage Ratio is equalto or greater than 1.1x on a trailing six month basis ; (2) a limit on the payment of dividends by the U.S. Borrower; (3) restrictions on the ability of the U.S.Borrower to incur additional debt, acquire, merge or otherwise change the ownership of the U.S. Borrower; (4) restrictions on investments and acquisitions;and (5) restrictions on dispositions of assets.- 69 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The details of the Siena Agreement as of December 31, 2014 were as follows: December 31, 2014Borrowing base $2,919Less: adjustments to the borrowing base Minimum availability (1,000)Outstanding letters of credits (537)Adjusted borrowing base 1,382Less: outstanding borrowing —Additional borrowing availability $1,382Interest rates on outstanding borrowing 5.00%The Company was in compliance with all financial covenants under the Siena Agreement as of December 31, 2014.Credit Agreement with Westpac Banking Corporation On November 29, 2011, certain Australian and New Zealand subsidiaries of the Company entered into a facility agreement with Westpac BankingCorporation and Westpac New Zealand Limited (collectively, “Westpac”). On September 30, 2013, the Company and certain of its Australian and NewZealand subsidiaries entered into a waiver letter to waive compliance with a financial covenant contained in the facility agreement at the September 30, 2013and December 31, 2013 testing dates, and on December 19, 2013, the Company and certain of its Australian and New Zealand subsidiaries entered into aDeed of Variation to the facility agreement to amend certain terms and conditions of the Facility Agreement. On December 2, 2014, the Company and certainAustralian and New Zealand subsidiaries entered into a Third Deed of Variation to amend certain terms and conditions of the facility agreement (as amended,the “Facility Agreement”).The Facility Agreement provides three tranches: (a) an invoice discounting facility of up to $8,171 (AUD10,000) (“Tranche A”) for an Australiansubsidiary of the Company, which is based on an agreed percentage of eligible accounts receivable; (b) an overdraft facility of up to $1,559 (NZD2,000)(“Tranche B”) for a New Zealand subsidiary of the Company; and (c) a financial guarantee facility of up to $4,086 (AUD5,000) (“Tranche C”) for theAustralian subsidiary. The Facility Agreement does not have a stated maturity date and can be terminated by Westpac upon 90 days written notice. Borrowings under TrancheA may be made with an interest rate based on the Invoice Finance 30-day Bank Bill Rate (as defined in the Facility Agreement) plus a margin of 1.10%.Borrowings under Tranche B may be made with an interest rate based on the Commercial Lending Rate (as defined in the Facility Agreement) plus a marginof 1.83%. Each of Tranche A and Tranche B bears a fee, payable monthly, equal to 1.50% and 0.96%, respectively, of the size of Westpac’s commitmentunder such tranche. Borrowings under Tranche C may be made incurring a fee equal to 2.10% of the face value of the financial guarantee requested. Amountsowing under the Facility Agreement are secured by substantially all of the assets of the Australian subsidiary, its Australian parent company and the NewZealand subsidiary (collectively, the “Obligors”) and certain of their subsidiaries.- 70 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The details of the Facility Agreement as of December 31, 2014 were as follows: December 31, 2014Tranche A: Borrowing capacity$8,171Less: outstanding borrowing—Additional borrowing availability$8,171Interest rates on outstanding borrowing4.78%Tranche B: Borrowing capacity$1,559Less: outstanding borrowing—Additional borrowing availability$1,559Interest rates on outstanding borrowing8.28%Tranche C: Financial guarantee capacity$4,086Less: outstanding financial guarantee requested(2,511)Additional availability for financial guarantee$1,575Interest rates on financial guarantee requested2.10% The Facility Agreement contains various restrictions and covenants applicable to the Obligors and certain of their subsidiaries, including (a) arequirement that the Obligors maintain (1) a minimum Tangible Net Worth (as defined in the Facility Agreement) of not less than the higher of 85% of theTangible Net Worth as of the last day of the previous calendar quarter and $14,299 (AUD17,500); (2) a minimum Fixed Charge Coverage Ratio (as defined inthe Facility Agreement) of 1.5x; and (3) a maximum Borrowing Base Ratio (as defined in the Facility Agreement) as of the last day of each calendar quarter ofnot more than 0.8; and (b) a limitation on certain intercompany payments with permitted payments outside the Obligor group restricted to a defined amountderived from the net profits of the Obligors and their subsidiaries.The Company was in compliance with all financial covenants under the Facility Agreement as of December 31, 2014.Other Credit AgreementsThe Company also has lending arrangements with local banks through its subsidiaries in the Netherlands, Belgium, and Singapore. As of December 31,2014, the Netherlands subsidiary could borrow up to $1,775 (€1,467) based on an agreed percentage of accounts receivable related to its operations. TheBelgium subsidiary had a $1,210 (€1,000) overdraft facility as of December 31, 2014. Borrowings under the Belgium and the Netherlands lendingarrangements may be made using an interest rate based on the one month EURIBOR plus a margin, and the interest rate under each of these arrangements was2.52% as of December 31, 2014. The lending arrangement in the Netherlands expires annually each June, but can be renewed for one year periods at thattime. The lending arrangement in Belgium has no expiration date and can be terminated with a 15 day notice period. In Singapore, the Company’s subsidiarycan borrow up to $377 (SGD500) for working capital purposes. Interest on borrowings under this overdraft facility is based on the Singapore Prime Rate plusa margin of 1.75%, which was 6.0% on December 31, 2014. The Singapore overdraft facility expires annually each August but can be renewed for one yearperiods at that time. The outstanding borrowings under the Netherlands, Belgium, and Singapore lending agreements were $0 as of December 31, 2014.The average monthly outstanding borrowings for the credit agreements above was $4,584 for the year ended December 31, 2014. The weighted averageinterest rate on all outstanding borrowings for the year ended December 31, 2014 was 3.95%. The Company continues to use the aforementioned credit to support its ongoing global working capital requirements, capital expenditures and othercorporate purposes and to support letters of credit. Letters of credit and bank guarantees are used primarily to support office leases. - 71 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 15 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Accumulated other comprehensive income (loss), net of tax, consisted of the following: December 31, 2014 2013Foreign currency translation adjustments $13,485 $17,203Pension plan obligations 128 (30)Accumulated other comprehensive income (loss) $13,613 $17,173For the years ended December 31, 2014 and 2013, the amounts of accumulated other comprehensive income (loss), which primarily pertained topension plan obligations, were $0 and $63, respectively, and reclassified to the Consolidated Statement of Operations and Other Comprehensive Income(Loss) under the caption "Salaries and related" expenses.NOTE 16 – SHELF REGISTRATION AND STOCKHOLDER RIGHTS PLANAcquisition Shelf Registration StatementThe Company has a shelf registration on file with the SEC to enable it to issue up to 1,350,000 shares of its common stock from time to time inconnection with acquisitions of businesses, assets or securities of other companies, whether by purchase, merger or any other form of acquisition or businesscombination. If any shares are issued using this shelf registration, the Company will not receive any proceeds from these offerings other than the assets,businesses or securities acquired. As of December 31, 2014, all of the 1,350,000 shares were available for issuance. Stockholder Rights PlanOn February 5, 2005, the Board adopted a Rights Agreement between the Company and a rights agent (the "2005 Rights Agreement") and declared adividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock of the Company. The dividend was paid upon theclose of business on February 28, 2005 to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company oneone-hundredth of a share of Series A Junior Participating Preferred Stock, par value $0.001 (“Preferred Shares”), of the Company, at a price of $8.50 per oneone-hundredth of a Preferred Share, subject to adjustment. On January 15, 2015, the Board approved an amendment and restatement of the 2005 RightsAgreement by adopting an Amended and Restated Rights Agreement (the “Rights Agreement”) between the Company and a rights agent. The Board adoptedthe Rights Agreement in an effort to protect stockholder value by attempting to diminish the risk that the Company’s ability to use its net operating losses(“NOLs”) to reduce potential future federal income tax obligations may become substantially limited. If any person becomes a 4.99% or more stockholder ofthe Company, then each Right (subject to certain limitations) will entitle its holder to purchase, at the Right's then current exercise price, a number of sharesof common stock of the Company or of the acquirer having a market value at the time of twice the Right's per share exercise price. The Company's Board ofDirectors may redeem the Rights for $0.001 per Right at any time prior to the time when the Rights become exercisable. The Rights will expire on the earliestof (i) the date of the Company’s 2015 annual meeting of stockholders (the “2015 Annual Meeting”) if the Company’s stockholders do not approve the RightsAgreement at the 2015 Annual Meeting, (ii) January 15, 2018, (iii) the time at which the Rights are redeemed as described above, (iv) the time at which theRights are exchanged as described in the Rights Agreement, (v) the repeal of Section 382 of the Internal Revenue Code if the Board determines that theRights Agreement is no longer necessary for the preservation of the Company’s NOLs, and (vi) the beginning of a taxable year of the Company to which theBoard determines that no NOLs may be carried forward.- 72 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 17 – SEGMENT AND GEOGRAPHIC DATASegment ReportingThe Company operates in three reportable segments: the Hudson regional businesses of Hudson Americas, Hudson Asia Pacific, and Hudson Europe.Corporate expenses are reported separately from the three reportable segments and pertain to certain functions, such as executive management, corporategovernance, marketing, human resources, accounting, administration, tax and treasury, and have been allocated to the reportable segments to the extentwhich the costs are attributable to the reportable segments. Segment information is presented in accordance with ASC 280, “Segments Reporting.” Thisstandard is based on a management approach that requires segmentation based upon the Company’s internal organization and disclosure of revenue andcertain expenses based upon internal accounting methods. The Company’s financial reporting systems present various data for management to run thebusiness, including internal profit and loss statements prepared on a basis not consistent with U.S. GAAP. Accounts receivable, net and long-lived assets arethe only significant assets separated by segment for internal reporting purposes. HudsonAmericas HudsonAsia Pacific HudsonEurope Corporate Inter-segmentelimination TotalFor the Year Ended December 31, 2014 Revenue, from external customers$50,146 $246,873 $284,173 $— $— $581,192Inter-segment revenue60 — 198 — (258) —Total revenue$50,206 $246,873 $284,371 $— $(258) $581,192Gross margin, from external customers$20,757 $93,014 $109,074 $— $— $222,845Inter-segment gross margin35 (143) 108 — — —Total gross margin$20,792 $92,871 $109,182 $— $— $222,845Business reorganization expenses (recovery)$94 $1,322 $1,407 $966 $— $3,789Impairment of long-lived assets$— $314 $348 $— $— $662EBITDA (loss) (a)$117 $(890) $(1,187) $(9,765) $— $(11,725)Depreciation and amortization485 3,287 1,247 540 — 5,559Intercompany interest income (expense), net— — (439) 439 — —Interest income (expense), net(90) (199) (37) (335) — (661)Income (loss) from continuing operations before income taxes$(458) $(4,376) $(2,910) $(10,201) $— $(17,945)Provision for (benefit from) income taxes$(2,201) $11 $35 $(4) $— $(2,159)As of December 31, 2014 Accounts receivable, net$6,695 $26,745 $40,639 $— $— $74,079Long-lived assets, net of accumulated depreciation and amortization$860 $8,227 $2,171 $584 $— $11,842Total assets$10,553 $54,141 $65,105 $9,873 $— $139,672- 73 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts) HudsonAmericas HudsonAsia Pacific HudsonEurope Corporate Inter-segmentelimination TotalFor the Year Ended December 31, 2013 Revenue, from external customers$51,857 $232,748 $277,967 $— $— $562,572Inter-segment revenue(2) — 107 — (105) —Total revenue$51,855 $232,748 $278,074 $— $(105) $562,572Gross margin, from external customers$18,692 $87,162 $103,575 $— $— $209,429Inter-segment gross margin(4) (71) 87 — (12) —Total gross margin$18,688 $87,091 $103,662 $— $(12) $209,429Business reorganization expenses (recovery)$448 $989 $3,214 $789 $— $5,440Impairment of long-lived assets$— $257 $1,079 $— $— $1,336EBITDA (loss) (a)$(717) $(3,227) $(9,197) $(7,330) $— $(20,471)Depreciation and amortization494 3,192 1,592 644 — 5,922Intercompany interest income (expense), net— (1,254) (532) 1,784 2 —Interest income (expense), net16 (183) 27 (414) — (554)Income (loss) from continuing operations before income taxes$(1,195) $(7,856) $(11,294) $(6,604) $2 $(26,947)Provision for (benefit from) income taxes61 3,489 (415) 129 — 3,264As of December 31, 2013 Accounts receivable, net$5,923 $24,647 $45,897 $— $— $76,467Long-lived assets, net of accumulated depreciation and amortization$604 $9,179 $3,494 $763 $— $14,040Total assets$18,338 $55,234 $74,877 $10,380 $— $158,829 HudsonAmericas HudsonAsia Pacific HudsonEurope Corporate Inter-segmentelimination TotalFor the Year Ended December 31, 2012 Revenue, from external customers$60,015 $288,144 $307,716 $— $— $655,875Inter-segment revenue— 117 86 — (203) —Total revenue$60,015 $288,261 $307,802 $— $(203) $655,875Gross margin, from external customers$22,026 $117,428 $118,339 $— $— $257,793Inter-segment gross margin(14) 12 2 — — —Total gross margin$22,012 $117,440 $118,341 $— $— $257,793Business reorganization expenses (recovery)$877 $1,285 $4,986 $358 $— $7,506Impairment of long-lived assets$— $— $— $— $— $—EBITDA (loss) (a)$(1,124) $5,354 $(4,406) $(3,612) $— $(3,788)Depreciation and amortization694 3,197 1,450 641 — 5,982Intercompany interest income (expense), net— (3,988) (435) 4,424 (1) —Interest income (expense), net11 (235) 57 (394) — (561)Income (loss) from continuing operations before income taxes$(1,807) $(2,066) $(6,234) $(223) $(1) $(10,331)Provision for (benefit from) income taxes$(3,858) $(527) $858 $418 $— $(3,109)As of December 31, 2012 Accounts receivable, net$8,040 $32,835 $47,717 $— $— $88,592Long-lived assets, net of accumulated depreciation and amortization$966 $12,909 $5,046 $635 $— $19,556Total assets$31,399 $72,517 $76,381 $13,171 $— $193,468- 74 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)(a)SEC Regulation S-K 229.10(e)1(ii)(A) defines EBITDA as earnings before interest, taxes, depreciation and amortization. EBITDA is presented toprovide additional information to investors about the Company's operations on a basis consistent with the measures that the Company uses tomanage its operations and evaluate its performance. Management also uses this measurement to evaluate working capital requirements. EBITDAshould not be considered in isolation or as a substitute for operating income and net income prepared in accordance with U.S. GAAP or as a measureof the Company's profitability.Geographic Data ReportingA summary of revenues for the years ended December 31, 2014, 2013 and 2012 and long-lived assets and net assets by geographic area as ofDecember 31, 2014, 2013 and 2012 were as follows: Information by geographic regionUnitedKingdom Australia UnitedStates ContinentalEurope OtherAsia Pacific OtherAmericas TotalFor the Year Ended December 31, 2014 Revenue (a)$181,155 $184,853 $49,375 $103,018 $62,020 $771 $581,192For the Year Ended December 31, 2013 Revenue (a)$180,084 $169,998 $50,859 $97,883 $62,750 $998 $562,572For the Year Ended December 31, 2012 Revenue (a)$201,205 $218,537 $57,994 $106,327 $69,791 $2,021 $655,875As of December 31, 2014 Long-lived assets, net (b)$1,834 $5,404 $1,429 $330 $2,823 $22 $11,842Net assets$18,894 $13,913 $7,255 $9,366 $9,772 $57 $59,257As of December 31, 2013 Long-lived assets, net (b)$2,890 $5,838 $1,338 $593 $3,341 $40 $14,040Net assets$21,479 $18,938 $15,819 $7,169 $10,791 $189 $74,385As of December 31, 2012 Long-lived assets, net (b)$3,629 $9,015 $1,552 $1,409 $3,895 $56 $19,556Net assets$26,750 $31,036 $26,404 $7,975 $14,122 $254 $106,541 (a)Revenue by geographic region disclosed above is net of any inter-segment revenue and, therefore, represents only revenue from external customersaccording to the location of the operating subsidiary.(b)Comprised of property and equipment and goodwill, net of accumulated depreciation and amortization. Corporate assets are included in the UnitedStates.- 75 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 18 – SELECTED QUARTERLY FINANCIAL DATA (unaudited) For The Year Ended December 31, 2014 Firstquarter Second quarter Thirdquarter Fourth quarterRevenue $144,167 $151,070 $149,278 $136,677Gross margin $54,029 $59,871 $55,687 $53,258Operating income (loss) $(3,374) $(2,865) $(5,113) $(6,134)Income (loss) from continuing operations $(4,112) $(3,565) $(4,570) $(3,539)Net income (loss) $(4,544) $(4,374) $(7,019) $2,743Basic and diluted earnings (loss) per share from continuingoperations $(0.13) $(0.11) $(0.14) $(0.11)Basic and diluted earnings (loss) per share from discontinuedoperations $(0.01) $(0.02) $(0.07) $0.19Basic and diluted earnings (loss) per share $(0.14) $(0.13) $(0.21) $0.08Basic and diluted weighted average shares outstanding (inthousands) 32,641 32,752 32,910 32,995Common stock equivalents and outstanding stock options excludedfrom the calculation of diluted earnings (loss) per share (inthousands) 1,274 1,207 1,176 1,681 For The Year Ended December 31, 2013 Firstquarter Second quarter Thirdquarter Fourth quarterRevenue $137,903 $145,383 $139,287 $139,999Gross margin $50,994 $55,106 $50,491 $52,838Operating income (loss) $(8,639) $(5,941) $(6,125) $(6,447)Income (loss) from continuing operations $(8,007) $(6,293) $(5,584) $(10,327)Net income (loss) $(8,242) $(5,811) $(5,047) $(11,295)Basic and diluted earnings (loss) per share from continuingoperations $(0.25) $(0.19) $(0.17) $(0.32)Basic and diluted earnings (loss) per share from discontinuedoperations $— $0.01 $0.02 $(0.03)Basic and diluted earnings (loss) per share $(0.25) $(0.18) $(0.15) $(0.35)Basic and diluted weighted average shares outstanding (inthousands) 32,344 32,717 32,600 32,600Common stock equivalents and outstanding stock options excludedfrom the calculation of diluted earnings (loss) per share (inthousands) 1,725 1,972 2,191 1,914Earnings (loss) per share calculations for each quarter include the weighted average effect for the quarter; therefore, the sum of quarterly earnings (loss)per share amounts may not equal year-to-date earnings (loss) per share amounts, which reflect the weighted average effect on a year-to-date basis. - 76 -ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURESNone.ITEM 9A. CONTROLS AND PROCEDURESDisclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chairman and Chief Executive Officer and its Executive Vice President andChief Financial Officer, has conducted an evaluation of the design and operation of the Company’s disclosure controls and procedures, as such term isdefined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the Company’s Chairman and ChiefExecutive Officer and its Executive Vice President, Chief Financial Officer and Controller concluded that the Company’s disclosure controls and procedureswere effective as of December 31, 2014.Management's Annual Report on Internal Control Over Financial ReportingThe report of management required under this Item 9A is contained in Item 8 of this Annual Report on Form 10-K under the caption “Management'sAnnual Report on Internal Control Over Financial Reporting”.Report of Independent Registered Public Accounting FirmThe audit report required under this Item 9A is contained in Item 8 of this Annual Report on Form 10-K under the caption “Report of IndependentRegistered Public Accounting Firm”.Changes in Internal Control Over Financial Reporting There were no changes in the Company’s internal control over financial reporting that occurred during the three months ended December 31, 2014 thathave materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone. - 77 -PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information included under the captions “Proposal 1: Election of Directors,” “Board of Directors and Corporate Governance” and “Section 16(a)Beneficial Ownership Reporting Compliance” in the Company's definitive proxy statement, which is expected to be filed pursuant to Regulation 14A within120 days following the end of the fiscal year covered by this report (the “Proxy Statement”), is hereby incorporated by reference. The information required byItem 10 with respect to our Executive Officers is included in Part I of this Annual Report on Form 10-K.We have adopted a Code of Business Conduct and Ethics that applies to all of our employees and a Code of Ethics for the Chief Executive Officer andthe Senior Financial and Accounting Officers. We have posted a copy of the Code of Business Conduct and Ethics and the Code of Ethics on our Web site atwww.hudson.com. The Code of Business Conduct and Ethics and the Code of Ethics are also available in print to any stockholder who requests them inwriting from the Corporate Secretary at 560 Lexington Avenue, 5th Floor, New York, New York 10022. We intend to satisfy the disclosure requirements underItem 5.05 of Form 8-K regarding amendments to, or waivers from, our Code of Ethics by posting such information on our Web site at www.hudson.com. Weare not including the information contained on our Web site as part of, or incorporating it by reference into, this report.ITEM 11. EXECUTIVE COMPENSATIONThe information required in Item 11 is incorporated by reference to the information in the Proxy Statement under the captions “DirectorCompensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation” and “Compensation Policiesand Practices and Risk.”ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe information required in Item 12 is incorporated by reference to the information in the Proxy Statement under the caption “Principal Stockholders.”Equity Compensation Plan InformationThe following table presents information on the Company's equity compensation plans as of December 31, 2014. Number of shares to beissued uponexercise ofoutstandingoptions Weighted averageexerciseprice of outstandingoptions Number of sharesremaining availablefor future issuanceunder equity compensation plans(excluding sharesreflected inColumn A) A B C Equity Compensation Plans approved by stockholders: Long Term Incentive Plan 356,800 $12.82 —(1)2009 Incentive Stock and Awards Plan — — 2,053,785(1)Employee Stock Purchase Plan — — 116,329(2)Equity Compensation Plans not approved by stockholders 400,000(3)5.18 —(4)Total 756,800 $8.78 2,170,114 - 78 -(1)Excludes 898,939 shares of unvested restricted common stock and restricted stock units previously issued under the Hudson Global, Inc.Long Term Incentive Plan and 2009 Incentive Stock and Awards Plan.(2)The Company suspended the Hudson Global, Inc. Employee Stock Purchase Plan effective January 1, 2009.(3)Represents stock options granted to Manuel Marquez on May 13, 2011 pursuant to the terms of his employment agreement as aninducement to him to join the Company as Chairman and Chief Executive Officer.(4)Excludes 25,000 unvested restricted stock units granted to Manuel Marquez on May 13, 2011 pursuant to the terms of his employmentagreement as an inducement to him to join the Company as Chairman and Chief Executive Officer.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required in Item 13 is incorporated by reference to the information in the Proxy Statement under the captions “Board of Directors andCorporate Governance-Independent Directors” and “Board of Directors and Corporate Governance-Policies and Procedures Regarding Related PersonTransactions.”ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required in Item 14 is incorporated by reference to the information in the Proxy Statement under the caption “Ratification of theAppointment of KPMG LLP as Independent Registered Public Accounting Firm.”- 79 -PART IVITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES1. Financial statements - The following financial statements and the reports of independent registered public accounting firm are contained in Item 8. Page Reports of Independent Registered Public Accounting Firm 41Consolidated Statements of Operations and Other Comprehensive Income (Loss) For The Years Ended December 31, 2014, 2013 and 2012 43Consolidated Balance Sheets As Of December 31, 2014 and 2013 44Consolidated Statements of Cash Flows For The Years Ended December 31, 2014, 2013 and 2012 45Consolidated Statement of Changes in Stockholders’ Equity For The Years Ended December 31, 2014, 2013 and 2012 46Notes to Consolidated Financial Statements 472. Financial statement schedulesSchedule I - Condensed financial information of the registrantSchedule II - Valuation and qualifying accounts and reservesAll other schedules are omitted since the required information is not present, or is not present in amounts sufficient to require submission of theschedule, or because the information required is included in the consolidated financial statements and the notes thereto.3. Exhibits - The exhibits listed in the accompanying index to exhibits are filed as part of this Annual Report on Form 10-K. - 80 -SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANTHUDSON GLOBAL, INC.CONDENSED STATEMENTS OF OPERATIONS (PARENT COMPANY ONLY)(in thousands) Year Ended December 31, 2014 2013 2012Operating expenses: Selling, general and administrative expenses $16,948 $15,953 $18,272Depreciation and amortization 541 645 641Business reorganization expenses 967 790 359Operating loss (18,456) (17,388) (19,272)Other income (expense): Interest, net 103 105 43Corporate costs allocation and other, net 8,150 9,412 15,016Income (loss) from parent before provision for income taxes (10,203) (7,871) (4,213)Provision for (benefit from) income taxes for parent company (4) 2 19Equity in earnings (losses) of subsidiaries, net of income taxes (2,995) (22,522) (1,103)Net income (loss) $(13,194) $(30,395) $(5,335) See notes to condensed financial statements.- 81 -HUDSON GLOBAL, INC.CONDENSED BALANCE SHEETS (PARENT COMPANY ONLY)(in thousands) December 31, 2014 2013ASSETS Current assets: Cash and cash equivalents $7,006 $7,470Prepaid and other 1,366 449Total current assets 8,372 7,919Property and equipment, net 584 1,694Investment in and advances to/from subsidiaries 54,785 67,821Other assets 917 766Total assets $64,658 $78,200 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable, accrued expenses and other current liabilities 4,937 $2,621Total current liabilities 4,937 2,621Other non-current liabilities 464 1,194Total liabilities 5,401 3,815Stockholders’ equity 59,257 74,385Total liabilities and stockholders' equity $64,658 $78,200 See notes to condensed financial statements.- 82 -HUDSON GLOBAL, INC.CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)(in thousands) For the Years Ended December 31, 2014 2013 2012Cash flows from operating activities: Net income (loss) $(13,194) $(30,395) $(5,335)Adjustments to reconcile net income (loss) to net cash provided by (used in) operatingactivities: Dividends received from subsidiaries — 2,341 6,255Non-cash (income) losses from subsidiaries, net of taxes 2,995 22,522 1,103Depreciation and amortization 541 645 641Stock-based compensation 405 953 1,479Other, net 248 368 368Changes in assets and liabilities: (Increase) decrease in prepaid and other assets (744) 144 1,151(Increase) decrease in due from subsidiaries 11,910 10,409 (6,736)Increase (decrease) in accounts payable, accrued expenses and other liabilities 837 (1,597) (2,443)Increase (decrease) in accrued business reorganization expenses 793 134 40Net cash provided by (used in) operating activities 3,791 5,524 (3,477)Cash flows from investing activities: Capital expenditures — (368) (76)Advances to and investments in subsidiaries, net (4,126) (6,673) —Net cash provided by (used in) investing activities (4,126) (7,041) (76)Cash flows from financing activities: Borrowings under credit facility 22,081 514 6,862Repayments under credit facility (22,081) (514) (6,862)Purchase of restricted stock from employees (129) (488) (600)Net cash provided by (used in) financing activities (129) (488) (600)Net (decrease) increase in cash and cash equivalents (464) (2,005) (4,153)Cash and cash equivalents, beginning of the period 7,470 9,475 13,628Cash and cash equivalents, end of the period $7,006 $7,470 $9,475 See notes to condensed financial statements.- 83 -HUDSON GLOBAL, INC.NOTES TO CONDENSED FINANCIAL STATEMENTS(in thousands)NOTE 1 - BASIS OF PRESENTATIONHudson Global, Inc. (the “Parent Company”) is a holding company that conducts substantially all of its business through its subsidiaries. As specifiedin certain of its subsidiaries' credit agreements in the U.S., Netherlands, Australia and New Zealand, there are restrictions on the Parent Company's ability toobtain funds from certain of its subsidiaries through dividends, intercompany expenses or interest (refer to Note 14, “Credit Agreements”, to the Company'sConsolidated Financial Statements). As of December 31, 2014, the Company was in a stockholders' equity position of $59,257, and approximately $26,436constituted restricted net assets as defined in Rule 4-08(e)(3) of Regulation S-X. The restricted net assets of the Company's subsidiaries exceeded 25% of theconsolidated net assets of the Company and its subsidiaries, thus requiring this Schedule I, “Condensed Financial Information of the Registrant.”Accordingly, the results of operations and cash flows for the years ended December 31, 2014, 2013 and 2012, and the balance sheets as of December 31, 2014and 2013 have been presented on a “Parent-only” basis. In these statements, the Company's investments in its consolidated subsidiaries are presented underthe equity method of accounting. The Parent-only financial statements should be read in conjunction with the Company's audited Consolidated FinancialStatements included elsewhere herein.NOTE 2 - DIVIDENDS RECEIVEDThe Company received dividends of $0, $2,341 and $6,255 in 2014, 2013 and 2012, respectively, from its consolidated subsidiaries.NOTE 3 - CREDIT AGREEMENTSSeveral of the Company's subsidiaries have credit agreements with lenders. Borrowings under the credit agreements are based on an agreed percentageof eligible accounts receivable. The borrowings of the holding company with RBS Citizens Business Capital were secured by the accounts receivable of theCompany's U.S. and U.K. subsidiaries and the agreement expired on August 5, 2014. Refer to Note 14, “Credit Agreements” to the Company's ConsolidatedFinancial Statements for further details.- 84 -SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS(IN THOUSANDS)Column A Column B Column C Column D Column E Additions Balance at Charged to Balance at Beginning Costs/Expenses EndDescriptions of Period (Recoveries) Deductions of PeriodAllowance for Doubtful Accounts For the Year Ended December 31, 2014 $1,108 98 220 $986For the Year Ended December 31, 2013 $1,167 (13) 46 $1,108For the Year Ended December 31, 2012 $1,778 (76) 535 $1,167- 85 -SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. HUDSON GLOBAL, INC. (Registrant) By:/s/ MANUEL MARQUEZ DORSCH Manuel Marquez Dorsch Chairman and Chief Executive Officer (Principal Executive Officer) Date:February 26, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theRegistrant and in the capacities and on the dates indicated.Signature Title Date /s/ MANUEL MARQUEZ DORSCH Chairman and Chief Executive Officer (PrincipalExecutive Officer) February 26, 2015Manuel Marquez Dorsch /s/ STEPHEN A. NOLAN Executive Vice President, Chief Financial Officerand Controller (Principal Financial Officer andPrincipal Accounting Officer) February 26, 2015Stephen A. Nolan /s/ RICHARD K. COLEMAN Director February 26, 2015Richard K. Coleman /s/ JEFFREY E. EBERWEIN Director February 26, 2015Jeffrey E. Eberwein /s/ JOHN J. HALEY Director February 26, 2015John J. Haley /s/ DAVID G. OFFENSEND Director February 26, 2015David G. Offensend /s/ RICHARD J. STOLZ Director February 26, 2015Richard J. Stolz - 86 -HUDSON GLOBAL, INC.FORM 10-KEXHIBIT INDEXExhibitNumber Exhibit Description(2) Purchase and Sale Agreement, dated as of November 7, 2014, by and among Document Technologies, LLC, DTI of London Limited,Hudson Global, Inc., Hudson Global Resources Management, Inc. and Hudson Global Resources Limited (incorporated by reference toExhibit 2.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated November 13, 2014 (File No. 0-50129)).(3.1) Amended and Restated Certificate of Incorporation of Hudson Global, Inc. (incorporated by reference to Exhibit 3.2 to Hudson Global,Inc.'s Current Report on Form 8-K dated June 2, 2014 (File No. 0-50129)).(3.2) Certificate of Designations of the Board of Directors Establishing the Series and Fixing the Relative Rights and Preferences of Series AJunior Participating Preferred Stock (incorporated by reference to Exhibit 3.1 to Hudson Global, Inc.'s Current Report on Form 8-K datedFebruary 2, 2005 (File No. 0-50129)).(3.3) Amended and Restated By-laws of Hudson Global, Inc. (incorporated by reference to Exhibit 3.4 to Hudson Global, Inc.'s Current Reporton Form 8-K dated June 2, 2014 (File No. 0-50129)).(4.1) Amended and Restated Rights Agreement, dated as of January 15, 2015, between Hudson Global, Inc. and Computershare Inc., successorrights agent to The Bank of New York (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form 8-A/A of HudsonGlobal, Inc. dated January 27, 2015 (File No. 0-50129)).(4.2) Facility Agreement, dated as of November 22, 2011, among Hudson Global Resources (Aust) Pty Limited, Hudson Global Resources (NZ)Limited, Hudson Highland (APAC) Pty Limited, Westpac Banking Corporation and Westpac New Zealand Limited (incorporated byreference to Exhibit 4.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated December 5, 2011 (File No. 0-50129)).(4.3) Waiver Letter, dated September 30, 2013, among Hudson Global Resources (Aust) Pty Limited, Hudson Global Resources (NZ) Limited,Hudson Highland (APAC) Pty Limited, Westpac Banking Corporation and Westpac New Zealand Limited (incorporated by reference toExhibit 4.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated September 30, 2013 (File No. 0-50129)).(4.4) Deed of Variation, dated December 19, 2013, among Hudson Global Resources (Aust) Pty Limited, Hudson Global Resources (NZ) Limited,Hudson Highland (APAC) Pty Limited, Westpac Banking Corporation and Westpac New Zealand Limited (incorporated by reference toExhibit 4.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated December 23, 2013 (File No. 0-50129)).(4.5) Third Deed of Variation, dated December 2, 2014, among Hudson Global Resources (Aust) Pty Limited, Hudson Global Resources (NZ)Limited, Hudson Highland (APAC) Pty Limited, Westpac Banking Corporation and Westpac New Zealand Limited (incorporated byreference to Exhibit 4.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated December 4, 2014 (File No. 0-50129)).(4.6) Receivables Finance Agreement, dated August 1, 2014, between Lloyds Bank Commercial Finance and Hudson Global Resources Limited(incorporated by reference to Exhibit 4.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated August 1, 2014 (File No. 0-50129)).(4.7) Loan and Security Agreement, dated August 1, 2014, among Hudson Global, Inc., Hudson Global Resources Management, Inc. and SienaLending Group LLC (incorporated by reference to Exhibit 4.2 to Hudson Global, Inc.'s Current Report on Form 8-K dated August 1, 2014(File No. 0-50129)).(10.1)* Hudson Global, Inc. Long Term Incentive Plan, as amended through October 29, 2007 (incorporated by reference to Exhibit 10.1 toHudson Global, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 0-50129)).(10.2)* Form of Hudson Global, Inc. Long Term Incentive Plan Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 toHudson Global, Inc.'s Current Report on Form 8-K dated May 1, 2007 (File No. 0-50129)).(10.3)* Form of Hudson Global, Inc. Long Term Incentive Plan Restricted Stock Award Agreement for share price vesting awards (incorporated byreference to Exhibit 10.2 to Hudson Global, Inc.'s Current Report on Form 8-K dated February 9, 2009 (File No. 0-50129)).(10.4)* Form of Hudson Global, Inc. Long Term Incentive Plan Stock Option Agreement (Employees) (incorporated by reference to Exhibit 10.4 toHudson Global, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (File No. 0-50129)).(10.5)* Form of Hudson Global, Inc. Long Term Incentive Plan Stock Option Agreement (Directors) (incorporated by reference to Exhibit 10.1 toHudson Global, Inc. Current Report on Form 8-K dated May 11, 2006 (File No. 0-50129)).- 87 -HUDSON GLOBAL, INC.FORM 10-KEXHIBIT INDEX(10.6)* Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as Amended and Restated (incorporated by reference to Exhibit A to theCompany's definitive proxy statement filed with the Securities Exchange Commission on Schedule 14A on March 16, 2012 (File No. 0-50129)).(10.7)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Stock Option Agreement (Employees) for awards made prior to April26, 2012 (incorporated by reference to Exhibit 4.2 to Hudson Global, Inc.'s Registration Statement on Form S-8 dated August 7, 2009 (Reg.No. 333-161171)).(10.8)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Stock Option Agreement (Employees) for awards made on or after April26, 2012 (incorporated by reference to Exhibit 4.2 to Hudson Global, Inc.'s Registration Statement on Form S-8 dated August 1, 2012 (Reg.No. 333-182973)).(10.9)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Stock Option Agreement (Directors) for awards made prior to April 26,2012 (incorporated by reference to Exhibit 4.3 to Hudson Global, Inc.'s Registration Statement on Form S-8 dated August 7, 2009 (Reg. No.333-161171)).(10.10)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Stock Option Agreement (Directors) for awards made on or after April26, 2012 (incorporated by reference to Exhibit 4.3 to Hudson Global, Inc.'s Registration Statement on Form S-8 dated August 1, 2012 (Reg.No. 333-182973)).(10.11)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for awards made prior to April 26,2012 (incorporated by reference to Exhibit 4.6 to Hudson Global, Inc.'s Registration Statement on Form S-8 dated August 7, 2009 (Reg. No.333-161171)).(10.12)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for awards made on or after April26, 2012 (incorporated by reference to Exhibit 4.4 to Hudson Global, Inc.'s Registration Statement on Form S-8 dated August 1, 2012 (Reg.No. 333-182973)).(10.13)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for EBITDA and gross margingrowth performance vesting awards made prior to April 26, 2012 (incorporated by reference to Exhibit 10.1 to Hudson Global, Inc.'sCurrent Report on Form 8-K dated February 11, 2010 (File No. 0-50129)).(10.14)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for EBITDA and gross margingrowth performance vesting awards made on or after April 26, 2012 (incorporated by reference to Exhibit 4.5 to Hudson Global, Inc.'sRegistration Statement on Form S-8 dated August 1, 2012 (Reg. No. 333-182973)).(10.15)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for EBITDA and gross margingrowth performance vesting awards with vesting also upon a termination without cause (incorporated by reference to Exhibit 10.1 toHudson Global, Inc.'s Current Report on Form 8-K dated February 14, 2011 (File No. 0-50129)).(10.16)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for Take-Out Ratio, EmployeeEngagement Score and Cash Efficiency Score performance vesting awards (incorporated by reference to Exhibit 10.2 to Hudson Global,Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 (File No. 0-50129)).(10.17)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Unit Award Agreement for Take-Out Ratio, EmployeeEngagement Score and Cash Efficiency Score performance vesting awards (incorporated by reference to Exhibit 10.5 to Hudson Global,Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (File No. 0-50129)).(10.18)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Unit Award Agreement (incorporated by reference toExhibit 10.6 to Hudson Global, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (File No. 0-50129)).(10.19)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for return on gross margin ratio andnet cash position from operations vesting awards (incorporated by reference to Exhibit 10.1 to Hudson Global, Inc.'s Current Report onForm 8-K dated October 3, 2014 (File No. 0-50129)).(10.20)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement for aggregated regional EBITDAand corporate costs vesting awards (incorporated by reference to Exhibit 10.1 to Hudson Global, Inc.'s Current Report on Form 8-K datedJanuary 22, 2015 (File No. 0-50129)).(10.21)* CEO Employment Agreement, dated as of March 7, 2011, between Hudson Global, Inc. and Manuel Marquez Dorsch (incorporated byreference to Exhibit 10.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated March 7, 2011 (File No. 0-50129)).(10.22)* Amendment to Employment Agreement, dated as of March 23, 2011, between Hudson Global, Inc. and Manuel Marquez Dorsch(incorporated by reference to Exhibit 10.1 to Hudson Global, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011(File No. 0-50129)).- 88 -HUDSON GLOBAL, INC.FORM 10-KEXHIBIT INDEX(10.23)* Executive Employment Agreement, dated as of May 31, 2013, between Hudson Global, Inc. and Stephen A. Nolan (incorporated byreference to Exhibit 10.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated June 5, 2013 (File No. 0-50129)).(10.24)* Executive Employment Agreement, amended and restated effective as of January 26, 2012, between Hudson Global, Inc. and Neil J. Funk(incorporated by reference to Exhibit 10.17 to Hudson Global, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011(File No. 0-50129)).(10.25)* Summary of Hudson Global, Inc. Compensation for Non-employee Members of the Board of Directors (incorporated by reference to Exhibit10.3 to Hudson Global, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 (File No. 0-50129)).(10.26)* Hudson Global, Inc. Amended and Restated Director Deferred Share Plan (incorporated by reference to Exhibit 10.4 to Hudson Global,Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 (File No. 0-50129)).(10.27) Letter Agreement, dated as of May 16, 2013, between Hudson Global, Inc. and Sagard Capital Partners, L.P. (incorporated by reference toExhibit 10.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated May 16, 2013 (File No. 0-50129)).(10.28)* Executive Agreement, dated as of November 28, 2014, between Hudson Global, Inc. and Latham Williams (incorporated by reference toExhibit 10.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated December 4, 2014 (File No. 0-50129)).(21) Subsidiaries of Hudson Global, Inc.(23) Consent of KPMG LLP.(31.1) Certification by Chairman and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.(31.2) Certification by the Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.(32.1) Certification of the Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350.(99.1) Proxy Statement for the 2015 Annual Meeting of Stockholders [To be filed with the Securities and Exchange Commission underRegulation 14A within 120 days after December 31, 2014; except to the extent specifically incorporated by reference, the Proxy Statementfor the 2014 Annual Meeting of Stockholders shall not be deemed to be filed with the Securities and Exchange Commission as part of thisAnnual Report on Form 10-K.](101) The following materials from Hudson Global, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 are filed herewith,formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations and Other ComprehensiveIncome (Loss) for the years ended December 31, 2014, 2013 and 2012, (ii) the Consolidated Balance Sheets as of December 31, 2014 and2013, (iii) the Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012, (iv) the ConsolidatedStatement of Changes in Stockholders’ Equity for the years ended December 31, 2014, 2013 and 2012, and (v) Notes to ConsolidatedFinancial Statements.* A management contract or compensatory plan or arrangement- 89 -Exhibit 21List of Significant Subsidiaries of Hudson Global, Inc.Hudson Global, Inc.'s significant subsidiaries as of December 31, 2014 are listed below. All other subsidiaries, if considered in the aggregate as a singlesubsidiary, would not constitute a significant subsidiary. Subsidiary State or jurisdictionof incorporation Percentage ownedHudson Global Resources Management, Inc. Pennsylvania 100%Hudson Highland Group Holdings International, Inc. Delaware 100%James Botrie and Associates, Inc. Canada 100%Hudson Global Resources Limited United Kingdom 100%Hudson Global Resources (Aust) Pty Limited Australia 100%Hudson Global Resources (NZ) Ltd New Zealand 100%Hudson Global Resources S.A.S. France 100%Hudson Global Resources S.L. Spain 100%Hudson Global Resources Madrid S.L. Spain 100%Hudson Global Resources (Singapore) Pte Limited Singapore 100%Hudson Global Resources Hong Kong Limited Hong Kong 100%Hudson Recruitment Shanghai Limited China 100%Hudson Global Resources LLC Ukraine 100%Hudson Global Resources s.r.o Czech Republic 100%Hudson Global Resources Sp.Zo.O Poland 100%Hudson Global Resources s.r.o. Slovakia 100%Balance Ervaring op Projectbasis B.V. Netherlands 100%Hudson Belgium SA NV Belgium 100%Hudson Luxembourg S.A. Luxembourg 100%Hudson Europe BV Netherlands 100%Exhibit 23Consent of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders Hudson Global, Inc.: We consent to the incorporation by reference in the registration statements on Form S-4 (No. 333-119563) and Form S-8 (Nos. 333-104209, 333-104210, 333-104212, 333-117005, 333-117006, 333-126915, 333-161170, 333-161171, 333-176007 and 333-182973) of Hudson Global, Inc. of our reportsdated February 26, 2015, with respect to the consolidated balance sheets of Hudson Global, Inc. as of December 31, 2014 and 2013, and the relatedconsolidated statements of operations and other comprehensive income (loss), changes in stockholders' equity, and cash flows for each of the years in thethree-year period ended December 31, 2014, and the financial statement schedules included in Item 15 of Form 10-K, and the effectiveness of internal controlover financial reporting as of December 31, 2014, which reports appear in the December 31, 2014 annual report on Form 10-K of Hudson Global, Inc. /s/ KPMG LLP New York, New York February 26, 2015Exhibit 31.1 CERTIFICATIONS I, Manuel Marquez Dorsch, certify that:1.I have reviewed this annual report on Form 10-K of Hudson Global, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. Dated:February 26, 2015/s/ MANUEL MARQUEZ DORSCH Manuel Marquez Dorsch Chairman and Chief Executive Officer Exhibit 31.2 CERTIFICATIONS I, Stephen A. Nolan, certify that:1.I have reviewed this annual report on Form 10-K of Hudson Global, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's mostrecent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internalcontrol over financial reporting. Dated:February 26, 2015/s/ STEPHEN A. NOLAN Stephen A. Nolan Executive Vice President, Chief Financial Officer and ControllerExhibit 32.1 Written Statement of the Chairman and Chief Executive OfficerPursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Chairman and Chief Executive Officer of Hudson Global, Inc. (the“Company”), hereby certify, based on my knowledge, that the Annual Report on Form 10-K of the Company for the year ended December 31, 2014 (the“Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairlypresents, in all material respects, the financial condition and results of operations of the Company. /s/ MANUEL MARQUEZ DORSCH Manuel Marquez Dorsch February 26, 2015 Exhibit 32.2 Written Statement of the Executive Vice President, Chief Financial Officer and ControllerPursuant to 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Executive Vice President, Chief Financial Officer and Controllerof Hudson Global, Inc. (the “Company”), hereby certify, based on my knowledge, that the Annual Report on Form 10-K of the Company for the year endedDecember 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that informationcontained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ STEPHEN A. NOLAN Stephen A. Nolan February 26, 2015 

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