Hudson Highland Group Inc.
Annual Report 2016

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, 2016oroTRANSITION 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.) 1325 Avenue of the Americas, New York, NY 10019(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 $58,308,000 based on the closing price of the Common Stock onthe NASDAQ Global Select Market on June 30, 2016.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, 2017Common Stock - $0.001 par value 31,708,428DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement for the 2017 Annual Meeting of Stockholders are incorporated by reference into Part III.Table of Contents PagePART IITEM 1.BUSINESS1ITEM 1A.RISK FACTORS3ITEM 1B.UNRESOLVED STAFF COMMENTS8ITEM 2.PROPERTIES9ITEM 3.LEGAL PROCEEDINGS9ITEM 4.MINE SAFETY DISCLOSURES9PART IIITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES11ITEM 6.SELECTED FINANCIAL DATA14ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS16ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK33ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA34ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES75ITEM 9A.CONTROLS AND PROCEDURES75PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE76ITEM 11.EXECUTIVE COMPENSATION76ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS76ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE77ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES77PART IVITEM 15.EXHIBITS, FINANCIAL STATEMENTS SCHEDULES78 SIGNATURES84 EXHIBIT INDEX85PART IITEM 1. BUSINESSHudson Global, Inc. (the “Company” or “Hudson”, “we”, “us” and “our”) provides specialized professional-level recruitment and related talentsolutions worldwide. Core service offerings include Permanent Recruitment, Contracting, Recruitment Process Outsourcing (“RPO”) and Talent ManagementSolutions. Hudson has approximately 1,600 employees and operates in 13 countries with three reportable geographic business segments: Hudson Americas,Hudson Asia Pacific, and Hudson Europe.For the year ended December 31, 2016, the amounts and percentages of the Company’s total gross margin from the three reportable segments were asfollows: Gross Margin$ in thousands Amount PercentageHudson Americas $13,609 7.8%Hudson Asia Pacific 84,126 48.2%Hudson Europe 76,682 44.0%Total $174,417 100.0%The Company's core service offerings include:Permanent Recruitment: Offered on both a retained and contingent basis, Hudson's Permanent Recruitment services leverage the Company'sconsultants, 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.Contracting: In Contracting, Hudson provides a range of project management, interim management and professional contract staffing services. Theseservices draw upon a combination of specialized recruiting and project management competencies to deliver a wide range of solutions. Hudson-employedprofessionals - either individually or as a team - are placed with client organizations for a defined period of time based on specific business needs.RPO: Hudson RPO delivers both permanent recruitment and contracting outsourced recruitment solutions tailored to the individual needs of primarilymid-to-large-cap multinational companies. Hudson RPO's delivery teams utilize state-of-the-art recruitment process methodologies and project managementexpertise in their flexible, turnkey solutions to meet clients' ongoing business needs. Hudson RPO services include complete recruitment outsourcing,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 June 15, 2015, the Company completed the sale of substantially all of the assets (excluding working capital) of its Hudson Information Technology(US) business (the "US IT business") to Mastech, Inc. As a result, the Company no longer has an Americas' Information Technology contracting practice. TheCompany also completed the sale of its Netherlands business to InterBalanceGroup BV effective April 30, 2015.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. As a result, the Company no longer has operations in the Legal eDiscovery business. In addition, the Company ceased directoperations in Sweden, which was included within the Hudson Europe segment during the third quarter of 2014. - 1 -CLIENTSThe Company's clients include small to large-sized corporations and government agencies. For the year ended December 31, 2016, within revenue fromcontinuing operations, there were approximately 50 Hudson Americas clients (as compared to approximately 130 in 2015), 2,800 Hudson Asia Pacific clients(as compared to 2,600 in 2015) and 3,200 Hudson Europe clients (as compared to 3,500 in 2015).In 2015, the Company sold and exited a number of businesses in the Americas and Europe. The divested businesses in the Americas and Europe,consisted of approximately 90 and 240 clients, respectively, included in continuing operations and in the 2015 client numbers above.For the year ended December 31, 2016, no single client accounted for more than 10% of the Company's total revenue. As of December 31, 2016, nosingle client accounted for more than 10% of the Company's total outstanding accounts receivable.EMPLOYEESThe Company employs approximately 1,600 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 on a regional and global basis.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 andposition knowledge, industry expertise, service quality, and efficiency in completing assignments. Typically, companies with greater strength in theseparameters garner higher margins.SEGMENT AND GEOGRAPHIC DATAFinancial information concerning the Company's reportable segments and geographic areas of operation is included in Note 19 of the Notes toConsolidated Financial Statements contained in Item 8 of this Form 10-K.AVAILABLE INFORMATIONWe maintain a website with the address www.hudson.com. We are not including the information contained on our website as part of, or incorporating itby reference into, this report. Through our website, we make available free of charge (other than an investor's own Internet access charges) our annual reportson 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 provide them tothe 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. In addition, certain geopolitical events,including the United Kingdom’s vote to withdraw from the European Union (“Brexit”), have caused significant economic, market, political and regulatoryuncertainty in some of the Company’s markets. We have limited flexibility to reduce expenses during economic downturns due to some overhead costs thatare fixed in the short-term. Furthermore, we may face increased pricing pressures during these periods. For example, in prior economic downturns, manyemployers in our operating regions reduced their overall workforce to reflect the slowing demand for 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 provide professional mid-level personnel on temporary assignment-by-assignment basis, which clients can generally terminate at any time or reducetheir level of use when compared to prior periods. Our professional recruitment business is also significantly affected by our clients' hiring needs and theirviews of their future prospects. These factors can also affect our RPO business. Clients may, on very short notice, terminate, reduce or postpone theirrecruiting assignments with us and, therefore, affect demand for our services. This could have a material adverse effect on our business, financial conditionand 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 of information technology, the industries in which we compete mayattract new competitors. Specifically, the increased use of the web-based and mobile technology 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- 3 -results of operations.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, 2016 and 2014. 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 by our subsidiaries to us, which may restrict our ability to pay dividends to our shareholders;•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 receivables facilities with National Australia Bank Limitedand Bank of New Zealand do not have a stated maturity date and can be terminated by National Australia Bank Limited and Bank of New Zealand upon 90days' written notice, and our receivables finance agreement with Lloyds Bank PLC and Lloyds Bank Commercial Finance can be terminated by Lloyds BankPLC and Lloyds Bank Commercial Finance upon three months’ written notice. We cannot provide assurance that we will be able to borrow under these creditfacilities if we need cash 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- 4 -ability to sell new services, and our ability to retain existing or gain new clients. Furthermore, we may need to borrow more cash from lenders or sell equity ordebt securities to the public to finance future investments and the terms of these financings may be adverse to us.We face risks related to our international operations.We conduct operations in 13 countries and face both translation and transaction risks related to foreign currency exchange. For the year endedDecember 31, 2016, approximately 92% of our gross margin was earned outside of the United States ("U.S."). Our financial results could be materiallyaffected by 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.- 5 -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.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, employees 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- 6 -•claims by our clients relating to our employees' misuse of client proprietary information, misappropriation of funds, other misconduct,criminal activity or similar claims.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.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 2036. 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 2016, the marketprice of our common stock reported on the NASDAQ Global Select Market ranged from a high of $2.97 to a low of $1.20. 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, our relativelylow daily trading volume or actions by significant stockholders, the price of our common stock could fluctuate for reasons unrelated to our operatingperformance. 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 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. Ourcertificate of incorporation and by-laws currently include provisions: •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 new business to be considered at anymeeting of stockholders; and•providing that vacancies on our Board of Directors will be filled by the remaining directors then in office. 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.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) January 15, 2018,(ii) the time at which the Rights are redeemed as described above, (iii) the time at which the Rights are exchanged pursuant to the terms of the RightsAgreement, (iv) the repeal of Section 382 of the Internal Revenue Code if the Board determines that the Rights Agreement is no longer necessary for thepreservation of the Company’s NOLs, and (v) the beginning of a taxable year of the Company to which the Board determines that no NOLs may be carriedforward. The Rights may have certain anti-takeover effects. The Rights may cause substantial dilution to any person or group that attempts to acquire theCompany without the approval of the Board. As a result, the overall effect of the rights may be to render more difficult or discourage a merger, tender offer orother business combination involving the Company that is not supported by the Board.ITEM 1B. UNRESOLVED STAFF COMMENTSNone.- 8 -ITEM 2. PROPERTIESAll of the Company's operating offices are located in leased premises. Our principal executive office is located at 1325 Avenue of the Americas, NewYork, New York, 10019, where we occupy space under a lease expiring in December 2017 with approximately 7,000 aggregate square feet.Hudson Americas shares our principal executive office and maintains no other leased locations. Hudson Asia Pacific maintains 16 leased locations withapproximately 130,000 aggregate square feet. Hudson Europe maintains 17 leased locations with approximately 142,000 aggregate square feet. All leasedspace 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.- 9 -EXECUTIVE OFFICERS OF THE REGISTRANTThe following table sets forth certain information, as of March 3, 2017, regarding the executive officers of Hudson Global, Inc.: Name Age TitleStephen A. Nolan 56 Chief Executive OfficerPatrick Lyons 53 Chief Financial Officer and Chief Accounting OfficerDavid F. Kirby 42 Senior Vice President, Treasury and Investor RelationsThe following biographies describe the business experience of our executive officers:Stephen A. Nolan has served as Chief Executive Officer since May 2015, with overall responsibility for the Company’s growth strategy, operationalexecution, and overall performance. Until August 2015, Mr. Nolan also served concurrently as Executive Vice President and Chief Financial Officer, aposition he held since joining the Company in May 2013. Mr. Nolan also served as the Company’s Controller from March 2014 to March 2015. Mr. Nolanhas more than 30 years of experience in accounting and finance, and has served as Chief Financial Officer for both Adecco Group North America and DHLGlobal Forwarding North America. From 2004 until 2012, Mr. Nolan served as Chief Financial Officer of Adecco Group North America, a staffing and humancapital division of Adecco SA, one of the world’s leading human resources service providers. During his tenure at Adecco, he helped drive strongperformance during a market downturn, spearheaded a major back office transformation and led the acquisition of MPS. Earlier in his career, he spent 15 yearswith Reckitt Benckiser, including two in the UK. Mr. Nolan is a Chartered Accountant and began his career as Audit Senior with PricewaterhouseCoopers inIreland.Patrick Lyons has served as Chief Financial Officer and Chief Accounting Officer since August 2015 with overall responsibility for the Company'sglobal accounting and finance functions. Prior to that, Mr. Lyons served as Vice President, Planning since 2010 and prior to that as Chief Financial Officer,Americas, since joining the Company in 2006. Having served for more than 25 years in professional services financial management and leadership roles, Mr.Lyons combines analytical rigor with hands-on execution focus, driving accountability and accuracy in financial reporting, cost control and profitability.Before joining the Company, Mr. Lyons held Chief Financial Officer roles at two staffing companies, Strategic Legal Resources and Adecco Staffing USA.Previously, Mr. Lyons worked for the TNT Group and Arthur Andersen where he qualified as a Chartered Accountant.David F. Kirby, has served as Senior Vice President, Treasury and Investor Relations since August 2015. Prior to that, Mr. Kirby served as VicePresident, Finance since 2011 and as Assistant Treasurer since 2008. Prior to that, Mr. Kirby served in a variety of roles in finance, treasury and investorrelations since joining the Company in 2001. Prior to joining the Company, Mr. Kirby held positions at TMP Worldwide, TransportEdge, and Merrill Lynch.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.- 10 -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 2016 under the symbol "HSON." On January 31,2017, there were approximately 409 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 Low2016 Fourth quarter $1.70 $1.20Third quarter $2.41 $1.46Second quarter $2.74 $1.85First quarter $2.97 $2.222015 Fourth quarter $2.98 $2.10Third quarter $3.24 $2.10Second quarter $3.10 $2.11First quarter $3.23 $1.98DIVIDENDSIn December 2015, our Board of Directors determined that we would pay a quarterly cash dividend on our common stock. The Company paid two cashdividends of $0.05 per share during fiscal 2016, the first on March 25, 2016 to shareholders of record as of March 15, 2016 and the second on June 24, 2016to shareholders of record as of June 14, 2016. As a result, for the year ended December 31, 2016, the Company paid a total of $3.4 million in dividends toshareholders. The cash dividend payments are applied to accumulated deficit.In September 2016, the Board of Directors determined that the acceleration of the Company's stock repurchase program was a better use of capital and,accordingly, stopped paying a quarterly cash dividend. Payment of any future cash dividends is at the discretion of the Board of Directors and will dependupon our financial condition, capital requirements, earnings and other factors deemed relevant by our Board of Directors. In addition, the terms of the creditagreements of our subsidiaries may restrict such subsidiaries from paying dividends and making other distributions to us that would provide us with cash topay dividends to our shareholders.ISSUER PURCHASES OF EQUITY SECURITIESThe Company's purchases of its common stock during the fourth quarter of fiscal 2016 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, 2016 - October 31, 2016 3,143 1.47 3,143 $3,692,000November 1, 2016 - November 30, 2016 54,341 1.47 54,341 3,612,000December 1, 2016 - December 31, 2016 85,187 1.48 85,187 3,486,000Total 142,671 $1.48 142,671 $3,486,000- 11 -(a)On July 30, 2015, the Company announced that its Board of Directors authorized the repurchase of up to $10.0 million of the Company's commonstock. The authorization does not expire. As of December 31, 2016, the Company had repurchased 2,989,127 shares for a total cost of approximately$6.5 million under this authorization. From time to time, the Company may enter into a Rule 10b5-1 trading plan for purposes of repurchasing commonstock under this authorization.- 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 the cumulative total return since December 31, 2011 of (a) the Company's common stock with (b) Russell 2000 Indexand (c) a peer group selected in good faith by the Company, in each case assuming reinvestment of dividends. The graph assumes $100 was invested onDecember 31, 2011 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. December 31, 2011 2012 2013 2014 2015 2016Hudson Global, Inc. $100.00 $93.53 $83.92 $64.72 $60.96 $29.57Russell 2000 $100.00 $116.35 $161.52 $169.42 $161.95 $196.45Peer Group $100.00 $120.21 $165.40 $161.77 $149.99 $176.16- 13 -ITEM 6. SELECTED FINANCIAL DATAThe following table shows selected financial data of the Company that has been adjusted to reflect the classification of certain businesses asdiscontinued operations. The data has been derived from, and should be read together with, “Management's Discussion and Analysis of Financial Conditionand Results of Operations” and corresponding notes and the Consolidated Financial Statements included in Items 7 and 8 of this Form 10-K. Year Ended December 31,$ in thousands, except per share data 2016 2015 2014 2013 2012SUMMARY OF OPERATIONS (a): Revenue $422,744 $463,197 $581,192 $562,572 $655,875Gross margin $174,417 $187,710 $222,845 $209,429 $257,793Business reorganization $1,580 $5,828 $3,789 $5,440 $7,506Operating income (loss) $(7,587) $3,241 $(17,486) $(27,152) $(10,094)Income (loss) from continuing operations $(8,933) $1,607 $(15,786) $(30,211) $(7,222)Income (loss) from discontinued operations, net of income taxes $143 $722 $2,592 $(184) $1,887Net income (loss) $(8,790) $2,329 $(13,194) $(30,395) $(5,335)Basic income (loss) per share from continuing operations $(0.27) $0.05 $(0.48) $(0.93) $(0.22)Basic net income (loss) per share $(0.26) $0.07 $(0.40) $(0.94) $(0.17)Diluted income (loss) per share from continuing operations $(0.27) $0.05 $(0.48) $(0.93) $(0.22)Diluted net income (loss) per share $(0.26) $0.07 $(0.40) $(0.94) $(0.17)OTHER FINANCIAL DATA: Net cash provided by (used in) operating activities $(9,420) $(17,351) $(17,840) $2,513 $13,159Net cash provided by (used in) investing activities $(2,724) $21,648 $16,731 $(2,557) $(8,272)Net cash provided by (used in) financing activities $(2,930) $644 $(1,256) $(497) $(4,274)BALANCE SHEET DATA: Current assets $84,142 $106,143 $118,921 $134,323 $157,412Total assets $101,812 $124,949 $139,672 $158,829 $193,468Current liabilities $50,579 $51,591 $67,117 $69,818 $67,168Total stockholders’ equity $41,885 $61,180 $59,257 $74,385 $106,541OTHER DATA: EBITDA (loss) (b) $(4,744) $6,820 $(11,725) $(20,471) $(3,788)(a)Effective June 14, 2015, the Company completed the sale of substantially all of the assets (excluding working capital) of its US IT business toMastech, Inc. The Company also completed the sale of its Netherlands business to InterBalanceGroup BV effective April 30, 2015. In addition,during 2015, the Company’s Board of Directors and management approved the exit of operations in certain countries within Central and EasternEurope (Ukraine, Czech Republic, and Slovakia), Luxembourg and Ireland. As these actions did not meet the requirements for classification asdiscontinued operations, the operating results and gain (loss) on sale and exit of businesses are presented as components of income (loss) fromcontinuing operations. See Note 3 included in Item 8 of this Form 10-K for additional information.Effective November 9, 2014, the Company completed the sale of substantially all of the assets and certain liabilities of its Legal eDiscovery businessin the U.S and U.K. to Document Technologies, LLC and DTI of London Limited. In addition, the Company ceased its operations in Sweden withinthe Hudson Europe segment during the third quarter of 2014. The results of operations of the Legal eDiscovery business and the Company'soperations in Sweden have been reclassified to discontinued operations for all periods presented and has been excluded from continuing operationsin accordance with the provisions of Accounting Standards Codification ("ASC") 205-20-45, “Reporting Discontinued Operations." See Note 4included in Item 8 of this Form 10-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.- 14 -Management also uses this measurement to evaluate working capital requirements. EBITDA should not be considered in isolation or as a substitutefor operating income and net income prepared in accordance with generally accepted accounting principles or as a measure of the Company'sprofitability. See Note 19 to the Consolidated Financial Statements for further EBITDA segment and reconciliation information.- 15 -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 19 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 expertise in recruiting mid-level professional talent across all management disciplines in a wide range of industries. The Companymatches clients and candidates to address client needs on a part time, full time and interim basis. Part of that expertise is derived from research on hiringtrends and the Company's clients’ current successes and challenges with their staff. This research has helped enhance the Company's understanding about thenumber of new hires that do not meet its clients’ long-term goals, the reasons why, and the resulting costs to the Company's clients. With operations in 13countries and relationships with specialized professionals around the world, the Company brings a strong ability to match talent with opportunities byassessing, recruiting, developing and engaging the best and brightest people for the Company's clients. The Company combines broad geographic presence,world-class talent solutions and a tailored, consultative approach to help businesses and professionals achieve maximum performance. The Company's focusis to continually upgrade its service offerings, delivery capability and assessment tools to make candidates more successful in achieving its clients' businessrequirements.The Company’s proprietary frameworks, assessment tools and leadership development programs, coupled with its broad geographic footprint, haveallowed the Company to design and implement regional and global recruitment solutions that the Company believes greatly enhance the quality of itsclient's hiring.To accelerate the implementation of the Company's strategy, the Company has engaged in the following initiatives:•Investing in the core businesses and practices that present the greatest potential for profitable growth.•Facilitating growth and development of the global RPO business.•Building and differentiating the Company's brand through its unique talent solutions offerings.•Improving further the Company’s cost structure and efficiency of its support functions and infrastructure.Strategic ActionsDuring the year ended December 31, 2015, the Company executed on strategic actions to focus on its core business lines and growth opportunities.These actions included:•In February 2015, the Company's management approved the exit of operations in certain countries within Central and Eastern Europe (Ukraine,Czech Republic and Slovakia). During the second quarter of 2015, the Company deemed the liquidation of those Central and Eastern Europebusinesses to be substantially complete. As such, under ASC 830, "Foreign Currency Matters," the Company transferred $1.2 million ofaccumulated foreign- 16 -currency translation gains from accumulated other comprehensive income to the statement of operations within gain on sale and exit ofbusinesses. See Note 3 to the Consolidated Financial Statements for additional information.•In March 2015, the Company's management approved the exit of operations in Luxembourg. During the third quarter of 2015, the Companydeemed the liquidation of its Luxembourg business to be substantially complete. As such, under ASC 830, "Foreign Currency Matters," theCompany transferred $0.1 million of accumulated foreign currency translation losses from accumulated other comprehensive income to thestatement of operations within gain on sale and exit of businesses. See Note 3 to the Consolidated Financial Statements for additionalinformation.•On May 7, 2015, the Company completed the sale of its Netherlands business to InterBalance Group B.V., effective April 30, 2015, in amanagement buyout for $9.0 million, including cash sold of $1.1 million. The Company recognized a gain on sale of $2.8 million, net ofclosing and other direct transaction costs, on the divestiture of the Netherlands business which included $2.8 million of non-cash accumulatedforeign currency translation losses. See Note 3 to the Consolidated Financial Statements for additional information.•On June 15, 2015, the Company completed the sale of its Hudson Information Technology (US) business (the "US IT business") for $17.0million in cash. The Company retained approximately $3.0 million in net working capital associated with the US IT business. The Companyrecognized a gain on sale of $15.9 million, net of closing and other direct transaction costs. See Note 3 to the Consolidated FinancialStatements for additional information.•In August 2015, the Company exited its operations in Ireland.•In the fourth quarter of 2015, the Company substantially completed the migration of the remaining Americas business to a new, lower-cost, ITplatform and shared service center and decommissioned the legacy support infrastructures.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 $23.0 million in cash, and recorded a gain of $11.3 million in connectionwith the sale. 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 $0.2 million of operating income and $0.0million of operating loss for the year ended December 31, 2016, respectively, which have been reclassified to discontinued operations for all periodspresented and have been excluded from continuing operations and from segment results for all periods presented in accordance with the provisions of ASC205-20-45 “Reporting Discontinued Operations”. See Note 4 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. In the U.K., the June 23, 2016 referendum by British voters to exit theEuropean Union (commonly referred to as “Brexit”) adversely impacted global markets, including currencies, and resulted in a decline in the value of theBritish pound as compared to the U.S. dollar. A weaker British pound compared to the U.S. dollar during a reporting period causes local currency results ofthe Company's U.K. operations to be translated into fewer U.S. dollars. The Company's U.K. operations, future financial performance and translation of resultsmay be affected, in part, by the outcome of tariff, trade, regulatory, and other negotiations as the U.K. negotiates its exit from the European Union.Conditions in Continental Europe have shown improvement with GDP growth in most of the major markets, as well as forecasted GDP growth for 2017.Australia faces a modest growth outlook for 2017, while the outlook for Asia is uncertain given China's slowing growth outlook.The Company closely monitors the economic environment and business climate in its markets and responds accordingly. At this time, the Company isunable to accurately predict the outcome of these events or changes in general economic conditions and their effect on the demand for the Company'sservices.- 17 -Financial PerformanceFor the year ended December 31, 2016, the Company increased revenue in its retained businesses in most markets. On a constant currency basis, for theyear ended December 31, 2016, revenue and gross margin declined by $20.7 million and $7.2 million, or 4.7% and 4.0%, respectively, compared to 2015. Aprimary driver of the decrease was attributable to the prior year divestitures of the Netherlands, US IT business, Luxembourg and Central and Eastern Europebusinesses. The following table reconciles the change in reported revenue and gross margin for the year ended December 31, 2016: Year Ended December 31, 2016$ in millionsChange in Revenue on a ConstantCurrency Basis Change in Gross Margin on aConstant Currency BasisNetherlands divestiture$(12.7) $(2.7)US IT business divestiture(13.7) (3.4)Luxembourg divestiture(0.3) (0.1)Central and Eastern Europe divestitures(0.1) (0.1)Retained businesses increase (decrease)6.1 (0.9)Reported change$(20.7) $(7.2)On a constant currency basis, the Company's retained businesses experienced an overall increase in revenue for the year ended 2016, as compared to2015. This was driven by retained revenue growth in 10 countries, led by Australia, Belgium, New Zealand, France, Hong Kong and the Americas. Theincreases were partially offset by declines in revenue in the U.K. and China.The following is a summary of the highlights for the years ended December 31, 2016, 2015 and 2014. These should be considered in the context of theadditional disclosures in this MD&A.•Revenue was $422.7 million for the year ended December 31, 2016, compared to $463.2 million for 2015, a decrease of $40.5 million, or 8.7%.◦On a constant currency basis, revenue decreased $20.7 million, or 4.7%. Contracting revenue decreased $18.7 million (down 6.5%compared to 2015) and permanent recruitment revenue decreased $2.6 million (down 2.2% compared to 2015). The decreases werepartially offset by an increase in talent management revenue of $0.3 million (up 0.7% compared to 2015).•Revenue was $463.2 million for the year ended December 31, 2015, compared to $581.2 million for 2014, a decrease of $118.0 million, or 20.3%.◦On a constant currency basis, the Company's revenue decreased $48.8 million, or 9.9%. Contracting revenue decreased $54.6million (down 15.9% compared to 2014). The decrease was partially offset by increases in permanent recruitment revenue of $5.6million (up 5.1% compared to 2014) and talent management revenue of $0.8 million (up 2.2% compared to 2014).•Gross margin was $174.4 million for the year ended December 31, 2016, compared to $187.7 million for 2015, a decrease of $13.3 million, or7.1%.◦On a constant currency basis, gross margin decreased $7.2 million, or 4.0%. Contracting gross margin decreased $6.5 million (down15.9% compared to 2015) and permanent recruitment gross margin decreased $2.4 million (down 2.1% compared to 2015). The decreasewas partially offset by an increase in talent management gross margin of $1.5 million (up 5.4% compared to 2015).Gross margin was $187.7 million for the year ended December 31, 2015, compared to $222.8 million for 2014, a decrease of $35.1 million, or15.8%.◦On a constant currency basis, gross margin decreased $9.1 million, or 4.8%. Contracting gross margin decreased $12.7 million (down23.8% compared to 2014) and talent management gross margin decreased $1.1 million (down 3.6% compared to 2014). The decreasewas partially offset by an increase in permanent recruitment gross margin of $4.9 million (up 4.6% compared to 2014).- 18 -•Selling, general and administrative expenses and other non-operating income (expense) (“SG&A and Non-Op”) was $177.6 million for the yearended December 31, 2016, compared to $194.9 million for 2015, a decrease of $17.3 million, or 8.9%. ◦On a constant currency basis, SG&A and Non-Op decreased $10.7 million, or 5.7%. SG&A and Non-Op, as a percentage of revenue, was42.0% for the year ended December 31, 2016, compared to 42.5% for 2015.SG&A and Non-Op was $194.9 million for the year ended December 31, 2015, compared to $230.1 million for 2014, a decrease of $35.2 million,or 15.3%. ◦On a constant currency basis, SG&A and Non-Op decreased $9.8 million, or 5.0%. SG&A and Non-Op, as a percentage of revenue, was42.5% for the year ended December 31, 2015, compared to 40.3% for 2014.•Business reorganization was $1.6 million for the year ended December 31, 2016, compared to $5.8 million for 2015, a decrease of $4.2 million, or$4.1 million on a constant currency basis.Business reorganization was $5.8 million for the year ended December 31, 2015, compared to $3.8 million for 2014, an increase of $2.0 million, or$2.4 million on a constant currency basis.•For the year ended December 31, 2014, the Company recorded an impairment of long-lived assets charge of $0.7 million. See "Long-lived Assetsand Goodwill" below for further detail.•EBITDA loss was $4.7 million for the year ended December 31, 2016, compared to EBITDA of $6.8 million for 2015. On a constant currencybasis, EBITDA decreased $12.1 million in 2016 compared to 2015.EBITDA was $6.8 million for the year ended December 31, 2015, compared to EBITDA loss of $11.7 million for 2014. On a constant currencybasis, EBITDA increased $18.8 million in 2015 compared to 2014.•Net loss was $8.8 million for the year ended December 31, 2016, compared to a net income of $2.3 million for 2015. On a constant currency basis,net income decreased $11.9 million in 2016 compared to 2015.Net income was $2.3 million for the year ended December 31, 2015, compared to a net loss of $13.2 million for 2014. On a constant currencybasis, net income increased $15.0 million in 2015 compared to 2014.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.During the fourth quarter of 2016, the Company experienced continued declines in the operating results within certain markets. These events weredeemed to be triggering events that required the Company to perform an impairment assessment with respect to long-lived assets, primarily property andequipment. The Company's internal projections as of the fourth quarter of 2016 anticipate improvement in its operating performance in 2017. Theundiscounted future cash flows resulting from the long-lived assets use and eventual disposition, exceeded the asset groups' carrying values. Accordingly,management concluded the Company's long-lived assets were not impaired.In addition to the Company's long-lived assets impairment testing, the Company's management also tested its goodwill for potential impairment as ofOctober 1, 2016. At the conclusion of its goodwill impairment testing, the Company determined the fair value of its China reporting unit substantiallyexceeded its carrying value. As such, the Company determined that no impairment of goodwill had taken place.Although the Company currently anticipates improvement in its operating results for 2017, if general economic conditions in certain markets in whichthe Company operates remain weak, or if the Company’s performance does not improve, the Company may record impairment charges related to goodwilland other long-lived assets in the future.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- 19 -periods as if exchange rates had remained constant period-over-period. The Company defines the term “constant currency” to mean that financial data forpreviously reported periods are translated into U.S. dollars using the same foreign currency exchange rates that were used to translate financial data for thecurrent period. The Company’s management reviews and analyzes business results in constant currency and believes these results better represent theCompany’s underlying business trends.Changes in revenue, gross margin, SG&A and Non-Op, business reorganization, operating income (loss), net income (loss) and EBITDA (loss) includethe effect of changes in foreign currency exchange rates. The tables below summarize the impact of foreign currency exchange rate adjustments on theCompany’s operating results for the years ended December 31, 2016, 2015 and 2014. Year Ended December 31, 2016 2015 2014 As As Currency Constant As Currency Constant$ in thousands reported reported translation currency reported translation currencyRevenue: Hudson Americas $15,561 $28,627 $(22) $28,605 $50,146 $(128) $50,018Hudson Asia Pacific 236,839 219,391 (2,235) 217,156 246,873 (39,412) 207,461Hudson Europe 170,344 215,179 (17,537) 197,642 284,173 (49,465) 234,708Total $422,744 $463,197 $(19,794) $443,403 $581,192 $(89,005) $492,187Gross margin: Hudson Americas $13,609 $16,111 $(22) $16,089 $20,757 $(123) $20,634Hudson Asia Pacific 84,126 89,682 (1,533) 88,149 93,014 (13,074) 79,940Hudson Europe 76,682 81,917 (4,550) 77,367 109,074 (18,907) 90,167Total $174,417 $187,710 $(6,105) $181,605 $222,845 $(32,104) $190,741SG&A and Non-Op (a): Hudson Americas $12,862 $17,590 $(44) $17,546 $20,582 $(178) $20,404Hudson Asia Pacific 83,954 85,684 (1,700) 83,984 92,127 (12,783) 79,344Hudson Europe 74,514 83,617 (4,836) 78,781 108,613 (19,004) 89,609Corporate 6,251 8,006 — 8,006 8,797 — 8,797Total $177,581 $194,897 $(6,580) $188,317 $230,119 $(31,965) $198,154Business reorganization: Hudson Americas $(39) $1,108 $— $1,108 $94 $— $94Hudson Asia Pacific 248 669 29 698 1,322 (215) 1,107Hudson Europe 1,387 2,883 (141) 2,742 1,407 (211) 1,196Corporate (16) 1,168 — 1,168 966 — 966Total $1,580 $5,828 $(112) $5,716 $3,789 $(426) $3,363Operating income (loss): Hudson Americas $1,090 $12,931 $10 $12,941 $870 $11 $881Hudson Asia Pacific 454 3,548 119 3,667 (3,013) 357 (2,656)Hudson Europe 1,709 1,743 381 2,124 3,112 (391) 2,721Corporate (10,840) (14,981) — (14,981) (18,455) — (18,455)Total $(7,587) $3,241 $510 $3,751 $(17,486) $(23) $(17,509)Net income (loss), consolidated $(8,790) $2,329 $733 $3,062 $(13,194) $1,214 $(11,980)EBITDA (loss) from continuingoperations(b): Hudson Americas $770 $13,354 $27 $13,381 $117 $55 $172Hudson Asia Pacific (338) 2,851 123 2,974 (890) (54) (944)Hudson Europe 1,064 (207) 413 206 (1,187) 345 (842)Corporate (6,240) (9,178) — (9,178) (9,765) — (9,765)Total $(4,744) $6,820 $563 $7,383 $(11,725) $346 $(11,379) (a)SG&A and Non-Op is a measure that management uses to evaluate the segments’ expenses, which include the following captions on theConsolidated Statements of Operations: Salaries and related, Office and general, Marketing and promotion and other income (expense), net.Corporate management fees are included in the segments’ other income (expense).(b)See EBITDA reconciliation in the following section.- 20 -Use of EBITDA (Non-GAAP measure)Management believes EBITDA is a meaningful indicator of the Company’s performance that provides useful information to investors regarding theCompany’s financial condition and results of operations. EBITDA is also considered by management as an indicator of operating performance and mostcomparable measure across the regions in which we operate. Management also uses this measurement to evaluate capital needs and working capitalrequirements. EBITDA should not be considered in isolation or as a substitute for operating income or net income prepared in accordance with generallyaccepted accounting principles in the U.S. (“GAAP”) or as a measure of the Company’s profitability. EBITDA is derived from net income (loss) adjusted forthe provision for (benefit from) income taxes, interest expense (income), and depreciation and amortization. The reconciliation of EBITDA to the most directly comparable GAAP financial measure is provided in the table below: Year Ended December 31,$ in thousands 2016 2015 2014Net income (loss) $(8,790) $2,329 $(13,194)Adjustment for income (loss) from discontinued operations, net of income taxes 143 722 2,592Income (loss) from continuing operations $(8,933) $1,607 $(15,786)Adjustments to income (loss) from continuing operations Provision for (benefit from) income taxes 742 646 (2,159)Interest expense (income), net 357 722 661Depreciation and amortization 3,090 3,845 5,559Total adjustments from income (loss) from continuing operations to EBITDA (loss) 4,189 5,213 4,061EBITDA (loss) $(4,744) $6,820 $(11,725) - 21 -Contracting DataThe following table sets forth the Company’s contracting revenue, gross margin and gross margin as a percentage of revenue for the years endedDecember 31, 2016, 2015 and 2014. Year Ended December 31, 2016 2015 2014$ in thousands As reported As reported Currencytranslation Constantcurrency As reported Currencytranslation ConstantcurrencyCONTRACTING DATA (a): Contracting revenue: Hudson Americas $1,459 $15,562 $— $15,562 $37,816 $— $37,816Hudson Asia Pacific 168,577 142,350 (769) 141,581 170,370 (29,164) 141,206Hudson Europe 100,741 147,140 (14,764) 132,376 199,920 (34,845) 165,075Total $270,777 $305,052 $(15,533) $289,519 $408,106 $(64,009) $344,097Contracting gross margin: Hudson Americas $222 $3,587 $— $3,587 $8,738 $— $8,738Hudson Asia Pacific 20,052 17,937 (94) 17,843 21,412 (3,635) 17,777Hudson Europe 13,849 21,044 (2,033) 19,011 32,370 (5,603) 26,767Total $34,123 $42,568 $(2,127) $40,441 $62,520 $(9,238) $53,282Contracting gross margin as a percent of contracting revenue: Hudson Americas 15.2%23.0%N/A23.0% 23.1% N/A 23.1%Hudson Asia Pacific 11.9%12.6%N/A12.6% 12.6% N/A 12.6%Hudson Europe 13.7%14.3%N/A14.4% 16.2% N/A 16.2%Total 12.6%14.0%N/A14.0% 15.3% N/A 15.5% (a)Contracting gross margin and gross margin as a percentage of revenue are shown to provide additional information regarding the Company’sability to manage its cost structure and to provide further comparability relative to the Company’s peers. Contracting gross margin is derived bydeducting the direct costs of contracting from contracting revenue. The Company’s calculation of gross margin may differ from those of othercompanies. See details in Results of Operations for further discussions of the changes in contracting revenue and gross margin.- 22 -Results of Operations (Discussion of significant matters is presented below):Hudson Americas (reported currency) Revenue Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions As reported As reported As reported Hudson Americas Revenue $15.6 $28.6 $(13.1) (45.6)% $50.1 $(21.5) (42.9)% For the year ended December 31, 2016, contracting revenue decreased $14.1 million, or 90.6%, partially offset by an increase in permanent recruitmentrevenue of $1.0 million, or 7.9%, as compared to 2015. The decline in contracting revenue was directly attributable to the divestiture of the Company's US ITbusiness in June 2015. The increase in permanent recruitment revenue was a result of growth in RPO, as compared to 2015.For the year ended December 31, 2015, contracting revenue decreased $22.3 million, or 58.8%, partially offset by an increase in permanent recruitmentrevenue of $0.8 million, or 6.2%, as compared to 2014. The change in revenue was attributable to the same factors as described above.Gross margin Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions As reported As reported As reported Hudson Americas Gross margin $13.6 $16.1 $(2.5) (15.5)% $20.8 $(4.6) (22.4)%Gross margin as a percentageof revenue 87.5% 56.3% N/A N/A 41.4% N/A N/AContracting gross margin as apercentage of contractingrevenue 15.2% 23.0% N/A N/A 23.1% N/A N/A For the year ended December 31, 2016, contracting gross margin decreased $3.4 million, or 93.8%, partially offset by an increase in permanentrecruitment gross margin of $0.8 million, or 6.6%, as compared to 2015. The changes in gross margin were attributable to the same factors as described abovefor revenue. Contracting gross margin, as a percentage of revenue, was 15.2% for the year ended December 31, 2016, as compared to 23.0% for 2015. Totalgross margin, as a percentage of revenue, increased to 87.5% for 2016, as compared to 56.3% for 2015, and such increase was attributable to the same factorsas described above for revenue.For the year ended December 31, 2015, contracting gross margin decreased $5.2 million, or 58.9%, partially offset by an increase in permanentrecruitment gross margin of $0.5 million, or 4.5%, as compared to 2014. The changes in gross margin were attributable to the same factors as described abovefor revenue. Contracting gross margin, as a percentage of revenue, was 23.0% for the year ended December 31, 2015, as compared to 23.1% for 2014. Totalgross margin, as a percentage of revenue, increased to 56.3% for 2015, as compared to 41.4% for 2014, the change was attributable to the same factors asdescribed above for revenue.- 23 -Selling, general and administrative expenses and non-operating income (expense) (“SG&A and Non-Op”) Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in % $ in millions As reported As reported As reported Hudson Americas SG&A and Non-Op $12.9 $17.6 $(4.7) (26.9)% $20.6 $(3.0) (14.5)%SG&A and Non-Op as apercentage of revenue 82.7% 61.4% N/A N/A 41.0% N/A N/A For the year ended December 31, 2016, SG&A and Non-Op decreased $4.7 million, or 26.9%, as compared to 2015 due to lower sales and administrativecosts as a result of the prior year divestiture of the US IT business. The decline was also driven by the change in control stock-based compensation expenseof $0.4 million recorded in June 2015.For the year ended December 31, 2015, SG&A and Non-Op decreased as compared to 2014 due to lower support costs and allocated corporate expensesas a result of the Legal eDiscovery and US IT business divestitures. The decline was partially offset by a proportion of stranded administrative expenses beingallocated to the discontinued Legal eDiscovery business in 2014 and change in control stock-based compensation expenses of $0.4 million for the yearended December 31, 2015.Business reorganizationFor the year ended December 31, 2016, business reorganization was $0.0 million, as compared to $1.1 million and $0.1 million for 2015 and 2014,respectively. Business reorganization incurred in 2015 were primarily related to severance for support personnel associated with the sale of the US ITbusiness, lease exit and contract cancellation costs.Operating Income and EBITDA Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions As reported As reported As reported Hudson Americas Operating income (loss): $1.1 $12.9 $(11.8) (91.5)% $0.9 $12.1 (a)EBITDA (loss) $0.8 $13.4 $(12.6) (94.0)% $0.1 $13.2 (a)EBITDA as a percentage ofrevenue 4.9% 46.6% N/A N/A 0.2% 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, 2016, EBITDA was $0.8 million, or 4.9% of revenue, as compared to EBITDA of $13.4 million, or 46.6% of revenue, for2015. The decrease in EBITDA was primarily due to the prior year gain on sale of the US IT business of $15.9 million, partially offset by a decrease inbusiness reorganization, as compared to 2015. Operating income was $1.1 million for the year ended December 31, 2016, as compared to $12.9 million for2015.For the year ended December 31, 2015, EBITDA was $13.4 million, or 46.6% of revenue, as compared to EBITDA of $0.1 million, or 0.2% of revenue, for2014. The increase in EBITDA was primarily due to the gain on sale of the US IT business of $15.9 million, partially offset by an increase in businessreorganization, as compared to 2014. Operating income was $12.9 million for the year ended December 31, 2015, as compared to $0.9 million for 2014.The difference between operating income (loss) and EBITDA (loss) for the years ended December 31, 2016, 2015 and 2014 was primarily due tocorporate management fees and depreciation.Hudson Asia Pacific (constant currency)Revenue Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Asia Pacific Revenue $236.8 $217.2 $19.7 9.1% $207.5 $9.7 4.7% For the year ended December 31, 2016, contracting revenue increased $27.0 million, or 19.1%, partially offset by a decrease in permanent recruitmentand talent management revenue of $5.9 million and $1.5 million or 9.7% and 10.6%, respectively, as compared to 2015.In Australia, for the year ended December 31, 2016, revenue increased $23.4 million, or 14.8%, as compared to 2015. Contracting revenueincreased $23.5 million, or 19.6%, for the year ended December 31, 2016, as compared to 2015. The increase in contracting revenue was in the Company'sinformation technology and public sector practice groups.In Asia, revenue decreased $7.5 million, or 22.5%, for the year ended December 31, 2016, as compared to the same period in 2015. The decrease in Asiawas primarily in China, as a result of weaker market conditions, leadership changes and employee turnover.For the year ended December 31, 2015, contracting revenue, permanent recruitment revenue and talent management revenue increased $0.4 million, $9.0million and $0.5 million, or 0.3%, 17.3% and 3.4%, respectively, as compared to 2014.In Australia, revenue increased $6.0 million, or 3.9%, for the year ended December 31, 2015, as compared to 2014. The increases were primarily inpermanent recruitment and contracting revenue increasing $3.1 million and $2.8 million, or 13.2% and 2.4%, as compared to 2014.In Asia, revenue increased $5.1 million, or 17.8%, for the year ended December 31, 2015, as compared to 2014. The increase in Asia was primarily inChina.Gross margin Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Asia Pacific Gross margin $84.1 $88.1 $(4.0) (4.6)% $79.9 $8.2 10.3%Gross margin as a percentageof revenue 35.5% 40.6% N/A N/A 38.5% N/A N/AContracting gross margin as apercentage of contractingrevenue 11.9% 12.6% N/A N/A 12.6% N/A N/A For the year ended December 31, 2016, permanent recruitment gross margin decreased $5.7 million, or 9.4%, partially offset by an increase in contractinggross margin of $2.2 million or 12.4%, as compared to 2015.In Australia, gross margin increased $2.8 million, or 5.7%, for the year ended December 31, 2016, as compared to the same period in 2015. The increasewas primarily in permanent recruitment and contracting, which increased $1.6 million and $1.9 million, or 6.2% and 12.6%, respectively, for the year endedDecember 31, 2016, as compared to 2015. The increase was partially offset by a decline in talent management gross margin of $0.4 million, or 5.7%, forthe year ended December 31, 2016, as compared to 2015.In Asia, gross margin declined $7.9 million, or 24.7%, for the year ended December 31, 2016, as compared to 2015. The decrease in Asia was primarily inChina.Gross margin as a percentage of revenue, for the year ended December 31, 2016 was 35.5%, as compared to 40.6% for 2015. The decrease in total grossmargin as a percentage of revenue for the year ended December 31, 2016 resulted from a decline in the permanent recruitment gross margin as a percentageof total gross margin, as compared to 2015. Contracting gross margin, as a percentage of revenue, was 11.9% for the year ended December 31, 2016, ascompared to 12.6%, for 2015 due to the growth in gross margin with large public sector clients in Australia and New Zealand, where the gross marginpercentage is lower than the rest of the contracting business. For the year ended December 31, 2015, permanent recruitment and contracting gross margins increased $8.5 million and $0.1 million, or 16.4% and0.4%, respectively, as compared to 2014.In Australia, gross margin increased $2.7 million, or 5.8%, for the year ended December 31, 2015, as compared to 2014. The increase was primarily inpermanent recruitment and contracting increasing $2.6 million and $0.6 million, or 11.3% and 3.9%, respectively, for the year ended December 31, 2015, ascompared to 2014. The increase was partially offset by a decline in talent management gross margin of 0.8 million, or 9.5%, for the year ended December 31,2015, as compared to 2014.In Asia, gross margin increased 5.8 million, or 21.9%, for the year ended December 31, 2015, as compared to the same period in 2014. The increase inAsia was primarily in China.Gross margin as a percentage of revenue, for the year ended December 31, 2015, was 40.6%, as compared to 38.5% for, 2014. The increase in grossmargin, as a percentage of revenue, resulted from an increase in higher margin permanent recruitment revenue. Contracting gross margin, as a percentage ofrevenue, remained relatively flat at 12.6%, as compared to 2014.SG&A and Non-Op Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Asia Pacific SG&A and Non-Op $84.0 $84.0 $— — % $79.3 $4.6 5.8%SG&A and Non-Op as apercentage of revenue 35.4% 38.7% N/A N/A 38.2% N/A N/A For the year ended December 31, 2016, SG&A and Non-Op remained relatively flat as compared to 2015. SG&A and Non-Op, as a percentage ofrevenue, was 35.4% for 2016, as compared to 38.7% for 2015.For the year ended December 31, 2015, SG&A and Non-Op increased $4.6 million, or 5.8%, as compared to 2014. The increase was primarily due tohigher headcount as a result of investment in additional fee earners in the region, higher variable bonus and commissions on gross margin and change incontrol stock-based compensation of $0.6 million, as compared to 2014. The increase was partially offset by savings associated with reorganization actionsinitiated in 2014.SG&A and Non-Op, as a percentage of revenue remained relatively flat, at 38.7% for 2015, as compared to 38.2% for 2014.Business reorganizationFor the year ended December 31, 2016, business reorganization was $0.2 million, as compared to $0.7 million for 2015 and $1.1 million for 2014.Business reorganization incurred in the current year was primarily for employee termination benefits. Business reorganization incurred in 2015 was primarilyfor lease termination payments in Australia and New Zealand. Business reorganization incurred in 2014 was related to a change-in-estimate for office spaceoptimization in Australia and employee termination costs for integration of back-office support functions in Asia. Operating Income and EBITDA Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Asia Pacific Operating income (loss): $0.5 $3.7 $(3.2) (86.5)% $(2.7) $6.3 (a)EBITDA (loss) $(0.3) $3.0 $(3.3) (a) $(0.9) $3.9 (a)EBITDA as a percentage ofrevenue (0.1)% 1.4% N/A N/A (0.5)% 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, 2016, EBITDA loss was $0.3 million, or 0.1% of revenue, as compared to EBITDA of $3.0 million, or 1.4% of revenue,for 2015. The decrease in EBITDA for the year ended December 31, 2016 was principally due to a decrease in gross margin. Operating income for the yearended December 31, 2016 was $0.5 million, as compared to operating income of $3.7 million, for 2015.For the year ended December 31, 2015, EBITDA was $3.0 million, or 1.4% of revenue, as compared to EBITDA loss of $0.9 million, or 0.5% of revenue,for 2014. The increase in EBITDA for the year ended December 31, 2015 was principally due to higher gross margin, partially offset by an increase in SG&Aand Non-Op expense. Operating income for the year ended December 31, 2015 was $3.7 million, as compared to operating loss of $2.7 million, for 2014.The difference between operating income (loss) and EBITDA (loss) for the years ended December 31, 2016, 2015 and 2014 was principally due tocorporate management fees and depreciation.Hudson Europe (constant currency)Revenue Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe Revenue $170.3 $197.6 $(27.3) (13.8)% $234.7 $(37.1) (15.8)% For the year ended December 31, 2016, contracting revenue decreased $31.6 million or 23.9%, as compared to 2015, partially offset by an increases inpermanent recruitment and talent management revenue of $2.3 million and $1.8 million, or 5.7% and 7.6%, respectively. The decrease was driven by the saleof the Netherlands business in May 2015 and the decline in the U.K. business, partially offset by improvements in Continental Europe. Total revenue in theNetherlands for the year ended December 31, 2016 decreased $12.7 million, or 100.0%, as compared to 2015.In the U.K., for the year ended December 31, 2016, revenue decreased $21.1 million, or 15.3%, to $116.5 million, from $137.6 million in 2015. Thedecrease in the U.K. was driven by a decline in contracting revenue of $20.7 million, or 17.8%, as compared to 2015, primarily a result of reduced demandand pricing pressure from large financial services contracting clients.In Continental Europe, for the year ended December 31, 2016, total revenue was $53.8 million, as compared to $60.1 million for the same periodin 2015, a decrease of $6.2 million, or 10.4%. The decline was a result of the prior year divestitures, lowering revenue for the year ended December 31,2016 by $13.1 million, as compared to the same period in 2015. Excluding the decline from prior year divestitures, revenue in Continental Europe increasedby $6.9 million, or 14.7%, for the year ended December 31, 2016, as compared to 2015.For the year ended December 31, 2015, contracting revenue and permanent recruitment revenue decreased $32.7 million and $4.3 million, or 19.8% and9.6%, respectively, as compared to 2014, partially offset by an increase in talent management revenue of $0.4 million or 1.7%, as compared to 2014. The saleof the Netherlands business during 2015 was the primary driver of the decline, as total revenue of the Netherlands for the year ended December 31, 2015decreased $26.2 million, or 67.3%, as compared to 2014.In the U.K., for the year ended December 31, 2015, revenue decreased $11.6 million, or 7.8%, to $137.6 million, from $149.2 million in 2014. Thedecrease in the U.K. was driven by declines in contracting and permanent recruitment revenue of $6.7 million and $4.9 million, or 5.4% and 20.1%,respectively, as compared to 2014. The declines were primarily a result of reduced demand from large financial services and public sector clients.In Continental Europe, for the year ended December 31, 2015, total revenue was $60.1 million, as compared to $85.5 million in 2014, a decreaseof $25.5 million, or 29.8%. As noted above, the prior year divestitures were the primary driver of the decline. Excluding the decline from the divestitures,revenue in Continental Europe, increased by $2.4 million, or 5.5%, for the year ended December 31, 2015, as compared to 2014.Gross margin Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe Gross margin $76.7 $77.4 $(0.7) (0.9)% $90.2 $(12.8) (14.2)%Gross margin as a percentageof revenue 45.0% 39.1% N/A N/A 38.4% N/A N/AContracting gross margin as apercentage of contractingrevenue 13.7% 14.4% N/A N/A 16.2% N/A N/A For the year ended December 31, 2016, contracting gross margin decreased $5.2 million, or 27.2% partially offset by increases in permanent recruitmentand talent management gross margins of $2.5 million and $1.7 million, or 6.2% and 8.9%, respectively, as compared to 2015.In the U.K., total gross margin for the year ended December 31, 2016, decreased $3.6 million or 10.1%, as compared to 2015. Contracting and permanentrecruitment gross margin declined $3.0 million and $0.5 million, or 19.3% and 2.8%, respectively, for the year ended December 31, 2016, as comparedto 2015.In Continental Europe for the year ended December 31, 2016, total gross margin increased $2.9 million, or 7.1%, as compared to 2015. The divestituresin 2015 resulted in a decline in gross margin for the year ended December 31, 2016, of $3.0 million, as compared to 2015. Excluding the decline from prioryear divestitures, for the year ended December 31, 2016, gross margin in Continental Europe increased $5.9 million, or 15.2%, as compared to 2015.For the year ended December 31, 2016, gross margin as a percentage of revenue, was 45.0%, as compared to 39.1%, for 2015. The increase in grossmargin, as a percentage of revenue resulted from an increase in the relative mix of higher margin permanent recruitment revenue. Contracting gross margin,as a percentage of revenue, was 13.7% as compared to 14.4%, for 2015.For the year ended December 31, 2015, contracting, permanent recruitment and talent management gross margins decreased $7.8 million, $4.2 million,and $0.4 million or 29.0%, 9.6% and 2.1%, respectively, as compared to 2014.In the U.K., total gross margin decreased $7.0 million, or 16.4%, as compared to 2014. Permanent recruitment and contracting gross margin declined $4.8million and $2.2 million, or 20.4% and 12.2%, respectively, as compared to 2014. The decline in the U.K. was driven by both lower margins in contractingas well as a reduction in higher margin permanent recruitment.In Continental Europe for the year ended December 31, 2015, total gross margin decreased $5.8 million, or 12.3%, as compared to 2014. The prior yeardivestitures resulted in a decline in gross margin for the year ended December 31, 2015, of $7.2 million, as compared to 2014. Excluding the decline fromprior year divestitures, for the year ended December 31, 2015 gross margin in Continental Europe increased $1.4 million, or 3.8%, as compared to 2014.For the year ended December 31, 2015, gross margin as a percentage of revenue, was 39.1%, as compared to 38.4%, for 2014. The contracting grossmargin, as a percentage of revenue, was 14.4%, as compared to 16.2%, for 2014. The decline is a result of weaker contracting margins in the U.K. and thepartial year impact of selling the Netherlands contracting business, which earned a higher than average contracting gross margin.SG&A and Non-Op Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe SG&A and Non-Op $74.5 $78.8 $(4.3) (5.4)% $89.6 $(10.8) (12.1)%SG&A and Non-Op as apercentage of revenue 43.7% 39.9% N/A N/A 38.2% N/A N/A For the year ended December 31, 2016, SG&A and Non-Op decreased $4.3 million, or 5.4%, as compared to 2015. The decline is a result of the 2015divestiture of the Netherlands business, lower stock based compensation expense and actions taken to streamline business processes in 2015, includingreduced real estate, back office support functions and corporate management fees, partially offset by higher staff costs in Continental Europe. The decline instock based compensation expense is partially attributable to the prior year June 2015 change in control stock compensation expense of $0.7 million. SG&Aand Non-Op, as a percentage of revenue, was 43.7% for 2016 compared to 39.9% for 2015.For the year ended December 31, 2015, SG&A and Non-Op decreased by $10.8 million, or 12.1%, as compared to 2014. In the U.K., lower gross marginresulted in a reduction of employee compensation expense in the year ended December 31, 2015, as compared to 2014. In addition, actions taken tostreamline business processes in 2014, including real estate reductions, back office support functions and reduced corporate management fees, resulted inlower SG&A and Non-Op for the year ended December 31, 2015 as compared to 2014. SG&A and Non-Op, as a percentage of revenue, was 39.9% for 2015 ascompared to 38.2% for 2014. The increase in SG&A and Non-Op, as a percentage of revenue, for the year ended December 31, 2015 was higher due to arelatively larger decline in revenue and change in control stock-based compensation expense of $0.7 million as compared to 2014.Business reorganization For the year ended December 31, 2016, business reorganization was $1.4 million, as compared to $2.7 million and $1.2 million in 2015 and 2014,respectively. Current year business reorganization was primarily attributable to lease termination payments in France and changes in lease terminationpayment estimates in the U.K. Business reorganization in 2015 was primarily attributable to lease termination payments and employee termination costs inthe U.K., Central and Eastern Europe and Luxembourg. Business reorganization in 2014 were principally attributable to employee termination costsprimarily in Belgium, the Netherlands, France and the U.K.Operating Income and EBITDA Year Ended December 31, 2016 2015 Change inamount Change in % 2014 Change inamount Change in %$ in millions Asreported Constantcurrency Constantcurrency Hudson Europe Operating income (loss): $1.7 $2.1 $(0.4) (19.0)% $2.7 $(0.6) (21.9)%EBITDA (loss) $1.1 $0.2 $0.9 (a) $(0.8) $1.0 (a)EBITDA (loss) as apercentage of revenue 0.6% 0.1% N/A N/A (0.4)% 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, 2016, EBITDA was $1.1 million, or 0.6% of revenue, as compared to EBITDA of $0.2 million, or 0.1% of revenue, for2015. The increase in EBITDA for the year ended December 31, 2016 was principally due to lower business reorganization and SG&A and Non-Op, partiallyoffset by a decrease in gross margin. Operating income was $1.7 million for the year ended December 31, 2016, as compared to operating income of $2.1million, for 2015.For the year ended December 31, 2015, EBITDA was $0.2 million, or 0.1% of revenue, as compared to EBITDA loss of $0.8 million, or 0.4% of revenue,for 2014. The increase in EBITDA for the year ended December 31, 2015 was principally due to the gain on sale of the Netherlands business of $2.8 millionand lower SG&A and Non-Op offset by lower gross margin. In addition, during the year ended December 31, 2015 there were no impairment charges, ascompared to $0.3 million for 2014. Operating income was $2.1 million for the year ended December 31, 2015, as compared to operating income of $2.7million for 2014.The difference between operating income (loss) and EBITDA (loss) for the years ended December 31, 2016, 2015 and 2014 was principally due tocorporate management fees and depreciation.The following are discussed in reported currencyCorporate expenses, net of corporate management fees For the year ended December 31, 2016, corporate expenses were $6.3 million as compared to $8.0 million for 2015, a decrease of $1.8 million, or 21.9%.The decrease was due to savings associated with business reorganization efforts launched in 2015 and a decline in stock based compensation expense, offsetby legal settlement costs associated with an arbitration claim (see Note 14) and lower corporate allocations to our regional business operations. The declinein stock based compensation expense is partially attributable to the June 2015 change in control stock compensation expense of $0.8 million.For the year ended December 31, 2015, corporate expenses were $8.0 million, as compared to $8.8 million for 2014, a decrease of $0.8 million, or 9.0%.The decrease for the year ended December 31, 2015 was due to savings associated with reorganization efforts launched in 2014, offset by stock-basedcompensation expense related to the change in control event and $0.7 million of CEO severance costs. Included in 2014 were approximately $1.4 million ofcosts incurred for the proxy contest and organizational strategy review. Excluding these items, corporate expenses decreased approximately $0.9 million, or11.7%, primarily due to savings associated with business reorganization efforts launched in 2014 partially offset by lower proportional corporate allocationsto the regions.For the years ended December 31, 2016, 2015 and 2014, business reorganization were $0.0 million, 1.2 million and $1.0 million, respectively, andprimarily consisted of lease termination payments and employee termination benefits.Depreciation and Amortization ExpenseDepreciation and amortization expense was $3.1 million, $3.8 million and $5.6 million for the years ended December 31, 2016, 2015 and 2014,respectively.Interest ExpenseInterest expense was $0.4 million for 2016 and was $0.7 million for each of the years ended December 31, 2015 and 2014.Provision for (Benefit from) Income Taxes The provision for income taxes for the year ended December 31, 2016 was $0.7 million, on $8.2 million of pre-tax loss, as compared to a provision forincome taxes of $0.6 million on $2.3 million of pre-tax income for 2015. The effective tax rate for the year ended December 31, 2016 was negative 9.1%, ascompared to 28.7% for 2015. The change in the Company's effective tax rate for the year ended December 31, 2016, as compared to 2015, was primarilyattributable to the gains on the sale or exit of businesses in 2015 which were tax-exempt. For the year ended December 31, 2016, the effective tax ratedifference from the U.S. Federal statutory rate of 35% was primarily attributable to the inability of the Company to recognize tax benefits on certain lossesuntil positive earnings are achieved in the U.S. and certain other foreign jurisdictions, changes in assessment of recoverability of future tax benefits in certainforeign jurisdictions, variations from the U.S. Federal statutory rate in foreign jurisdictions, and non-deductible expenses.The provision for income taxes for the year ended December 31, 2015 was $0.6 million on $2.3 million of pre-tax income, as compared to a benefit forincome taxes of $2.2 million on $17.9 million of pre-tax loss for 2014. The effective tax rate for the year ended December 31, 2015 was 28.7%, as comparedto 12.0% for 2014. The change in the Company's effective tax rate for the year ended December 31, 2015, as compared to 2014 was primarily attributable toU.S. tax benefits recognized in 2014 with respect to intra-period allocations between continuing and discontinued operations and the gains on the sale or exitof businesses in 2015 which were tax-exempt. For the year ended December 31, 2015, the effective tax rate difference from the U.S. Federal statutory rate of35% was primarily attributable to changes in valuation allowances in the U.S. and certain foreign jurisdictions which reduces or eliminates the effective taxrate on current year profits or loss, variations from the U.S. Federal statutory rate in foreign jurisdictions, taxes on repatriations of foreign profits, and non-deductible expenses. The effect of state tax rate changes in 2015 on deferred tax assets was offset by an increase in valuation allowance and has no net impacton effective tax rate.Income (Loss) from Discontinued OperationsIncome from discontinued operations was $0.1 million for the year ended December 31, 2016, as compared to $0.7 million and $2.6 million, in 2015 and2014, respectively.Net Income (Loss)Net loss was $8.8 million for the year ended December 31, 2016, as compared to net income of $2.3 million for 2015, a decrease in net income of $11.1million. Basic and diluted loss per share were $0.26 for the year ended December 31, 2016, as compared to basic and diluted income per share of $0.07 in2015.Net income was $2.3 million for the year ended December 31, 2015, as compared to net loss of $13.2 million for 2014, an increase in net income of $15.5million. Basic and diluted income per share were $0.07 for the year ended December 31, 2015, as compared to basic and diluted loss per share of $0.40 in2014. - 24 -Liquidity and Capital Resources As of December 31, 2016, cash and cash equivalents totaled $21.3 million, as compared to $37.7 million as of December 31, 2015 and $34.0 million asof December 31, 2014. The following table summarizes the cash flow activities for the years ended December 31, 2016, 2015 and 2014: For The Year Ended December 31,$ in millions 2016 2015 2014Net cash provided by (used in) operating activities $(9.4) $(17.4) $(17.8)Net cash provided by (used in) investing activities (2.7) 21.6 16.7Net cash provided by (used in) financing activities (2.9) 0.6 (1.3)Effect of exchange rates on cash and cash equivalents (1.3) (1.3) (1.0)Net increase (decrease) in cash and cash equivalents $(16.3) $3.7 $(3.4) Cash Flows from Operating ActivitiesFor the year ended December 31, 2016, net cash used in operating activities was $9.4 million, as compared to net cash used in operating activities of$17.4 million in 2015, a decrease in net cash used in operating activities of $8.0 million. The change in net cash used in operating activities is principallydue to a reduction in operating expenses, fluctuations in foreign currency, lower business restructuring outflows and the timing of cash receipts and paymentsto vendors and employees. For the year ended December 31, 2016, net cash used in operating activities included $4.0 million for business reorganizationactivities and $3.8 million for legal settlement costs associated with an arbitration claim (see note 14). Net cash used in operating activities fromdiscontinued operations was $1.0 million for the year ended December 31, 2016, as compared to cash used in operating activities from discontinuedoperation of $0.1 million in 2015.For the year ended December 31, 2015, net cash used in operating activities was $17.4 million, as compared to net cash used in operating activities of$17.8 million in 2014, a decrease in net cash used in operating activities of $0.4 million. The decrease in net cash used in operating activities resultedprincipally due to the same factors noted above. Net cash used in operating activities from discontinued operations was $0.1 million for the years endedDecember 31, 2015 as compared to net cash provided by operating activities from discontinued operations of $12.1 million in 2014.Cash Flows from Investing ActivitiesFor the year ended December 31, 2016, net cash used in investing activities was $2.7 million, as compared to net cash provided by investing activities of$21.6 million in 2015, a decrease in net cash provided by investing activities of $24.3 million. The decrease in net cash provided by investing activities wasprincipally related to the net proceeds from sale of the US IT and Netherlands businesses in 2015 of $24.7 million.For the year ended December 31, 2015, net cash provided by investing activities was $21.6 million, as compared to net cash provided by investingactivities of $16.7 million in 2014, an increase in net cash provided by investing activities of $4.9 million. The increase in net cash provided by investingactivities was principally related to the proceeds from sale of the US IT and Netherlands business in 2015 and a decline in capital expenditures, to $3.1million in 2015 from $5.3 million in 2014.Cash Flows from Financing ActivitiesFor the year ended December 31, 2016, net cash used in financing activities was $2.9 million, as compared to net cash provided by financing activities of$0.6 million in 2015, an increase in net cash used in financing activities of $3.5 million. The increase in net cash used in financing activities was primarilyattributable to current year cash dividends and repurchase of common stock, partially offset by an increase in net borrowings in the year ended December 31,2016 as compared to 2015.For the year ended December 31, 2015, net cash provided by financing activities was $0.6 million, as compared to net cash used in financing activities of$1.3 million for 2014, an increase in net cash provided by financing activities of $1.9 million. The increase in net cash provided by financing activities wasprimarily attributable to an increase in net borrowings in 2015 as compared to 2014, partially offset by the repurchase of common stock in 2015.- 25 -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”). Until September 15, 2016, theLloyds Agreement provided the U.K. Borrower with the ability to borrow up to $18.5 million (£15.0 million), at which time the U.K. Borrower entered into anamendment to the Lloyds Agreement that reduced the borrowing limit to $14.8 million (£12.0 million). Extensions of credit are based on a percentage of theeligible accounts receivable less required reserves from the Company's U.K. operations. The initial term was two years with renewal periods every threemonths thereafter. 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 contracting andpermanent recruitment activities in the U.K. operation ("Lloyds Tranche A"). The borrowing limit of Lloyds Tranche A is $14.2 million (£11.5 million) basedon 83% of eligible billed contracting and permanent recruitment receivables. The second tranche is a revolving facility that is based on the unbilled work-in-progress (as defined under the receivables finance agreement) activities in the Company's U.K. operations ("Lloyds Tranche B"). The borrowing limit ofLloyds Tranche B is $0.6 million (£0.5 million) based on 25% of eligible work-in-progress from permanent recruitment activity. For both tranches,borrowings may be made with an interest rate based on a base rate as determined 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 $2.5 million (£2.0 million).The details of the Lloyds Agreement as of December 31, 2016 were as follows:$ in millions December 31, 2016Borrowing capacity $7.4Less: outstanding borrowing —Additional borrowing availability $7.4Interest rates on outstanding borrowing 2.00%The Company was in compliance with all financial covenants under the Lloyds Agreement as of December 31, 2016.Facility Agreement with National Australia Bank LimitedOn October 30, 2015, Hudson Global Resources (Aust) Pty Limited (“Hudson Australia”) and Hudson Global Resources (NZ) Limited (“Hudson NewZealand”), both subsidiaries of Hudson Global, Inc., entered into a Finance Agreement, dated as of October 27, 2015 (the “Finance Agreement”), withNational Australia Bank Limited (“NAB”), a NAB Corporate Receivables Facility Agreement, dated as of October 27, 2015 (the “Australian ReceivablesAgreement”), with NAB and a BNZ Corporate Receivables Facility Agreement, dated as of October 27, 2015 (the “New Zealand Receivables Agreement”),with Bank of New Zealand (“BNZ”).The Finance Agreement provides a bank guarantee facility of up to $2.2 million (AUD3.0 million) for Hudson Australia and Hudson New Zealand. TheFinance Agreement matures and becomes due and payable on October 27, 2018. A fee equal to 1.5% per annum will be charged on each bank guaranteeissued under the Finance Agreement. The Finance Agreement bears a fee, payable semiannually in arrears, equal to 0.3% per annum of NAB’s commitmentunder the Finance Agreement.The Australian Receivables Agreement provides a receivables facility of up to $18.0 million (AUD25.0 million) for Hudson Australia, which is based onan agreed percentage of eligible accounts receivable, and of which up to $2.9 million (AUD4.0 million) may be used to support the working capitalrequirements of operations in China, Hong Kong and Singapore. The Australian Receivables Agreement does not have a stated maturity date and can beterminated by Hudson Australia or NAB upon 90 days written notice. Borrowings under the Australian Receivables Agreement may be made with an interestrate based- 26 -on a market rate plus a margin of 1.5% per annum. The Australian Receivable Agreement bears a fee, payable monthly in advance, equal to $5 thousand(AUD6 thousand) per month.The New Zealand Receivables Agreement provides a receivables facility of up to $3.5 million (NZD5.0 million) for Hudson New Zealand, which isbased on an agreed percentage of eligible accounts receivable. The New Zealand Receivables Agreement does not have a stated maturity date and can beterminated by Hudson New Zealand or BNZ upon 90 days written notice. Borrowings under the New Zealand Receivables Agreement may be made with aninterest rate based on a market rate. The New Zealand Receivables Agreement bears a fee, payable monthly in advance, equal to $1 thousand (NZD1thousand) per month.The details of the NAB Finance and Facilities Agreements as of December 31, 2016 were as follows: $ in millionsDecember 31, 2016Finance Agreement: Borrowing capacity$2.2Less: outstanding borrowing(1.9)Additional borrowing availability$0.3Interest rates on outstanding borrowing1.50% Australian Receivables Agreement: Borrowing capacity$15.6Less: outstanding borrowing(7.8)Additional borrowing availability$7.9Interest rates on outstanding borrowing3.17% New Zealand Receivables Agreement: Borrowing capacity$2.2Less: outstanding borrowing—Additional borrowing availability$2.2Interest rates on outstanding borrowing4.00%Amounts owing under the Finance Agreement, the Australian Receivables Agreement and the New Zealand Receivables Agreement are secured bysubstantially all of the assets of Hudson Australia and Hudson New Zealand. Each of the Finance Agreement, the Australian Receivables Agreement and theNew Zealand Receivables Agreement contains various restrictions and covenants applicable to the Obligors, including: a requirement that the Obligorsmaintain (1) a minimum Fixed Charge Coverage Ratio (as defined in the NAB Facility Agreement) of 1.50x as of the last day of each calendar quarter; and (2)a minimum Receivables Ratio (as defined by the NAB Facility Agreement) of 1.20x.The Company was in compliance with all financial covenants under the NAB Facility Agreement as of December 31, 2016.Other Credit AgreementsThe Company also has lending arrangements with local banks through its subsidiaries in Belgium and Singapore. As of December 31, 2016, theBelgium subsidiary had a $1.1 million (€1 million) overdraft facility. Borrowings under the Belgium lending arrangement may be made with an interest ratebased on the one month EURIBOR plus a margin, and was 2.75% as of December 31, 2016. The lending arrangement in Belgium has no expiration date andcan be terminated with a 15 day notice period. In Singapore, the Company’s subsidiary can borrow up to $0.1 million (SGD0.2 million) for working capitalpurposes. Interest on borrowings under this overdraft facility is based on the Singapore Prime Rate plus 1.75%, which was 6.00% on December 31, 2016. TheSingapore overdraft facility expires annually each August but can be renewed for one year periods at that time. There were no outstanding borrowings underBelgium and Singapore lending agreements as of December 31, 2016.Excluding the NAB Finance Agreement, the average monthly outstanding borrowings and weighted average interest rate for all the credit agreementsabove was $7.4 million and 3.37%, respectively, for the year ended December 31, 2016.- 27 -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. Liquidity OutlookAs of December 31, 2016, the Company had cash and cash equivalents on hand of $21.3 million supplemented by additional borrowing availability of$18.6 million under the Lloyds Agreement, the NAB Facility Agreement and other lending arrangements in Belgium and Singapore. The Company believesthat it has sufficient liquidity to satisfy its needs through at least the next 12 months, based on the Company's total liquidity as of December 31, 2016. TheCompany's near-term cash requirements during 2017 are primarily related to funding operations, restructuring actions, investing in capital expenditures andrepurchasing common stock. For 2017, the Company expects to make capital expenditures of approximately $2.5 million to $3.5 million and payments inconnection with current restructuring actions of approximately $1.5 million to $2.0 million. The Company is closely managing its capital spending and willperform capital additions where economically prudent, while continuing to invest strategically for future growth.As of December 31, 2016, $5.2 million of the Company's cash and cash equivalents noted above was held in the U.S. and the remainder was heldinternationally, primarily in the U.K. ($5.0 million), Belgium ($3.0 million), Mainland China ($2.0 million), Spain ($1.8 million), France ($1.3 million),Hong Kong ($0.7 million), and Australia ($0.6 million). The majority of the Company's offshore cash is available to it as a source of funds, net of any taxobligations or assessments. Unrepatriated cumulative earnings of certain foreign subsidiaries are considered to be invested indefinitely outside of the UnitedStates, except where the Company is able to repatriate these earnings to the United States without a material incremental tax provision. In managing its day-to-day liquidity and its capital structure, the Company does not rely on the unrepatriated earnings as a source of funds. The Company has not provided forU.S. Federal income or foreign withholding taxes on these undistributed foreign earnings because a distribution of these foreign earnings with materialincremental tax provision is unlikely to occur in the foreseeable future. It is not practicable to determine the amount of tax associated with such undistributedearnings.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 ArrangementsAs of December 31, 2016, other than operating leases described below, the Company had no off-balance sheet arrangements. - 28 -Contractual ObligationsThe 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, 2016 were as follows(commitments based in currencies other than U.S. dollars were translated using exchange rates as of December 31, 2016):Contractual Obligation Less than1 year 1 to 3 years 3 to 5 years More than5 years $ in thousands TotalOperating lease obligations (a) $15,355 $21,939 $7,121 $1,027 $45,442Capital lease obligations 98 147 — — 245Other purchase obligations 900 1,125 — — 2,025Other long term liabilities (b) — — — — —Other (c) 266 — — — 266Total $16,619 $23,211 $7,121 $1,027 $47,978a.Future minimum lease commitments have not been offset by expected future minimum sublease rental income of $5.9 million, due in the futurethrough 2020 under subleases with third parties. Commitments and sublease rentals based in currencies other than U.S. dollars were translated usingexchange rates as of December 31, 2016.b.The Company's non-current liabilities of $8.4 million in the Consolidated Balance Sheet as of December 31, 2016 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.c.Represents remaining employee severance and related costs expected to be paid pursuant to the 2016 Exit Plan and Previous Plans. See Note 13included in Item 8 of this Form 10-K for additional information.ContingenciesFrom time to time in the ordinary course of business, the Company is subject to compliance audits by U.S. federal, state, local and foreign governmentregulatory, tax and other authorities relating to a variety of regulations, including wage and hour laws, unemployment taxes, workers’ compensation,immigration, and 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 and currentemployees, and regulators or tax authorities. Periodic events and management actions such as business reorganization initiatives can change the number andtype of audits, claims, lawsuits, contract disputes or complaints asserted against the Company. Events can also change the likelihood of assertion and thebehavior 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. Employment laws vary in the markets in whichwe operate, and in some cases, employees and former employees have extended periods during which they may bring claims against the Company.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 $0.1 million and $0.1 million as of December 31, 2016 and 2015, 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.- 29 -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.Contracting revenue is reported on a gross basis when the Company acts as the principal in the transaction and is at risk for collection in accordance withASC 605-45, “Overall Considerations of Reporting Revenue Gross as a Principal versus Net as an Agent." The Company’s revenues are derived from itsgross billings, which are based on (i) the payroll 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 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.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. Our assessment includes an analysis of whether deferred tax assets willbe realized in the ordinary course of operations based on the available positive and negative evidence, including the scheduling of deferred tax liabilitiesand forecasted income from operations. The underlying assumptions we use in forecasting future taxable income require significant judgment. In the eventthat actual income from operations differs from forecasted amounts, or if we change our estimates of forecasted income from operations, we could recordadditional charges or reduce allowances in order to adjust the carrying value of deferred tax assets to their realizable amount. Such adjustments could bematerial to our consolidated financial statements. See Note 7 to the Consolidated Financial Statements for further information regarding deferred tax assets- 30 -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. As of December 31, 2016, the gross liabilityfor income taxes associated with uncertain tax positions was $2.2 million.The Company's unrecognized tax benefits, if recognized in the future, would affect the annual effective income tax rate. See Note 7 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.Long-lived AssetsThe Company periodically evaluates whether events or changes in circumstances have occurred that indicate long-lived assets may not be recoverable.When such circumstances are present, the Company assesses whether the carrying value will be recovered though the expected undiscounted future cashflows resulting from the use and eventual disposition of the long-lived asset. In the event the sum of the expected undiscounted future cash flows is less thanthe carrying value of the long-lived asset, an impairment loss equal to the excess of the long-lived asset's carrying value over its fair value is recorded in ASC360-1-35.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 may elect 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 a recent fair value calculation. If it is concluded that it is more likely than not that the fair value of a reporting unit is less thanits carrying value, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test isnot required.The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carryingamount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount,- 31 -then goodwill of the reporting unit is not considered impaired and the second step of the impairment test is unnecessary. In contrast, if the carrying amount ofa reporting unit exceeds its fair value, the second step 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 different from what has been recorded in the current period.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.Prior to the adoption of Accounting Standards Update ("ASU") No. 2016-09 ("ASU 2016-09"), Compensation - Stock Compensation (Topic 718) on October1, 2016, the Company recorded stock-based compensation expense net of estimated forfeitures. The Company estimated its forfeiture rate based on historicaldata such as stock option exercise activities and employee termination patterns. After adoption of ASU 2016-09, the Company accounts for forfeitures as theyoccur. There were no stock options granted during the year ended December 31, 2016.Recent Accounting PronouncementsSee note 2 to our Consolidated Financial Statements regarding the impact or potential impact of recent accounting pronouncements upon our financialposition and results of operations.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 related to international operations, including foreign currency fluctuations, (9) the Company’sdependence on key management personnel, (10) the Company’s ability to- 32 -attract and retain highly-skilled professionals, (11) the Company’s ability to collect its accounts receivable, (12) the Company’s ability to achieveanticipated cost savings through the Company’s cost reduction initiatives, (13) the Company’s heavy reliance on information systems and the impact ofpotentially losing or failing to develop technology, (14) risks related to providing uninterrupted service to clients, (15) the Company’s exposure toemployment-related claims from clients, employers and regulatory authorities and limits on related insurance coverage, (16) the Company’s ability to utilizenet operating loss carry-forwards, (17) volatility of the Company’s stock price, and (18) the impact of government regulations. 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, 2016, the Company earned approximately 92% 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 did not impact our reportednet income (loss).The Brexit referendum resulted in a decline in the value of the British pound, as compared to the U.S. dollar. The Company's United Kingdom ("U.K.")operations, future financial performance and translation of results may be affected, in part, by the outcome of tariff, trade, regulatory, and other negotiationsas the U.K. negotiates its exit from the European Union.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 Bank PLC and Lloyds Bank Commercial Finance Limited, National Australia Bank Limited and other credit agreements with lendersin Belgium and Singapore. The Company did not hedge the interest risk on borrowings under the credit agreements, and, accordingly, it is exposed to interestrate risk on the borrowings under such credit agreements. Based on our annual average borrowings, a 1% increase or decrease in interest rates on ourborrowings would not have a material impact on our earnings.- 33 -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, 2016 using thecriteria set forth in Internal Control-Integrated Framework (2013) 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, 2016, 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.- 34 -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, 2016and 2015, and the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholders’ equity for each of the years inthe three-year period ended December 31, 2016. In connection with our audits of the consolidated financial statements, we also have audited the financialstatement schedules in Item 15(2). These consolidated financial statements and financial statement schedules are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these consolidated financial statements and financial statement 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, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three‑year period endedDecember 31, 2016, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, whenconsidered in relation to the basic consolidated financial statements taken as a whole, present 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, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 3, 2017 expressed an unqualified opinion onthe effectiveness of the Company’s internal control over financial reporting./s/ KPMG LLPNew York, New YorkMarch 3, 2017- 35 -Report of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersHudson Global, Inc.:We have audited Hudson Global, Inc. and subsidiaries’ (Hudson Global, Inc.) internal control over financial reporting as of December 31, 2016, basedon criteria established in Internal Control - Integrated Framework (2013) 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 any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance 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, 2016,based on criteria established in Internal Control - Integrated Framework (2013) 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, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), cashflows, and stockholders’ equity for each of the years in the three-year period ended December 31, 2016, and our report dated March 3, 2017 expressed anunqualified opinion on those consolidated financial statements./s/ KPMG LLPNew York, New YorkMarch 3, 2017- 36 -HUDSON GLOBAL, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts) Year Ended December 31, 2016 2015 2014Revenue $422,744 $463,197 $581,192Direct costs 248,327 275,487 358,347Gross margin 174,417 187,710 222,845Operating expenses: Salaries and related 139,848 149,442 176,718Office and general 33,457 40,921 48,131Marketing and promotion 4,029 4,268 5,472Depreciation and amortization 3,090 3,845 5,559Business reorganization 1,580 5,828 3,789Impairment of long-lived assets — — 662Total operating expenses 182,004 204,304 240,331Gain (loss) on sale and exit of businesses — 19,835 —Operating income (loss) (7,587) 3,241 (17,486)Non-operating income (expense): Interest income (expense), net (357) (722) (661)Other income (expense), net (247) (266) 202Income (loss) from continuing operations before provision for income taxes (8,191) 2,253 (17,945)Provision for (benefit from) income taxes from continuing operations 742 646 (2,159)Income (loss) from continuing operations (8,933) 1,607 (15,786)Income (loss) from discontinued operations, net of income taxes 143 722 2,592Net income (loss) $(8,790) $2,329 $(13,194)Earnings (loss) per share: Basic and diluted Income (loss) from continuing operations $(0.27) $0.05 $(0.48)Income (loss) from discontinued operations 0.01 0.02 0.08Net income (loss) $(0.26) $0.07 $(0.40)Weighted-average shares outstanding: Basic 33,174 33,869 32,843Diluted 33,174 34,084 32,843 See accompanying notes to consolidated financial statements.- 37 -HUDSON GLOBAL, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(in thousands) Year Ended December 31, 2016 2015 2014Comprehensive income (loss): Net income (loss) $(8,790) $2,329 $(13,194)Other comprehensive income (loss): Foreign currency translation adjustment, net of income taxes (3,333) (3,326) (3,718)Defined benefit pension plans - unrecognized net actuarial gain (loss) and prior servicecosts (credit), net of income taxes (28) 5 158Total other comprehensive income (loss), net of income taxes (3,361) (3,321) (3,560)Comprehensive income (loss) $(12,151) $(992) $(16,754)See accompanying notes to consolidated financial statements.- 38 -HUDSON GLOBAL, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except per share amounts) December 31, 2016 2015ASSETS Current assets: Cash and cash equivalents$21,322 $37,663Accounts receivable, less allowance for doubtful accounts of $799 and $860, respectively58,517 62,420Prepaid and other4,265 5,979Current assets of discontinued operations38 81Total current assets84,142 106,143Property and equipment, net7,041 7,928Deferred tax assets, non-current6,494 6,724Other assets4,135 4,154Total assets$101,812 $124,949LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable$4,666 $5,184Accrued expenses and other current liabilities36,154 40,344Short-term borrowings7,770 2,368Accrued business reorganization1,756 2,252Current liabilities of discontinued operations233 1,443Total current liabilities50,579 51,591Deferred rent2,968 4,244Income tax payable, non-current2,211 2,279Other non-current liabilities4,169 5,655Total liabilities59,927 63,769Commitments 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 34,910 and 35,260 shares, respectively34 34Additional paid-in capital482,265 480,816Accumulated deficit(440,478) (428,287)Accumulated other comprehensive income6,931 10,292Treasury stock, 3,145 and 646 shares, respectively, at cost(6,867) (1,675)Total stockholders’ equity41,885 61,180Total liabilities and stockholders' equity$101,812 $124,949 See accompanying notes to consolidated financial statements. - 39 -HUDSON GLOBAL, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2016 2015 2014Cash flows from operating activities: Net income (loss)$(8,790) $2,329 $(13,194)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization3,090 3,845 5,835Impairment of long-lived assets— — 1,129Provision for (recovery of) doubtful accounts226 178 97Provision for (benefit from) deferred income taxes(208) 189 (102)Stock-based compensation1,449 4,231 1,325Gain on sale and exit of businesses— (21,245) (11,333)Other, net211 194 354Changes in operating assets and liabilities, net of effect of dispositions: Decrease (increase) in accounts receivable(582) (1,254) (7,117)Decrease (increase) in prepaid and other assets1,053 2,763 (1,731)Increase (decrease) in accounts payable, accrued expenses and other liabilities(3,317) (7,902) 4,213Increase (decrease) in accrued business reorganization(2,552) (679) 2,684Net cash provided by (used in) operating activities(9,420) (17,351) (17,840)Cash flows from investing activities: Capital expenditures(2,766) (3,061) (5,346)Proceeds from sale of consolidated subsidiary, net of cash sold— 7,894 —Proceeds from sale of assets, net of disposal costs42 16,815 22,077Net cash provided by (used in) investing activities(2,724) 21,648 16,731Cash flows from financing activities: Borrowings under credit agreements118,583 147,429 133,030Repayments under credit agreements(112,835) (144,994) (133,194)Repayment of capital lease obligations(85) (104) (500)Dividend payments(3,401) — —Payments for deferred financing costs— (57) (454)Purchases of treasury stock(5,127) (1,386) —Purchase of restricted stock from employees(65) (244) (138)Net cash provided by (used in) financing activities(2,930) 644 (1,256)Effect of exchange rates on cash and cash equivalents(1,267) (1,267) (1,024)Net increase (decrease) in cash and cash equivalents(16,341) 3,674 (3,389)Cash and cash equivalents, beginning of the period37,663 33,989 37,378Cash and cash equivalents, end of the period$21,322 $37,663 $33,989Supplemental disclosures of cash flow information: Cash payments during the period for interest$336 $381 $442Cash payments during the period for income taxes, net of refunds$918 $89 $970 See accompanying notes to consolidated financial statements. - 40 -HUDSON GLOBAL, INC.CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY(in thousands) Common stock Additionalpaid-incapital Accumulateddeficit Accumulated othercomprehensiveincome (loss) Treasurystock Total Shares Value Balance at January 1, 2014 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) $59,257Net income (loss) — — — 2,329 — — 2,329Other comprehensive income (loss), translationadjustments — — — — (3,326) — (3,326)Other comprehensive income (loss), pensionliability adjustment — — — — 5 — 5Purchase of treasury stock (528) (1,386) (1,386)Purchase of restricted stock from employees (108) — — — — (244) (244)Issuance of shares for 401(k) plan contribution 116 — (104) — — 418 314Stock-based compensation 1,589 — 4,231 — — — 4,231Balance at December 31, 2015 34,611 $34 $480,816 $(428,287) $10,292 $(1,675) $61,180Net income (loss) — — — (8,790) — — (8,790)Other comprehensive income (loss), translationadjustments — — — — (3,333) — (3,333)Other comprehensive income (loss), pensionliability adjustment — — — — (28) — (28)Cash Dividends ($.10 per share) — — — (3,401) — — (3,401)Purchase of treasury stock (2,461) — — — — (5,127) (5,127)Purchase of restricted stock from employees (35) — — — — (65) (65)Stock-based compensation (350) — 1,449 — — — 1,449Balance at December 31, 2016 31,765 $34 $482,265 $(440,478) $6,931 $(6,867) $41,885See accompanying notes to consolidated financial statements. 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, Contracting,Recruitment Process Outsourcing (“RPO”) and Talent Management Solutions. As of December 31, 2016, the Company had approximately 1,600 employeesoperating in 13 countries with three reportable geographic business segments: Hudson Americas, Hudson Asia Pacific, and Hudson Europe.The Company’s core service offerings include: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.Contracting: In Contracting, Hudson provides a range of project management, interim management and professional contract staffing services. Theseservices draw upon a combination of specialized recruiting and project management competencies to deliver a wide range of solutions. Hudson-employedprofessionals - either individually or as a team - are placed with client organizations for a defined period of time based on a client's specific business need.RPO: Hudson RPO delivers both permanent recruitment and contracting outsourced recruitment solutions tailored to the individual needs of primarilymid-to-large-cap multinational companies. Hudson RPO's delivery teams utilize state-of-the-art recruitment process methodologies and project managementexpertise in their flexible, turnkey solutions to meet clients' ongoing business needs. Hudson RPO services include complete recruitment outsourcing,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, executivecoaching, 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 4 for further detailsregarding the discontinued operations reclassification.Recently Adopted Accounting StandardsIn March 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-09, "Compensation -Stock Compensation (Topic 718)" ("ASU 2016-09") which is intended to simplify several aspects of the accounting for share-based payment awardstransactions. ASU 2016-09 will be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and earlyadoption is permitted. The Company has elected to early adopt ASU 2016-09 as of January 1, 2016. The Company elected to account for forfeitures as theyoccur. The adoption of ASU 2016-09 did not have a material effect on the Company's financial statements and related disclosures.In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (subtopic 205-40)" ("ASU 2014-15"),which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’sability to continue as a going concern. Management will be required to- 41 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)perform this assessment for both interim and annual reporting periods and must make certain disclosures if it concludes that substantial doubt exists. ASU2014-15 is effective for annual periods ending after December 15, 2016 and for interim periods thereafter. The Company adopted ASU 2014-15 effectiveDecember 31, 2016. The adoption did not have a material impact on its consolidated financial statements.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.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 puts pressure on global economic conditions and may in turn impact the aforementioned estimates andassumptions.Nature of Business and Credit RiskThe Company's revenue is earned from professional placement services, mid-level employee professional staffing and contracting services and humancapital services. These services are provided to a large number of customers in many different industries. The Company operates throughout North America,the United Kingdom ("U.K."), Continental Europe, Australia, New Zealand and Asia. During 2016, no single client accounted for more than 10% of theCompany's total revenue. As of December 31, 2016, 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.Contracting revenue is reported on a gross basis when the Company acts as the principal in the transaction and is at risk for collection in accordance withFASB Accounting Standards Codification Topic (“ASC”) 605-45, “Overall Considerations of Reporting Revenue Gross as a Principal versus Net as anAgent.” The Company's revenues are derived from its gross billings, which are based on (i) the payroll cost of its worksite employees; and (ii) a markupcomputed 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,”- 42 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)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.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. Prior to the adoption of ASU 2016-09, the Company recorded stock-based compensation expense net of estimated forfeitures.For stock options, the Black-Scholes option pricing model considers, among other factors, the expected volatility of the Company's stock price, risk-freeinterest rates, dividend rate and the expected life of the award. Expected volatilities are calculated based on the historical volatility of the Company'scommon stock. Volatility is determined using historical prices to estimate the expected future fluctuations in the Company's share price. The risk-free interestrate is based on the U.S. Treasury, the term of which is consistent with the expected term of the option.When the Company estimates the expected life of stock options, the Company determines its assumptions for the Black-Scholes option-pricing modelin accordance with ASC 718 and Staff Accounting Bulletin ("SAB") No. 107. Significant assumptions used in the valuation of stock options include:•The expected term of stock options is estimated using the simplified method since the Company currently does not have sufficient stock optionexercise history.•The expected risk free interest rate is based on the U.S. Treasury constant maturity interest rate which term is consistent with the expected termof the stock options.•The expected volatility is based on the historic volatility.In December 2007, the Securities and Exchange Commission (“SEC”) staff issued SAB No. 110, “Certain Assumptions Used In Valuation Methods -Expected Term". SAB No. 110 allows companies to continue to use the simplified method, as defined in SAB No. 107, to estimate the expected term of stockoptions under certain circumstances. The simplified method for estimating expected term uses the mid-point between the vesting term and the contractualterm of the stock option. The Company has analyzed the circumstances in which the use of the simplified method is allowed. The Company has opted to usethe simplified method for stock options the Company granted because management believes that the Company does not have sufficient historical exercisedata to provide a reasonable basis upon which to estimate the expected term.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- 43 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)tax assets where management believes it is more likely than not that the deferred tax assets will not be realized in the relevant jurisdiction. If we determinethat a deferred tax asset will not be realizable, an adjustment to the deferred tax asset will result in a reduction of earnings at that time. See Note 7 to theConsolidated Financial Statements for further information 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 as a component of income tax expense. Although the outcome related to these exposures is uncertain, inmanagement's opinion, adequate provisions for income taxes have been made for estimable potential liabilities emanating from these exposures. In certaincircumstances, the ultimate outcome for exposures and risks involve significant uncertainties which render them inestimable. If actual outcomes differmaterially from these estimates, including those that cannot be quantified, they could have material impact on the Company's results of operations.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”) is computed by dividing the Company’s net income (loss) by the weighted average number of shares outstandingduring the period. When the effects are not anti-dilutive, diluted earnings (loss) per share is computed by dividing the Company’s net income (loss) by theweighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options “in-the-money” and unvestedrestricted 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 performance conditions: (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 related performance periodand the result would be dilutive under the treasury stock method. Stock awards subject to vesting or exercisability based on the achievement of marketconditions 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.- 44 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)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 - 5Leasehold 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.Impairment of Long-Lived AssetsThe Company periodically evaluates whether events or changes in circumstances have occurred that indicate long-lived assets may not be recoverable.When such circumstances are present, the Company assesses whether the carrying value will be recovered through the expected undiscounted future cashflows resulting from the use and eventual disposition of the long-lived asset. In the event the sum of the expected undiscounted future cash flows is less thanthe carrying value of the long-lived asset, an impairment loss equal to the excess of the long-lived asset's carrying value over its fair value is recorded. Thefair values of long-lived assets are based on the Company's own judgments about the assumptions that market participants would use in pricing the asset oron observable market data, when available.Goodwill ImpairmentASC 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 may elect 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- 45 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)market considerations, cost factors, overall financial performance and the trend of cash flows, other relevant company-specific events and the ''cushion''between a reporting unit's fair value and carrying amount in the recent fair value calculation. If it is concluded that it is more likely than not that the fairvalue of a reporting unit is less than its carrying value, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, thetwo-step goodwill impairment test 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 19.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.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.Recent Accounting Standard Updates Not Yet AdoptedIn November 2016, the FASB issued ASU No. 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"), which requires theinclusion of restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on thestatement of cash flows. The ASU is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods withinthose fiscal years. The Company is currently evaluating the impact to its consolidated financial statements.In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and CashPayments" ("ASU 2016-15"), which provides clarification on how companies present and classify certain cash receipts and cash payments in the statement ofcash flows. ASU 2016-15 will be effective for fiscal periods beginning after December 15, 2017 and interim periods within those fiscal years. Early adoptionis permitted. If an entity early adopts the amendments in an interim period, any adjustments must be reflected as of the beginning of the fiscal year thatincludes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is currently evaluatingthe impact to its consolidated financial statements.In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), which amends the existing standards for lease accounting.This new standard requires the recognition of lease assets and lease liabilities on the balance- 46 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)sheet and the disclosure of key information about leasing arrangements including the amounts, timing, and uncertainty of cash flows arising from leases. ASU2016-02 will be effective for the Company on January 1, 2019 and will require modified retrospective application as of the beginning of the earliest yearpresented in the financial statements. Early adoption is permitted. We plan to adopt this ASU on January 1, 2019, and are currently evaluating the impact toour consolidated financial statements.In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." This ASU is a comprehensive new revenuerecognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects theconsideration it expects to receive in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing anduncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized fromcosts incurred to obtain or fulfill a contract. In July 2015, the FASB amended the effective date of this ASU to fiscal years beginning after December 15, 2017and early adoption is permitted only for fiscal years beginning after December 15, 2016. In March, April and May 2016, the FASB issued ASU 2016-08“Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” ASU 2016-10“Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” and ASU 2016-12 "Revenue from Contractswith Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients" which provide further clarifications to be considered whenimplementing this ASU. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would beapplied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would berecognized at the date of initial application. We have started evaluating the impact of this ASU as it relates to our revenue streams, as well as certainassociated expenses, however, are unable at this time to assess whether the application of this ASU has a material impact on the recognition of our revenues.Depending on the results of our review, there could be changes to the classification and timing of recognition of revenues and expenses. We expect tocomplete our assessment process, including selecting a transition method for adoption, by the end of the third quarter of 2017 along with our implementationprocess prior to the adoption of this ASU on January 1, 2018.There have been no other new accounting pronouncements not yet effective that have significance, or potential significance, to the Company'sConsolidated Financial Statements.NOTE 3 – DIVESTITURESHudson Information Technology (US) business (the "US IT business")On June 15, 2015, the Company completed the sale (the "US IT Business Sale") of substantially all of the assets (excluding working capital) of its USIT business to Mastech, Inc. (the "Purchaser"). The completion of the US IT Business Sale was effective June 14, 2015. The US IT Business Sale was pursuantto an Asset Purchase Agreement, dated as of May 8, 2015, by and among the Company, Hudson Global Resources Management, Inc., a wholly ownedsubsidiary of the Company, and the Purchaser. At the closing of the Sale, the Company received from the Purchaser pursuant to the Asset Purchase Agreementthe purchase price of $16,977 in cash. The US IT business pre-tax loss in accordance with ASC No. 205 "Reporting Discontinued Operations" ("ASC 205")for the year ended December 31, 2015 was $130 compared to a pre-tax profit of $2,167 for the same period in 2014.On the US IT Business Sale, for the year ended December 31, 2015, the Company recognized a pre-tax gain of $15,918, net of closing and other directtransaction costs. Income tax on the gain of the US IT business sale was $11. For U.S. Federal income tax purposes, the gain is offset in full by net operatingloss carryforwards. For state and local income tax purposes, the gain is mostly offset by net operating loss carryforwards. As the divestiture did not meet therequirements for classification as discontinued operations, the gain on sale is presented as a component of income (loss) from operations.- 47 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Netherlands businessOn May 7, 2015, the Company entered into a Share Purchase Agreement and completed the sale (the "Netherlands Business Sale") of its Netherlandsbusiness, to InterBalance Group B.V., effective April 30, 2015, in a management buyout for $9,029, which included cash retained of $1,135. As a result, forthe year ended December 31, 2015 the Company recognized a gain of $2,841 on the divestiture of the Netherlands Business Sale, which included $2,799 ofnon-cash accumulated foreign currency translation losses. Income tax on the gain was $0 because the gain is exempt from Netherlands tax. As the divestituredid not meet the requirements for classification as discontinued operations, the gain on sale is presented as a component of income (loss) from operations.The Netherlands pre-tax profit in accordance with ASC 205 for the years ended December 31, 2015 and 2014 was $373 and $1,799, respectively.Exit of Businesses in Central and Eastern EuropeIn February 2015, the Company's Board of Directors approved the exit of operations in certain countries within Central and Eastern Europe (Ukraine,Czech Republic and Slovakia). During the second quarter of 2015, the Company deemed the liquidation of its Central and Eastern Europe businesses to besubstantially complete. In accordance with ASC 830, "Foreign Currency Matters," ("ASC 830") for the year ended December 31, 2015 the Companytransferred $1,208 of accumulated foreign currency translation gains from accumulated other comprehensive income to the statement of operations withingain on sale and exit of businesses.LuxembourgIn March 2015, the Company's management approved the exit of operations in Luxembourg. In the third quarter of 2015, the Company deemed theliquidation of its Luxembourg business to be substantially complete. In accordance with ASC 830, for the year ended December 31, 2015, the Companytransferred $132 of accumulated foreign currency translation losses from accumulated other comprehensive income to the statement of operations within gainon sale and exit of businesses.NOTE 4 – 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 had no significant continuinginvolvement in the operations of the Legal eDiscovery business after the disposal transaction. In addition, the Company ceased operations in Sweden, whichwere included within the Hudson Europe segment, during the third quarter of 2014.The Company concluded that the divestiture of the Legal eDiscovery business and the cessation of operations in Sweden met 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, 2016 December 31, 2015 eDiscovery Sweden Total eDiscovery Sweden TotalTotal assets $38 $— $38 $49 $32 $81Total liabilities (a) $291 $— $291 $1,439 $4 $1,443a.Total liabilities primarily consisted of restructuring liabilities for lease termination payments and severance.- 48 -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, 2016 eDiscovery Sweden TotalRevenue $30 $— $30Gross margin 130 — 130Business reorganization (111) — (111)Operating income (loss), excluding gain (loss) from sale of business 187 (19) 168Other non-operating income (loss), including interest — — —Gain (loss) from sale of discontinued operations — — —Income (loss) from discontinued operations before income taxes 187 (19) 168Provision (benefit) for income taxes (b) 25 — 25Income (loss) from discontinued operations $162 $(19) $143 For The Year Ended December 31, 2015 eDiscovery Sweden TotalRevenue $(1) $30 $29Gross margin (30) 30 —Business reorganization 501 (29) 472Operating income (loss), excluding gain (loss) from sale of business (731) 14 (717)Other non-operating income (loss), including interest (8) — (8)Gain (loss) from sale of discontinued operations 137 1,273 1,410Income (loss) from discontinued operations before income taxes (602) 1,287 685Provision (benefit) for income taxes (b) (37) — (37)Income (loss) from discontinued operations $(565) $1,287 $722 For The Year Ended December 31, 2014 eDiscovery Sweden TotalRevenue $54,620 $1,513 $56,133Gross margin 9,227 864 10,091Business reorganization 2,861 416 3,277Impairment charges (a) 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 (b) 2,121 — 2,121Income (loss) from discontinued operations $3,712 $(1,120) $2,592a.As a result of the divestiture of the Company's Legal eDiscovery business in the fourth quarter of 2014, the Company recorded impairment chargesrelated to assets no longer in use of $467 in the U.S. and U.K.b.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 inabilityof the Company to recognize tax benefits on losses in the U.S. and certain foreign- 49 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)jurisdictions, variations from the U.S. tax rate in foreign jurisdictions, non-deductible expenses and other miscellaneous taxes.NOTE 5 – REVENUE, DIRECT COSTS AND GROSS MARGIN The Company’s revenue, direct costs and gross margin were as follows: For The Year Ended December 31, 2016 Contracting PermanentRecruitment Talent Management Other TotalRevenue$270,777 $112,582 $37,204 $2,181 $422,744Direct costs (1)236,654 2,429 7,216 2,028 248,327Gross margin$34,123 $110,153 $29,988 $153 $174,417 For The Year Ended December 31, 2015 Contracting PermanentRecruitment Talent Management (2) Other TotalRevenue$305,052 $118,934 $37,425 $1,786 $463,197Direct costs (1)262,322 2,733 8,681 1,751 275,487Gross margin$42,730 $116,201 $28,744 $35 $187,710 For the Year Ended December 31, 2014 Contracting PermanentRecruitment Talent Management (2) Other TotalRevenue$408,106 $126,686 $43,586 $2,814 $581,192Direct costs (1)345,586 2,369 7,980 2,412 358,347Gross margin$62,520 $124,317 $35,606 $402 $222,845(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.(2)Talent Management has been recast from Other in this disclosure.- 50 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 6 – STOCK-BASED COMPENSATIONEquity Compensation PlansThe Company maintains the Hudson Global, Inc. 2009 Incentive Stock and Awards Plan, as amended and restated on May 24, 2016 (the “ISAP”),pursuant to which it can issue equity-based compensation incentives to eligible participants. The ISAP permits the granting of stock options, restricted stock,and restricted stock units as well as other types of equity-based awards. The Compensation Committee of the Company’s Board of Directors (the“Compensation Committee”) will establish such conditions as it deems appropriate on the granting or vesting of stock options, restricted stock, restrictedstock units and other types of equity-based awards. As determined by the Compensation Committee, equity awards may also be subject to immediate vestingupon the occurrence of certain events following a change in control of the Company. The Company primarily grants restricted stock and restricted stock unitsto its employees. A restricted stock unit is equivalent to one share of the Company’s common stock and is payable only in common stock of the Companyissued under the ISAP.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. On May 24, 2016, the Company's stockholders approved anamendment and restatement of the ISAP to, among other things, increase the number of shares of the Company's common stock that are reserved for issuanceby 2,400,000 shares. As of December 31, 2016, there were 2,834,298 shares of the Company’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.The Company’s stock plan agreements provided that a change in control of the Company will occur if, among other things, individuals who weredirectors as of the date of the agreement and any new director whose appointment or election was approved or recommended by a vote of at least two-thirds ofthe directors then in office who were either directors on the date of the agreement or whose appointment or election was previously so approved orrecommended (each, a “continuing director”) cease to constitute a majority of the Company’s directors. A change in control occurred as of the Company's2015 annual meeting of stockholders on June 15, 2015 under these agreements because continuing directors ceased to constitute a majority of the Company'sdirectors. As a result, certain equity awards vested resulting in an accelerated stock-based compensation expense of $2,541 for the year ended December 31,2015.A summary of the quantity and vesting conditions for stock-based units granted to the Company's employees for the year ended December 31, 2016was as follows:Vesting conditions Number of RestrictedStock Units GrantedPerformance and service conditions (1) (2) 500,000(1)The performance conditions with respect to restricted stock units may be satisfied as follows: (a)For employees from the Americas, Asia Pacific and Europe 80% of the restricted stock units may be earned on the basis of performance asmeasured by "regional adjusted EBITDA," and 20% of the restricted stock units may be earned on the basis of performance as measuredby "group adjusted EBITDA"; and(b)For employees from the Corporate office 100% of the restricted stock units may be earned on the basis of performance as measured by"group adjusted EBITDA."(2)To the extent restricted stock units are earned on the basis of performance, such restricted stock units will vest on the basis of service as follows:(a)33% of the restricted stock units will vest on the first anniversary of the grant date;(b)33% of the restricted stock units will vest on the second anniversary of the grant date; and- 51 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)(c)34% of the restricted stock units will vest on the third anniversary of the grant date; provided that, in each case, the employee remainsemployed by the Company from the grant date 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. The restricted stock units vest immediately upon grant and arecredited to each of the non-employee director's retirement accounts under the Director Plan. Restricted stock units issued under the Director Plan contain theright to a dividend equivalent award in the form of additional restricted stock units. The dividend equivalent award is calculated using the same rate as thecash dividend paid on a share of the Company's common stock, and then divided by the closing price of the Company’s common stock on the date thedividend is paid to determine the number of additional restricted stock units to grant. Dividend equivalent awards have the same vesting terms as theunderlying awards. During the year ended December 31, 2016, the Company granted 263,477 restricted stock units to its non-employee directors pursuant tothe Director Plan. As of December 31, 2016, non-employee directors held 459,656 deferred restricted stock units.For the years ended December 31, 2016, 2015 and 2014, the Company’s stock-based compensation expense related to stock options, restricted stockand restricted stock units, which are included in the accompanying Consolidated Statements of Operations, were as follows: For The Year Ended December 31, 2016 2015 2014Stock options$17 $23 $85Restricted stock678 3,188 798Restricted stock units754 1,020 442Total$1,449 $4,231 $1,325Tax benefits recognized in jurisdictions where the Company has taxable income$90 $362 $98As of December 31, 2016 and 2015, 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, 2016 2015 UnrecognizedExpense WeightedAverage Period inYears UnrecognizedExpense WeightedAverage Period inYearsStock options $— 0.00 $17 0.85Restricted stock $— 0.00 $701 0.75Restricted stock units $195 1.55 $— 0.00 - 52 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Stock OptionsStock options granted by the Company generally expire between five and ten years after the date of grant and have an exercise price of at least 100% ofthe fair market value of the underlying share of common stock on the date of grant and generally vest ratably over a four-year period.The following were the weighted average assumptions used to determine the fair value of stock options granted by the Company and the details ofoption activity as of and for the respective periods: As of December 31, 2016 2015 2014Volatility (a) 48.9% (a)Risk free interest rate (a) 1.1% (a)Dividends (a) — (a)Expected life (years) (a) 2.75 (a)Weighted average fair value of options granted during the period (a) $0.81 (a)(a)Stock option assumptions are not provided above because there were no options granted during the years ended December 31, 2016 and 2014.Changes in the Company’s stock options for the years ended December 31, 2016, 2015 and 2014 were as follows: For The Year Ended December 31, 2016 2015 2014 Number ofOptions WeightedAverageExercise Priceper Share Number ofOptions WeightedAverageExercise Priceper Share Number ofOptions WeightedAverageExercise Priceper ShareOptions outstanding at January 1,206,000 $8.13 756,800 $8.78 800,350 $9.15Granted— — 50,000 2.49 — —Forfeited— — (485,000) 7.32 — —Expired(82,500) 11.09 (115,800) 13.35 (43,550) 15.50Options outstanding at December 31,123,500 $6.16 206,000 $8.13 756,800 $8.78Options exercisable at December 31,123,500 $6.16 181,000 $8.91 756,800 $8.78The 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, 2016, 2015 and 2014.The weighted average remaining contractual term and the aggregated intrinsic value for stock options outstanding and exercisable as of December 31,2016 and 2015 were as follows: As of December 31, 2016 2015 RemainingContractual Termin Years Aggregated IntrinsicValue RemainingContractual Termin Years Aggregated IntrinsicValueStock options outstanding 2.35 $— 2.22 $22Stock options exercisable 2.35 $— 1.86 $11- 53 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Restricted StockChanges in the Company’s restricted stock for the years ended December 31, 2016, 2015 and 2014 were as follows: For The Year Ended December 31, 2016 2015 2014 Number ofShares ofRestrictedStock WeightedAverageGrant DateFair Value Number ofShares ofRestrictedStock WeightedAverageGrant DateFair Value Number ofShares ofRestrictedStock WeightedAverageGrant DateFair ValueUnvested restricted stock at January 1,680,000 $1.60 803,999 $3.00 997,802 $3.00Granted— — 1,270,500 2.17 482,900 3.22Vested(330,000) 2.45 (1,204,798) 2.90 (182,251) 5.21Forfeited(350,000) 0.85 (189,701) 3.14 (494,452) 2.39Unvested restricted stock at December 31,— $— 680,000 $1.60 803,999 $3.00The total fair value of restricted stock vested during the years ended December 31, 2016, 2015 and 2014 were as follows: For The Year Ended December 31, 2016 2015 2014Fair value of restricted stock vested $553 $2,675 $669Restricted Stock Units Changes in the Company’s restricted stock units arising from grants to certain employees and non-employee directors for the years ended December 31,2016, 2015 and 2014 were as follows: For The Year Ended December 31, 2016 2015 2014 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,— $— 119,940 $3.57 115,869 $3.65Granted763,477 2.56 372,739 2.47 175,759 3.40Vested(263,477) 2.12 (450,179) 2.70 (122,522) 3.86Forfeited(20,000) 2.79 (42,500) 3.21 (49,166) 2.42Unvested restricted stock units at December 31,480,000 $2.79 — $— 119,940 $3.57 The total fair value of restricted stock units vested during the years ended December 31, 2016, 2015 and 2014 were as follows: For The Year Ended December 31, 2016 2015 2014Fair value of restricted stock units vested $558 $1,022 $436- 54 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Defined Contribution Plan and Employer-matching contributionsThe Company maintains the Hudson Global, Inc. 401(k) Savings Plan (the “401(k) plan”). The 401(k) plan allows eligible employees to contribute upto 15% of their earnings to the 401(k) plan. The Company has the discretion to match employees’ contributions up to 3% of the employees' earnings througha contribution of the Company’s common stock or cash. Vesting of the Company’s contribution occurs over a five-year period. For the years endedDecember 31, 2016, 2015 and 2014, the Company’s expenses and contributions to satisfy the prior years’ employer-matching liability for the 401(k) planwere as follows: For The Year Ended December 31,($ in thousands, except otherwise stated) 2016 2015 2014Expense recognized for the 401(k) plan $155 $193 $385Contributions to satisfy prior years' employer-matching liability Number of shares of the Company's common stock issued (in thousands) — 116 118Market value per share of the Company's common stock on contribution date (in dollars) $— $2.71 $3.65Non-cash contribution made for employer matching liability $— $314 $430Additional cash contribution made for employer-matching liability 162 — —Total contribution made for employer-matching liability $162 $314 $430 - 55 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)7 – INCOME TAXESIncome Tax ProvisionThe domestic and foreign components of income (loss) before income taxes from continuing operations were as follows: Year ended December 31, 2016 2015 2014Domestic $(5,768) $3,607 $(10,342)Foreign (2,423) (1,354) (7,603)Income (loss) from continuing operations before provision for income taxes $(8,191) $2,253 $(17,945)The provision for (benefit from) income taxes from continuing operations were as follows: Year ended December 31, 2016 2015 2014Current tax provision (benefit): U.S. Federal $— $— $(1,712)State and local (11) 18 (550)Foreign 981 439 205Total current provision for (benefit from) income taxes 970 457 (2,057)Deferred tax provision (benefit): U.S. Federal — — —State and local — — —Foreign (228) 189 (102)Total deferred provision for (benefit from) income taxes (228) 189 (102)Total provision for (benefit from) income taxes from continuing operations $742 $646 $(2,159)Tax Rate ReconciliationThe effective tax rates for the years ended December 31, 2016, 2015 and 2014 were negative 9.1%, 28.7% and 12.0%, respectively. These effective taxrates differ from the U.S. Federal statutory rate of 35% due to state income taxes, changes in valuation allowances in the U.S. and certain foreign jurisdictionswhich reduces or eliminates the effective tax rate on current year profits or losses, variations from the U.S. Federal statutory rate in foreign jurisdictions, taxeson repatriations of foreign profits, and non-deductible expenses. The effect of state tax rate changes in 2015 on deferred tax assets was offset by an increase invaluation allowance and has no net impact on effective tax rate.- 56 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)The following is a reconciliation of the effective tax rate from continuing operations for the years ended December 31, 2016, 2015 and 2014 to the U.S.Federal statutory rate of 35%: Year ended December 31, 2016 2015 2014Provision for (benefit from) continuing operations at Federal statutory rate of 35% $(2,867) $787 $(6,281)State income taxes, net of Federal income tax effect (7) 11 (357)Change in valuation allowance (5,045) 447 (3,427)Taxes related to foreign income 8,901 2,140 5,628Effect of state tax rate changes on deferred tax assets — (6,834) —Nondeductible expenses 399 1,375 2,446Others (639) 2,720 (168)Provision for (benefit from) income taxes $742 $646 $(2,159)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. As of December 31, 2015 the Company adopted ASU No. 2015-17, "Balance Sheet Classification of Deferred Taxes" on a prospective basis, whichrequired that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. Accordingly, net deferred tax assetsas of December 31, 2016 and 2015, have been classified as non-current in the accompanying Consolidated Balance Sheets. Significant temporary differencesat December 31, 2016 and 2015 were as follows: As of December 31, 2016 2015Deferred tax assets (liabilities): Allowance for doubtful accounts $157 $122Property and equipment 1,024 321Goodwill and intangibles 3,879 5,381Accrued compensation 3,011 2,666Accrued liabilities and other 2,311 3,244Tax loss carry-forwards 152,197 154,028Deferred tax assets (liabilities) gross, total 162,579 165,762Valuation allowance (156,343) (159,298)Deferred tax assets (liabilities), net of valuation allowance, total $6,236 $6,464Net Operating Losses (“NOLs”) and Valuation AllowanceAt December 31, 2016, the Company had net NOLs for U.S. Federal tax purposes of approximately $326,295. 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 2036. As December 31, 2015, the NOL balance did not include a deduction in the amountof $5,222 attributable to stock options and restricted stock until such time as the Company recognizes the deferred tax asset associated with such deduction.During 2016, the Company adopted ASU 2016-09, as a result the NOL balance was increased by the $5,222 previously unrecognized deductions related tostock options and restricted stock and the valuation allowance was increased resulting in a net tax impact of $0. The Company's utilization of NOLs issubject to an annual limitation imposed by Section 382 of the Internal Revenue Code, which may limit our ability to utilize all of the existing NOLs beforethe expiration dates. As of December 31, 2016, certain international subsidiaries had NOLs for local tax purposes of $82,355. With the exception of $75,273of NOLs with an indefinite carry forward period as of December 31, 2016, these losses will expire at various dates through 2036, with $42 scheduled to expireduring 2017. The deferred tax recognized for NOLs are presented net of- 57 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)unrecognized tax benefits, where applicable.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 reversals of deferred tax liabilities, taxplanning strategies, and projected future taxable income. The provision for income tax includes a net tax benefit of $887, resulting from changes in judgmentregarding the realizability of deferred tax assets in future years. As of December 31, 2016, $147,941 of the valuation allowance relates to the deferred taxasset for NOLs, $130,518 of which is U.S. Federal and state, and $17,423 of which is foreign, that management has determined will more likely than notexpire prior to realization. The remaining valuation allowance of $8,402 relates to deferred tax assets on U.S. and foreign temporary differences thatmanagement estimates will not be realized due to the Company's U.S. and foreign tax losses.Uncertain Tax Positions As of December 31, 2016 and 2015, 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, 2016 2015Gross unrecognized tax benefits excluding interest and penalties $2,039 $2,190Less: amount presented as a reduction to a deferred tax asset 438 447Unrecognized tax benefits, excluding interest and penalties $1,601 $1,743Accrued interest and penalties 610 536Total unrecognized tax benefits that would impact the effective tax rate $2,211 $2,279The following table shows a reconciliation of the beginning and ending amounts of unrecognized tax benefits, exclusive of interest and penalties:Balance at January 1, 2016 $2,190Additions based on tax positions related to the current year 87Additions for tax positions of prior years 7Lapse of statute of limitations (162)Currency Translation (83)Balance at December 31, 2016 $2,039Estimated interest and penalties classified as part of the provision for income taxes in the Company’s Consolidated Statements of Operations for theyears ended December 31, 2016, 2015 and 2014 were as follows: Year ended December 31, 2016 2015 2014Expense for (benefit of) estimated interest and penalties related to unrecognized tax benefits $77 $50 $(150)Based on information available as of December 31, 2016, it is reasonably possible that the total amount of unrecognized tax benefits could decrease inthe range of $200 to $400 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.- 58 -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 31,2016, 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 2013Other U.S. state and local jurisdictions 2012U.K. 2015Australia 2012Majority of other foreign jurisdictions 2011The Company believes that its tax reserves are adequate for all years subject to examination above.NOTE 8 – EARNINGS (LOSS) PER SHAREA reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share calculations were as follows: For The Year Ended December 31, 2016 2015 2014Earnings (loss) per share ("EPS"): EPS - basic and diluted Income (loss) from continuing operations $(0.27) $0.05 $(0.48)Income (loss) from discontinued operations 0.01 0.02 0.08Net income (loss) $(0.26) $0.07 $(0.40)EPS numerator - basic and diluted: Income (loss) from continuing operations $(8,933) $1,607 $(15,786)Income (loss) from discontinued operations, net of income taxes 143 722 2,592Net income (loss) $(8,790) $2,329 $(13,194)EPS denominator (in thousands): Weighted average common stock outstanding - basic 33,174 33,869 32,843Common stock equivalents: stock options and other stock-based awards (a) — 215 —Weighted average number of common stock outstanding - diluted 33,174 34,084 32,843(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 6 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.- 59 -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 31,2016, 2015 and 2014 did not include the effect of the following potentially outstanding shares of common stock because the effect would have been anti-dilutive or market conditions have not been achieved: For The Year Ended December 31, 2016 2015 2014Unvested restricted stock — 350,000 803,999Unvested restricted stock units 480,000 — 119,940Stock options 123,500 206,000 756,800Total 603,500 556,000 1,680,739NOTE 9 – RESTRICTED CASHA summary of the Company’s restricted cash included in the accompanying Consolidated Balance Sheets as of December 31, 2016 and 2015 was asfollows: As of December 31, 2016 2015Included under the caption "Other assets": Collateral accounts$557 $229Rental deposits385 480Total amount under the caption "Other assets":$942 $709Included under the caption "Prepaid and other": Client guarantees$139 $118Other108 110Total amount under the caption "Prepaid and other"$247 $228Total restricted cash$1,189 $937Collateral accounts primarily include deposits held under a collateral trust agreement, which supports the Company’s workers’ compensation policyand an outstanding letter of credit in the U.S. The rental deposits with banks include amounts held as guarantees from subtenants in the U.K. Clientguarantees were held in banks in Belgium as deposits for various client projects. Other primarily includes bank guarantee for licensing in Switzerland.- 60 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 10 – PROPERTY AND EQUIPMENT, NETAs of December 31, 2016 and 2015, property and equipment, net were as follows: As of December 31, 2016 2015Computer equipment$5,888 $5,911Furniture and equipment2,244 2,668Capitalized software costs17,010 17,946Leasehold and building improvements13,699 15,522 38,841 42,047Less: accumulated depreciation and amortization31,800 34,119Property and equipment, net$7,041 $7,928The Company had expenditures of approximately $235 and $513 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, 2016 and 2015, respectively.Depreciation expense is not recorded for such assets until they are placed in service.Impairment of Long-Lived AssetsDuring the fourth quarter of 2016, the Company experienced continued declines in the operating results within certain markets. These events weredeemed to be triggering events that required the Company to perform an impairment assessment with respect to long-lived assets, primarily property andequipment. The Company estimated the expected undiscounted future cash flows resulting from the long-lived assets' use and eventual disposition, andcompared it to their carrying value. The undiscounted future cash flows exceeded the asset group's carrying value, indicating the Company's long-lived assetswere not impaired.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, 2016 and 2015. Asummary of the Company’s equipment acquired under capital lease agreements was as follows: As of December 31, 2016 2015Capital lease obligation, current$65 $62Capital lease obligation, non-current$140 $229The Company acquired $0 and $0 of property and equipment under capital lease agreements for the years ended December 31, 2016 and 2015,respectively.- 61 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 11 – 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 Consolidated Balance Sheets, for the years ended December 31, 2016 and 2015. The goodwill is related to the Company’s acquisition ofthe businesses of Tong Zhi (Beijing) Consulting Service Ltd and Guangzhou Dong Li Consulting Service Ltd. Carrying Value 2016 2015Goodwill, January 1,$1,938 $2,029Currency translation(126) (91)Goodwill, December 31,$1,812 $1,938On October 1, 2016 and 2015, the Company applied ASC 350-20-35, and performed quantitative assessments to determine whether it was more likelythan not that the fair value of its China reporting unit was less than its carrying value. At the conclusion of its assessment, the Company determined the fairvalue of the reporting unit exceeded its carrying value. As such, the Company determined that no impairment of goodwill had taken place.At December 31 2016, the Company performed additional assessment with respect to goodwill and determined that no impairment existed at its Chinareporting unit as of December 31, 2016.NOTE 12 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESAs of December 31, 2016 and 2015, the Company's accrued expenses and other current liabilities consisted of the following: December 31, 2016 2015Salaries, commissions and benefits $21,843 $23,684Sales, use, transaction and income taxes 7,438 7,876Fees for professional services 1,148 1,760Rent 1,920 1,218Deferred revenue 1,024 1,722Other accruals 2,781 4,084Total accrued expenses and other current liabilities $36,154 $40,344- 62 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 13 – BUSINESS REORGANIZATIONThe Company initiated and executed certain strategic actions requiring business reorganization ("2016 Exit Plan"). Business exit costs associated withthe 2016 Exit Plan primarily consisted of employee termination benefits, lease termination payments and costs for elimination of contracts for certaindiscontinued services and locations.The Board previously approved other reorganization plans in prior years (the "Previous Plans"). Business exit costs associated with Previous Plansprimarily consisted of employee termination benefits, lease termination payments and costs for elimination of contracts for certain discontinued services andlocations.For the year ended December 31, 2016, restructuring charges associated with these initiatives primarily included employee separation costs in Europeand Asia Pacific and lease termination payments for rationalized offices and professional fees in Europe under the 2016 Exit Plan and Previous Plans.Business reorganization from continuing operations for the years ended December 31, 2016, 2015 and 2014 for the 2016 Exit Plan and the PreviousPlans, collectively, were as follows: Year Ended December 31, 2016 2015 2014Business reorganization from continuing operations Previous Plans $482 $5,828 $3,7892016 Plan 1,098 — —Total business reorganization from continuing operations $1,580 $5,828 $3,789The 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, 2016. The amounts for Changes in Estimate and Additional Charges are classified as businessreorganization in the Company’s Consolidated Statements of Operations. Amounts in the “Payments” column represent primarily the cash paymentsassociated with the reorganization plans. Changes in the accrued business reorganization for the year ended December 31, 2016 were as follows: December 31, 2015 Changes inEstimate AdditionalCharges Payments December 31, 2016Lease termination payments$2,970 $301 $691 $(1,689) $2,273Employee termination benefits1,186 (144) 460 (1,236) 266Other associated costs208 22 250 (448) 32Total$4,364 $179 $1,401 $(3,373) $2,571 Lease Termination PaymentsThe business reorganization incurred for lease termination for the years ended December 31, 2016, 2015 and 2014 by segment were as follows:Lease termination payments for the year endedDecember 31, Hudson Hudson Hudson Americas Asia Pacific Europe Corporate Total2016 $(16) $(24) $1,022 $10 $9922015 $503 $625 $1,358 $181 $2,6672014 $91 $771 $40 $— $902- 63 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Employee Termination BenefitsThe business reorganization incurred for employee termination benefits for the years ended December 31, 2016, 2015 and 2014 by segment were asfollows:Employee termination benefits for the year endedDecember 31, Hudson Hudson Hudson Americas Asia Pacific Europe Corporate Total2016 $(8) $273 $77 $(26) $3162015 $350 $(2) $792 $969 $2,1092014 $3 $510 $1,285 $967 $2,765Other Associated CostsOther associated business reorganization incurred for contract cancellation costs and professional fees for the years ended December 31, 2016, 2015 and2014 by segment were as follows:Other Associated Costs for the year endedDecember 31, Hudson Hudson Hudson Americas Asia Pacific Europe Corporate Total2016 $(15) $— $287 $— $2722015 $255 $47 $733 $17 $1,0522014 $— $40 $82 $— $122- 64 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)14 – 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, 2016, futureminimum lease commitments under non-cancelable operating leases, which will be expensed as primarily in office and general expenses, were as follows:2017 $15,3552018 13,1812019 8,7582020 5,5062021 1,615Thereafter 1,027 $45,442Rent and related expenses for operating leases of facilities and equipment recorded under the caption “Office and general” in the accompanyingConsolidated Statements of Operations were $8,931, $10,540, and $14,441 for the years ended December 31, 2016, 2015 and 2014, respectively. Futureminimum lease commitments have not been offset by expected future minimum sublease rental income of $5,893, due in the future through 2020 undersubleases with third parties. Commitments and sublease rentals based in currencies other than U.S. dollars were translated using exchange rates as ofDecember 31, 2016.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, 2016 and 2015 were as follows: As of December 31, 2016 2015Current portion of asset retirement obligations$78 $142Non-current portion of asset retirement obligations1,693 1,820Total asset retirement obligations$1,771 $1,962Consulting, Employment and Non-compete 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.- 65 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)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 $105 and $109 as of December 31, 2016 and 2015, respectively.Costs Associated with TerminationAs previously disclosed, in May 2015, the Company incurred compensation and benefits obligations to its former Chairman and Chief ExecutiveOfficer, Manuel Marquez, under his employment agreement, dated March 7, 2011, in connection with the Company providing Mr. Marquez notice of non-renewal of his employment agreement, which is treated as a termination without cause. The Company had accrued $747 as of March 31, 2016 in connectionwith compensation and benefits Mr. Marquez was entitled to upon a termination without cause, subject to his execution of a release. Mr. Marquez did notagree with the Company’s treatment of compensation and benefits under his employment agreement and, in August 2015, filed an arbitration claim againstthe Company for additional amounts of up to approximately $2,000 and reimbursement of his legal fees.On May 27, 2016, the arbitrator issued his decision on Mr. Marquez’s claim and awarded Mr. Marquez approximately $1,800 in additionalcompensation and benefits and approximately $700 toward the reimbursement of a portion of his legal fees incurred pursuing his claim. For the year endedDecember 31, 2016, the Company recorded an additional charge of $3,025 for the resolution of this arbitration.- 66 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 15 – 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”). Until September 15, 2016, theLloyds Agreement provided the U.K. Borrower with the ability to borrow up to $18,518 (£15,000), at which time the U.K. Borrower entered into anamendment to the Lloyds Agreement that reduced the borrowing limit to $14,814 (£12,000). 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 was 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 contracting andpermanent recruitment activities in the U.K. operation ("Lloyds Tranche A"). The borrowing limit of Lloyds Tranche A is $14,197 (£11,500) based on 83% ofeligible billed contracting and permanent recruitment receivables. The second tranche is a revolving facility that is based on the unbilled work-in-progress(as defined under the receivables finance agreement) activities in the U.K. operation ("Lloyds Tranche B"). The borrowing limit of Lloyds Tranche B is $617(£500) based on 25% of eligible work-in-progress from the permanent recruitment. For both tranches, borrowings may be made with an interest rate based ona base rate as determined 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 $2,469 (£2,000).The details of the Lloyds Agreement as of December 31, 2016 were as follows: December 31, 2016Borrowing capacity $7,380Less: outstanding borrowing (19)Additional borrowing availability $7,361Interest rates on outstanding borrowing 2.00%The Company was in compliance with all financial covenants under the Lloyds Agreement as of December 31, 2016.Facility Agreement with National Australia Bank LimitedOn October 30, 2015, Hudson Global Resources (Aust) Pty Limited (“Hudson Australia”) and Hudson Global Resources (NZ) Limited (“Hudson NewZealand”), both subsidiaries of Hudson Global, Inc., entered into a Finance Agreement, dated as of October 27, 2015 (the “Finance Agreement”), withNational Australia Bank Limited (“NAB”), a NAB Corporate Receivables Facility Agreement, dated as of October 27, 2015 (the “Australian ReceivablesAgreement”), with NAB and a BNZ Corporate Receivables Facility Agreement, dated as of October 27, 2015 (the “New Zealand Receivables Agreement”),with Bank of New Zealand (“BNZ”). The Finance Agreement provides a bank guarantee facility of up to $2,161 (AUD3,000) for Hudson Australia and Hudson New Zealand. The FinanceAgreement matures and becomes due and payable on October 27, 2018. A fee equal to 1.5% per annum will be charged on each bank guarantee issued underthe Finance Agreement. The Finance Agreement bears a fee, payable semiannually in arrears, equal to 0.3% per annum of NAB’s commitment under theFinance Agreement.The Australian Receivables Agreement provides a receivables facility of up to $18,005 (AUD25,000) for Hudson Australia, which is based on an agreedpercentage of eligible accounts receivable, and of which up to $2,881 (AUD4,000) may be used to support the working capital requirements of operations inChina, Hong Kong and Singapore. The Australian Receivables Agreement does not have a stated maturity date and can be terminated by Hudson Australia orNAB upon 90 days- 67 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)written notice. Borrowings under the Australian Receivables Agreement may be made with an interest rate based on a market rate plus a margin of 1.5% perannum. The Australian Receivable Agreement bears a fee, payable monthly in advance, equal to $5 (AUD6) per month.The New Zealand Receivables Agreement provides a receivables facility of up to $3,463 (NZD5,000) for Hudson New Zealand, which is based on anagreed percentage of eligible accounts receivable. The New Zealand Receivables Agreement does not have a stated maturity date and can be terminated byHudson New Zealand or BNZ upon 90 days written notice. Borrowings under the New Zealand Receivables Agreement may be made with an interest ratebased on a market rate. The New Zealand Receivables Agreement bears a fee, payable monthly in advance, equal to $1 (NZD1) per month.The details of the NAB Finance and Facility Agreements as of December 31, 2016 were as follows: December 31, 2016Finance Agreement: Borrowing capacity$2,161Less: outstanding borrowing(1,901)Additional borrowing availability$260Interest rates on outstanding borrowing1.50% Australian Receivables Agreement: Borrowing capacity$15,606Less: outstanding borrowing(7,751)Additional borrowing availability$7,855Interest rates on outstanding borrowing3.17% New Zealand Receivables Agreement: Borrowing capacity$2,231Less: outstanding borrowing—Additional borrowing availability$2,231Interest rates on outstanding borrowing4.00%Amounts owing under the Finance Agreement, the Australian Receivables Agreement and the New Zealand Receivables Agreement are secured bysubstantially all of the assets of Hudson Australia and Hudson New Zealand. Each of the Finance Agreement, the Australian Receivables Agreement and theNew Zealand Receivables Agreement contains various restrictions and covenants applicable to the Obligors, including: a requirement that the Obligorsmaintain (1) a minimum Fixed Charge Coverage Ratio (as defined in the NAB Facility Agreement) of 1.50x as of the last day of each calendar quarter; and (2)a minimum Receivables Ratio (as defined by the NAB Facility Agreement) of 1.20x.The Company was in compliance with all financial covenants under the NAB Facility Agreement as of December 31, 2016.- 68 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)Other Credit AgreementsThe Company also has lending arrangements with local banks through its subsidiaries in Belgium and Singapore. The Belgium subsidiary had a $1,052(€1,000) overdraft facility as of December 31, 2016. Borrowings under the Belgium lending arrangement may be made using an interest rate based on the onemonth EURIBOR plus a margin, and the interest rate under each of these arrangements was 2.75% as of December 31, 2016. The lending arrangement inBelgium has no expiration date and can be terminated with a 15-day notice period. In Singapore, the Company’s subsidiary can borrow up to $138 (SGD200)for working capital purposes. Interest on borrowings under this overdraft facility is based on the Singapore Prime Rate plus a margin of 1.75%, which was6.0% on December 31, 2016. The Singapore overdraft facility expires annually each August but can be renewed for one year periods at that time. Theoutstanding borrowings under the Belgium and Singapore lending agreements were $0 as of December 31, 2016.Excluding the NAB Finance Agreement, the average monthly outstanding borrowings and weighted average interest rate for all the credit agreementsabove was $7,385 and 3.37%, respectively, for the year ended December 31, 2016.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. NOTE 16 – STOCKHOLDERS' EQUITYThe Company paid a cash dividend of $0.05 per share paid on June 24, 2016 to shareholders of record as of June 14, 2016. The Company also paid acash dividend of $0.05 per share on March 25, 2016 to shareholders of record as of March 15, 2016. As a result, for the year ended December 31, 2016, theCompany paid $3,401 in dividends to shareholders. The cash dividend payments are applied to accumulated deficit.On July 30, 2015, the Company announced that its Board of Directors authorized the repurchase of up to $10,000 of the Company's common stock. TheCompany intends to make purchases from time to time as market conditions warrant. This authorization does not expire. During the year ended December 31,2016 and 2015, the Company had repurchased 1,361,493 and 527,634 shares in the open market for a total cost of $3,147 and $1,386, respectively. Duringthe year ended December 31, 2016, the Company also purchased 1,100,000 shares from Sagard Capital Partners, L.P. in a private transaction pursuant to asecurities purchase agreement for a total cost of $1,980 or $1.80 per share. As of December 31, 2016, under the July 30, 2015 authorization, the Company hadrepurchased 2,989,127 shares for a total cost of $6,513.NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Accumulated other comprehensive income (loss), net of tax, consisted of the following: December 31, 2016 2015Foreign currency translation adjustments $6,826 $10,159Pension plan obligations 105 133Accumulated other comprehensive income (loss) $6,931 $10,292As a result of the sale of the Netherlands business and substantially complete liquidation of certain foreign owned entities, the net foreign currencytranslation loss transferred from accumulated other comprehensive income and included in determining net income (loss) was $450 for year endedDecember 31, 2015. No such adjustment was recorded in the current year. See Note 3 and 4 regarding the substantially complete liquidation of certain foreignowned entities and the sale of the Netherlands business.For the years ended December 31, 2016 and 2015, the amounts of accumulated other comprehensive income (loss), which primarily pertained topension plan obligations, were $22 and $19, respectively, and reclassified to the Consolidated Statement of Operations under the caption "Salaries andrelated" expenses.- 69 -NOTE 18 – 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, 2016, 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) January 15, 2018, (ii) the time at which the Rights are redeemed as described above, (iii) the time at which the Rights are exchanged as described in theRights Agreement, (iv) the repeal of Section 382 of the Internal Revenue Code if the Board determines that the Rights Agreement is no longer necessary forthe preservation of the Company’s NOLs, and (v) the beginning of a taxable year of the Company to which the Board determines that no NOLs may be carriedforward.- 70 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 19 – 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, human resources, accounting, administration, tax and treasury, and have been allocated to the reportable segments to the extent which the costsare attributable to the reportable segments. Segment information is presented in accordance with ASC 280, “Segments Reporting.” This standard is based on amanagement approach that requires segmentation based upon the Company’s internal organization and disclosure of revenue and certain expenses basedupon internal accounting methods. The Company’s financial reporting systems present various data for management to run the business, including internalprofit and loss statements prepared on a basis not consistent with U.S. GAAP. Accounts receivable, net and long-lived assets are the only significant assetsseparated by segment for internal reporting purposes. HudsonAmericas HudsonAsia Pacific HudsonEurope Corporate Inter-segmentelimination TotalFor the Year Ended December 31, 2016 Revenue, from external customers$15,561 $236,839 $170,344 $— $— $422,744Inter-segment revenue20 — 314 — (334) —Total revenue$15,581 $236,839 $170,658 $— $(334) $422,744Gross margin, from external customers$13,609 $84,126 $76,682 $— $— $174,417Inter-segment gross margin(14) (271) 285 — — —Total gross margin$13,595 $83,855 $76,967 $— $— $174,417Business reorganization$(39) $248 $1,387 $(16) $— $1,580EBITDA (loss) (a)$770 $(338) $1,064 $(6,240) $— $(4,744)Depreciation and amortization49 1,744 892 405 — 3,090Intercompany interest income (expense), net— — (204) 204 — —Interest income (expense), net— (318) (32) (7) — (357)Income (loss) from continuing operations before income taxes$721 $(2,400) $(64) $(6,448) $— $(8,191)Provision for (benefit from) income taxes$30 $(2,040) $2,761 $(9) $— $742As of December 31, 2016 Accounts receivable, net$2,507 $32,271 $23,739 $— $— $58,517Long-lived assets, net of accumulated depreciation and amortization$2 $7,049 $1,528 $359 $— $8,938Total assets$5,880 $51,331 $40,790 $3,811 $— $101,812- 71 -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, 2015 Revenue, from external customers$28,627 $219,391 $215,179 $— $— $463,197Inter-segment revenue41 — 498 — (539) —Total revenue$28,668 $219,391 $215,677 $— $(539) $463,197Gross margin, from external customers$16,111 $89,682 $81,917 $— $— $187,710Inter-segment gross margin25 (477) 451 — 1 —Total gross margin$16,136 $89,205 $82,368 $— $1 $187,710Gain (loss) on sale and exit of businesses$15,918 $— $3,917 $— $— $19,835Business reorganization$1,108 $669 $2,883 $1,168 $— $5,828EBITDA (loss) (a)$13,354 $2,851 $(207) $(9,178) $— $6,820Depreciation and amortization604 1,951 802 488 — 3,845Intercompany interest income (expense), net— — (526) 526 — —Interest income (expense), net(342) (276) (94) (10) — (722)Income (loss) from continuing operations before income taxes$12,408 $624 $(1,629) $(9,150) $— $2,253Provision for (benefit from) income taxes58 776 (176) (12) — 646As of December 31, 2015 Accounts receivable, net$3,155 $29,824 $29,441 $— $— $62,420Long-lived assets, net of accumulated depreciation and amortization$36 $7,382 $1,859 $674 $— $9,951Total assets$7,766 $49,246 $53,557 $14,380 $— $124,949 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$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- 72 -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, 2016, 2015 and 2014 and long-lived assets and net assets by geographic area as ofDecember 31, 2016, 2015 and 2014 were as follows: Information by geographic regionUnitedKingdom Australia China UnitedStates ContinentalEurope OtherAsia Pacific OtherAmericas TotalFor the Year Ended December 31, 2016 Revenue (a)$116,508 $181,899 $16,203 $14,690 $53,837 $38,737 $870 $422,744For the Year Ended December 31, 2015 Revenue (a)$154,931 $159,539 $25,401 $27,965 $60,248 $34,451 $662 $463,197For the Year Ended December 31, 2014 Revenue (a)$181,155 $184,853 $20,976 $49,375 $103,018 $41,044 $771 $581,192As of December 31, 2016 Long-lived assets, net (b)$1,259 $4,023 $2,381 $369 $261 $645 $— $8,938Net assets$9,101 $10,732 $5,762 $4,854 $7,284 $4,279 $(127) $41,885As of December 31, 2015 Long-lived assets, net (b)$1,707 $4,115 $2,835 $718 $144 $432 $— $9,951Net assets$17,371 $9,920 $9,386 $13,467 $7,176 $3,875 $(15) $61,180As of December 31, 2014 Long-lived assets, net (b)$1,834 $5,404 $2,186 $1,429 $330 $636 $23 $11,842Net assets$18,894 $13,913 $6,198 $7,255 $9,366 $3,574 $57 $59,257 (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.- 73 -IndexHUDSON GLOBAL, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except share and per share amounts)NOTE 20 – SELECTED QUARTERLY FINANCIAL DATA (unaudited) For The Year Ended December 31, 2016 Firstquarter Second quarter Thirdquarter Fourth quarterRevenue $101,227 $113,067 $108,136 $100,314Gross margin $41,262 $46,839 $43,542 $42,774Operating income (loss) $(3,705) $(2,425) $(786) $(671)Income (loss) from continuing operations $(3,570) $(3,347) $(1,908) $(108)Income (loss) from discontinued operations $83 $209 $35 $(184)Net income (loss) $(3,487) $(3,138) $(1,873) $(292)Basic and diluted earnings (loss) per share from continuingoperations $(0.10) $(0.10) $(0.06) $—Basic and diluted earnings (loss) per share from discontinuedoperations $— $0.01 $— $(0.01)Basic and diluted earnings (loss) per share $(0.10) $(0.09) $(0.06) $(0.01)Basic and diluted weighted average shares outstanding (inthousands) 34,631 33,252 33,572 32,227Common stock equivalents and outstanding stock options excludedfrom the calculation of diluted earnings (loss) per share (inthousands) 1,345 548 299 604 For The Year Ended December 31, 2015 Firstquarter Second quarter Thirdquarter Fourth quarterRevenue $124,317 $122,743 $110,028 $106,109Gross margin $47,904 $50,222 $45,145 $44,439Operating income (loss) $(6,716) $13,643 $(3,826) $140Income (loss) from continuing operations $(6,654) $12,774 $(2,029) $(2,484)Income (loss) from discontinued operations $(184) $1,103 $(55) $(142)Net income (loss) $(6,838) $13,877 $(2,084) $(2,626)Basic and diluted earnings (loss) per share from continuingoperations $(0.20) $0.38 $(0.06) $(0.07)Basic and diluted earnings (loss) per share from discontinuedoperations $(0.01) $0.03 $— $—Basic and diluted earnings (loss) per share $(0.21) $0.41 $(0.06) $(0.08)Basic weighted average shares outstanding (in thousands) 33,053 33,525 34,687 34,274Diluted weighted average shares outstanding (in thousands) 33,053 34,007 34,687 34,274Common stock equivalents and outstanding stock options excludedfrom the calculation of diluted earnings (loss) per share (inthousands) 1,903 979 1,124 886Earnings (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. - 74 -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 Chief Executive Officer and its Chief Financial Officer, has conducted anevaluation of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) under theSecurities Exchange Act of 1934, as amended. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concludedthat the Company’s disclosure controls and procedures were effective as of December 31, 2016.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, 2016 thathave materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.ITEM 9B. OTHER INFORMATIONNone. - 75 -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 website 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 1325 Avenue of the Americas, 12th Floor, New York, New York 10019. We intend to satisfy the disclosurerequirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, our Code of Ethics by posting such information on our website atwww.hudson.com. We are not including the information contained on our website 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, 2016. 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 73,500 $8.66 — 2009 Incentive Stock and Awards Plan 50,000 2.49 2,834,298(1)Employee Stock Purchase Plan — — 116,329(2)Total 123,500 $6.16 2,950,627 (1)Excludes 480,000 shares of unvested restricted common stock previously issued under the Hudson Global, Inc. Long Term Incentive Planand 2009 Incentive Stock and Awards Plan.(2)The Company suspended the Hudson Global, Inc. Employee Stock Purchase Plan effective January 1, 2009.- 76 -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.”- 77 -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 35Consolidated Statements of Operations For The Years Ended December 31, 2016, 2015 and 2014 37Consolidated Statements of Comprehensive Income (Loss) For The Years Ended December 31, 2016, 2015 and 2014 38Consolidated Balance Sheets As Of December 31, 2016 and 2015 39Consolidated Statements of Cash Flows For The Years Ended December 31, 2016, 2015 and 2014 40Consolidated Statement of Stockholders’ Equity For The Years Ended December 31, 2016, 2015 and 2014 41Notes to Consolidated Financial Statements 412. 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. - 78 -SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANTHUDSON GLOBAL, INC.CONDENSED STATEMENTS OF OPERATIONS (PARENT COMPANY ONLY)(in thousands) Year Ended December 31, 2016 2015 2014Operating expenses: Selling, general and administrative expenses $10,451 $13,327 $16,948Depreciation and amortization 405 488 541Business reorganization (16) 1,168 967Operating loss (10,840) (14,983) (18,456)Other income (expense): Interest, net 197 516 103Corporate costs allocation and other, net 4,195 5,318 8,150Income (loss) from parent before provision for income taxes (6,448) (9,149) (10,203)Provision for (benefit from) income taxes for parent company (9) (12) (4)Equity in earnings (losses) of subsidiaries, net of income taxes (2,351) 11,466 (2,995)Net income (loss) $(8,790) $2,329 $(13,194) See notes to condensed financial statements.- 79 -HUDSON GLOBAL, INC.CONDENSED BALANCE SHEETS (PARENT COMPANY ONLY)(in thousands) December 31, 2016 2015ASSETS Current assets: Cash and cash equivalents $2,414 $13,025Prepaid and other 220 196Total current assets 2,634 13,221Property and equipment, net 359 674Investment in and advances to/from subsidiaries 39,965 50,770Other assets 818 485Total assets $43,776 $65,150 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable, accrued expenses and other current liabilities $1,425 $3,494Total current liabilities 1,425 3,494Other non-current liabilities 466 476Total liabilities 1,891 3,970Stockholders’ equity 41,885 61,180Total liabilities and stockholders' equity $43,776 $65,150 See notes to condensed financial statements.- 80 -HUDSON GLOBAL, INC.CONDENSED STATEMENTS OF CASH FLOWS (PARENT COMPANY ONLY)(in thousands) For the Years Ended December 31, 2016 2015 2014Cash flows from operating activities: Net income (loss) $(8,790) $2,329 $(13,194)Adjustments to reconcile net income (loss) to net cash provided by (used in) operatingactivities: Dividends received from subsidiaries 1,593 7,468 —Non-cash (income) losses from subsidiaries, net of taxes 2,363 (11,466) 2,995Depreciation and amortization 405 488 541Stock-based compensation 390 637 405Other, net — — 248Changes in operating assets and liabilities: (Increase) decrease in prepaid and other assets (447) 1,921 (744)(Increase) decrease in due from subsidiaries 4,959 14,503 11,910Increase (decrease) in accounts payable, accrued expenses and other liabilities (1,251) (1,269) 837Increase (decrease) in accrued business reorganization (825) (120) 793Net cash provided by (used in) operating activities (1,603) 14,491 3,791Cash flows from investing activities: Capital expenditures — (897) —Advances to and investments in subsidiaries, net (415) (5,945) (4,126)Net cash provided by (used in) investing activities (415) (6,842) (4,126)Cash flows from financing activities: Borrowings under credit facility — — 22,081Repayments under credit facility — — (22,081)Dividend payments (3,401) — —Purchase of treasury stock (5,127) (1,386) —Purchase of restricted stock from employees (65) (244) (129)Net cash provided by (used in) financing activities (8,593) (1,630) (129)Net increase (decrease) in cash and cash equivalents (10,611) 6,019 (464)Cash and cash equivalents, beginning of the period 13,025 7,006 7,470Cash and cash equivalents, end of the period $2,414 $13,025 $7,006 See notes to condensed financial statements.- 81 -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.K., Australia and New Zealand, there are restrictions on the Parent Company's ability to obtain fundsfrom certain of its subsidiaries through dividends, intercompany expenses or interest (refer to Note 15, “Credit Agreements”, to the Parent Company'sConsolidated Financial Statements). As of December 31, 2016, the Parent Company was in a stockholders' equity position of $41,885, and approximately$13,831 constituted restricted net assets as defined in Rule 4-08(e)(3) of Regulation S-X. The restricted net assets of the Parent Company's subsidiariesexceeded 25% of the consolidated net assets of the Parent Company and its subsidiaries, thus requiring this Schedule I, “Condensed Financial Information ofthe Registrant.” Accordingly, the results of operations and cash flows for the years ended December 31, 2016, 2015 and 2014, and the balance sheets as ofDecember 31, 2016 and 2015 have been presented on a “Parent-only” basis. In these statements, the Parent Company's investments in its consolidatedsubsidiaries are presented under the equity method of accounting. The Parent-only financial statements should be read in conjunction with the ParentCompany's audited Consolidated Financial Statements included elsewhere herein.NOTE 2 - DIVIDENDS RECEIVEDThe Parent Company received dividends of $1,593, $7,468 and $0 in 2016, 2015 and 2014, respectively, from its consolidated subsidiaries.NOTE 3 - CREDIT AGREEMENTSSeveral of the Parent Company's subsidiaries have credit agreements with lenders. Borrowings under the credit agreements are based on an agreedpercentage of eligible accounts receivable. Refer to Note 15, “Credit Agreements” to the Parent Company's Consolidated Financial Statements for furtherdetails.- 82 -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 Deductions EndDescriptions of Period (Recoveries) Other of Period2014 Allowance for Doubtful Accounts $1,108 97 219 $986Deferred tax assets-valuation allowance $162,278 (3,427) — $158,8512015 Allowance for Doubtful Accounts $986 178 304 $860Deferred tax assets-valuation allowance $158,851 447 — $159,2982016 Allowance for Doubtful Accounts $860 226 287 $799Deferred tax assets-valuation allowance $159,298 (5,045) (2,089) $156,342- 83 -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/ STEPHEN A. NOLAN Stephen A. Nolan Chief Executive Officer (Principal Executive Officer) Date:March 3, 2017 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/ STEPHEN A. NOLAN Chief Executive Officer and Director(Principal Executive Officer) March 3, 2017Stephen A. Nolan /s/ PATRICK LYONS Chief Financial Officer and Chief AccountingOfficer(Principal Financial Officer and PrincipalAccounting Officer) March 3, 2017Patrick Lyons /s/ JEFFREY E. EBERWEIN Chairman March 3, 2017Jeffrey E. Eberwein /s/ ALAN L. BAZAAR Director March 3, 2017Alan L. Bazaar /s/ RICHARD K. COLEMAN, JR. Director March 3, 2017Richard K. Coleman, Jr. /s/ IAN V. NASH Director March 3, 2017Ian V. Nash - 84 -HUDSON GLOBAL, INC.FORM 10-KEXHIBIT INDEXExhibitNumber Exhibit Description(2.1) 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)).(2.2) Asset Purchase Agreement, dated as of May 8, 2015, by and among Hudson Global, Inc., Hudson Global Resources Management, Inc. andMastech, Inc. (incorporated by reference to Exhibit 2.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated May 8, 2015 (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 15, 2015 (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 15, 2015 (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) 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)).(4.3) Receivables Finance Agreement Amendment, dated September 15, 2016, between Lloyds Bank Commercial Finance Limited and HudsonGlobal Resources Limited (incorporated by reference to Exhibit 4.1 to Hudson Global, Inc.’s Current Report on Form 8-K dated September15, 2016 (File No. 0-50129)).(4.4) Finance Agreement, dated as of October 27, 2015, among Hudson Global Resources (Aust) Pty Limited, Hudson Global Resources (NZ)Limited, and National Australia Bank Limited (incorporated by reference to Exhibit 4.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated October 30, 2015 (File No. 0-50129)).(4.5) NAB Corporate Receivables Facility Agreement, dated as of October 27, 2015, among Hudson Global Resources (Aust) Pty Limited,Hudson Global Resources (NZ) Limited, and National Australia Bank Limited (incorporated by reference to Exhibit 4.2 to Hudson Global,Inc.'s Current Report on Form 8-K dated October 30, 2015 (File No. 0-50129)).(4.6) BNZ Corporate Receivables Facility Agreement, dated as of October 27, 2015, among Hudson Global Resources (NZ) Limited, HudsonGlobal Resources (Aust) Pty Limited, and Bank of New Zealand (incorporated by reference to Exhibit 4.3 to Hudson Global, Inc.'s CurrentReport on Form 8-K dated October 30, 2015 (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 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)).(10.3)* 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)).(10.4)* 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 April 13, 2016 (File No. 0-50129)).(10.5)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Stock Option Agreement (New Non-Employee Directors) (incorporatedby reference to Exhibit 10.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated October 2, 2015 (File No. 0-50129)).(10.6)* 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)).- 85 -HUDSON GLOBAL, INC.FORM 10-KEXHIBIT INDEX(10.7)* 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)).(10.8)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Award Agreement (Executive Officers and GlobalLeadership Team) for awards made on or after November 6, 2015. (incorporated by reference to Exhibit 10.10 to Hudson Global, Inc.’sAnnual Report on Form 10-K dated March 3, 2016 (File No. 0-50129)).(10.9)* Form of Hudson Global, Inc. 2009 Incentive Stock and Awards Plan Restricted Stock Unit Award Agreement (incorporated by reference toHudson Global, Inc.’s Quarterly Report on Form 10-Q dated April 28, 2016 (File No. 0-50129)).(10.10)* Summary of Hudson Global, Inc. Compensation for Non-employee Members of the Board of Directors.(10.11)* 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)).(10.12)* Amended and Restated Executive Employment Agreement, dated April 30, 2016 and effective as of May 18, 2015, between HudsonGlobal, Inc. and Stephen A. Nolan (incorporated by reference to Exhibit 10.2 to Hudson Global, Inc.’s Current Report on Form 8-K datedApril 30, 2016 (File No. 0-50129)).(10.13)* Amended and Restated Restricted Stock Award Agreement, dated April 30, 2016 and effective as of May 18, 2015, between HudsonGlobal, Inc. and Stephen A. Nolan (incorporated by reference to Exhibit 10.1 to Hudson Global, Inc.’s Current Report on Form 8-K datedApril 30, 2016 (File No. 0-50129)).(10.14)* Executive Employment Agreement, dated as of May 18, 2015, 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 May 18, 2015 (File No. 0-50129)).(10.15)* Restricted Stock Award Agreement, dated as of May 18, 2015, between Hudson Global, Inc. and Stephen A. Nolan (incorporated byreference to Exhibit 10.2 to Hudson Global, Inc.'s Current Report on Form 8-K dated May 18, 2015 (File No. 0-50129)).(10.16)* Promotion Letter Agreement, dated as of August 7, 2015, between Hudson Global, Inc. and Patrick Lyons (incorporated by reference toExhibit 10.1 to Hudson Global, Inc.'s Current Report on Form 8-K dated August 7, 2015 (File No. 0-50129)).(10.17) Promotion Letter Agreement, dated as of August 6, 2015, between Hudson Global, Inc. and David F. Kirby. (incorporated by reference toExhibit 10.8 to Hudson Global, Inc.’s Annual Report on Form 10-K dated March 3, 2016 (File No. 0-50129)).(21) Subsidiaries of Hudson Global, Inc.(23) Consent of KPMG LLP.(31.1) Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.(31.2) Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.(32.1) Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.(32.2) Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.(99.1) Proxy Statement for the 2017 Annual Meeting of Stockholders [To be filed with the Securities and Exchange Commission underRegulation 14A within 120 days after December 31, 2016; except to the extent specifically incorporated by reference, the Proxy Statementfor the 2017 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, 2016 are filed herewith,formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the years ended December31, 2016, 2015 and 2014, (ii) the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015and 2014, (iii) the Consolidated Balance Sheets as of December 31, 2016 and 2015, (iv) the Consolidated Statements of Cash Flows for theyears ended December 31, 2016, 2015 and 2014, (v) the Consolidated Statement of Stockholders’ Equity for the years ended December 31,2016, 2015 and 2014, and (vi) Notes to Consolidated Financial Statements.* A management contract or compensatory plan or arrangement- 86 -Exhibit 21Subsidiaries of Hudson Global, Inc. Subsidiary State or jurisdictionof incorporation Percentage ownedHudson Global Resources (Aust) Pty Limited Australia 100%Hudson Highland (APAC) Pty Limited Australia 100%Hudson Belgium SA NV Belgium 100%Hudson Global Resources Belgium NV Belgium 100%James Botrie and Associates, Inc. Canada 100%Hudson Recruitment Shanghai Limited China 100%Hudson Highland Group Holdings International, Inc. Delaware 100%Hudson Global Resources S.A.S. France 100%Hudson Global Resources Hong Kong Limited Hong Kong 100%Hudson HoldCo (Hong Kong) Limited Hong Kong 100%Hudson Global Resources Jersey Limited Jersey 100%Hudson Europe BV Netherlands 100%Hudson Global Resources (NZ) Ltd New Zealand 100%Hudson Global Resources Management, Inc. Pennsylvania 100%Hudson Global Resources Sp.Zo.O Poland 100%Hudson Global Resources (Singapore) Pte Limited Singapore 100%Hudson Global Resources Madrid S.L. Spain 100%Hudson Global Resources S.L. Spain 100%Hudson Global Resources Switzerland Switzerland 100%Hudson Global Resources Limited United Kingdom 100%Listed above are certain consolidated directly or indirectly owned Hudson Global, Inc. subsidiaries included in the consolidated financial statements ofHudson Global, Inc. Unlisted subsidiaries, considered in the aggregate, do not constitute a significant subsidiary.Exhibit 23Consent of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersHudson Global, Inc.: We consent to the incorporation by reference in the registration statements (No. 333-119563) on Form S-4 and (Nos. 333-104209, 333-104210, 333-104212,333-117005, 333-117006, 333-126915, 333-161170, 333-161171, 333-176007, 333-182973 and 333-212941) on Form S-8 of Hudson Global, Inc. of ourreports dated March 3, 2017, with respect to the consolidated balance sheets of Hudson Global, Inc. and subsidiaries as of December 31, 2016 and 2015, andthe related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholders' equity for each of the years in the three-yearperiod ended December 31, 2016, and the related financial statement schedules listed in Item 15(2), and the effectiveness of internal control over financialreporting as of December 31, 2016, which reports appear in the December 31, 2016 annual report on Form 10-K of Hudson Global, Inc./s/ KPMG LLP New York, New York March 3, 2017Exhibit 31.1 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 the 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:March 3, 2017/s/ STEPHEN A. NOLAN Stephen A. Nolan Chief Executive Officer Exhibit 31.2 CERTIFICATIONS I, Patrick Lyons, 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 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)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:March 3, 2017/s/ PATRICK LYONS Patrick Lyons Chief Financial Officer and Chief Accounting OfficerExhibit 32.1 Written Statement of the 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 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, 2016 (the “Report”) fullycomplies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in allmaterial respects, the financial condition and results of operations of the Company. /s/ STEPHEN A. NOLAN Stephen A. Nolan March 3, 2017 Exhibit 32.2 Written Statement of the Chief Financial Officer and Chief Accounting 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 Chief Financial Officer and Chief Accounting Officer of HudsonGlobal, 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, 2016 (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/ PATRICK LYONS Patrick Lyons March 3, 2017 

Continue reading text version or see original annual report in PDF format above