Item 1A. Risk Factors
Item 1A. RISK FACTORS
The discussion of our business and operations included in this Quarterly Report on Form 10-Q should be read together with the risk factors described in Item 1A. of our Annual Report on Form 10-K for the fiscal year ended April 30, 2022. They describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties, together with other factors described elsewhere in this Report, have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. New risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our financial condition or financial results.
We continue to experience volatility in our business driven by global economic conditions and supply chain disruptions, which have had and are continuing to have a negative effect on our liquidity, caused us to express substantial doubt about our ability to continue as a going concern, and could cause us to default on our credit facilities, giving our lender the right to foreclose on our assets, or we could have difficulty finding additional financing, all which would have a material adverse effect on our business, financial condition and results of operations.
Global economic conditions and supply chain disruptions have and will continue to cause volatility in our cash flow, pricing, order volumes lead times, competitiveness, revenue cycles, and production costs. We believe it is likely these conditions will continue to have negative impacts in fiscal 2023. Our ability to fund inventory levels, operations and capital expenditures in the future will be dependent on our ability to generate cash flow from operations in these conditions, to maintain or improve margins, and to use funds from our credit facility. Our credit facility expires in April 2025, and it imposes restrictions limiting our ability to incur debt, contingent liabilities, lease obligations or liens; make a substantial change of ownership; or acquire or purchase a business or its assets. Our credit facilities also impose certain financial covenants on us which restrict the level of cash dividends and capital expenditures. A breach of any of these covenants could result in an event of default under our credit facilities. Upon the occurrence of an event of default, the lender could elect to declare any and all amounts outstanding under such facilities to be immediately due and payable, terminate all
30
Table of Contents
commitments to extend further credit, and foreclose on our assets, which would have a material adverse effect on our business, financial condition, and results of operations.
We cannot be certain we will not experience future disruptions or need additional liquidity to fund inventory levels, operations, and capital expenditures. We will need to seek forms of additional liquidity to meet our obligations as they come due in the 12 months following the date of this Report, and we cannot be assured that such liquidity will be available or the form of such liquidity, such as equity raises or debt financing. Although we are in the process of obtaining additional liquidity through various means as described elsewhere in this Report, these plans are not finalized and are subject to market conditions that are not within our control. These conditions and the conditions described in the foregoing paragraph raise substantial doubt about our ability to continue as a going concern. This determination could cause our existing and prospective suppliers, customers, and financing sources to not do business with us. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. The condensed consolidated financial statements included in this Report do not include any adjustments that could result from this uncertainty. If we are required to realize our assets and discharge our liabilities other than in the normal course of business, it would cause investors to suffer the loss of all or a substantial portion of their investment. The determination that there is substantial doubt about our ability to continue as a going concern and our inability to adequately improve our liquidity position each could have a material adverse effect on our business, financial condition, and results of operations. See “Note 1. Basis of Presentation – Liquidity and Going Concern” of the Notes to our Condensed Consolidated Financial Statements included in this Report.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Share Repurchases
During the three months ended October 29, 2022 and October 30, 2021, we did not repurchase any shares of our common stock.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.