What changed in this filing

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Item 1A. Risk Factors

2022-07-01 compared with 2021-07-15 · 50 added, 37 removed, 80 unchanged (52% of the section changed)

4 unchanged sentences

These forward-looking statements involve risks and uncertainties.

Our actual results could differ materially from those forward-looking statements as a result of many factors, including those more fully described below and elsewhere in our public reports.

Our actual results

could differ materially from those forward-looking statements as a result of many factors, including those more fully described below and elsewhere in our public reports.

We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

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The tightening of credit in financial markets, worsening of economic conditions, a prolonged global, national or regional economic recession or other similar events could have a material adverse effect on the demand for our products and on our sales, pricing and profitability.

We are unable to predict the likely occurrence or duration of these adverse economic conditions and the impact these events may have on our operations and the laboratory furniture industry in general.

We are unable to predict the likely occurrence or duration of these adverse economic conditions and the impact these events may have on our operations and the end users who purchase our products.

If we fail to compete effectively, our revenue and profit margins could decline.

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If we lose a large customer, our sales and profits would decline.

We have substantial sales to three of our domestic customers.

We have substantial sales to three of our domestic channel partners.

The combined sales to two dealers and our national stocking distributor accounted for approximately 38% of our sales in fiscal year 2022.

Loss of all or a part of our sales to a large customer would have a material effect on our revenues and profits until an alternative channel partner could be developed.

Loss of all or a part of our sales to a large channel partner would have a material effect on our revenues and profits until an alternative channel partner could be developed.

An increase in the price of raw materials and energy could negatively affect our sales and profits.

It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates, as products are frequently to be installed in buildings yet to be constructed.

It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates, as products are frequently installed in buildings yet to be constructed.

Since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor, material and energy costs between the quotation of an order and the delivery of the products.

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Numerous factors beyond our control, such as general economic conditions, competition, worldwide demand, labor costs, energy costs, and import duties and other trade restrictions, influence prices for our raw materials.

During the fiscal year ended April 30, 2022, prices for two of our principal raw materials, steel and epoxy resin, increased 149% and 162%, respectively.

We have not always been able, and in the future we might not be able, to increase our product prices in amounts that correspond to increases in costs of raw materials, without materially and adversely affecting our sales and profits.

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When sales do not meet our expectations, our operating results will be reduced for the relevant quarters.

Our principal markets are in the laboratory building construction industry.

Our principal markets are in the laboratory and healthcare building construction industry.

This industry is subject to significant volatility due to various factors, none of which is within our control.

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• Failing to anticipate the need for, appropriately invest in and effectively manage the human, information technology and logistical resources necessary to support our business, including managing the costs associated with such resources;

• Increased costs, and the need to devote additional resources to comply with more stringent SEC reporting requirements if we become an "accelerated filer" under applicable SEC rules;

• Failing to generate sufficient future positive operating cash flows and, if necessary, secure adequate external financing to fund our growth;

• Interruptions in service by common carriers that ship goods within our distribution channels;

• Increased costs, potential operational shutdowns, supply chain disruptions and other disruptive factors related to the coronavirus pandemic.

In addition, the timing of our revenue recognition could be negatively impacted by government shutdowns and site closures.

Cybersecurity incidents could expose us to liability and damage our reputation and our business.

Disruptions of our supply chain could have a material adverse effect on our operating and financial results.

Disruption of our supply chain capabilities due to trade restrictions, political instability, severe weather, natural disasters, public health crises, war, terrorism, or labor supply could impair our ability to source key components.

If we are required to obtain these components from an alternate source, we may not be able to obtain pricing on as favorable terms.

Additionally, we may be forced to pay additional transportation costs and/or we may experience a delay in our ability to meet demand for our products.

Any of the foregoing disruptions could exacerbate other risk factors and have an adverse effect on operating results and financial condition.

During fiscal year 2022, we experienced increases in raw material costs as a result of supply chain disruptions, and we could continue to experience such increases.

We recently experienced a network cyber attack that disrupted our domestic operations.

Future cybersecurity incidents could expose us to liability and damage our reputation and our business.

We collect, process, store, and transmit large amounts of data, and it is critical to our business strategy that our facilities and infrastructure remain secure and are perceived by the marketplace to be secure.

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Failure to prevent or mitigate data loss or other security incidents could expose us or our customers, associates and vendors to a risk of loss or misuse of such information, cause customers to lose confidence in our data protection measures, damage our reputation, adversely affect our operating results or result in litigation or potential liability for us.

While we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber risks, this insurance coverage is subject to a retention amount and may not be applicable to a particular incident or otherwise may be insufficient to cover all our losses beyond any retention.

Similarly, we expect to continue to make investments in our information technology infrastructure.

As disclosed in our Form 10-Q for the period ended October 31, 2021, on November 5, 2021, the Company experienced a criminal network cyber attack that led to a disruption of our domestic operations, including manufacturing, engineering, administration, and sales operations.

By November 15, 2021, we had substantially restored our operations.

We engaged third party experts, including a cybersecurity firm, to perform a fulsome forensic investigation of this attack;

among other things, the cybersecurity firm assessed whether any confidential or sensitive data had been compromised.

Based on the results of the investigation, we do not believe any confidential or sensitive data has been downloaded, stolen from the Company's systems, or otherwise exfiltrated.

The Company had insurance coverage against recovery costs and business interruption resulting from cyber attacks.

However, the Company incurred expenses and losses in excess of its existing insurance coverage.

As of April 30, 2022, the Company no longer had active insurance coverage against potential cyber attacks.

While the Company will seek to obtain insurance for losses related to any similar future events, there can be no assurance that such insurance will be available to the Company.

Any future such events, particularly if not covered by insurance, could have material adverse effects on the Company's business and/or results of operations.

Additionally, we expect to continue to make investments in our information technology infrastructure.

The implementation of these investments may be more costly or take longer than we anticipate, or could otherwise adversely affect our business operations, which could negatively impact our financial position, results of operations or cash flows.

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trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.

government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements, such as the recent replacement of the North American Free Trade Agreement with a new agreement among the U.S., Canada and Mexico.

It has also initiated tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of goods.

In response, certain foreign governments have imposed retaliatory tariffs on goods that their countries import from the U.S.

Changes in U.S.

trade policy could result in one or more foreign governments adopting responsive trade

policies making it more difficult or costly for us to import our products or raw materials from those countries.

This, together with tariffs already imposed, or that may be imposed in the future, by the U.S., could require us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.

We cannot predict the extent to which the U.S.

or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products or raw materials in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.

Changes in U.S.

trade policy could result in one or more foreign governments adopting responsive trade policies making it more difficult or costly for us to import our products or raw materials from those countries.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S.

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The impact of COVID-19 and future pandemics could adversely affect our business, results of operations, financial condition, and liquidity.

In December 2019, a novel coronavirus ("COVID-19") emerged and has subsequently spread worldwide.

On March 11, 2020, the World Health Organization ("WHO") recognized COVID-19 as a global pandemic, prompting many national, regional, and local governments, including ones in the markets in which the Company operates, to implement preventative or protective measures, such as travel and business restrictions, temporary store closures, and wide-ranging quarantines and stay-at-home orders.

The global impact of the outbreak continues to evolve and many countries continue to react with mandated business and school closures, travel restrictions, and quarantines.

While we have been able to keep our operations open for the most part during the pandemic and COVID-19 vaccines are now being administered throughout the world, COVID-19 could continue to have material and adverse effects on our ability to successfully operate due to, among other factors:

• A general decline in business activity, especially as it relates to our customers' expansion or consolidation activities;

• The destabilization of the financial markets, which could negatively impact our customer growth and access to capital, along with our customers' ability to make payments for their purchase orders;

• Severe disruptions to and instability in the global financial markets, and deterioration in credit and financing conditions, which could affect our access to capital necessary to fund business operations or current investment and growth strategies;

• The potential negative impact on the health of our personnel, or the personnel of our customers, vendors, and partners, especially if a significant number of them are affected;

• A material disruption in our supply chain, which has affected and could continue to affect our ability to source products from vendors on a timely basis or on favorable terms.

We are continuing to closely monitor developments related to the COVID-19 pandemic to assess its impact on our business;

however, due to the wide-ranging and highly uncertain nature of this event, it currently is not possible to estimate the ultimate direct and indirect impact of COVID-19 on our business, results of operations, financial condition, or liquidity with reasonable certainty.

Thus far, throughout the pandemic, we believe we have successfully navigated the risks associated with COVID-19 and have been able to successfully maintain our business operations.

The extent of the continued impact of COVID-19 on our business and financial results depends on future developments, including the emergence of new and different strains of the virus and the effectiveness of vaccinations and other public health measures.

1 unchanged sentence

The sweeping nature of pandemics makes it extremely difficult to predict how and to what extent our business and operations could be affected in the long run.

If a significant percentage of our workforce or the workforce of our third party business partners are unable to work, including because of illness or travel or government restrictions in connection with the COVID-19 pandemic or any future pandemic or disease outbreak, our operations may be negatively impacted.

In response to the health and safety risks and challenges presented by the COVID-19 pandemic, the Company has been proactively and regularly implementing measures to protect its employees.

These measures include, but are not limited to, the following:

• Abiding by national, state, and local recommendations including requiring the wearing of protective face masks and practicing of social distancing;

• Arranging for regular cleaning services for Company facilities;

• Providing hand sanitizers and other disinfectants at workstations;

• Adopting remote working protocols, systems, and processes for nonessential employees to work from home;

• Conducting employee temperature checks, and on some occasions, requiring mandatory testing for employees and self-quarantine protocols pending test results.

These measures have had the effect, and are likely to continue to have the effect, of increasing our operating expenses, and could also have the effect of disrupting our operations and/or making them less efficient, which could have a negative effect on our financial results.

Our workforce, and the workforce of our vendors, service providers, and counterparties, could be affected by COVID-19, which could result in an adverse impact on our ability to conduct business.

We are continuing to take precautions to protect the safety and well-being of our employees while striving to provide uninterrupted services to our customers.

Since the onset of the pandemic, we have continued to support our business operations.

However, no assurance can be given that these actions will be sufficient, nor can we predict the level of disruption that will occur to our employees' ability to provide customer support and service.

In addition, the increase in the number of our employees working remotely has increased certain risks to our business, including increased demand on our information technology resources and systems, greater potential for phishing and other cyber attacks, and an increase in the number of points of potential attack.

Any failure to manage these risks effectively and to identify and respond to any cyber attacks on a timely basis may adversely affect our business.

New processes, procedures, and controls may be required to respond to any changes in our business

Further, should any key employees become ill from COVID-19 and unable to work, our ability to operate our internal controls may be adversely impacted.

Additional factors related to COVID-19 or other major public health issues that could have material and adverse effects on our ability to successfully operate include, but are not limited to, the following:

• The efforts of governmental and non-governmental organizations in combating the spread and severity of COVID-19 or other major public health issues may not be effective.

Further, we cannot predict how legal and regulatory responses to concerns about COVID-19 or other major public health issues will impact our business;

• A general decline in business activity, especially as it relates to our customers' expansion or consolidation activities;

• A material disruption in our supply chain, which could affect our ability to source products from vendors on a timely basis or on favorable terms.

Sales to customers outside the United States or with international operations expose us to risks inherent in international sales.

5 unchanged sentences

Our international expansion efforts may not be successful in creating further demand for our products outside of the United States or in effectively selling our products in the international markets we enter.

Unresolved Staff Comments

Not Applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors