What changed in this filing

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Item 1A. Risk Factors

2022-10-13 compared with 2021-10-13 · 97 added, 65 removed, 272 unchanged (37% of the section changed)

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You should consider the following factors carefully, in addition to other information contained in this Annual Report on Form 10-K, before making an investment decision with respect to our securities.

We face risks related to the ongoing COVID-19 pandemic and actions in response thereto, which have exacerbated or could further exacerbate conditions in our other risk factors noted below.

The risks described below are not the only risks we face.

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New product development itself is inherently risky, as research failures, competitive barriers arising out of the intellectual property rights of others, launch and production difficulties, customer rejection and unexpectedly short product life cycles as well as other factors and events beyond our control may occur even after substantial effort and expense on our part.

As a result of the COVID-19 pandemic, we, at times, experienced limitations on our ability to conduct plant tests with customers, which impacted our sales.

We may, at times, experience limitations on our ability to conduct plant tests with customers, which may impact our sales.

Even in the case of a successful launch of a new product, the ultimate benefit we realize may be uncertain if the new product “cannibalizes” sales of our existing products beyond expected levels.

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Factors that may affect our quarterly operating results include:

• fluctuating demand for our products and services;

• fluctuating demand for our products and services, including as a result of changes in the level of pet ownership and spending on pets;

• size and timing of sales of our products and services;

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• the overall tax rate of our business, which may be affected by a number of factors, including the use of tax attributes, the financial results of our international subsidiaries and the timing, size and integration of acquisitions we may make from time to time;

• the occurrence of a widespread outbreak of an illness or any other communicable disease, any other public health crisis, natural disaster or other force majeure event ;

• the occurrence of a widespread outbreak of an illness or any other communicable disease, any other public health crisis, natural disaster, force majeure event or other catastrophic or unforeseen events ;

• the incurrence of restructuring, impairment or other charges;

• general economic conditions and specific economic conditions in our industry and the industries of our customers.

The Company has experienced an increase in sales as a result of higher levels of pet ownership and spending on pets.

Additionally, the continued COVID-19 pandemic and its impact may exacerbate these factors and cause greater fluctuations in our operating results from quarter-to-quarter.

Additionally, the effects from and the continuation of the COVID-19 pandemic and its impacts may exacerbate these factors and cause greater fluctuations in our operating results from quarter-to-quarter.

To the extent these factors slow or change, consumer demand for our products may not be sustained or may reverse, and our results could be adversely affected.

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Investors should not rely on the results of one quarter as an indication of our future performance.

Uncertainties in economic conditions and their impact on consumer spending patterns could adversely impact our business, financial condition, and results of operations.

The United States has from time to time experienced challenging economic conditions, including in connection with the COVID-19 pandemic, and the global financial markets have recently undergone and may continue to experience significant volatility and disruption.

Our business, financial condition and results of operations may be materially adversely affected by changes in consumer confidence, levels of unemployment, inflation, interest rates, tax rates and general uncertainty regarding the overall future economic environment.

The keeping of pets and the purchase of pet-related products may constitute discretionary spending for some consumers and any material decline in the amount of consumer discretionary spending may reduce overall levels of pet ownership or spending on pets.

As a result, a recession or slowdown in the economy may cause a decline in demand for our products.

If economic conditions result in decreased spending on pets and have a negative impact on our retail customers and suppliers, our business, financial condition and results of operations may be materially adversely affected.

Acquisitions involve a number of risks, any of which could cause us not to realize the anticipated benefits.

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• the ability to achieve identified operating and financial synergies anticipated to result from an acquisition;

• problems that could arise from the integration of the acquired business;

• problems that could arise from the integration of the acquired business, it's management or other unanticipated problems or liabilities;

• unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying our rationale for pursuing the acquisition.

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A limited number of customers account for a large percentage of our net sales, as described in Item 1 “Business” above.

The loss of, or a substantial decrease in the volume of, purchases by Walmart, Clorox or any of our other top customers could harm our sales and profitability.

The loss of, or a substantial decrease in the volume of, purchases by Walmart, or any of our other top customers could harm our sales and profitability.

In addition, an adverse change in the terms of our dealings with, or in the financial wherewithal or viability of, one or more of our significant customers could harm our business, financial condition and results of operations.

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As a result, changes in the strategies of our largest customers may reduce our net sales.

These strategic changes may include a reduction in the number of brands or variety of

products they carry or a shift of shelf space to private label products or increased use of global or centralized procurement initiatives.

These strategic changes may include a reduction in the number of brands or variety of products they carry or a shift of shelf space to private label products or increased use of global or centralized procurement initiatives.

Further, the continued impact of COVID-19 may result in a change in demand for or availability of our products as a result of customers modifying their restocking, fulfillment, or shipping practices in response to, or recovery from, the global pandemic.

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Price or trade concessions, or the failure to make them to retain customers, could adversely affect our sales and profitability.

The products we sell are subject to significant price competition.

The products we sell are subject to significant price competition and the price may fluctuate for a variety of reasons.

From time to time, we may need to reduce the prices for some of our products to respond to competitive and customer pressures and to maintain market share.

These pressures are often exacerbated during an economic downturn.

Additionally, we have, from time to time, experienced customer-driven price deductions on our products as a result of delayed shipments of products.

Any reduction in prices to respond to these pressures would reduce our profit margins.

In addition, if our sales volumes fail to grow sufficiently to offset any reduction in margins, our results of operations would suffer.

Because of the competitive environment facing many of our customers, particularly our high-volume mass merchandiser customers, these customers have increasingly sought to obtain price reductions, specialized packaging or other concessions from product suppliers.

Because of the competitive environment facing many of our customers, particularly our high-volume mass merchandiser customers, these customers have increasingly sought to obtain price reductions, deductions, specialized packaging or other concessions from product suppliers.

These business demands may relate to inventory practices, logistics or other aspects of the customer-supplier relationship.

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Further, if we are unable to maintain terms that are acceptable to our customers, these customers could reduce purchases of our products and increase purchases of products from our competitors, which would harm our sales and profitability.

Increases in energy, commodity and transportation costs would increase our operating costs, and we may be unable to pass all these increases on to our customers in the form of higher prices and surcharges.

If our energy, commodity and transportation costs increase disproportionately to our net sales, our earnings could be significantly reduced.

Increases in energy, commodity, transportation, labor and other costs would increase our operating costs, and we may be unable to pass all these increases on to our customers in the form of higher prices and surcharges.

If our energy, commodity, transportation, labor and/or other costs increase disproportionately to our net sales, our earnings could be significantly reduced.

Increases in our operating costs may reduce our profitability if we are unable to pass all the increases on to our customers through price increases or surcharges.

Sustained price increases, surcharges or price inflation (or inflation pressure generally), in turn, may lead to declines in volume, and while we seek to project tradeoffs between price increases, surcharges and inflation, on the one hand, and volume, on the other, there can be no assurance that our projections will prove to be accurate.

In particular, as a result of the COVID-19 pandemic and increased demand in trucking in certain areas of the United States following the reopening of state economies as well as increased shipping demand globally, which has impacted overseas vessel deliveries, the Company has experienced significant increases in transportation costs, decreases in the availability of shipping, and other global supply chain complexities and could experience delays in customer shipments.

Given the varying level of re-openings and the continued spread of the pandemic globally (and uncertainty regarding how areas will respond to a continued or renewed spread), it is possible that significant disruptions could occur if the pandemic continues to put pressure on transportation and shipping as a result of an imbalance of supply and demand or if there are continued increases in costs that we are unable to recover.

In particular, as a result of increased demand in trucking the United States as well as increased shipping demand globally, which has impacted overseas vessel deliveries, the Company has experienced significant increases in transportation costs, decreases in the availability of shipping, and other global supply chain complexities and could experience delays in customer shipments and increased customer deductions for late shipments.

Such increase in transportation costs may be further exacerbated by volatile global oil and gas markets.

It is possible that significant disruptions could occur if the effects of the COVID-19 pandemic and other global factors continue to put pressure on transportation and shipping as a result of an imbalance of supply and demand or if there are continued increases in costs that we are unable to recover.

The duration and magnitude of the increased transportation costs cannot be predicted at this time and there can be no assurances that such costs and/or shipping disruptions will not continue to increase.

We are subject to volatility in the price and availability of natural gas, as well as other sources of energy.

Such volatility could be intensified by geopolitical tensions, including war and terrorism, as well as other disruptions and market reactions to such events.

From time to time, we may use forward purchase contracts or financial instruments to moderate the volatility of a portion of our energy costs.

The success or failure of any such transactions depends on a number of factors, including our ability to anticipate and manage volatility in energy prices, the general demand for fuel by the manufacturing sector, seasonality and the weather patterns throughout the United States and the world.

The prices of other commodities such as paper, plastic resins, synthetic rubber and steel significantly influence the costs of packaging, replacement parts and equipment we use in the manufacture of our products and the maintenance of our facilities.

The prices of other commodities such as paper, plastic resins, synthetic rubber, lumber, and steel significantly influence the costs of packaging, replacement parts and equipment we use in the manufacture of our products and the maintenance of our facilities.

Similarly, transportation prices impact our cost of packaging and raw materials we purchase, as well as our cost to deliver finished products to our customers.

As a result, increases in the prices of commodities and transportation may increase our cost of sales and present the same types of risks as described above.

We have also experienced increases in prices of non-commodity materials we purchase.

As a result, increases in the prices of commodities, transportation and other materials may increase our cost of sales and present the same types of risks as described above.

Further, the Company has experienced an increasingly competitive labor market, changes in the availability of our workers, and labor shortages in our supply chain, which could result in increased costs, such as increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our facilities and overall business.

To the extent that we experience increased costs in any of these areas, we may increase our prices, pass the increases along to customers, or otherwise take actions to offset the impact.

Further, competitive pressures and other factors may also limit our ability to quickly raise prices in response to increased costs.

However, competitive pressures and other factors may also limit our ability to quickly raise prices in response to increased costs.

Accordingly, we may not be able to offset increased costs fully or at all, and there can be no assurances that increasing prices will fully mitigate the impact of these increases, which could adversely impact our results.

Our business could be negatively affected by supply, capacity, labor, information technology and logistics disruptions or the costs incurred to avoid these disruptions.

Supply, capacity, information technology and logistics disruptions (which may be caused by a variety of factors, including public health crises such as the COVID-19 outbreak or other outbreaks of diseases or illnesses, weather conditions, governmental controls, tariffs, national emergencies, natural or man-made disasters or other force majeure events) or our failure to mitigate such disruptions could adversely affect our ability to manufacture, package or transport our products or require additional resources to maintain or restore our supply chain.

Our business could be negatively affected by supply, capacity, labor, information technology, logistics and other disruptions or the costs incurred to avoid these disruptions.

Supply, capacity, information technology and logistics disruptions (which may be caused by a variety of factors, including public health crises such as the COVID-19 outbreak or other outbreaks of diseases or illnesses, weather conditions, governmental controls, tariffs, national emergencies, natural or man-made disasters, other force majeure events, abrupt political change or other political, civil or social unrest or instability, mass or other physical violence (or threats thereof), including terrorist activity and armed conflict, or other similar events) or our failure to mitigate such disruptions could adversely affect our ability to manufacture, package or transport our products or require additional resources to maintain or restore our supply chain.

In addition, labor shortages or an increase in the cost of labor could adversely affect our profit margins and results of operations.

As a result of the COVID-19 pandemic, there could be continued or renewed restrictions on our ability to travel or disruptions in our supply chain or ability to manufacture our products, as well as temporary closures of our facilities or those of our suppliers or customers, any of which could impact our sales and operating results.

Some of our products require raw materials that are provided by a limited number of suppliers, or are demanded by other industries or are simply not available at times.

Also, some of our products are manufactured on equipment at or near its capacity thus limiting our ability to sell additional volumes of such products until more capacity is obtained.

As a result of the effects of and the continuation of the COVID-19 pandemic, there could be continued or renewed restrictions on our ability to travel or disruptions in our supply chain or ability to manufacture our products, as well as temporary closures of our facilities or those of our suppliers or customers, any of which could impact our sales and operating results.

Some of our products require raw materials and/or packaging that are provided by a limited number of suppliers, or are demanded by other industries or are simply not available at times.

Problems or delays experienced by these suppliers as a result of labor shortages or other events could lead to shortages in our production capacity, which could impact our ability to meet

customer demand.

In addition, as we grow or experience increased customer demand, our existing suppliers may not be able to meet our increasing demand, and we may need to find additional suppliers.

We may not be able to secure suppliers who provide materials at, or services to, the specification, quantity and quality levels that we demand (or at all) or be able to negotiate acceptable fees and terms of services with any such suppliers.

Additionally, such disruptions have resulted in challenges in addressing or backlogs and further backlog could develop in the event of continued disruptions.

Disruptions arising from the foregoing or other events could adversely impact our results.

Further, some of our products are manufactured on equipment at or near its capacity thus limiting our ability to sell additional volumes of such products until more capacity is obtained.

Additionally, as with all manufacturing facilities, equipment and infrastructure age and become subject to increasing maintenance and repair and the costs associated with such maintenance and repair may be significant.

We have experienced increased costs and shortages in repair parts and our ability to procure components to repair equipment essential for our manufacturing processes could also be negatively impacted by various restrictions or disruptions in supply chains, among other items.

In addition, an increase in truck or ocean freight costs may reduce our profitability, and a decrease in transportation availability may affect our ability to deliver our products to our customers and consequently decrease customer satisfaction and future orders.

See “ Increases in energy, commodity and transportation costs would increase our operating costs, and we may be unable to pass all these increases on to our customers in the form of higher prices and surcharges ” for additional risks related to increased transportation costs and logistics disruptions.

See “ Increases in energy, commodity, transportation, labor and other costs would increase our operating costs, and we may be unable to pass all these increases on to our customers in the form of higher prices and surcharges ” for additional risks related to increased transportation costs and logistics disruptions.

Changes in inventory strategy by our customers as well as other external factors could adversely affect our sales and increase our inventory risk.

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No Company-owned life insurance coverage has been obtained on current team members.

Further, in the event of a loss of a key member of our senior management team, it is uncertain whether COVID-19 and its impact may result in difficulties in recruiting and hiring for such positions.

Risks Related to Regulatory Compliance

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Substantial penalties and other costs may be imposed if we violate certain of these laws and regulations even if the violation was inadvertent or unintentional.

Failure to maintain or achieve compliance with these laws and regulations or with the permits required for our operations could result in substantial operating costs and capital expenditures, in addition to fines and administrative, civil or criminal sanctions, third-party claims for property damage or personal injury, cleanup and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of limiting our operations or otherwise requiring a change to our operations.

Under the “joint and several” liability principle of certain environmental laws, we may be held liable for all

remediation costs at a particular site and the amount of that liability could be material.

fines and administrative, civil or criminal sanctions, third-party claims for property damage or personal injury, cleanup and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of limiting our operations or otherwise requiring a change to our operations.

Under the “joint and several” liability principle of certain environmental laws, we may be held liable for all remediation costs at a particular site and the amount of that liability could be material.

In addition, future environmental laws and regulations could restrict our ability to expand our facilities or extract our existing reserves or could require us to acquire costly equipment or to incur other significant expenses in connection with our business.

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In addition to the regulatory matters described above, our operations are subject to various federal, state, local and foreign laws and regulations relating to the mining, manufacture, packaging, labeling, content, storage, distribution and advertising of our products and the conduct of our business operations.

For example, in the United States, some of our products, product claims, labeling and advertising are regulated by the Food and Drug Administration, the Consumer Product Safety Commission, the Occupational Health and Safety Administration, the Mine Safety and Health Administration, the Environmental Protection Agency and the Federal Trade Commission.

For example, in the United States, some of our products, product claims, labeling and advertising are regulated by the Food and Drug Administration, the Consumer Product Safety Commission, the Occupational Safety and Health Administration, the Mine Safety and Health Administration, the Environmental Protection Agency and the Federal Trade Commission.

Most states have agencies that regulate in parallel to these federal agencies.

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As a result of closures caused by government action taken in response to COVID-19, the Company experienced some delays in obtaining such permits and registrations for its products.

While the Company has taken steps to mitigate such delays, there can be no assurances that there will not be further delays as governments and agencies continue to respond to the COVID-19 outbreak.

While the Company has taken steps to mitigate such delays, there can be no assurances that there will not be further delays as governments and agencies in the wake of the COVID-19 outbreak.

Further, if applicable laws or regulations are changed or interpreted differently in the future, it may become more difficult or expensive for us to comply.

In addition, investigations or evaluations of our products by government agencies may require us to adopt additional labeling, safety measures or other precautions, or may effectively limit or eliminate our ability to market and sell these products.

Accordingly, there can be no assurance that current or future governmental regulation will not have a material adverse effect on our business or that we will be able to obtain or renew required governmental permits and registrations in the future.

Accordingly, there can be no assurance that we will be able to obtain or renew required governmental permits and registrations in the future.

Further, there can be no assurance that current or future governmental regulation or other rule-making (including proposals regarding increased disclosure on climate-related matters) will not have a material adverse effect on our business.

Our efforts to comply with new requirements and regulations could result in increased general and administrative expenses and a diversion of substantial management time and attention from revenue-generating activities to compliance activities.

We are also experiencing increasing customer scrutiny of the content and manufacturing of our products, particularly our products entering or affecting the food chain, in parallel with the increasing government regulation discussed above.

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There can be no assurance that future customer requirements concerning the content or manufacturing of our products will not have a material adverse effect on our business.

We face risks to our domestic and international sales and business operations due to economic, political, regulatory and other conditions.

We face risks to our domestic and international sales and business operations due to political, regulatory, economic and other conditions.

Unstable economic, political, regulatory and other conditions could adversely affect demand for our products or disrupt our operations in the United States and in international markets.

International sales and operations are subject to currency exchange fluctuations, fund transfer and trade restrictions and import/export duties.

In some cases, we may have difficulty enforcing agreements and collecting accounts receivable through a foreign country’s legal system.

We derived approximately 20% of our consolidated net sales from sales outside of the United States in fiscal year 2021.

Further, an increase in inflation rates could affect the Company's profitability and cash flows, due to higher employment costs, higher operating costs, higher financing costs, and/or higher supplier prices.

Inflation may also adversely affect foreign exchange rates.

The Company may be unable to pass along such higher costs to its customers.

In addition, inflation may adversely affect customers' operations.

The international nature of our operations subjects the Company to numerous risks, including political, civil and/or instability (including acts of terrorism, civil or social unrest, labor unrest, violence in connection with political or social events, and outbreaks of war and pandemics or other disease outbreaks).

Both international and domestic operations are also subject to regulatory requirements and issues, including with respect to environmental matters.

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political climate have introduced greater uncertainty with respect to tax policies, trade relations, tariffs and government regulations affecting trade between the U.S.

other countries.

In particular, it remains uncertain what impact the continued COVID-19 pandemic and the reactions of governmental authorities and others thereto will have on international trade and what impact any changes in international trade will have on the economy or on the businesses of the Company and those of its customers and its suppliers.

and other countries.

In particular, it remains uncertain what effects will continue in connection with the COVID-19 pandemic, its impacts, and the reactions of governmental authorities and others thereto will have on international trade and what impact any changes in international trade will have on the economy or on the businesses of the Company and those of its customers and its suppliers.

In addition to considerations around the U.S.

political climate, geopolitical concerns may also impact our business;

for instance, we have experienced, and expect to continue to experience, the indirect impacts of the conflict resulting from Russia’s invasion of Ukraine, including increases in the cost of raw and packaging materials and commodities (including the price of oil), supply chain and logistics challenges and foreign currency volatility, and it is not possible to predict the broader or longer-term consequences of this conflict or the sanctions imposed to date.

These developments, as well as the risks outlined above, could have a material adverse effect on the Company’s business, financial condition and results of operations.

In addition, our international sales and operations are subject to various economic-related risks.

Our international sales and operations are, among other factors, subject to currency exchange fluctuations, fund transfer and trade restrictions and import/export duties.

In some cases, we may have difficulty enforcing agreements and collecting accounts receivable through a foreign country’s legal system.

Further, an increase in inflation rates could affect the Company’s profitability and cash flows, due to higher employment costs, higher operating costs, higher financing costs, and/or higher supplier prices.

Inflation may also adversely affect foreign exchange rates.

The Company may be unable to pass along such higher costs to its customers.

In addition, inflation may adversely affect customers’ operations.

We may incur adverse safety events or product liability claims that may be costly, create adverse publicity and may add further governmental regulation.

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Further, lawsuits can be expensive to defend, whether or not they have merit, and the defense of these actions may divert the attention of our management and other resources that would otherwise be engaged in managing our business and our reputation could suffer, any of which could harm our business.

Goodwill, long-lived, and other intangible assets recorded as a result of our acquisitions could become impaired.

We review goodwill, long-lived assets, including property, plant and equipment and identifiable amortizing intangible assets, for impairment whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable.

Factors which may cause an impairment of long-lived assets include lower share trading prices and the adverse impact of rising costs and additional expenses to mitigate supply chain disruptions, among other factors.

In 2022, we recorded a $5.6 million loss of goodwill related to the impairment of goodwill at our Retail and Wholesale Products Group reporting unit.

We assess all existing goodwill at least annually for impairment on a reporting unit basis.

The techniques used in our qualitative assessment and goodwill impairment tests incorporate a number of estimates and assumptions that are subject to change.

Although we believe these estimates and assumptions are reasonable and reflect market conditions forecasted at the assessment date, any changes to these assumptions and estimates due to market conditions or otherwise may lead to an outcome where impairment charges would be required in future periods.

We may be subjected to increased taxes or fluctuating tax rates, which could adversely affect our results of operations and/or cash flows.

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The Company has undertaken repurchases of common stock on the open market (including pursuant to a 10b5-1 plan) and is also authorized to undertake repurchases in private, negotiated transactions.

The Company has no obligations to repurchase any specific dollar amount or to

acquire any specific number of shares.

The Company has no obligations to repurchase any specific dollar amount or to acquire any specific number of shares.

The timing, number and manner of share repurchases is determined by management and may depend upon a number of factors, including the trading price, market conditions, and the Company’s liquidity needs and management of its spending.

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• announcements of significant acquisitions, strategic alliances or joint ventures by us, our customers, suppliers or competitors;

• sales of our common stock by the Company, our officer or directors or unaffiliated third party investors;

• introduction of new products or services;

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• other developments affecting us, our industries, customers or competitors.

In addition, the stock market may experience extreme price and volume fluctuations that have a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance.

In addition, the stock market may experience extreme price and volume fluctuations that have a significant effect on the market prices of securities issued by many companies, including the Company, for reasons unrelated to their operating performance.

These broad market fluctuations may materially adversely affect our Common Stock price, regardless of our operating results.

relatively small public float, number of stockholders and average daily trading volume, our Common Stock may be relatively more susceptible to volatility arising from any of these factors.

Given its relatively small public float, number of stockholders and average daily trading volume, our Common Stock may be relatively more susceptible to volatility arising from any of these factors.

If we experience significant fluctuations in our stock price, we may be exposed to securities class action lawsuits, which could negatively affect our business.

There can be no assurance that the price of our Common Stock will increase in the future or be maintained at its recent levels.

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We are not obligated to continue a dividend for any fixed period, and the payment of dividends could be suspended or discontinued at any time at our discretion and without prior notice.

Although we have maintained our dividend despite the impact of COVID-19, there can be no assurance that we will continue to do so, particularly if the situation deteriorates.

There can be no assurance that we will continue to pay dividends.

The amount and timing of any future dividends may vary, and the payment of any dividend does not assure that we will pay dividends in the future.

General Risk Factors

Technology failures or cyber security breaches could have an adverse effect on the Company's business and operations.

Technology failures or cyber security breaches or other unauthorized access to our information technology systems or sensitive or proprietary information could have an adverse effect on the Company's business and operations.

We rely on information technology systems to process, transmit, store, and protect electronic information.

For example, a significant portion of the communications between the Company's personnel, customers, and suppliers depends on information technology and we rely on access to such information systems for our operations.

We cannot guarantee that the security measures in place will prevent disruptions, failures, computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, hacking, and other cyber-attacks or other privacy or security breaches in the information technology or phone systems of the Company, our customers or third parties, which could adversely affect our communications and business operations.

We cannot guarantee that the security measures in place will prevent disruptions, failures, computer viruses or other malicious codes, ransomware, unauthorized access attempts, denial of service attacks, phishing, hacking, and other cyber-attacks or other privacy or security breaches in the information technology, phone systems or other systems (whether due to third-party action, bugs or vulnerabilities, physical break-ins, employee error, malfeasance or otherwise) of the Company, our customers or third parties, which could adversely affect our communications and business operations.

Further, events such as natural disasters, fires, power outages, systems failures, telecommunications failures, employee error or malfeasance or other catastrophic events could similarly cause interruptions, disruptions or shutdowns, or exacerbate the risk of the failures described above.

These risks may be increased as more employees work from home as part of our response to the COVID-19 pandemic.

These risks may be increased as more employees work from home.

We may not have the resources or technical sophistication to anticipate, prevent or detect rapidly-evolving types of cyber-attacks and other security risks.

Attacks may be targeted at us, our customers and suppliers, or others who have entrusted us with information.

To date, the Company has not experienced any material impact to the business or operations resulting from information or cybersecurity attacks;

however, because of the frequently changing attack techniques, along with the increased volume and sophistication of the attacks, there is the potential for the Company to be adversely impacted.

While the Company has policies and procedures in place, including system monitoring and data back-up processes to prevent or mitigate the effects of these potential disruptions or breaches, security breaches and other disruptions to information technology systems could interfere with our operations.

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Furthermore, security breaches pose a risk to confidential data and intellectual property, which could result in damage to our competitiveness and reputation.

Additionally, in connection with our global operations, we, from time to time, transmit data across national borders to conduct our business and, consequently, are subject to a variety of laws and regulations in the United States and other jurisdictions regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personal data, including the European Union General Data Protection Regulation.

Additionally, in connection with our global operations, we, from time to time, transmit data across national borders to conduct our business and, consequently, are subject to a variety of laws and regulations regarding privacy, data protection, and data security, including those related to the collection, processing, storage, handling, use, disclosure, transfer, and security of personal data, including the European Union General Data Protection Regulation, Personal Information Protection Law in China and similar regulations in states within the United States and in countries around the world.

Our efforts to comply with privacy and data protection laws may impose significant costs and challenges that are likely to increase over time.

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Any potential disruptions with the ERP system could affect our ability to process orders, ship product and send invoices.

These difficulties could, in turn, negatively impact our financial results

including sales, earnings and cash flow.

These difficulties could, in turn, negatively impact our financial results including sales, earnings and cash flow.

Further development and maintenance of the ERP system will continue to require investment of human and financial resources, which may cause increased costs and other difficulties.

Our business could be adversely affected by a widespread threat to public health.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and many factors and uncertainties remain regarding the pandemic and its effects.

In response to the COVID-19 outbreak and as jurisdictions have experienced resurgences in the spread of COVID-19, countries and local governments across the world implemented “Shelter in Place,” “Safe at Home,” quarantine or similar orders that restricted workforce and/or required closures of “non-essential” businesses along with restrictions on travel.

Such restrictions and closures initially disrupted our sales office in China and has limited travel by our salesforce and delayed product shipments.

While our facilities otherwise remained operational as essential businesses throughout the pandemic, there can be no assurances that we will not have to close facilities in the future due to concerns over the health and well-being of our employees, or as a result of government directives in response to COVID-19 or other public health threats.

Further, while we have implemented policies and practices in accordance with CDC guidance, as well as other local health and governmental directives, to protect our employees at each of our locations, including sanitizing and cleaning protocols, social distancing, remote work, and suspending non-essential employee travel, there can be no assurances that these efforts will be successful in preventing health concerns from impacting our operations.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and in response to the COVID-19 outbreak and as jurisdictions have experienced resurgences in the spread of COVID-19, countries and local governments across the world implemented “Shelter in Place,” “Safe at Home,” quarantine or similar orders that restricted workforce and/or required closures of “non-essential” businesses along with restrictions on travel.

Such restrictions and

closures initially disrupted our sales office in China and limited travel by our salesforce and delayed product shipments.

The COVID-19 pandemic created significant volatility, uncertainty, and economic disruption.

While our facilities otherwise remained operational as essential businesses throughout the pandemic, there can be no assurances that we will not have to close facilities or experience other disruption in the future due to concerns over the health and well-being of our employees, or as a result of government directives in response to COVID-19 or other public health threats.

The spread of a widespread threat to public health such as COVID-19 has currently had limited disruption and impact to our third party business partners, suppliers, service providers, and customers but no assurances can be made that future threats to public health will not have a more significant impact on our operations or results.

Although the disruptions, delays and modifications to our operations caused by COVID-19 have not had a material impact on our results of operations, there continues to be significant uncertainty relating to the COVID-19 pandemic and the responses thereto as well as the potential effects of the pandemic on our business which could negatively affect our costs, customer orders, and collection of accounts receivable, which may be material.

In addition, the deterioration of worldwide economic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, and commodity and energy prices, as well as demand for our products.

Even as the COVID-19 pandemic subsides, we may experience adverse impacts to our business and financial results due to uncertainty regarding the ultimate duration of the pandemic (including increases in COVID-19 case numbers, the duration, scope and efficacy of measures taken by governments in response to the pandemic, the provision of and access to medical responses to the pandemic, and the impact of the pandemic on the economy, including any economic recession or depression that may occur as the pandemic continues to evolve, and due to any major public health crises that may occur in the future.

Given the uncertainties related to the pandemic, including its continued duration and severity, we cannot reasonably estimate the scope of its impact on our employees, operations, suppliers, or customers, or the full extent to which COVID-19 and actions taken in response to the pandemic could continue to affect the global economy and our results.

Public health crises may create significant uncertainty relating to the COVID-19 pandemic and the responses thereto as well as the potential effects of the pandemic on our business and could negatively affect our costs, customer orders, and collection of accounts receivable, which may be material.

In addition, a public health crisis could result in the deterioration of worldwide economic conditions and impact the proper functioning of financial and capital markets, foreign currency exchange rates, and commodity and energy prices, as well as demand for our products.

We may experience adverse impacts to our business and financial results due to uncertainty regarding the ultimate duration of the COVID-19 pandemic and/or its effects and due to any major public health crises that may occur in the future.

We are subject to various legal and regulatory proceedings, including litigation in the ordinary course of business, which may adversely impact our business, financial condition and results of operations.

11 unchanged sentences

Moreover, effective internal control is necessary for us to produce reliable financial reports and is important to help prevent financial fraud.

If we cannot provide reliable financial reports

or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock could drop significantly.

If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock could drop significantly.

Failure to maintain a level of corporate social responsibility could damage our reputation and could adversely affect our business, financial condition or results of operations.

6 unchanged sentences

the failure to be perceived as appropriately addressing matters of social responsibility;

consumer perception of statements made by us, our employees and executives, agents, customers, suppliers, or other third parties (including others in our industry);

consumer perception of statements made by us, our employees and

executives, agents, customers, suppliers, or other third parties (including others in our industry);

or our responses to any of the foregoing.

Further, we may be subject to rulemaking regarding corporate social responsibility and/or disclosure, as public awareness and focus on social and environmental issues has led to legislative and regulatory efforts to impose increase regulations and require further disclosure.

As a result, we may become subject to new or more stringent regulations, legislation or other governmental requirements or industry standards and/or an increased demand to meet voluntary criteria related to such matters.

Increased regulations, including around climate change concerns, could subject us to additional costs and restrictions and require us to make certain changes to our manufacturing practices and/or product designs, which could negatively impact our business, results of operations, financial condition and competitive position.

ITEM 1B – UNRESOLVED STAFF COMMENTS

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