What changed in this filing

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Item 1A. Risk Factors

2023-04-27 compared with 2022-04-19 · 84 added, 121 removed, 83 unchanged (71% of the section changed)

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Market Condition Risks

The Company’s business has been and may continue to be negatively impacted by the ongoing COVID-19 pandemic. 

The COVID-19 pandemic has severely restricted the level of economic activity around the world.

In response to this COVID-19 pandemic, the governments of many countries, states, cities and other geographic regions, as well as customers and suppliers, have taken preventative or protective actions, such as imposing restrictions on travel and business operations, shutdowns, lockdowns, mask mandates and other measures.

Temporary closures of businesses have been ordered and numerous other businesses have temporarily closed voluntarily.

These actions may continue to expand in scope, type and impact depending on the ongoing severity of the pandemic.

These measures, while intended to protect human life, have had and are expected to continue to have significant adverse impacts on domestic and foreign economies.

Currently, the effectiveness of economic stabilization efforts being taken by federal and state government authorities to mitigate the effects of these actions and the spread of COVID-19 is uncertain.

This COVID-19 pandemic has impacted, and may continue to impact, the Company's office locations and manufacturing facilities, as well as those of its customers and third-party vendors, including through the effects of facility closures, reductions in operating hours and other social distancing efforts.

In addition, the Company has modified its business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and the Company may take further actions as may be required by government authorities or that the Company determines are in the best interests of its employees, customers, partners and suppliers. In some cases, customer mitigation efforts have prevented the Company from accessing the facilities of its customers to deliver products and provide services.

In addition, some of the Company’s customers have chosen to delay and some of the Company's customers may choose to abandon projects for which the Company provides products and/or services as a result of such actions. 

Further, the Company may experience disruptions or delays in its supply chain as a result of such actions.

While a substantial portion of the Company’s businesses have been classified as an essential business in jurisdictions in which facility closures have been mandated, the Company can provide no assurance that this will not change in the future or that the Company’s businesses will be classified as essential in each of the jurisdictions in which they operate.

The Company’s results of operations, financial condition, liquidity and cash flow in 2020 were materially adversely affected by the COVID-19 pandemic and may in the future be materially adversely affected if the COVID-19 pandemic again worsens, although the extent of any such impacts remains unclear at this time.

Crude oil and natural gas prices are volatile, and any substantial and extended increases or decreases in oil and natural gas prices will likely have a material effect on demand and pricing in the Company's business.

 Generally, when the prices for crude oil and natural gas are higher, demand for certain of the Company’s products increases and the Company is able to negotiate higher prices.

On the other hand, when the prices of crude oil and natural gas are lower, demand for certain of the Company’s products decreases and the Company is forced to compete with lower prices and other concessions.

Volatility in these commodity prices can also result in circumstances where demand for certain of the Company’s products is suddenly high, but the Company is unable to negotiate higher prices, thereby adversely impacting the Company’s margins and capacity to accept new projects at higher margins.

Among the factors that can or could cause these price fluctuations are:

the level of consumer demand;

global supplies of crude oil and natural gas;

global drilling activity;

the actions of other crude oil exporting nations and the Organization of Petroleum Exporting Countries;

government sanctions and boycotts of crude oil, natural gas and other energy products produced by certain countries, such as the current sanctions and boycotts of oil and natural gas provided by Russia as a result of the war in Ukraine;

worldwide economic and political conditions, including political instability or armed conflict in oil and gas producing regions, such as the current war in Ukraine;

the price and availability of, and demand for, competing energy sources, including alternative energy sources.

Oil prices may continue to be volatile as a result of the disruption of global markets from the war in Ukraine and resulting boycotts of Russian oil and gas by several countries, as well as the ongoing COVID-19 pandemic.

West Texas Intermediate crude oil prices have increased from approximately $60 per barrel in March 2021 to approximately $75 per barrel in December 2021 and further increasing to approximately $100 per barrel in March 2022.

While the Company can give no assurance that this increase in prices will result in increased sales and earnings, continued higher prices historically lead to higher capital spending by energy companies.

federal government or other restrictions on oil and gas production, transportation or use, could have an impact on the Company's business;

however, most of the Company's sales attributable to oil and gas markets are outside of the United States.

As such, any impacts are not expected to be material. 

Global economic weakness and volatility would likely adversely affect operating margins for the Company’s services and products.

If the global economy experiences a severe and prolonged downturn, it would likely adversely impact the Company's business.

Downturns in such general economic conditions can significantly affect the business of the Company's customers, which in turn affects demand, volume, pricing, and operating margins for the Company's services and products.

A downturn in one or more of the Company's significant markets would likely have a material adverse effect on the Company's business, results of operations, financial condition and cash flows.

Because economic and market conditions vary within the Company's geographic regions, the Company's performance will also vary.

In addition, the Company is exposed to fluctuations in currency exchange rates and commodity prices, including rising steel prices and volatility in oil prices.

The Company notes that the current Russian oil and gas boycotts have caused a surge in oil prices which has impacted some of our material and freight costs, adding to upward pressure from global supply chain impacts from the COVID-19 pandemic.

The Company has experienced and anticipates continuing to experience increased prices for purchasing and shipping raw materials. The Company has updated its pricing to customers to offset the impacts of the raw material price increases.

Fluctuations in the availability of, and price of, steel may affect the Company's results of operations .

The steel industry is highly cyclical in nature, and at times, pricing can be highly volatile due to a number of factors beyond the Company's control, including general economic conditions, import duties, other trade restrictions and currency exchange rates.

This volatility may negatively impact market conditions thus reducing project activity and the Company's results of operations.

The Company utilizes escalation clauses and bid expiration dates to mitigate any impact of this volatility on its earnings.

Through a series of Presidential Proclamations pursuant to Section 232 of the Trade Expansion Act of 1962, as of the date of this filing, U.S.

imports of certain steel products are subject to a 25% tariff (exceptions are Australia, Argentina, Brazil and South Korea imports), with retaliatory tariffs imposed by importing countries.

These tariffs could lead to increased steel costs and decreased supply availability. 

The United States has maintained tariffs on certain imported steel, aluminum and items originating from China.

These tariffs have increased the cost of raw materials and components we purchase.

If the United States or other countries impose additional tariffs, that could have a further adverse impact on our business.

There can be no assurance that the current administration will continue its approach to global trade policies and any changes to those policies could have negative impacts on the price and availability of steel and other imports used in the Company's business.

The Company is in active discussions with our suppliers to ensure any supply disruptions are minimal if tariffs increase or there is any outright ban on Chinese imports in the future. 

The Company regularly updates its quoting system for the movements in steel prices and attempts to recover these price differentials through price increases in the Company's products;

however, the Company is not always successful.

Any increase in steel prices that is not offset by an increase in the Company's prices that is accepted by customers could have an adverse effect on the Company's business, results of operations, financial position and cash flows. In addition, if the Company is unable to acquire timely steel supplies, it may need to decline bid and order opportunities, which could also have an adverse effect on the Company's business, results of operations, financial position and cash flows.

The Company's operations and earnings may be significantly affected by changes in oil and gas prices .

Oil and gas prices depend on local, regional, and global events or conditions that affect supply and demand.

Any material decline in oil or gas prices could have a material adverse effect on the demand for the Company's products, its operations and financial condition.

The Company may be unable to purchase raw materials at favorable prices, or maintain beneficial relationships with its suppliers, which could result in a shortage of supply, or increased pricing .

There can be no assurance regarding the availability of supply for key components of the Company's products.

The lack of supply of these components could result in an adverse effect on the financial condition of the Company. 

The steel industry in particular is highly cyclical in nature, and at times, pricing can be highly volatile due to a number of factors beyond the Company's control.

The Company utilizes escalation clauses and bid expiration dates to mitigate the impact of this volatility on its earnings. This volatility may negatively impact market conditions thus reducing project activity and the Company's results of operations. If the United States or other countries in which the Company operates impose tariffs on imports of raw materials, including steel, used in the Company's operations, that could have a further adverse impact on our business.

The Company regularly updates its quoting system for the movements in raw material prices and seeks to recover price differentials through increases in the selling price of the Company's products;

however, the Company may not always be successful, and any increase in raw material prices that is not offset by an increase in the Company's prices that is accepted by customers could have an adverse effect on the Company's business, results of operations, financial position and cash flows. In addition, if the Company is unable to acquire timely raw material supplies, it may need to decline bid and order opportunities, which could also have an adverse effect on the Company's business, results of operations, financial position and cash flows.

Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company could experience delays and has incurred increased prices for raw materials used in our production processes.

To mitigate these impacts, the Company has implemented several strategies, including purchasing from alternative suppliers and planning for material purchases farther in advance to ensure the Company has materials when needed.

The Company also adjusts its pricing to customers to offset the impacts of the raw material price increases.

The Company is unable to predict the duration of the current inflationary environment, raw material supply shortages and transportation delays, and the resulting future disruptions to the Company’s operations are uncertain.

Decreases in government spending on projects using the Company’s products, and challenges to the Company’s non-government customers’

liquidity and availability of capital funds, may adversely impact demand for the Company’s products.

Uncertainty about economic market conditions poses risks that the Company's customers may postpone spending for capital improvement and maintenance projects in response to tighter credit markets or negative financial news, which could have a material adverse effect on the demand for the Company's products.

Decreases in U.S.

federal and state spending on projects using the Company's products can have negative impact on sales volume from the Company's domestic facilities.

Governmental spending on large infrastructure projects in the Gulf Cooperation Council ("GCC") countries vary and spending has in the past been curtailed or delayed as a result of reduced public spending budgets in countries which are dependent on oil and gas revenues and their respective price levels.

Decreases in government spending on projects using the Company's products can have a negative impact on the Company's sales volumes. Uncertainty about economic market conditions poses risks that the Company's customers may postpone spending for capital improvement and maintenance projects in response to tighter credit markets or negative financial news, which could have a material adverse effect on the demand for the Company's products.

Financial Risks

The Company may be unable to repay its debt or renew its expiring international credit facilities.

There is a risk that the Company may not be able to remain in compliance with its credit agreement covenants due to, among other matters, the potential impact on the Company's results of operations and financial condition resulting from the COVID-19 pandemic and any adverse developments in the market for oil and gas.

The Company may be unable to maintain compliance with existing debt covenants,  

repay its debt or renew its expiring international credit facilities.

There is a risk that the Company may not be able to remain in compliance with its credit agreement covenants.

If there were an event of default under the Company's current revolving credit facilities, the lenders could cause all amounts outstanding with respect to that debt to be due and payable immediately.

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creating liens.

The Company has approximately $4.2 million becoming due in 2022 under its various foreign revolving lines of credit.

The Company has approximately $ 4.0  million becoming due in the year ending January 31,  

2024  under its various foreign revolving lines of credit.

The Company’s credit arrangements used by its Middle Eastern subsidiaries are renewed on an annual basis.

In addition to these credit arrangements, the Company also obtains project financing in the Middle East on a project-by-project basis.

The Company has approximately $1.8 million becoming due in 2022 under its project financing agreements.

While the Company believes that it will be able to renew its Middle East credit arrangements and will have continued access to individual project financing, there is no assurance that such arrangements will be renewed or made available in similar amounts or on similar terms and conditions as the current arrangements, or that such individual project financing will be available for projects that the Company is interested in pursuing.

In addition to these credit arrangements, the Company also obtains financing in the Middle East on a project-by-project basis.

The Company has approximately $ 1.7 million becoming due in the year ending January 31,  

2024 under its project financing agreements.

Any replacement credit arrangements outside of the United States may further limit the Company’s ability to repatriate funds from abroad.

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The Company’s ability to comply with any covenants may be adversely affected by general economic conditions, political decisions, industry conditions and other events beyond management’s control.

The Company incurred net losses for its three fiscal years prior to 2019, as well as in 2020, and may be unable to maintain sustained levels of profitability or positive cash flows in the future.

The Company experienced net losses for its three fiscal years prior to 2019, as well as in 2020.

While the Company was profitable and had positive cash flow in 2021, there is no guarantee that the Company will be able to sustain its 2021 levels of profitability or positive cash flows in the future. Generating net income and positive cash flows in the future will depend on the Company's ability to successfully complete and execute its strategic plan. The Company’s inability to successfully maintain profitability and positive cash flows may result in it experiencing a serious liquidity deficiency resulting in material adverse consequences that could threaten its viability.

The Company extended credit to a customer for a project in the Middle East in 2013 and, if the Company is unable to collect this account receivable, its future profitability could be adversely impacted.

In 2013, the Company started a project in the Middle East as a sub-contractor, with billings in the aggregate amount of approximately $41.9 million.

The Company completed all its deliverables in 2015, and has since then collected approximately $38.3 million, with a remaining balance due in the amount of $3.6 million.

Included in this balance is an amount of $3.4 million, which pertains to retention clauses within the agreements of the Company's customer, and which become payable by the customer when this project is fully tested and commissioned.

In the absence of a firm date for the final commissioning of the project, and due to the long-term nature of this receivable, $2.0 million of this retention amount was reclassified to a long-term receivable account.

The Company has been engaged in ongoing active efforts to collect the outstanding amount.

During 2021, the Company received approximately $0.1 million from the customer.

In August 2021, the Company has also received an updated acknowledgment of the outstanding balances and assurances of payment from the customer.

Further, the Company has been engaged by the customer to perform additional work in 2022 under customary trade credit terms that supports the continued cooperation between the Company and the customer.

As a result, the Company did not reserve any allowance against this amount as of January 31, 2022.

However, if the Company’s efforts to collect on this account are not successful in 2022, then the Company may be required to recognize an allowance for all, or substantially all, of any such then uncollected amounts in the future.

The Company may be unable to achieve sustained levels of profitability or positive cash flows in the future.

There is no guarantee that the Company will be able to achieve profitability or positive cash flows in the future.

The Company’s inability to successfully achieve profitability and positive cash flows may result in it experiencing a serious liquidity deficiency resulting in material adverse consequences that could threaten its viability.

One of the Company’s accounts receivable in the total amount of $ 2.7 million and $ 3.6 million as of 

January 31, 2023 and 2022 , respectively, has been outstanding for several years.

As of January 31, 2023 , the entire balance represents a retention receivable that is payable upon the commissioning of the system. Due to the long-term nature of the receivable, $ 2.5 million and $ 2.0  million were included in other long-term assets as of January 31, 2023 and 2022 , respectively.

The Company completed all of its deliverables in 2015 under the related contract, but the system has not yet been commissioned by the customer as additional activities must be completed prior to the overall system completion and commissioning.

Nevertheless, the Company has been engaged in ongoing active efforts to collect this outstanding amount.

The Company continues to engage with the customer to ensure full payment of open balances, and during April 2022 received an updated acknowledgment of the outstanding balances and assurances of payment from the customer.

During 2022, the Company received a partial payment to settle $ 0.9 million of the customer's outstanding balance.

Further, the Company has been engaged by the customer to perform additional work in the year ending January 31,  

2024 under customary trade credit terms that supports the continued cooperation between the Company and the customer.

As a result, the Company did not reserve any allowance against this outstanding receivable as of  

January 31, 2023 .

However, if the Company’s efforts to collect on this account are not successful, the Company may recognize an allowance for all, or substantially all, of any such then uncollected amounts.

The Company may be impacted by interpretations and changes in tax regulations and legislation which could adversely affect the Company's results of operations. 

Tax interpretations, regulations, and legislation in the various jurisdictions in which the Company operates are subject to measurement uncertainty and the interpretations can impact net income, income tax expense or recovery, and deferred income tax assets or liabilities. 

Tax rules and regulations, including those relating to foreign jurisdictions, are subject to interpretation and require judgment by the Company that may be challenged by the applicable taxation authorities upon audit.  Although the Company believes its assumptions, judgements and estimates are reasonable, changes in tax laws or the Company's interpretation of tax laws and the resolution of any tax audits could significantly impact the amounts provided for income taxes in the Company's consolidated financial statements.

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could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S.

As of January 31, 2022, the Company had $40.1 million of gross federal NOLs and $2.7 million of state NOLs available to offset the Company’s future taxable income, if any.

Of the gross federal NOL amount, $33.8 million will begin to expire between tax years 2030 and 2037 and the remainder has an indefinite carryforward.

The state NOLs expire at various dates from 2022 to 2032.

The Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership.

As of January 31, 2023 , the Company had $ 34.3  million of gross federal NOLs and $ 45.5 million of gross state NOLs available to offset the Company’s future taxable income.

Of the gross federal NOL amount, $ 26.9 million will begin to expire between tax years 

2033 and 

2038 and the remainder has an indefinite carryforward.

The state NOLs expire at various dates from 2023  to 2032 .

In addition, the Company's ability to use its NOLs may be limited in the event of future changes in its stock ownership.

As a result, if the Company earns net taxable income, the Company’s ability to use its pre-change NOLs to offset U.S.

federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to the Company.

In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

federal taxable income may be subject to limitations, which could potentially result in a future tax liability of the Company.

In addition, at the state level, there may be periods in the future during which the use of NOLs is suspended or otherwise limited, which could result in a state tax liability which would otherwise not arise. 

The Company may be required to reverse previously recorded revenue and profits as a result of inaccurate estimates made in connection with the Company’s "over time" revenue recognition.

Certain domestic divisions have contracts that recognize revenues using periodic recognition of income.

Certain of the Company's contracts recognize revenues using periodic recognition of income.

For these contracts, the Company uses the "over time" accounting method.

This methodology allows revenue and profits to be recognized proportionally over the life of a contract by comparing the amount of the cost incurred to date against the total amount of cost expected to be incurred.

The effect of revisions to revenue and total estimated cost is recorded when the amounts are known or can be reasonably estimated.

These revisions can occur at any time and could be material.

The effect of revisions to revenue and total estimated cost is recorded when amounts are known or can be reasonably estimated.

Revisions can occur at any time and could be material.

On a historical basis, management believes that reasonably reliable estimates of the progress towards completion on long-term contracts have been made.

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Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that the Company would prevent or detect a misstatement of its financial statements or fraud.

As of January 31, 2023, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s internal control over financial reporting was not effective due to an identified material weakness.

The material weakness was regarding the design and operating effectiveness of controls related to the existence of inventory during the fiscal year ended January 31, 2023.

Specifically, the Company failed to appropriately perform cycle count procedures at one of the Company's operating facilities, resulting in a significant adjustment during the full physical inventory count at period end.

Further, management review of the process and resulting adjustments on a periodic basis failed to identify the issue. The material weakness did not result in any material misstatements to the Company’s consolidated financial statements.

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

If the current material weakness is not remediated, or if additional material weaknesses or significant deficiencies in the Company’s internal control over financial reporting are discovered or occur in the future, the Company’s consolidated financial statements may contain material misstatements and the Company could be required to restate its financial results.

The failure to maintain an effective system of internal control over financial reporting could limit the Company’s ability to report its financial results accurately and in a timely manner or to detect and prevent fraud and could also cause a loss of investor confidence and decline in the market price of the Company’s common stock.

See further discussion of the material weakness, including the Company's planned remediation procedures, in Item 9A., Controls and Procedures.

Business Condition Risks

Delays in the timing of order receipt, execution, delivery and acceptance for the Company’s products generally negatively impact the Company’s operating results.

Since the Company's revenues are based on discrete projects, the Company's operating results in any reporting period generally are negatively impacted as a result of large variations in the level of overall market demand or delays in the timing of project execution phases.

Since the Company's revenues are based on discrete projects, the Company's operating results in any reporting period generally are negatively impacted as a result of large declines in the level of overall market demand or delays in the timing of project execution phases.

The Company may not be able to successfully negotiate progress-billing arrangements for its large contracts, which could adversely impact the Company’s working capital needs, cash flows and credit risk.

The Company sells systems and products under contracts that allow the Company to either bill upon the completion of certain agreed upon milestones, or upon actual shipment of the system or product. The Company attempts to negotiate progress-billing milestones on large contracts to help manage its working capital and cash flows, and to reduce the credit risk associated with these large contracts. Consequently, shifts in the billing terms of the contracts in the backlog from period to period can increase the Company's requirements for working capital, negatively impact its cash flows and increase its exposure to credit risk.

The Company sells systems and products under contracts that allow the Company to either bill upon the completion of certain agreed upon milestones, or upon actual shipment of the system or product. The Company attempts to negotiate progress-billing milestones on large contracts to help manage its working capital and cash flows, and to reduce the credit risk associated with these large contracts. Consequently, changes in accepted billing terms of contracts could impact the Company's requirements for working capital and cash flows.

Aggressive pricing by existing competitors and the entrance of new competitors in the markets in which the Company operates could drive down the Company's profits and reduce the Company's revenue.

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In periods of declining demand, the Company's fixed cost structure may limit its ability to cut costs, which may be a competitive disadvantage compared to companies with more flexible cost structures, or may result in reduced operating margins, operating losses and negative cash flows.

The Company may be unable to purchase raw materials at favorable prices, or maintain beneficial relationships with its suppliers, which could result in a shortage of supply, or increased pricing .

To the extent the Company relies upon a single source for key components of several of its products, the Company believes there are alternate sources available for such components.

However, there can be no assurance that the interruption of supplies of such components would not have an adverse effect on the financial condition of the Company and that the Company, if required to do so, would be able to negotiate agreements with alternative sources on acceptable terms. 

The Company's global supply chains have been negatively affected by the COVID-19 pandemic.

Due to the current inflationary environment, raw material supply shortages and transportation delays, the Company routinely experiences significant delays and increased prices for raw materials used in our production processes.

The Company has also updated its pricing to customers to offset the impacts of the raw material price increases.

While these impacts are expected to continue into 2022, the resulting future disruptions to the Company’s operations are uncertain.

The Company may be subject to claims for damages for defective products.

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The Company has, from time to time, had claims alleging defects in its products.

The Company cannot be certain it will not experience material product liability losses in the future or that it will not incur significant costs to defend such claims.

While the Company currently has product liability insurance, the Company cannot be certain that its product liability insurance coverage will be adequate for liabilities that may be incurred in the future or that such coverage will continue to be available to the Company on commercially reasonable terms.

The Company may experience material product liability claims in the future and it could incur significant costs to defend such claims.

While the Company currently has product liability insurance that it believes to be sufficient, the Company cannot be certain that its product liability insurance coverage will be adequate for liabilities that may be incurred in the future or that such coverage will continue to be available to the Company on commercially reasonable terms.

Any claims relating to defective products that result in liabilities exceeding the Company's insurance coverage could have a material adverse effect on the Company's business, results of operations, financial position and cash flows.

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The Company may receive defective materials from its vendors that are incorporated into the Company's products during the manufacturing process.

The cost to repair, remake or replace defective products could be greater than the amount that can be recovered from the vendor.

While the Company mitigates this risk through contract terms, traceability and specifications, and has recourse to recover from vendors the costs to repair, remake or replace defective products, such costs could be greater than the amount that can be recovered. 

Such excess costs could have an adverse effect on the Company's business, results of operations, financial position and cash flows.

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No assurance can be given that these amounts will be recovered after cancellation.

Any cancellation or delay in orders may result in revenues that are lower than expected.

The Company's results of operations could be adversely affected by changes in international regulations and other activities of U.S.

governmental agencies related to the Company’s international operations .

Any reduction or cancellation of orders may result in revenues that are lower than expected.

The Company's results of operations could be adversely affected by changes in international regulations and other activities of governmental agencies related to the Company’s operations .

International sales represent a significant portion of the Company's total sales.

The Company's sales to foreign customers increased to 66.2% in 2021 from 49.8% in 2020.

The Company's anticipated growth and profitability may require increasing foreign sales volume and may necessitate further international expansion.

The Company's results of operations could be adversely affected by changes in trade, monetary and fiscal policies, laws and regulations, other activities of U.S.

governments, agencies and similar organizations, and other factors.

These factors include, but are not limited to, changes in a country's or region's economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers. We cannot predict the impact, if any, changes in foreign policies adopted by the current U.S.

The Company's sales to foreign customers were 

63.8%  and 

66.2% in the years ended 

January 31, 2023 and 2022 , respectively. The Company's anticipated growth and profitability may require increasing foreign sales volume and may necessitate further international expansion.

The Company's results of operations could be adversely affected by changes in trade, monetary and fiscal policies, laws and regulations, other activities of governments, agencies and similar organizations, and other factors.

These factors include, but are not limited to, changes in a country's or region's economic or political conditions, trade regulations affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers. We cannot predict the impact of changes in foreign policies adopted by the current U.S.

administration will have on our business.

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In addition, these risks can include extraordinarily delayed collections of accounts receivable.

Because the Company conducts a significant portion of its business activities in the Middle East, the political and economic events of the countries that comprise the GCC can have a material effect on the Company’s business, results of operations, financial condition, and cash flows.

Because the Company conducts a significant portion of its business activities in the Gulf Cooperation Council ("GCC"), the political and economic events of the countries that comprise the GCC can have a material effect on the Company’s business, results of operations, financial condition, and cash flows.

Due to the international scope of the Company’s operations, it is subject to a complex system of commercial and trade regulations around the world.

Recent years have seen an increase in the development and enforcement of laws regarding trade compliance anti-corruption, such as the U.S.

Foreign Corrupt Practices Act and similar laws from other countries as well as new regulatory requirements regarding data privacy.

The Company’s foreign subsidiaries are governed by laws, rules and business practices that differ from those of the United States.

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The Company's cyclical or general expansion may result in unanticipated adverse consequences, including significant strain on management, operations and financial systems, as well as on the Company's ability to attract and retain competent employees.

In the future, the Company may seek to grow its business by investing in new or existing facilities, making acquisitions, entering partnerships and joint ventures, or constructing new facilities, which could entail a number of additional risks, including:

strain on working capital;

diversion of management's attention away from other activities, which could impair the operation of existing businesses;

failure to successfully integrate the acquired businesses or facilities into existing operations;

failure to successfully integrate an acquired business or facility into existing operations;

inability to maintain key pre-acquisition business relationships;

loss of key personnel of the acquired business or facility;

loss of key personnel of an acquired business or facility;

exposure to unanticipated liabilities;

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As a result of these and other factors, including general economic risks, the Company may not be able to realize the expected benefits from future acquisitions, new facility developments, partnerships, joint ventures or other investments.

The Company and its operations may be negatively impacted by pandemics and other public health crises.

 Pandemics and other public health crises may impact 

the Company's office locations and manufacturing facilities, as well as those of its customers and third-party vendors, including through the effects of facility closures, reductions in operating hours and other social distancing efforts. 

The Company’s results of operations, financial condition, liquidity and cash flow may in the future be materially adversely affected by pandemics and other public health crises, although the extent of any such impacts cannot be predicted.

The Company's information technology systems may be negatively affected by cybersecurity threats.

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The Company relies extensively on computer systems to process transactions and manage its business, and its business is at risk from and may be impacted by cybersecurity attacks.

These could include attempts to gain unauthorized access to data and computer systems.

Attacks can be both individual and/ or highly organized attempts organized by very sophisticated hacking organizations.

The Company employs a number of measures to prevent, detect and mitigate these threats, which include password encryption, frequent password change events, firewall detection systems, anti-virus software in-place and frequent backups;

however, there is no guarantee such efforts will be successful in preventing a cyber-attack.

A successful attack could disrupt and otherwise adversely affect the Company's reputation and results of operations, including through lawsuits by third parties.

The Audit Committee of the Board of Directors is responsible for overseeing the Company's cybersecurity policies and programs. 

The Company employs a number of measures to prevent, detect and mitigate these threats, which include data and email encryption, strong password management policy, firewall systems, anti-virus software, and frequent backups. However, there is no guarantee such efforts will be successful in preventing a cyber-attack.

A successful attack could adversely affect the Company's reputation and results of operations, including through lawsuits by third parties.

The Audit Committee of the Board of Directors is responsible for overseeing the adequacy and effectiveness of the Company's cybersecurity policies and programs. 

UNRESOLVED STAFF COMMENTS - None.

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