LAKELAND INDUSTRIES INC

Previous wording

You should carefully consider the following risks before investing in our common stock. The risks and uncertainties described below are those that we have identified as material, but they are not the only risks that we may face. If any of the events referred to below actually occur, our business, financial condition, liquidity and results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should also refer to the other information in this Form 10-K and in the documents we incorporate by reference into this Form 10-K, including our consolidated financial statements and the related notes.

Current wording

You should carefully consider the following risks before investing in our common stock. The risks and uncertainties described below are those that we have identified as material, but they are not the only risks that we may face. If any of the events referred to below actually occur, our business, financial condition, liquidity and results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. In addition, the risks discussed below include forward-looking statements, and our actual results may differ substantially from those discussed in the forward-looking statements. See the section titled “Information Relating to Forward-Looking Statements” for a discussion of such statements and their limitations. You should also refer to the other information in this Form 10-K and in the documents we incorporate by reference into this Form 10-K, including our consolidated financial statements and the related notes.

Previous wording

We are subject to risk as a result of our international manufacturing operations.

Current wording

We are subject to risk as a result of our international manufacturing operations, including risks resulting from recent developments in the international trade environment, such as increased import tariffs.

Previous wording

In recent years, the United States has imposed tariffs on various products imported into the United States. These tariffs have resulted in, and may continue to trigger, retaliatory actions by affected countries, including the imposition of tariffs on the United States by other countries. Under the current administration, trade policy has been a central focus, with renewed scrutiny on trade relationships with China and efforts to renegotiate or withdraw from key agreements such as the United States-Mexico-Canada Agreement (USMCA). This shift has included the introduction of additional tariffs, including on Mexican, Canadian, Chinese, Vietnamese, European Union and Indian goods, targeted sanctions, and restrictions on investments linked to industries deemed critical to U.S. national security. Certain foreign governments, such as China, Canada, Mexico and the European Union, have instituted or are considering imposing trade sanctions on certain U.S. goods and denying U.S. companies access to critical raw materials. The extent and duration of increased tariffs, which we are unable to predict, and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products in affected markets.

Current wording

In recent years, the U.S. has imposed tariffs on various products imported into the U.S. These tariffs have resulted in, and may continue to trigger, retaliatory actions by affected countries, including the imposition of tariffs on the U.S. by other countries. Under the current administration, trade policy has been a central focus, with renewed scrutiny on trade relationships with China and efforts to renegotiate or withdraw from key agreements such as the United States-Mexico-Canada Agreement (USMCA). This shift has included the introduction of additional tariffs, including on Mexican, Canadian, Chinese, Vietnamese, European Union and Indian goods, targeted sanctions, and restrictions on investments linked to industries deemed critical to U.S. national security. Certain foreign governments, such as China, Canada, Mexico and the European Union, have instituted or are considering imposing trade sanctions on certain U.S. goods and denying U.S. companies access to critical raw materials.

Previous wording

Tariffs increase the cost of our products and the components and raw materials that go into making them. These increased costs adversely impact the gross margin we earn on our products. Tariffs can also make our products more expensive for customers, which could make our products less competitive and reduce consumer demand. Countries may also adopt other measures, such as controls on imports or exports of goods, technology, or data, that could adversely impact the Company’s operations and supply chain and limit the Company’s ability to offer our products and services as designed. These measures can require us to take various actions, including changing suppliers and restructuring business relationships. Changing our operations in accordance with new or changed trade restrictions can be expensive, time-consuming, disruptive to our operations and distracting to management. Such restrictions have been, and in the future may be announced, amended, paused, reinstated or rescinded with little or no advance notice, and we may not be able to mitigate all adverse impacts from such measures, effectively. Political uncertainty surrounding trade and other international disputes could also have a negative effect on consumer confidence and spending. Any of these events could reduce customer demand, increase the cost of our products and services, or otherwise have a materially adverse impact on our customers’ and suppliers’ businesses and results of operations, which could in turn adversely impact our financial performance and growth prospects.

Current wording

Our business has been negatively affected by the IEEPA tariffs and may be negatively affected in the future by this quickly evolving tariff situation and the economic uncertainty created thereby. Tariffs increase the cost of our products and the components and raw materials that go into making them. These increased costs adversely impact the gross margin we earn on our products. Tariffs have also increased the cost of our products for customers, making them less competitive and have resulted in reduced consumer demand. Countries may also adopt other measures, such as controls on imports or exports of goods, technology, or data, that could adversely impact the Company’s operations and supply chain and limit the Company’s ability to offer our products and services as designed. These measures can require us to take various actions, including changing suppliers, shifting production of certain products to lower-tariff countries and restructuring business relationships. Changing our operations in accordance with new or changed trade restrictions can be expensive, time-consuming, and disruptive to our operations, as well as distracting to management. Such restrictions have been, and may be in the future, announced, amended, paused, reinstated, or rescinded with little or no advance notice, and we may not be able to effectively mitigate all adverse impacts from such measures. Uncertainty surrounding trade and other international disputes has had a negative effect on consumer confidence and spending, and we cannot predict how long such uncertainty may last. These events have reduced customer demand, and additional tariff policies could exacerbate those effects, increase the cost of our products and services, or otherwise have a materially adverse impact on our customers’ and suppliers’ businesses and results of operations, which could in turn additionally adversely impact our financial performance and growth prospects.

Previous wording

Our global operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political instability, and natural disasters. The occurrence of any of these events could have an adverse effect on our business results and financial condition.

Current wording

Our global operations are susceptible to global events, including acts or threats of war or terrorism, international conflicts, political instability, and natural disasters. The occurrence or continuation of any of these events could have an adverse effect on our business results and financial condition.

Previous wording

The impact of the invasion of Ukraine, including economic sanctions or expansions of the war or other military conflicts, as well as potential responses to them by Russia, could adversely affect the Company’s business, supply chain, suppliers or customers and potentially heighten our risk of cyber-attacks. In addition, although negotiations for a potential ceasefire are ongoing, there is no certainty as to whether, when, or for how long any such ceasefire would have effect, and the continuation of Russia's invasion of Ukraine could lead to other disruptions, instability, and volatility in global markets and industries that could negatively impact the Company’s operations. It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability of raw materials, supplies, freight and labor, currency exchange rates and financial markets, all of which could impact the Company’s business, financial condition and results of operations.

Current wording

The impact of the invasion of Ukraine, including economic sanctions or expansions of the war or other military conflicts, as well as potential responses to them by Russia, could adversely affect the Company’s business, supply chain, suppliers or customers and potentially heighten our risk of cyber-attacks. In addition, although negotiations for a potential end to hostilities occur periodically, there is no certainty as to whether, when, or for how long any resulting ceasefire would remain in effect, and the continuation of Russia's invasion of Ukraine could lead to other disruptions, instability, and volatility in global markets and industries that could negatively impact the Company’s operations. Additionally, the conflict in and around Iran has increased instability in the Middle East region and generated new economic uncertainty in global supply chains, due in part to the restriction of shipping activity through the Strait of Hormuz. The broader consequences of these conflicts are uncertain, and could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, the availability of raw materials, supplies, freight and labor, currency exchange rates and financial markets, all of which could impact the Company’s business, financial condition and results of operations.

Previous wording

Further escalation of specific trade tensions, including those between the U.S. and China, and those between the U.S. and Mexico and Canada, or more broadly in global trade conflicts, could adversely impact the Company's business and operations. The Company's business is also impacted by social, political, and labor conditions in locations in which the Company or its suppliers or customers operate; adverse changes in the availability and cost of capital; monetary policy; interest rates; inflation; recession; commodity prices; currency volatility or exchange control; ability to expatriate earnings; and other laws and regulations in the jurisdictions in which the Company or its suppliers or customers operate. For example, changes in local economic conditions or outlooks, such as lower economic growth rates in China, Europe, or other key markets, impact the demand or profitability of the Company's products.

Current wording

Further escalation of specific trade tensions, including those between the U.S. and China, and those between the U.S. and Mexico and Canada, or more broadly in global trade conflicts, could adversely impact the Company's business and operations. The Company's business is also impacted by social, political, and labor conditions in locations in which the Company or its suppliers or customers operate; adverse changes in the availability and cost of capital; monetary policy; interest rates; inflation; recession; commodity prices; currency volatility or exchange control; ability to expatriate earnings; and other laws and regulations in the jurisdictions in which the Company or its suppliers or customers operate. For example, changes in local economic conditions or outlooks, such as lower economic growth rates in China, Europe, or other key markets, impact the demand for or profitability of the Company's products.

Previous wording

We have business operations in 16 foreign countries. In FY25, more than half of our net sales were made by operations outside the United States. Those operations are subject to various political, economic and other risks and uncertainties, which could have a material adverse effect on our business. These risks include the following:

Current wording

We have business operations in 16 foreign countries. In FY26, more than half of our net sales were made by operations outside the U.S. Those operations are subject to various political, economic and other risks and uncertainties, which could have a material adverse effect on our business. These risks include the following:

Previous wording

Our ability to manufacture, distribute and sell products is critical to our operations. These activities are subject to inherent risks such as natural disasters, power outages, fires or explosions, labor strikes, terrorism, epidemics, pandemics, import restrictions, regional economic, business, environmental or political events, governmental regulatory requirements or nongovernmental voluntary actions in response to global climate change or other concerns regarding the sustainability of our business, which could disrupt our supply chain and impair our ability to manufacture or sell our products. If not mitigated in advance or otherwise effectively managed, this interruption could adversely impact our business, financial condition and results of operations and require additional resources to address.

Current wording

Our ability to manufacture, distribute and sell products is critical to our operations. These activities are subject to inherent risks such as natural disasters, power outages, fires or explosions, labor strikes, terrorism, war, epidemics, pandemics, import restrictions, regional economic, business, environmental or political events, governmental regulatory requirements or nongovernmental voluntary actions in response to global climate change or other concerns regarding the sustainability of our business, which could disrupt our supply chain and impair our ability to manufacture or sell our products. If not mitigated in advance or otherwise effectively managed, this interruption could adversely impact our business, financial condition and results of operations and require additional resources to address.

Previous wording

Our sales are generally made based on individual purchase orders, which may later be modified or canceled by the customer rather than on long-term commitments. We have historically been required to place firm orders for fabrics and components with our suppliers before receiving an order for our products based on our forecasts of customer demands. Our sales process requires us to make multiple demand forecast assumptions, each of which may introduce errors in our estimates, causing excess inventory to accrue or a lack of manufacturing capacity when needed. If we overestimate customer demand, as we have done in recent years, we may allocate resources to manufacturing products that we may not be able to sell when we expect to or at all. As a result, we experienced in fiscal year 2024 a buildup of excess inventory, with corresponding negative impacts on our financial results. We may experience similar results if we overestimate customer demand in the future. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would lose sales opportunities and market share and damage our customer relationships. On occasion, we have been unable to adequately respond to delivery dates required by our customers because of the lead time needed for us to obtain required materials or to send fabrics to our assembly facilities in China, Vietnam, India, and Mexico.

Current wording

Our sales are generally made based on individual purchase orders, which may later be modified or canceled by the customer rather than on long-term commitments. We have historically been required to place firm orders for fabrics and components with our suppliers before receiving an order for our products based on our forecasts of customer demands. Our sales process requires us to make multiple demand forecast assumptions, each of which may introduce errors in our estimates, causing excess inventory to accrue or a lack of manufacturing capacity when needed. If we overestimate customer demand, as we have done in recent years, we may allocate resources to manufacturing products that we may not be able to sell when we expect to or at all. We may experience similar results if we overestimate customer demand in the future. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would lose sales opportunities and market share and damage our customer relationships. On occasion, we have been unable to adequately respond to delivery dates required by our customers because of the lead time needed for us to obtain required materials or to send fabrics to our assembly facilities in China, Vietnam, India, and Mexico.

Previous wording

Three of our competitors, DuPont, Ansell, and MSA, have substantially greater financial, marketing and sales resources than we do. In addition, we believe that the barriers to entry in the disposable and reusable garments and gloves markets are relatively low. We cannot assure you that our present competitors or competitors that choose to enter the marketplace in the future will not exert significant competitive pressures.

Current wording

Three of our competitors, DuPont, Ansell, and MSA Safety, have substantially greater financial, marketing and sales resources than we do. In addition, we believe that the barriers to entry in the disposable and reusable garments and gloves markets are relatively low. We cannot assure you that our present competitors or competitors that choose to enter the marketplace in the future will not exert significant competitive pressures.

Previous wording

Our performance is substantially dependent on the continued services and performance of our senior management and certain other key personnel, including James M. Jenkins, our President and Chief Executive Officer and Executive Chairman; Roger D. Shannon, our Chief Financial Officer and Secretary; Helena An, our Chief Operating Officer, Laurel A. Yartz, our Chief Human Resources Officer; Barry G. Phillips, our Chief Revenue Officer – Fire; and Cameron S. Stokes our Chief Commercial Officer – Global Industrials. The loss of services of any of our executive officers or other key employees could have a material adverse effect on our business, financial condition, and results of operations. In addition, any future expansion of our business will depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled managerial, marketing, customer service and manufacturing personnel, and our inability to do so could have a material adverse effect on our business, financial condition and results of operations.

Current wording

Our performance is substantially dependent on the continued services and performance of our senior management and certain other key personnel, including James M. Jenkins, our President and Chief Executive Officer and Executive Chairman; J. Calven Swinea, our Chief Financial Officer and Secretary; Helena An, our Chief Operating Officer, Laurel A. Yartz, our Chief Human Resources Officer; Barry G. Phillips, our Chief Revenue Officer – Fire; Cameron S. Stokes our Chief Commercial Officer – Global Industrials; and Kevin Rae, our Executive Vice President of Europe, Middle East and Africa Fire Sales. The loss of services of any of our executive officers or other key employees could have a material adverse effect on our business, financial condition, and results of operations. In addition, any future expansion of our business will depend on our ability to identify, attract, hire, train, retain and motivate other highly skilled managerial, marketing, customer service and manufacturing personnel, and our inability to do so could have a material adverse effect on our business, financial condition and results of operations.

Previous wording

We employ various measures to prevent, detect, address and mitigate cybersecurity threats (including access controls, vulnerability assessments, training for employees with electronic access to confidential information, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems). However, our security measures may be inadequate to prevent security breaches, and our business operations and reputation could be materially adversely affected by these events and any resulting federal and state fines and penalties, legal claims or proceedings. There are also significant costs associated with a data breach, including investigation costs, remediation and mitigation costs, notification and monitoring costs, attorneys’ fees, and the potential for reputational harm and lost revenues due to a loss of confidence. We cannot predict the costs to comply with these laws or the costs associated with a potential data breach, which could have a material adverse effect on our business, results of operations, financial position and cash flows, and our business reputation. As cyber threats continue to evolve, we may be required to expend significant capital and other resources to protect against the threat of security breaches or to mitigate and alleviate problems caused by security incidents. While there have been no identified cybersecurity incidents, in the last three years that have materially affected our business strategy, results of operations or financial condition to date, there can be no assurance that such risks will not have a material adverse effect in the future.

Current wording

We employ various measures to prevent, detect, address and mitigate cybersecurity threats (including access controls, vulnerability assessments, training for employees with electronic access to confidential information, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems). However, our security measures may be inadequate to prevent security breaches, and our business operations and reputation could be materially adversely affected by these events and any resulting federal and state fines and penalties, legal claims or proceedings. There are also significant costs associated with a data breach, including investigation costs, remediation and mitigation costs, notification and monitoring costs, attorneys’ fees, and the potential for reputational harm and lost revenues due to a loss of confidence. We cannot predict the costs to comply with these laws or the costs associated with a potential data breach, which could have a material adverse effect on our business, results of operations, financial position and cash flows, and our business reputation. As cyber threats continue to evolve, we may be required to expend significant capital and other resources to protect against the threat of security breaches or to mitigate and alleviate problems caused by security incidents. To date, we have not identified any cybersecurity threats, that have materially affected our business strategy, results of operations or financial condition. However, there can be no assurance that such risks will not have a material adverse effect in the future.

Previous wording

As a global organization that accesses and processes personal data in the course of its business, we are subject to U.S. and international data privacy, security and data breach notification laws, as well as contractual requirements that may govern the collection, use, disclosure and protection of personal data.

Current wording

As a global organization that accesses and processes personal data in the course of its business, we are subject to U.S. and international data privacy, security and data breach notification laws, as well as contractual requirements that may govern the collection, use, disclosure and protection of personal and other sensitive data.

Previous wording

For example, in the United States, individual state statutes establish mandatory data breach notification requirements as well as more general privacy and security requirements. All 50 states, the District of Columbia and U.S. territories have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected persons and/or state regulators in the event of a data breach or compromise, including when their personal information has or may have been accessed by an unauthorized person. These laws apply according to the residence of the impacted individual. Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information. In addition, various state privacy laws grant individuals various rights with respect to personal information and may require significant expense and resources to comply with these laws. For example, the California Consumer Privacy Act (“CCPA”) (as amended by the California Privacy Rights Act) is one of a few state privacy laws that include private rights of action that may expose us to private litigation regarding our privacy and security practices and significant damages awards or settlements in civil litigation.

Current wording

For example, in the U.S., individual state statutes establish mandatory data breach notification requirements as well as more general privacy and security requirements. All 50 states, the District of Columbia and U.S. territories have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected persons and/or state regulators in the event of a data breach or compromise, including when their personal information has or may have been accessed by an unauthorized person. These laws apply according to the residence of the impacted individual. Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information. In addition, various state privacy laws grant individuals various rights with respect to personal information and may require significant expense and resources to comply with these laws. While most of these state privacy laws are exclusively enforced by their state attorneys general, the California Consumer Privacy Act (“CCPA”) is one of a few state privacy laws that includes a limited private right of action regarding security practices in the event of a data breach, thus exposing us to potential private litigation that could result in significant damages awards or settlements in civil litigation. Finally, in addition to comprehensive state privacy laws, there are multiple other more specific and potentially applicable federal state privacy laws around the U.S. that regulate specific kinds of data, from biometric and health data to website analytics and online advertising and more, each of which present, to the extent applicable, the potential for statutory penalties, regulatory enforcement action, or, in some cases, private litigation.

Previous wording

Outside the United States, as our company continues to grow internationally through acquisitions as well as expanded business operations, we may be subject to established and continuously evolving international laws and regulations regarding individual rights around personal information and the cross-border transfers thereof. For example, Regulation (EU) 2016/679 (General Data Protection Regulation) (“GDPR”) and its counterpart in the United Kingdom, the Personal Information Protection Law of the People's Republic of China, adopted August 20, 2021, effective November 1, 2021 (“PIPL”), the Personal Information Protection and Electronic Documents Act in Canada (“PIPEDA”), and other such international privacy laws around the world, as well as their implementing regulations, contain data breach notification requirements, outline certain obligations and restrictions around the collection, processing, and cross-border transfers of personal information, and may also grant individuals certain consumer rights over their personal information. Given our organization’s international locations and global distribution networks, compliance with the varying data privacy requirements in effect across the United States and around the world, particularly as they continue to evolve in many countries, may necessitate expenditures and changes in our business models. Failure to comply with these requirements can subject us to legal, regulatory, and reputational risks, as well as the financial risks that can accompany regulatory investigations, enforcement actions and private litigation.

Current wording

Outside the U.S., as our company continues to grow internationally through acquisitions as well as expanded business operations, we may be subject to established and continuously evolving international laws and regulations regarding individual rights around personal information and the cross-border transfers thereof. For example, Regulation (EU) 2016/679 (General Data Protection Regulation) (“GDPR”) and its counterpart in the United Kingdom, the Personal Information Protection Law of the People's Republic of China, adopted August 20, 2021, effective November 1, 2021 (“PIPL”), the Personal Information Protection and Electronic Documents Act in Canada (“PIPEDA”), and other such international privacy laws around the world, as well as their implementing regulations, contain data breach notification requirements, outline certain obligations and restrictions around the collection, processing, and cross-border transfers of personal information, and may also grant individuals certain consumer rights over their personal information. In addition, the recently effective DOJ Bulk Transfer Rule prohibits or restricts the cross-border bulk transfer of government-related data or bulk sensitive U.S. personal data to persons and countries of concern. Given our organization’s international locations and global distribution networks, compliance with the varying data privacy requirements in effect across the U.S. and around the world, particularly as they continue to evolve in many countries, may necessitate expenditures and changes in our business models. Failure to comply with these requirements can subject us to legal, regulatory, and reputational risks, as well as the financial risks that can accompany regulatory investigations, enforcement actions and private litigation.

Previous wording

If we are unable to integrate or successfully manage businesses that we have recently acquired or may acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and increased revenue, which may result in material adverse short and long-term effects on our consolidated operating results, financial condition and liquidity. Even if we are able to integrate the operations of our acquired businesses into our operations, we may not realize the full benefits of the cost savings, revenue enhancements or other benefits that we may have expected at the time of acquisition. In addition, even if we achieve the expected benefits, we may not be able to achieve them within the anticipated time frame, and such benefits may be offset by costs incurred in integrating the acquired companies and increases in other expenses.

Current wording

If we are unable to integrate or successfully manage businesses that we have recently acquired or may acquire in the future, we may not realize anticipated cost savings, improved manufacturing efficiencies and increased revenue, which may result in material adverse short and long-term effects on our consolidated operating results, financial condition and liquidity. Even if we are able to integrate the operations of our acquired businesses into our operations, we may not realize the full benefits of the cost savings, revenue enhancements or other benefits that we may have expected at the time of acquisition. In addition, even if we achieve the expected benefits, we may not be able to achieve them within the anticipated time frame, and such benefits may be offset by costs incurred in integrating the acquired companies and increases in other expenses. For example, as disclosed in Item 9A of this Annual Report, we are in the process of remediating a material weakness in our internal control over financial reporting related to the need to enhance information technology general controls ("ITGCs") over the completeness and accuracy of the Company’s foreign reporting packages. These reporting packages serve as the basis for multiple controls, including a key management review control designed to detect material misstatements in the Company’s consolidated financial statements. We can give no assurance that additional material weaknesses will not arise in the future.

Previous wording

Acquisitions involve a number of special risks in addition to those mentioned above, including the diversion of management’s attention to the assimilation of the operations and personnel of the acquired companies, the potential loss of key employees of acquired companies, potential exposure to unknown liabilities, adverse effects on our reported operating results and the amortization or write-down of acquired intangible assets. We cannot assure you that any acquisition by us will or will not occur, that if an acquisition does occur, it will not materially and adversely affect our results of operations or that any such acquisition will be successful in enhancing our business. To the extent that we are unable to manage growth efficiently and effectively or are unable to attract and retain additional qualified management personnel, our business, financial condition and results of operations could be materially and adversely affected.

Current wording

Acquisitions involve a number of special risks in addition to those mentioned above, including the diversion of management’s attention to the assimilation of the operations and personnel of the acquired companies, the potential loss of key employees of acquired companies, potential exposure to unknown liabilities, unfavorable accounting treatment, adverse effects on our reported operating results and the amortization or write-down of acquired intangible assets. We cannot assure you that any acquisition by us will or will not occur, that if an acquisition does occur, it will not materially and adversely affect our results of operations or that any such acquisition will be successful in enhancing our business. To the extent that we are unable to manage growth efficiently and effectively or are unable to attract and retain additional qualified management personnel, our business, financial condition and results of operations could be materially and adversely affected.

Previous wording

Our system of internal and disclosure controls and procedures was designed to provide reasonable assurance of achieving its objectives. However, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been or will be detected. As a result, there can be no assurance that our system of internal and disclosure controls and procedures will be successful in preventing all errors, theft and fraud or in informing management of all material information in a timely manner. For example, as disclosed in Item 9A of this annual report, we are in the process of remediating a material weakness related to inconsistencies in enterprise-wide controls over financial reporting resulting from our acquisition of several subsidiaries over the past two years. We can give no assurance that additional material weaknesses will not arise in the future.

Current wording

Our system of internal and disclosure controls and procedures was designed to provide reasonable assurance of achieving its objectives. However, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been or will be detected. As a result, there can be no assurance that our system of internal and disclosure controls and procedures will be successful in preventing all errors, theft and fraud or in informing management of all material information in a timely manner. For example, as disclosed in Item 9A of this Annual Report, we are in the process of remediating a material weakness in our internal control over financial reporting related to the need to enhance "ITGCs" over the completeness and accuracy of the Company’s foreign reporting packages. These reporting packages serve as the basis for multiple controls, including a key management review control designed to detect material misstatements in the Company’s consolidated financial statements. We can give no assurance that additional material weaknesses will not arise in the future.

Previous wording

We are implementing a new enterprise resource planning system, and challenges with the planning or implementation of the system may impact our internal control over financial reporting, business and operations.

Current wording

We are implementing a new enterprise resource planning system, and challenges with the implementation of the system or further delays may impact our internal control over financial reporting, business and operations.

Previous wording

We are undertaking a multi-year process of implementing a complex new SAP enterprise resource planning system (“ERP”), which is a major undertaking that will replace most of our existing operating and financial systems. An ERP system is used to maintain financial records, enhance data security and operational functionality and resiliency, and provide timely information to management related to the operation of a business. The SAP ERP implementation will require the integration of the new ERP with existing information systems and business processes. Our ERP planning has required, and the ongoing planning and future implementation of the new ERP will continue to require, investment of significant capital and human resources, requiring the attention of members of our management team. Any deficiencies in the design, or delays or issues encountered in the implementation, of the new SAP ERP could result in significantly greater capital expenditures and employee time and attention than currently contemplated and could adversely affect our ability to operate our business, including effective management of our invoicing and accounts receivable and collections processes, file timely reports with the SEC or otherwise affect the proper and efficient operation of our controls. If the system as implemented, or after necessary investments, does not result in our ability to maintain accurate books and records, our financial condition, results of operations, and cash flows could be materially adversely impacted. Additionally, conversion from our old system to the new ERP may also cause inefficiencies until the ERP is stabilized and mature. The implementation of our new ERP will require new procedures and many new controls over financial reporting. If we are unable to adequately plan, implement and maintain procedures and controls relating to our ERP, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and impact the effectiveness of our internal control over financial reporting. All of the above could result in harm to our reputation or our customers, as well as expose us to regulatory actions or claims, any of which could materially impact our business, results of operations, financial condition and stock price.

Current wording

We have commenced a multi-year process of implementing a complex new SAP enterprise resource planning system (“ERP”), which is a major undertaking that will replace most of our existing operating and financial systems. An ERP system is used to maintain financial records, enhance data security and operational functionality and resiliency, and provide timely information to management related to the operation of a business. The SAP ERP implementation will require the integration of the new ERP with existing information systems and business processes. This process has required and will continue to require the investment of significant capital and human resources, requiring the attention of members of our management team. Any deficiencies in the design, or delays or issues encountered in the implementation, of the new SAP ERP could result in significantly greater capital expenditures and employee time and attention than currently contemplated and could adversely affect our ability to operate our business, including effective management of our invoicing and accounts receivable and collections processes, file timely reports with the SEC or otherwise affect the proper and efficient operation of our controls. We have already experienced some delays in the implementation of the new ERP system and an associated increase in cost, and there is no guarantee that other delays will not take place. In addition, we replaced the implementer of our ERP system and will onboard a new implementer in the first half of fiscal 2027. Further changes in scope, timeline or cost could have a material adverse effect on our results of operation.

Previous wording

We have identified a material weakness in our internal control over financial reporting which, if not remediatedappropriately or in a timely manner, could result in a loss of investor confidence and adversely impact the trading price ofour securities.

Current wording

We have identified a material weakness in our internal control over financial reporting which, if not remediated appropriately or in a timely manner, could result in a loss of investor confidence and adversely impact the trading price of our securities.

Previous wording

As disclosed in Part II - Item 9A. Controls and Procedures, management has identified a material weakness in our internal control over financial reporting relating to controls over the completeness and accuracy of the Company’s foreign reporting packages which are the basis preparation of our consolidated financial statements. As a result, management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of January 31, 2025. The material weakness did not result in any material misstatements to the Company’s consolidated financial statements, and the Company is currently working to remediate the material weakness. However, there can be no assurance that these remediation efforts will be successful. In addition, these remediation efforts will place a burden on management and may result in additional expenses.

Current wording

As disclosed in Part II - Item 9A. Controls and Procedures, management has identified a material weakness in our internal control over financial reporting relating to controls over the completeness and accuracy of the Company’s foreign reporting packages which are the basis of multiple controls, including a key management review control designed to detect a material misstatement in our consolidated financial statements. As a result, management concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of January 31, 2026. The material weakness did not result in any material misstatements to the Company’s consolidated financial statements, and the Company is currently working to remediate the material weakness. However, there can be no assurance that these remediation efforts will be successful. In addition, these remediation efforts will place a burden on management and may result in additional expenses.

Previous wording

We review our long-lived assets for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Goodwill and indefinite-lived intangible assets are required to be assessed for impairment at least annually. Factors that may be considered a change in circumstances, indicating that the carrying amount of our goodwill, indefinite-lived intangible assets or long-lived assets may not be recoverable, include slower growth rates in our markets, reduced expected future cash flows, increased country risk premiums because of political uncertainty and a decline in stock price and market capitalization. We consider available current information when calculating our impairment charge. If there are indicators of impairment, our long-term cash flow forecasts for our operations deteriorate or discount rates increase, we may be required to recognize additional impairment charges in later periods. The Company recognized goodwill impairment charges of $3.0 million, representing the entire amount of goodwill related to the Pacific reporting unit in the Other Foreign geographic segment and $7.5 million, representing 83% of the goodwill related to the Eagle reporting unit in the Europe geographic segment, during the year ended January 31, 2025.

Current wording

The Company recognized goodwill impairment charges of $2.6 million, representing 45% of goodwill related to the LHD reporting unit in the Europe geographic segment during the year ended January 31, 2026. The Company recognized goodwill impairment charges of $3.0 million, representing the entire amount of goodwill related to the Pacific reporting unit in the Other Foreign geographic segment and $7.5 million, representing 83% of the goodwill related to the Eagle reporting unit in the Europe geographic segment, during the year ended January 31, 2025.

Previous wording

We are also exposed to foreign currency exchange rate risks due to our sales to customers in foreign countries in the amount of $106.8 million in FY25. Our sales in these countries are usually denominated in the local currency. If the value of the U.S. dollar increases relative to these local currencies, and we are unable to raise our prices proportionally, then our profit margins could decrease because of the exchange rate change.

Current wording

We are also exposed to foreign currency exchange rate risks due to our sales to customers in foreign countries in the amount of $111.0 million in FY26. Our sales in these countries are usually denominated in the local currency. If the value of the U.S. dollar increases relative to these local currencies, and we are unable to raise our prices proportionally, then our profit margins could decrease because of the exchange rate change.

Previous wording

In connection with our operations in China, we purchase a significant number of raw materials and components from outside of the United States. However, our purchases in China are primarily made in the RMB, the value of which has floated for the last 7 years, and therefore, we have been exposed to additional foreign exchange rate risk on our Chinese raw material and component purchases.

Current wording

In connection with our operations in China, we purchase a significant number of raw materials and components from outside of the U.S. However, our purchases in China are primarily made in the RMB, the value of which has floated for the last 7 years, and therefore, we have been exposed to additional foreign exchange rate risk on our Chinese raw material and component purchases.

Previous wording

Our primary risk from foreign currency exchange rate changes is related to non-US dollar-denominated sales in China, Canada, South America and Europe and, to a lesser extent Mexico and Russia. Our sales to customers in Canada are denominated in Canadian dollars, South America in Argentine Pesos, Europe in Euros and British Pounds, and China in RMB and U.S. dollars. If the value of the U.S. dollar increases relative to the Canadian dollar, the Argentine Peso, the Pound, the Euro, or the RMB, then our net sales could decrease as our products would be more expensive to these international customers because of changes in the exchange rate. When appropriate, we manage the foreign currency risk through forward contracts against the Canadian dollar, Australian dollar, New Zealand dollar and Euro, as well as through cash flow hedges in the U.S. against the RMB and the Euro. If non-U.S. dollar-denominated international purchases and sales grow, exposure to volatility in exchange rates could have a material adverse impact on our financial results.

Current wording

Our primary risk from foreign currency exchange rate changes is related to non-US dollar-denominated sales in China, Canada, South America and Europe and, to a lesser extent Mexico and Russia. Our sales to customers in Canada are denominated in Canadian dollars, South America in Argentine Pesos, Europe in Euros and British Pounds, and China in RMB and U.S. dollars. If the value of the U.S. dollar increases relative to the Canadian dollar, the Argentine Peso, the Pound, the Euro, or the RMB, then our net sales could decrease as our products would be more expensive to these international customers because of changes in the exchange rate. When appropriate, we manage the foreign currency risk through forward contracts against the Australian dollar, New Zealand dollar and Euro, as well as through cash flow hedges in the U.S. against the RMB and the Euro. If non-U.S. dollar-denominated international purchases and sales grow, exposure to volatility in exchange rates could have a material adverse impact on our financial results.

Previous wording

As a result of the Loan Agreement the Company entered into on June 25, 2020, as amended to date, we currently have a $40.0 million revolving credit facility, which matures on December 12, 2029. Our credit facility requires, and any future credit facilities may also require, among others, that we comply with specified financial covenants relating to fixed charge coverage and investment in acquisitions. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Loan Agreement” for more information. Our ability to satisfy these financial covenants can be affected by events beyond our control, and we cannot guarantee that we will meet the requirements of these covenants.

Current wording

As a result of the Loan Agreement the Company entered into on June 25, 2020, as amended to date, we currently have a $40.0 million revolving credit facility, which matures on December 12, 2029. Our credit facility requires, and any future credit facilities may also require that we comply with specified financial covenants relating to fixed charge coverage and investment in acquisitions, among others. At times we have been unable to maintain compliance with certain of these covenants, though we have historically been able to obtain waivers of such noncompliance from our lenders. Specifically, as of January 31, 2026, we were not in compliance with our “basic fixed charge coverage ratio” and “funded debt to EBITDA ratio” covenants; however, on April 13, 2026, we and the lender entered into a limited waiver, pursuant to which the lender waived our non-compliance, as of January 31, 2026, with these covenants. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Loan Agreement” for more information. Our ability to satisfy these financial covenants can be affected by events beyond our control, and we cannot guarantee that we will meet the requirements of these covenants. If any non-compliance with such covenants is not cured or waived, the applicable lenders could accelerate our outstanding obligations or proceed against the collateral granted to them to secure that indebtedness, which could have a material adverse effect on our financial position and our business generally. At January 31, 2026, we had $28.5 million outstanding debt under our credit facility.

Previous wording

We must comply with American laws such as the Foreign Corrupt Practices Act (FCPA) and Sarbanes-Oxley as well as anticorruption legislation in the U.K. Some of our competitors and customers in foreign jurisdictions may not adhere to such legislation. As a result, we believe that we lose sales orders due to our strict adherence to such regulations.

Current wording

We must comply with American laws such as the Foreign Corrupt Practices Act (FCPA) and Sarbanes-Oxley as well as anticorruption legislation in the U.K. Compliance with U.S. and foreign laws, including sanctions, anti-corruption, tax, data privacy, labor, and competition regulations, increases our operating costs and exposes us to risks. Despite our compliance policies, violations may occur. Any violation could result in significant fines, penalties, operational restrictions, and reputational harm, and investigations and enforcement actions can be costly and divert management’s attention, materially adversely affecting our business.

Previous wording

The U.S. Congress, the Organization for Economic Co-operation and Development (OECD) and other government agencies in jurisdictions in which we invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD has changed numerous long-standing tax principles through its base erosion and profit shifting (“BEPS”) project, which could adversely impact our effective tax rate.

Current wording

The U.S. Congress, the Organization for Economic Co-operation and Development (OECD) and other government agencies in jurisdictions in which we invest or do business have maintained a focus on issues related to the taxation of multinational companies. One example is base erosion and profit shifting, where profits may be reported for tax purposes in low-tax jurisdictions or payments are made between affiliates from higher-tax jurisdictions to lower-tax jurisdictions. The OECD has developed, and an increasing number of jurisdictions have continued to implement, elements of its Two-Pillar Solution for international tax reform. Pillar One includes rules relating to the allocation of taxing rights, while Pillar Two introduces a global minimum tax under the Pillar Two Global Anti-Base Erosion (“GloBE”) rules.

Previous wording

We are subject to regular review and audit by foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ materially from the tax amounts recorded in our consolidated financial statements, which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.

Current wording

Tax laws in the U.S. and other countries in which we do business could change on a prospective or retroactive basis, including through refinements to these rules, new adoptions, or responses to evolving international developments, any of which could adversely affect our business, financial condition, and results of operations. We are subject to regular review and audit by foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ materially from the tax amounts recorded in our consolidated financial statements, which could have a material adverse effect on our consolidated results of operations, financial condition and cash flows.

Previous wording

The regulatory environment in which we operate is subject to change, and new regulations and new or existing claims, such as those related to certain PFAS substances, could have a material adverse effect on our business, financial condition and results of operations or make aspects of our business as currently conducted no longer possible. For example, the Company has been named as a party to a number of lawsuits filed by firefighters related to exposure to PFAS in firefighter turnout gear. These cases are consolidated inIn re: Aqueous Film-Forming Foams Products Liability Litigation, MDL No.: 2:18-mn-2873-RMG (District of South Carolina, Charleston Division). We may, in the future, be subject to additional claims related to PFAS, including for degradation of natural resources from such PFAS and personal injury or product liability claims as a result of human exposure to such PFAS.

Current wording

The regulatory environment in which we operate is subject to change, and new regulations and new or existing claims, such as those related to certain PFAS substances, could have a material adverse effect on our business, financial condition and results of operations or make aspects of our business as currently conducted no longer possible. For example, the Company has been named as a party to a number of lawsuits filed by firefighters related to exposure to PFAS in firefighter turnout gear. These cases are largely consolidated in In re: Aqueous Film-Forming Foams Products Liability Litigation, MDL No.: 2:18-mn-2873-RMG (District of South Carolina, Charleston Division) or pending in a putative class action in the United States District Court of Connecticut, styled as Uniformed Professional Fire Fighters Association of Connecticut et al. v. 3M Company et al., Case No. 3:24-CV-01101. We may, in the future, be subject to additional claims related to PFAS, including for degradation of natural resources from such PFAS and personal injury or product liability claims as a result of human exposure to such PFAS.

Previous wording

The market price of our common stock could be subject to significant fluctuations in response to quarter-to-quarter variations in our operating results, announcements of new products or services by us or our competitors and other events or factors. For example, a shortfall in net sales or net income, or an increase in losses, from levels expected by securities analysts or investors, could have an immediate and significant adverse effect on the market price of our common stock. Volume fluctuations that have particularly affected the market prices of many micro and small capitalization companies have often been unrelated or disproportionate to the operating performance of these companies. These fluctuations and general economic and market conditions may adversely affect the market price for our common stock.*** ***

Current wording

For example, a shortfall in net sales or net income, or an increase in losses, from levels expected by securities analysts or investors, could have an immediate and significant adverse effect on the market price of our common stock. Volume fluctuations that have particularly affected the market prices of many micro and small capitalization companies have often been unrelated or disproportionate to the operating performance of these companies. These fluctuations and general economic and market conditions may adversely affect the market price for our common stock.