Brazil Restructuring and Subsequent Event

9 Months Ended

Oct. 31, 2014

19. Brazil Restructuring and Subsequent Event

Management currently intends to restructure its operations in Brazil because of its failure to progress as planned to profitability.

We intend to close the facility in Salvador, Brazil, sell the real estate and then sell off the remaining old corporation and/or its assets together or separately.

When complete, these changes should result in a substantial pretax restructuring charge and is expected to allow a tax deduction in the USA. Such charges are not expected to generate a net loss after taxes and may result in a net gain after taxes in view of the anticipated tax benefit.

We expect this should be consummated anywhere from Q4 FY15 through Q2 FY16, however these negotiations will be complex and may require more time than anticipated in order to maximize shareholder value.

In connection with the restructuring plan, we plan to create two new corporations potentially relocating them to two different states in Brazil that have more advantageous tax policy, more competitive freight rates, and are located closer to our customer base. In so doing we believe we will be able to further reduce operational overhead and improve customer service. We expect one company to import and sell disposable and chemical garments; the other to import and manufacture fire and FR garments.

The proposed restructuring is subject to a number of factors, including without limitation, future operating results in Brazil and the degree of success of selling assets.