Company: NOTV
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001628280-25-039017
Chunk: 97

Company: Inotiv, Inc.
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 3
Chunk 97
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 or limitations, our business, particularly in our RMS segment, will be materially adversely affected. 

In recent years, overall supply constraints with respect to NHPs led to an extremely dynamic pricing environment for NHPs, which made it difficult to predict results, led to reduced volumes, and required us to adjust operations. 

In addition, increases in the costs of NHPs without ratable increased revenue as a result of macroeconomic and other factors, including increased tariffs, export or import laws/restrictions or embargoes, inflation, international trade regulations and foreign government instability, among other circumstances could materially adversely affect our business, financial condition, cash flows and results of operations. 

Our imported NHPs were subject to 10% tariffs during the third quarter of fiscal 2025. These tariffs were required to be paid within 30 days of import, which is a shorter timeframe than the average NHP research model inventory turnover. As a result, payment of tariffs negatively impacted the Company's cash flows during the third fiscal quarter of 2025 and is expected to impact the Company's cash flows in the future. Future NHP imports are expected to be subject to 15%-20% tariffs. The current and future applicable tariff percentages are based on the country of origin of the imported NHPs. Further, there continues to be a risk of additional and/or increased tariffs in connection with ongoing geopolitical factors. Our attempts to mitigate the financial impacts of the additional tariff costs may not be successful in the desired timeframe or at all. Should additional and/or increased tariffs be put into place and exist for some time, our business, financial condition, cash flows and results of operations could be materially adversely affected by the additional costs to us and/or by our clients' prioritization of studies and our suppliers' prioritization and allocation of their supply going forward.

Some of our clients and contracts depend on government funding of research and development and a reduction in that funding may adversely affect our business.

A significant portion of our sales are derived from clients at academic institutions and research laboratories whose funding is partially dependent on funding from government sources, including the National Institutes of Health and U.K./E.U. equivalents. Such funding can be difficult to forecast as government research and development funding is subject to political and budgetary uncertainties, which can delay client purchases or reduce demand for our products and services. Our sales may be adversely affected if our clients delay purchases as a result of uncertainties surrounding the approval of government budget proposals. There can be no certainty that government research funding that is approved