What changed in this filing

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Item 1A. Risk Factors

2024-07-25 compared with 2023-08-03 · 97 added, 75 removed, 372 unchanged (32% of the section changed)

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If any of these products fail to achieve clinical acceptance or are perceived unfavorably by the market, it could severely limit our ability to drive revenue growth, which could have a material adverse effect on our business, financial condition, results of operations and/or liquidity.

See Risk Factor titled “Our business and prospects rely heavily upon our ability to successfully complete clinical trials, including, but not limited to, our NanoKnife DIRECT clinical study, our NanoKnife PRESERVE clinical study, AlphaVac APEX-AV clinical study and clinical studies for AngioVac.

We may choose to, or may be required to, suspend, repeat or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results are negative or inconclusive or the trials are not well designed.”

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Any actual or perceived diminution in the quality of our products, or our failure or inability to maintain these other efforts, could damage our reputation with interventional physicians, interventional and surgical oncologists, and critical care nurses, and cause our growth to be limited and our business to be harmed, which could have a material adverse effect on our business, financial condition, results of operations and/or liquidity.

Our business and prospects rely heavily upon our ability to successfully complete clinical trials, including, but not limited to, our NanoKnife DIRECT clinical study, our NanoKnife PRESERVE clinical study, AlphaVac APEX-AV clinical study and clinical studies for AngioVac.

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Clinical trial protocols may require a large number of patients to be enrolled in the trials.

Patient enrollment is a function of many factors, including the size of the patient population for the target indication, the

proximity of patients to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the availability of alternative or new treatments.

Patient enrollment is a function of many factors, including the size of the patient population for the target indication, the proximity of patients to clinical sites, the eligibility criteria for the trial, the existence of competing clinical trials and the

availability of alternative or new treatments.

Clinical trials may be suspended by the FDA or by a regulatory agency in another jurisdiction at any time if the FDA or the regulatory agency finds deficiencies in the conduct of these trials or it is believed that these trials expose patients to unacceptable health risks.

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Furthermore, if we are unable to identify alternative sources of supply, we would have to modify our products to use substitute components, which may cause delays in shipments, backlogs, increased prices for our products or increased design and manufacturing costs.

In addition, we purchase certain products as a distributor for the manufacturer of those products.

In addition, we historically have purchased and may purchase in the future certain products as a distributor for the manufacturer of those products.

Any constraint or interruption in the supply of raw materials, other product components or finished products that we distribute could materially impact our ability to sell products, and have a material adverse effect on our business, financial condition, results of operations and/or liquidity.

We rely on third-party manufacturers to manufacture some of our products today, and we have announced a plan to move to a fully outsourced model for manufacturing in various parts of the world, which exposes us to additional risks, including reduced control over manufacturing, delivery timing, product quality issues, potential price fluctuations, regulatory, environmental, labor or other operational disruptions, which would result in a loss of revenue or reduced profitability.

We currently rely on third-party manufacturers for a portion of our products and due to the resource and cost limitations of manufacturing in upstate New York, on January 5, 2024, we announced a restructuring of our manufacturing footprint and a shift to an outsourced model (the “Plan”).

This Plan is intended to transfer all product manufacturing processes to third-party

manufacturers located in various parts of the world, including, but not limited to the United States, Costa Rica, Latvia, Italy, Israel and China.

The restructuring activities associated with the Plan are expected to be completed in the third quarter of fiscal year 2026.

If we are unable to effectively execute on this Plan within the announced timeline it could have a material adverse effect on our business, financial condition and/or results of operations.

Our manufacturing strategy may present certain risks and uncertainties that could have a material adverse effect on our business, financial condition and/or results of operations, many of which we cannot predict, including, but not limited to:

• the ability to effectively negotiate and enter into contracts with third party manufacturers;

• if market demand for our products is less than our purchase obligations to our manufacturers, we may incur substantial penalties and substantial inventory write-offs;

• manufacturers of our products are subject to ongoing periodic inspections by the FDA and other regulatory authorities for compliance with strictly enforced good manufacturing practices regulations and similar foreign standards, and we do not have control over our third-party manufacturers’ compliance with these regulations and standards;

• we may have to share intellectual property rights, including any improvements in the manufacturing processes or new manufacturing processes for our products;

• our product costs may increase if our manufacturers pass their increasing costs onto us;

• if our agreement with a third-party manufacturer expires, we may not be able to renegotiate a new agreement with that manufacturer on favorable terms, if at all.

If we cannot successfully complete such renegotiation, we may not be able to locate any necessary acceptable replacement manufacturers or enter into favorable agreements with such replacement manufacturers in a timely manner, if at all;

• manufacturing could be curtailed or partially or completely shut down as the result of a number of circumstances, most of which are outside of our control, such as unscheduled maintenance, an earthquake, hurricane, flood, tsunami or other natural disaster, significant labor strikes or work stoppages, government implementation of export limitations or freezes, political unrest or pandemics.

In addition, our business practices in international markets are subject to the requirements of the U.S.

Foreign Corrupt Practices Act of 1977, as amended, any violation of which could subject us to significant fines, criminal sanctions and other penalties.

We expect all of our contracted manufacturing facilities, to comply with all applicable laws, including labor, safety and environmental laws, and to otherwise meet our standards of conduct.

Our ability to find manufacturing facilities that uphold these standards is a challenge, especially with respect to facilities located outside the United States.

We also are subject to the risk that one or more of these manufacturing facilities will engage in business practices in violation of our standards or applicable laws, which could damage our reputation, hurt our relationship with our customers and result in negative publicity, damage to our brand and a material and adverse effect on our business, financial condition, results of operations and/or liquidity.

A portion of the manufacturing activities is conducted in China.

As a result, our business, financial condition, results of operations could be affected significantly by economic, political and legal developments in China as well as trade disputes between China and the United States and the potential imposition of bilateral tariffs.

The imposition of tariffs or export restrictions on products imported by us from China could require us to (i) increase prices to our members or (ii) locate suitable alternative manufacturing capacity or relocate our operations from China to other countries.

In the event we are unable to increase our prices or find alternative manufacturing capacity or relocate to an alternative base of operation outside of China on favorable terms, we would likely experience higher manufacturing costs and lower gross margins, which could have an adverse effect on our business and results of operations.

The Chinese economy differs from the economies of most developed countries in many respects, including the degree of government involvement, the level of development, the growth rate, the control of foreign exchange, access to financing and the allocation of resources.

We are heavily dependent on third-party distributors to generate a substantial portion of our international revenues and are at the risk of these distributors also selling for our competitors, failing to be financially viable and failing to effectively distribute our products in compliance with applicable laws.

Outside of North America we rely heavily on third party distributors, either on a country-by-country basis or on a multi-country, regional basis, to market, sell and distribute our products where we do not have a direct sales and marketing presence (including, among others, China, Japan, Brazil, the Middle East and many European countries).

As such, our revenue, if any,

depends on the terms of such arrangements and the distributors’ efforts.

As such, our revenue, if any, depends on the terms of such arrangements and the distributors’ efforts.

These efforts may turn out not to be sufficient and our third-party distributors may not effectively sell our products.

International distributors accounted for approximately 77% of international revenues for the fiscal year ended May 31, 2024.

International sales grew 12% in fiscal year 2023 as we continued to develop and foster partnerships with distributors such as Healthcare 21, Cardiva and Mediplast.

International sales decreased 6% in fiscal year 2024 partially due to the sale of the PICCs, Midline, dialysis and BioSentry businesses, along with the discontinuation of the RadioFrequency Ablation product line.

If we are unable to maintain our relationships or establish direct sales capabilities on acceptable terms or at all, we may lose significant revenue or be unable to achieve our growth aspirations.

In certain circumstances, distributors may also sell competing products, or products for competing diagnostic modalities, and may have incentives to shift sales towards those competing products.

In certain circumstances, distributors may also sell competing products, or products for competing diagnostic modalities, and may have incentives to shift sales

towards those competing products.

As a result, we cannot assure you that our international distributors will increase or maintain our current levels of unit sales or increase or maintain our current unit pricing, which, in turn, could have a material adverse effect on our business, financial condition, results of operations and/or liquidity.

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Our products are used by physicians to treat seriously ill patients.

We are periodically subject to product liability claims, and patients or customers may in the future bring claims against us in a number of circumstances and for a number of reasons,

including if our products were misused, if a component of our product fails, if our manufacture or design was flawed, if the product produced unsatisfactory results or if the instructions for use and operating manuals and disclosure of product related risks for our products were found to be inadequate.

We are periodically subject to product liability claims, and patients or customers may in the future bring claims against us in a number of circumstances and for a number of reasons, including if our products were misused, if a component of our product fails, if our manufacture or design was flawed, if the product produced unsatisfactory results or if the instructions for use and operating manuals and disclosure of product related risks for our products were found to be inadequate.

In addition, individuals or groups seeking to represent a class may file suit against us.

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We may be exposed to risks associated with product line divestitures as we may never realize the expected benefits and could cause operational disruptions with personnel, systems and infrastructure changes.

On February 15, 2024, the Company entered into an asset purchase agreement (the "Asset Purchase Agreement") with Spectrum Vascular pursuant to which Spectrum acquired the Company's PICC and Midline businesses for $34.5 million in cash and resulted in a pre-tax book income of $6.7 million.

Included in the agreement is a $5.5 million earn-out related to the sales of divested products over a two-year period and a milestone payment of $5.0 million paid upon final transfer of the manufacturing to a third-party.

The Company and Spectrum entered into various agreements to facilitate the transition to Spectrum, including a Transactions Services Agreement and Contract Manufacturing Agreement.

On June 8, 2023, the Company entered into an asset purchase agreement (the "Asset Purchase Agreement") with Merit Medical Systems, Inc.

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The Company and Merit entered into various agreements to facilitate the transition to Merit, including a Transactions Services Agreement and Contract Manufacturing Agreement.

This divestiture along with potential future divestitures of certain product lines will allow us to transform ourselves into a high growth, highly profitable, medical technology company.

These divestitures along with potential future divestitures of certain product lines will allow us to transform ourselves into a high growth, highly profitable, medical technology company.

If we are unable to achieve our growth and profitability objectives due to competition, lack of acceptance of our products, failure to generate favorable clinical data or gain regulatory approvals, or other risks as described in this section, or due to other events, we will not be successful in transforming our business and may not see the appropriate market valuation.

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In addition, political and social turmoil may put further pressure on economic conditions in the United States and abroad.

The global economy has been periodically impacted by the effects of global economic downturns (such as those recently related to COVID-19).

The global economy has been periodically impacted by the effects of global economic downturns.

There can be no assurance that there will not be further such events or deterioration in the global economy.

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• economic instability and inflation, recession or interest rate fluctuations.

Geopolitical developments related to various global conflicts are sources of uncertainty and may cause disruptions to global or regional markets, supply chains or operations in the regions.

Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from U.S.

and European leaders.

The Israel/Hamas war has also disrupted operations of companies doing business in the Middle East.

These events may escalate and have created increasingly volatile global economic conditions.

Resulting changes in U.S.

trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” A trade war could result in increased costs for raw materials we use in our manufacturing and could result in Russia and other foreign governments imposing tariffs on products that we export outside the U.S.

trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China and Israel, resulting in a “trade war.” A trade war could result in increased costs for raw materials we use in our manufacturing and could result in Russia, Israel and other foreign governments imposing tariffs on products that we export outside the U.S.

or otherwise limiting our ability to sell our products abroad.

These increased costs could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, if the conflict between Russia and Ukraine continues for a long period of time, or if other countries, including the U.S., become further involved in the conflict, we could face material adverse effects on our business, financial condition, results of operations and/or liquidity.

Furthermore, if global conflicts continue for a long period of time, or if other countries, including the U.S., become further involved in the conflict, we could face material adverse effects on our business, financial condition, results of operations and/or liquidity.

Our business could be harmed if we cannot hire or retain qualified personnel.

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If we are not able to hire and retain personnel in our manufacturing facilities, we may not meet our production demand.

We have experienced labor shortages in fiscal years 2022 and 2023 that significantly contributed to the backlog.

We experienced labor shortages in fiscal year 2023 that significantly contributed to the backlog in fiscal year 2023.

In addition, our sales force is highly talented and we face intense competition in our industry for sales personnel which could have an adverse effect on our business and revenue if there is significant turnover.

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Our future financial results will depend in part on our ability to profitably manage our growth.

Management will need to maintain existing customers and attract new customers, recruit, retain and effectively manage employees, as well as expand operations and integrate customer support and financial control systems.

If integration-related expenses and capital expenditure

requirements are greater than anticipated or if we are unable to manage our growth profitably, our financial results and the market price of our common stock may decline.

Management will need to maintain existing customers and attract new customers, recruit, retain and effectively manage employees, as well as expand

operations and integrate customer support and financial control systems.

If integration-related expenses and capital expenditure requirements are greater than anticipated or if we are unable to manage our growth profitably, our financial results and the market price of our common stock may decline.

In recent years we have begun to implement operational excellence initiatives which include a number of restructuring, realignment and cost reduction initiatives.

We may not realize the benefits of these initiatives to the extent or on the timing we anticipated and the ongoing difficulties in implementing these measures may be greater than anticipated and/or offset by inflationary pressures, which could cause us to incur additional costs or result in business disruptions like the backlogs we have experienced in fiscal years 2022 and 2023.

In addition, if these measures are not successful or sustainable, we may undertake additional realignment and cost reduction efforts, which could result in significant additional expenses and adversely impact our ability to achieve our other strategic goals and business plans.

We may fail to attract additional capital necessary to expand our business or may incur additional indebtedness which, together with our current indebtedness levels, could impose operating and financial restrictions on us as a result of debt service obligations which could significantly limit our ability to execute our business strategy or curtail our growth.

We may fail to attract additional capital necessary to expand our business or may incur indebtedness which could impose operating and financial restrictions on us as a result of debt service obligations which could significantly limit our ability to execute our business strategy or curtail our growth.

We may require additional capital to expand our business.

If cash generated internally is insufficient to fund capital requirements, we may require additional debt or equity financing.

If cash generated internally is insufficient to fund capital requirements, we may require debt or equity financing.

In addition, we may require financing to fund any significant acquisitions we may seek to make.

Disruptions in the capital markets and increases in the cost of capital have previously resulted, and could again result, in volatility, decreased liquidity, and widening of credit spreads, which could make needed financing either unavailable or available on terms unsatisfactory to us which could result in significant stockholder dilution.

We may incur additional indebtedness or draw additional amounts on our existing credit facilities in the future subject to limitations contained in the agreements governing our debt.

We may incur indebtedness or draw amounts on credit facilities in the future subject to limitations contained in the agreements governing our debt.

The interest rate on potential borrowings could be a floating rate which could expose us to the risk of increased interest expense in the future.

The terms of indebtedness could require us to comply with certain financial maintenance covenants.

In addition, the terms of our existing indebtedness include, and any future indebtedness could include, covenants restricting or limiting our ability to take certain actions.

In addition, any future indebtedness could include, covenants restricting or limiting our ability to take certain actions.

These covenants could adversely affect our ability to obtain additional financing, to finance future operations, to pursue certain business opportunities or take certain corporate actions.

The covenants could also restrict our flexibility in planning for changes in our business and the industry and could make us more vulnerable to economic downturns and adverse developments, could limit our flexibility in planning for, or reacting to, changes and opportunities in the markets in which we compete, could place us at a competitive disadvantage compared to our competitors that have less debt or could require us to dedicate a substantial portion of our cash flow to service our debt.

Our ability to meet our cash requirements, including our debt service obligations, could be dependent upon our operating performance, which would be subject to general economic and competitive conditions and to financial, business and other factors affecting our operations, many of which could be beyond our control.

Our ability to meet our cash requirements could be dependent upon our operating performance, which would be subject to general economic and competitive conditions and to financial, business and other factors affecting our operations, many of which could be beyond our control.

We cannot provide assurance that our business operations would generate sufficient cash flows from operations to fund potential cash requirements and debt service obligations.

If our operating results, cash flow or capital resources prove inadequate, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt and other obligations.

If we incurred indebtedness and were unable to service our debt, we could be forced to reduce or delay planned expansions and capital expenditures, sell assets, restructure or refinance our debt or seek additional equity capital, and we could be unable to take any of these actions on satisfactory terms or in a timely manner.

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Our failure to generate sufficient operating cash flow to pay our potential debts or to successfully undertake any of these actions could have a material adverse effect on us.

On June 8, 2023, the Company completed the sale of the dialysis and BioSentry businesses to Merit Medical Systems, Inc.

In connection with the completion of the sale, the Company repaid all amounts outstanding under its then existing Credit Agreement, and as a result, the Credit Agreement was extinguished.

We believe that our current cash balance, together with cash generated from operations will provide sufficient liquidity to meet our anticipated needs for capital for at least the next 12 months.

If we seek to make acquisitions of other businesses or technologies in the future for cash or if circumstances materially change, we may require additional financing for liquidity, capital requirements or growth initiatives.

We may not be able to obtain financing on terms and at interest rates that are favorable to us or at all.

Any inability by us to obtain financing in the future could have a material adverse effect on our business, financial position, results of operations and cash flows .

Inflationary pressure and unfavorable economic conditions could negatively affect our operations and business.

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For example, in 2022 and continuing into 2024, the United States and other certain foreign countries have experienced a rapid increase in inflation levels.

Such heightened inflationary levels may negatively impact demand for our products and increase our costs.

Additionally, we finance a portion of our portfolio with unhedged floating- rate debt from our Credit Agreement.

The rapid increase in inflation during fiscal year 2023 led to a rapid increase in market interest rates, which materially increased the interest rate on our floating rate debt.

Such heightened inflationary levels may

negatively impact demand for our products and increase our costs.

The rapid increase in inflation during fiscal year 2024 led to a rapid increase in market interest rates.

In addition, if rates continue to increase, we may incur significant additional expense and adversely impact our ability to achieve our other strategic goals and business plans.

Our goodwill, intangible assets and fixed assets are subject to potential impairment;

we have recorded significant goodwill impairment charges and may be required to record additional charges to future earnings if our goodwill or intangible assets become impaired.

A significant portion of our assets consists of goodwill, intangible assets and fixed assets, the carrying value of which may be reduced if we determine that those assets are impaired, including intangible assets from recent acquisitions.

During the fourth quarter of fiscal year 2021, the Company made the decision to abandon the OARtrac product technology and trademark.

This resulted in an impairment charge of $14.0 million.

The impairment charge is recorded in "Acquisition, restructuring and other items, net", on the Consolidated Statements of Operations (see Note 19, "Acquisition, restructuring and other items, net" set forth in the Notes in the consolidated financial statements included in this Annual Report on Form 10-K).

we have recorded significant impairment charges and may be required to record additional charges to future earnings if our assets become impaired.

A significant portion of our assets consist of goodwill, intangible assets and fixed assets, the carrying value of which may be reduced if we determine that those assets are impaired, including intangible assets from recent acquisitions.

Most of our intangible and fixed assets have finite useful lives and are amortized or depreciated over their useful lives on either a straight-line basis or over the expected period of benefit or as revenues are earned from the sales of the related products.

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If an intangible asset is considered to be impaired, the amount of the impairment will equal the excess of the carrying value over the fair value of the asset.

If actual results differ from the assumptions and estimates used in the intangible asset calculations, we could incur future impairment or amortization charges, which could negatively impact our financial condition and results of operations.

During the third quarter of fiscal year 2024, the Company made the decision to abandon the Syntrax product line.

This resulted in an impairment charge of $3.4 million.

During the third quarter of fiscal year 2024, the Company announced a restructuring of its manufacturing footprint and a shift to an outsourced model.

This resulted in an impairment charge of $3.4 million related to the facilities closure.

The impairment charges are recorded in "Acquisition, restructuring and other items, net", on the Consolidated Statements of Operations (see Note 19, "Acquisition, restructuring and other items, net" set forth in the Notes in the consolidated financial statements included in this Annual Report on Form 10-K).

Goodwill and other intangible assets that have indefinite useful lives are not amortized, but rather, are tested for impairment annually or more frequently if impairment indicators arise.

Prior to the first quarter of fiscal year 2023, the Company managed its operations as one reporting unit.

At the beginning of the first quarter of fiscal year 2023, the Company began to manage its operations as two operating segments and two reporting units, namely Med Tech and Med Device (see Note 18 "Segment and Geographic Information" set forth in the Notes to our consolidated financial statements included in this Annual Report on Form 10-K).

The annual goodwill impairment review performed in April 2023 and 2022 indicated no goodwill impairments.

The annual goodwill impairment review performed in April 2023 indicated no goodwill impairment.

As of May 31, 2023, the Company concluded that the sale of the dialysis product portfolio and BioSentry tract sealant system biopsy businesses to Merit Medical Systems, Inc.

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Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $14.5 million for the year ended May 31, 2023 to write down the carrying value of the Med Device reporting unit to fair value.

If actual results differ from the assumptions and estimates used in the goodwill and intangible asset calculations, we could incur future impairment or amortization charges, which could negatively impact our financial condition and results of operations.

As of February 29, 2024, the Company concluded that the sustained decline in our stock price was a triggering event for the Med Tech reporting unit.

The Company utilized the income approach, as it was determined to be a better representation of the remaining Med Tech reporting unit's projected long-term performance.

Based on the results of this evaluation, the Company recorded a goodwill impairment charge of $159.5 million for the quarter ended February 29, 2024 to write down the carrying value of the Med Tech reporting unit to fair value.

We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.

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The expiration of the Federal net operating loss carryforwards is as follows:

$5.2 million between 2023 and 2024, $79.4 million between 2028 and 2037 and $85.1 million indefinitely.

$37.1 million between 2029 and 2032 and $73.9 million indefinitely.

Our state net operating loss carryforwards as of May 31, 2024 after considering remaining IRC Section 382 limitations are $14.4 million which expire in various years from 2029 to 2043.

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Our information systems require an ongoing commitment of resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing need to protect patient and customer information, and changing customer patterns.

In addition, third parties may attempt to gain

access into our systems or products or those of our supply chain partners to obtain data relating to patients or our proprietary information.

In addition, third parties may attempt to gain access into our systems or products or those of our supply chain partners to obtain data relating to patients or our proprietary information.

Any failure by us, our distributors, or our supply chain partners to maintain or protect information technology systems and data integrity, including from cyber-attacks, ransomware, intrusions or other breaches, could result in the unauthorized access to supply chain partners or vendors and personally identifiable information, theft of intellectual property, misappropriation of assets, or otherwise compromise confidential or proprietary information and disrupt operations of our Company, our distributors, or our supply chain partners.

Any of these events, in turn, may cause us to lose existing customers, have difficulty preventing, detecting, and controlling fraud, have disputes with customers, our supply chain partners, physicians, and other health care professionals, be subject to legal claims and liability, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach or theft of intellectual property, or suffer other adverse consequences, any of which could have a material adverse effect on our business, financial condition and/or results of operations.

Artificial intelligence based platforms present new risks and challenges to our business.

Artificial intelligence, or AI, based platforms are increasingly being used in the medical device and consumer health industries.

We are committed to providing a safe and secure environment for all of our personnel, our business partners and our customers, including the responsible use of AI chatbots and generative AI data processor products (“AI Systems”).

We have developed policies governing the use of AI Systems to help reasonably ensure that such AI Systems are used in a trustworthy manner by our employees, contractors and authorized agents and that AngioDynamics’ assets, including intellectual property, competitive information, personal information and customer information, are protected.

The failure by our personnel to adhere to the company’s established policies could violate confidentiality obligations or applicable laws and regulations, jeopardize our intellectual property rights, cause or contribute to unlawful discrimination or result in the misuse of personally identifiable information or the injection of malware into the company’s systems, any of which could have a material adverse effect on our business, results of operations and financial condition.

The use of AI Systems by our business partners with access to our confidential information, including trade secrets, may continue to increase and could lead to the release of such information, which could negatively impact our company, including our ability to realize the benefits of our intellectual property.

The use of AI Systems by our business partners may lead to novel and urgent cybersecurity risks, which could have a material adverse effect on our operations and reputation as well as the operations of any of our business partners.

We may also face increased competition from other companies that are using AI Systems, some of whom may develop more effective methods than we and any of our business partners have, which could have a material adverse effect on our business, results of operations and financial condition.

In addition, uncertainties regarding developing legal and regulatory requirements and standards may require significant resources to modify and maintain business practices to comply with U.S.

laws concerning the use of AI and AI Systems, the nature of which cannot be determined at this time.

Any disaster at our manufacturing facilities or those of our suppliers could disrupt our ability to manufacture our products for a substantial amount of time.

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If one of our principal suppliers were to experience a similar disaster, uninsured loss or under-insured loss, we might not be able to obtain adequate alternative sources of supplies or products.

Any significant uninsured loss, prolonged or repeated disruption, or inability to operate experienced by us or any of our principal suppliers could cause significant harm to our business, financial condition, results of operations and/or liquidity.

Any significant uninsured loss, prolonged or repeated disruption, or inability to

operate experienced by us or any of our principal suppliers could cause significant harm to our business, financial condition, results of operations and/or liquidity.

Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could cause our stock price to decline and prevent attempts by our stockholders to replace or remove our current management.

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Any delay or prevention of a change of control transaction or changes in our Board of Directors could cause the market price of our common stock to decline.

The COVID-19 pandemic has negatively impacted our business and operations around the world and may continue to materially and adversely impact our business, operations and financial results.

The COVID-19 pandemic has created significant disruption and uncertainty in the global economy and has negatively impacted our business and results of operations and financial condition during fiscal years 2021, 2022 and 2023.

Although the impact of COVID-19 and the resulting measures decreased during 2023, they have the potential to continue to negatively impact our business, results of operations and financial condition in the future.

Numerous national, international, state and local jurisdictions have imposed, and others in the future may impose, a variety of government orders and restrictions for their residents to control the spread of COVID-19.

Such orders or restrictions may cause significant alteration of our operations, work stoppages, slowdowns and delays, travel restrictions and event cancellations, among other effects, thereby significantly and negatively impacting our operations.

Other disruptions or potential disruptions include:

(i) restrictions on our personnel and personnel of business partners to travel and access customers for training and case support; (ii) reductions in spending by our customers;

(iii) delays in clearance, approvals or certifications by regulatory bodies; (iv) diversion of or limitations on employee resources that would otherwise be focused on the operations of our business, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; (v) reductions in our sales team, including through layoffs, furloughs or other losses of sales representatives; (vi) additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’

capacity to manufacture our products;

(vii) disruption of our research and development activities;

and (viii) delays in ongoing studies and pre-clinical trials.

In addition, elective procedures that use our products significantly decreased in number during fiscal year 2021, as health care organizations around the world prioritized the treatment of patients with COVID-19 and reduced spending in other areas.

We experienced a similar impact to procedure volumes with the resurgence of COVID-19 in fiscal year 2022 which continued through fiscal year 2023.

For example in fiscal year 2021, U.S.

governmental authorities had recommended, and in certain cases required, that elective, deferrable, specialty and other procedures and appointments, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 so that limited resources and personnel could be focused on the treatment of infected patients.

Many of these procedures that use our products were suspended or postponed at times during fiscal years 2021, 2022 and 2023.

Similarly, our clinical trials were impacted by COVID-19 as hospitals prioritized treating these patients.

It is unclear when or if other resurgences of COVID-19, or increased spread of its variants, may again cause a rise in infections and result in authorities and/or customers imposing restrictions that could adversely affect our business, financial condition, results of operations and/or liquidity.

In addition, most of the hospitals and clinics that purchase our products have instituted strict procedures at their facilities in an effort to prevent the spread of COVID-19, including restrictions on sales representatives entering these facilities.

This has been, and currently remains, a major impediment to our sales efforts, as supporting existing customers and acquiring new customers is much more difficult in this environment.

These restrictions have had an effect on our sales and, until they are lifted, our business, operations and financial results will continue to be adversely impacted.

These challenges and restrictions will likely continue for the duration of the pandemic, which is uncertain, and may even continue beyond the pandemic.

Many areas have relaxed restrictions from time-to-time and have resumed business operations, but a resurgence in infections or mutations of the coronavirus that causes COVID-19 could cause authorities and/or our customers to reinstate such restrictions or impose additional restrictions.

All of these factors also may cause or contribute to disruptions and delays in our logistics and supply chain.

The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on future developments that are uncertain and cannot be predicted, including new information that may emerge concerning the severity and spread of the virus and the actions by government entities, our customers and other parties to contain the virus or treat its impact, among others.

To the extent the COVID-19 pandemic adversely affects our business, operations and financial results, it may also have the effect of heightening other risks described herein, such as those relating to general economic conditions, demand for our products, relationships with suppliers and sales efforts.

Global health crises, pandemics, epidemics or other outbreaks could adversely impact our business, operations and financial results.

We are subject to risks associated with global health crises, pandemics, epidemics or other outbreaks beyond our control which could adversely affect our business, operations and financial results.

Such risks may also have the effect of heightening other risks described herein, such as those relating to general economic conditions, demand for our products, relationships with suppliers and sales efforts.

For example, impacts from the COVID-19 pandemic and measures taken in response thereto, such as constraints in the capacities of hospitals and other healthcare providers to perform non-COVID related procedures, changes to our on-site operations, delays in product development efforts and related clinical trials and regulatory clearances and approvals, and disruptions to global supply chains and labor markets, resulting in cost inflation and raw material supply constraints, adversely affected our business and there can be no assurance that similar events will not occur in the future.

We could be negatively impacted by Environmental, Social and Governance (ESG), climate change and other sustainability-related matters .

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We operate in many parts of the world, and our operations are affected by complex state, federal and international laws relating to healthcare, environmental protection, antitrust, anti-corruption, anti-bribery, fraud and abuse, export control, tax, employment and laws regarding privacy, personally identifiable information and protected health information, including, for example, the Food, Drug and Cosmetic Act (“FDCA”), various FDA and international regulations relating to, among other things, the development, quality assurance, manufacturing, importation, distribution, marketing and sale of, and billing for, our products, the federal Anti-Kickback Statute and Federal False Claims Act (Note 17), the U.S.

foreign data protection, data security and privacy laws, laws related to the collection, storage, use and disclosure of personal data and laws and regulations relating to sanctions and money laundering.

Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in international jurisdictions, including the UK Anti-Bribery Act, the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), General Data Protection Regulation (“GDPR”), domestic and foreign data protection, data security and privacy laws, laws related to the collection, storage, use and disclosure of personal data and laws and regulations relating to sanctions and money laundering.

The failure to comply with these laws and regulatory standards, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer:

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The FDA’s 510(k) clearance procedure, also known as “premarket notification,” is the process we have used for our current products.

This process usually takes from four to twelve months from the date the premarket

notification is submitted to the FDA, but may take significantly longer.

This process usually takes from four to twelve months from the date the premarket notification is submitted to the FDA, but may take significantly longer.

Even after a device receives regulatory approval it remains subject to significant regulatory and quality requirements, such as manufacturing, recordkeeping, renewal, recertification or reporting and other post market approval requirements, which may include clinical, laboratory or other studies.

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Identifying third-party patent rights can be particularly difficult because, in general, patent applications can be maintained in secrecy for at least 18 months after their earliest priority date, and publication of discoveries in the scientific or patent literature often lag behind actual discoveries.

Some companies in the medical device industry have used intellectual property infringement litigation to

gain a competitive advantage.

Some companies in the medical device industry have used intellectual property infringement litigation to gain a competitive advantage.

If a competitor were to challenge our patents, licenses or other intellectual property rights, or assert that our products infringe its patent or other intellectual property rights, we could incur substantial litigation costs, be forced to make expensive changes to our product design, pay royalties or other fees to license rights in order to continue manufacturing and selling our products, or pay substantial damages.

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In the past, securities class action litigation has often been brought against a company after a period of volatility in the market price of its common stock.

Unresolved Staff Comments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors