What changed in this filing

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Item 1A. Risk Factors

2023-08-22 compared with 2022-08-16 · 58 added, 96 removed, 465 unchanged (25% of the section changed)

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In this event, the market price of our ordinary shares could decline and you could lose some or all of your investment.

COVID-19 and Macroeconomic Environment Updates

The COVID-19 pandemic has adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets.

In addition, the pandemic has resulted in travel restrictions, business closures and the institution of quarantines and other restrictions on movement in many communities.

The extent of the impact of COVID-19 on our future business, financial condition and operating results will depend largely on future developments, including (i) the duration and magnitude of the pandemic;

(ii) the measures taken by governmental authorities and private sectors to limit the spread of COVID-19;

(iii) our ability to continue providing products and services;

and (iv) the effect of the pandemic and resulting global economic uncertainty and financial market volatility on our customers, all of which are highly uncertain and unpredictable.

While we have updated our risk factors to reflect risks of which we are aware, this situation is changing rapidly and additional impacts may arise that we are not aware of currently.

In addition, increased international political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures, Russia’s invasion of Ukraine, conflicts in the Middle East and Asia, strained international relations arising from these conflicts and the related decline in consumer confidence and economic weakness, may hinder our ability to do business.

Although such events have not significantly affected our business or operations, the ultimate impact is unknown and future developments could adversely affect our financial condition and operating results.

Company and Operational Risks

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We have depended, and will continue to depend, upon a small number of customers for a significant percentage of our revenues.

During each of fiscal years 2022 and 2021, we had three customers that each contributed 10% or more of our revenues.

During fiscal years 2023 and 2022, we had four and three customers, respectively, that each contributed 10% or more of our revenues.

Such customers together accounted for 55.9% and 48.2% of our revenues during the respective periods.

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Further, our customer concentration increases the concentration of our accounts receivable and our exposure to payment default by any of our key customers.

Many of our existing and potential customers have substantial debt burdens, have experienced financial distress or have static or declining revenues, all of which may be exacerbated by the sudden and continuing global economic downturn and uncertainty due to COVID-19 and subsequent adverse conditions in the credit markets, as well as the impact of the U.S.-China trade dispute.

Many of our existing and potential customers have substantial debt burdens, have experienced financial distress or have static or declining revenues, all of which may be exacerbated by the current global economic downturn and subsequent adverse conditions in the credit markets, as well as the impact of the U.S.-China trade dispute.

Certain of our customers have gone out of business, declared bankruptcy, been acquired, or announced their withdrawal from segments of the optics market.

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For example, Lumentum Holdings Inc.

(“Lumentum”) completed its acquisition of NeoPhotonics Corporation in August 2022;

II-VI Incorporated (“II-VI”) completed its acquisition of Coherent, Inc.

completed its acquisition of NeoPhotonics Corporation in August 2022;

Coherent Corp.

(formerly known as II-VI Incorporated) completed its acquisition of Coherent, Inc.

in July 2022;

Cisco Systems, Inc.

and Cisco Systems, Inc.

completed its acquisition of Acacia Communications Inc.

in March 2021.

II-VI completed its acquisition of Finisar Corporation in September 2019;

and Lumentum completed its acquisition of Oclaro, Inc.

in December 2018.

In some cases, consolidation among our customers has led to a reduction in demand for our services as customers have acquired the capacity to manufacture products in-house.

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For example, any of the risks described in this “Risk Factors” section and, in particular, the following factors, could cause our revenues, gross profit margins, and operating results to fluctuate from quarter to quarter:

• any reduction in customer demand or our ability to fulfill customer orders as a result of disruptions in our supply chain caused by COVID-19 or geopolitical conflicts such as the ongoing armed conflict in Ukraine;

• any reduction in customer demand or our ability to fulfill customer orders as a result of disruptions in our supply chain;

• our ability to acquire new customers and retain our existing customers;

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Our customized optics and glass operations face competition from companies such as Browave Corporation, Fujian Castech Crystals, Inc., Photop Technologies, Inc., and Research Electro-Optic, Inc.

competitors for printed circuit board assemblies include STI Limited, Axiom Manufacturing Services Limited and TT Electronics plc.

Other existing contract manufacturing companies, original design manufacturers or outsourced semiconductor assembly and test companies could also enter our target markets.

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As a result, a reduction in customer demand could decrease our gross profit and harm our business, financial condition and operating results.

For example, in the six months ended June 26, 2020, due to COVID-19 we experienced some order cancellations and delays with respect to telecom products that we manufacture for our customers;

however, these cancellations and delays were partially offset by increased demand for datacom products.

In addition, we make significant decisions with respect to production schedules, material procurement commitments, personnel needs and other resource requirements based on our estimate of our customers’ requirements.

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Our exposure to financially troubled customers or suppliers could harm our business, financial condition and operating results.

Some of our customers and suppliers have in the past and may in the future experience financial difficulty, particularly in light of the sudden and continuing global economic downturn and uncertainty due to COVID-19 and subsequent adverse conditions in the credit markets that have affected access to capital and liquidity.

As a result, we devote significant resources to monitor receivables and inventory balances with certain of our customers.

Some of our customers and suppliers have in the past and may in the future experience financial difficulty, particularly in light of the global economic downturn and uncertainty due to COVID-19 and subsequent adverse conditions in the credit markets that have affected access to capital and liquidity.

In addition, the recent failures of Silicon Valley Bank and Signature Bank created significant market disruption and uncertainty within the U.S.

banking sector, in particular with respect to regional banks.

During challenging economic times, our customers may face difficulties in gaining timely access to sufficient credit, which could impact their ability to make timely payments to us.

As a result, we devote significant resources to monitor

receivables and inventory balances with certain of our customers.

If our customers experience financial difficulty, we could have difficulty recovering amounts owed to us from these customers, or demand for our services from these customers could decline.

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Historically, we have experienced supply shortages resulting from various causes, including reduced yields by our suppliers, which prevented us from manufacturing products for our customers in a timely manner.

Recently, we experienced significant fluctuations in the availability of certain materials due to COVID-19, which had an adverse impact on our revenue and costs for the six months ended June 26, 2020.

Currently, we are experiencing various levels of semiconductor impact due to a significant global shortage.

The semiconductor supply chain is complex, and a constrained wafer capacity is occurring deep in the chain.

During the COVID-19 pandemic, there has been a surging demand for consumer electronics, which in turn has increased the demand for semiconductors.

At the same time, wafer foundries that support chipmakers have not invested enough in recent years to increase capacities to the levels needed to support current demand from all of their customers.

Wafers have a long lead time for production, in some cases up to 30 weeks, which further exacerbates the shortage.

The semiconductor supply chain is complex, and, in recent years, there has been a significant global shortage of semiconductors.

Demand for consumer electronics surged during the COVID-19 pandemic and remains strong, which in turn has increased the demand for semiconductors.

At the same time, wafer foundries that support chipmakers have not invested enough in recent years to increase capacities to the levels needed to support the increased demand from all of their customers.

Further exacerbating the shortage is the long production lead-time for wafers, which can take up to 30 weeks in some cases.

A shortage of semiconductors or other key components can cause a significant disruption to our production schedule and have a substantial adverse effect on our business, financial condition and operating results.

Our revenues, profitability and customer relations will be harmed by continued fluctuations in the availability of materials, a stoppage or delay of supply, a substitution of more expensive or less reliable parts, the receipt of defective parts or contaminated materials, an increase in the price of supplies, or an inability to obtain reductions in price from our suppliers in

response to competitive pressures.

We continue to undertake programs to strengthen our supply chain.

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Further, due to the difficulty in determining whether a given defect resulted from our customer’s design of the product or our manufacturing process, we may be exposed to product liability or product warranty claims arising from defects that are not attributable to our manufacturing process.

In addition, if the number or type of defects exceeds certain percentage limitations contained in our contractual arrangements, we may be required to conduct extensive failure analysis, re-qualify for production or cease production of the specified products.

In addition, if the number or

type of defects exceeds certain percentage limitations contained in our contractual arrangements, we may be required to conduct extensive failure analysis, re-qualify for production or cease production of the specified products.

Product liability claims may include liability for personal injury or property damage.

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We may experience significant unexpected losses from fluctuations in exchange rates.

For example, in the three months ended March 29, 2019, we experienced a $3.1 million foreign exchange loss, which negatively affected our net income per share for the same period by $0.08.

For example, in the three months ended December 30, 2022, we experienced a $3.9 million foreign exchange loss, which negatively affected our net income per share for the same period by $0.11.

Our customer contracts generally require that our customers pay us in U.S.

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As of June 30, 2023, the U.S.

dollar had depreciated approximately 5.5% against the RMB since June 26, 2020.

dollar had appreciated approximately 12.4% against the RMB since June 25, 2021.

There remains significant international pressure on the PRC government to adopt a substantially more liberalized currency policy.

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Our customers also depend on international sales, which further exposes us to the risks associated with international operations.

Conducting business outside the United States subjects us to a number of additional risks and challenges, including:

Conducting business outside the United States subjects us to a number of risks and challenges, including:

• compliance with a variety of domestic and foreign laws and regulations, including trade regulatory requirements;

• periodic changes in a specific country or region’s economic conditions, such as recession;

• unanticipated restrictions on our ability to sell to foreign customers where sales of products and the provision of services may require export licenses or are prohibited by government action (for example, in early 2018, the U.S.

Department of Commerce prohibited the export and sale of a broad category of U.S.

products, as well as the provision of services, to ZTE Corporation, and in 2019, to Huawei, both of which are customers of certain of our customers);

products, as well as the provision of services, to ZTE Corporation in early 2018, and to Huawei in 2019, both of which are customers of certain of our customers);

• fluctuations in currency exchange rates;

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To ensure compliance, some of our customers immediately suspended shipments to Huawei in order to assess whether their products were subject to the restrictions resulting from the ban.

This had an immediate impact on our customer orders in the fourth quarter of fiscal year 2019, which affected our revenue for that quarter.

immediate impact on our customer orders in the three months ended June 28, 2019, which affected our revenue for that quarter.

We expect this ban to continue to adversely affect orders from our customers for the foreseeable future.

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Therefore, political, social, business and economic conditions in Thailand have a significant effect on our business.

In March 2022, Thailand was assessed as a medium political risk by Marsh, an insurance broker and risk advisor.

Any changes to tax regimes, laws, exchange controls or political action in Thailand may harm our business, financial condition and operating results.

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Further, the Thai government may raise the minimum wage standards for labor and could repeal certain promotional certificates that we have received or tax holidays for certain export and value added taxes that we enjoy, either preventing us from engaging in our current or anticipated activities or subjecting us to higher tax rates.

We expect to continue to invest in our manufacturing operations in the PRC, which will continue to expose us to risks inherent in doing business in the PRC, any of which risks could harm our business, financial condition and operating results.

We expect to continue to invest in our manufacturing operations in the People's Republic of China ("PRC"), which will continue to expose us to risks inherent in doing business in the PRC, any of which risks could harm our business, financial condition and operating results.

We anticipate that we will continue to invest in our customized optics manufacturing facilities located in Fuzhou, the PRC.

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In particular, the political and economic climate in the PRC (both at national and regional levels) is fluid and unpredictable.

In March 2022, the PRC was assessed as a medium political risk by Marsh.

A large part of the PRC’s economy is still being operated under varying degrees of control by the PRC government.

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Furthermore, any litigation in the PRC may be protracted and result in substantial costs and diversion of resources and management’s attention.

Natural disasters, epidemics (including COVID-19), acts of terrorism and other political and economic developments could harm our business, financial condition and operating results.

Natural disasters, epidemics, acts of terrorism and political and economic developments could harm our business, financial condition and operating results.

Natural disasters could severely disrupt our manufacturing operations and increase our supply chain costs.

These events, over which we have little or no control, could cause a decrease in demand for our services, make it difficult or impossible for us to manufacture and deliver products or for our suppliers to deliver components allowing us to manufacture those products, require large expenditures to repair or replace our facilities, or create delays and inefficiencies in our supply chain.

For example, the 2011 flooding in Thailand forced us to temporarily shut down all of our manufacturing facilities in Thailand and cease production permanently at our Chokchai facility, which adversely affected our ability to meet our customers’ demands during fiscal year 2012.

In some countries in which we operate, including the PRC, the U.S., the U.K.

and Thailand, outbreaks of infectious diseases such as COVID-19, H1N1 influenza virus, severe acute respiratory syndrome (“SARS”) or bird flu could disrupt our manufacturing operations, reduce demand for our customers’ products and increase our supply chain costs.

For example, our facility in Fuzhou, the PRC, which manufactures custom optics components, was not permitted to resume operations for a period of two weeks in February 2020 due to the outbreak of COVID-19, which negatively affected our revenues for the three months ended March 27, 2020.

In addition, we and some of our suppliers and customers in the PRC experienced labor shortages during the three months ended March 27, 2020 due to travel restrictions imposed by the Chinese government.

We continue to take precautionary measures including leaves of absence for affected employees and their close contacts, stringent contact tracing, enhanced safe distancing measures, and arrangements for the vaccination of our employees in Thailand.

Although we did not experience any significant disruptions in our operations or decrease in customer demand during year ended June 24, 2022, any worsening of the pandemic may result in more stringent measures being implemented by local authorities, such as shutting down our manufacturing facilities, which would have a significant negative impact on our operations.

While we are unable to accurately predict the full impact that COVID-19 will have on our business, financial condition and operating results due to numerous uncertainties, including the duration and severity of the pandemic as well as related containment measures ordered by government authorities, our compliance with such measures has already impacted our day-to-day operations and could continue to disrupt our business, as well as that of our customers, suppliers and other counterparties, for an indefinite period of time.

For example, the 2011 flooding in Thailand forced us to temporarily shut down all of our manufacturing facilities in Thailand and cease production permanently at our former Chokchai facility, which adversely affected our ability to meet our customers’ demands during fiscal year 2012.

In some countries in which we operate, including the PRC, the U.S., and Thailand, outbreaks of infectious diseases such as COVID-19, H1N1 influenza virus, severe acute respiratory syndrome or bird flu could disrupt our manufacturing operations, reduce demand for our customers’ products and increase our supply chain costs.

For example, the outbreak of COVID-19 resulted in a two-week suspension of operations at our facility in Fuzhou, the PRC in February 2020 and caused labor shortages for us and some of our suppliers and customers in the PRC during the three months ended March 27, 2020, which negatively affected our revenues during the same period.

Although we continue to take precautionary measures, including leaves of absence for affected employees and their close contacts, stringent contact tracing, and enhanced safe distancing measures, any worsening of the COVID-19 pandemic or the emergence of other infectious diseases may result in more stringent measures being implemented by local authorities, such as shutting down our manufacturing facilities, which would have a significant negative impact on our operations.

Any escalation in these events or similar future events may disrupt our operations and the operations of our customers and suppliers and may affect the availability of materials needed for our manufacturing services.

may also disrupt the transportation of materials to our manufacturing facilities and finished products to our customers.

Such events may also disrupt the transportation of materials to our manufacturing facilities and finished products to our customers.

These events have had, and may continue to have, an adverse impact on the U.S.

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Financial Risks

Unfavorable worldwide economic conditions may negatively affect our business, financial condition and operating results.

The sudden and continuing global economic downturn and uncertainty due to the effects of COVID-19 and subsequent volatility and adverse conditions in the capital and credit markets have negatively affected levels of business and consumer spending, heightening concerns about the likelihood of a global depression and potential default of various national bonds and debt backed by individual countries.

Such developments, as well as the politics impacting these, could adversely affect our financial results.

Unfavorable worldwide economic conditions (including inflation and supply chain disruptions) may negatively affect our business, financial condition and operating results.

The current global economic downturn and volatility and adverse conditions in the capital and credit markets have negatively affected levels of business and consumer spending, heightening concerns about the likelihood of a global recession and potential default of various national bonds and debt backed by individual countries.

Such developments, as well as the policies impacting these, could adversely affect our financial results.

In particular, the economic disruption caused by COVID-19 has led to reduced demand in some of our customers’ optical communications product portfolios and significant volatility in global stock markets and currency exchange rates.

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In addition, our ability to access capital markets may be restricted, which could have an impact on our ability to react to changing economic and business conditions and could also adversely affect our business, financial condition and operating results.

Due to the unprecedented and rapidly changing social and global economic impacts associated with COVID-19, we are unable to predict or estimate the ultimate impact of the pandemic on our business, which will depend on, among other things:

the extent and duration of the pandemic, the severity of the disease and the number of people infected;

the effects on the global economy, including the effects and duration of measures taken by governmental authorities and other third parties restricting day-to-day life and business operations;

and the efficacy of governmental programs implemented to assist businesses impacted by the pandemic.

At this time, we cannot estimate the short- or long-term impacts of COVID-19 on our business, financial condition and operating results.

Inflation has also risen globally to historically high levels.

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Inflation and government efforts to combat inflation, such as raising the benchmark interest rate, could increase market volatility and have an adverse effect on the financial market and global economy.

In addition, we expect that disruptions in our supply chain and fluctuations in the availability of parts and materials will continue to have a significant

impact on our ability to generate revenue, despite strong demand from our customers.

Such adverse conditions could negatively impact demand for our products, which could adversely affect our business, financial condition and operating results.

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Any failure by us or our subsidiaries to comply with these agreements could harm our business, financial condition and operating results.

The phase-out of the London Interbank Offered Rate (“LIBOR”) could affect interest rates under our existing credit facility agreement, as well as our ability to seek future debt financing.

LIBOR is the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rates on loans globally.

We generally use LIBOR as a reference rate to calculate interest rates under our credit facility agreement.

In 2017, the U.K.’s Financial Conduct Authority ("FCA"), which regulates LIBOR, announced that it intended to phase out LIBOR by the end of 2021.

On March 5, 2021, the FCA announced the dates on which the panel bank submissions for all LIBOR settings will cease, after which representative LIBOR rates will no longer be available.

The FCA confirmed that all LIBOR settings will cease to be provided by any administrator or no longer be representative as follows:

immediately after December 31, 2021, in the case of all GBP, EUR, CHF and JPY settings, and the 1-week and 2-month USD settings;

and immediately after June 30, 2023, in the case of the remaining USD settings.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, has identified replacing USD LIBOR with a new index, the Secured Overnight Financing Rate, calculated using short-term repurchase agreements backed by Treasury securities.

In response to the announcement by the FCA on the future cessation and loss of representativeness of LIBOR benchmark, the International Swaps and Derivatives Association ("ISDA") issued a statement on March 5, 2021 confirming that the FCA’s announcement constitutes an index cessation event under IBOR Fallbacks and Supplements and the ISDA 2020 Fallbacks Protocol for all 35 LIBOR settings.

As a result, the fallback spread adjustments were fixed as of the date of the announcement.

The fallbacks will automatically occur for outstanding derivatives contracts that incorporate the IBOR Fallbacks Supplement or are subject to the ISDA 2020 Fallbacks Protocol immediately after December 31, 2021 for outstanding derivatives referenced to all EUR, GBP, CHF and JPY LIBOR settings, and June 30, 2023 for outstanding derivatives referenced to all USD LIBOR settings.

We have adhered to the ISDA 2020 IBOR Fallbacks Protocol since January 2021 for outstanding interest rate swap agreements which we have with banks with interest rates referenced to 1-month USD LIBOR and 3-month USD LIBOR settings;

therefore, the fallbacks will automatically occur immediately after June 30, 2023 as described above.

The new rates may not be as favorable to us as those in effect prior to any LIBOR phase-out.

In addition, the transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that currently rely on LIBOR.

The transition may also result in reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes.

Any such effects of the transition away from LIBOR, as well as other unforeseen effects, may result in expenses, difficulties, complications or delays in connection with future financing efforts, which could have a material adverse impact on our business, financial condition and operating results.

We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our shareholders.

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Our current property and casualty insurance covers loss or damage to our property and third-party property over which we have custody and control, as well as losses associated with business interruption, subject to specified exclusions and limitations such as coinsurance, facilities location sub-limits and other policy limitations and covenants.

Even with insurance coverage, natural disasters or other catastrophic events, including acts of war, could cause us to suffer substantial losses in our operational capacity and could also lead to a loss of opportunity and to a potential adverse impact on our relationships with our existing customers resulting from our inability to produce products for them, for which we might not be compensated by existing insurance.

Even with insurance coverage, natural disasters or other catastrophic events, including acts of war, could cause us to suffer substantial losses in our

operational capacity and could also lead to a loss of opportunity and to a potential adverse impact on our relationships with our existing customers resulting from our inability to produce products for them, for which we might not be compensated by existing insurance.

This in turn could have a material adverse effect on our business, financial condition and operating results.

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The results of audits and examinations of previously filed tax returns and continuing assessments of our tax exposures may have an adverse effect on our provision for income taxes and tax liability.

For example, in connection with the conclusion of the audit of our U.S.

federal and state tax returns for the tax years 2016 and 2017, we incurred additional taxes, interest and penalties.

We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities.

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Fabrinet (the “Cayman Islands Parent”) is an exempted company incorporated in the Cayman Islands.

We maintain manufacturing operations in Thailand, the PRC, the U.K.

We maintain manufacturing operations in Thailand, the PRC, the U.S.

We cannot determine in advance the extent to which some jurisdictions may require us to pay taxes or make payments in lieu of taxes.

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After June 2020, 50% of our income generated from products manufactured at our Pinehurst campus will be exempted from tax through June 2025.

New preferential tax treatment is available to us for products manufactured at our Chonburi campus Building 9, where income generated will be tax exempt through 2031, capped at our actual investment amount.

Such preferential tax treatment is contingent on various factors, including the export of our customers’ products out of Thailand and our agreement not to move our manufacturing facilities out of our current province in Thailand for at least 15 years from the date on which preferential tax treatment was granted.

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If any tax authorities are successful in challenging our financing or transfer pricing policies, our income tax expense may be adversely affected and we could become subject to interest and penalty charges, which may harm our business, financial condition and operating results.

Several governments are considering various tax reform proposals that, if enacted, may contain provisions that could increase our tax expense.

Further changes in the tax laws of various jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for Economic Co-operation and Development, which represents a coalition of member countries and has recommended changes to numerous long-standing tax principles.

If implemented by taxing authorities, such changes could have a material adverse effect on our business, financial condition and operating results.

Several governments are considering tax reform proposals that, if enacted, could increase our tax expense.

The Organization for Economic Co-operation and Development (OECD) announced that it has reached agreement among its member countries to implement Pillar Two rules, a global minimum tax at 15% for certain multinational enterprises.

Many countries are expected to issue laws and regulations to conform to this regime.

We will continue to monitor legislative and regulatory developments to assess the impact on our business, financial condition and operating results.

We have incurred and will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to continue to devote substantial time to various compliance initiatives.

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NADCAP (National Aerospace and Defense Contractors Accreditation Program) for Quality Assurance throughout the Aerospace and Defense Industries;

and ISO 45001 for Occupational Health and Safety Management Systems.

ISO 45001 for Occupational Health and Safety Management Systems;

and ISO 22301 for Business Continuity Management Systems.

We also maintain compliance with various additional standards imposed by the FDA with respect to the manufacture of medical devices.

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ANSI ESD S20.20 for facilities and manufacturing process control, in compliance with ESD standard;

Transported Asset Protection Association ("TAPA") and Custom Trade Partnership Against Terrorism ("C-TPAT") for Logistic Security Management System;

TAPA and C-TPAT for Logistic Security Management System;

and CSR-DIW for Corporate Social Responsibility in Thailand.

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Compliance with these rules has resulted in additional cost and expense, including for due diligence to determine and verify the sources of any conflict minerals used in the products we manufacture, and may result in additional costs of remediation and other changes to processes or sources of supply as a consequence of such verification activities.

These rules may also affect the sourcing and availability of minerals used in the products we manufacture, as there may be only a limited number of suppliers offering “conflict free” metals that can be used in the products we manufacture for our customers.

These rules may also affect the sourcing and availability of

minerals used in the products we manufacture, as there may be only a limited number of suppliers offering “conflict free” metals that can be used in the products we manufacture for our customers.

Although we do not anticipate any material adverse effects based on the nature of our operations and these laws and regulations, we will need to ensure that we and, in some cases, our suppliers comply with applicable laws and regulations.

If we fail to timely comply with such laws and regulations, our customers may cease doing business with us, which would have a

material adverse effect on our business, financial condition and operating results.

If we fail to timely comply with such laws and regulations, our customers may cease doing business with us, which would have a material adverse effect on our business, financial condition and operating results.

In addition, if we were found to be in violation of these laws, we could be subject to governmental fines, liability to our customers and damage to our reputation, which would also have a material adverse effect on our business, financial condition and operating results.

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Any of these factors may result in large and sudden changes in the volume and price at which our ordinary shares trade.

Volatility and weakness in our share price could mean that investors may not be able to sell their shares at or above the prices they paid and could impair our ability in the future to offer our ordinary shares or convertible securities as a source of additional capital and/or as consideration in the acquisition of other businesses.

Volatility and weakness in our share price could mean that investors may not be able to sell their shares at or above the prices they paid and could also impair our ability in the future to offer our ordinary shares or convertible securities as a source of additional capital and/or as consideration in the acquisition of other businesses.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.

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federal income tax purposes for the taxable year 2023 or for the foreseeable future.

However, despite our expectations, we guarantee that we will not become a PFIC for the taxable year 2022 or any future year because our PFIC status is determined at the end of each year and depends on the

However, despite our expectations, we cannot guarantee that we will not become a PFIC for the taxable year 2023 or any future year because our PFIC status is determined at the end of each year and depends on the

composition of our income and assets during such year.

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tax laws and regulations as well as burdensome reporting requirements.

Our business could be negatively affected as a result of activist shareholders.

Our business and share price could be negatively affected as a result of activist shareholders.

If an activist investor takes an ownership position in our ordinary shares, responding to actions by such activist shareholder could be costly and time-consuming, disrupt our operations and divert the attention of management and our employees.

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In addition, our share price could experience periods of increased volatility as a result of shareholder activism.

Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit your opportunity to sell shares at a premium.

Certain provisions in our constitutional documents may discourage our acquisition by a third party, which could limit our shareholders' opportunity to sell shares at a premium.

Our constitutional documents include provisions that could limit the ability of others to acquire control of us, modify our structure or cause us to engage in change-of-control transactions, including, among other things, provisions that:

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An objection can be made to the Grand Court of the Cayman Islands but is unlikely to succeed unless there is evidence of fraud, bad faith or collusion.

If the arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of a corporation incorporated in a jurisdiction in the U.S., providing rights to receive payment in cash for the judicially determined value of the shares.

jurisdiction in the U.S., providing rights to receive payment in cash for the judicially determined value of the shares.

This may make it more difficult for our shareholders to assess the value of any consideration they may receive in a merger or consolidation or to require that the offeror give them additional consideration if they believe the consideration offered is insufficient.

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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