What changed in this filing

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Item 1A. Risk Factors

2023-11-16 compared with 2022-11-17 · 95 added, 73 removed, 345 unchanged (33% of the section changed)

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Expenditures by our customers depend on the current and anticipated market demand for semiconductors and products that use semiconductors, LEDs and batteries, including mobile devices, personal computers, consumer electronics, telecommunications equipment, automotive components, electric vehicles and other industrial products.

Reductions or other fluctuations in our customers' spending as a result of uncertain conditions and volatility in the macroeconomic environment, including from government, economic or fiscal instability, economic recession, actual or potential inflation, rising interest rates, slower growth in certain geographic regions, global health crises and pandemics, restricted global credit conditions, reduced demand, excess inventory, higher energy prices, or other conditions, could adversely affect our business, financial condition and operating results.

Reductions or other fluctuations in our customers' spending as a result of uncertain conditions and volatility in the macroeconomic environment, including from government, economic or fiscal instability, economic recession, actual or potential inflation, rising interest rates, slower growth in certain geographic regions, global trade issues, global health crises and pandemics, restricted global credit conditions, reduced demand, excess inventory, higher energy prices, or other conditions, could adversely affect our business, financial condition and operating results.

Further, our profitability can be affected by volatility because we incur a certain amount of fixed costs that we cannot modulate up and down to meet increases or decreases in demand.

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Our visibility into future demand is generally limited and forecasting is difficult, and we believe historic, industry-wide volatility will persist.

The COVID-19 pandemic has adversely affected our business, and may in the future materially and adversely affect our results of operations and financial condition.

The ongoing COVID-19 pandemic and resulting containment measures have significantly impacted the global economy, disrupted global supply chains, created significant volatility and disruption in financial markets, and affected unemployment levels.

The global responses to the COVID-19 pandemic remain dynamic.

Some countries continue to impose quarantines, containment measures or travel restrictions, and certain countries, such as China, continue to impose periodic lockdowns in response to rising case numbers.

In certain jurisdictions, there has been a resurgence of illnesses or threat of emerging new variants of the virus, potentially leading to more severe restrictions in the future.

While we continue our normal operations in all of our manufacturing locations, work-from-home practices have been instituted or permitted from time-to-time across our offices worldwide, which have in some cases impacted our non-manufacturing productivity.

We could experience further productivity disruptions in the event of an outage to systems and technologies critical to effect remote work, or from the increased data security and technology risks arising therefrom.

The COVID-19 pandemic continues to disrupt our supply chain, including materials, equipment, engineering support and services, especially to, from and within China.

In addition, the costs of logistics have increased as a result of general inflationary pressures, and labor shortages have further contributed to rising costs across the supply chain, further exacerbating the impact the pandemic has had on the supply chain.

Other effects of the COVID-19 pandemic on our business will depend on future developments that cannot be accurately predicted at this time, but may include the following:

• a decrease in short-term and/or long-term demand for our products resulting from widespread business shutdowns and slowdowns, quarantines, travel and logistics restrictions and other actions taken by governments, businesses, and the general public in an effort to limit exposure to and spread of COVID-19;

• negative impacts to our operations, technology development, new product introduction and customer qualifications resulting from our efforts to mitigate the impact of COVID-19 through execution of our BCP;

• increased volatility in the semiconductor and electric vehicle industries due to heightened uncertainty, including our inability to keep pace relative to our competitors during a post-COVID-19 market recovery should that occur;

• reduced sales volume to or loss of customers, or cancellation, delay or reduction of backlogged customer orders.

The ultimate impact of COVID-19 on our business will depend on, among other things:

• the extent and duration of the pandemic, the severity of the disease;

• the emergence of new variants of the virus;

• the distribution and effectiveness of available vaccines and boosters and the rates at which they are administered;

• the effects on the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting day-to-day life,

• international travel and border crossings, and the length of time that such measures remain in place;

• governmental programs implemented to assist businesses impacted by the COVID-19 pandemic.

To the extent the COVID-19 pandemic adversely affects our business, results of operations and financial conditions, it may also exacerbate the other risks discussed in this section on “Risk Factors”.

The ongoing Israel-Hamas war may adversely affect our business, financial condition or results of operations.

On October 7, 2023, an escalated armed conflict between Israel and the Hamas terrorist organization commenced, leading to a series of extended hostilities along Israel’s border with the Gaza Strip.

Additionally, since October 8, 2023, the Hezbollah militant group has increased its hostilities against Israel over its northern region, including Haifa.

Many multinational companies in the semiconductor industry have research, design and development centers situated in Israel, including our Company, which has a manufacturing facility and a business office in Haifa.

The intensity, duration and outcome of the ongoing war is uncertain and its continuation or escalation may have a material adverse effect on our business and operations.

While we are currently maintaining business and operations in Israel without material damage or interruptions at our Israeli facility, our assets and operations in Israel could be vulnerable to future property damage, inventory loss, business disruption, and expropriation.

We have around 70 employees in Israel.

While to our knowledge, there have been no reported casualties or injuries to our employees as of the date of this report, some of our Israeli employees have been mobilized as members of the Israeli military reserves to active duty.

The ongoing war could cause harm to our employees and otherwise impair their ability to work for extended periods of time, as well as disrupt supply chains, transport networks, telecommunications and financial systems, and other critical infrastructure necessary to conduct business in Israel.

As the intensity of the war has been rapidly evolving, including the potential for heightened geopolitical tensions in the Middle East, we continue to receive and review reports concerning our operations and business partners and remain vigilant.

The risk of cybersecurity incidents may also increase in connection with the ongoing war.

These attacks may impact critical infrastructure and financial institutions globally, which in turn could adversely affect our operations.

While we have taken actions to mitigate such potential risks, the proliferation of malware from the war into systems unrelated to the war, or cyberattacks targeted against U.S.

companies, could adversely affect our operations.

Even if the war moderates, or a peaceful resolution in the region is reached, the detrimental impact to the global financial markets may be far-reaching, and may not recover immediately.

The potential effects of these conditions could have a material adverse effect on our business, results of operations and financial condition.

We depend on our suppliers, including sole source suppliers, for raw materials, components and subassemblies.

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• reliability or quality issues with certain key subassemblies provided by single source suppliers as to which we may not have any short-term alternative;

• shortages caused by disruptions at our suppliers and subcontractors for a variety of reasons, including public health emergencies and associated containment measures (such as the COVID-19 pandemic), geopolitical tensions (such as the Ukraine/Russia conflict), significant natural disasters (including as a result of climate change) or significant price changes (including as a result of inflationary pressures);

• shortages caused by disruptions at our suppliers and subcontractors for a variety of reasons, including public health emergencies and associated containment measures, war or geopolitical tensions (such as the Israel-Hamas war, tensions in the Middle East and the Ukraine/Russia conflict), significant natural disasters (including as a result of climate change) or significant price changes (including as a result of inflationary pressures);

• delays in the delivery of raw materials or subassemblies, which, in turn, may delay shipments to our customers;

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If any of these risks were to materialize, we might be unable to deliver our products to our customers on time and at expected cost, or at all.

While we observed some easing of the industry-wide supply constraints towards the end of fiscal 2022, we expect constraints to continue and the duration of such constraints or their long-term impact on our business cannot be predicted at this time.

As part of our supply chain management, we have increased our inventory levels in an effort to mitigate component shortages.

While we observed some easing of the industry-wide supply constraints towards the end of fiscal 2022 and in fiscal 2023, we expect some constraints to continue and the duration of such constraints or their long-term impact on our business cannot be predicted at this time.

As part of our supply chain management, we may from time to time increase our inventory levels to mitigate against anticipated future component shortages.

These increases in our inventory levels may lead to an excess of materials in the future in the event that the demand for our products is lower than our expectations or if we otherwise fail to anticipate future customer demand properly.

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Some of these competitors are Asian and European companies that have had, and may continue to have, an advantage over us in supplying products to local customers who appear to prefer to purchase from local suppliers.

Some of these competitors compete across many of our product lines, while others are primarily focused in a specific product area, sometimes with government assistance or through the support of strategic alliances, all of which could result in lowering the barriers to entry.

Some of these competitors compete across many of our product lines, while others are primarily focused in a specific product area, all of which could result in lowering the barriers to entry.

Some governments may have provided, and will continue to provide, financial assistance or other support to some of our competitors or to new entrants, to advance the nation's growth in the semiconductor equipment and packaging materials industries.

We expect our competitors to improve their current products’ performance, and to introduce new products and materials with improved price and performance characteristics.

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Substantially all of our sales, distribution channels and manufacturing operations are located outside of the U.S., which subjects us to risks, including risks from changes in trade regulations, currency fluctuations, political instability and conflicts.

From time to time, our customers may request that we deliver our products to countries where they own or operate production facilities or to countries where they utilize third-party subcontractors or warehouses as part of their supply chain.

Our customer base in the Asia/Pacific region has become more geographically concentrated over time as a result of general economic and industry conditions and trends.

Over 90% of our net revenue is derived from shipments to customers located outside of the U.S., primarily in the Asia/Pacific region.

In the Asia/Pacific region, our customer base remains more geographically concentrated in China as a result of economic and industry conditions.

Approximately 56.9%, 55.6% and 51.6% of our net revenue for fiscal 2022, 2021, and 2020, respectively, was derived from shipments to customers located in China.

Approximately 38.6%, 45.8% and 43.4% of our net revenue for fiscal 2023, 2022, and 2021, respectively, was derived from shipments to customers headquartered in China.

We expect our future performance to depend on our ability to continue to compete in foreign markets, particularly in the Asia/Pacific region.

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suppliers for materials and components used in our products, and substantially all of our manufacturing operations are located in countries other than the U.S.

We manufacture our ball, wedge and APAMA bonders in Singapore, our Hybrid and Electronic Assembly solutions in the Netherlands, our dicing blades, capillaries and bonding wedges in China, and our capillary blanks in Israel and China.

We manufacture our ball, wedge and APAMA TM bonders in Singapore, our Hybrid and Electronic Assembly solutions in the Netherlands, our dicing blades, capillaries and bonding wedges in China, our capillaries in Israel and China, and our advanced dispensing equipment in Taiwan.

We also rely on independent foreign distribution channels for certain of our product lines.

As a result, a major portion of our business is subject to the risks associated with international, and particularly Asia/Pacific, commerce, such as:

As a result, a major portion of our business is subject to the risks associated with international commerce, particularly Asia/Pacific region, such as:

• stringent and frequently changing trade compliance regulations;

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• natural disasters such as earthquakes, fires or floods, including as a result of climate change;

• risks of war and civil disturbances, including the Ukraine/Russia conflict, or other events that may limit or disrupt manufacturing, markets and international trade;

• war, risks and rumors of war and civil disturbances, including the Israel-Hamas war and the Ukraine/Russia conflict, or other events that may limit or disrupt manufacturing, markets and international trade;

• act of terrorism that impact our operations, customers or supply chain or that target U.S.

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• legal systems which are less developed and may be less predictable than those in the U.S.

In addition, there is a potential risk of conflict and instability in the relationship between Taiwan and China which could disrupt the operations of our customers and/or suppliers in both Taiwan and China, our manufacturing operations in China, and our future plans in the region.

Our international operations also depend on favorable trade relations between the U.S.

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Catastrophic events, such as pandemics and extreme weather events as a result of climate change, can have a material adverse effect on our operations and financial results.

Our operations and business, and those of our customers and suppliers, can be disrupted by natural disasters, public health issues (including the COVID-19 pandemic), cybersecurity incidents, interruptions of service from utilities, or other catastrophic events including as a result of climate change.

Our operations and business, and those of our customers and suppliers, can be disrupted by natural disasters, public health issues, cybersecurity incidents, interruptions of service from utilities, or other catastrophic events including as a result of climate change.

For example, we have at times experienced temporary disruptions in our manufacturing processes as a result of power outages.

In addition, global climate change can result in natural disasters occurring more frequently, with greater intensity and with less predictability.

For example, in August 2022, China’s Sichuan province ordered all factories to shut down for an extended period to ease a power shortage in the region resulting from an unprecedented heat wave crossing 104-degree Fahrenheit in dozens of Chinese cities.

As Sichuan is a key manufacturing location for the semiconductor and solar panel industries, such power rationing measures impacted factories and suppliers who operate there.

For example, in September 2023, territories in the East Asian monsoon region, including Guangdong, Hong Kong, Fujian and Taiwan, experienced significant typhoons and storm surges, resulting in a temporary suspension of business and services.

Such temporary suspension of business and services impacted some of the semiconductor factories and suppliers who operate there.

The long-term effects of climate change on the global economy and the semiconductor industry in particular are unclear but could be severe, and could exacerbate the other risk factors described herein.

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Some of the systems we maintain as part of our business recovery plans cannot guarantee us protection from such disruptions.

Furthermore, even if our operations are unaffected or recover quickly, if our customers or suppliers cannot timely resume their own operations due to a catastrophic event, we may be unable to fulfil our customers’ orders, and may experience reduced or cancelled orders or other disruptions to our supply chain that may adversely affect our results of operations.

Furthermore, even if our operations are unaffected or if we managed to recover our operations quickly, if our customers or suppliers cannot timely resume their own operations due to a catastrophic event, we may be unable to fulfil our customers’ orders, and may experience reduced or cancelled orders or other disruptions to our supply chain that may adversely affect our results of operations.

We are subject to export restrictions that may limit our ability to sell to certain customers, and trade wars, in particular the U.S.-China trade war, could adversely affect our business.

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Therefore, these products cannot be sold to Huawei and other Entity List companies, and are subject to certain end-use restrictions.

To date, these amendments to the EAR have not had a material direct impact on our business, financial condition or results of operations and we do not expect that they will, although they could have indirect impacts, including increasing tensions in U.S.

and Chinese trade relations, potentially leading to negative sentiments towards U.S.-based companies among Chinese consumers.

Additionally, some end users may prefer to avoid the U.S.

supply chain to avoid the application of these regulations.

Future changes in, and responses to, U.S.

trade policy could reduce the competitiveness of our products and cause our sales to decline, and therefore could have a material adverse effect on our business, financial condition or results of operations.

supply chain in its entirety to avoid the application of these regulations.

The rules promulgated by the BIS are typically complex, and the BIS could revise or expand them in response to public comments.

Likewise, the BIS may issue guidance clarifying the scope of the rules.

Such revisions, expansions or guidance could change the impact of the rules for our business.

Future changes in, and responses to, the various export regulations, tariffs, or other trade regulations between the U.S.

and other countries may be unpredictable.

Such further changes may limit our ability to produce products, increase our selling or manufacturing costs, decrease margins, reduce the competitiveness of our products and cause our sales to decline, and therefore could have a material adverse effect on our business, financial condition or results of operations.

Because a small number of customers account for most of our sales, our net revenue could decline if we lose a significant customer.

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Sales to our ten largest customers comprised 53.5% and 49.1% of our net revenue for fiscal 2023 and fiscal 2022, respectively.

We expect a small number of customers will continue to account for a high percentage of our net revenue for the foreseeable future.

We expect that a small number of customers will continue to account for a high percentage of our net revenue for the foreseeable future.

Thus, our business success depends on our ability to maintain strong relationships with our customers.

Any one of a number of factors could adversely affect these relationships.

If, for example, during periods of escalating demand for our equipment, we were unable to add inventory and production capacity quickly enough to meet the needs of our customers, or if because of supply chain constraints we are not able to fulfil our customers' orders, they may turn to other suppliers making it more difficult for us to retain their business.

If, for example, during periods of escalating demand for our equipment, we were unable to add inventory or increase our production capacity quickly enough to meet the needs of our customers, or if we are not able to fulfil our customers' orders due to supply chain constraints, they may turn to other suppliers making it more difficult for us to retain their business.

We may also make commitments from time-to-time to our customers regarding minimum volumes and performance standards, and if we are unable to meet those commitments, we may incur liabilities to our customers.

If we lose orders from a significant customer that we are not able to replace, if a significant customer reduces its orders substantially, or if we incur liabilities for not meeting customer commitments, these losses, reductions or liabilities may materially and adversely affect our business, financial condition and operating results.

If we lose orders from a significant customer that we are not able to replace, or if a significant customer reduces its orders substantially, or if we incur liabilities for not meeting customer commitments, these losses, reductions or liabilities may materially and adversely affect our business, financial condition and operating results.

We maintain a backlog of customer orders that is subject to cancellation, reduction or delay in delivery schedules, which may result in lower than expected revenues.

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Human Capital Risks

Increased labor costs and competition for qualified personnel may reduce the efficiency of our flexible manufacturing model and adversely impact our operating results.

The labor costs in the various countries in which we operate are rising.

There is substantial competition in China and Singapore for qualified and capable manufacturing personnel, which may make it difficult for us to recruit and retain qualified employees.

In addition, current or future immigration laws, policies or regulations may limit our ability to attract, hire and retain qualified employees in Singapore.

If we are unable to staff sufficient personnel at our China, Singapore, Israel and the Netherlands facilities or if there are increases in labor costs that we are unable to recover in our pricing to our customers, we may experience increased manufacturing costs, which would adversely affect our operating results.

Our business depends on attracting and retaining management, sales and technical employees as well as on the succession of senior management.

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Alternative packaging technologies may render some of our products obsolete and materially and adversely affect our overall business and financial results.

Alternative packaging technologies have emerged that may improve device performance or reduce the size of an integrated circuit package, as compared to traditional wire bonding.

Alternative packaging technologies have emerged that may improve device performance, reduce the size of or enhance the number of components inherent in an integrated circuit package, as compared to traditional wire bonding.

These technologies include flip chip and wafer-level packaging.

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Our efforts to monitor, develop, modify and implement appropriate tests and manufacturing processes for our products may not be sufficient to permit us to avoid a rate of failure in our products that results in substantial delays in shipment, significant repair or replacement costs, potential damage to our reputation or general customer dissatisfaction with our products.

We may also not be able to obtain product liability or other insurance to fully cover such risks.

We may also not be able to successfully claim against our suppliers or obtain product liability or other insurance to fully cover such risks.

Any of the foregoing risks, if they were to materialize, could have a material adverse effect on our business, results of operations or financial condition.

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(1) result in significant costs to us for additional capital equipment or other process requirements;

(2) restrict our ability to expand our operations, and/or (3) cause us to curtail our operations.

(2) restrict our ability to expand our operations;

and/or (3) cause us to curtail our operations.

We also could incur significant costs, including cleanup costs, fines or other sanctions and third-party claims for property damage or personal injury, as a result of violations of or liabilities under such laws and regulations.

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Increasing attention to ESG matters, including any targets or other ESG initiatives, could result in additional costs or risks or adversely impact our business

Certain investors, shareholder advocacy groups, other market participants, customers and other stakeholder groups have focused increasingly on companies' environmental, social and governance (“ESG”) initiatives, including those concerning climate change, human rights, diversity and inclusion, and shareholder proxy access.

This may result in increased costs, enhanced compliance or disclosure obligations and costs, or other adverse impacts on our business, financial condition or results of operations.

Certain investors, shareholder advocacy groups, other market participants, customers and other stakeholder groups have focused increasingly on companies' environmental, social and governance (“ESG”) initiatives, including those concerning climate change, greenhouse gas emissions, human rights, diversity and inclusion, and shareholder proxy access.

This may result in increased costs, enhanced compliance or disclosure obligations and related costs, or other adverse impacts on our business, financial condition or results of operations.

From time to time, we create and publish voluntary disclosures regarding ESG matters.

Our sustainability report, currently in its sixth edition, continues to outline our Company’s strategies, initiatives and performance of ESG topics identified through a materiality assessment to be most relevant to the operations and stakeholders of our Company.

Our sustainability report, currently in its seventh edition and available on our website, continues to outline our Company’s strategies, initiatives and performance of ESG topics identified through a materiality assessment to be most relevant to the operations and stakeholders of our Company.

The identification, assessment, and disclosure of such matters is complex.

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We may not be successful in protecting our technology for a number of reasons, including the following:

• employees, subcontractors, vendors, consultants and customers may violate their contractual agreements, and the cost of enforcing those agreements may be prohibitive, or those agreements may be unenforceable or more limited than we anticipate;

• employees, subcontractors, vendors, consultants and customers may violate their contractual agreements or post-employment non-competition obligations, and the cost of enforcing those agreements may be prohibitive, or those agreements may be unenforceable or more limited than we anticipate;

• foreign intellectual property laws may not adequately protect our intellectual property rights;

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or we may otherwise be unable to obtain adequate protection for our technology;

Also, competitors may copy or misappropriate our trade secrets, products or designs either through lawful means of reverse engineering or through unlawful means that we are unable to prove, in either case eroding our market share.

In addition, our partners and alliances may have rights to technology developed by us.

• when our patents expire, or if they are invalidated, narrowed or circumvented, our competitors may be able to utilize the inventions protected by our patents.

Also, competitors may copy or misappropriate our trade secrets, products or designs either through lawful means of reverse engineering or through independent development.

We remain vigilant and take note of similar products and solutions offered by our competitors and, based on reasonable efforts, investigate whether any of our competitors’ products or solutions is the outcome of unlawful reverse engineering.

For example, we are currently investigating a potential unlawful reverse engineering incident and, where necessary, plan to pursue appropriate legal action against parties that may be involved in such unlawful reverse engineering.

Competitors or third parties (including ex-employees violating their surviving contractual obligations with us) may also copy or reverse engineer aspects of our products or solutions through unlawful means, or illegally use information that we regard as proprietary.

While we conduct active surveillance and monitor potential threats surrounding any unauthorized use from competitors or third parties, we may not be able to detect misuse of our proprietary information before it occurs.

For example, as a result of our active surveillance, we have learned that certain ex-employees in China, who had access to materials containing proprietary information and trade secrets about our products and designs, may have provided them to their current employer that is our direct competitor.

We continue to fully investigate this matter and, if appropriate, pursue litigation against all parties that may be involved to protect our confidential information and trade secrets.

Despite our best efforts in active surveillance and monitoring, such policing may be difficult, time-consuming, non-definitive and non-exhaustive, and we cannot be certain that the steps we have taken will prevent misappropriation of our intellectual property.

Additionally, laws of foreign countries may not provide us with adequate remedy against unauthorized use of our intellectual property, or we may be unable to prove unauthorized use as prescribed by such foreign laws.

In either case, if the protection of our intellectual property proves to be inadequate or unenforceable, others may be able to use our proprietary developments without compensation or appropriate remediation to us, resulting in potential cost advantages to our competitors and consequentially eroding our market share.

Furthermore, our partners and alliances may have rights to technology developed by us.

We may incur significant expense to protect or enforce our intellectual property rights.

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Occasionally, third parties assert that we are, or may be, infringing on or misappropriating their intellectual property rights.

In these cases, we defend, and will continue to defend, against claims or negotiate licenses where we consider these actions appropriate.

Intellectual property cases are uncertain and involve complex legal and factual questions.

Some of these assertions may not be legitimate.

In these cases, we defend or in some instances dispel, and will continue to defend or dispel, against claims or negotiate licenses where we consider these actions appropriate.

Intellectual property cases are uncertain, time-consuming and involve complex legal and factual questions.

If we become involved in this type of litigation, it could consume significant resources and divert our attention from our business.

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We also hold large amounts of data in data center facilities around the world, primarily in Singapore and the U.S., on which our business depends.

A disruption, infiltration or failure of our information technology systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security and loss of critical data, which in turn could materially adversely affect our business.

A disruption, infiltration or failure of our information technology systems owned or used by us or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security and loss of critical data, which in turn could materially adversely affect our business.

Our security procedures, such as virus protection software, data loss protection and our business continuity planning, such as our disaster recovery policies and back-up systems, may not be adequate or implemented properly to fully address the adverse effect of such events, which could adversely impact our operations.

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Furthermore, when we implement new systems and/or upgrade existing systems, we could be faced with temporary or prolonged disruptions that could adversely affect our business.

For example, artificial intelligence (“AI”) may be used to generate cyberattacks with greater scale and efficacy than the traditional threat actors.

In other instance, a cybersecurity threat could be introduced as the result of our business partners incorporating the output of an AI tool that includes a threat, such as introducing malicious code by incorporating an AI generated source code.

We have experienced, and expect to continue to be subject to, cybersecurity threats and incidents, ranging from employee error or misuse, to individual attempts to gain unauthorized access to information systems, to sophisticated and targeted measures known as advanced persistent threats, none of which have been material to the Company to date.

We devote significant resources to network security and other measures to protect our systems and data from unauthorized access or misuse.

However, depending on the nature and scope, cybersecurity incidents could result in business disruption;

the misappropriation, corruption or loss of confidential information and critical data (of the Company or that belonging to third parties);

However, depending on its nature and scope, cybersecurity incidents could result in business disruption;

misappropriation, corruption or loss of confidential information and critical data (of the Company or that belonging to its third parties);

reputational damage;

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and increased cybersecurity protection and remediation costs.

We also try to protect the confidential nature of our proprietary information by using commonly accepted information technology systems and network security measures.

Such measures may not provide adequate protection for our proprietary information.

For example, our internal procedures may not prevent an existing or former employee or consultant from misappropriating our trade secrets and providing them to a competitor, and recourse we take against such misconduct may not provide an adequate remedy to fully protect our interests.

While we maintain insurance policies that may cover certain liabilities in connection with a cybersecurity incident, we cannot be certain that our insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.

We are implementing a new enterprise resource planning system.

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In addition, a weakening of the U.S.

dollar against other currencies could make our costs in non-U.S.

dollar against other currencies could make our costs in certain non-U.S.

locations more expensive to fund.

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Our primary exposures include the Singapore Dollar, Chinese Yuan, Japanese Yen, Swiss Franc, Philippine Peso, Thai Baht, Taiwan Dollar, South Korean Won, Israeli Shekel, Malaysian Ringgit and Euro.

Although we from time to time have entered into foreign exchange forward contracts to hedge certain foreign currency exposure of our operating expenses, our attempts to hedge against these risks may not be successful and may result in a material adverse impact on our financial results and cash flows.

Although we have entered into foreign exchange forward contracts from time to time to hedge our operating expenses against certain foreign currency exposure, our attempts to hedge against these risks may not be successful and may result in a material adverse impact on our financial results and cash flows.

Changes to our existing tax incentive in Singapore may materially reduce our reported results of operations in future periods.

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Although the timing and methods of implementation may vary, many countries, including those in the Asia/Pacific region in which we have significant operations, have implemented, or are in the process of implementing, legislation or practices inspired by the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development (“OECD”).

Unless repealed or otherwise modified, beginning in our fiscal 2023, the U.S.

Tax Cuts and Jobs Act of 2017 (“TCJA”) enactment of IRC Section 174 will require the capitalization and amortization of R&D expenditures which will increase our effective tax rate and reduce our operating cash flows.

In December 2021, the OECD issued its guidance on the Global Anti-Base Erosion (“GloBE”) rules with the purpose of ensuring multinational companies pay a minimum level tax on the income generated in each of the jurisdictions where they operate in.

In December 2022, the European Council attained a consensus on Pillar Two of the GloBE rules to implement the 15% global minimum tax, and many EU and G20 countries have specified their plan to adhere to the OECD guidelines as early as fiscal 2025 which may materially impact our income tax expense.

Further, the increased scrutiny on international tax and continuous changes to countries’ tax legislation may also affect the policies and decisions of tax authorities with respect to certain income tax and transfer pricing positions taken by the Company in prior or future periods.

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Additionally, our future effective tax rate could be affected by numerous other factors including higher or lower than anticipated foreign earnings in various jurisdictions where we are subjected to tax rates that differ from the U.S.

federal statutory tax rate, by changes in the valuation allowances recorded against certain deferred tax balances, or by changes in accounting principles and reporting requirements, or interpretations and application thereof.

Changes in our assertion for foreign earnings permanently or non-permanently reinvested as a result of changes in facts and circumstances and challenges by tax authorities to our historic or future tax positions and transfer pricing policies could also significantly adversely impact our future effective tax rate.

Changes in our assertion for foreign earnings, whether permanently or non-permanently reinvested, as a result of changes in facts and circumstances or challenges by tax authorities to our historic or future tax positions and transfer pricing policies, could also significantly adversely impact our future effective tax rate.

Risks Related to Our Shares and Corporate Law

We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common shares.

We have the ability to issue additional equity securities, which would lead to dilution of our issued and outstanding common stock.

We may from time to time issue additional equity securities or securities convertible into equity securities, which would result in dilution of our existing shareholders’ equity interests in us.

Our board of directors has the authority to issue, without vote or action of shareholders, preferred shares in one or more series, and has the ability to fix the rights, preferences, privileges and restrictions of any such series.

Any such series of preferred shares could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of our common shares.

In addition, we are authorized to issue, without shareholder approval, up to an aggregate of 200 million common shares, of which approximately 57.1 million shares were outstanding as of October 1, 2022.

We are also authorized to issue, without shareholder approval (except as required by the rules of the Nasdaq stock market), securities convertible into either common shares or preferred shares.

In addition, we are authorized to issue, without shareholder approval, up to an aggregate of 200 million common stock, of which approximately 56.3 million shares were outstanding as of September 30, 2023.

We are also authorized to issue, without shareholder approval (except as required by the rules of the Nasdaq stock market), securities convertible into either common stock or preferred stock.

We may issue such shares in connection with financing transactions, joint ventures, mergers and acquisitions or other purposes.

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These provisions and some other provisions of the Pennsylvania Business Corporation Law could delay, defer or prevent us from experiencing a fundamental change and may adversely affect our common shareholders' voting and other rights.

If our internal controls over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in the trading price of our common stock.

As a public company, we are required to maintain internal control over financial reporting and disclosure controls and procedures.

Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report on our internal control over financial reporting.

As described in “Part II, Item 9A — Controls and Procedures” of this Annual Report, we previously identified a material weakness in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management has concluded that this material weakness was remediated as of September 30, 2023.

However, one or more material weaknesses may be identified in the future during the evaluation and testing process of our internal controls in future years.

If we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective, our consolidated financial statements may contain material misstatements and we could be required to revise or restate our financial results.

This could materially and adversely affect our business, results of operations and financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the material weakness, subject us to fines, penalties or judgments, harm our reputation, adversely affect the trading price of our common stock, or otherwise cause a decline in investor confidence.

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