What changed in this filing

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Item 1A. Risk Factors

2021-06-01 compared with 2020-06-01 · 241 added, 236 removed, 197 unchanged (71% of the section changed)

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Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial condition.

The ongoing COVID-19 pandemic and any possible occurrence of other epidemics or other widespread public health problems could have a material adverse effect on our business and financial condition.

We have been and will continue to be adversely affected by the current COVID-19 outbreak.

We have been unable to continue normal business operations due to the spread of the virus globally, government imposed “stay at home” orders, and decreases in business activity of our customers, suppliers, and other business partners.

We may continue to see adverse impact on our ability (a) to manufacture, test, service and ship our products and provide our services, (b) to get required materials and components to build and service our products, and (c) to staff labor and management for manufacturing, supply chain, research and development, service and administrative operations.

Further, we may continue to experience adverse impact with our global supply chain partners and transportation service providers.

Any extended pandemic outbreak, such as is occurring with COVID-19, could cause our key third party suppliers or Mesa Labs itself to temporarily close one or more manufacturing facilities.

In addition, in 2020 there has been a significant decline in industry conferences worldwide and also a significant decline in our ability to travel to visit current and potential customers, which will adversely affect our ability to create leads and generate business.

Also, in some cases, our customers have suspended operations or limited our ability to come on-site.

Many hospitals and bio-pharma companies will not permit non-COVID-19 related work on-site, including installations and repairs, and we are unable to ship products to various other customers, which will decrease our revenues and organic revenues growth.

Furthermore, there is no assurance we can maintain for an extended period of time our efforts to have employees work at home and operate reduced workforces at facilities.

There is also no assurance that we can mitigate other threats to the business such as developing contingency plans for potential supply interruptions.

Any of the foregoing events or other consequences of the COVID-19 crisis could materially adversely affect our business, result of operations, prospects, and financial condition.

The full extent to which the COVID-19 outbreak will impact our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain it or its impact.

In the future, our business could be adversely affected by other public health problems.

We have identified a material weakness in our internal control over financial reporting that, if not effectively remediated, could result in material misstatements in our financial statements and other negative outcomes.

Under Section 404 of the Sarbanes-Oxley Act of 2002 and rules promulgated by the SEC, companies are required to conduct an annual comprehensive evaluation of their internal control over financial reporting.

Further, each year our independent registered public accounting firm is required to attest to and report on the effectiveness of our internal control over financial reporting.

Management concluded that as of March 31, 2020, our internal control over financial reporting was not effective.

As described in "Part II, Item 9A — Controls and Procedures," we identified and evaluated certain deficiencies in our information technology general controls in the fourth quarter of fiscal year 2020, and have concluded that those deficiencies, collectively, represent 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 our annual or interim financial statements will not be prevented or detected on a timely basis.

As a result of this material weakness, management has concluded that our disclosure controls and procedures were not effective as of March 31, 2020.

The material weakness will not be considered remediated until management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective.

We can provide no assurance that our remediation efforts will be effective or that additional material weaknesses will not arise in the future.

The existence of this material weakness and of any other ineffective controls over our financial reporting could have negative impacts including one or more of the following:

Restatement of previously filed financial statements;

Failure to meet our reporting deadlines (which among other consequences would result in a default of our Convertible Notes due 2020);

Loss of investor confidence;

Restrict our ability to access capital markets;

Require us to expend significant resources to correct the deficiencies;

Negative impact on the trading price of our common stock.

Business and Strategic Risks

The COVID-19 pandemic has adversely impacted and continues to pose risks to our business.

Since December 2019, an outbreak of a novel strain of a virus named SARS-CoV-2, or coronavirus, which causes COVID-19, spread to countries in which we or our customers and suppliers operate, including the United States and caused major disruption throughout the year.

The COVID-19 pandemic continues to evolve, and to date, has led to the implementation of various responses, including government-imposed quarantines, extended business closures, travel restrictions and other public health safety measures, as well as reported adverse impacts on healthcare resources, facilities and providers across the United States and in other countries.

In response to the COVID-19 pandemic and in accordance with direction from state and local government authorities, we have restricted and may continue to restrict access to our facilities to our office-based employees, limited the number of personnel that can be present at our facilities at any one time, and imposed travel restrictions during the year ended March 31, 2021.

In addition, many of our customers and potential customers closed facilities or limited facility hours due to the spread of COVID-19.

Such closures have resulted in, and may continue to result in, our inability to demonstrate and install some of our products, as well as lower demand for certain products. 

Any interruptions in the installation of ordered products could delay our ability to recognize revenues in a particular quarter.

In addition, we must maintain sufficient production capacity in order to meet anticipated customer demand, which carries fixed costs that we may not be able to offset if installations cannot occur, which would adversely affect our operating margins.

In addition, the trading prices for our common stock and other stocks in our peer group have experienced volatility as a result of COVID-19.

As a result, we may face difficulties raising capital through the issuance of our common stock or such issuances may be on unfavorable terms.

We operate on a global basis with offices or operations in North America, Europe, and Asia, and global health crises, such as COVID-19, could result in a widespread economic downturn in the industries in which we and our customers operate.

The extent to which the outbreak impacts our business and the businesses of our customers will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the continued geographic spread of the disease, the duration of the outbreak, and actions taken in the United States and elsewhere to contain the outbreak and treat the disease, such as vaccination rates and efficacy, social distancing and quarantines, business closures and business disruptions.

Some factors from the COVID-19 pandemic that could delay or otherwise adversely affect our operations and performance include:

Disruptions in our supply chain;

Limitations on travel that could interrupt our ability to provide installation or maintenance services at customer sites and could impact our ability to effectively market our products;

Interruption in global shipping affecting the transport of our products and other supplies;

Restrictions on business operations by local, state, or federal governments;

Business disruptions or cybersecurity risks associates with a substantial portion of our workforce working from home for extended periods of time;

The impact of the valuation of our financial assets due to market volatility;

Interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact review, inspection, clearance, and approval timelines.

The COVID-19 pandemic could also have the effect of heightening other risk factors described in this report.

Conditions in the global economy, the markets we serve, and the financial markets may adversely affect our business, financial statements, and access to capital markets.

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adversely impacting market sizes and growth rates.

There can be no assurances that debt or equity capital markets will be available to us in the future.

If growth in the global economy or in any of the markets we serve slows for a significant period, if there is significant deterioration in the global economy or such markets or if improvements in the global economy do not benefit the markets we serve, our business and financial statements could be adversely affected.

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and other countries.

Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience cyclicality.

Our growth could suffer if the markets into which we sell our products and services decline, do not grow as anticipated or experience volatility.

Our growth depends in part on the growth of the markets which we serve, and visibility into our markets is limited (particularly for markets into which we sell through distribution).

Our quarterly sales and profits depend substantially on the volume and timing of orders received during the fiscal quarter, which are difficult to forecast.

Any decline or lower than expected growth in our served markets could diminish demand for our products and services, which would adversely affect our financial statements.

Certain of our businesses operate in industries that may experience periodic, cyclical downturns.

In addition, in certain of our businesses demand depends on customers’ capital spending budgets as well as government funding policies, and matters of public policy and government budget dynamics as well as product and economic cycles can affect the spending decisions of these entities.

Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, marketing or promotional programs, new product introductions, the timing of industry conferences and changes in distributor or customer inventory levels due to distributor or customer management thereof or other factors.

In addition, in certain of our businesses’

demand depends on customers’

capital spending budgets as well as government funding policies, and matters of public policy and government budget dynamics as well as product and economic cycles can affect the spending decisions of these entities.

Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, marketing or promotional programs, new product introductions, the timing of industry conferences, changes in distributor or customer inventory levels, or other factors.

Any of these factors could adversely affect our growth and results of operations in any given period.

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Because of the range of products and services we sell and the variety of markets we serve, we encounter a wide variety of competitors (refer to Item 1.

Business - Competition for additional details), including several that possess both larger sales forces and greater capital resources.

Business for additional details), including several that possess both larger sales forces and greater capital resources.

In order to compete effectively, we must maintain longstanding relationships with major customers, continue to grow our business by establishing relationships with new customers, develop new products and services to maintain and expand our brand recognition and leadership position in various product and service categories, and penetrate new markets, including in developing countries and high growth markets.

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Various changes within the industries we serve may limit future demand for our products and may include the following:

changes in dialysis reimbursements;

mergers within the dialysis provider industry, concentrating our medical meter and solutions sales with a few, large customers;

changes in dialysis reimbursements that our customers may receive;

increase in the adoption of home dialysis systems, as discussed further in 

Changes to dialysis methods may decrease demand for our dialysis products and negatively impact our financial statements.

mergers within the dialysis provider industry, concentrating our medical meter and solutions sales with a few, large customers; 

mergers within other industries we serve, making us more dependent upon fewer, larger customers for our sales;

decreased product demand, driven by changes in our customers’ regulatory environments or standard industry practices;

decreased product demand, driven by changes in our customers’

regulatory environments or standard industry practices;

and   

price competition for key products.

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Many factors, including available resources for capital investments, public policy spending priorities and policies, and product and economic cycles, have a significant effect on the capital spending policies of these entities.

Our growth depends in part on the timely development and commercialization, and customer acceptance of new and enhanced products and services based on technological innovation.

Our growth depends in part on the timely development and commercialization, and customer acceptance of new and enhanced products and services based on technological innovation.

Our growth depends on the acceptance of our products and services in the marketplace, the penetration achieved by the companies which we sell to, and our ability to introduce new and innovative products that meet the needs of the various markets we serve.

We can offer no assurance that we will be able to continue to introduce new and enhanced products, that the products we introduce, or have introduced, will be widely accepted by the marketplace, or that the companies that we contract with to distribute and represent our products will continue to successfully penetrate our various markets.

Our failure to continue to introduce new and enhanced products or gain widespread acceptance of our products and services could adversely affect our financial statements.

If we fail to accurately predict future customer needs and preferences or fail to produce viable technologies, we may invest heavily in research and development of products and services that do not lead to significant revenues, which could adversely affect our profitability.

We can offer no assurance that we will be able to continue to introduce new and enhanced products, that the products we introduce, or have introduced, will be widely accepted by the marketplace, or that our direct sales team or independent distributors will successfully penetrate our various markets.

Our failure to introduce new and enhanced products or gain widespread acceptance of our products and services could adversely affect our financial statements.

If we fail to accurately predict future customer needs and preferences, fail to produce viable technologies, or to protect the intellectual property of such technologies, we may invest heavily in research and development of products and services that do not lead to significant revenues, which could adversely affect our profitability.

Even if we successfully innovate and develop new and enhanced products and services, we may incur substantial costs in doing so, and our profitability may suffer.

Competitors may also develop after-market services and parts for our products which attract customers and adversely affect our return on investment for new products.

Adverse changes in our relationships with, or the financial condition, performance, purchasing patterns or inventory levels of, key distributors and other channel partners could adversely affect our financial statements.

We sell a significant amount of products to key distributors and other channel partners that have valuable relationships with customers and end-users.

Some of these distributors and other partners also sell our competitors’ products or compete with us directly, and if they favor competing products for any reason they may fail to market our products effectively.

Competitors may also develop after-market services and parts for our products which attract customers and adversely affect our return on investment for new products. 

In addition, we face risks in connection with the retirement of old products and customer migration to new products.

Adverse changes in our relationships with, or the financial condition, performance, purchasing patterns or inventory levels of, distributors and other channel partners could adversely affect our financial statements.

We sell a significant number of products to distributors and other channel partners that have valuable relationships with customers and end-users.

Some of these distributors and other partners also sell our competitors’

products or compete with us directly, and if they favor competing products for any reason, they may fail to market our products effectively.

Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, could adversely affect our business and financial statements.

The levels of inventory maintained by our distributors and other channel partners, and changes in those levels, can also negatively impact our results of operations in any given period.

In addition, the consolidation of distributors and customers in certain of our served industries can adversely impact our business and financial statements.

In addition, the consolidation of distributors could adversely impact our business and financial statements. 

Our international operations subject us to a wide range of risks.

Our operations and sales outside of the United States have increased as a result of our strategic acquisitions and the continued expansion of our commercial organization.

Risks related to these increased foreign operations include:

fluctuations in foreign currency exchange rates, which may affect the costs incurred in international operations and could harm our results of operations and financial condition;

interruption in the transportation of materials to us and finished goods to our customers;

differences in terms of sale, including longer payment terms than are typical in the United States;

local product preferences and product requirements;

trade protection measures, embargoes and import or export restrictions and requirements;

unexpected changes in laws or regulatory requirements, including changes in tax laws;

capital controls and limitations on ownership and on repatriation of earnings and cash;

changes in general economic and political conditions in countries where we operate, particularly as a result of ongoing economic instability within foreign jurisdictions;

difficulty in staffing and managing widespread operations;

differing labor or employment regulations;

difficulties in implementing restructuring actions on a timely or comprehensive basis;

differing protection of intellectual property;

greater uncertainty, risk, expense and delay in commercializing products in certain foreign jurisdictions, including with respect to product and other regulatory approvals.

International business risks have in the past and may in the future negatively affect our business and financial statements.

A deterioration in diplomatic relations between the United States and any country where we conduct business could adversely affect our future operations and lead to a decline in profitability.

Changes in U.S.

policy regarding international trade, including import and export regulation and international trade agreements, could also negatively impact our business.

Tariffs imposed by the U.S.

on a broad range of imports or trade measures imposed by other countries could result in an increase in supply chain costs that we may not be able to offset or that could otherwise adversely impact our results of operations.  

Our international operations are governed by the U.S.

Foreign Corrupt Practices Act and similar anti-corruption laws outside the U.S.

Global enforcement of anti-corruption laws has increased in recent years, with more enforcement proceedings by U.S.

and foreign governmental agencies and the imposition of significant fines and penalties.

Our international operations, which often involve customer relationships with foreign governments, create the risk that there may be unauthorized payments or offers of payments made by employees, consultants, or distributors.

Any alleged or actual violations of these laws may subject us to government investigations and significant criminal or civil sanctions and other liabilities, and negatively affect our reputation.

Uncertainties remain regarding the consequences of the UK ceasing to be a member state of the EU on January 31, 2020 (commonly referred to as “Brexit”), including the application of the terms of the trade and cooperation agreement with the EU, the impact of new or different laws and regulations as the UK determines which EU laws to replace or replicate, and trade and tax impacts as the UK negotiates its own tax and trade treaties with countries around the world.

The impacts from Brexit could add time and expense to the conduct of our business, delay regulatory approval of products, adversely impact the manufacturing or movement of products, adversely impact customer demand, and otherwise adversely affect our business and financial statements both inside and outside the UK. 

Operational Risks

A significant disruption in, or breach in security of, our information technology systems or data could adversely affect our business, reputation and financial statements.

We rely on information technology systems, some of which are provided or managed by third-parties, to process, transmit and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers, and other business partners), and to manage or support a variety of critical business processes and activities (such as receiving and fulfilling orders, billing, collecting and making payments, shipping products, providing services and support to customers and fulfilling contractual obligations).

In addition, some products or software we sell to customers may connect to our systems for maintenance or other purposes.

In addition, some products or software we sell to customers may connect to our systems for maintenance or other purposes, and we sell software as a service and cloud-based platforms.

These systems, products and services (including those we acquire through business acquisitions) may be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, ransomware, human error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate.

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Security breaches of systems provided or enabled by us, regardless of whether the breach is attributable to a vulnerability in our products or services, could result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers, patients or suppliers.

Like most multinational corporations, our information technology systems have been subject to computer viruses, malicious codes, unauthorized access and other cyber-attacks and we expect the sophistication and frequency of such attacks to continue to increase.

Our information technology systems have been subject to computer viruses, malicious codes, unauthorized access and other cyber-attacks and we expect the sophistication and frequency of such attacks to continue to increase.

Unauthorized tampering, adulteration or interference with our products may also adversely affect product functionality and result in loss of data, risk to patient safety and product recalls or field actions.

Any of the attacks, breaches or other disruptions or damage described above could interrupt our operations or the operations of our customers and partners, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer, patient, business partner and employee relationships and our reputation or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased costs for security and remediation, each of which could adversely affect our business, reputation and financial statements.

Any attacks, breaches or other disruptions or damage could interrupt our operations or the operations of our customers and partners, delay production and shipments, result in theft of our and our customers’

intellectual property and trade secrets, damage customer, business partner, and employee relationships, and our reputation or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased costs for security and remediation, each of which could adversely affect our business, reputation and financial statements.

Further, a significant number of our employees began working remotely in response to the COVID-19 pandemic and related governmental and community responses, which exposes us to greater cybersecurity risks. Any inability to maintain reliable information technology systems and appropriate controls with respect to global data privacy and security requirements and prevent data breaches can result in adverse regulatory consequences, business consequences and litigation.

Violation of data privacy laws could adversely affect our business, reputation and financial statements.

If we are unable to maintain reliable information technology systems and appropriate controls with respect to global data privacy and security requirements and prevent data breaches, we may suffer adverse regulatory consequences, business consequences and litigation.

As a multinational organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.

As a multinational organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.

The EU General Data Protection Regulation imposes significantly stricter requirements in how we collect and process personal data, including, among other things, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances and significant fines for non-compliance.

Government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements.

In addition, compliance with the varying data privacy regulations around the world may require significant expenditures, and may require changes in our products or business models that increase competition or reduce revenues.

In addition, compliance with the varying data privacy regulations around the world may require significant expenditures and may require changes in our products or business models that increase competition or reduce revenues.

We face numerous manufacturing and supply chain risks.

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Any or all of these problems could result in the loss of customers, provide an opportunity for competing products to gain market acceptance, and otherwise adversely affect our financial condition.

Changes to dialysis methods may decrease demand for our dialysis products and negatively impact our financial statements.

In July 2019, an executive order was signed by the President of the United States that is intended to change the way that kidney care is delivered to patients and reimbursed through government-sponsored medical programs.

The executive order’s objectives included encouraging dialysis patients to receive treatments through in-home care rather than at a dialysis clinic and also reducing the number of people developing kidney failure.

The extent of the impact of the executive order, as well as the timing of the impact on procedures and the market in general is currently unknown. Currently, our Dialyguard product line accounts for approximately one-third of the revenues and gross margin associated with our Instruments division.

The majority of the revenues in our Dialyguard business are associated with products that are used in dialysis clinics, while a smaller portion of our sales relate to in home care.

Another recent development is dialysis machines that feature built-in dialysis calibration functionalities.

Demand for our dialysis products may be adversely affected by these or other developments in the dialysis industry.

We may be unable to efficiently manage our growth as a larger and more geographically diverse organization.

Our strategic acquisitions and the continued organic expansion of our commercial sales operations have increased the scope and complexity of our business.

As a result, we will face challenges inherent in efficiently managing a more complex business with an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs.

Our inability to manage successfully a substantially larger and geographically more diverse (including from a cultural perspective) organization could materially adversely affect our operating results and, as a result, the market price of our common stock.

If we suffer loss to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our operations could be seriously harmed.

If any of these facilities, supply chains or systems were to experience a catastrophic loss, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation and result in legal exposure and large repair or replacement expenses.

The third-party insurance coverage that we maintain will vary from time to time in both type and amount depending on cost, availability and our decisions regarding risk retention, and may be unavailable or insufficient to protect us against such losses.

Our financial results are subject to fluctuations in the cost and availability of commodities that we use in our operations.

As discussed in “Item 1.

Business—Materials,” our manufacturing and other operations employ a wide variety of components, raw materials and other commodities, including metallic-based components, electronic components, chemicals, plastics and other petroleum-based products.

Prices for and availability of these components, raw materials and other commodities have fluctuated significantly in the past.

Our facilities, supply chains, distribution systems and information technology systems are subject to catastrophic loss due to fire, flood, earthquake, hurricane, pandemics and epidemics and other public health crises, war, terrorism or other natural or man-made disasters. If any of these facilities, supply chains or systems were to experience a catastrophic loss, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation and result in legal exposure and large repair or replacement expenses.

Our insurance coverage with respect to natural disaster is limited and is subject to deductible and coverage limits and may be unavailable or insufficient to protect us against such losses.

Our financial results are subject to fluctuations in the cost and availability of components and commodities that we use in our operations.

As discussed in “Item 1.

Business—Materials,”

our manufacturing and other operations employ a wide variety of components, and raw materials and other commodities, including metallic-based components, electronic components, chemicals, and plastics and other petroleum-based products.

Prices for and availability of these components, and raw materials and other commodities have fluctuated significantly in the past.

Any sustained interruption in the supply of these items could adversely affect our business.

In addition, due to the highly competitive nature of the industries that we serve, the cost-containment efforts of our customers and the terms of certain contracts we are party to, if commodity prices rise we may be unable to pass along cost increases through higher prices.

If we are unable to fully recover higher commodity costs through price increases or offset these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or offset these costs, our margins and profitability could decline and our financial statements could be adversely affected.

In addition, due to the highly competitive nature of the industries that we serve, the cost-containment efforts of our customers and the terms of certain contracts we are party to, if components and commodity prices rise, we may be unable to pass along cost increases through higher prices.

If we are unable to fully recover higher costs through price increases or offset these increases through cost reductions, or if there is a time delay between the increase in costs and our ability to recover or offset these costs, our margins and profitability could decline, and our financial statements could be adversely affected.

Significant developments or uncertainties stemming from the U.S.

administration, including changes in U.S.

trade policies, tariffs and the reaction of other countries thereto could have an adverse effect on our business.

trade policies, tariffs and the reaction of other countries thereto could have an adverse effect on our business.

Changes, potential changes or uncertainties in U.S.

social, political, regulatory and economic conditions or laws and policies governing foreign trade, manufacturing, and development and investment in the territories and countries where we or our customers operate, or governing the health care system, can adversely affect our business and financial statements.

For example, the U.S.

administration has increased tariffs on certain goods imported into the United States, raised the possibility of imposing significant, additional tariff increases and called for substantial changes to trade agreements.

In particular, trade tensions between the United States and China have escalated and each country has imposed significant, additional tariffs on a wide range of goods imported from the other country.

China accounted for approximately 4% of our sales in fiscal year 2020.

For example, trade tensions between the United States and China remain high, and each country has continued to impose significant tariffs on a wide range of goods imported from the other country.

China accounted for approximately 5% of our sales during the year ended March 31, 2021.

These factors have adversely affected, and in the future could further adversely affect, our business and financial statements.

The health care industry and related industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs, which could adversely affect our financial statements.

The health care industry and related industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs. Many of the end-users to whom our customers supply products rely on government funding of and reimbursement for health care products and services and research activities.

Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “PPACA”), health care austerity measures in other countries and other potential health care reform changes and government austerity measures have reduced and may further reduce the amount of government funding or reimbursement available to customers or end-users of our products and services and/or the volume of medical procedures using our products and services.

Global economic uncertainty or deterioration can also adversely impact government funding and reimbursement.

These changes as well as other impacts from market demand, government regulations, third-party coverage and reimbursement policies and societal pressures have started changing the way healthcare is delivered, reimbursed and funded and may cause participants in the health care industry and related industries that we serve to purchase fewer of our products and services, reduce the prices they are willing to pay for our products or services, reduce the amounts of reimbursement and funding available for our products and services from governmental agencies or third-party payors, affect the acceptance rate of new technologies and products and increase our compliance and other costs.

All of the factors described above could adversely affect our business and financial statements.

Defects or quality issues associated with our products could adversely affect the results of our operations.

Manufacturing or design defects or “bugs”

in, unanticipated use of, safety or quality issues (or the perception of such issues) with respect to, standard use of, “off label”

use of, or inadequate disclosure of risks relating to the use of products and services that we make or sell (including items that we source from third-parties or that we provide to third parties who sell on our behalf) can lead to property damage, loss of profits or other liability.

These events could lead to recalls or safety alerts, result in the removal of a product or service from the market and result in product liability or similar claims being brought against us.

Any of the above can result in the discontinuation of marketing of such products in one or more countries and give rise to claims for damages from persons who believe they have been injured as a result of product issues, including claims by individuals or groups seeking to represent a class.

The manufacture of many of our products is a highly exacting and complex process, and if we directly or indirectly encounter problems manufacturing products, our reputation, business and financial statements could suffer.

The manufacture of many of our products is a highly exacting and complex process, due in part to strict regulatory requirements.

Problems may arise during manufacturing for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, natural disasters and environmental factors, and if not discovered before the product is released to market could result in recalls and product liability exposure.

Because of the time required to approve and license certain regulated manufacturing facilities and other stringent regulations of the FDA and similar agencies regarding the manufacture of certain of our products, an alternative manufacturer may not be available on a timely basis to replace such production capacity.

Any of these manufacturing problems could result in significant costs, liability and lost revenues, loss of market share as well as negative publicity and damage to our reputation that could reduce demand for our products.

We need to attract and retain key employees to be competitive.

Our ability to compete effectively depends upon our ability to attract and retain executives and other key employees.

Competition for experienced employees, particularly for persons with specialized skills, can be intense.

Our ability to recruit such talent will depend on a number of factors, including compensation and benefits, work location and work environment.

If we cannot effectively recruit and retain qualified executives and employees, our business could be adversely affected.

Acquisitions and Divestitures Risks

Any inability to consummate acquisitions at our historical rate and at appropriate prices could negatively impact our growth rate and stock price.

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In addition, competition for acquisitions may result in higher purchase prices.

Changes in accounting or regulatory requirements, or instability in the credit markets, or global crisis that prevents travelling or other activities necessary for acquisitions (as we’ve seen in 2020 with the COVID-19 crisis), could also adversely impact our ability to consummate acquisitions.

Changes in accounting or regulatory requirements, or instability in the credit markets, or global crisis that prevents travelling or other activities necessary for acquisitions could also adversely impact our ability to consummate acquisitions.

Our acquisition of businesses could negatively impact our financial statements.

As an important part of our business strategy, we acquire businesses, some of which may be material.

Please see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional details.

Please see “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations”

for additional details.

These acquisitions involve a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges, including the following, any of which could adversely affect our business and our financial statements:

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we may incur or assume significant debt in connection with our acquisitions which could cause a deterioration of our credit rating, result in increased borrowing costs and interest expense and diminish our future access to the capital markets;

acquisitions could cause our results of operations to differ from our own or the investment community’s expectations in any given period, or over the long-term;

pre-closing and post-closing acquisition-related earnings charges could adversely impact our results of operations in any given period, and the impact may be substantially different from period to period;

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we may be unable to achieve cost savings or other synergies anticipated in connection with an acquisition;

we may assume by acquisition unknown liabilities, known contingent liabilities that become realized, known liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions resulting from the acquired company’s activities.

The realization of any of these liabilities or deficiencies may increase our expenses, adversely affect our financial position or cause us to fail to meet our public financial reporting obligations;

in connection with acquisitions, we often enter into post-closing financial arrangements such as purchase price adjustments, earn-out obligations and indemnification obligations, which may have unpredictable financial results;

as a result of our acquisitions, we have recorded significant goodwill and intangible assets on our consolidated balance sheet.

as a result of our acquisitions, we have recorded significant goodwill and intangible assets on our balance sheets.

If we are not able to realize the value of these assets, we may be required to incur charges relating to the impairment of these assets, which could materially impact our financial statements.

The GPT Acquisition presents business, financial, and reputational risks.

On October 31, 2019, we completed the GPT Acquisition.

The GPT Acquisition is our largest acquisition to date based on purchase price, expands our business into a new business line, and involves a number of financial, accounting, managerial, operational, legal, compliance and other risks and challenges.

The GPT Acquisition entails important risks, including the following:

the risk that the GPT business could under-perform relative to our expectations and the price that we pay or not perform in accordance with our anticipated timetable, or we could fail to operate such business profitably;

the risk that we are unable to successfully integrate GPT operations and employees and realize its benefits, including the potential impact of the consummation of the proposed transaction on relationships, including with employees, suppliers, clients and competitors;

changes in general economic, business and political conditions which affect the GPT business, including changes in the financial markets;

and significant competition in the marketplace.

Because a significant portion of GPT’s total assets are represented by goodwill and definite-lived intangible assets, we could be required to write off some or all of this goodwill and other intangibles, which may adversely affect our financial condition and results of operations.

We accounted for the GPT Acquisition consummated on October 31, 2019 as a purchase of a business under U.S.

GAAP, using the acquisition method of accounting.

A portion of the purchase price for this business is allocated to identifiable tangible and intangible assets and assumed liabilities based on estimated fair values at the date of acquisition.

Goodwill is measured indirectly as the excess of the consideration transferred compared to the value of other identifiable net assets.

The purchase price allocation resulted in an adjusted preliminary goodwill value of $77.1 million and a preliminary value of $99.9 million related to other intangible assets.

Refer to Note 4.

“Significant Transactions” within Item 8.

Financial Statements and Supplementary Data of this Annual Report on Form 10-K for additional information regarding the preliminary purchase price allocation.

When we perform impairment tests, it is possible that the carrying value of goodwill or other intangible assets could exceed their implied fair value and therefore would require adjustment.

Such adjustment would result in a charge to operating income in that period.

Once adjusted, there can be no assurance that there will not be further adjustments for impairment in future periods.

The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.

If intangible assets and goodwill that we recorded in connection with our acquisitions become impaired, we may have to take significant charges against earnings.

In connection with the accounting for our completed acquisitions, we recorded a significant amount of intangible assets, including developed technology and customer relationships relating to the acquired product lines, and goodwill.

Under accounting principles generally accepted in the United States (“GAAP”), we must assess, at least annually and potentially more frequently, whether the value of intangible assets and goodwill has been impaired.

Intangible assets and goodwill will be assessed for impairment in the event of an impairment indicator.

Any reduction or impairment of the value of intangible assets and goodwill will result in a charge against earnings, which could materially adversely affect our results of operations and shareholders’

equity in future periods.

The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities , or we may have acquisition agreements with no indemnification protection at all.

Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it.

In most of these agreements, however, the liability of the former owners is limited, and certain former owners may be unable to meet their indemnification responsibilities.

We cannot guarantee that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that could adversely impact our financial statements.

We cannot guarantee that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that could adversely impact our financial statements. In addition, we may enter into acquisition agreements that have no indemnification protection at all.

Future strategic transactions or acquisitions may require us to seek additional financing, which we may not be able to secure on favorable terms, if at all.

We actively evaluate various strategic transactions on an ongoing basis, and in order to complete such transactions, we may need to seek additional financing.

Should we need to do so, we may not be able to secure such financing, or obtain such financing on favorable terms.

In addition, future acquisitions may require the issuance or sale of additional equity or debt securities, which may result in additional dilution to our stockholders.

Divestitures or other dispositions could negatively impact our business.

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Transactions such as these pose risks and challenges that could negatively impact our business and our results of operations.

For example, we were unable to sell our cold chain packaging business on satisfactory terms within our anticipated timeframe, and disposed of the business by running off operations, which was both a distraction to management, and also potentially not as financially favorable as selling the business.

In addition, other divestitures or other dispositions may dilute our earnings per share, have other adverse financial, tax, and accounting impacts, and disputes may arise with buyers.

For example, we were unable to sell our cold chain packaging business on satisfactory terms within our anticipated timeframe, and disposed of the business by running off operations, which was both a distraction to management, and also potentially not as financially favorable as selling the business. 

In addition, other divestitures or other dispositions may dilute our earnings per share, have other adverse financial, tax, and accounting impacts, and disputes may arise with buyers. 

The contingent consideration associated with certain of our acquisitions may negatively impact our available cash and financial statements.

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If we are required to pay more than the amount initially recorded, the difference is recorded as expense in our consolidated statements of operations and as an adjustment to cash flows from operating activities, which could materially impact our financial statements.

If we do not or cannot adequately protect our intellectual property, or if third parties infringe our intellectual property rights, we may suffer competitive injury or expend significant resources enforcing our rights.

Legal, Regulatory, Compliance, and Reputational Risks

We are subject to lawsuits and regulatory proceedings.

We have been a defendant in a number of lawsuits, and in the future are subject to the possibility of a variety of litigation and regulatory proceedings, including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, product liability, marketing matters, insurance coverage, competition and sales and trading practices, environmental matters, product retirement, personal injury, and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement.

We may also become subject to lawsuits as a result of past or future acquisitions or as a result of liabilities retained from, or representations, warranties or indemnities provided in connection with, divested businesses.

Any of these lawsuits may include claims for compensatory damages, punitive and consequential damages or injunctive relief.

The defense of these lawsuits may divert our management’s attention, we may incur significant expenses in defending these lawsuits, and we may be required to pay damage awards or settlements or become subject to equitable remedies that could adversely affect our operations and financial statements.

Moreover, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against such losses.

In addition, developments in proceedings in any given period may require us to adjust the loss contingency estimates that we have recorded in our financial statements, record estimates for liabilities or assets previously not susceptible of reasonable estimates or pay cash settlements or judgments.

Any of these developments could adversely affect our financial statements in any given period.

We cannot make assurances that our liabilities in connection with litigation and other legal regulatory proceedings will not exceed our estimates or adversely affect our financial statements and business.

Please see Note 15. “Commitments and Contingencies”

of Notes to Consolidated Financial Statements contained in Item 8.

Financial Statements and Supplementary Data for additional discussion.

Our reputation, ability to do business and prepare financial statements may be impaired by improper conduct by any of our employees, agents or business partners.

We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by employees, agents or business partners of ours (or of businesses we acquire or partner with) that would violate U.S.

and/or non-U.S.

laws, including the laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, export and import compliance, money laundering and data privacy. 

If we do not or cannot adequately protect our intellectual property, if third parties infringe our intellectual property rights, or if we or our customers are alleged to infringe upon others ’

intellectual property rights, we may suffer competitive injury or expend significant resources enforcing or defending our rights.

We own patents, trademarks, copyrights, trade secrets and other intellectual property and licenses to intellectual property owned by others, which in the aggregate are important to our business.

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There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights.

Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property, detect or prevent circumvention or unauthorized use of such property, and the cost of enforcing our intellectual property rights, could adversely impact our competitive position and results of operations.

Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents or business partners.

and/or non-U.S.

In particular, the U.S.

Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business.

Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the United States and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause us to incur significant legal and investigatory fees.

In addition, the government may seek to hold us liable for violations committed by companies that we acquire.

We also rely on our suppliers to adhere to our supplier standards of conduct and material violations of such standards of conduct could occur that could have a material effect on our business, reputation and financial statements.

Our businesses are subject to extensive regulation;

failure to comply with regulations could adversely affect our financial statements and our business, including our reputation.

In addition, we or our customers may be alleged to infringe upon the intellectual property of third parties.

Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property, detect or prevent circumvention or unauthorized use of such property, and the cost of enforcing our intellectual property rights or defending against any allegation of infringement, could adversely impact our competitive position and results of operations.

We are subject to extensive regulation.

The process of obtaining and maintaining required regulatory approvals is lengthy, expensive and uncertain.

We can offer no assurance that delays will not occur in the future, which could have a significant adverse effect on our ability to introduce new products on a timely basis.

Regulatory agencies periodically inspect our manufacturing facilities to ascertain compliance with “good manufacturing practices” and can subject approved products to additional testing and surveillance programs.

Regulatory agencies periodically inspect our manufacturing facilities to ascertain compliance with “good manufacturing practices”

and can subject approved products to additional testing and surveillance programs.

Failure to comply with applicable regulatory requirements can, among other things, result in fines, suspension of regulatory approvals, product recalls, operating restrictions and criminal penalties.

If we fail to comply with regulatory requirements it could have an adverse effect on our results of operations and financial condition.

The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions.

If we fail to comply with regulatory requirements, it could have an adverse effect on our results of operations and financial condition. The regulations we are subject to have tended to become more stringent over time and may be inconsistent across jurisdictions.

We, our representatives and the industries in which we operate may at times be under review and/or investigation by regulatory authorities.

Failure to comply (or any alleged or perceived failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal, monetary and nonmonetary penalties, and any such failure or alleged failure (or becoming subject to a regulatory enforcement investigation) could also damage our reputation, disrupt our business, limit our ability to manufacture, import, export and sell products and services, result in loss of customers and disbarment from selling to certain federal agencies and cause us to incur significant legal and investigatory fees.

Compliance with these and other regulations may also affect our returns on investment, require us to incur significant expenses or modify our business model or impair our flexibility in modifying product, marketing, pricing or other strategies for growing our business.

Our products and operations are also often subject to the rules of industrial standards bodies such as the International Standards Organization, and failure to comply with these rules could result in withdrawal of certifications needed to sell our products and services and otherwise adversely impact our business and financial statements.

Certain of our businesses are subject to extensive regulation by the U.S.

Food and Drug Administration (“FDA”) and by comparable agencies of other countries.

Failure to comply with those regulations would likely adversely affect our reputation and our financial statements.

Certain of our products are medical devices and other products are subject to regulation by the U.S.

FDA, by other federal and state governmental agencies, by comparable agencies of other countries and regions and by regulations governing radioactive or other hazardous materials.

FDA, by other federal and state governmental agencies, by comparable agencies of other countries and regions.

We cannot guarantee that we will be able to obtain regulatory clearance (such as 510(k) clearance) or approvals for our new products or modifications to (or additional indications or uses of) existing products within our anticipated timeframe or at all, and if we do obtain such clearance or approval, it may be time-consuming, costly and subject to restrictions.

Our ability to obtain such regulatory clearances or approvals will depend on many factors and the process for obtaining such clearances or approvals could change over time and may require the withdrawal of products from the market until such clearances are obtained.

The global regulatory environment has become increasingly stringent and unpredictable.

Several countries that did not have regulatory requirements for medical devices have established such requirements in recent years, and other countries have expanded, or plan to expand, their existing regulations.

For example, the EU has adopted the EU Medical Device Regulation (the “EU MDR”) which imposes stricter requirements for the marketing and sale of medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance.

Manufacturers of currently approved medical devices will have until May 2020 to meet the requirements of the EU MDR.

Failure to meet the requirements could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.

For example, the EU Medical Device Regulation (the “EU MDR”) imposes strict requirements for the marketing and sale of medical devices, including in the area of clinical evaluation requirements, quality systems and post-market surveillance.

Failure to meet the requirements could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.

Ensuring that our internal operations and business arrangements with third parties comply with applicable laws and regulations involves substantial costs.

It is also possible that government authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law.

Noncompliance with the laws and regulations referenced above can result in, among other things, fines, expenses, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, refusal of the government to grant 510(k) clearance of devices, withdrawal of marketing approvals, criminal prosecutions and other adverse effects referenced under “Our businesses are subject to extensive regulation;

failure to comply with those regulations could adversely affect our financial statements and our business, including our reputation.” Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources.

Noncompliance with applicable laws and regulations can result in, among other things, fines, expenses, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, failure to receive 510(k) clearance of devices, withdrawal of marketing approvals, reputation damage, business disruption, in loss of customers and disbarment from selling to certain federal agencies, criminal prosecutions and other adverse effects.

Further, defending against any such actions can be costly and time-consuming and may require significant personnel resources.

Therefore, even if we are successful in defending against any such actions brought against us, our business may be impaired.

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Once a medical device is permitted to be legally marketed in the United States pursuant to a 510(k) clearance, a manufacturer may be required to notify the FDA of certain modifications to the device.

Manufacturers determine in the first instance whether a change to a product requires a new 510(k) clearance or premarket submission, but the FDA may review any manufacturer’s decision.

The FDA may not agree with our decisions regarding whether new clearances are necessary.

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If the FDA disagrees with our determinations and requires us to submit new 510(k) notifications, we may be required to cease marketing or to recall the modified product until we obtain clearance, and we may be subject to significant regulatory fines or penalties.

The health care industry and related industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs.

Many of the end-users to whom our customers supply products rely on government funding of and reimbursement for health care products and services and research activities.

Global economic uncertainty or deterioration can also adversely impact government funding and reimbursement.

All of the factors described above could adversely affect our business and financial statements.

Changes in governmental regulations may reduce demand for our products or services or increase our expenses.

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In addition, regulatory deadlines may result in substantially different levels of demand for our products and services from period-to-period.

Product liability suits against us, product defects or unanticipated use or inadequate disclosure with respect to our products or services could adversely affect our business, reputation and our financial statements.

Manufacturing or design defects in, unanticipated use of, safety or quality issues (or the perception of such issues) with respect to, or inadequate disclosure of risks relating to the use of products and services that we make or sell (including items that we source from third parties) can lead to personal injury, property damage or other liability.

These events could lead to recalls or safety alerts, result in the removal of a product or service from the market and result in product liability or similar claims being brought against us.

Recalls, removals and product liability and similar claims (regardless of their validity or ultimate outcome) can result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products and services. Our product liability insurance may not adequately cover our costs arising from defects in our products or otherwise.

We are subject to laws and regulations governing government contracts.

We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in revenues associated with these customers.

We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government.

We are also subject to investigation for compliance with the regulations governing government contracts.

A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.

Financial and Tax Risks

We may be required to recognize additional impairment charges for our goodwill and other intangible assets.

As of March 31, 2020, the net carrying value of our goodwill and other intangible assets totaled $261.4 million, after recording a $0.3 million charge to impair certain goodwill and long-lived assets related to our Cold Chain Packaging Division during the third quarter of our year ended March 31, 2020 as we disposed of the business and ceased operations.

In accordance with generally accepted accounting principles, we periodically assess these assets for all segments to determine if they are impaired.

As of March 31, 2021, the net carrying value of our goodwill and other intangible assets totaled $272.6 million. In accordance with generally accepted accounting principles, we periodically assess our assets to determine if they are impaired.

Significant negative industry or economic trends, disruptions to our business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of our assets, changes in the structure of our business, divestitures, market capitalization declines, or increases in associated discount rates may impair our goodwill and other intangible assets.

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dollar could result in unfavorable translation effects.

In addition, certain of our businesses may invoice customers in a currency other than the business’ functional currency, and movements in the invoiced currency relative to the functional currency could also result in unfavorable translation effects.

In addition, certain of our businesses may invoice customers in a currency other than the business’

functional currency, and movements in the invoiced currency relative to the functional currency could also result in unfavorable translation effects.

We also face exchange rate risk from our investments in subsidiaries owned and operated in foreign countries.

We do not enter into hedging arrangements to mitigate any foreign currency exposure.

These events could lead to recalls or safety alerts, result in the removal of a product or service from the market and result in product liability or similar claims being brought against us.

Recalls, removals and product liability and similar claims (regardless of their validity or ultimate outcome) can results in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products and services.

Defects and unanticipated use or inadequate disclosure with respect to our products or services (including software), or allegations thereof, could adversely affect our business, reputation and financial statements.

Manufacturing or design defects or “bugs” in, unanticipated use of, safety or quality issues (or the perception of such issues) with respect to, “off label” use of, or inadequate disclosure of risks relating to the use of products and services that we make or sell (including items that we source from third-parties) can lead to property damage, loss of profits or other liability.

These events could lead to recalls or safety alerts, result in the removal of a product or service from the market and result in product liability or similar claims being brought against us.

The manufacture of many of our products is a highly exacting and complex process, due in part to strict regulatory requirements.

Any of these manufacturing problems could result in significant costs, liability and lost revenue, loss of market share as well as negative publicity and damage to our reputation that could reduce demand for our products.

We are subject to laws and regulations governing government contracts.

We are also subject to investigation for compliance with the regulations governing government contracts.

A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.

The vote by the United Kingdom (U.K.) to leave the European Union (EU) and implementation of Brexit could adversely affect us .

As of January 31, 2020, the U.K.

is no longer a member of the EU (Brexit).

This withdrawal has caused and may continue to cause political and economic uncertainty, including significant volatility in global stock markets and currency exchange rate fluctuations.

As a result, we face risks and uncertainty regarding the form and consequences of the implementation of Brexit, including the possibility that the U.K.

and the EU could fail to come to an agreement on the terms of the U.K.

and the EU are currently in negotiations on the terms.

Finalized terms are due on December 31, 2020.

During this 11-month period, the U.K.

will continue to follow all EU rules, and their trading relationship will remain the same.

If no agreement is reached by December 31, 2020, the UK’s membership in the EU could terminate under a so-called “hard Brexit” which could mean increased costs from re-imposition of tariffs on trade between the UK and EU, shipping delays because of the need for customs inspections and procedures, and temporary shortages of certain goods.

In addition, trade and investment between the UK, the EU, the United States and other countries will be impacted by the fact that the UK currently operates under the EU’s tax treaties.

The UK will need to negotiate its own tax and trade treaties with countries all over the world, which could take years to complete.

Even if the UK and EU manager reach agreement, the terms are currently unknown.

We could become subject to export tariffs and regulatory restrictions that could increase the costs and time related to doing business in Europe.

Any of these factors or other unanticipated results of Brexit could adversely affect customer demand, our relationships with customers and suppliers and our business and financial statements.

For the year ended March 31, 2020, about 3% of our sales were derived from customers located in the UK, however, the impact of Brexit could also impact our sales and operations outside the UK.

Changes in accounting standards could affect our reported financial results.

New accounting standards or pronouncements that may become applicable to our Company from time to time, or changes in the interpretation of existing standards and pronouncements, could have a significant effect on our reported results of operations for the affected periods.

Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability.

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and in various non-U.S.

jurisdictions.

The amount of income taxes we pay is subject to ongoing audits by U.S.

jurisdictions. The amount of income taxes we pay is subject to ongoing audits by U.S.

federal, state and local tax authorities and by non-U.S.

tax authorities, such as those audits described elsewhere in this report.

If audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected.

tax authorities, such as those audits described elsewhere in this report. 

Any further significant changes to the tax system in the United States or in other jurisdictions (including changes in the taxation of international income as further described below) could adversely affect our financial statements.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent fraud.

If we identify a material weakness in our internal control over financial reporting, our ability to meet our reporting obligations and the trading price of our stock could be negatively affected.

Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud.

Any inability to provide reliable financial reports or prevent fraud could harm our business.

We regularly review and update our internal controls, disclosure controls and procedures, and corporate governance policies.

In addition, we are required under the Sarbanes-Oxley Act of 2002 to report annually on our internal control over financial reporting.

Any system of internal controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.

If we, or our independent registered public accounting firm, determine that our internal control over financial reporting is not effective, discover areas that need improvement in the future or discover a material weakness, these shortcomings could have an adverse effect on our business and financial results, and the price of our common stock could be negatively affected.

Accordingly, a material weakness increases the risk that the financial information we report contains material errors.

If we cannot conclude that we have effective internal control over our financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified opinion regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could lead to a decline in our stock price.

Failure to comply with reporting requirements could also subject us to sanctions and/or investigations by the SEC, The Nasdaq Stock Market or other regulatory authorities.

We have previously implemented several significant ERP modules and expect to implement a new Human Resources Information System in the future.

The implementation of these systems represent a change in our internal control over financial reporting.

Although we continue to monitor and assess our internal controls environment as changes are made and new modules are implemented, and we have taken additional steps to modify and enhance the design and effectiveness of our internal control over financial reporting, there is a risk that deficiencies may occur that could aggregate to a material weakness.

If we fail to remedy any deficiencies or maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties or shareholder litigation.

In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our operating results or financial condition.

Our ability to use net operating losses and tax credit carryforwards and certain built-in losses to reduce future tax payments is limited by provisions of the Internal Revenue Code, and it is possible that certain transactions or a combination of certain transactions may result in material additional limitations on our ability to use our net operating loss and tax credit carryforwards.

Section 382 and 383 of the Internal Revenue Code of 1986, as amended, contain rules that limit the ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit carryforwards and certain built-in losses recognized in years after the ownership change.

These rules generally operate by focusing on ownership changes involving stockholders owning directly or indirectly 5% or more of the stock of a company and any change in ownership arising from a new issuance of stock by the company.

Generally, if an ownership change occurs, the yearly taxable income limitation on the use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term, tax-exempt rate and the value of the company’s stock immediately before the ownership change.

We may be unable to offset our taxable income with losses, or our tax liability with credits, before such losses and credits expire and therefore would incur larger federal income tax liability.

While our most recent Section 382 analysis did not show any current exposure, future transactions or combinations of future transactions may result in a change in control under Section 382.

Federal net operating losses generated after December 31, 2017 are not subject to expiration and generally may not be carried back to prior taxable years except that, under the Coronavirus Aid, Relief, and Economic Security Act, net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years.

Additionally, for taxable years beginning after March 31, 2021, the deductibility of such deferral net operating losses is limited to 80% of our taxable income in any future taxable year.

Changes in tax law relating to multinational corporations could adversely affect our tax position.

Congress, government agencies in non-U.S.

jurisdictions where we and our affiliates do business, and the Organisation for Economic Co-operation and Development (“OECD”) have recently focused on issues related to the taxation of multinational corporations.

One example is in the area of “base erosion and profit shifting,” where profits are claimed to be earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates.

One example is in the area of “base erosion and profit shifting,”

where profits are claimed to be earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates.

The OECD has released several components of its comprehensive plan to create an agreed set of international rules for addressing base erosion and profit shifting.

As a result, the tax laws in the United States and other countries in which we do business could change on a prospective or retroactive basis, and any such changes could adversely affect our business and financial statements.

Our business is subject to sales tax in numerous states.

The application of indirect taxes, such as sales tax, is a complex and evolving issue.

A company is required to collect and remit state sales tax from certain of its customers if that company is determined to have “nexus” in a particular state.

The determination of nexus varies by state and often requires knowledge of each jurisdiction’s tax case law.

A company is required to collect and remit state sales tax from certain of its customers if that company is determined to have “nexus”

in a particular state.

The determination of nexus varies by state and often requires knowledge of each jurisdiction’s tax case law.

The application and implementation of existing, new or future laws could change the states in which we are required to collect and remit sales taxes.

If any jurisdiction determines that we have “nexus” in additional locations that we have not contemplated, it could have an adverse effect on our financial statements.

We are subject to the possibility of a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial statements.

We are subject to the possibility of a variety of litigation and other legal and regulatory proceedings incidental to our business, including claims for damages arising out of the use of products or services and claims relating to intellectual property matters, employment matters, tax matters, commercial disputes, product liability, marketing matters, competition and sales and trading practices, environmental matters, personal injury, insurance coverage and acquisition or divestiture-related matters, as well as regulatory investigations or enforcement.

Any of these lawsuits may include claims for compensatory damages, punitive and consequential damages and/or injunctive relief.

Moreover, any insurance or indemnification rights that we may have may be insufficient or unavailable to protect us against such losses.

Any of these developments could adversely affect our financial statements in any given period.

Please see Note 15.

“Commitments and Contingencies” of Notes to Consolidated Financial Statements contained in Item 8.

Financial Statements and Supplementary Data for additional discussion.

If any jurisdiction determines that we have “nexus”

in additional locations that we have not contemplated, it could have an adverse effect on our financial statements.

If global credit market conditions deteriorate, our financial performance could be adversely affected.

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If conditions in major credit markets deteriorate, our ability to obtain debt financing or the terms associated with that debt financing may be negatively affected, which could affect our results of operations.

We have substantial international operations which are subject to numerous risks;

if our international operations are not successful, our business will be adversely affected.

For the year ended March 31, 2020, approximately 44% of our sales and revenues were made outside the United States.

Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally.

In addition, many of our manufacturing operations, suppliers and employees are located outside the United States.

Our international business is subject to risks that are customarily encountered in non-U.S.

operations, including:

Impact of possible recessions in economies outside the United States;

Political and economic instability, including instability related to war and terrorist attacks and to political and diplomatic matters such as Brexit;

Adverse changes in tariffs and trade protection measures;

Difficulty in obtaining and maintaining foreign regulatory approval and complying with foreign regulations, including the EU Medical Device Regulation;

An outbreak of a contagious disease, such as COVID-19, which may cause us or our distributors, vendors and/or customers to temporarily suspend our or their respective operations in the affected city or country;

Contractual provisions governed by foreign law, such as local law rights to sales commissions by terminated distributors;

Decreased healthcare spending by foreign governments that would reduce international demand for our products;

Strengthening of the U.S.

dollar relative to foreign currencies that could make our products less competitive because a significant amount of our international sales are denominated in U.S.

Changes in capital and exchange controls affecting international trade;

Greater difficulty in accounts receivable collection and longer collection periods;

Difficulties of staffing and managing foreign operations;

Reduced protection for intellectual property rights in some countries and potentially conflicting intellectual property rights of third parties under the laws of various foreign jurisdictions;

Attitudes by clinicians, and cost reimbursement policies, towards use of disposable supplies that are potentially unfavorable to our business;

Complying with U.S.

regulations that apply to international operations, including trade laws, the U.S.

Foreign Corrupt Practices Act, and anti-boycott laws, as well as international laws such as the U.K.

Loss of business through government tenders that are held annually in many cases;

Potentially negative consequences from changes in tax laws, including legislative changes concerning taxation of income earned outside of the United States.

For example, in fiscal year 2020, we generated approximately 4% of our sales from China.

Accordingly, our business, financial condition and results of operations can be adversely influenced by political, economic and social conditions in China.

Further, considerable uncertainty exists regarding the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies.

Changes to policy regarding the treatment of kidney disease may adversely decrease demand for our dialysis products and negatively impact our financial statements.

In July 2019, an executive order was signed by the President of the United States that is intended to change the way that kidney care is delivered to patients and reimbursed through government-sponsored medical programs.

The extent of the impact of the executive order, as well as the timing of the impact on procedures and the market in general is currently unknown.

Currently, our Dialyguard product line accounts for approximately one-third of the revenues and gross margin associated with our Instruments division.

The majority of the revenues in our Dialyguard business are associated with products that are used in dialysis clinics, while a smaller portion of our sales relate to in home care.

If the executive order is successful at limiting the use of dialysis clinics, our financial statements, and the revenues and profits of the Instruments division may be negatively impacted.

Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business or the ability to raise capital to repay our 1.375% convertible senior notes due August 15, 2025 (the “Notes”) at maturity or repurchase the notes in the event of a fundamental change.

We incurred significant indebtedness in the amount of $172,500 in the form of the Notes which mature on August 15, 2025 unless earlier converted.

We incurred significant indebtedness in the amount of $172,500 in the form of the Notes which mature on August 15, 2025, unless earlier converted. 

We also have a revolving credit facility and could borrow under that at any time and could incur more debt.

We currently expect to settle future conversions solely in shares of our common stock, which has the effect of including the shares of common stock issuable upon conversion of the Notes in our diluted earnings per share to the extent such shares are not anti-dilutive.

We will reevaluate this policy from time to time in the event conversion notices are received from holders of the Notes or not if our stock price is not above the strike price.

We will reevaluate this policy from time to time in the event conversion notices are received from holders of the Notes or not if our stock price is not above the strike price.

Holders of the Notes also have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change (as defined in the applicable indenture governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

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We may become involved in this type of litigation in the future.

Any securities litigation claims brought against us could result in substantial expense and the diversion of management’s attention from our business.

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