What changed in this filing

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Item 1A. Risk Factors

2025-02-25 compared with 2024-02-26 · 84 added, 59 removed, 452 unchanged (24% of the section changed)

13 unchanged sentences

• Our ability to fulfill our backlog may have an effect on our long-term ability to procure contracts and fulfill current contracts.

• We are implementing a new enterprise resource planning system.

Our failure to implement it successfully, on time and on budget could have a material adverse effect on us.

Risks Related to Our Customers

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Our success also depends in part on refining our cost structure and supply chains so that we have flexibility and can maintain and improve profitability.

Deterioration in the tariff environment, political instability or changes in suppliers may cause our costs to increase and, if we are not able to offset the increased costs by charging higher sales prices, will cause a decline in our margins.

Deterioration in the tariff environment such as discussed herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to compete for the business of domestic customers in China and other jurisdictions, which has adversely affected and may continue to adversely affect our, business, financial condition and results of operations,” political instability or changes in suppliers may cause our costs to increase and, if we are not able to offset the increased costs by charging higher sales prices, will cause a decline in our margins.

To improve margins on our products, we would need to negotiate price reductions with our vendors.

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Further, our gross margins and financial performance may be adversely affected by increases in our operating costs, such as material, labor, supplier costs, logistics and energy costs, all of which have been and may continue to be subject to inflationary pressures.

Operating costs have increased and may continue to increase further as a result of supply chain disruptions in connection with the sourcing of components, materials, equipment, engineering support, and services, labor shortages, high inflation rates, and cost increases attributable to the COVID-19 pandemic and the effects of the Russia-Ukraine conflict.

Operating costs have increased and may continue to increase further as a result of supply chain disruptions in connection with the sourcing of components, materials, equipment, engineering support, and services, labor shortages, high inflation rates, and cost increases attributable to the effects of geopolitical events, such as the Russia-Ukraine conflict.

In addition, we source components for certain of our tools from a supplier in Israel.

If the conflict in Israel and the surrounding area escalates, it could disrupt our supply chain, resulting in a material adverse impact on our business.

If the conflict in Israel and Gaza and the surrounding area escalates, it could disrupt our supply chain, resulting in a material adverse impact on our business.

These risks may be heightened because we obtain some of the components and subassemblies included in our systems from a limited group of suppliers and do not have long-term contracts with many of our suppliers.

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We have limited visibility into our customers’ inventories, future customer demand and the product mix that our customers will require, which could adversely affect our production forecasts and operating margins.

Certain of our customers have publicly stated their intent to decrease their memory product inventory levels as lead time for components begins to decrease.

This has and could continue to result in a temporary decrease in demand for our products as customers delay capacity expansions until inventory levels are sufficiently reduced.

In addition, innovation in our industry could render significant portions of our inventory obsolete.

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Our earnings could be negatively affected, and our inventory levels could materially increase, if we are unable to predict our inventory needs in an accurate and timely manner and adjust our orders for parts and subcomponents in the event that our needs increase or decrease materially due to unexpected increases or decreases in demand for our products.

Any material increase in our inventories could result in an adverse effect on our financial position, while any material decrease in our ability to procure needed inventories could result in an inability to supply customer demand for our products, thus adversely affecting our revenue.

Any material increase in our inventories could result in an adverse effect on our financial position, while any material decrease in our ability

to procure needed inventories could result in an inability to supply customer demand for our products, thus adversely affecting our revenue.

If we deliver systems with defects, our credibility will be harmed, and the sales and market acceptance of our systems will decrease.

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Competition for engineering and other technical personnel in some of the markets in which we operate is especially intense due to continued increases in the number of technology companies worldwide.

In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including cash and stock-based compensation.

If the anticipated value of our stock-based incentive awards does not materialize so that they cease to be viewed as valuable, if our profits decrease, or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened.

In order to attract and retain executives and other key employees, we must provide a competitive compensation package, including cash and share-based compensation.

If the anticipated value of our share-based incentive awards does not materialize so that they cease to be viewed as valuable, if our profits decrease, or if our total compensation package is not viewed as competitive, our ability to attract, retain and motivate executives and key employees could be weakened.

Any prolonged disruption in the operations of our manufacturing facilities could have a material adverse effect on our revenue.

We produce the majority of our systems in our manufacturing facilities located in Wilmington, Massachusetts, Milpitas, California and Bloomington, Minnesota.

We produce the majority of our systems in our manufacturing facilities in the following locations:

Wilmington, Massachusetts;

Milpitas, California;

Tucson, Arizona;

and Bloomington, Minnesota.

We also use contract manufacturers in China, Japan and the United States.

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Additionally, if we are consistently unable to fulfill our backlog, this may be a disincentive to customers to award large contracts to us in the future until they are comfortable that we can effectively manage our backlog.

We are implementing a new enterprise resource planning system.

Our failure to implement it successfully, on time and on budget could have a material adverse effect on us.

We are in the process of completing a multi-year implementation of a complex new enterprise resource planning (“ERP”) system.

ERP implementations are complex, time-consuming, labor intensive, and involve substantial expenditures on system software and implementation activities.

The ERP system is critical to our ability to provide important information to our management, obtain and deliver products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, and otherwise operate our business.

ERP implementations also require transformation of business and financial processes in order to reap the benefits of the ERP system.

Any such implementation involves risks inherent in the conversion to a new computer system, including loss of information and potential disruption to our normal operations.

The implementation and maintenance of the new ERP system has required, and will continue to require, the investment of significant financial and human resources and the implementation may be subject to delays and cost overruns.

In addition, we may not be able to successfully complete the implementation of the new ERP system without experiencing difficulties.

Any disruptions, delays or deficiencies in the design and implementation or the ongoing maintenance of the new ERP system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, including reports required by the SEC such as the evaluation of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and otherwise operate our business.

Additionally, if we do not effectively implement the ERP system as planned or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess it adequately could be delayed.

Risks Related to Our Customers

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We expect to continue to make significant investments in our research and development activities and at times may make inventory investments prior to commercialization.

We may experience difficulties or delays in our development efforts with respect to new systems, and we may not ultimately be successful in our product enhancement efforts to improve and advance products or in responding effectively to technological change, as not all research and development activities result in viable commercial

In addition, we cannot provide assurance that we will be able to develop new products for the most opportunistic new markets and applications.

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We own or have licensed a number of patents relating to our metrology, lithography, wafer and defect inspection systems, as well as artificial intelligence and machine learning systems, and software, including both embedded and application software, and have filed applications for additional patents.

Any of our pending patent applications

may be rejected, however, and we may be unable to develop additional proprietary technology that is patentable in the future.

In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and/or may be invalidated, enforceable and/or challenged by third parties.

Any of our pending patent applications may be rejected, however, and we may be unable to develop additional proprietary technology that is patentable in the future.

In addition, the patents that we do own or that have been issued or licensed to us may not provide us with competitive advantages and/or may be invalidated, rendered unenforceable and/or challenged by third parties.

Third parties may also design around our patents or copy our patented inventions without our knowledge.

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For example, our competitors may independently develop similar technology or duplicate our products.

If this occurs, it could be easier for our competitors to develop and sell competing products in these countries.

this occurs, it could be easier for our competitors to develop and sell competing products in these countries.

Accordingly, infringement of our intellectual property rights poses a serious risk to our ability to conduct business.

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Cyber-attacks and other malicious internet-based activities continue to increase.

The Russia–Ukraine conflict and related sanctions imposed by the U.S.

government may expose government entities and public and private U.S.

companies to attempted or actual cybersecurity attacks launched in retaliation, and these attacks could materially disrupt our supply chain or our systems and operations or those of our customers and suppliers.

As the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, our ability to anticipate these techniques or to implement adequate preventative measures is reduced.

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Likewise, cybersecurity events impacting our suppliers could result in substantial delays in our ability to obtain necessary components for our products from those suppliers, which could hamper our ability to ship our products to our customers, harming our results of operations and our customer relationships.

Any or all of the above issues could negatively affect our ability to attract new customers, cause existing customers to choose to purchase from our competitors, result in reputational damage or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our operating results.

Compliance with data protection laws may be costly and may impede development of new products, and any failure to comply with, or inquiries under, these laws may could have a material adverse effect on our business, results of operations, and financial condition.

Any or all of the above issues could negatively affect our ability to attract new customers, cause

existing customers to choose to purchase from our competitors, result in reputational damage or subject us to third-party lawsuits, regulatory fines or other action or liability, which could adversely affect our operating results.

Compliance with data protection laws may be costly and may impede development of new products, and any failure to comply with, or inquiries under, these laws could have a material adverse effect on our business, results of operations, and financial condition.

The General Data Protection Regulation (“GDPR”) is a regulation in European Union (“EU”) law on data protection and privacy for the individuals within the EU and the European Economic Area (“EEA”).

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These laws and regulations can be costly to comply with and may delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention, or subject us to inquiries or investigations, claims or other remedies, including fines, which may be significant, or demands that we modify or cease existing business practices.

us by governmental entities or others, which could have a material adverse effect on our business, results of operations, and financial condition.

A failure by us, our suppliers, or other parties with whom we do business to comply with posted privacy policies or with other federal, state, or international privacy-related or data protection laws and regulations, including GDPR, CCPA, CPRA and other new or changing privacy laws and regulations, could result in proceedings against us by governmental entities or others, which could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to Competition

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We face substantial competition from established companies in each of the markets we serve.

We principally compete with KLA, Nova, Camtek, Ushio, Canon, and PDF Solutions.

We principally compete with KLA, Nova, Camtek, Ushio, Canon, GigaVis Co.

and PDF Solutions.

Each of our products also competes with products that use different metrology, inspection or lithography techniques.

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The semiconductor device industry is a high-visibility industry in many of the European and Asian countries in which we sell our products.

Because the governments of these countries have provided extensive financial support to our semiconductor device manufacturing customers in these countries, we believe that our customers could be disproportionately affected by any trade embargoes, excise taxes, tariffs, or other restrictions imposed by their governments on trade with U.S.

Because the governments of these countries have provided extensive financial support to our semiconductor device manufacturing customers in these countries, we believe that our customers could be disproportionately affected by any trade embargoes, excise taxes, tariffs, trade retaliation, or other restrictions imposed by their governments on trade with U.S.

companies such as ourselves, particularly with respect to the ongoing tensions between the United States and China.

Over the last several years, the U.S.

Additionally, over the last several years, the U.S.

government has significantly expanded export controls on certain technologies and commodities to certain markets, particularly with respect to semiconductor and other high technology exports to China.

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In 2022, the DoC also added a number of companies in China to the Unverified List and Entity List of the Export Administration Regulations (“EAR”), including Yangtze Memory Technologies Co., Ltd (YMTC).

In October 2023, the DoC revised and expanded the 2022 export controls.

In October 2023, as well as 2024 and early 2025, the DoC revised and expanded the 2022 export controls.

The effect of these changes, among others, is that Onto Innovation is required to conduct additional end-use diligence and in some instances obtain export licenses before providing products to certain customers.

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Failure to obtain any required license could result in a reduction of anticipated revenues until we are able to replace unlicensed orders with other customer orders for which a license has been obtained or is not required, and there can be no assurance that replacement orders will be obtained on favorable terms, in a timely manner, or at all.

In addition, any licenses that are granted to us or to our customers may have a short duration or require us to satisfy various conditions.

In addition, any licenses that are granted to us or to our customers may have a short duration or require us to satisfy various conditions, and it is possible that licenses that have been granted may be revoked or we may not be successful in obtaining reissuance of such licenses upon their expiration or in the event modifications are required to a previously issued license.

Any of these occurrences could have a material adverse effect on our revenues, business, financial condition and results of operations.

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government will impose additional export controls on our products or systems, which could lead to further revenue losses.

Such changes could result in additional restrictions on our ability to sell products to customers in China and other jurisdictions.

For example, it remains uncertain what changes, if any, the new U.S.

presidential administration will make with respect to U.S.

export control policy.

Any such changes could result in additional restrictions on our ability to sell products to customers in China and other jurisdictions.

Foreign customers affected by current or future U.S.

government sanctions, controls or threats of sanctions or controls may respond by developing their own solutions to replace our products or by utilizing our foreign competitors’ products (who are not subject to the same export controls and can fulfill the orders).

In addition, these export controls may also reduce overall global demand for our customers’ products or for other products produced or manufactured in the U.S.

In addition, these export controls may also reduce overall global demand for our customers’ products or for other products

produced or manufactured in the U.S.

or based on U.S.

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The cost of maintaining compliance under multiple and changing regulatory regimes may adversely affect our business, financial condition and results of operations, and, in the case of export controls, has adversely affected and may continue to adversely affect our results of operations.

As discussed herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to impact both our ability to compete for the business of domestic customers in China and our results of operations,” the U.S.

government issued new export control rules in 2022 and 2023 aimed at restricting China’s access to semiconductor equipment and advanced computing technology, among other things.

As discussed herein under the heading “Tariffs, export regulations, and other market barriers have impacted and may continue to impact our ability to compete for the business of domestic customers in China and other jurisdictions, which has adversely affected and may continue to adversely affect our, business, financial condition and results of operations,” the U.S.

government issued new export control rules between 2022 and 2025 aimed at restricting China’s access to semiconductor equipment and advanced computing technology, among other things.

To comply with the new rules, Onto Innovation has had to expend time and resources that might otherwise have been used for revenue generating activities.

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For example, the Ukraine–Russia geographic region is a major source of critical raw materials used for semiconductor manufacturing (such as neon and palladium), and any supply chain disruptions or shortages of such materials due to the ongoing conflict in that region could impact our customers in a manner that reduces demand for our products.

Similarly, if the conflict in Israel and the surrounding area escalates further, it could result in disruptions to our supply chain and/or the operations of our customers in a manner that reduces demand for our products.

Similarly, if the conflict in Israel and Gaza and the surrounding area escalates, it could result in disruptions to our supply chain and/or the operations of our customers in a manner that reduces demand for our products.

In addition, due to the complex relationships among China, Hong Kong, Taiwan, and the United States, there is risk that political, diplomatic, and national security influences might lead to trade, technology, or capital disputes, or disruptions affecting the semiconductor industry.

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Our business may also be affected by public health issues (for example, an outbreak of a contagious disease such as COVID-19, avian influenza, measles or Ebola).

The effects of the public health crisis caused by the COVID-19 pandemic and the resulting economic impact have affected, and may continue to affect, our operations and those of our suppliers, third-party service providers, and customers.

The extent to which the economic effects of the COVID-19 pandemic could continue to impact our business, results of operations, and financial conditions is difficult to predict and depends on numerous evolving factors including any future resurgences of the pandemic and the intensity and duration of any resulting adverse macroeconomic conditions.

The COVID-19 pandemic exposed our business, results of operations, and financial condition to the following adverse impacts:

The effects of a public health crisis may affect our operations and those of our suppliers, third-party service providers, and customers.

The extent to which the economic effects of a public health crisis could impact our business, results of operations, and financial conditions are difficult to predict, and depend on numerous evolving factors including any future resurgences of the public health crisis and the intensity and duration of any resulting adverse macroeconomic conditions.

A public health crisis could expose our business, results of operations, and financial condition to the following adverse impacts:

disruptions to our supply chain in connection with the sourcing of materials, support, and services;

of operations due to unavailability of employees as a result of illness, travel restrictions and other factors;

disruption of operations due to unavailability of employees as a result of illness, travel restrictions and other factors;

and a decrease in demand for our products;

Additional sustained or prolonged outbreaks of COVID-19, or any ongoing, worsening or recurring supply chain disruptions or macroeconomic effects of the pandemic could have a material adverse effect on our business, results of operations, legal exposure, or financial condition and may also heighten many of the other risks described in this “Risk Factors” section.

Additional sustained or prolonged public health crises, or any ongoing, worsening or recurring supply chain disruptions or macroeconomic effects of such crises could have a material adverse effect on our business, results of operations, legal exposure, or financial condition and may also heighten many of the other risks described in this “Risk Factors” section.

There may also be conflict or uncertainty in the countries in which we operate, including safety issues, , disruptions of service from utilities, nuclear power plant accidents or general economic or political unrest, including war, civil unrest or terrorist attacks.

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Consequently, to date, our operations have not been materially adversely affected by Russia’s invasion of Ukraine, or the Israel-Hamas conflict.

However, if the Russia-Ukraine or Israel-Hamas conflicts escalate further and/or the U.S.

However, if the Russia-Ukraine conflict and/or the conflicts in Israel and Gaza and the surrounding area escalate further, and/or the U.S.

or other jurisdictions impose additional sanctions on the governments or entities involved, this could result in disruptions to the global economy and/or supply chains that could adversely affect our business.

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Also, similar worldwide anti-bribery laws, such as the U.K.

Bribery Act and Chinese anti-corruption laws, generally prohibit companies and their intermediaries from making improper payments to non-U.S.

Bribery Act and Chinese anti-corruption laws, generally prohibit companies and their intermediaries from

making improper payments to non-U.S.

officials for the purpose of obtaining or retaining business.

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Significant judgment is required to determine and estimate worldwide tax liabilities.

Our future annual and quarterly tax rates could be affected by

numerous factors, including changes in the (1) applicable tax laws;

Our future annual and quarterly tax rates could be affected by numerous factors, including changes in the (1) applicable tax laws;

(2) composition of earnings in countries with differing tax rates;

or (3) recoverability of our deferred tax assets and liabilities.

Beginning in 2022, the U.S.

Due to the pace of legislative changes and the scale of our business activities, any substantial changes in tax policies or legislative initiatives may materially and adversely affect our business, the taxes we are required to pay, our financial position, and results of operations.

For example, beginning in 2022, the U.S.

Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the existing option to deduct research and development expenditures and requires taxpayers to amortize them over five years pursuant to IRC Section 174.

Although Congress is considering legislation that would defer the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified.

The requirement reduced our cash flows for 2022 and 2023, and may continue to reduce our cash flows unless repealed.

In addition, recent proposals to increase the U.S.

corporate income tax rate, increase U.S.

taxation of international business operations and impose a global minimum tax could have a negative impact on our tax position depending upon the terms of the final enacted legislation.

Based on the nature of the uncertainties around specific legislation to be enacted, we have not quantified the impact of this risk.

Many countries and organizations such as the Organization for Economic Cooperation and Development are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

The requirement reduced our cash flows for 2022, 2023 and 2024, and may continue to reduce our cash flows.

In addition, any changes to U.S.

and global corporate income tax laws, including increasing U.S.

taxation of international business operations and imposing a global minimum tax could have a negative impact on our tax position in the future.

Many countries and organizations, such as the Organization for Economic Cooperation and Development (“OECD”), which is discussed further below, are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.

Any of these developments or changes in federal, state, or international tax laws or tax rulings could adversely affect our effective tax rate and our results of operations.

The OECD has released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and Base Erosion and Profit Shifting (“BEPS”), an initiative that aims to standardize and modernize global tax policy.

The guidance also established a global minimum tax of 15%.

This guidance has been implemented by several jurisdictions, including jurisdictions in which we operate, and many other jurisdictions are in the process of implementing it.

Depending on the final form of legislation ultimately enacted, there may be significant consequences for us due to our international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our provision for income taxes.

presidential administration has directed the U.S.

Department of Treasury to develop options for “protective measures” in response to tax rules imposed by non-U.S.

countries that are extraterritorial or disproportionately affect U.S.

companies (which may include taxes imposed under the OECD guidance) and legislation has been introduced that would increase U.S.

tax rates on non-U.S.

companies and investors if their home jurisdictions impose discriminatory or extraterritorial taxes on U.S.

companies, but we cannot predict whether such protective measures or legislation will be adopted or what, if any, responsive measures will be adopted by non-U.S.

In addition, we are subject to regular examination of our income tax returns by the Internal Revenue Service and other tax authorities.

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Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our results of operations.

In December 2021, the Organization for Economic Co-operation and Development (“OECD”), released guidance covering various topics, including country-by-country reporting, definitional changes to permanent establishment and Base Erosion and Profit Shifting (“BEPS”), an initiative that aims to standardize and modernize global tax policy.

The proposed guidance also established a global minimum tax of 15%.

Depending on the final form of guidance adopted by OECD members and legislation ultimately enacted, if any, there may be significant consequences for us due to our international business activities, including, but not limited to, an increase in our tax uncertainty and adverse effects on our provision for income taxes.

Turmoil or fluctuations in the credit markets and the financial services industry may negatively impact our business, results of operations, financial condition or liquidity, and our factoring arrangements may expose us to additional risks.

In the past, global credit markets and the financial services industry have experienced periods of turmoil and upheaval characterized by the tightening of the credit markets, the weakening of the global economy and an unprecedented level of intervention from the United States and other governments.

Adverse economic conditions, such as sustained periods of economic uncertainty or a crisis in the financial markets may have a material adverse effect on our liquidity and financial condition if our ability to obtain credit from the capital financial markets, or from trade creditors was impaired.

If banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.

financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.

In addition, a worsening economy or an economic crisis could also adversely impact our customers’ ability to finance the purchase of systems from us or our suppliers’ ability to provide us with product, either of which may negatively impact our business and results of operations.

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Compliance with current or future environmental laws and regulations could restrict our ability to expand our facilities or require us to acquire additional expensive equipment, modify our manufacturing processes, or incur other significant expenses.

For example, we are or expect to become subject to various new or proposed climate-related and other sustainability laws and regulations, including, for example, the state of California’s new climate change disclosure requirements, the EU’s new Corporate Sustainability Reporting Directive and proposed climate-change disclosure requirements from the SEC.

Compliance with such laws and regulations, as well as the overall increased focus and scrutiny from the SEC and other regulators, investors, customers, vendors, employees, and other stakeholders concerning environmental, social and governance (“ESG”) and climate matters, could impose additional costs on us.

For example, we are, or may become subject to various new or proposed climate-related and other sustainability laws and regulations, including, for example, the state of California’s new climate change disclosure requirements, the EU’s new Corporate Sustainability Reporting Directive and proposed climate-change disclosure requirements from the SEC.

Compliance with such laws and regulations, as well as any increased focus or scrutiny from the SEC and other regulators, investors, customers, vendors, employees, and other stakeholders concerning sustainability and climate matters, could impose additional costs on us.

We may unintentionally violate environmental laws or regulations in the future as a result of human error, equipment failure or other causes.

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We cannot provide any assurance that we will be successful in consummating future acquisitions on favorable terms or that we will realize the benefits that we anticipate from one or more acquisitions that we consummate.

Integrating any business, product, technology or service into our current operations could be expensive and time-consuming and/or disrupt our ongoing business.

Integrating any business, product, technology or service into our current operations could be expensive and

time-consuming and/or disrupt our ongoing business.

Further, there are numerous risks associated with acquisitions and potential acquisitions, including, but not limited to:

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In addition, during periods of rapid growth, we must be able to increase manufacturing capacity and personnel to meet customer demand.

We can provide no assurance that these objectives can be met in a timely manner in response to industry cycles, and we cannot predict when and to what extent sales may normalize, or when and to what extent gross margins may improve, following any such occurrence.

We can provide no assurance that these objectives can be met in a timely manner in response to industry cycles, and we cannot predict when and to what extent sales may normalize, or when

and to what extent gross margins may improve, following any such occurrence.

If we fail to respond to industry cycles, our business could be seriously harmed.

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If our customers have difficulties in obtaining capital or financing, this could result in lower sales.

Customers with liquidity issues could also

result in an increase in bad debt expense.

Customers with liquidity issues could also result in an increase in bad debt expense.

These conditions could also affect our key suppliers, which could affect their ability to supply parts and result in delays of our customer shipments.

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

What changed 10-K

Item 1A. Risk Factors