What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-12-17 compared with 2024-12-19 · 528 added, 119 removed, 123 unchanged (84% of the section changed)

2 unchanged sentences

Photronics, Inc.

(and its subsidiaries, collectively referred to herein as “Photronics”, the “Company”, “we”, “our”, or “us”) is one of the world’s

leading manufacturers of photomasks, which are high precision photographic quartz or glass plates containing microscopic images of electronic circuits.

Photomasks are a key

element in the manufacture of ICs and FPDs and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates during the fabrication of ICs, a variety of FPDs and, to a lesser extent, other types of electrical and

optical components.

We have eleven manufacturing facilities, which are located in Taiwan (3), China (2), Korea (1), the United States (3), and Europe (2).

(and its subsidiaries, collectively referred to herein as “Photronics”, the “Company”, “we”, “our”, or “us”) is one of the world’s leading manufacturers of photomasks, which are high precision

photographic quartz or glass plates containing microscopic images of electronic circuits.

Photomasks are a key element in the manufacture of ICs and FPDs and are used as masters to transfer circuit patterns onto semiconductor wafers and FPD

substrates during the fabrication of ICs, a variety of FPDs and, to a lesser extent, other types of electrical and optical components.

We have eleven manufacturing facilities, which are located in Taiwan (3), China (2), South Korea (1), the United

States (3), and Europe (2).

Our principal executive offices are located at 15 Secor Road, Brookfield, Connecticut, 06804, telephone (203) 775-9000.

1 unchanged sentence

We make available, free of charge through our

website, our Forms 10-K, Definitive Proxy Statements on Schedule 14A, Forms 10-Q, Current Reports on Form 8-K, and any amendments to these reports as soon as reasonably practicable after such materials are electronically filed with or furnished

The information found on, or incorporated into, our website is not part of this or any other report we file with or furnish to the SEC.

2 unchanged sentences

We operate as a single reporting segment as a manufacturer of photomasks, which are high precision quartz or glass plates containing microscopic images of electronic circuits for use in the fabrication of IC’s and

In accordance with ASC 280 – “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources

In accordance with the ASC 280 – “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources

and assessing performance for the entire Company.

1 unchanged sentence

disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.

All material operating units qualify for aggregation under “Segment Reporting” due to their similar

customer base and similarities in:

All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer

base and similarities in:

economic characteristics;

1 unchanged sentence

and procurement, manufacturing and distribution processes.

Since the Company operates in one segment, all financial information required by “Segment

Reporting” can be found in the accompanying consolidated financial statements.

Since the Company operates in one segment, all financial information required by “Segment Reporting” can

be found in the accompanying consolidated financial statements.

We manufacture photomasks, which are used as masters to transfer circuit patterns onto semiconductor wafers and FPD substrates.

The photomasks we

manufacture incorporate circuit designs provided to us on a confidential basis by our customers.

The photomasks we manufacture incorporate circuit designs provided to us on a confidential

basis by our customers.

Photomasks are typically sold in sets comprised of layers, with each layer having a distinct pattern that is etched onto a different photomask.

resulting series of photomasks is then used to image the circuit patterns onto each successive layer of a semiconductor wafer or FPD substrate.

The typical manufacturing process for a photomask involves the receipt and conversion of circuit

design data to manufacturing pattern data.

A lithography system then exposes the circuit pattern onto a photomask blank.

The resulting series of photomasks is then used to image the circuit patterns

onto each successive layer of a semiconductor wafer or FPD substrate.

The typical manufacturing process for a photomask involves the receipt and conversion of circuit design data to manufacturing pattern data.

A lithography system then exposes the

circuit pattern onto a photomask blank.

The exposed areas are developed and etched to imprint the pattern on the photomask.

The photomask is then inspected for

defects and conformity to the customer's design data.

After the repair of any defects, the photomask is cleaned, any required pellicles (protective translucent membranes) are applied and, after final inspection, the photomask is shipped to the

The photomask is then inspected for defects and conformity to the customer’s design data.

After the repair of any defects,

the photomask is cleaned, any required pellicles (protective translucent membranes) are applied and, after final inspection, the photomask is shipped to the customer.

“High-end” photomasks support 28 nanometer and smaller design nodes for ICs and Generation 10.5+, AMOLED, and LTPS display-based process technologies for FPDs.

1 unchanged sentence

semiconductors and Generation 8 and below (excluding AMOLED and LTPS) process technologies for displays, which we refer to as “mainstream” photomasks, constitute the majority of designs currently being fabricated in volume.

At these geometries

and at various high-end nodes, we can produce full lines of photomasks.

At these geometries and

at various high-end nodes, we can produce full lines of photomasks.

Moreover, there is no significant technology employed by our competitors that is not available to us.

We expect advanced-generation designs to continue to be developed, and

we believe we are well positioned to service an increasing volume of this business as a result of our ongoing investments in manufacturing processes and technology in the regions where our customers are located.

We expect advanced-generation designs to continue to be developed, and we

believe we are well positioned to service an increasing volume of this business as a result of our ongoing investments in manufacturing processes and technology in the regions where our customers are located.

Generally, Photronics and each of its customers engage in a qualification and correlation process before we become an approved supplier.

2 unchanged sentences

Some prices may remain in effect for an extended period of time.

In many instances, we enter into sales arrangements with an understanding that, as long as our performance is competitive, we will

receive a specified percentage of that customer’s photomask orders.

In many instances, we enter into sales arrangements with an understanding that, as long as our performance is competitive, we will receive

a specified percentage of that customer’s photomask orders.

The first several layers of photomasks are sometimes required to be delivered to customers within twenty-four hours from the time we receive customer design data.

1 unchanged sentence

between order and shipment dates (typically from one day to three weeks) for a significant amount of our revenue, the dollar amount of our current backlog is not a reliable indicator of future revenue.

However, the demand for some IC photomasks

can extend over the traditional time period;

However, the demand for some IC photomasks can

extend beyond the traditional time period;

thus, for some products, our backlog can expand to as long as two to three months.

1 unchanged sentence

equipment reliability.

We work to meet these requirements by making significant investments in research and development, manufacturing capacity, preventive and on-going equipment maintenance programs, manufacturing and data processing systems,

and by utilizing statistical process control methods to optimize our manufacturing processes and reduce cycle times.

by utilizing statistical process control methods to optimize our manufacturing processes and reduce cycle times.

Quality control is an integral part of the photomask manufacturing process.

2 unchanged sentences

Each photomask is inspected several times during the manufacturing process to ensure compliance with customer specifications.

We continue to make substantial investments in equipment to produce, inspect and

repair photomasks to ensure that customer specifications are met.

We continue to make substantial investments in equipment to produce, inspect and repair

photomasks to ensure that customer specifications are met.

Sales and Marketing

4 unchanged sentences

time, and allows us to serve customers that utilize manufacturing foundries outside of the United States, principally in Asia.

See Note 10 and Note 18 to our consolidated financial statements in Part II, Item 8 of this report for the amount of

revenue and long-lived assets attributable to each of our geographic areas of operations.

See Note 10 – Revenue and Note 19 – Risks and Concentrations to our consolidated financial statements in Part II, Item 8

of this report for the amount of revenue and long-lived assets attributable to each of our geographic areas of operations.

Research and Development

We primarily conduct research and development activities for IC photomasks at our Boise, Idaho, facility and, to a

lesser degree, Photronics DNP Mask Corporation (“PDMC”), our joint-venture subsidiary in Taiwan.

Research and development for FPD photomasks is primarily conducted at Photronics Korea, Ltd., our subsidiary in South Korea.

Additionally, we

conduct site-specific research and development programs to support local, strategic customer roadmaps.

All of these research and development programs and activities are undertaken to advance our competitiveness in technology and manufacturing

We also conduct application-oriented research and development, including data and service technology to support the integration of photomasks into customer processes.

Currently, research and development for IC photomasks are

primarily focused on photomasks enabling wafer geometries of 14 nanometer node and smaller, including EUV and, for FPDs, on Generations 8 and 10 substrate size photomasks for new TV technologies, emerging opportunities for micro- and mini-LED

displays, and photomask technology needed for the complex FPD photomasks required in the manufacture of advanced mobile displays, such as AMOLED.

We believe these core

competencies will continue to be a critical part of semiconductor and FPD manufacturing, as wafer and FPD substrate optical lithography continues to enable new high-end ICs and displays.

We incurred research and development expenses of $16.6

million, $13.7 million, and $18.3 million in 2024, 2023 and 2022, respectively.

It is our belief that we own, control, or license the proprietary information (including trade secrets and patents) that we need to continue to meet our customers’

requirements.

We primarily conduct research and development activities for IC photomasks at our Boise, Idaho, facility.

Research and development for FPD photomasks is primarily conducted at Photronics Korea, Ltd., our subsidiary

in South Korea.

Additionally, we conduct region specific applications development programs to support local, strategic customer roadmaps.

All of these research and development programs and activities are undertaken to advance our competitiveness

in technology and manufacturing efficiency.

We also conduct data and service technology development efforts to support the integration of photomasks into customer processes at regions worldwide.

Currently, research and development for IC

photomasks are primarily focused on photomasks enabling wafer geometries of 7 nanometer node and smaller, including EUV and, for FPDs on Generation 8.6 AMOLED and photomasks for more advanced FPD display integration across all sizes.

we note the role AI is playing in driving the technology roadmap for IC devices and our technology program covers multiple initiatives to deliver AI grade photomasks in IC and advanced packaging applications.

We believe these core competencies

will continue to be a critical part of semiconductor and FPD manufacturing, as wafer and FPD substrate optical lithography continues to enable new high-end ICs and displays.

We incurred research and development expenses of $15.8 million, $16.6

million, and $13.7 million in 2025, 2024 and 2023, respectively.

It is our belief that we own, control, or license the proprietary information (including trade secrets and patents) that we need to continue to meet our customers’ requirements.

Accordingly, we devote a significant portion of our human and financial resources to R&D programs and seek to maintain close relationships with customers to remain responsive to their needs.

We also believe that our

intellectual property and trade secret know-how will continue to be important to maintaining our technical leadership and competitive position in the field of photomasks.

We also believe that our intellectual property and

trade secret know-how will continue to be important to maintaining our technical leadership and competitive position in the field of photomasks.

The customers for photomasks are primarily semiconductor and FPD manufacturers and to a lesser degree fabless design and equipment companies serving those industries.

The size of the photomask market is driven by

the number of designs released to support IC and FPD product introductions and manufacturing expansions.

The photomasks required for those designs are manufactured by independent merchant manufacturers like Photronics and by semiconductor and

FPD manufacturers that produce photomasks for their own use (captive manufacturers).

The size of the photomask market is driven by the

number of designs released to support IC and FPD product introductions and manufacturing expansions.

The photomasks required for those designs are manufactured by independent merchant manufacturers like Photronics and by semiconductor and FPD

manufacturers that produce photomasks for their own use (captive manufacturers).

In rare instances, captive manufacturers also sell to other semiconductor or FPD manufacturers.

The production value of photomasks produced by merchant suppliers has transitioned from a period when there was a trend toward the divesture or closing of captive photomask operations by semiconductor manufacturers, and to an increase in the share of the market served by independent merchant manufacturers , like Photronics .

This trend was

driven by the increased complexity and cost of capital equipment used in manufacturing photomasks , and the lack of economy of scale for many semiconductor and FPD

manufacturers to effectively utilize the equipment.

That period was followed by a period during which, in order to reach certain roadmap milestones, some captive mask facilities invested at faster

rates than independent manufacturers, and the revenue share of market transitioned back to photomasks being majority captive-supplied.

More recently, there has been a tendency of more production being directed to the independent merchant

manufacturers, with market share moving toward the independents.

Nevertheless, most captive manufacturers maintain business and technology relationships with independent photomask manufacturers for ongoing support.

We support customers across the full spectrum of IC and FPD production by

manufacturing photomasks using electron beam or optical (laser-based) lithography systems.

For IC photomasks, the predominant writing technology used for advanced photomasks with fine-scale resolution requirements is electron beam writing

systems, while FPD mask fabrication utilizes optical writing systems.

The production value of photomasks produced by merchant suppliers has transitioned from a period when there was a trend toward the divestiture or closing of captive photomask operations by semiconductor manufacturers,

and to an increase in the share of the market served by independent merchant manufacturers, like Photronics.

This trend was driven by the increased complexity and cost of capital equipment used in manufacturing photomasks, and the lack of economy

of scale for many semiconductor and FPD manufacturers to effectively utilize the equipment.

That period was followed by a period during which, in order to reach certain roadmap milestones, some captive mask facilities invested at faster rates than independent manufacturers, and the revenue share of market

transitioned back to photomasks being majority captive-supplied.

More recently, there has been a tendency of more production being directed to the independent merchant manufacturers, with market share moving toward the independents.

Nevertheless,

most captive manufacturers maintain business and technology relationships with independent photomask manufacturers for ongoing support.

We support customers across the full spectrum of IC Production by manufacturing photomasks using electron beam or optical (laser-based) lithography systems.

In addition, we have added the most advanced electron beam

mask writing system for IC mask writing that employs a multi-beam writing architecture to deliver speed and performance improvements over existing systems.

For FPD, the mask fabrication utilizes only optical writing systems to write the mask

These systems are capable of producing the most advanced semiconductor and display photomasks for use in an array of products.

End markets served with IC photomasks include

devices used for artificial intelligence, cloud computing, microprocessors, memory, telecommunications, internet

connected devices, automotive, industrial and other applications.

End markets served with IC photomasks include devices used for artificial intelligence, cloud computing,

microprocessors, memory, telecommunications, internet connected devices, automotive, industrial and other applications.

We own a number of both high-end and mature electron beam and laser-based lithography systems.

1 unchanged sentence

These include integrated device manufacturers, fabless semiconductor companies, and “pure-play” foundries.

During 2024, we

sold our products to approximately 675 customers.

Revenue from United Microelectronics Corp.

accounted for approximately 15%, 14% and 15% of our total revenues in 2024, 2023 and 2022, respectively, and revenue from Samsung Electronics

accounted for approximately 12%, 10% and 11% of our total revenues in those respective years.

In addition, revenue from Semiconductor Manufacturing International Corporation accounted for approximately 9%, 13% and 5% of our total

revenues in 2024, 2023 and 2022, respectively.

During 2025, we sold our products to

approximately 636 customers.

For fiscal year 2025, Customer A, B and C accounted for approximately 16%, 13% and 8%, of consolidated revenue, respectively.

For fiscal year 2024, Customer A, B and C accounted for approximately 15%, 12% and 9% of

consolidated revenue, respectively.

For fiscal year 2023, Customer A, B and C accounted for approximately 14%, 10% and 13% of consolidated revenue, respectively.

No other customer represented 10% or more of consolidated revenue in any of the

three fiscal years.

Our five largest customers, in the aggregate, accounted for approximately 50%, 50% and 51% of our revenue in 2025, 2024 and 2023, respectively.

A significant decrease in the amount of revenue from

any of these customers could have a material adverse effect on our financial performance and business prospects.

A significant decrease in the amount of revenue from any of these customers could

have a material adverse effect on our financial performance and business prospects.

The photomask industry is highly competitive, and most of our customers utilize multiple photomask suppliers.

4 unchanged sentences

We also believe that geographic proximity to customers is an important factor in certain markets where cycle time from order to delivery is critical.

While some of our competitors may

have greater financial, sales, marketing, or other resources than Photronics, we believe that we are able to compete effectively because of our dedication to customer service, ongoing investments in state-of-the-art photomask equipment and

facilities, and experienced technical employees.

Using market data from research firm Tech Insights, the total market for IC photomasks is approximately 7.8B USD (2023) and, based on internal

estimates, the total market for FPD masks is approximately 930M USD (2023).

While some of our competitors may have

greater financial, sales, marketing, or other resources than Photronics, we believe that we are able to compete effectively because of our dedication to customer service, ongoing investments in state-of-the-art photomask equipment and facilities,

and experienced technical employees.

The semiconductor equipment industry is highly competitive and is characterized by a small number of participants ranging in size.

Our competitors include Compugraphics International, Ltd., Dai Nippon Printing Co., Ltd

(outside of Taiwan and China), Hoya Corporation, LG Innotek Co., Ltd., Shenzhen Newway Photomask Making Co., Ltd., Shenzhen Qingyi Photomask, Ltd., SK-Electronics Co., Ltd., Taiwan Mask Corporation, and Toppan Electronics Products Co., Ltd.

We also compete with semiconductor and FPD manufacturers' captive photomask manufacturing operations that supply photomasks for internal use and, in some instances, also for external customers and foundries.

We expect to face continued

competition which, in the past, has led to pressure to reduce prices.

We believe the pressure to reduce prices, together with the significant investment required in capital equipment to manufacture high-end photomasks will continue in the

We also compete with

semiconductor and FPD manufacturers' captive photomask manufacturing operations that supply photomasks for internal use and, in some instances, also for external customers and foundries.

We expect to face continued competition which, in the past,

has led to pressure to reduce prices.

We believe the pressure to reduce prices, together with the significant investment required in capital equipment to manufacture high-end photomasks will continue in the future.

International Operations

1 unchanged sentence

operations were approximately 82%, 83% and 86% of our total revenues in 2025, 2024 and 2023, respectively.

We believe that our ability to serve

markets is enhanced by our having, among other things, a local presence in the markets we serve.

We believe that our ability to serve non-U.S.

markets is enhanced by

our having, among other things, a local presence in the markets we serve.

This requires significant investments in financial, managerial, operational, and other resources.

Sales and operations outside of the United States are subject to inherent risks, and may be adversely affected by fluctuations in currency exchange rates, the imposition of government controls, political and economic

conditions in various countries, legal compliance and regulatory requirements, tariffs and other trade barriers, difficulties with staffing and managing international operations, longer accounts receivable collection cycles, potential

restrictions on transfers of funds, and potentially adverse tax consequences.

These factors may have a material adverse effect on our ability to generate revenue outside of the United States and may require us to deploy resources where they could

otherwise be used to their greatest advantage.

Notes 10 – Revenue and Note 18 – Risks and Concentrations of our consolidated financial statements, in Part II,

Item 8 of this report, respectively, present our revenue and long-lived assets by geographic area.

These factors, as well as any of the other risk factors related to our international business and operations that are described in Item 1A “Risk

Factors,” could have a material adverse effect on our future business and financial results.

on transfers of funds, and potentially adverse tax consequences.

These factors may have a material adverse effect on our ability to generate revenue outside of the United States and may require us to deploy resources where they could otherwise be

used to their greatest advantage.

Note 10 – Revenue and Note 19 – Risks and Concentrations of our consolidated financial statements, in Part II, Item 8 of this report, respectively, present our revenue and long-lived assets by geographic area.

These factors, as well as any of the other risk factors related to our international business and operations including our joint venture operations in China and Taiwan are described in Item 1A “Risk Factors,” could have a material adverse effect on

our future business and financial results.

Raw materials used by Photronics generally include:

high precision quartz substrates

(including large area substrates for FPD ), which are used as photomask starting blanks and are

primarily obtained from Japanese and Korean suppliers;

high precision quartz substrates (including large area substrates for FPD), which are used as photomask starting blanks and are primarily obtained from Japanese and

South Korean suppliers;

pellicles and electronic grade chemicals, which are used in the manufacturing process;

and compacts, which are durable plastic containers in which photomasks are shipped.

These materials

are generally sourced from several suppliers.

These materials are generally sourced from several

We believe that our utilization of a select group of strategic suppliers enables us to access the most technologically advanced materials available.

On an ongoing basis, we continue to consider

additional supply sources.

On an ongoing basis, we continue to consider additional supply sources.

We typically enter into annual pricing agreements with our suppliers, some of which include volume-based incentives that have resulted in substantial cost savings;

these agreements do not require us to purchase

minimum dollar amounts or quantities of their subject materials.

these agreements do not require us to purchase minimum

dollar amounts or quantities of their subject materials.

We rely on a limited number of equipment suppliers to develop and provide the equipment used in the photomask manufacturing process.

16 unchanged sentences

and in other countries in which we produce or market our products.

The effects of compliance with these regulations are currently not material to our results

of operations, capital expenditures, or competitive position.

The effects of compliance with these regulations are currently not material to our results of operations, capital

expenditures, or competitive position.

However, compliance with changes to existing or new regulations may have a material adverse effect on our future results of operations, capital expenditures, or competitive position.

We discuss the potential impact of our not adhering to a number of these regulations in Item 1A.

We discuss the potential

impact of our not adhering to a number of these regulations in Item 1A.

“Risk Factors”, of this Form 10-K.

29 unchanged sentences

We provide mandatory safety trainings in our production facilities, which are designed to focus on empowering our employees with the knowledge and tools they need to make safe choices and to minimize risks.

Supervisors complete safety management courses as well.

complete safety management courses as well.

The health and wellness of our employees are critical to our success.

We provide our employees with access to a variety of innovative, flexible and convenient health and wellness programs.

Such programs are designed to support employees’ physical and mental health by providing tools

and resources to help them improve or maintain their health status and encourage engagement in healthy behaviors.

Such programs are designed to support employees’ physical and mental health by providing tools and

resources to help them improve or maintain their health status and encourage engagement in healthy behaviors.

Additionally, we provide robust compensation and benefits.

In addition to salaries, these programs, which vary by country/region,

can include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources,

In addition to salaries, these programs, which vary by country/region, can

include annual bonuses, stock-based compensation awards, a 401(k) plan with employee matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources,

employee assistance programs, and tuition assistance.

Set forth below are discussions of the risk factors we believe can make an investment in our business speculative or risky.

Concentration Related Risk Factors

Our dependency on the microelectronics industry, which as a whole is volatile, could create volatility in our demand and have a negative material impact on our business.

We sell substantially all of our photomasks to designers and manufacturers of IC and FPD electronic devices.

We believe that the demand for photomasks depends primarily on design activity rather than sales volume

from products using photomask technologies.

Consequently, an increase in semiconductor or FPD sales does not necessarily result in a corresponding increase in photomask sales.

In addition, the reduced use of application-specific ICs, reductions

in design complexities, other changes in the technology or methods of manufacturing or designing semiconductors or FPDs, or a slowdown in the introduction of new semiconductor or FPD designs could reduce demand for photomasks ‒ even if the demand

for semiconductors and FPDs increases.

Historically, the microelectronics industry has been volatile, with sharp periodic downturns and slowdowns.

These negative trends have been characterized by, among other things, diminished product demand,

excess production capacity, and accelerated erosion of selling prices with a concomitant effect on revenue and profitability.

We depend on a limited number of suppliers for equipment and raw materials and, if those suppliers fail to timely deliver their products to us, we may be unable to fulfill orders from our customers, which could

adversely affect our business and results of operations.

We rely on a limited number of photomask equipment manufacturers to develop, supply, and repair the equipment we use.

These equipment manufacturers usually require lead times of twelve months or longer between the

order date and the delivery of certain photomask imaging and inspection equipment.

The failure of our suppliers to develop, deliver or service such equipment on a timely basis due to internal issues, supply chain constraints or government-imposed

restrictions could have a material adverse effect on our business and results of operations.

In addition, the manufacturing equipment necessary to produce advanced photomasks could become prohibitively expensive, which could similarly affect us.

We use high-precision quartz photomask blanks, pellicles, and electronic grade chemicals in our manufacturing processes.

There are a limited number of suppliers of these raw materials, and we do not have long-term

contracts with these suppliers.

Any delays or quality problems in connection with significant raw materials, particularly photomask blanks, could cause delays in the shipments of photomasks, which could have a material adverse effect on our

business and results of operations.

The fluctuation of foreign currency exchange rates, with respect to prices of equipment and raw materials used in manufacturing, could also have a material adverse effect on our business and results of

We have been dependent on sales to a limited number of large customers;

the loss of any of these customers or a significant reduction in orders from these customers could have a material adverse effect on our revenues

and results of operations.

Historically, we have sold a significant proportion of photomasks to a limited number of IC and FPD manufacturers.

During 2025, 2024 and 2023, our two largest customers accounted for an aggregate of 29%, 27% and 27%, respectively, of our

Our five largest customers accounted for an aggregate of 50%, 50% and 51% of our revenue in 2025, 2024 and 2023, respectively.

The loss of a significant customer, a significant reduction or delay in orders from any significant customer

(including reductions or delays due to customer departures from recent buying patterns), or an unfavorable change in competitive conditions in the semiconductor or FPD industries could have a material adverse effect on our financial performance and

business prospects.

The consolidation of semiconductor manufacturers, or an economic downturn in the semiconductor industry, may increase the likelihood of losing a significant customer and could also have an adverse effect on our financial

performance and business prospects.

Financing Related Risk Factors

Our cash flows from operations and current holdings of cash may not be adequate for our current and long-term needs.

Our liquidity, as we operate in a high fixed-cost environment, is highly dependent on our revenue volume and the timing of our capital expenditures, which can vary significantly from period to period.

conditions in the semiconductor and FPD markets, our cash flows from operations and current holdings of cash may not be adequate to meet our current and long-term needs for capital expenditures, operations, and debt repayments.

Historically, in

certain years, we have used external financing to fund these needs.

Due to conditions in the credit market, some financing instruments used by us in the past may not be available.

Therefore, we cannot provide assurance that additional sources of

financing would be available to us on commercially favorable terms, if at all, should our cash requirements exceed our existing cash, and operating cash flows.

Our operations will continue to require substantial capital expenditures, for which we may be unable to provide or obtain funding.

The manufacture of leading-edge photomasks requires us to make substantial investments in additional manufacturing capability.

We expect that we will be required to continue to make substantial capital expenditures to

meet customer requirements and to position us for future growth.

Our capital expenditure payments for fiscal 2026 are expected to be approximately $330 million, of which approximately $13.0 million was included in Accounts

payable and Accrued liabilities on our October 31, 2025 consolidated balance sheet.

We cannot provide assurance that we will be able to obtain the additional capital required to fund our operations

or capital expenditures on reasonable terms, if at all, or that any such inability will not have a material adverse effect on our business and results of operations.

Industry and Competitive Related Risk Factors

Our business depends on managerial and technical personnel, who are in great demand, and our inability to attract and retain qualified employees could adversely affect our business and results of operations.

Our success depends, in part, upon key managerial and technical personnel, as well as our ability to continue to attract and retain additional qualified personnel.

The loss of certain key personnel (for example, our

Chief Executive Officer, Chief Financial Officer, or Chief Technology Officer) could have a material adverse effect on our business and results of operations.

We cannot offer assurance that we can retain our key managerial and technical employees,

or that we can attract similar additional employees in the future.

The photomask industry is dependent on the semiconductor and display industries, which are subject to rapid technological change and fluctuations in capacity needs.

Consequently, we might fail to adequately time our

capabilities to market needs, which could have a material adverse effect on our business and results of operations.

The photomask industry has been, and we expect it to continue to be, characterized by technological change and evolving industry requirements, which recent supply chain regionalization efforts have accelerated.

In order to remain

competitive, we will be required to continually anticipate, respond to, and scale technologies of increasing complexity in both the traditional and emerging markets that we serve.

In particular, we believe that, as semiconductor geometries

continue to become smaller and FPDs become larger or otherwise more advanced, we will be required to manufacture photomasks of increasingly challenging complexity.

Moreover, the demand for photomasks in non-leading-edge nodes may increase beyond

our ability to meet our customers’ requirements within adequate response times.

Additionally, the demand for photomasks has been, and could in the future be, adversely affected by changes in semiconductor and high-performance electronics

fabrication methods that affect the type or quantity of photomasks utilized, such as changes in semiconductor demand that favor programmable IC devices and other approaches that replace application-specific ICs, or the use of certain

chip-stacking methodologies that lessen the emphasis on conventional lithography technology.

Furthermore, evidence of the viability and the corresponding market acceptance of alternative methods of transferring IC designs onto semiconductor

wafers could reduce or eliminate the need for photomasks in the production of semiconductors.

The risk of loss of our intellectual property, trade secrets, or other sensitive business or customer confidential information or disruption of operations due to cyberattacks or data breaches could

negatively impact our financial results.

Cyberattacks or data breaches could compromise confidential, business-critical information, cause disruptions in our operations, expose us to potential litigation, or harm our reputation.

We have important assets,

including intellectual property, trade secrets, and other sensitive, business-critical and/or confidential information which may be vulnerable to such incidents.

While we have a comprehensive cybersecurity program that is continually reviewed,

maintained, and upgraded, we cannot assure that we are invulnerable to cyberattacks and data breaches which, if significant, could negatively impact our business and financial results.

We may be unable to enforce or defend our ownership and use of proprietary technology, and the utilization of unprotected Company developed technology by our competitors could adversely affect our business, results of

operations, and financial position.

We believe that the success of our business depends more on proprietary technology, information and processes, and know-how than on our patents or trademarks.

Much of our proprietary information and technology related

to manufacturing processes is not patented and may not be patentable.

We cannot offer assurance that:

we will be able to adequately protect our technology;

competitors will not independently develop similar technology;

international intellectual property laws will adequately protect our intellectual property rights.

We may become the subject of infringement claims or legal proceedings by third parties with respect to current or future products or processes.

Any such claims, with or without merit, or litigation to enforce or

protect our intellectual property rights that require us to defend against claimed infringements of the rights of others, could result in substantial costs, diversion of resources, and product shipment delays or could force us to enter into royalty

or license agreements, rather than dispute the merits of these claims.

Any of the foregoing could have a material adverse effect on our business, results of operations, and financial position.

We operate in a highly competitive environment, and, should we be unable to meet our customers’ requirements for product quality, timeliness of delivery or technical capabilities, our revenue could be adversely

The photomask industry is highly competitive, and most of our customers utilize more than one photomask supplier.

Our competitors include Compugraphics International, Ltd., Dai Nippon Printing Co., Ltd (outside of

Taiwan and China), Hoya Corporation, LG Innotek Co., Ltd., Shenzhen Newway Photomask Making Co., Ltd., Shenzhen Qingyi Photomask, Ltd., SK-Electronics Co.

Ltd., Taiwan Mask Corporation, and Tekscend Photomask.

We also compete with semiconductor

and FPD manufacturers' captive photomask manufacturing operations, some of which market their photomask manufacturing services to outside customers.

We expect to face continued competition from these and other suppliers in the future.

competitors have substantially greater financial, sales, marketing, or other resources than we do.

Also, when producing smaller geometry photomasks, some of our competitors may be able to more rapidly develop and produce such masks and achieve

higher manufacturing yields than we can.

We believe that consistency of product quality, timeliness of delivery, competitive pricing, technical capability and service are the principal factors considered by customers when selecting their

photomask suppliers.

Our inability to meet these competitive requirements could have a material adverse effect on our business and results of operations.

In the past, competition has led to pressure to reduce prices and the need to invest in

advanced manufacturing technology, which we believe contributed to the decrease in the number of independent photomask suppliers, several years ago.

These pressures may worsen in the future, causing further consolidation.

Investment Related Risk Factors

Joint ventures may not operate according to their business plans if our partners fail to fulfill their obligations, which may adversely affect our results of operations and compel us to dedicate additional resources to

these joint ventures.

The nature of a joint venture requires us to share control in certain areas with unaffiliated third parties and it is always possible that the alignment that brought us and our joint venture partner together may change

over time, whether due to change in business strategy, change in control, change in market conditions or applicable laws, or other events.

Differing views among joint venture participants may result in delayed decisions or failures to agree on

major issues.

If our joint venture partner does not fulfill its obligations or that alignment changes, the affected joint venture may not be able to operate in accordance with its business plan or the parties may seek to exit the joint venture

under the terms of the joint venture agreement or otherwise.

Under such a scenario, among other possible consequences, our results of operations may be adversely affected, we may be compelled to increase the level of our resources devoted to the

joint venture or our company-wide business plan may need to be adjusted.

If such differences caused a joint venture to deviate from its business plan, or put, change of control or other exit or termination provisions are triggered, our results of

operations could be materially adversely affected.

Our operations in China expose us to substantial risks.

In 2019, we commenced operations at our two manufacturing facilities in China.

These investments are subject to substantial risks which may include, but are not limited to:

the inability to protect our intellectual property rights under

Chinese law, which may not offer as high a level of protection as U.S.

unexpectedly long negotiation periods with Chinese suppliers and customers;

quality issues related to materials sourced from local vendors;

unexpectedly high labor costs

due to a tight labor supply;

and difficulty in repatriating funds and selling or transferring assets.

Our investments in China also exposed us to a significant additional foreign currency exchange risk, which we had not been subject to in prior

In addition, as tensions have, from time to time, escalated between the U.S.

and China, we believe there is an enhanced risk that our substantial investments in China may be subject to unforeseen or additional restrictions, which may include

expropriation of our investments by the Chinese government or restrictions imposed on our operations by the U.S.

or other countries.

These and other risks may result in our not realizing a return on, or losing some, or all, of our investments in

China, which would have a material adverse effect on our financial condition and financial performance.

We may incur unforeseen charges related to possible future facility closures, restructurings, or forfeitures.

We cannot provide assurance that there will not be facility closures, restructurings, or forfeitures in the near or long term, nor can we assure that we will not incur significant charges should there be any future

facility closures, restructurings, or forfeitures.

We may not be able to consummate future acquisitions or joint ventures or integrate acquisitions into our business, which could result in unanticipated expenses and losses.

As part of our business growth strategy, we have acquired businesses and entered into joint ventures in the past, and we may pursue acquisitions and joint venture opportunities in the future.

Our future efforts to grow

the Company may include expanding into new or related markets or industries.

Our ability to implement this component of our growth strategy may be limited by both our ability to identify appropriate acquisition or joint venture candidates and our

financial resources, including our available cash and borrowing capacity.

The expense incurred in consummating acquisitions or entering into joint ventures, the time it takes to integrate an acquisition, or our failure to integrate businesses

successfully, could result in unanticipated expenses and losses.

Furthermore, we may not be able to realize any of the anticipated benefits from acquisitions or joint ventures.

The process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties, and may require significant financial resources that would otherwise be available for the

ongoing development or expansion of existing operations.

Some of the risks associated with the integration of acquisitions include:

potential disruption of our ongoing business;

distraction of management;

unforeseen claims and liabilities,

including unexpected environmental exposures;

unforeseen adjustments, taxes, charges and write-offs;

problems enforcing the indemnification obligations of sellers of businesses or joint venture partners for claims and liabilities;

unexpected losses

of customers of, or suppliers to, the acquired business;

difficulty in conforming the acquired business’ standards, processes, procedures and controls with our operations;

variability in financial performance arising from the implementation of

acquisition accounting;

inability to coordinate new product and process development;

loss of senior managers and other critical personnel;

problems with new labor unions;

and challenges arising from the increased scope, geographic diversity, and

complexity of our operations.

Operations Related Risk Factors

Our quarterly operating results fluctuate significantly and may continue to do so in the future.

We have experienced fluctuations in our quarterly operating results, and we anticipate that such fluctuations will continue and could intensify in the future.

Fluctuations in operating results may result in volatility

in the prices of our common stock and financial instruments that could be linked to its value.

Operating results may fluctuate as a result of many factors, including the size and timing of orders and shipments, the loss of significant customers,

changes in product mix, the flow of customer design releases, technological change, fluctuations in manufacturing yields, the actions of our competitors, and general economic conditions.

We operate in a high fixed-cost environment and, should our

revenues and asset utilization decrease, our operating margins could be negatively impacted.

Our customers generally order photomasks on an as-needed basis;

thus, our revenue in any quarter is dependent primarily on orders received during that quarter.

Since we operate with little backlog, and the rate of new

orders may vary significantly from quarter to quarter, our capital expenditures and consequential expense levels are, to some extent, based primarily on sales forecasts and technological advancements in photomask manufacturing equipment.

Consequently, if anticipated revenues in any quarter do not occur when expected, our capital investments could result in underutilized capacity and disproportionately high expense levels, causing operating results to be adversely affected.

the foregoing factors, we believe that quarter to quarter comparisons of our operating results cannot be relied upon as indicators of future performance.

In addition, in future quarters, our operating results could be below guidance we may provide

or the expectations of public market analysts and investors, which could have a material adverse effect on the market price of our common stock.

Our substantial non-U.S.

operations are subject to additional risks.

Revenues from our non-U.S.

operations were approximately 82%, 83% and 86% of our total revenues in 2025, 2024 and 2023, respectively.

We believe that maintaining

significant international operations requires us to have, among other things, a local presence in the geographic markets that we supply.

This requires significant investments in financial, managerial, operational, and other resources.

we have significantly expanded our operations in international markets by acquiring existing businesses in Europe and Asia, and building manufacturing facilities in Taiwan and China.

In order to enable us to optimize our investments and other

resources, we closely monitor the semiconductor and FPD manufacturing markets for indications of geographic movement and, in conjunction with these efforts, continue to assess the locations of our manufacturing facilities.

These assessments could

result in the opening of additional facilities or closing of our current facilities.

Operations outside of the United States are subject to inherent risks, including:

fluctuations in currency exchange rates;

unstable political and economic conditions in various countries;

changes in economic alliances;

unexpected changes in regulatory requirements including import and export regulations;

compliance with a variety of burdensome foreign laws and regulations;

compliance with anti-bribery and anti-corruption laws (such as the Foreign Corrupt

Practices Act);

tariffs and other trade barriers;

difficulties in staffing and managing international operations;

and longer accounts receivable collection cycles.

foreign countries may enact other restrictions on foreign trade or

investment, including:

currency exchange controls;

trade sanctions which result in our losing access to customers and suppliers;

legislation which renders agreements to be difficult to enforce;

impositions on the movement of funds or other assets;

or we may be subject to adverse tax consequences.

These factors may have a material adverse effect on our costs or our ability to generate revenues outside of the United States and, consequently, on our business and results of operations.

We could be subject to damages based on claims brought against us by our customers, or lose customers as a result of the failure of our products to meet certain quality specifications.

Our products provide important performance attributes for our customers’ products.

If a product fails to perform in a manner consistent with quality specifications, or has a shorter useful life than warrantied, a

customer could seek replacement of the product or damages for costs incurred as a result of the product failing to perform, particularly if such products are sold under agreements that contain limited performance and life cycle warranties.

customers often require us to guarantee that our products conform to certain product specifications that they provide.

Any failure to comply with such specifications could result in claims or legal action.

A successful claim, or series of claims,

against us could have a material adverse effect on our financial condition and results of operations and could result in a loss of one or more customers.

We face risks associated with the use of sophisticated equipment and complex manufacturing processes and technologies.

Our inability to effectively utilize such equipment and

technologies and perform such processes could have a material adverse effect on our business and results of operations.

Our complex manufacturing processes require the use of expensive and technologically sophisticated equipment and materials, and are continually modified in an effort to improve manufacturing yields and product quality.

Minute impurities, defects, or other difficulties in the manufacturing process can lower manufacturing yields and render products unmarketable.

Moreover, the manufacture of leading-edge photomasks is more complex and time consuming than

manufacturing less advanced photomasks, and their fabrication may result in delays in the manufacture of all levels of photomasks.

We have, on occasion, experienced manufacturing difficulties and capacity limitations that have delayed our ability

to deliver products within the time frames contracted for by our customers.

We cannot provide assurance that we will not experience these or other manufacturing difficulties, or be subject to increased costs, which could result in a loss of

customers or otherwise have a material adverse effect on our business and results of operations.

We have a high level of fixed costs.

Because of the capital-intensive nature of the photomask manufacturing business, we have a high level of fixed costs and a high degree of operating leverage.

Accordingly, should our sales volumes decline as a result of

a decrease in design releases from our customers or for any other reason, we may have excess or underutilized production capacity which could significantly impact our operating margins or result in write-offs from asset impairments.

Regulatory Related Risk Factors

Additional taxes could adversely affect our financial results.

Our tax filings are subject to audits by tax authorities in the various jurisdictions in which we do business.

These audits may result in assessments of additional taxes that are subsequently resolved with the taxing

authorities or through the courts.

Currently, we believe there are no outstanding assessments whose resolution would result in a material adverse financial result.

However, we cannot offer assurances that unasserted or potential future assessments

would not have a material adverse effect on our financial condition or results of operations.

Risks related to tariffs and global trade policies could adversely affect our business, financial condition, and results of operations.

In FY25, new tariffs were announced on imports to the U.S., followed by various modifications and delays.

Further changes are expected to be made in the future, which may include additional sector-based tariffs or

other measures.

Department of Commerce has initiated an investigation under Section 232 of the Trade Expansion Act of 1962, as amended, into, among other things, imports of semiconductors, semiconductor manufacturing equipment, and their

derivative products, including downstream products that contain semiconductors.

Tariffs and trade restrictions may increase costs and complexity in our supply chain, including the procurement of semiconductor manufacturing equipment, raw materials,

and critical components.

They may also elevate the cost of our products, reduce demand, and negatively affect customer purchasing behavior.

Our products and technology could be subject to U.S.

export control laws and/or the export control laws of the foreign jurisdictions where we operate.

We are subject to various laws relating to the export of products we manufacture, and the technology related thereto, and our failure to comply with these laws could subject us to substantial fines, penalties, and even

injunctions, the imposition of which could have a material adverse effect on the success of our business.

Certain of our products are or could be subject to the Export Administration Regulations (“EAR”) if they are manufactured in the U.S., or based on U.S.

technology, or contain more than a de minimis amount of

controlled U.S.

The EAR could prohibit the export of certain products out of the US or could prohibit our foreign sites from manufacturing or delivering photomasks to certain restricted entities.

Additionally, the Company has a large,

global business with sales outside the U.S.

representing a majority of the Company’s total net sales, and the Company believes that it generally benefits from growth in international trade.

However, trade policies and disputes and other

international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect the Company’s business, particularly if these measures occur in regions where the Company derives a

significant portion of its revenues.

Based on the complex relationships between the United States and certain foreign countries including, but not limited to China, there is inherent risk that political, diplomatic and national security influences might

lead to trade disputes, impacts and/or disruptions to our operations or our ability to sell our photomasks.

The United States and other countries have imposed and may continue to impose trade restrictions and have also levied tariffs and taxes on

certain goods and imposed export restrictions.

Increases in tariffs, additional taxes or other trade restrictions and retaliatory measures may increasingly impact customer demand and customer investment in manufacturing equipment, increase our

manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell, export products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of

operations, or financial condition.

We may be unprepared for changes to environmental laws and regulations and may incur liabilities arising from environmental matters.

We are subject to numerous environmental laws and regulations that impose various environmental controls on, among other things, the discharge of pollutants into the air and water and the handling, use, storage,

disposal, and cleanup of solid and hazardous wastes.

Changes in these laws and regulations may have a material adverse effect on our financial position and results of operations, and inadequate compliance with their requirements could give rise to

significant liabilities.

If we violate environmental, health or safety laws or regulations, in addition to being required to correct such violations, we can be held liable in administrative, civil, or criminal proceedings, and substantial

fines and other sanctions could be imposed that could disrupt or limit our operations.

Liabilities associated with the investigation and cleanup of hazardous substances, as well as personal injury, property damages or natural resource damages

arising from the release of, or exposure to, such hazardous substances, may be imposed in many situations without regard to violations of laws or regulations or other fault, and may also be imposed jointly and severally (so that a responsible party

may be held liable for more than its share of the losses involved, or even the entire loss).

Such liabilities may also be imposed on many different entities with a relationship to the hazardous substances at issue, including, for example, entities

that formerly owned or operated the property affected by the hazardous substances and entities that arranged for the disposal of the hazardous substances at the affected property, as well as entities that currently own or operate such property.

nature of our business, including historical operations at our current and former facilities, exposes us to risks of liability under these laws and regulations due to the production, storage, use, transportation and sale of materials that can cause

contamination or personal injury if released into the environment.

Additional information may arise in the future concerning the nature or extent of our liability with respect to identified sites and additional sites that may be identified, for

which we are alleged to be liable.

General Risk Factors

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

In recent years, there has been an increased focus from stakeholders on environmental, social, and governance matters, including greenhouse gas emissions and climate-related risks, sustainability, renewable energy,

water stewardship, waste management, diversity, equity and inclusion, responsible sourcing and supply chain, human rights, and social responsibility.

Evolving stakeholder expectations and our efforts to manage these issues, report on them, and

accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact, including on our reputation and stock price, reputational harm, including damage to

our relationships with customers, suppliers, investors, governments, or other stakeholders, adverse impacts on our ability to manufacture and sell products and maintain our market share, the success of our collaborations with third parties,

increased risk of litigation, investigations, or regulatory enforcement action, unfavorable environmental, social, and governance ratings or investor sentiment, diversion of resources and increased costs to control, assess, and report on

environmental, social, and governance metrics.

Ineffective internal controls could impact our business and operating results.

Our internal controls over financial reporting may not prevent or detect misstatements because of their inherent limitations in detecting human errors, the circumvention or overriding of controls, or fraud;

effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

fail to maintain the adequacy of our internal controls, including any failure to implement

required new or improved controls;

otherwise fail to prevent financial reporting misstatements;

or experience difficulties in implementing internal controls, our business and operating results could be adversely impacted, and we could fail to meet

our financial reporting obligations.

Our business could be adversely impacted by global or regional catastrophic events.

Our business could be materially adversely affected by terrorist acts, widespread outbreaks of infectious diseases, government responses emplaced to limit the impact of infectious diseases (such as shelter-in-place

directives), or the outbreak or escalation of wars including, but not limited to, the invasion of Ukraine by the Russian Federation.

Such events in the geographic regions in which we do business, including escalations of political tensions and

military conflicts in the U.S., Europe, the Republic of South Korea, the People’s Republic of China, or the Republic of China (Taiwan), and any governmental sanctions enacted in reaction thereto, could result in a global energy crisis, economic

inflation, supply-chain disruptions, or the confiscation or destruction of our facilities;

all and any of these outcomes could have material, adverse impacts on our results of operations, financial condition, and cash flows.

Our production facilities could be damaged or disrupted by natural or manmade disasters or labor strikes, either of which could adversely affect our financial position, results of operations, and cash flows.

A major catastrophe, such as an earthquake, flood, fire, or other disaster, labor strike, or work stoppage at any of our manufacturing facilities, or a manufacturing facility of our suppliers or customers, could result

in a prolonged interruption of our business.

A disruption resulting from any one of these events could cause significant delays in shipments of our products and the loss of revenue and customers, which could have a material adverse effect on our

financial position, results of operations, and cash flows.

Our facilities in Taiwan are located in a seismically-active area.

Our sales can be impacted by the health and stability of the general economy, which could adversely affect our results of operations and cash flows.

Unfavorable general economic conditions in the U.S.

or other countries in which we or our customers conduct business may have the effect of reducing the demand for photomasks.

Economic downturns may lead to a decrease

in demand for end products whose manufacturing processes involve the use of photomasks, which may result in a reduction in new product design and development by semiconductor or FPD manufacturers and adversely affect our results of operations and

Technology failures or cyber security breaches could have a material adverse effect on our operations.

We rely on information technology systems to process, transmit, store, and protect electronic information.

For example, a significant portion of the communications between our personnel, customers, and suppliers

depends on information technology.

Our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications

failures, computer viruses, hackers, and other security issues.

Although we have technology and information security processes and disaster recovery plans in place to mitigate our risks to these vulnerabilities, these measures may not be adequate

to ensure that our operations will not be disrupted, should such an event occur.

The General Data Protection Regulation (“GDPR”) applies to the collection, use, retention, security, processing, and transfer of personally identifiable information of residents of E.U.

The GDPR created a

range of new compliance obligations and imposes significant fines and sanctions for violations.

It is possible that the GDPR may be interpreted or applied in a manner that is adverse to, or unforeseen by us, including requirements that are

inconsistent with our practices, or that we may otherwise fail to construe its requirements in ways that are satisfactory to the E.U.

Upon leaving the E.U.

on January 31, 2021, the U.K.

enacted a new domestic data privacy law called

– General Data Protection Regulation” (“UK-GDPR”).

Although somewhat less restrictive than the GDPR, the UK-GDPR is similar to the GDPR with respect to both an entity’s obligation to protect personal information and the imposition of

significant fines for violations.

Any failure, or perceived failure, by us to comply with the GDPR or the UK-GDPR, or with any applicable regulatory requirements or orders, including, but not limited to privacy, data protection, information security,

or consumer protection related privacy laws and regulations, in one or more jurisdictions within the E.U., the U.K.

or elsewhere, could:

result in proceedings or actions against us by governmental entities or individuals;

subject us to significant

fines, penalties, and/or judgments;

require us to change our business practices;

limit access to our products and services in certain countries, or otherwise adversely affect our business, as we would be at risk to lose both customers and revenue,

and incur substantial costs.

We may, in the future, incur net losses.

Although the Company has been profitable since fiscal 2010, it has, in the past, incurred net losses.

We cannot provide assurance that the Company will not incur net losses in the future.

Market Related Risk Factors

Changes in foreign currency exchange rates could have a material adverse effect on our results of operations, financial condition, or cash flows.

Our consolidated financial statements are prepared in accordance with U.S.

GAAP and are reported in U.S.

Our operations have transactions and balances denominated in currencies other than the U.S.

primarily the South Korean won, New Taiwan dollar, Japanese yen, Chinese Yuan, Euro, Singapore dollar, and the British pound sterling.

In 2025, we recorded a net loss from changes in foreign currency exchange rates of $8.3 million in our

consolidated statement of income, while our net assets decreased by 0.1 million as a result of the translation of foreign currency financial statements to U.S.

Significant foreign currency fluctuations may adversely affect our results of

operations, financial condition, or cash flows.

Our hedging activity could negatively impact our results of operations and cash flows.

We may enter into derivatives to manage our exposures to interest rate and currency movements.

If we do not accurately forecast our results of operations, execute contracts that do not effectively mitigate our economic

exposures to interest rates and currency rates, elect to not apply hedge accounting (when doing so would have mitigated our losses), or fail to comply with the complex accounting requirements for hedging transactions, our results of operations and

cash flows could be volatile, as well as negatively impacted.

The market price of our common stock is subject to volatility and could fluctuate widely in response to various factors, many of which are beyond our control.

Factors that may influence the price of our common stock include, but are not limited to, the following:

loss of any of our key customers or suppliers;

additions or departures of key personnel;

third party sales of common stock;

short interest in our common stock;

our ability to execute our business plan, including but not limited to, our expansion into China;

announcements and consummations of business acquisitions;

operating results that fall below or exceed expectations;

announcements of forecasted earnings or material transactions;

issuances or repurchases of our common stock;

intellectual property disputes;

reputational damage suffered with or without merit;

industry developments;

news about or disclosures made by our competitors or customers;

business combinations, divestitures, or bankruptcies by customers, suppliers, or competitors;

economic and other external factors including (but not limited to) inflation, recessions, natural disasters, military actions, political instability, or social unrest;

period to period fluctuations in our financial results.

In addition, securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.

These market fluctuations may also

materially and adversely affect the market price of our common stock.

Such fluctuations may be the result of imbalances between buy and sell offers, the actions of quantitative or algorithmic stock traders and short-sellers, or low trading volume

which can magnify the effects of a small number of transactions on the price of a stock.

We operate in a global, competitive environment which gives rise to operating and market risk exposure.

We sell our products in a competitive, global environment, and compete worldwide for sales on the basis of product quality, price, technology, and customer service.

Sales of our products are also

subject to federal, state, local, and foreign taxes, laws and regulations, trade agreements, import and export controls, duties, and tariffs.

The imposition of additional regulations or controls including export controls, duties, tariffs, or

changes to bilateral and regional trade agreements, could negatively impact our results of operations.

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 1. Business