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Item 1A. Risk Factors

2022-01-28 compared with 2021-01-28 · 209 added, 142 removed, 290 unchanged (55% of the section changed)

The following discussion is divided into five sections.

The following discussion is divided into several sections.

The first section, which begins immediately following this paragraph, discusses some of the risks that may affect our business, results of operations and financial condition.

The second section, captioned “ Risks Related to Our Relationship with MiTAC Holdings Corporation,” discusses risks relating to MiTAC’s influence over us.

The third section, captioned “Risks Related to our Industry,” discusses risk impacting businesses operating in our industry.

The fourth section, captioned “Risks Related to the Separation,” discusses some of the risks relating to the separation of Concentrix into an independent publicly-traded company.

The fifth section, captioned “Risks Related to the Macroeconomic and Regulatory Environment,” relates to risks which broadly affect companies operating in regions that we do.

With the completion of the Separation on December 1, 2020, our discussion about our risks is focused on our Technology Solutions segment.

The second section, captioned “Risks Related to Our Indebtedness” discusses our debt-related risks.

The third section, captioned “Risks Related to Our Relationships with Apollo Global Management Inc.

and MiTAC Holdings Corporation,” discusses risks relating to Apollo Global Management’s influence over us and our relationship with MiTAC Holdings Corporation.

The fourth section, captioned “Risks Related to our Industry,” discusses risks impacting businesses operating in our industry.

The fifth section, captioned “Risks Related to the Acquisition of Tech Data” relates to risks associated with the Merger.

The sixth section, captioned “Risks Related to the Macro-Economic and Regulatory Environment,” relates to risks which broadly affect companies operating in regions in which we operate.

You should carefully review all of these sections, as well as our consolidated financial statements and notes thereto and the other information appearing in this report, for important information regarding risks that affect us.

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In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

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Risks Related to Our Business and Operations

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the impact of the business acquisitions and dispositions we make;

general economic conditions and level of IT and CE spending and outsourced business services;

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general economic conditions and level of IT spending;

the loss or consolidation of one or more of our significant OEM suppliers or customers;

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Therefore, we may not be able to control spending in a timely manner to compensate for any unexpected revenue shortfall.

Our operating results are affected by the seasonality of the IT and CE products and services industry.

Our operating results are affected by the seasonality of the IT products and services industry.

We have historically experienced higher sales in our fourth fiscal quarter due to patterns in the capital budgeting, federal government spending and purchasing cycles of end-users.

These patterns may not be repeated in subsequent periods.

These historical patterns may not be repeated in subsequent periods and may be impacted by the Merger.

You should not rely on period-to-period comparisons of our operating results as an indication of future performance.

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We have limited protection against excess inventory should anticipated demand not materialize.

We depend on a limited number of OEMs to supply the IT and CE products and services that we sell and the loss of, or a material change in, our business relationship with a major OEM supplier could adversely affect our business, financial position and operating results.

We depend on a limited number of OEMs to supply the IT products and services that we sell and the loss of, or a material change in, our business relationship with a major OEM supplier could adversely affect our business, financial position and operating results.

Our future success is highly dependent on our relationships with a small number of OEM suppliers.

For example, sales of HP products and services comprised approximately 12%, 12% and 13% of our consolidated revenue for fiscal years 2020, 2019 and 2018, respectively.

For example, sales of HP Inc.

products and services comprised approximately 12%, 15% and 14% of our total revenue for fiscal years 2021, 2020 and 2019, respectively.

Our OEM supplier agreements typically are short-term and may be terminated without cause upon short notice.

The loss or deterioration of our relationship with HP or any other major OEM supplier, the authorization by OEM suppliers of additional distributors, the sale of products by OEM suppliers directly to our reseller and retail customers and end-users, or our failure to establish relationships with new OEM suppliers or to expand the distribution and supply chain services that we provide OEM suppliers could adversely affect our business, financial position and operating results.

OEM supplier agreements are often established at a regional or country level and these relationships may change in some countries or regions and not others.

The loss or deterioration of our relationship with HP Inc.

or any other major OEM supplier, the authorization by OEM suppliers of additional distributors, the sale of products by OEM suppliers directly to our reseller and retail customers and end-users, or our failure to establish relationships with new OEM suppliers or to expand the distribution and supply chain services that we provide OEM suppliers could adversely affect our business, financial position and operating results.

In addition, OEM suppliers may face liquidity or solvency issues that in turn could negatively affect our business and operating results.

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Our business is also highly dependent on the terms provided by our OEM suppliers.

Generally, each OEM supplier has the ability to change the terms and conditions of its distribution agreements, such as reducing the amount of price protection and return rights or reducing the level of purchase discounts, incentive rebates and marketing programs available to us.

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From time to time we may conduct business with a supplier without a formal agreement because the agreement has expired or was otherwise terminated.

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Our gross margins are low, which magnifies the impact of variations in gross margin, operating costs and our operating results.

As a result of significant price competition in the IT and CE products and services industry, our gross margins are low, and we expect them to continue to be low in the future.

Increased competition arising from industry consolidation and low demand for certain IT and CE products and services may hinder our ability to maintain or improve our gross margins.

As a result of significant price competition in the IT products and services industry, our gross margins are low, and we expect them to continue to be low in the future.

Increased competition arising from industry consolidation and low demand for certain IT products and services may hinder our ability to maintain or improve our gross margins.

These low gross margins magnify the impact of variations in revenue and operating costs on our operating results.

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We are subject to the risk that our inventory value may decline, and protective terms under our OEM supplier agreements may not adequately cover the decline in value, which in turn may harm our business, financial position and operating results.

The IT and CE products industry is subject to rapid technological change, new and enhanced product specification requirements, and evolving industry standards.

The IT products industry is subject to rapid technological change, new and enhanced product specification requirements, and evolving industry standards.

These changes may cause inventory on hand to decline substantially in value or to rapidly become obsolete.

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In most cases, we have no guaranteed price or delivery agreements with our OEM suppliers.

We occasionally experience a supply shortage of certain products as a result of strong demand or problems experienced by our OEM suppliers.

We have experienced a supply shortage of certain products as a result of strong demand or problems experienced by our OEM suppliers, including during fiscal year 2020 and 2021 due to global supply chain constraints resulting from the impacts of the COVID-19 pandemic.

If shortages or delays persist, the price of those products may increase, or the products may not be available at all.

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Our business experiences customer concentration from time to time.

One customer accounted for 19%, of our consolidated revenue in fiscal years 2020 and 2019 and 17%, in fiscal year 2018.

One customer accounted for 17%, 23% and 24% of our total revenue in fiscal years 2021, 2020 and 2019.

While we do not believe that the loss of any single customer would have a material adverse effect on us, such loss could result in an adverse impact on certain of our businesses.

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Volumes can fluctuate based on customer demand, delivery quality and the competitive landscape.

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ability to deliver customized solutions on a timely basis is critical to our success.

Our ability to deliver customized solutions on a timely basis is critical to our success.

Any delay could impact our competitive position and result in loss of customer orders, which could impact our financial position and operating results.

The market for CE products that we distribute is characterized by short product life cycles.

Increased competition for limited retailer shelf space, decreased promotional support from resellers or retailers or increased popularity of downloadable or online content and services could adversely impact our revenue.

The market for CE products, such as personal computers and tablets, mobile devices, wearable devices, video game titles and hardware, and audio or visual equipment, is characterized by short product life cycles and frequent introductions of new products.

The markets in which we compete frequently introduce new products to meet changing consumer preferences and trends.

As a result, competition is intense for resellers’ and retailers’ limited shelf space and promotions.

If our vendors’ new products are not introduced in a timely manner or do not achieve significant market acceptance, we may not generate sufficient sales or profitability.

Further, if we are unable to successfully compete for resellers’ or retailers’ space and promotional resources, this could negatively impact market acceptance of our products and negatively impact our business and operating results.

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We have pursued and intend to continue to pursue strategic acquisitions or investments in new markets and may encounter risks associated with these activities, which could harm our business and operating results.

We have in the past pursued, and in the future expect to pursue, acquisitions of, or investments in, businesses and assets in new markets, either within or outside the IT and CE products and services industries and the customer experience services industry, that complement or expand our existing business.

We have in the past pursued, and in the future expect to pursue, acquisitions of, or investments in, businesses and assets in new markets, either within or outside the IT products and services industry, that complement or expand our existing business.

For example, in September 2021, we completed the acquisition of Tech Data.

Our acquisition strategy involves a number of risks, including:

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Our goodwill and identifiable intangible assets could become impaired, which could have a material non-cash adverse effect on our results of operations.

We recorded substantial goodwill and amortizable intangible assets as a result of our previous acquisitions.

We recorded substantial goodwill and both definite and indefinite-lived intangible assets as a result of our previous acquisitions, including the Merger.

We review our goodwill and intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

We assess whether there has been an impairment in the value of goodwill at least annually.

We assess whether there has been an impairment in the value of goodwill and indefinite-lived intangible assets at least annually.

Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or intangible assets may not be recoverable include declines in stock price, market capitalization or cash flows and slower growth rates in our industry.

We could be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or intangible assets were determined, negatively impacting our results of operations.

We could be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or intangible assets is determined, negatively impacting our results of operations.

Because of the capital-intensive nature of our business, we need continued access to capital, which if not available to us or if not available on favorable terms, could harm our ability to operate or expand our business.

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If cash from available sources is insufficient, proceeds from our accounts receivable securitization and revolving credit programs are limited or cash is used for unanticipated needs, we may require additional capital sooner than anticipated.

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In the event we are required, or elect, to raise additional funds, we may be unable to do so on favorable terms, or at all, and may incur expenses in raising the additional funds.

Our current and future indebtedness could adversely affect our operating results and severely limit our ability to plan for, or react to, changes in our business or industry.

We could also be limited by financial and other restrictive covenants in securitization or credit arrangements, including limitations on our borrowing of additional funds and issuing dividends.

We could also be limited by financial and other restrictive covenants in our securitization or credit arrangements, including limitations on our borrowing of additional funds and issuing dividends.

Furthermore, the cost of securitization or debt financing could significantly increase in the future, making it cost prohibitive to securitize our accounts receivable or borrow, which could force us to issue new equity securities.

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Any inability to raise additional capital when required could have an adverse effect on our business and operating results.

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We have significant credit exposure to our customers, and negative trends in their businesses could cause us significant credit loss and negatively impact our cash flow and liquidity position.

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Our credit exposure risk may increase due to financial difficulties or liquidity or solvency issues experienced by our customers, resulting in their inability to repay us.

The liquidity or solvency issues may increase as a result of an economic downturn or a decrease in IT or CE spending by end-users.

The liquidity or solvency issues may increase as a result of an economic downturn or a decrease in IT spending by end-users.

If we are unable to collect payments in a timely manner from our customers due to changes in financial or economic conditions, or for other reasons, and we are unable to collect under our credit insurance policies, we may write-off the amount due from the customers.

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These systems support a variety of functions including inventory management, order processing, shipping, shipment tracking, and billing.

Failures or significant downtime of our IT or telecommunications systems could prevent us from taking customer orders, printing product pick-lists, shipping products, billing customers and handling call volume.

Failures or significant downtime of our IT or telecommunications systems has, in the past, and could, in the future, prevent us from taking customer orders, printing product pick-lists, shipping products, billing customers and handling call volume.

Sales also may be affected if our reseller and retail customers are unable to access our pricing and product availability information.

We also rely on the Internet, and in particular EDI and XML, for a large portion of our orders and information exchanges with our OEM suppliers and reseller and retail customers.

The Internet and individual websites have experienced a number of disruptions and slowdowns, some of which were caused by organized attacks.

In addition, some websites have experienced security breakdowns.

If we were to experience a security breakdown, disruption or breach that compromised sensitive information, it could harm our relationship with our OEM suppliers and reseller and retail customers.

The Internet and individual websites have experienced a number of disruptions, slowdowns and security breakdowns, some of which were caused by organized attacks.

If we were to experience a future security breakdown, disruption or breach that compromised sensitive information, it could harm our relationship with our OEM suppliers and reseller and retail customers.

Disruption of our website or the Internet in general could impair our order processing or more generally prevent our OEM suppliers and reseller and retail customers from accessing information.

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The occurrence of any of these events could have an adverse effect on our operations and financial results.

Because of the experience of our key personnel in the IT, CE and the customer experience services industries and their technological and industry expertise, if we were to lose any of our key personnel, it could inhibit our ability to operate and grow our business successfully.

Because of the experience of our key personnel in the IT industry and their technological and industry expertise, if we were to lose any of our key personnel, it could inhibit our ability to operate and grow our business successfully.

We are dependent in large part on our ability to retain the services of our key senior executives and other technological and industry experts and personnel.

Except for Dennis Polk, our President and Chief Executive Officer, we generally do not have employment agreements with our executives or employees.

Except for certain of our key executives, we generally do not have employment agreements with our employees.

We also do not carry “key person” insurance coverage for any of our key executives.

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Also, the same or similar incidents may occur in the future for which we may not have sufficient insurance coverage or policy limits to be fully compensated for the loss, which may have an adverse effect on our business and financial results.

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We may become involved in intellectual property or other disputes that could cause us to incur substantial costs, divert the efforts of our management, and require us to pay substantial damages or require us to obtain a license, which may not be available on commercially reasonable terms, if at all.

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Although we generally have various levels of indemnification protection from our OEM suppliers and design and integration solutions customers, in many cases any indemnification to which we may be entitled is subject to maximum limits or other restrictions.

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In addition, we have developed proprietary IT systems, mobile applications, and cloud-based technology and acquired technologies that play an important role in our business.

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We may be unable to obtain such a license on commercially reasonable terms, if at all.

We are from time to time involved in other litigation in the ordinary course of business.

We are from time to time involved in other litigation in the ordinary course of business which have and may include claims with respect to antitrust, mergers and acquisitions and other matters.

For example, four lawsuits were brought against the Company and its Board in connection with the Merger, each of which was later voluntarily dismissed .

In the ordinary course of business, we also receive inquiries from and have discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations.

We may not be successful in defending these or other claims.

Regardless of the outcome, litigation could result in substantial expense and could divert the efforts of our management.

We have significant operations concentrated in North and Latin America, Asia-Pacific and Europe and any disruption in the operations of our facilities could harm our business and operating results.

Our worldwide operations could be subject to natural disasters, adverse weather conditions and other business disruptions, which could seriously harm our revenue and financial condition and increase our costs and expenses.

We have significant operations in our facilities located in North and Latin America, Asia-Pacific and Europe.

As a result, any prolonged disruption in the operations of our facilities, whether due to technical difficulties, power failures, break-ins, destruction or damage to the facilities as a result of a natural disaster, fire or any other reason, could harm our operating results.

Allegations made in the course of regulatory or legal proceedings may also harm our reputation, regardless of whether there is merit to such claims.

Furthermore, because litigation and the outcome of regulatory proceedings are inherently unpredictable, our business, financial condition or operating results could be materially affected by an unfavorable resolution of one or more of these proceedings, claims, demands or investigations.

We do not expect that the ultimate resolution of these matters will have a material adverse effect on our consolidated financial position.

However, the resolution of certain of these matters could be material to our operating results for any particular period.

For further information regarding our current litigation matters, refer to Note 18 – Commitments and Contingencies, to the Consolidated Financial Statements in Item 8.

We have significant operations globally and any disruption in the operations of our facilities could harm our business and operating results.

Our worldwide operations could be subject to natural disasters, adverse weather conditions, global pandemics and other business disruptions, which could seriously harm our revenue and financial condition and increase our costs and expenses.

We have significant operations in our facilities located in the Americas, Europe and APJ.

Certain of our facilities, including one of our corporate headquarters locations in Clearwater, Florida, are located in geographic areas that heighten our exposure to hurricanes, tropical storms and other severe weather events.

Any prolonged disruption in the operations of our facilities, whether due to technical difficulties, power failures, break-ins, destruction, damage to, or prolonged closure of, the facilities as a result of a natural disaster, fire, pandemic or any other reason, could harm our operating results.

If there are related disruptions in local or international supply chains, we may experience supply shortages or delays in receiving products from our OEM suppliers or experience other delays in shipping to our customers.

If we are unable to fulfill customer requirements in a timely manner, this could harm our operating results.

We currently have a disaster recovery plan and business interruption insurance;

We currently have a disaster recovery plan and carry property damage and business interruption insurance;

however, they may not be sufficient to compensate for losses that may occur.

The terms of our debt arrangements impose significant restrictions on our ability to operate which in turn could negatively affect our ability to respond to business and market conditions and therefore could have an adverse effect on our business and operating results.

As of November 30, 2020, we had $2.8 billion, including obligations of Concentrix, in outstanding short and long-term borrowings under term loans, lines of credit, accounts receivable securitization programs and capital leases, excluding trade payables.

Subsequent to November 30, 2020, upon completion of the Separation, our outstanding borrowings totaled $1.6 billion.

A portion of our revenue is financed by floor plan financing companies and any termination or reduction in these financing arrangements could increase our financing costs and harm our business and operating results.

A portion of our product distribution revenue is financed by floor plan financing companies.

Floor plan financing companies are engaged by our customers to finance, or floor, the purchase of products from us.

In exchange for a fee, we transfer the risk of loss on the sale of our products to the floor plan companies.

We currently receive payment from these financing companies within approximately 15 to 30 days from the date of the sale, which allows our business to operate at much lower relative working capital levels than if such programs were not available.

If these floor plan arrangements are terminated or substantially reduced, the need for more working capital and the increased financing cost could harm our business and operating results.

Risks Related to our Indebtedness

The terms of our debt arrangements impose restrictions on our ability to operate which in turn could negatively affect our ability to respond to business and market conditions and therefore could have an adverse effect on our business and operating results.

As of November 30, 2021, we had $4.1 billion in outstanding short and long-term borrowings under term loans, our Senior Notes (as defined below), lines of credit, accounts receivable securitization programs and capital leases, excluding trade payables.

The terms of one or more of the agreements under which this indebtedness was incurred may limit or restrict, among other things, our ability to:

incur additional indebtedness;

make investments;

pay dividends or make certain other restricted payments;

repurchase common stock;

consummate certain asset sales or acquisitions;

enter into certain transactions with affiliates;

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We are also required to maintain specified financial ratios and satisfy certain financial condition tests under certain of our debt facilities.

Our inability to meet these ratios and tests could result in the acceleration of the repayment of the related debt, termination of the applicable facility, an increase in our effective cost of funds or the cross-default of other credit and securitization arrangements.

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arrangements.

As a result, our ability to operate may be restricted and our ability to respond to business and market conditions may be limited, which could have an adverse effect on our business and operating results.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations, which could adversely affect our business.

Our ability to make scheduled debt payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors

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beyond our control.

We cannot be certain that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness.

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In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations.

Some of our credit facilities restrict our ability to dispose assets and use the proceeds from such disposition.

Some of our indebtedness restricts our ability to dispose of certain assets.

As such, we may not be able to consummate those dispositions or use any resulting proceeds and, in addition, such proceeds may not be adequate to meet any debt service obligations then due.

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our lenders could declare all outstanding principal and interest to be due and payable;

the lenders under our credit agreements could terminate their commitments to loan us money and, in the case of our secured credit agreements, foreclose against the assets securing their borrowings;

the lenders under our credit agreements could terminate their commitments to loan us money and, in the case of any secured credit arrangements, foreclose against the assets securing their borrowings;

we could be forced to raise additional capital through the issuance of additional, potentially dilutive securities;

we could be forced into bankruptcy or liquidation, which is likely to result in delays in the payment of our indebtedness and in the exercise of enforcement remedies related to our indebtedness.

If the interest rates on our borrowings increase, our access to capital and net income could be adversely affected.

Our borrowings and securitization arrangements are variable-rate obligations and expose us to interest rate risks.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt.

This could further exacerbate the risks to our financial condition.

We and our subsidiaries may be able to incur significant additional indebtedness in the future.

For example, as of November 30, 2021, we had access to $3.5 billion in unused commitments under the TD SYNNEX revolving credit facility (as defined below).

If new debt is added to our current debt levels, the related risks that we now face could intensify.

Although the TD SYNNEX credit facilities (as defined below) contain restrictions on the incurrence of additional indebtedness by our subsidiaries, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.

Changes in our credit rating may increase our interest expense or other costs of capital.

Certain of our financing instruments involve variable rate debt, thus exposing us to the risk of fluctuations in interest rates.

In addition, the interest rate payable on our Senior Notes (as defined below), our revolving and term loan credit agreement and certain other debt instruments is subject to adjustment from time to time if our credit rating is downgraded.

The expected replacement of the LIBOR benchmark interest rate and other interbank offered rates with new benchmark rate indices may have an impact on our financing costs.

As of November 30, 2021, we had approximately $1.5 billion of debt outstanding under facilities with interest rates based on LIBOR.

Some of our credit facilities include fallback language that seeks to facilitate an agreement with our lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based on the Secured Overnight Financing Rate or other benchmark replacement rates upon certain triggering events.

We cannot predict what the impact of any such replacement rate would be to our interest expense, however, the discontinuation, reform, or replacement of LIBOR or any other benchmark rates may result in fluctuating interest rates that may have a negative impact on our interest expense and our profitability.

Potential changes to the underlying floating-rate indices and reference rates may have an adverse impact on our liabilities indexed to LIBOR and could have a negative impact on our profitability and cash flows.

Furthermore, we cannot predict or quantify the time, effort and cost required to transition to the use of new benchmark rates, including with respect to negotiating and implementing any necessary changes to existing contractual agreements, and implementing changes to our systems and processes.

We continue to evaluate the operational and other effects of such changes , including possible impacts on our accounting for interest rate hedging agreements .

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Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Interest rates may increase in the future.

As a result, interest rates on the obligations under certain of our credit facilities, our and our subsidiaries’ respective accounts receivable securitization programs and debt facilities, or other variable rate debt incurrences or offerings could be higher or lower than current levels.

As of November 30, 2021, we had approximately $1.5 billion of outstanding term loan debt subject to variable interest rates and our subsidiaries had approximately $178.5 million in the aggregate outstanding under debt facilities subject to variable interest rates.

If interest rates increase, debt service obligations and our interest expense will increase even though the amount borrowed remains the same.

Our net income and cash flows, including cash available for servicing indebtedness, will correspondingly decrease.

Certain of our borrowings and securitization arrangements are variable-rate obligations and expose us to interest rate risks.

If interest rates increase, debt service obligations and our interest expense will increase even though the amount borrowed remains the same.

Our net income and cash flows, including cash available for servicing indebtedness, will correspondingly decrease.

An increase in interest rates may increase our future borrowing costs and restrict our access to capital.

Additionally, current market conditions, the recovering global economy, and overall credit conditions could limit our availability of capital, which could cause increases in interest margin spreads over underlying indices, effectively increasing the cost of our borrowing.

While some of our credit facilities have contractually negotiated spreads, any changes to these spreads in connection with renegotiations of our credit facilities could adversely affect our results of operations.

While some of our debt arrangements have contractually negotiated spreads, any changes to these spreads in connection with renegotiations of our credit facilities could adversely affect our results of operations.

We have entered into interest rate swaps with financial institutions to effectively convert a portion of our floating rate debt to a fixed interest rate to manage our exposure to fluctuations in interest rates.

While we have entered into interest rate hedging agreements with respect to our borrowings under certain of our credit facilities, such agreements are not expected to fully mitigate against interest rate risk.

In the event of the nonperformance by the counterparties, we are exposed to credit losses.

A portion of our product distribution revenue is financed by floor plan financing companies.

Floor plan financing companies are engaged by our customers to finance, or floor, the purchase of products from us.

In exchange for a fee, we transfer the risk of loss on the sale of our products to the floor plan companies.

If these floor plan arrangements are terminated or substantially reduced, the need for more working capital and the increased financing cost could harm our business and operating results.

Risks Related to Our Relationship with MiTAC Holdings Corporation

The concentration of ownership of our common stock among our executive officers, directors and principal stockholders could allow them to influence all matters requiring stockholder approval and could delay or prevent a change in control of SYNNEX.

Risks Related to Our Relationships with Apollo Global Management, Inc.

and MiTAC Holdings Corporation

As of November 30, 2021, our executive officers, directors and principal stockholders owned approximately 56% of our outstanding common stock.

In particular, MiTAC Holdings Corporation (“MiTAC Holdings”) and its affiliates owned approximately 18% of our common stock.

MiTAC Holdings is a publicly-traded company on the Taiwan Stock Exchange.

As a result, these stockholders have the potential ability to influence matters requiring stockholder approval, including the election of directors and the approval of mergers and acquisitions, or exert influence on actions of our Board of Directors.

This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

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There could be potential conflicts of interest between us and MiTAC Holdings and its affiliates, which could affect our business and operating results.

MiTAC Holdings’ and its affiliates’ continuing beneficial ownership of our common stock could create conflicts of interest with respect to a variety of matters, such as potential acquisitions, competition, issuance or disposition of securities, election of directors, payment of dividends and other business matters.

In particular, Apollo Global Management, Inc.

(“Apollo”) and its affiliates owned approximately 45.0% of our common stock.

Apollo is the private equity company that owned Tech Data prior to the Merger.

A s part of the Merger, 44 million shares of TD SYNNEX common stock were issued to Apollo.

Additionally, the Company entered into an Investor Rights Agreement at the closing of the Merger, which provides that the board of directors be comprised of eleven directors, and that affiliates of Apollo have the right to nominate (i) up to four directors, if Apollo and its affiliates own 30% or more of the outstanding shares of TD SYNNEX common stock;

(ii) up to three directors if Apollo and its affiliates own between 20% and 30% of the outstanding shares of TD SYNNEX common stock;

(iii) up to two directors, if Apollo and its affiliates own between 10% and 20% of the outstanding shares of TD SYNNEX common stock;

or (iv) up to one director, if Apollo and its affiliates own between 5% and 10% of the outstanding shares of TD SYNNEX common stock.

As a result, Apollo is in a position to influence (subject to organizational documents and Delaware law) the composition of the Company’s board of directors and the outcome of corporate actions requiring stockholder approval, such as mergers, business combinations and dispositions of assets, among other corporate transactions.

This concentration of investment and voting power could discourage others from initiating a potential merger, takeover or other change of control transaction that may otherwise be beneficial to TD SYNNEX and its stockholders, which could adversely affect the market price of TD SYNNEX common stock.

There could be potential conflicts of interest between us and MiTAC Holdings Corporation and its affiliates, which could affect our business and operating results.

As of November 30, 2021, MiTAC Holdings Corporation (“MiTAC Holdings”) and its affiliates owned approximately 9.5% of our common stock.

MiTAC Holdings’ and its affiliates’ continuing beneficial ownership of our common stock could create conflicts of interest with respect to a variety of business matters.

For example, we currently purchase inventories from MiTAC Holdings.

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For fiscal year 2021, Mr.

Miau received the same compensation as our independent directors and during fiscal year 2021 Mr.

Miau will receive the same compensation as our independent directors.

Miau’s compensation as one of our directors is based upon the approval of the Nominating and Corporate Governance Committee, which is solely composed of independent members of the Board of Directors.

We also have adopted a policy requiring material transactions in which any of our directors has a potential conflict of interest to be approved by our Audit Committee, which is also composed of independent members of the Board of Directors.

Synnex Technology International Corp., or Synnex Technology International, a publicly-traded company based in Taiwan and affiliated with MiTAC Holdings, currently provides distribution and fulfillment services to various markets in Asia and Australia, and is also a potential competitor of ours.

Miau received the same compensation as our independent directors.

Miau’s compensation as one of our d irectors is based upon the approval of the Nominating and Corporate Governance Committee, which is solely composed of independent members of the Board of Directors.

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also have adopted a policy requiring material transactions in which any of our directors has a potential conflict of interest to be approved by our Audit Committee, which is also composed of independent members of the Board of Directors.

As of November 30, 2021, MiTAC Incorporated, a privately-held company based in Taiwan and a separate entity from MiTAC Holdings, directly and indirectly owned approximately 15.7% of Synnex Technology International and approximately 9.0% of MiTAC Holdings.

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In the future, we may increasingly compete with Synnex Technology International, particularly if our business in Asia expands or Synnex Technology International expands its business into geographies or customers we serve.

Although Synnex Technology International is a separate entity from us, it is possible that there will be confusion as a result of the similarity of our names.

Moreover, we cannot limit or control the use of the Synnex name by Synnex Technology International in certain geographies and our use of the Synnex name may be restricted as a result of registration of the name by Synnex Technology International or the prior use in jurisdictions where it currently operates.

The future sale of a large number of shares by Apollo or MiTAC Holdings, including as the result of the exercise of registration rights, may adversely affect the market price of the Company’s common stock.

We have granted registration rights to Apollo pursuant to an Investors Rights Agreement dated September 1, 2021, and to MiTAC Holdings pursuant to a Letter Agreement dated September 3, 2021, that require us to register their shares for resale in certain circumstances.

Sales of a substantial number of shares of the Company’s common stock in the public market, or the perception that these sales may occur, could cause the market price of our common stock to decline.

These sales, or the possibility of these sales, also may make it more difficult for us to sell equity securities in the future.

Risks Related to Our Industry

Volatility in the IT and CE industries could have a material adverse effect on our business and operating results.

Volatility in the IT industry could have a material adverse effect on our business and operating results.

We have, in the past, experienced decreases in demand and we anticipate that the industries we operate in will be subject to a high degree of cyclicality in the future.

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We operate in a highly competitive environment, both in the United States and internationally.

This competition is based primarily on product and service availability, credit availability, price, speed of delivery, ability to tailor specific solutions to customer needs, quality and depth of product and service lines, pre-sales and post-sales technical support, flexibility and timely response to design changes, and technological capabilities, service and support.

We compete with a variety of regional, national and international IT and CE product and service providers and contract manufacturers and assemblers and providers of customer experience services.

This competition is based primarily on product and service availability, credit availability, price, effectiveness of information systems and e-commerce tools, speed of delivery, ability to tailor specific solutions to customer needs, quality and depth of product and service lines, pre-sales and post-sales technical support, flexibility and timely response to design changes, and technological capabilities, service and support.

We compete with a variety of regional, national and international IT product and service providers and contract manufacturers and assemblers.

In some instances, we also compete with our own customers, our own OEM suppliers and MiTAC Holdings and its affiliates.

Our primary competitors are substantially larger and have greater financial, operating, manufacturing and marketing resources than us.

Some of our competitors may have broader geographic breadth and range of services than us and may have more developed relationships with their existing customers.

Some of our competitors may have a broader range of services than us and may have more developed relationships with their existing customers.

We may lose market share in the United States or in international markets, or may be forced in the future to reduce our prices in response to the actions of our competitors and thereby experience a reduction in our gross margins.

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Increased competition and negative reaction from our OEM suppliers or reseller and retail customers resulting from our expansion into new business areas could harm our business and operating results.

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Our business may be adversely affected by some OEM suppliers’ strategies to consolidate business or increase their direct sales, which in turn could cause our business and operating results to suffer.

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Other suppliers may reduce or eliminate promotional activities to reduce their expenses, which could, in turn, result in declined demand from our reseller or retailer customers and end-users.

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Some OEM suppliers, including some of the leading OEM suppliers that we service, have been selling products and services directly to reseller and retail customers and end-users, thereby limiting our business opportunities.

If large OEM suppliers increasingly sell directly to end-users or our resellers and retailers, rather than use us as the distributor of their products and services, our business and operating results will suffer.

The IT and CE industries are subject to rapidly changing technologies and process developments, and we may not be able to adequately adjust our business to these changes, which in turn would harm our business and operating results.

Dynamic changes in the IT and CE industries, including the consolidation of OEM suppliers and reductions in the number of authorized distributors used by OEM suppliers, have resulted in new and increased responsibilities for management personnel and have placed, and continue to place, a significant strain upon our management, operating and financial systems and other resources.

If large OEM suppliers increasingly sell directly to end-users or our resellers and retailers, or select a competitor rather than use us as the distributor of their products and services, our business and operating results will suffer.

The IT industry is subject to rapidly changing technologies and process developments, and we may not be able to adequately adjust our business to these changes, which in turn would harm our business and operating results.

Dynamic changes in the IT industry, including the consolidation of OEM suppliers and reductions in the number of authorized distributors used by OEM suppliers, have resulted in new and increased responsibilities for management personnel and have placed, and continue to place, a significant strain upon our management, operating and financial systems and other resources.

We may be unable to successfully respond to and manage our business in light of industry developments and trends.

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Also crucial to our success in managing our operations is our ability to achieve additional economies of scale.

Our failure to achieve these additional economies of scale or to respond to changes in the IT and CE industries could adversely affect our business and operating results.

Risks Related to the Separation

We or Concentrix may fail to perform under the transaction agreements executed as part of the Separation, which in turn may adversely affect our business.

In connection with the Separation, we and Concentrix entered into several agreements, including among others a separation and distribution agreement and an employee matters agreement.

The separation and distribution agreement and employee matters agreement determine the allocation of assets and liabilities between the companies following the Separation for those respective areas and include any necessary indemnifications related to liabilities and obligations.

Concentrix has spun off and some of its obligations under these and other agreements have transferred to the successor entities.

We will rely on Concentrix or its successor entities to satisfy their performance and payment obligations under these agreements.

If Concentrix or its successor entities are unable to satisfy their obligations under these agreements, we could incur operational difficulties or losses that could have a material and adverse effect on our business, financial condition and results of operations.

The Separation may not achieve some or all of the anticipated benefits, which may in turn affect our business and stock price.

We may not realize some or all of the anticipated strategic, financial, operational, marketing or other benefits from the Separation, or such benefits may be delayed by a variety of circumstances, which may not be under our control or Concentrix’.

As independent publicly-traded companies, we and Concentrix will be smaller, less diversified companies with a narrower business focus and may be more vulnerable to changing market conditions, which could materially and adversely affect our respective business, financial condition and results of operations.

Further, there can be no assurance that the combined value of the common stock of the two publicly-traded companies will be equal to or greater than what the value of our common stock would have been had the proposed Separation not occurred.

If the Separation fails to qualify for tax-free treatment, it could result in substantial tax liability for the Company.

We have obtained an opinion that, for U.S.

federal income tax purposes, the Separation will qualify as a tax-free reorganization under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended, to us and our United States stockholders.

The opinion we received will not be binding on the IRS or any court.

Accordingly, there can be no assurance that the IRS will not challenge the conclusions reflected in the opinion or that a court would not sustain such a challenge.

If the Separation fails to qualify for tax-free treatment, we would be subject to tax as if we had sold the stock of Concentrix in a taxable sale for its fair market value, which would result in substantial tax liability for us, and our stockholders would be subject to tax on the fair market value of the Concentrix stock received in the Separation.

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Our failure to achieve these additional economies of scale or to respond to changes in the IT industry could adversely affect our business and operating results.

Risks Related to the Acquisition of Tech Data

We may fail to realize the anticipated benefits of the Merger, which could adversely affect the value of our common stock.

SYNNEX and Tech Data operated independently prior to the Merger, and there can be no assurances that the businesses will be integrated successfully.

It is possible that the integration process could result in the loss of key employees, the disruption of ongoing business, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated.

Specifically, issues that must be addressed to realize the anticipated benefits of the Merger so the combined business performs as expected include, among other things:

integrating the companies’ IT systems and other technologies, products and services;

identifying and eliminating redundant and underperforming operations and assets;

harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

attracting, motivating and retaining executives and other key personnel;

addressing possible differences in business backgrounds, corporate cultures and management philosophies;

consolidating the companies’ corporate, administrative and information technology infrastructure;

managing the movement of certain businesses and positions to different locations;

maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors;

consolidating offices that are currently in or near the same location.

In addition, at times, the attention of certain members of management and resources may be focused on the integration of the business and diverted from day-to-day business operations, which may disrupt the business of the combined company.

If we fail to properly mitigate these risks or address the issues set forth above, the anticipated cost savings and other benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected, which in turn could adversely affect our business operations and value of our common stock.

We have incurred and will continue to incur significant transaction and integration-related costs in connection with the Merger.

We have incurred a number of non-recurring costs associated with the Merger and combining the operations of Tech Data and SYNNEX and we expect to continue to incur significant transaction costs related to the Merger.

We also will incur significant integration-related fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs.

We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred related to the Merger and the integration of Tech Data and SYNNEX.

Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

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Risks Related to the Macro - Economic and Regulatory Environment

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The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation due to “shelter-in-place” restrictions by various governments worldwide and created significant volatility and disruption of financial markets.

This has adversely impacted our results of operations during fiscal year 2020 .

The extent of the impact of the COVID-19 pandemic on our future operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transports, the effect on our customers and demand for our products and services;

More recently, the Delta and Omicron variants of the virus have contributed to a surge in COVID-19 cases globally and the full impact of the newly emerged Omicron variant has yet to be determined.

The extent of the impact of the COVID-19 pandemic on our future operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transportation, the effect on our customers and demand for our products and services;

our ability to sell and provide our products and services, including as a result of travel restrictions and people working remotely;

the ability of our customers to pay for our solutions;

and any closures of our or our customers’ offices and facilities all of which are uncertain and cannot be predicted.

any closures of our or our customers’ or partners’ offices and facilities;

and the impact of governmental actions or mandates imposed in response to COVID-19, all of which are uncertain and cannot be predicted.

An extended period of global supply chain and economic disruption could materially affect our business, our results of operations, our access to sources of liquidity, the carrying value of our goodwill and intangible assets, our financial condition and our stock price.

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Most of our international revenue, cost of revenue and operating expenses are denominated in foreign currencies.

In Latin America, our revenue is generally denominated in local currencies while cost of revenue is denominated in U.S.

We presently have currency exposure arising from both sales and purchases denominated in foreign currencies.

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This could have a negative impact on us if revenue related to these purchases is transacted in U.S.

In addition, currency devaluation can result in our products, the majority of which are purchased by us in U.S.

dollars, to be relatively more expensive to procure than products manufactured locally.

We currently conduct only limited hedging activities, which involve the use of currency forward contracts.

In addition, currency devaluation can result in products that we purchase in U.S.

dollars being relatively more expensive to procure than products manufactured locally.

Furthermore, our local competitors in certain markets may have different purchasing models that provide them reduced foreign currency exposure compared to us.

This may result in market pricing that we cannot meet without significantly lower profit on sales.

We conduct hedging activities, which involve the use of currency forward or option contracts.

Hedging foreign currencies can be risky.

Certain of these hedge positions are undesignated hedges of balance sheet exposures, such as intercompany loans, and typically have maturities of less than one year.

While we maintain policies to protect against fluctuations in currency exchange rates, extreme fluctuations may result in our incurring losses in some countries.

There is also additional risk if the currency is not freely or actively traded.

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For example, in many countries, revenue from the local currency services substantially offsets the local currency denominated operating expenses.

The translation of the financial statements of foreign operations into U.S.

dollars is also impacted by fluctuations in foreign currency exchange rates, which may positively or negatively impact our results of operations.

In addition, the value of our equity investment in foreign countries may fluctuate based upon changes in foreign currency exchange rates.

These fluctuations, which are recorded in a cumulative translation adjustment account, may result in losses in the event a foreign subsidiary is sold or closed at a time when the foreign currency is weaker than when we made investments in the country.

The realization of any or all of these risks could have a significant adverse effect on our financial results.

We rely on independent shipping companies for delivery of products, and price increases or service interruptions from these carriers could adversely affect our business and operating results.

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Freight and shipping charges can have a significant impact on our gross margin.

As a result, an increase in freight surcharges due to rising fuel cost or general price increases will have an immediate adverse effect on our margins, unless we are able to pass the increased charges to our reseller and retail customers or renegotiate terms with our OEM suppliers.

As a result, an increase in freight surcharges due to rising fuel cost or general price increases

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will have an immediate adverse effect on our margins, unless we are able to pass the increased charges to our reseller and retail customers or renegotiate terms with our OEM suppliers.

In addition, in the past, carriers have experienced work stoppages due to labor negotiations with management.

An increase in freight or shipping charges, the termination of our arrangements with one or more of these independent shipping companies, the failure or inability of one or more of these independent shipping companies to deliver products, or the unavailability of their shipping services, even temporarily, could have an adverse effect on our business and operating results.

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Because we conduct substantial operations in China, risks associated with economic, political and social events in China could negatively affect our business and operating results.

A substantial portion of our IT systems operations, including our IT systems support and software development operations, are located in China.

A substantial portion of our IT systems operations, including a substantial portion of our IT systems support and software development operations, are located in China.

In addition, we also conduct general and administrative activities from our facilities in China.

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uncertainty in obtaining tax holiday extensions or expiration or loss of tax holidays in various jurisdictions.

The Organization for Economic Cooperation and Development has been working on the Base Erosion and Profit Sharing Project, and has issued and will continue to issue, guidelines and proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business.

Certain countries are evaluating their tax policies and regulations, which could affect international business and may have an adverse effect on our overall tax rate, along with increasing the complexity, burden and cost of tax compliance.

For example, on December 22, 2017, the U.S.

federal government enacted the U.S.

Tax Cuts and Jobs Act (“U.S.

Tax Reform”) which significantly revised U.S.

corporate income tax law by, among other things, reducing the U.S.

federal corporate income tax rate from 35% to 21% and implementing a modified territorial tax system that included a one-time transition tax on deemed repatriated earnings of foreign subsidiaries.

Additional changes in the U.S.

tax regime or in how U.S.

multinational corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect our business, financial condition or results of operations.

We report our results of operations based on our determination of the amount of taxes owed in various tax jurisdictions in which we operate.

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The results from various tax examinations and audits may differ from the liabilities recorded in our financial statements and could adversely affect our financial results and cash flows.

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Cyberattacks or the improper disclosure or control of personal information could result in liability and harm our reputation, which could adversely affect our business.

Our business is heavily dependent upon information technology networks and systems.

Internal or external attacks on those networks and systems could disrupt our normal operations centers and impede our ability to provide critical products and services to our customers and clients, subjecting us to liability under our contracts and damaging our reputation.

Internal or external attacks on those networks and systems could disrupt our normal operations centers and impede our ability to provide critical products and services to our customers, subjecting us to liability under our contracts and damaging our reputation.

Additionally, such attacks could compromise our intellectual property or result in fraud if our business emails are improperly accessed.

For example, in the third quarter of 2021, the Company became aware that certain outside actors gained access to a limited portion of the Company’s networks and systems.

After conducting a thorough review of the attack with a leading third-party cybersecurity firm, the Company determined that the attack did not access any material data.

Our business also involves the use, storage and transmission of information about our employees, and customers.

If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary damages, fines or criminal prosecution.

While we take measures to protect the security of, and prevent unauthorized access to, our systems and personal and proprietary information, the security controls for our systems, as well as other security practices we follow, may not prevent improper access to, or disclosure of, personally identifiable or proprietary information.

We have security controls for our systems and other security practices in place to protect the security of, and prevent unauthorized access to, our systems and personal and proprietary information, such as firewalls and anti-virus software, and we also provide information to our employees about the need to deploy security measures and the impact of doing so;

however there can be no assurance that such security measures, will prevent improper access to our networks and systems, such as that which occurred earlier in 2021, or access to or disclosure of, personally identifiable or proprietary information.

We could also face legal, reputational and financial risks if we fail to protect customer and internal data from security breaches or cyberattacks.

Furthermore, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services.

The General Data Protection Regulation in Europe, the California Consumer Privacy Act and other similar laws have resulted, and will continue to result, in increased compliance costs.

The General Data Protection Regulation (“GDPR”) in Europe, the California Consumer Privacy Act and other similar laws have resulted, and will continue to result, in increased compliance costs.

Our failure to adhere to or successfully implement processes in response to these and other changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.

We could also face legal, reputational and financial risks if we fail to protect customer and internal data from security breaches or cyberattacks.

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Global health and economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

Worldwide economic conditions remain uncertain due to adverse consequences concerning the United States and China trade negotiations, market volatility as a result of political leadership in certain countries and other disruptions to global and regional economies and markets.

External factors, such as potential terrorist attacks, acts of war, geopolitical and social turmoil or epidemics and other similar outbreaks in many parts of the world, could prevent or hinder our ability to do business, increase our costs and negatively affect our stock price.

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difficulties and costs of staffing and managing operations in certain foreign countries;

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work stoppages or other changes in labor conditions;

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If we fail to realize the anticipated growth of our future international operations, our business and operating results could suffer.

Increasing attention on environmental, social and governance (ESG) matters may have a negative impact on our business, impose additional costs on us, and expose us to additional risks.

Companies are facing increasing attention from investors, customers, partners, consumers and other stakeholders relating to ESG matters, including environmental stewardship, social responsibility, diversity and inclusion, racial justice and workplace conduct.

In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.

Such ratings are used by some investors to inform their investment and voting decisions.

Unfavorable ESG ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price and our access to and costs of capital.

We have established corporate social responsibility programs aligned with sound environmental, social and governance principles.

These programs reflect our current initiatives and are not guarantees that we will be able to achieve them.

Our ability to successfully execute these initiatives and accurately report our progress presents numerous operational, financial, legal, reputational and other risks, many of which are outside our control, and all of which could have a material negative impact on our business.

Additionally, the implementation of these initiatives imposes additional costs on us.

If our ESG initiatives fail to satisfy investors, customers, partners and our other stakeholders, our reputation, our ability to sell products and services to customers, our ability to attract or retain employees, and our attractiveness as an investment, business partner or acquirer could be negatively impacted.

Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.

If we are unable to maintain effective internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected, which in turn could cause the market price of our common stock to decline.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control structure and procedures for financial reporting.

We completed an evaluation of the effectiveness of our internal control over financial reporting for fiscal year 2020, and we have an ongoing program to

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perform the system and process evaluation and testing necessary to continue to comply with these requirements.

We completed an evaluation of the effectiveness of our internal control over financial reporting for fiscal year 2021, and we have an ongoing program to perform the system and process evaluation and testing necessary to continue to comply with these requirements.

However, internal control over financial reporting has inherent limitations, including human error, the possibility that controls could be circumvented or become inadequate because of changed conditions, and fraud.

Because of the inherent limitations, misstatements due to error or fraud may occur and may not always be prevented or timely detected.

We expect to continue to incur significant expense and to devote management resources to Section 404 compliance.

In the event that one of our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firm determines that our internal control over financial reporting is not effective as defined under Section 404, investor perceptions and our reputation may be adversely affected, and the market price of our stock could decline.

We expect to continue to incur significant expenses and to devote management resources to Section 404 compliance, including impacts resulting from the Merger.

In the event that our management or independent registered public accounting firm determines that there is a material weakness in our internal control over financial reporting, investor perceptions and our reputation may be adversely affected, and the market price of our stock could decline.

Changes to financial accounting standards may affect our results of operations and cause us to change our business practices.

We prepare our financial statements to conform to generally accepted accounting principles in the United States (“GAAP”).

These accounting principles are subject to interpretation by the Financial Accounting Standards Board, American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies.

These accounting principles are subject to interpretation by the Financial Accounting Standards Board, American Institute of Certified

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Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies.

A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced.

Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

The United Kingdom’s withdrawal from the European Union (“EU”) could adversely impact our business, results of operations and financial condition.

On January 31, 2020, the United Kingdom left the EU (“Brexit”).

The United Kingdom and EU entered into a new trade agreement in December 2020, subject to final approval by the European Parliament.

In addition, the United Kingdom is in the process of negotiating trade agreements with the United States and certain other countries The most significant impact of the new agreement between the United Kingdom and the EU are new regulations regarding trade, tax, security and employees, among others, in the United Kingdom.

Compliance with such regulations could be costly, negatively impacting our business, results of operations and financial condition.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors