What changed in this filing

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Item 1A. Risk Factors

2022-02-18 compared with 2021-02-22 · 119 added, 123 removed, 287 unchanged (46% of the section changed)

Key Risk Factors That May Impact Future Results

Stockholders should carefully consider the risk factors described below.

Stockholders should carefully consider the risk factors described below, many of which have been, and could be further, exacerbated by the COVID-19 pandemic and any further impact to the global business and economic environment which may result.

Any of these factors, many of which are beyond our control, could materially and adversely affect our business, financial condition, operating results, cash flow, and stock price.

Risks Related to Our Business, Finance and Operations

The effects of the COVID-19 pandemic have strained and have threatened to negatively impact our businesses and operations, and the duration and extent to which COVID-19 may impact our future results of operations and overall financial performance remains uncertain.

The outbreak and continuing spread of COVID-19 has resulted in a substantial curtailment of business activities worldwide and has caused and is likely to continue to cause weakened economic conditions, both in the United States and many countries abroad, including in markets in Asia and Europe from which we derive the majority of our revenue.

The effects of the COVID-19 pandemic have strained and have negatively impacted our businesses and operations, and the duration and extent to which COVID-19 may impact our future results of operations and overall financial performance remains uncertain.

The outbreak and continuing spread of COVID-19 and its variants have resulted in a substantial curtailment of business activities worldwide and has caused and is likely to continue to cause weakened economic conditions, both domestically and abroad, including in markets in Asia and Europe from which we derive the majority of our revenue.

Government restrictions (such as stay-at-home orders), quarantines and worker absenteeism as a result of COVID-19 have led to a significant number of business closures and other slowdowns.

These slowdowns have adversely impacted and will likely continue to adversely impact Veeco directly, as well as our customers, suppliers and other partners.

We have determined that our operations are considered part of the critical and essential infrastructure defined by applicable government agencies.

Consequently, as of the date of filing this report, we are currently permitted and are endeavoring to maintain manufacturing and supply chain operations.

However, the conditions caused by COVID-19 could adversely affect our customers’ ability or willingness to purchase our products or services, delay prospective customers’ purchasing decisions, adversely impact our ability to source and deliver products and provide on-site services to our customers, delay the provisioning of our offerings, or lengthen payment terms, all of which could adversely affect our future sales, operating results and overall financial performance.

In addition, adverse impacts on the creditworthiness of our customers and other counterparties and their ability to pay amounts owed to us and our ability to collect such amounts may be adversely affected, which could materially and adversely affect our results of operations, financial condition and cash flows.

The COVID-19 pandemic has resulted in significant disruption of global financial markets and could materially impact the value of our common stock, our access to capital, and our business and results of operations in the near and long-term.

While all of our global sites are currently operational, any local pandemic outbreaks could require us to temporarily curtail production levels or temporarily cease operations based on government mandates.

Furthermore, the COVID-19 conditions have adversely impacted, and may continue to adversely impact, our ability to timely source critical parts and materials and to provide on-site services to our customers.

Supply chain shortages, which have been and may continue to be exacerbated by shipping delays caused by transportation interruptions (associated with matters such as reduced availability of air transport, port closures, and increased border controls), could require us to purchase excess inventory with longer lead times, which could increase inventory obsolescence risk while negatively impacting our working capital.

Shortages of critical parts have strained and may continue to strain our manufacturing capacity, threatening to adversely impact our ability to meet customer needs, which may negatively impact our revenues, results of operations and financial condition.

While we have been able to successfully mitigate these risks thus far, without material negative impact to our financial performance, our continued ability to do so remains uncertain.

In addition, the conditions caused by COVID-19 could adversely affect our customers’ ability or willingness to purchase our products or services or otherwise delay prospective customers’ purchasing decisions.

These conditions may delay the provisioning of our offerings, or lengthen payment terms, all of which could adversely affect our future sales, operating results and overall financial performance.

In addition, adverse impacts on the creditworthiness of our customers and other counterparties may negatively affect their ability to pay amounts owed to us, which could materially and adversely affect our results of operations and financial condition.

The COVID-19 pandemic has resulted in significant disruption of global financial markets and could negatively impact our stock price, our access to capital, and our business and results of operations in the near and long-term.

Unfavorable market conditions have adversely affected, and may continue to adversely affect, our operating results.

Conditions of the markets in which we operate are volatile and have experienced, and may in the future continue to experience, significant deterioration.

Conditions of the markets in which we operate are volatile and may experience significant deterioration.

Changing market conditions require that we continuously monitor and reassess our strategic resource allocation decisions.

If we fail to properly adapt to changing business environments, we may lack the infrastructure and resources necessary to scale up our businesses to successfully compete during periods of growth, or we may incur excess fixed costs during periods of decreasing demand.

Adverse market conditions relative to our products have resulted in, and may continue to result in:

● reduced demand for our products;

● rescheduling and cancellations of orders for our products, which may result in negative backlog adjustments;

Adverse market conditions relative to our products may result in:

● reduced demand for our products, or the rescheduling or cancellation of orders for our products which may result in negative backlog adjustments;

● asset impairments, including the impairment of goodwill and other intangible assets;

● unfavorable changes in customer mix and product mix;

● increased price competition leading to a lower profit margin for our products;

● increased competition from sellers of used equipment or lower-priced alternatives to our products;

● increased price competition for our products, or increased competition from sellers of used equipment or lower-priced alternatives to our products, which could lead to lower profit margins for our products;

● increased inventory obsolescence;

● disruptions in our supply chain;

● higher operating costs as a percentage of revenues;

● higher operating costs, caused by matters including but not limited to macroeconomic inflationary pressures, which the Company is currently beginning to experience;

● an increase in uncollectable amounts due from our customers resulting in increased reserves for doubtful accounts and write-offs of accounts receivable.

If the markets in which we participate continue to experience deteriorations or downturns, this could negatively impact our sales and revenue generation, margins, operating expenses, and profitability.

If the markets in which we participate experience deteriorations or downturns, this could negatively impact our sales and revenue generation, margins, operating expenses, and profitability.

The timing of our orders, shipments, and revenue recognition may cause our quarterly operating results to fluctuate significantly.

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When coupled with the fluctuating amount of time required for shipment, installation, and final acceptance, our sales cycles often vary widely, and these variations can cause fluctuations in our operating results.

As a result of our lengthy sales cycles, we may incur significant research, development, selling, general, and administrative expenses before we generate revenue for these products.

We may never generate the anticipated revenue if a customer cancels or otherwise changes its purchase plans, which could have an adverse effect on our business.

We are now confronting many of these risks as we gain traction in the Semiconductor market, which is often characterized by long customer qualification times, typically twelve to eighteen months.

As a result of our lengthy sales cycles, we may incur significant research and development, selling, general, and administrative expenses before we generate revenue for these products.

We may never generate the anticipated revenue if a customer cancels or otherwise changes its purchase plans, or if our evaluation systems do not satisfy customer requirements (which could result in working capital constraints, excess inventory or inventory obsolescence, and other harm to the Company).

These risks are particularly prevalent in the semiconductor market, which is often characterized by long customer qualification times, typically twelve to eighteen months.

Once qualified, the ramp to volume production can take an additional extended period of time, often twelve to twenty-four months.

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Customer purchase orders may be cancelled or rescheduled by the customer, sometimes with limited or no penalties, which may result in increased or unrecoverable costs for the Company.

We adjust our backlog for such cancellations, contract modifications, and delivery delays that result in a delivery period in excess of one year, among other items.

We adjust our backlog for such cancellations and contract modifications, among other items.

A downturn in one or more of our businesses could result in an increase in order cancellations and postponements.

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In the future, if we determine that our inventory is overvalued, we will be required to recognize associated costs in our financial statements at the time of such determination.

In addition, we place orders with our suppliers based

on our customers’ orders.

In addition, we place orders with our suppliers based on our customers’ orders.

If our customers cancel their orders with us, we may not be able to cancel our orders with our suppliers.

Any resulting charges could be materially adverse to our results of operations and financial condition.

Resulting charges could have a material adverse effect on our results of operations and financial condition.

We may be required to take impairment charges on assets.

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Adverse changes in business conditions or worse-than-expected performance by these acquired companies could negatively impact our estimates of future operations and result in impairment charges to these assets.

For example, in the fourth quarter of 2019 we recorded non-cash impairment charges of $25.0 million, primarily related to our equity investments without readily observable market prices.

For example, in the fourth quarters of 2019 and 2021 we recorded non-cash impairment charges of $25.0 million and $1.0 million, respectively, primarily related to our equity investments without readily observable market prices.

If our assets are further impaired, our financial condition and results of operations could be materially and adversely affected.

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Acquisitions and investments involve numerous risks, many of which are unpredictable and beyond our control, including the following:

● difficulties and increased costs in integrating the personnel, operations, technologies, and products of acquired companies;

● diversion of management’s attention and disruption of ongoing businesses;

● the failure to realize expected synergies and difficulties and costs, including the diversion of management’s attention, in integrating the personnel, operations, technologies, and products of acquired companies;

● the inability to complete proposed transactions as anticipated, resulting in obligations to pay professional and other expenses, including any applicable termination fees;

● potential loss of key employees of acquired companies, especially if a relocation or change in responsibilities is involved;

● difficulties in managing geographically dispersed operations in a cost-effective manner;

● the failure to realize expected synergies;

● unknown, underestimated, and undisclosed commitments or liabilities;

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Divestitures involve significant risks and uncertainties, including the ability to sell such businesses at satisfactory prices, on acceptable terms, and in a timely manner.

Divestitures may also disrupt other parts of our businesses, distract the attention of our management, result in a loss of key employees or

customers, and require that we allocate internal resources that would otherwise be devoted to operating our existing businesses.

Divestitures may also disrupt other parts of our businesses, distract the attention of our management, result in a loss of key employees or customers, and require that we allocate internal resources that would otherwise be devoted to operating our existing

Divestitures may expose us to unanticipated liabilities (including those arising from representations and warranties made to a buyer regarding the businesses) and to ongoing obligations to support the businesses following such divestitures, any and all of which could adversely affect our business, financial condition, and results of operations.

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We have adopted, and may in the future adopt, certain measures that may have the effect of delaying, deferring, or preventing a takeover or other change in control of our Company, which a holder of our common stock might not consider to be in the holder’s best interest.

These measures include:

● “blank check” preferred stock;

● a classified board of directors;

● certain other provisions appearing in our certificate of incorporation and bylaws.

Our board of directors has the authority to issue up to 500,000 shares of preferred stock and to fix the rights (including voting rights), preferences and privileges of these shares (“blank check” preferred).

For example, our board of directors has the authority to issue up to 500,000 shares of preferred stock and to fix the rights (including voting rights), preferences and privileges of these shares (“blank check” preferred stock).

Such preferred stock may have rights, including economic rights, senior to our common stock.

As a result, the issuance of the preferred stock could have a material adverse effect on the price of our common stock and could make it more difficult for a third party to acquire a majority of our outstanding common stock.

Our board of directors is divided into three classes with each class serving a staggered three-year term.

In addition, our board of directors is divided into three classes with each class serving a staggered three-year term.

The existence of a classified board makes it more difficult for our shareholders to change the composition of our board of directors, and therefore the Company’s policies, in a relatively short period of time.

We have adopted certain certificate of incorporation and bylaws provisions which have anti-takeover effects.

Furthermore, we have adopted certain certificate of incorporation and bylaws provisions which have anti-takeover effects.

These include:

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Such activities could interfere with our ability to execute our strategic plans, be costly and time consuming, disrupt our operations, and divert the attention of management and our employees.

We may not have the ability to raise the funds necessary to settle for cash conversions of our 2.70% Convertible Senior Notes due 2023 (the “2023 Notes”), our 3.50% Convertible Senior Notes due 2025 (the “2025 Notes”), or our 3.75% Convertible Senior Notes due 2027 (the “2027 Notes”) (the 2023 Notes, 2025 Notes, and 2027 Notes, together, the “Notes”) or to repurchase the Notes for cash upon a fundamental change, and any future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.

Our current debt facilities, including our 2.70% Convertible Senior Notes due 2023 (the “2023 Notes”), our 3.50% Convertible Senior Notes due 2025 (the “2025 Notes”), or our 3.75% Convertible Senior Notes due 2027 (the “2027 Notes”) (the 2023 Notes, 2025 Notes, and 2027 Notes, together, the “Notes”), and our revolving credit facility (the “Credit Facility”), may contain certain restrictions, covenants and repurchase provisions that may limit our ability to raise the funds necessary to meet our working capital needs, which may include the cash conversion of the Notes or repurchase of the Notes for cash upon a fundamental change.

As of December 31, 2021, we had $20.2 million in principal amounts outstanding in 2023 Notes, $132.5 million in principal amounts outstanding in 2025 Notes, and $125.0 million in principal amounts outstanding in 2027 Notes.

Holders of the Notes will have the right to require us to repurchase all or any portion of their Notes upon the occurrence of a fundamental change before the maturity date at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date, as described in the applicable Notes and indenture.

In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the notes being converted.

In addition, as of December 31, 2021, we had an undrawn senior secured revolving credit facility in an aggregate principal amount of $150.0 million, including a $15.0 million letter of credit sublimit.

These debt facilities contain certain covenant and other restrictions that may limit our ability to, among other things, incur additional debt or create liens, sell certain assets, and merge or consolidate with third parties, which may, in turn, preclude us from responding to changes in business and economic conditions, engaging in transactions that might otherwise be beneficial to us, or obtaining additional financing.

Our ability to comply with some of these covenants is dependent on our future performance, which will be subject to many factors, some of which are beyond our control such

as prevailing economic conditions.

In addition, our failure to comply with these covenants could result in a default under the Notes or Credit Facility, which could accelerate the debt.

If any of our debt is accelerated, we may not have sufficient funds available to repay such debt, which could materially and negatively affect our financial condition and results of operation.

In addition, our ability to repurchase or to pay cash upon conversion of the Notes, or maturity of the Credit Facility, may be limited by law, by regulatory authority or by agreements governing our indebtedness that exist at the time of repurchase, conversion, or maturity.

Our failure to settle the debt as required would constitute a default under the applicable debt facility and could also lead to a default under the other debt facilities.

If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness.

Finally, holders of the Notes will have the right to require us to repurchase all or any portion of their Notes upon the occurrence of a fundamental change before the maturity date at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date, as described in the applicable Notes and indenture.

Additionally, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted.

However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the Notes surrendered therefor or pay cash with respect to the Notes being converted.

In addition, our ability to repurchase or to pay cash upon conversion of the Notes may be limited by law, by regulatory authority or by agreements governing our indebtedness that exist at the time of repurchase or conversion.

Our failure to repurchase the Notes at a time when the repurchase is required by the respective indenture or to pay any cash upon conversion of the Notes as required by the respective indenture would constitute a default under the indenture for that series of convertible notes and could also lead to a default under the indenture for the other series of convertible notes.

A default under either indenture or the fundamental change itself could lead to a default under any of our future indebtedness.

If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or to pay cash upon conversion of the Notes.

The conditional conversion features of the 2023 Notes, 2025 Notes, and 2027 Notes, if triggered, may materially and adversely affect our financial condition and operating results.

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The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options , which we refer to as ASC 470-20, an entity must separately account for the liability and equity components of certain convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.

The effect of ASC 470-20 on the accounting for the Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at the issuance date, and the value of the equity component is treated as debt discount for purposes of accounting for the debt component of the Notes.

As a result, we are required to record a greater amount of non-cash interest expense as a result of the amortization of the discounted carrying value of the Notes to their face amount over the respective terms of the Notes.

We report lower net income (or higher net loss) in our financial results because ASC 470-20 requires interest to include both the amortization of the debt discount and the instrument’s coupon interest rate, which could adversely affect our financial results, the trading price of our common stock, and the trading price of the Notes.

In addition, under certain circumstances, including our ability and intent to settle the convertible debt instruments in cash, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the Notes are not included in the calculation of diluted income per share except to the extent that the conversion value of the Notes exceeds their principal amount.

Under the treasury stock method, for diluted income per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued.

We cannot be sure that we will meet the criteria to utilize the treasury stock method in the future.

If we are unable to utilize the treasury stock method, we would be required to apply

the if-converted method.

Under this method, diluted income per share would generally be calculated assuming that all the Notes were converted into shares of our common stock at the beginning of the reporting period, unless the result would be anti-dilutive.

If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, then our diluted income per share could be adversely affected.

In August 2020, the FASB issued ASU 2020-06:

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Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

Under the standard, which will be effective for our fiscal year 2022, if not earlier adopted, an entity is no longer required to separately account for the liability and equity components of convertible debt instruments, such as those described above.

Under the standard, which will be effective for our fiscal year 2022, an entity is no longer required to separately account for the liability and equity components of certain convertible debt instruments that may be settled entirely or partially in cash upon conversion, such as the Notes.

As a result, entities will account for a convertible debt instrument wholly as debt, unless certain other conditions are met.

The elimination of these seperation models will reduce non-cash interest expense, and thereby increasing net income (or reducing net loss) for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06.

Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, and precludes the use of the treasury stock method for certain debt instruments, which could adversely affect our diluted net income (loss) per share.

The elimination of these separation models will reduce our non-cash interest expense, and thereby increasing net income (or reducing net loss).

Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share, and precludes the use of the treasury stock method for certain debt instruments, which will adversely affect our diluted shares outstanding.

We cannot be sure whether other changes may be made to the current accounting standards related to the Notes, or otherwise, that could have an adverse impact on our financial statements.

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Pursuant to U.S.

federal and state tax rules, a corporation is generally permitted to deduct from taxable income in any year net operating losses (“NOLs”) carried forward from prior years and to reduce from tax liabilities in any year R&D credits carried forward from prior years.

credits carried forward from prior years.

As of December 31, 2021, we had U.S.

federal NOL carryforwards of approximately $219.3 million, of which $6.9 million has an indefinite carryforward period, with the remaining expiring in varying amounts between 2034 and 2037, if not utilized.

federal NOL carryforwards of approximately $165.8 million, of which $6.9 million have an indefinite carryforward period, with the remaining expiring in 2036, if not utilized.

We also had U.S.

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The shares of common stock, if any, issued upon conversion of the Notes will, upon such issuance, be taken into account when determining the cumulative change in our ownership for Section 382 purposes.

As a result, any conversion of the Notes that we elect to settle in shares may materially increase the risk that we could experience an ownership change in the future.

As a result, any conversion of the Notes that we elect to settle in shares may materially increase the risk that we could experience an ownership change for these purposes in the future.

The capped call transactions may affect the value of the 2027 Notes and our common stock.

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The option counterparties or their affiliates may enter into or modify hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2027 Notes (and are likely to do so during any observation period related to a conversion of the 2027 Notes).

This activity could also cause or avoid an increase or a

decrease in the market price of our common stock and the 2027 Notes, which could affect the ability of the noteholders to convert the 2027 Notes and, to the extent the activity occurs during any observation period related to a conversion of the 2027 Notes, it could affect the number of shares and value of the consideration that noteholders will receive upon conversion of the 2027 Notes.

This activity could also cause or avoid an increase or a decrease in the market price of our common stock and the 2027 Notes, which could affect the ability of the noteholders to convert the 2027 Notes and, to the extent the activity occurs during any observation period related to a conversion of the 2027 Notes, it could affect the number of shares and value of the consideration that noteholders will receive upon conversion of the 2027 Notes.

Risks Associated with Operating a Global Business

We are exposed to risks of operating businesses outside the United States.

Most of our sales are to customers located outside of the United States, and we expect sales from non-U.S.

markets to continue to represent a significant portion of our sales in the future.

A majority of our sales are to customers located outside of the United States, which we expect to continue in the future.

sales and operations are subject to risks inherent in conducting business outside the United States, many of which are beyond our control including:

● political and social attitudes, laws, rules, regulations, and policies within countries that favor local companies over U.S.

companies, including government-supported efforts to promote the development and growth of local competitors;

companies, including government-supported efforts to promote local competitors;

● global trade issues and uncertainties with respect to trade policies, including tariffs, trade sanctions, and international trade disputes, and the ability to obtain required import and export licenses;

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● multiple conflicting and changing governmental laws and regulations, including varying labor laws and tax regulations;

● reliance on various information systems and information technology to conduct our business, making us vulnerable to additional cyberattacks by third parties or breaches due to employee error, misuse, or other causes, that could result in further business disruptions, loss of or damage to our intellectual property and confidential information (and that of our customers and other business partners), reputational harm, transaction errors, processing inefficiencies, or other adverse consequences;

● regional economic downturns, varying foreign government support, unstable political environments, and other changes in foreign economic conditions (such as the United Kingdom’s departure from the European Union, commonly referred to as Brexit);

● reliance on various information systems and information technology to conduct our business, making us vulnerable to cyberattacks by third parties or breaches due to employee error, misuse, or other causes, that could result in business disruptions, loss of or damage to our intellectual property and confidential information (and that of our customers and other business partners), reputational harm, transaction errors, processing inefficiencies, or other adverse consequences;

● regional economic downturns, varying foreign government support, unstable political environments, and other changes in foreign economic conditions;

● the impact of public health epidemics, such as the COVID-19 pandemic, on employees, suppliers, customers and the global economy;

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and China have adversely affected, and may continue to adversely affect, our business, results of operations, and financial condition.

government has recently enacted several changes in trade policy which have adversely affected the Company’s ability to sell and service its products to and for customers located in China and in certain other countries.

These changes have included, without limitation, the elimination of license exception CIV, the addition of several companies to the U.S.

Commerce Department’s Entity List, and the implementation of new regulations governing the sale of equipment to

defined “Military End Users” and for defined “Military End Uses”.

government has enacted several changes in trade policy which have adversely affected the Company’s ability to sell and service its products to and for customers located in China and in certain other countries.

These changes have included, without limitation, the elimination of license exception CIV, the implementation of new regulations governing the sale of equipment to defined “Military End Users” and for defined “Military End Uses”, and the addition of several companies to the U.S.

Commerce Department’s Entity List (including Semiconductor Manufacturing International Corporation and its related entities).

The effect of these changes, among others, is that U.S.

companies are now required to obtain export licenses before providing commodities, software, and technology (that are subject to the regulations) to customers for whom licensing requirements did not previously apply.

companies are now required to obtain export licenses before providing commodities, software, and technology (which are subject to the regulations) to customers for whom licensing requirements did not previously apply.

These heightened export restrictions may also inhibit technical discussions with existing or prospective customers, negatively impacting our ability to pursue sales opportunities.

The administrative processing, attendant delays and risk of ultimately not obtaining required export approvals pose a particular disadvantage to the Company relative to our non-U.S.

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against certain Chinese companies, have triggered retaliatory action by China and could trigger further retaliation.

For example, China has instituted trade sanctions on certain U.S.

goods, as well as other sanctions designed to deny U.S.

companies access to critical raw materials.

In addition, China has provided, and is expected to continue to provide, significant assistance, financial and otherwise, to its domestic industries, including some of our competitors.

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Export Administration Regulations (“EAR”) when exported to and re-exported from international jurisdictions, in addition to the local jurisdiction’s export regulations applicable to individual shipments.

Currently, our MOCVD, MBE, laser annealing and certain other systems and products are controlled for export under the EAR.

Currently, our laser annealing, MOCVD, MBE and certain other systems and products are controlled for export under the EAR.

Licenses or proper license exceptions may be required for the shipment of our products to certain customers or countries.

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Changes to or ambiguities in these laws and regulations may create uncertainty regarding our compliance requirements.

While we intend to invest

the required resources to comply with these regulatory requirements, if we are found by a court or regulatory agency to have failed in these efforts, our business, financial condition, and results of operations could be adversely affected.

While we intend to comply with these regulatory requirements, if we are found by a court or regulatory agency to have failed in these efforts, our business, financial condition, and results of operations could be adversely affected.

We may be exposed to liabilities under the Foreign Corrupt Practices Act and other similar laws.

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Attacks of this nature are increasing in their frequency, levels of persistence, sophistication, and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of expertise and motives (including industrial espionage), including organized criminal groups, nation states, and others.

In addition to the extraction of

sensitive information, attacks could include the deployment of harmful malware, ransomware, or other means which could affect service reliability and threaten the confidentiality, integrity, and availability of information.

Significant disruptions in our, or our third-party vendors’, information technology systems or other data security incidents could adversely affect our business operations and result in the loss or misappropriation of, and unauthorized access to, sensitive information, which could result in financial, legal, regulatory, business, and reputational harm to us.

In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, or other means which could affect service reliability and threaten the confidentiality, integrity, and availability of information.

Significant disruptions in our information technology systems (or those of our key suppliers, contract manufacturers, distributors, sales agents and other partners) or other data security incidents could adversely affect our business operations and result in the loss or misappropriation of, and unauthorized access to, sensitive information, which could result in financial, legal, regulatory, business, and reputational harm to us.

On November 1, 2018, we announced the discovery of an attack on our computer system by a highly-sophisticated actor.

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and international patents and have additional pending patent applications relating to certain of our products and technologies.

The process of seeking patent protection is lengthy and expensive, and we cannot be certain that pending or future applications will result in issued patents or that issued patents will be of sufficient scope or strength to provide meaningful protection or commercial advantage.

In addition, our intellectual property rights may be circumvented, invalidated, or rendered obsolete by the rapid pace of technological change, or through efforts by others to reverse engineer our products or design around patents that we own.

The process of seeking patent protection is lengthy and expensive, and we cannot be certain that pending or future applications will result in issued patents or in patents which provide meaningful protection or commercial advantage.

In addition, our intellectual property rights may be circumvented, invalidated, or rendered obsolete by the rapid pace of

technological change, or through efforts by others to reverse engineer our products or design around patents that we own.

Policing unauthorized use of our products and technologies is difficult and time consuming and the laws of other countries may not protect our proprietary rights as fully or as readily as U.S.

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We also periodically receive notices from customers who believe that we are required to indemnify them for damages they may incur related to infringement claims made against these customers by third parties.

Our customary practice is to evaluate such assertions and to consider the available alternatives, including

whether to seek a license, if appropriate.

Our customary practice is to evaluate such assertions and to consider the available alternatives, including whether to seek a license, if appropriate.

However, we cannot ensure that licenses can be obtained or, if obtained, will be on acceptable terms or that costly litigation or other administrative proceedings will not occur.

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Our ability to remain competitive depends on our ability to enhance existing products and develop and manufacture new products in a timely and cost effective manner and to accurately predict technology transitions.

Our performance may be adversely affected if we are unable to accurately predict evolving market trends and related customer needs and to effectively allocate our resources among new and existing products and technologies.

We are also exposed to potential risks associated with unexpected product performance issues.

Our performance may be adversely affected if we are

unable to accurately predict evolving market trends and related customer needs and to effectively allocate our resources among new and existing products and technologies.

The semiconductor industry, characterized by a high frequency and complexity of technology transitions and inflections (commonly referred to as “Moore’s Law”), poses unique risks and challenges.

Our ability to successfully compete in this market will depend on our ability to address and manage a number of industry-specific risks, including and without limitation to the following:

● the heightened cost of research and development, associated with matters such as shrinking geometries, complex device structures, multiple applications and process steps, and the use of new materials;

● customer demands for shorter cycle times between order placements and product shipments, which will necessitate accurate forecasting of customer investment;

● customer demands for continuous reductions in the total cost of manufacturing system ownership, together with challenging equipment service demands and the resulting need for us to properly allocate our service resources;

● the number of types and varieties of semiconductors and number of applications across multiple substrate sizes;

● the need to reduce product development time, despite increasingly difficult technical challenges;

● the importance of establishing market positions in segments with growing demand.

If we fail to properly allocate appropriate resources, successfully develop and commercialize products to meet customer demand, and effectively anticipate industry trends, our business and results of operations may be adversely impacted.

In addition, the semiconductor industry has experienced, and may continue to experience, significant consolidation, among both semiconductor manufacturers and manufacturing equipment suppliers.

Larger competitors resulting from consolidations may have certain advantages over us, including but not limited to more efficient cost structures, substantially greater financial and other resources, greater presence in key markets, and greater name recognition.

Consolidation among our competitors and integration among our customers could erode our market share, negatively impact our ability to compete, and have a material adverse effect on our business.

Whether in connection with the semiconductor industry or otherwise, we are also exposed to potential risks associated with unexpected product performance issues.

Our product designs and manufacturing processes are complex and could contain unexpected product defects, especially when products are first introduced.

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These and other costs could be substantial and our reputation could be harmed, resulting in a reduced demand for our products and a negative effect on our business, financial condition, and results of operations.

Certain of our sales are dependent on the demand for consumer electronics, which can experience significant volatility due to seasonal and other factors.

The demand for semiconductors, LEDs, HDDs and other devices is highly dependent on sales of consumer electronics, such as televisions, computers, tablets, digital video recorders, smartphones, cell phones, and other mobile devices.

Factors that could influence the levels of spending on consumer electronic products include consumer confidence, access to credit, volatility in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, and other macroeconomic factors affecting consumer spending behavior.

Certain of our sales are dependent on the demand for consumer electronic products and automobiles, which can experience significant volatility.

The demand for semiconductors, HDDs and other devices is highly dependent on sales of consumer electronic products, such as tablets, smartphones, laptops and wearable devices.

In addition, as a result of the growing automotive semiconductor market, semiconductor demand is also heavily influenced by the demand for automobiles.

Factors that could affect the levels of spending on consumer electronic products and automobiles include consumer confidence, access to credit, volatility in fuel and other energy costs, conditions in the residential real estate and mortgage markets, labor and healthcare costs, and other macroeconomic factors affecting consumer spending behavior.

The emergence of new or competing technologies may also affect demand for consumer electronic products.

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Furthermore, in the past, some of our customers have overestimated their potential for market share growth.

If this growth is overestimated, we may experience cancellations of orders in backlog, rescheduling of customer deliveries, obsolete inventory, and liabilities to our suppliers for products no longer needed.

If this growth is overestimated, we may experience cancellations of orders in

backlog, rescheduling of customer deliveries, obsolete inventory, and liabilities to our suppliers for products no longer needed.

Alternatively, changes that result in sudden increases in demand for consumer electronic products and automobiles (for example, as a result of the reopening of the economy with the easing of COVID-19 related restrictions) may result in a shortage of parts and materials needed to manufacture our products, and attendant shipping delays (both to us and to our customers) and/or the cancellation of orders placed by our customers.

We have a concentrated customer base, located primarily in a limited number of regions, which operates in highly concentrated industries.

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Accordingly, if a customer selects a competitor’s product over ours, we could experience difficulty selling to that customer for a significant period of time.

Furthermore, we do not have long-term contracts with our customers.

Furthermore, we typically do not have long-term contracts with our customers.

As a result, our agreements with our customers do not provide assurance of future sales, and we are exposed to competitive price pressures on new orders we attempt to obtain.

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Alternatively, during periods of rapid growth, we must be able to acquire and develop sufficient manufacturing capacity to meet customer demand and attract, hire, assimilate, and retain a sufficient number of qualified people.

Our net sales and operating results may be negatively affected if our customers experience economic downturns or slowdowns in their businesses.

Our net sales and operating results may be negatively affected if we fail to predict and effectively respond.

Our failure to estimate customer demand accurately could result in inventory obsolescence, liabilities to our suppliers for products no longer needed, and manufacturing interruptions or delays which could affect our ability to meet customer demand.

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Any or all of these factors could materially and adversely affect our business, financial condition, and results of operations.

We rely on a limited number of suppliers, some of whom are our sole source for particular components.

Certain of the parts, components, and sub-assemblies included in our products are obtained from a single source or a limited group of suppliers.

Our inability to develop alternative sources, as necessary, could result in a prolonged interruption in our ability to supply related products, a failure on our part to meet the demands our customers, and a significant increase in the price of related products, which could adversely affect our business, financial condition, and results of operations .

Our failure to successfully manage our outsourcing activities or failure of our outsourcing partners to perform as anticipated could adversely affect our results of operations.

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While we maintain some level of internal manufacturing capability for these systems, we rely on our outsourcing partners to perform their contracted functions to allow us flexibility to adapt to changing market conditions, including periods of significantly diminished order volumes.

If our outsourcing partners do not perform as required, or if our outsourcing efforts do not allow us to realize the intended cost savings and flexibility, our results of operations (and those of our third-party providers) may be adversely affected.

If our outsourcing partners do not perform as required, or if our outsourcing efforts do not allow us to realize the intended cost savings and flexibility,

our results of operations (and those of our third-party providers) may be adversely affected.

Disputes and possibly litigation involving third party providers could result and we could suffer damage to our reputation.

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Although we attempt to select reputable providers, one or more of these providers could fail to perform as we expect.

loss of intellectual property rights, quality issues, increased product time-to-market, and an inefficient allocation of our human resources, any or all of which could materially and adversely affect our business, financial condition, and results of operations.

We rely on a limited number of suppliers, some of whom are our sole source for particular components.

Certain of the parts, components, and sub-assemblies included in our products are obtained from a single source or a limited group of suppliers.

If we do not effectively manage our outsourcing efforts or if third party providers do not perform as anticipated, we may not realize the benefits of productivity improvements and we may experience operational difficulties, increased costs, manufacturing and installation interruptions or delays, inefficiencies in the structure and operation of our supply chain, loss of intellectual property rights, quality issues, increased product time-to-market, and an inefficient allocation of our human resources, any or all of which could materially and adversely affect our business, financial condition, and results of operations.

General Risk Factors

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The trading price of our common shares has fluctuated significantly and could decline independent of the overall market, and shareholders could lose all or a substantial part of their investment.

The market price of our common shares could continue to fluctuate in response to several factors, including those mentioned elsewhere in this section and, among others:

The market price of our common shares could continue to fluctuate in response to several factors, including among others:

● difficult macroeconomic conditions, international trade disputes, unfavorable geopolitical events, and general stock market uncertainties, such as those occasioned by a global liquidity crisis and a failure of large financial institutions;

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● changes in recommendations and financial estimates by investment research analysts, and decisions by investment research analysts to cease coverage of our Company;

● our failure to successfully and timely implement cost reduction initiatives and restructuring activities, if and when required;

● margin trading, short sales, hedging and derivative transactions involving our common stock;

● our failure to successfully implement cost reduction initiatives and restructuring activities, if and when required;

● delays or difficulties in satisfying internal control evaluations and attestation requirements of Section 404 of the Sarbanes Oxley Act of 2002;

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These lawsuits, if and when brought, can result in substantial costs and a diversion of management’s attention and resources, which can adversely affect our financial condition, results of operations, and liquidity.

We are subject to risks of non-compliance with environmental, health, and safety regulations.

From a corporate governance perspective, there is an increasing focus on reducing energy usage and improving the environmental impact and sustainability associated with manufacturing operations.

In addition, we are subject to environmental, health, and safety regulations in connection with our business operations, including but not limited to

regulations related to the development, manufacture and use of our products, recycling and disposal of related materials, and the operation and use of our facilities and real property.

Failure or inability to comply with existing or future environmental, safety and sustainability standards and regulations could result in significant remediation liabilities, the imposition of fines, the suspension or termination of research, development, or use of certain of our products, and other harm to the Company, which could have a material adverse effect on our business, financial condition, and results of operations.

Aside from these potential adverse effects on our business operations, we are committed to ensuring safe

working conditions, treating our employees with dignity and respect, and sourcing, manufacturing, and distributing our

products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause

reputational harm for the Company.

We are subject to risks of non-compliance with environmental, health, and safety regulations and sustainability requirements.

We are subject to environmental, health, and safety regulations in connection with our business operations, including but not limited to regulations related to the development, manufacture and use of our products, recycling and disposal of related materials, and the operation and use of our facilities and real property.

Failure or inability to comply with existing or future environmental, health and safety regulations, including those relating to climate change, could result in

significant remediation liabilities, the imposition of fines, the suspension or termination of research, development, or use of certain of our products, and other harm to the Company, which could have a material adverse effect on our business, financial condition, and results of operations.

In addition to regulatory compliance, customer and investor sustainability requirements, as well as the Company’s own sustainability targets, could cause us from time to time to alter our manufacturing and other operations, potentially at significant cost to the Company as we strive to meet these requirements and targets.

Any failure to meet these sustainability standards could negatively affect the demand for our products and our stock price, and may subject the Company to significant costs and liabilities and reputational harm.

We are committed to ensuring safe working conditions, treating our employees with dignity and respect, and sourcing, manufacturing, and distributing our products in a responsible and environmentally friendly manner, and any failure on our part to do so may cause reputational and other harm for the Company.

Furthermore, some of our operations involve the storage, handling, and use of hazardous materials that may pose a risk of fire, explosion, or environmental release.

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Our inability to attract, retain, and motivate employees could have a material adverse effect on our business.

Our success depends in part upon our ability to attract, retain, and motivate employees, including those in executive, managerial, engineering and marketing positions, as well as highly skilled and qualified technical personnel.

Attracting, retaining, and motivating such qualified personnel may be difficult due to challenging industry conditions, competition for such personnel by other technology companies, consolidations and relocations of operations, and workforce reductions, and there can be no assurance that we will be successful in recruiting or retaining key personnel.

We have entered into employment agreements with certain key personnel but our inability to attract, retain, and motivate key personnel could have a material adverse effect on our business, financial condition, and results of operations.

Changes in accounting pronouncements or taxation rules or practices may adversely affect our financial results.

Changes in accounting pronouncements or taxation rules or practices can have a significant effect on our reported results.

New accounting pronouncements and taxation rules can have a material impact on revenue recognition practices, effective tax rates, results of operations, and our financial condition.

In addition, varying interpretations of accounting pronouncements or taxation practices, and the questioning of our current or past practices (such as those associated with our transfer pricing), may adversely affect our reported financial results.

Our income taxes may change.

We are subject to income tax on a jurisdictional or legal entity basis and significant judgment is required in certain instances to allocate our taxable income to a jurisdiction and to determine the related income tax expense and benefits.

Our success depends largely on our ability to attract, retain, and motivate employees, including those in executive, managerial, engineering and marketing positions, as well as highly skilled and qualified technical personnel.

Competition for qualified design and technical personnel is intense, particularly in the semiconductor industry and especially when business cycles are improving.

Competitors may try to recruit, and may succeed in recruiting, our most valuable technical employees.

To attract and retain key employees, we must provide competitive compensation packages, including cash and stock-based compensation, among other benefits.

If the value of our stock-based incentive awards decreases, or if our total compensation packages are not viewed as competitive, our ability to attract and retain key employees could suffer.

We do not have key person life insurance on any of our executives, and we may not be able to readily replace key departed employees.

Our inability to attract, retain, and motivate key personnel could have a significant negative effect on our business, financial condition, and results of operations.

Changes in accounting pronouncements or taxation rules, practices, or rates may adversely affect our financial results.

Changes in, or newly enacted, accounting pronouncements or taxation rules, practices or rates can materially affect our revenue recognition practices, effective tax rates, results of operations, and our financial condition.

In addition, varying interpretations of accounting pronouncements or taxation practices, and the questioning of our current or past practices, may adversely affect our reported financial results.

Furthermore, we are subject to income tax on a jurisdictional or legal entity basis and significant judgment is required in certain instances to allocate our taxable income to a jurisdiction and to determine the related income tax expense and benefits.

Losses in one jurisdiction generally may not be used to offset profits in other jurisdictions.

As a result, changes in the mix of our earnings (or losses) between jurisdictions, among other factors, could alter our overall effective income tax rate, possibly resulting in significant tax rate increases.

We are regularly audited by various tax authorities.

Income tax audit assessments or changes in tax laws, regulations, or other interpretations may result in increased tax provisions which could materially affect our operating results in the period or periods in which such determinations are made or changes occur.

In addition, our effective tax rate could increase if we determine that it is no longer more likely than not that we are able to realize our remaining net deferred tax assets, if we are unable to generate sufficient future taxable income in certain jurisdictions, or if we are otherwise required to increase our valuation allowances against our deferred tax assets.

Furthermore, we are regularly audited by various tax authorities, and these audits may result in increased tax provisions which could negatively affect our operating results in the period or periods in which such determinations are made or changes occur.

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