What changed in this filing

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Item 1A. Risk Factors

2024-02-29 compared with 2023-03-01 · 42 added, 43 removed, 348 unchanged (20% of the section changed)

2 unchanged sentences

Risks Related to Our Business

The COVID-19 outbreak has adversely impacted and could continue to adversely impact our results of operations.

The impact of the COVID-19 outbreak on a global basis has adversely affected and is likely to continue to adversely affect our business in a number of respects, although the further extent, nature and timing of such impact cannot be predicted at this time.

The COVID-19 outbreak has led countries around the world, as well as most states in the U.S., to from time-to-time implement restrictions relating to the operation of almost all types of businesses.

The closure standards vary from jurisdiction to jurisdiction, but they typically require all but “critical”, “essential” or “life-sustaining” businesses to close all offices and facilities.

We believe, based on the various standards published to date, that our businesses meet or will meet the requisite standards to remain open, at least partially, in all jurisdictions in which we operate, although there is no assurance that our decision to remain open will not be challenged.

To date, our supply chain has not experienced significant disruptions as a result of the COVID-19 pandemic.

However, our suppliers could be required by government authorities to temporarily cease operations in accordance with the various restrictions discussed above, might be limited in their production capacity due to complying with restrictions relating to the operation of businesses during the COVID-19 pandemic, or could suffer their own supply chain disruptions, impacting their ability to continue to supply us with the quantity of materials required by us.

If as a result of the COVID-19 outbreak governments take additional protective actions, or extend the time period for existing protective actions, or the distribution and administration of the vaccines for COVID-19 are delayed, disrupted, or prolonged, such actions or events may have a material adverse impact on our business and operating results.

This could include closures of our facilities or the closure of the facilities of our customers, suppliers, or other vendors in our supply chain.

Any disruption of our supply chain or the businesses of our customers could adversely impact our business and results of operations.

The extent and duration of the impact on the global economy and financial markets from COVID-19 is difficult to predict, and the extent to which COVID-19 will negatively affect us and the duration of any potential business disruption is uncertain.

The impact to our business and results of operation will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the COVID-19 outbreak and the actions taken by authorities and other entities to contain COVID-19 or treat its impact, and the impact of such actions, all of which are beyond our control.

These potential impacts, while uncertain, could adversely affect our operating results.

A shortage of qualified labor could have a material adverse effect on our business and results of operations.

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A number of factors may adversely affect the labor force available to us or increase labor costs, including general macroeconomic conditions, high employment levels, federal unemployment subsidies, increased wages offered by other employers, vaccine mandates and other government regulations, and our responses thereto.

We are currently experiencing a shortage of qualified labor in certain geographies, particularly with manufacturing plant production workers in the United States, Israel and Japan.

Outside suppliers that we rely on have also experienced shortages of qualified labor.

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Competition for modules and systems is most often based on customer relationships, product reliability, technical performance, and the ability to anticipate and satisfy customer needs for specific design configurations.

Many other manufacturers have more experience in particular geographic

markets and specific applications than we do, and may be better positioned to compete in these areas.

Many other manufacturers have more experience in particular geographic markets and specific applications than we do, and may be better positioned to compete in these areas.

We cannot assure you that we will be able to successfully grow our business in the face of these competitive challenges.

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We may not be successful in future acquisitions or other strategic transaction endeavors, if any, which could have an adverse effect on our business and results of operations.

Historically, we expanded our business in part by completing acquisitions, and an important element of our business strategy continues to be expansion through acquisition.

Historically, we expanded our business in part by completing acquisitions, and we expect that an important element of our business strategy will continue to be expansion through acquisition.

We cannot assure that we will identify, have the financial capabilities to execute, and/or successfully complete strategic transactions with suitable partners in the future.

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Such transactions involve a number of risks, including the following:

• we may incur substantial costs, including advisory fees and diversion of management attention, in evaluating a potential transaction;

• we may incur substantial costs, including advisory fees and diversion of management attention, in evaluating a potential transaction, whether or not the transaction is consummated;

• we may be unable to achieve the anticipated benefits from the transaction;

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A number of countries in which we manufacture or do business in are identified in the report as being on the Priority Watch List or the Watch List.

In China, for instance, the USTR is concerned about the urgent need to remediate a range of IP-related concerns, including trade secret theft, online piracy and counterfeiting, the high-volume manufacture and export of counterfeit goods, technology transfer requirements imposed as a condition to access the Chinese market, the mandatory application of adverse terms to foreign IP licensors, and IP ownership and research and development localization requirements.

goods, technology transfer requirements imposed as a condition to access the Chinese market, the mandatory application of adverse terms to foreign IP licensors, and IP ownership and research and development localization requirements.

Structural impediments to administrative, civil, and criminal IP enforcement are also problematic.

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While our agreements with our customers and distributors typically contain provisions designed to limit our exposure to potential material product liability claims, including appropriate warranty, indemnification, damages waiver, and limitation of liability provisions, it is possible that such provisions may not be effective under the laws of some jurisdictions, thus exposing us to substantial liability.

Moreover, defending a suit, regardless of its merits, could entail substantial expense, and require the

time and attention of key management personnel.

Moreover, defending a suit, regardless of its merits, could entail substantial expense, and require the time and attention of key management personnel.

If product liability claims are brought against us, the costs associated with defending such claims may adversely affect our results of operations and future cash flows.

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If our custom product or system is ultimately accepted by the customer, we may then begin to realize substantial revenues from our development efforts.

In particular, our Measurement Systems business segment which produces highly specialized systems, can be priced for several hundred thousand dollars per unit, so that a contract to acquire one or more units can materially contribute to our revenues during the period or periods that we are permitted to recognize the contract revenues for accounting purposes.

The nature of our measurement systems business segments, and in particular, the products and systems manufactured for the steel industry, may therefore result in substantial fluctuations in our operating results, including revenues and profitability, from period to period, even though there has been no fundamental change in our business or its prospects.

In particular, our Measurement Systems business segment which produces highly specialized systems, can be priced for ten thousand dollars to $1 million or more per unit, so that a contract to acquire one or more units can materially contribute to our revenues during the period or periods that we are permitted to recognize the contract revenues for accounting purposes.

The nature of our measurement systems business segments, and in particular, the products and systems manufactured for the steel

industry, may therefore result in substantial fluctuations in our operating results, including revenues and profitability, from period to period, even though there has been no fundamental change in our business or its prospects.

Further, customers may request a delay in shipping a product they have ordered due to changes in their business needs, which may delay the revenue recognition for the product until shipment occurs.

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Many of the orders that comprise our backlog may be canceled by our customers without penalty.

Our customers, particularly for our sensors segment products, often cancel orders when business is weak and inventories are excessive, a situation that we

have previously experienced during periods of economic slowdown.

Our customers, particularly for our sensors segment products, often cancel orders when business is weak and inventories are excessive, a situation that we have previously experienced during periods of economic slowdown.

Therefore, we cannot be certain that the amount of our backlog accurately forecasts the level of orders that will ultimately be delivered.

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For periods in which the prices of these raw materials are rising, we may be unable to pass on the increased cost to our customers, which would result in decreased margins for the products in which they are used.

For periods in which the prices are declining, we may be required to write down our inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or market.

For periods in which the prices are declining, we may be required to write down our

inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or market.

Depending on the extent of the difference between market price and our carrying cost, this write-down could have a material adverse effect on our net earnings.

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Internal control over financial reporting may not prevent or detect misstatements because of inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.

Therefore, even effective internal control over financial reporting can provide only reasonable assurance with

respect to the preparation and fair presentation of financial statements.

Therefore, even effective internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

If we cannot provide reasonable assurance with respect to our financial reports and effectively prevent fraud, our operating results could be harmed.

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Federal, state, provincial, foreign, and local environmental requirements relating to air, soil, and water quality, handling, discharge, storage, and disposal of a variety of substances (including per- and polyfluoroalkyl substances, or PFAS), and climate change are also significant factors in our business, and changes to such requirements generally result in an increase to our costs of operations.

Although we have never been involved in any environmental matter that has had a material adverse impact on our overall operations, there can be no assurance that in connection with any past or future operation, acquisition or otherwise, we will not be obligated to address environmental matters that could have a material adverse impact on our business, financial condition, and results of operations.

otherwise, we will not be obligated to address environmental matters that could have a material adverse impact on our business, financial condition, and results of operations.

The failure by us to comply with applicable environmental, health and safety requirements could result in fines, penalties, enforcement actions, third-party claims for property damage and personal injury, requirements to clean up property or to pay for the costs of cleanup, or regulatory or judicial orders requiring corrective measures, which could have a material adverse effect on our business, financial condition or results of operations.

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During this process, we may experience under-utilization of certain plants and factories in higher-cost regions, and capacity constraints in plants and factories located in lower-cost regions.

Also, we may experience delays in the expected transition from a higher-cost location to a lower-cost one that results in greater than expected use of the higher-cost

Also, we may experience delays in the expected transition from a higher-cost location to a lower-cost one that results in greater than expected use of the higher-cost facility.

This transitional utilization may result initially in production inefficiencies and higher costs.

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Current and future tariffs, trade regulation or other restrictions may adversely impact our business, financial condition and results of operations.

We have manufacturing operations in China, Europe, Canada, Israel and the United States, as well as in other countries.

Significant tariffs or other restrictions which are placed on Chinese, European, Canadian or Israeli imports to the United States, or any related counter-measures which are taken by the countries involved, may materially harm our revenues and results of operations.

We have manufacturing operations in India, China, Europe, Canada, Israel and the United States, as well as in other countries.

Significant tariffs or other restrictions which are placed on Indian, Chinese, European, Canadian or Israeli imports to the United States, or any related counter-measures which are taken by the countries involved, may materially harm our revenues and results of operations.

Tariffs, or other changes in U.S.

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We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impacts on our business.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental actions related to tariffs, quotas, duties, taxes or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, and our suppliers, which in turn could adversely impact our business, financial condition and results of operations.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental actions related to tariffs, quotas, duties, taxes or trade

agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, and our suppliers, which in turn could adversely impact our business, financial condition and results of operations.

We are subject to the risks of political, economic, health, and military instability in countries outside the United States in which we operate.

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We have principal manufacturing facilities and operations located in Israel.

Accordingly, our business will be directly influenced by the political, economic and military conditions affecting Israel at any given time.

Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries.

We have never experienced any material interruption in our operations attributable to these factors, in spite of several Middle East crises, including wars.

Accordingly, our business is directly influenced by the political, economic and military conditions affecting Israel at any given time.

Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries, terrorist organizations and other militant groups, including the current war between Israel and Hamas.

We have never experienced any material interruption in our operations attributable to these factors, in spite of several Middle East crises, including the current war.

In response to conflict in or around Israel, we could in the future temporarily discontinue production in Israel for the safety of our employees.

We could also face future production slowdowns or interruptions at either of our manufacturing locations in Israel due to the impacts of conflicts, such as the war between Israel and Hamas, including personnel absences as a number of our employees have been called to active military duty, or due to other resource constraints such as the inability to source materials for production.

The intensity and duration of Israel’s current war against Hamas are difficult to predict as are such war’s implications on our operations and on the global economy.

A change in the security and political situation in Israel and in the economy could have a material adverse effect on our business, operating results and financial condition.

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The length of time required by the licensing processes can vary, potentially delaying the shipment of products or performance of services and the recognition of the corresponding revenue.

In addition, failure to comply with any of these regulations could result in substantial civil and criminal, monetary and non-monetary penalties, disruptions to our business, limitations on our ability to import and export products and services and damage to our reputation.

In addition, failure to comply with any of these regulations could result in substantial civil and criminal, monetary and non-monetary penalties,

disruptions to our business, limitations on our ability to import and export products and services and damage to our reputation.

In 2022, we determined that certain export shipments of products from one of our subsidiaries did not comply with the filing requirements of U.S.

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Our financial position, results of operations and cash flows could be adversely affected by difficult conditions and significant volatility in the capital, credit and commodities markets and in the overall worldwide economy.

Disruptions in supply chains, inflation, and rising interest rates have a negative effect on economies and the performance of stock markets.

Recent global events have adversely affected and are continuing to adversely affect workforces, organizations, economies, and financial markets globally, leading to economic downturns, inflation, and increased market volatility.

The ongoing wars between Israel and Hamas and between Russia and Ukraine, escalating tensions in the South China Sea, Red Sea and Yemen, high inflation, increasing interest rates, bank failures and associated financial instability and crises, and supply chain issues have added to global economic and market volatility.

Any uncertainty about the federal budget or the debt limit in the United States could have a negative effect on the United States and global economy.

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Any cyber incidents could materially disrupt operational systems;

loss of trade secrets or other proprietary or competitively sensitive information;

compromise personally identifiable information regarding customers or employees;

result in loss of trade secrets or other proprietary or competitively sensitive information;

compromise personally identifiable information regarding customers, employees or other persons;

and jeopardize the security of our facilities.

Because techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques, or to implement adequate preventative measures.

Information technology security threats, including security breaches, computer malware, and other cyber-attacks are increasing in both frequency and sophistication, and could create financial liability, subject us to legal or regulatory sanctions, or damage our reputation with customers, suppliers, and other stakeholders.

Information technology security threats, including security breaches, computer malware, and other cyber-attacks are increasing in both frequency and sophistication, including as a result of ongoing military conflicts, certain U.S.

foreign relations, and increased remote work arrangements, and could create financial liability, subject us to legal or regulatory sanctions, or damage our reputation with customers, suppliers, and other stakeholders.

We continuously seek to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on our competitive position, reputation, results of operations, financial condition, and cash flows.

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Any loss of such information could harm our competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by the disruptions or security breaches.

We have implemented protective measures to prevent against and limit the effects of system or network disruptions, but there can be no assurance that such measures will be sufficient to prevent or limit the damage from any future disruptions and any such disruption could have a material adverse impact on our business and results of operations.

We have implemented protective measures to prevent against and limit the

effects of system or network disruptions, but there can be no assurance that such measures will be sufficient to prevent or limit the damage from any future disruptions and any such disruption could have a material adverse impact on our business and results of operations.

Third-party service providers, such as subcontractors, distributors and vendors have access to certain portions of our sensitive data.

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Any such loss of data by our third-party service providers could have a material adverse impact on our business and results of operations.

We may use artificial intelligence in our business, and challenges with properly managing its use could adversely affect our business .

We may incorporate artificial intelligence (“AI”) solutions into our business, processes, or products, and applications of AI may become important in our operations over time.

Our competitors or other third parties may incorporate AI into their businesses more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.

Additionally, if the types of information that AI applications assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely affected.

The rapid evolution of AI, including potential government regulation of AI, may require significant resources to develop, test and maintain our implementations of AI.

Unexpected events, such as a natural disaster, could disrupt our operations and adversely affect our results of operations.

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natural disasters, such as flooding, hurricanes, and earthquakes;

outbreaks of disease or illness;

war or terrorist activities;

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2022 Stock Incentive Program, as may be amended from time to time, provides for the grant of equity-based awards, including restricted stock, restricted stock units, stock options, and other equity-based awards to our directors, officers, and other employees, advisors and consultants.

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