−Removed: Summary of Principal Risk Factors
−Removed: Investing in Varex Imaging Corporation ("we," "our," "us," the "Company," or "Varex") common stock involves risks.
−Removed: See below and Part I, Item 2 " Management’s Discussion and Analysis of Financial Condition and Results of Operations " and Part I, Item 3 " Quantitative and Qualitative Disclosures about Market Risk " for a discussion of the following principal risks and other risks that make an investment in Varex speculative or risky:
−Removed: • The global economy has been and continues to be adversely impacted by economic instability and geopolitical tensions.
−Removed: • We sell our products and services to a limited number of original equipment manufacturer (“OEM”) customers, many of which are also our competitors, and a reduction in or loss of business of one or more of these customers may materially reduce our sales.
−Removed: • We may not be able to accurately predict the demand or delivery schedules for our products.
−Removed: • We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or with greater abilities to develop more effective technologies, or we could be forced to reduce our prices.
−Removed: • Our success depends on the successful development, introduction, and commercialization of new generations of products and enhancements to or simplifications of existing product lines.
−Removed: • More than half of our revenue is generated from customers located outside the United States and is subject to global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, and other risks associated with international operations and sales that could materially and adversely impact our business and financial results.
−Removed: • It has become more difficult to attract and retain employees, which has impacted, and is likely to continue to impact, our ability to develop and manufacture products and operate our business.
−Removed: • We may be unable to complete future acquisitions or realize expected benefits from acquisitions of or investments in new businesses, products, or technologies, which could harm our business.
−Removed: • Warranty claims may materially and adversely affect our business.
−Removed: • Product defects or misuse may result in material product liability or professional errors and omissions claims, litigation, investigation by regulatory authorities, or product recalls that could harm our future revenues and require us to pay material uninsured claims.
−Removed: • We are exposed to credit risk and fluctuations in the values of our investment portfolio.
−Removed: • Our business is subject to evolving Environmental, Social, and Governance (“ESG”) requirements and stakeholder expectations that could expose us to numerous risks.
−Removed: • Supply chain disruptions, including the loss of a supplier, and any inability to obtain supplies of important components have impacted our ability to manufacture products, have caused delays in our ability to deliver products, and have increased our costs and may continue to do so.
−Removed: • Shortages, changes in source of, and increases in prices for, raw materials have negatively impacted our ability to manufacture products, have caused delays, and have increased our cost of goods.
−Removed: • A disruption at our manufacturing facilities, as well as fluctuating manufacturing costs, could materially and adversely affect our business.
−Removed: • Our competitive position would be harmed if we are not able to maintain our intellectual property rights, and protecting our intellectual property and defending against infringement claims can be costly.
−Removed: • Disruption of critical information systems or material breaches in the security of our systems may materially and adversely affect our business and customer relations.
−Removed: • Changes in import/export regulatory regimes, tariffs, and national policies could continue to negatively impact our business.
−Removed: • Compliance with foreign laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure to comply may result in unfavorable legal proceedings, in significant penalties and other harm to our business.
−Removed: • Compliance with United States laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure or delays in obtaining regulatory clearances or approvals or failure to comply with
−Removed: applicable laws and regulations could prevent us from distributing our products, require us to recall our products, or result in unfavorable legal proceedings, significant penalties or other harm to our business.
−Removed: • Initiation of legal proceedings, defense against legal proceedings and unfavorable results of legal proceedings could materially and adversely affect our financial results.
−Removed: • We have significant debt obligations and could incur additional debt that could adversely affect our business, profitability, liquidity, credit rating, and ability to meet our obligations.
−Removed: • The ABL Facility and the indenture governing our Senior Secured Notes impose significant operating and financial restrictions that may limit our current and future operating flexibility, particularly our ability to respond to changes in the economy or our industry or to take certain actions, which could harm our long-term interests and may limit our ability to make payments on the notes.
−Removed: • Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our common stock.
−Removed: • Liabilities related to our operations when we were part of Varian Medical Systems, Inc., a Siemens Healthineers Company ("Varian"), or liabilities associated with the spin-off from Varian, could materially and adversely affect our business, financial condition, results of operations, and cash flows.
−Removed: The following risk factors and other information included in this Quarterly Report on Form 10-Q (this "Quarterly Report") should be carefully considered.
−Removed: Although the risk factors described below are the ones management deems significant, additional risks and uncertainties not presently known to us or that we presently deem not material may also adversely affect our business operations.
−Removed: If any of the following risks or additional risks and uncertainties actually occur, our business, operating results, and financial condition could be adversely affected.
+Added: Investing in Varex Imaging Corporation common stock involves risks and the following risk factors and other information included in this Quarterly Report on Form 10-Q (this "Quarterly Report") under Part I, Item 2 " Management’s Discussion and Analysis of Financial Condition and Results of Operations " and Part I, Item 3 " Quantitative and Qualitative Disclosures about Market Risk " should be carefully considered.
+Added: Although the risk factors described below are the ones management deems significant, additional risks and uncertainties not presently known to us or that are presently known to us that we presently deem not material may also adversely affect our business operations.
Risks Relating to Our Business
−Removed: The global economy has been and continues to be adversely impacted by economic instability and geopolitical tensions.
−Removed: In many markets where we operate, global economic instability and geopolitical tensions have contributed to volatility in commodity prices, and in the credit and capital markets;
−Removed: market, supply chain, and inventory disruptions;
−Removed: sustained inflation;
−Removed: exchange rate volatility;
−Removed: the imposition of sanctions and countermeasures;
−Removed: and increased likelihood of new and unfavorable trade regulations.
−Removed: These conditions have shrunk capital equipment budgets, slowed decision-making and made it difficult for our customers and vendors to accurately forecast and plan future business activities.
−Removed: This, in turn, has caused our customers to be more cautious with, and sometimes freeze, delay, or dramatically reduce purchases and capital project expenditures.
−Removed: Some countries have adopted, and may in the future adopt, austerity or stimulus programs that could negatively affect our results from period to period.
−Removed: We have experienced, and in some areas continue to experience, difficulties in obtaining materials used to build our products, and these difficulties have in the past impacted, and could in the future impact, our ability to deliver finished products to our customers.
−Removed: If we are unable to produce and deliver products to our customers without unreasonable delay, those customers may seek alternative suppliers or decide to in-source certain products.
−Removed: Further, our competitors with greater financial resources may be better able to restructure their manufacturing and supply chains in response to geopolitical and economic trends and thereby have a competitive advantage over us.
−Removed: We have been and, in some cases, continue to be subject to price increases on the components used to make our products.
−Removed: If we are not able to mitigate these price increases and/or adequately increase prices for our products, our operations, cash flow, and financial position could continue to be adversely impacted.
−Removed: Inflation has the potential to increase our overall cost structure.
−Removed: The existence of sustained inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, increased shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.
−Removed: As interest rates rise to address inflation or otherwise, we may experience further increases in capital and other costs.
−Removed: Changes in monetary or other policies in the United States and abroad, including efforts to combat inflation, economic and/or political instability, or in reaction thereto, could affect foreign currency exchange rates.
−Removed: Furthermore, if one or more European countries were to replace the Euro with another currency, our sales in these countries, or in Europe generally, would likely be materially and adversely affected until stable exchange rates are established.
−Removed: Our products are generally priced in U.S.
−Removed: Because our business is global and some payments may be made in local currency, fluctuations in foreign currency exchange rates can impact our results by affecting product demand and purchasing decisions, revenues and expenses, and/or the profitability in U.S.
−Removed: Dollars of products and services that we provide in foreign markets.
−Removed: If the measures we take to mitigate the impact of inflation and exchange rate fluctuations are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected.
−Removed: Even if such measures are effective, the benefits of such measures may not be realized until after the costs of inflation have been incurred.
−Removed: Additionally, fluctuations in commodities prices could materially and adversely affect our performance.
−Removed: Rising commodities prices have in the past increased, and may in the future increase, our costs and those of our medical OEM customers, which could in turn result in reduced demand for our products or impact our financial results.
−Removed: Further, our security product revenues from oil-producing countries, in which we have a significant customer base, have in the past suffered as a result of volatility in oil prices and remain sensitive to fluctuations in the future.
−Removed: The uncertain economic environment has also impacted, and may in the future continue to impact, our service business, as customers’ constrained budgets may result in pricing pressure, extended warranty provisions, and even cancellation of service contracts.
−Removed: In addition, concerns over continued economic instability could make it more difficult for us to collect outstanding receivables.
−Removed: A weak or deteriorating healthcare market would inevitably materially and adversely affect our business, financial conditions, and results of operations.
We sell our products and services to a limited number of OEM customers, many of which are also our competitors, and a reduction in or loss of business of one or more of these customers may materially reduce our sales.
−Removed: We sell our products to a limited number of OEM customers, many of which are also our competitors with in-house X-ray component manufacturing operations.
−Removed: We had one customer during the three months ended June 30, 2023 that accounted for 14.8% of our revenue.
−Removed: Our ten largest customers as a group accounted for approximately 52% and 51% of our revenue for the three months ended June 30, 2023 and July 1, 2022, respectively.
−Removed: Our ten largest customers as a group accounted for approximately 51% and 50% of our revenue for the nine months ended June 30, 2023 and July 1, 2022, respectively.
−Removed: We will continue to depend on sales to a relatively small number of major customers.
−Removed: Because we often take significant time to replace lost business, it is likely that our operating results would be materially and adversely affected if one or more of our major OEM customers were to cancel, delay, or reduce orders in the future.
+Added: We had one customer during the three months ended December 29, 2023 that accounted for 15% of our revenue.
+Added: Our ten largest customers as a group accounted for approximately 52% and 55% of our revenue for the three months ended December 29, 2023 and December 30, 2022, respectively.
+Added: Because we often take significant time to replace lost business, in the past our operating results have been, and in the future it is likely that our operating results would be, materially and adversely affected if one or more of our major OEM customers were to cancel, delay, or reduce orders in the future.
Furthermore, we generate significant accounts receivables from the sale of our products and the provision of services directly to our major customers.
−Removed: We had one customer that accounted for 12.9% of our accounts receivables as of June 30, 2023.
−Removed: If one or more of these customers were to cancel a product order or service contract (whether in accordance with its terms or otherwise), become insolvent, or otherwise be unable or fail to pay for our products and/or services, our operating results and financial condition could be materially and adversely affected.
+Added: One customer accounted for 8.2% of our accounts receivables as of December 29, 2023.
+Added: If one or more of these customers were to cancel a product order or service contract, become insolvent, or otherwise be unable or fail to pay for our products and/or services in a timely manner, our operating results and financial condition could be materially and adversely affected.
We may not be able to accurately predict the demand or delivery schedules for our products.
−Removed: End-user product demand, economic uncertainties, the impact of pandemic diseases, natural disasters, armed conflict, geopolitical tensions, and other matters beyond our control make it difficult for our customers to accurately forecast and plan future business activities;
−Removed: which makes it difficult for us to accurately predict the demand for our products.
−Removed: Because the manufacture of our products requires some lead-time, changes in customer purchasing forecasts have previously impacted our business, resulting in excess inventory and slowdowns in sales.
−Removed: Similar inventory adjustments and slowdowns in sales are likely to occur in the future.
−Removed: Changes to customer forecasts can occur on short notice.
−Removed: Our customers also face inherent competitive issues and new product introduction delays which can result in changes in forecasts.
−Removed: The market and regulatory risks faced by our customers also ultimately impact our ability to forecast future business.
+Added: End-user product demand, economic uncertainties, the impact of pandemic diseases, natural disasters, armed conflict, geopolitical tensions, government actions (for example, the Chinese government initiated anti-corruption investigation related to its healthcare industry), and other matters beyond our control, make it difficult for our customers to accurately forecast and plan future business activities, which makes it difficult for us to accurately predict demand for our products.
+Added: Because the manufacture of our products requires some lead-time, changes in customer purchasing forecasts have previously resulted in excess inventory and slowdowns in sales, which are likely to occur again in the future.
+Added: Changes to customer forecasts can occur on short notice, as our customers face inherent competitive issues, new product introduction delays, and market and regulatory risks.
Our agreements for imaging components contain purchasing estimates that are typically based on our customers’ forward-looking forecasts rather than firm commitments, and actual purchasing volumes under the agreements may vary significantly from these estimates.
1 unchanged sentence
Reductions in purchasing patterns have in the past, and may in the future, materially and adversely affect our operating results.
−Removed: We compete in highly competitive markets, and we may lose business to our customers or other companies with greater resources or with greater abilities to develop more effective technologies, or we could be forced to reduce our prices.
+Added: We compete in highly competitive markets, and we are subject to pricing pressures and other factors that could result in margin erosion and loss of customers.
We compete in markets characterized by rapidly-evolving technology, intense competition and pricing pressure.
We often compete with companies that have greater financial, marketing and other resources than us.
−Removed: Some of the major diagnostic imaging systems companies, which are the primary OEM customers for our X-ray imaging components, also manufacture X-ray imaging components, including X-ray tubes, for use in their own imaging systems products.
−Removed: We must compete with these in-house manufacturing operations for business.
−Removed: If these customers manufacture a greater percentage of their components in-house or otherwise decrease purchases from external sources, which may occur for a number of reasons, including a strong U.S.
−Removed: Dollar, rising interest rates or a general economic slowdown, we could experience reductions in purchasing volume by, or loss of, one or more of these customers.
−Removed: Such a reduction or loss may have a material and adverse effect on our business.
+Added: Some of the major diagnostic imaging systems companies, which are the primary OEM customers for our X-ray imaging components, also manufacture X-ray imaging components, including X-ray tubes and flat panel detectors, for use in their own imaging systems products.
+Added: We have experienced, and may in the future experience, decreased sales of our products to these customers if they manufacture a greater percentage of their components in-house or purchase components from external sources other than us, which has had and may in the future have an
+Added: adverse effect on our business and results of operations.
+Added: We have in the past made price and other concessions to maintain existing customers and attract new customers, and may have to make additional price concessions in the future.
In addition, we compete against other stand-alone, independent X-ray tube manufacturers for both the OEM business of major diagnostic imaging equipment manufacturers and the independent servicing business for X-ray tubes.
The market for flat panel detectors is also very competitive, and we face intense competition from over a dozen smaller competitors.
−Removed: As a result of these competitive dynamics, to effectively retain the business of our customers and compete with our competitors we must have an advantage in one or more significant areas, such as lower product cost, better product quality and/or superior technology and/or performance.
−Removed: We have made price concessions to maintain existing customers and attract new customers, and may have to make additional price concessions in the future.
−Removed: In our Industrial segment, we compete with other OEM suppliers primarily outside of the United States.
−Removed: The market for our X-ray tube and flat panel products used for nondestructive testing in industrial applications is small and highly fragmented.
+Added: In our Industrial segment, we also compete with other OEM suppliers primarily outside of the United States.
Some of our competitors outside of the United States may have resources and support from their governments that we do not, such as preferences for local manufacturers, and may not be subject to the same trade compliance regulations as us.
−Removed: Therefore, our ability to compete in certain high-growth markets may be limited compared to our competitors.
−Removed: Our competitors could develop technologies and products that are more effective than those we currently use or produce or that could render our products obsolete or noncompetitive.
−Removed: In addition, the timing of our competitors’ introduction of products into the market could affect the market acceptance and sales of our products.
−Removed: Some competitors offer specialized products that provide, or may be perceived by customers to provide, an advantage over our products.
−Removed: Also, some of our non-United States competitors may not be subject to the same standards, regulatory and/or other legal requirements to which we are subject and, therefore, they could have a competitive advantage in developing, manufacturing and marketing products and services.
−Removed: Any inability to develop, gain regulatory approval for and supply commercial quantities of competitive products to the market as quickly and effectively as our competitors could limit market acceptance of our products and reduce our sales.
−Removed: Any of these competitive factors could negatively and materially affect our pricing, sales, revenues, market share and gross margins and our ability to maintain or increase our operating margins.
−Removed: Our success depends on the successful development, introduction, and commercialization of new generations of products and enhancements to or simplifications of existing product lines.
−Removed: We operate in a market characterized by rapid change and technological innovation, particularly with respect to flat panel technology.
−Removed: Our customers use our products in their medical diagnostic, security, and industrial imaging systems, and we must continually introduce new products at competitive prices while also improving existing products with higher quality, lower costs, and increased features.
+Added: Our competitors are not all subject to the same standards, regulatory and/or other legal requirements to which we are subject and, therefore, they could have a competitive advantage in developing, manufacturing, and marketing products and services.
+Added: Any inability to develop, gain regulatory approval for, and supply commercial quantities of competitive products to the market as quickly and effectively as our competitors could limit market acceptance of our products and negatively and materially affect our pricing, sales, revenues, market share, and gross margins and our ability to maintain or increase our operating margins.
+Added: Our success depends on meeting our customers' needs and demands.
To be successful, we must anticipate our customers’ needs and demands, as well as potential shifts in market preferences.
−Removed: Our failure to do so has in the past resulted, and may in the future result, in the loss of customers and an adverse impact to our financial performance.
+Added: If we are unable to anticipate these needs and demands, or the mix of products requested by our customers changes from what we expect, our revenue, margins, and financial results could be adversely affected.
When the U.S.
−Removed: Dollar is strong compared to the operating currencies of our international customers, our ability to meet such customers’ pricing expectations is particularly challenging and may result in erosion of product margin and market share.
−Removed: We have in the past spent, and in the future may need to spend, more time and money than we expect to develop, market and introduce new products or enhancements, and, even if we succeed, we may not be able to recover all or a meaningful part of our investment.
−Removed: Once introduced, new products may materially and adversely impact sales of our existing products or make them less desirable or even obsolete, which could materially and adversely impact our revenues and operating results.
−Removed: In addition, certain costs, including installation and warranty costs, associated with new products may be proportionately greater than the costs associated with other products and may therefore disproportionately, materially, and adversely affect our gross and operating margins.
+Added: Dollar is strong compared to the operating currencies of our international customers, our ability to meet such customers’ pricing expectations is particularly challenging and may result in erosion of revenues, product margin, and/or market share or other concessions on business terms.
+Added: In addition, certain costs, including installation and warranty costs, associated with new products may be proportionately greater than the costs associated with existing products and may therefore disproportionately, materially, and adversely affect our gross and operating margins.
+Added: We may also experience lower margins due to increased commodities prices, and inadequate transfer pricing favoring sales to third parties over internal sales.
If we are unable to lower these costs over time, our operating results could be materially and adversely affected.
Some of the electronic components and integrated circuits used in our flat panel detectors are susceptible to discontinuance and obsolescence risks, which may force us to incorporate newer generations of these components, resulting in unplanned additional R&D expenses, delays in the launch of new products, supply disruptions, or inventory write-downs.
−Removed: Our ability to successfully develop and introduce new products and product enhancements and simplifications, and the revenues and costs associated with these efforts, are affected by our ability to, among other things:
−Removed: • properly identify customer needs or long-term customer demands;
−Removed: • prove the feasibility of new products;
−Removed: • identify complementary technologies or intellectual property and, where appropriate, negotiate and maintain related licensing agreements or other arrangements to facilitate development of new products and product enhancements and simplifications;
−Removed: • properly manage and control research and development costs;
−Removed: • limit the time required from proof of feasibility to routine production;
−Removed: • timely and efficiently comply with internal quality assurance systems and processes;
−Removed: • limit the timing and cost of regulatory approvals;
−Removed: • adequately protect the underlying intellectual property and, where licensed or jointly developed, ensure the continuity of our use of such intellectual property for the manufacture, sale and distribution of new products and product enhancements or simplifications;
−Removed: • accurately predict and control costs associated with inventory overruns caused by the phase-in of new products and the phase-out of old products;
−Removed: • price our products competitively and profitably, which can be particularly difficult with a strong U.S.
−Removed: • manufacture, deliver, and install our products on time in sufficient volumes and accurately predict and control costs associated with manufacturing installation, warranty, and maintenance of the products;
−Removed: • appropriately manage our supply chain;
−Removed: • manage customer acceptance and payment for products;
−Removed: • anticipate, respond to, and compete successfully with competitors.
−Removed: Furthermore, as discussed in greater detail elsewhere in this “Risk Factors” section, we cannot be sure that we will be able to successfully develop, manufacture, or introduce new products or enhancements, the roll-out of which involves compliance with complex quality assurance processes, including the Quality System Regulation (“QSR”) of the U.S.
+Added: Further, using aging production equipment might hamper our capacity to innovate to meet customers’ needs and demands and stay competitive.
+Added: Failure to develop and adopt artificial intelligence ("AI") technology could also hinder competitiveness and growth potential in a rapidly evolving market.
+Added: We may also experience challenges in developing and implementing effective market strategies, leading to missed opportunities and customer dissatisfaction.
+Added: Our success depends on the successful development, introduction, and commercialization of new generations of products and enhancements to or simplifications of existing product lines.
+Added: We operate in a market characterized by rapid change and technological innovation.
+Added: Our customers use our products in their medical diagnostic, security, and industrial imaging systems, and we must continually introduce new products at competitive prices while also improving existing products with higher quality, lower costs, and increased features.
+Added: We and our joint ventures have in the past spent, and in the future may need to spend, more time and money than we expect to develop, market, and introduce new products, product enhancements, and technologies.
+Added: Even if we succeed in introducing new products, enhancements, or technologies as soon as expected, if at all, potential customers may not accept or purchase these new products, enhancements, or technologies, and we may not be able to recover all or a meaningful part of our investment.
+Added: Once introduced, new products may materially and adversely impact sales of our existing products or make them less desirable or even obsolete, which could materially and adversely impact our revenues and operating results.
+Added: Furthermore, we may not be able to successfully develop, manufacture, or introduce new products or enhancements to existing products, the roll-out of which involves compliance with complex quality assurance processes, including the Quality System Regulation (“QSR”) of the U.S.
Food and Drug Administration (“FDA”).
Failure to complete these processes timely and efficiently could result in delays that could affect our ability to attract and retain customers or cause customers to delay or cancel orders, which would materially and adversely affect our revenues and operating results.
−Removed: More than half of our revenue is generated from customers located outside the United States, and is subject to global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, and other risks associated with international operations and sales that could materially and adversely affect our business and financial results.
−Removed: We conduct business globally.
−Removed: Revenues generated from customers located outside the United States accounted for approximately 69% and 71% of our total revenues for the three months ended June 30, 2023 and July 1, 2022, respectively and approximately 69% and 70% of our total revenues for the nine months ended June 30, 2023 and July 1, 2022, respectively.
−Removed: As a result, we must provide significant service and support globally.
+Added: More than half of our revenue is generated from customers located outside the United States, and is subject to global, regional, and country-specific economic instability, shifting political environments, changing tax treatment, and other risks associated with international manufacturing, operations, and sales.
+Added: Revenues generated from customers located outside the United States accounted for approximately 68% and 68% of our total revenues for the three months ended December 29, 2023 and December 30, 2022, respectively.
We intend to continue to expand our presence in international markets and expect to expend significant resources in doing so.
−Removed: We cannot be sure that we will be able to meet our sales, service, and support objectives or obligations in these international markets or recover our investment in these international markets.
−Removed: Our future results could be harmed by a variety of factors, including:
+Added: Our future results could be impacted by a variety of factors, including:
• currency fluctuations, and in particular the strength of the U.S.
−Removed: Dollar (which is our functional and reporting currency) relative to many currencies, which have adversely affected, and may in the future adversely affect, our financial results and cause some customers to delay purchasing decisions, move to in-sourcing supply, migrate to lower cost alternatives, or ask for discounts;
+Added: Dollar (which is our functional and reporting currency);
+Added: • political and economic instability, including the possibility of civil unrest, terrorism, mass violence or armed conflict, which may among other things, impact our operations and business access;
+Added: • difficulties in staffing and managing employee relations in foreign operations, including in foreign joint ventures, particularly in attracting and retaining personnel qualified to design, test, sell and support our products;
+Added: • difficulties in coordinating our operations globally and in maintaining uniform standards, controls, procedures, and policies across our operations;
• the longer payment cycles associated with many customers located outside the United States;
• difficulties in interpreting or enforcing agreements and collecting receivables through many foreign countries’ legal systems;
−Removed: • changes in restrictions on trade between the United States and other countries or unstable regional political and economic conditions;
−Removed: • changes in the political, regulatory, safety or economic conditions in a country or region;
−Removed: • the imposition by governments of additional taxes, tariffs, global economic sanctions programs, or other restrictions on foreign trade such as the tariffs put into place by both China and the United States;
−Removed: • conflicts between countries, including the current military conflict between Russia and Ukraine, and related sanctions, and growing tensions surrounding China and Taiwan;
−Removed: • any inability to obtain required export or import licenses or approvals, including the inability to obtain required export licenses during a United States government shutdown;
−Removed: • natural disasters and pandemics;
−Removed: • failure to comply with export laws and requirements, which may result in civil or criminal penalties and restrictions on our ability to export our products, particularly our industrial linear accelerator products;
−Removed: • risks unique to the Chinese market, including import barriers and preferences for local manufacturers;
−Removed: • failure to obtain proper business licenses or other documentation or to otherwise comply with local laws and requirements regarding marketing, sales, service, or any other business we conduct in a foreign jurisdiction, which may result in civil or criminal penalties and restrictions on our ability to conduct business in that jurisdiction;
−Removed: • difficulties in protecting our intellectual property in foreign countries.
−Removed: In recent years our international operations have represented a larger share of our business.
−Removed: The more we depend on international sales, the more vulnerable we become to these factors.
−Removed: It has become more difficult to attract and retain employees, which has impacted, and is likely to continue to impact, our ability to develop and manufacture products and operate our business.
−Removed: Our future success depends, to a great degree, on our ability to retain, attract, expand, integrate, and train our management team and other key personnel, such as qualified engineering, service, sales, marketing, manufacturing and other staff.
−Removed: We compete for key personnel with other medical equipment and software manufacturers and technology companies, as well as universities and research institutions.
−Removed: Competition for qualified personnel has increased over the past years.
−Removed: We have observed an overall tightening and increasingly competitive labor market, which has resulted in increased wages offered by other employers and voluntary attrition of employees in the industry, making it more difficult to recruit, hire, and retain talent.
−Removed: Because competition is intense, particularly in Utah, where unemployment rates are relatively low, compensation-related costs have increased, and could continue to increase, significantly.
−Removed: If we are unable to hire and train qualified personnel, we may not be able to maintain or expand our business.
−Removed: Additionally, our United States-based employees, including our senior management team, work for us on an at-will basis and there is no assurance that any such employees will remain with us.
−Removed: Replacing key employees, including our executive officers, and management personnel may be difficult or costly and may take an extended period of time because of the limited number of individuals in our industry and where we are located with the breadth of skills and experience that we require.
−Removed: We have faced and may continue to face increased challenges of employee attraction and retention.
−Removed: To the extent we hire employees from competitors, we also may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information.
−Removed: We may face additional risks from the acquisition or development of new lines of business.
−Removed: From time to time, we may acquire or develop new lines of business.
−Removed: There are substantial risks and uncertainties associated with new lines of business, particularly in instances where the markets are not fully developed or are ones we have not operated in before.
−Removed: Risks include developing knowledge of and experience in the new business, recruiting market professionals, new types or greater levels of liability exposure, increasing research and development expenditures, and developing and capitalizing on new relationships with experienced market participants.
−Removed: This may mean significant investment and involvement of our senior management to acquire or develop, then integrate, the business into our operations.
−Removed: Timelines for integration of new businesses may not be achieved, and price and profitability targets may not prove feasible, as new products can carry lower gross margins than existing products.
−Removed: External factors, such as compliance with regulations, (including in the case of some evolving end-markets, fast-changing regulatory developments and legal uncertainties), competitive alternatives, and shifting market preferences may also impact whether implementation of a new business will be successful.
−Removed: Failure to manage these risks could have a material and adverse effect on our business, results of operations, and/or financial condition.
−Removed: In addition, some of our products are multi-purpose products designed and intended to be used by OEMs and end users for a wide range of imaging and irradiation purposes including for use in new and emerging industries.
−Removed: Certain of these industries may be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations, and consumer perceptions, which depending on how they develop, could negatively impact demand for such products.
−Removed: We cannot reasonably predict the nature of these developments or the effect, if any, that these developments could have on our business.
−Removed: We may be unable to complete future acquisitions or realize expected benefits from acquisitions of or investments in new businesses, products, or technologies, which could harm our business.
−Removed: Our ability to identify and take advantage of attractive acquisitions or other business development opportunities is an important component in implementing our overall business strategy.
−Removed: We must grow our business in response to changing technologies, customer demands, and competitive pressures.
−Removed: In some circumstances, we may decide to grow our business through the acquisition of complementary businesses, products, or technologies, rather than through internal development;
−Removed: however, there is no guarantee that these acquisitions will be successful or that we will realize a return on our investment.
−Removed: Identifying suitable acquisition candidates can be difficult, time consuming, and costly, and we may not be able to identify suitable candidates or successfully complete or finance identified acquisitions, including as a result of failing to obtain regulatory or competition clearances, which could impair our growth and ability to compete.
−Removed: In addition, completing an acquisition can divert our management and key personnel from our current business operations, which could harm our business and affect our financial results.
−Removed: Even if we complete an acquisition, we may not be able to successfully integrate newly-acquired organizations, products, technologies, or employees into our operations or may not fully realize some of the expected synergies.
−Removed: Integrating an acquisition can also be expensive and time consuming and may strain our resources.
−Removed: It may cost us more to commercialize new products than originally anticipated or cause us to increase our expenses related to research and development, either of which could materially and adversely impact our results of operations.
−Removed: In many instances, integrating a new business will also involve implementing or improving internal controls appropriate for a public company into a business that lacks them.
−Removed: It is also possible that an acquisition could increase our risk of litigation, as a third party may be more likely to assert a legal claim following an acquisition because of perceived deeper pockets or a perceived greater value of a claim.
−Removed: In addition, we may be unable to retain the employees of acquired companies or the acquired company’s customers, suppliers, distributors, or other partners for a variety of reasons, including the fact that these entities may be our competitors or may have close relationships with our competitors.
−Removed: Further, we may find that we need to restructure or divest acquired businesses or assets of those businesses.
−Removed: Completed acquisitions may not produce the full efficiencies, growth, or benefits that were expected.
−Removed: If we decide to sell assets or a business, it may be difficult to identify buyers or alternative exit strategies on acceptable terms, in a timely manner, or at all, which could delay the accomplishment of our strategic objectives.
−Removed: We may be required to dispose of a business at a lower price or on less advantageous terms, or to recognize greater losses than we had anticipated.
−Removed: If we acquire a business, we allocate the total purchase price to the acquired business’ tangible assets and liabilities, identifiable intangible assets, and liabilities based on their fair values as of the date of the acquisition and record the excess of the purchase price over those values as goodwill.
−Removed: If we fail to achieve the anticipated growth from an acquisition, or if we decide to sell assets or a business, we may be required to recognize an impairment loss on the write-down of our assets and goodwill, which could materially and adversely affect our financial results.
−Removed: In addition, acquisitions can result in potentially dilutive issuances of equity securities or the incurrence of debt, contingent liabilities or expenses, or other charges, any of which could harm our business and affect our financial results.
+Added: • imposition of burdensome governmental regulations, including changing laws and regulations with respect to collection and maintenance of personally identifiable data;
+Added: • the imposition by governments of additional taxes, tariffs, global economic sanctions programs, or other restrictions on foreign trade;
+Added: • compliance with export laws and requirements.
+Added: Our international locations expose us to higher security risks compared to our United States locations, which could result in both harm to our employees and contractors or substantial costs.
+Added: Some of our services are performed in or adjacent to high-risk locations where the country or location and surrounding area is suffering from political, social, or economic turmoil, war or civil unrest, or has a high level of criminal or terrorist activity.
+Added: In those locations where we have employees or operations, we may incur substantial costs to maintain the safety of our personnel, and we may suffer the loss of employees and contractors, which could harm our business reputation and operating results.
+Added: We may be unable to complete future acquisitions or joint ventures or realize expected benefits from acquisitions of or investments in new businesses and joint ventures, products, or technologies, which could harm our business.
+Added: Our ability to identify and take advantage of attractive acquisitions or other business development opportunities (including through joint ventures) is an important component in implementing our overall business strategy.
+Added: Such transactions involve a number of risks, including the following:
+Added: • we may not be able to identify suitable candidates or successfully complete or finance identified acquisitions,
+Added: • we may incur substantial costs, including advisory fees and diversion of management attention, in evaluating a potential transaction;
+Added: • we may be unable to achieve the anticipated benefits from the transaction, including a return on our investment;
+Added: • we may have difficulty integrating organizations, products, technologies, or employees of an acquired business into our operations and may have difficulty retaining the key personnel of the acquired business;
+Added: • acquisitions, investments, and joint ventures could result in increased risks, including from potential litigation,
+Added: • we may find that we need to restructure or divest acquired businesses or assets of the acquired business;
+Added: • if we fail to achieve the anticipated growth from an acquisition or joint venture, or if we decide to sell assets or a business, we may be required to dispose of a business at a lower price or on less advantageous terms, or to recognize an impairment loss on the write-down of our assets and goodwill.
We participate in joint ventures and other investments in privately held and publicly traded companies.
For example, we hold a 40% ownership interest in dpiX LLC, our major supplier of our amorphous silicon-based thin film transistor arrays for flat panels used in our digital image detectors, and a 50% interest in VEC Imaging GmbH & Co.
−Removed: KG, a joint venture formed to develop technology for use in X-ray imaging components and we recently invested in another X-ray imaging components technology company.
−Removed: These and other investments are subject to risk of loss of investment capital as well as losses associated with contributed or jointly developed intellectual property.
−Removed: These types of investments are inherently risky, in some instances because the markets for the technologies or products these companies have under development may never materialize or may underperform relative to our expectations.
+Added: KG, ("VEC") a joint venture formed to develop technology for use in X-ray imaging components, and a minority interest in another X-ray imaging components technology company.
+Added: These and other investments are subject to risk of loss of investment capital as well as losses associated with contributed or jointly developed intellectual property, or intellectual property developed at or about the same time as these investments.
+Added: These types of investments are inherently risky, in some instances because the markets for the technologies or products these companies have under development may never materialize, may develop slower than expected, or may underperform relative to our expectations.
If these companies do not succeed, we could lose some or all of our investment in these companies.
−Removed: In addition, we may incur significant costs and management resources to enforce our rights, protect our intellectual property and other assets, address disputes that have arisen, are ongoing, or may arise in the future, and/or unwind, dispose of or terminate our arrangements with respect to these investments.
−Removed: There is no guarantee that the time and money invested by us in these projects, or jointly developed intellectual property or product or product enhancements will yield the expected returns.
−Removed: Warranty claims may materially and adversely affect our business.
−Removed: We could experience an increase in warranty claims as a result of issues with product quality or product failures as a direct result of our design, manufacturing, or issues in our supply chain.
−Removed: Such an occurrence may damage our market reputation, cause sales to decline, or require repairs or voluntary remedial measures to enhance customer satisfaction, which could materially and adversely impact our financial results.
−Removed: Increased warranty claims on any given product could cause us to halt production on that product and significantly impair our liquidity and profitability, and could cause reputational harm to us.
−Removed: Because some categories of products tend to experience higher numbers of warranty claims than others, a shift in the types of products that our customers purchase could lead to an increase in warranty claims.
−Removed: If actual levels of warranty claims are greater than the level of claims we estimate, cost of sales could increase, and our financial condition could be materially and adversely affected.
−Removed: In addition, product quality issues could result in significant follow-on effects for us, including, among other things, reputational harm to us and our customers, loss of customers, and liability as a result of product quality issues.
−Removed: These outcomes would materially and adversely affect our business and financial condition.
−Removed: Product defects or misuse may result in material product liability or professional errors and omissions claims, litigation, investigation by regulatory authorities, or product recalls that could harm our future revenues and require us to pay material uninsured claims.
−Removed: Our business exposes us to potential product liability claims that are inherent in the manufacture, sale, installation, servicing, and support of components that are used in medical devices and other devices that deliver radiation.
−Removed: Because our products, through incorporation into OEMs’ systems, are involved in the intentional delivery of radiation to the human body and other situations where people may come into contact with radiation (for example, when our security and inspection products are being used to scan cargo or in the diagnosis of medical problems), the possibility for significant personal injury or loss of life exists.
−Removed: We may also be subject to claims for property damage, personal injury, or economic loss related to or resulting from any errors or defects in our products or the installation, servicing, or support of our products.
+Added: In addition, we may incur significant costs and management resources to enforce our rights, protect our intellectual property and other assets, address disputes or legal claims that have arisen, are ongoing, or may arise in the future, and/or unwind, dispose of or terminate our arrangements with respect to these
+Added: There is no guarantee that the time and money invested by us in these projects, developed intellectual property, or product or product enhancements, will yield the expected returns on the anticipated timeline or at all.
+Added: Legal proceedings may materially and adversely affect our business, results of operations, or cash flows.
+Added: From time to time, we are a party to or otherwise involved in legal proceedings, claims, government inspections, audits or investigations, and other legal matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise.
+Added: Such proceedings are often lengthy, subject to significant uncertainty and may be expensive, time consuming, and disruptive to our operations.
+Added: For these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit.
+Added: If a legal proceeding were ultimately resolved against us, we may be required to pay damages or fines, some of which may be in excess of our insurance coverage, or may require us to change our business practices, which could materially and adversely impact our business, results of operations, or cash flows.
+Added: Our subsidiary Varex Imaging Deutschland AG holds a 50% interest in VEC.
+Added: In August 2023, the partners to the VEC joint venture filed judicial proceedings in Germany against one another disputing the validity of shareholder resolutions passed in January 2023.
+Added: Each party is seeking to have the other party’s managing director(s) removed and to exclude the other party from the joint venture.
+Added: If either party is successful, the prevailing party would be required to purchase the non-prevailing party’s interest in the joint venture for an amount equal to 75% of the fair market value thereof, which amount is in dispute.
+Added: Product defects or misuse may result in material product or other liability or professional errors and omissions claims, litigation, investigation by regulatory authorities, or product recalls.
+Added: Our business exposes us to potential product and other liability claims that are inherent in the manufacture, sale, installation, servicing, and support of components that are used in medical devices and other devices that deliver radiation.
+Added: Because our products, through incorporation into OEMs’ systems, are involved in the intentional delivery of radiation to the human body and other situations where people may come into contact with radiation, the possibility for significant personal injury or loss of life exists.
+Added: Furthermore, if our x-ray inspection systems fail to detect the presence of bombs, explosives, weapons, contraband, or other threats to personal safety, this may lead to personal injury, loss of life, and extensive property damage.
+Added: We may also be subject to warranty and damage claims for property damage, personal injury, or economic loss related to or resulting from any errors or defects in our products or the installation, servicing, or support of our products.
Any accident or mistreatment could subject us to legal costs, litigation, adverse publicity, and damage to our reputation, whether or not our products or services were a factor.
−Removed: If our X-ray inspection systems fail to detect the presence of bombs, explosives, weapons, contraband, or other threats to personal safety, we could be subject to product and other liability claims or negative publicity, which could result in increased costs, reduced sales, and a decline in the market price of our common stock.
−Removed: There are many factors beyond our control that could result in such a failure, including operator error and misuse of or malfunction of our equipment.
−Removed: The failure of our systems to detect the presence of these dangerous materials may lead to personal injury, loss of life, and extensive property damage and may result in potential claims against us.
−Removed: Product liability actions are subject to uncertainty and may be expensive, time consuming, and disruptive to our operations.
−Removed: For these and other reasons, we may choose to settle product liability claims against us regardless of their actual merit.
+Added: We are currently a party to certain products liability litigation which, if adversely determined, could have an adverse material impact on our financial results.
+Added: If a product we design or manufacture were defective, we may be required to correct or recall the product and notify regulatory authorities.
+Added: We may choose to settle product liability claims against us regardless of their actual merit.
A product liability action determined against us could result in adverse publicity or significant damages, including the possibility of punitive damages, and our combined financial position, results of operations, or cash flows could be materially and adversely affected.
−Removed: If a product we design or manufacture were defective (whether due to design, labeling or manufacturing defects, improper use of the product, or other reasons), we may be required to correct or recall the product and notify regulatory authorities.
−Removed: The adverse publicity resulting from a correction or recall could damage our reputation and cause customers to review and potentially terminate their relationships with us.
−Removed: A product correction or recall could consume management time and have an adverse financial impact on our business, including incurring substantial costs, losing revenues, and accruing losses.
We maintain limited product liability insurance coverage.
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If a material claim is not insured or is in excess of our insurance coverage, we could have to pay substantial damages, which could have a material and adverse effect on our financial position and/or results of operations.
−Removed: We are exposed to credit risk and fluctuations in the values of our investment portfolio.
−Removed: Our investments can be negatively affected by liquidity, credit deterioration, financial results, market and economic conditions, political risk, sovereign risk, interest rate fluctuations or other factors.
−Removed: As a result, the value and liquidity of our cash, cash equivalents and marketable securities may fluctuate substantially.
−Removed: Future fluctuations in their value could result in significant losses and could have a material adverse impact on our financial condition and operating results.
−Removed: See Part I, Item 3 " Quantitative and Qualitative Disclosures about Market Risk " for more information regarding the risks related to credit risks and fluctuations on our business.
−Removed: Our business is subject to evolving ESG requirements and stakeholder expectations that could expose us to numerous risks.
−Removed: Regulators, customers, consumers, investors, and other stakeholders are increasingly focusing on ESG issues and related disclosures.
−Removed: Changing ESG requirements and stakeholder expectations, including ESG requirements set forth in customer procurement policies, have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.
−Removed: For example, developing and acting on ESG initiatives, and collecting, measuring, and reporting ESG information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s proposed climate-related reporting requirements.
−Removed: We may also communicate certain ESG initiatives and goals in our SEC filings or in other public disclosures.
−Removed: These initiatives and goals could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy, or completeness of the disclosure of our ESG initiatives.
−Removed: Further, statements about our ESG initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.
−Removed: In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals.
−Removed: If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.
−Removed: In addition, our customers have adopted, and may continue to adopt, procurement policies that require us to comply with social, and environmental responsibility provisions.
−Removed: An increasing number of investors have adopted, and may continue to adopt, ESG policies for their portfolio companies, and various voluntary sustainability initiatives and organizations have promulgated different social and environmental responsibility and sustainability guidelines.
−Removed: These practices, policies, provisions, and initiatives are under active development, subject to change, can be unpredictable and conflicting, and may prove difficult and expensive for us to comply with and could negatively affect our reputation, business, or financial condition.
Risks Relating to the Manufacture of our Products
−Removed: Supply chain disruptions, including the loss of a supplier, and any inability to obtain supplies of important components have impacted our ability to manufacture products, have caused delays in our ability to deliver products, and have increased our costs and may continue to do so.
−Removed: As discussed under the heading " Risks Relating to Our Business " above, supply chain disruptions have had, and could continue to have, an impact on our ability to manufacture certain products.
−Removed: We have experienced some delays in receiving materials used to make certain products due both to material shortages and shipping delays.
−Removed: These delays for certain products could continue in the future.
−Removed: Material shortages have caused, and could in the future cause, us to temporarily stop production of certain products or miss opportunities to pursue additional sales of some products.
−Removed: If we are unable to obtain the materials necessary to make certain products or if we must pay more for certain materials, it could have a material adverse effect on our business and financial results.
−Removed: We obtain some of the components included in our products from a limited group of suppliers or from sole-source suppliers, such as wave guides for industrial linear accelerators, transistor arrays, cesium iodide coatings and specialized integrated circuits for flat panel detectors, X-ray tube targets, housings, glass frames, high-voltage cable, bearings, and various other components.
−Removed: For example, our major supplier of our amorphous silicon-based thin film transistor arrays for flat panels used in our digital image detectors is dpiX LLC.
−Removed: We do not have majority voting rights or the power to direct the activities of dpiX.
−Removed: In addition, Varian is our sole source supplier for a key component in linear accelerators used in our security and inspection products subsystems, which are specially made for us.
−Removed: If current suppliers cease producing these or other components, or fail to provide products on our delivery timelines, there can be no assurance that the components will be available from other suppliers on reasonable terms or at all, and this could materially and adversely affect out business and financial results.
−Removed: If we lose any of these limited- or sole-source suppliers, if their operations are substantially interrupted, or if any of them fail to meet performance or quality specifications or delivery deadlines, we may be required to obtain and qualify one or more replacement suppliers or to manufacture the components internally.
−Removed: Such an event (1) may then also require us to redesign or modify our products to incorporate new parts and/or further require us to obtain clearance, qualification, or certification of these products, including by the FDA, or obtain other applicable regulatory approvals in other countries, (2) could significantly increase costs for the affected products, (3) cause material delays in delivery of affected and other related products, or (4) could prevent us from meeting our delivery obligations to our customers.
−Removed: In addition, manufacturing capacity limitations of any of our suppliers or other inability of these suppliers to meet increasing demand or delivery deadlines could limit growth opportunities for the affected product lines and damage customer relationships.
−Removed: Shortages of, and greater demand for, components and subassemblies could also increase manufacturing costs if the supply/demand imbalance increases the price of the components and subassemblies.
−Removed: Any of these events could materially and adversely affect our business and financial results.
−Removed: If we decide to manufacture a component that was previously purchased from an external supplier, we may not be able to manufacture the component as efficiently as the external supplier and may experience delays or problems in successfully manufacturing the component, which could materially and adversely affect our ability to manufacture and supply products to customers.
−Removed: Shortages, changes in source of, and increases in prices for, raw materials have negatively impacted our ability to manufacture products, have caused delays, and have increased our cost of goods.
−Removed: We rely on the supplies of certain raw materials such as tungsten, lead, iridium, and copper for security and inspection products and copper, lead, tungsten, rhenium, molybdenum zirconium, and various high grades of steel alloy for X-ray tubes.
+Added: Supply chain disruptions, including the loss of a supplier, and any inability to obtain raw materials or supplies of important components due to inflation have impacted our ability to manufacture products, have caused delays in our ability to deliver products, and have increased our costs and may continue to do so.
+Added: Inflation and supply chain disruptions have had, are currently having, and could continue to have, an impact on our ability to manufacture certain products.
+Added: Inflation has the potential to increase our overall cost structure, and sustained inflation has resulted in, and may continue to result in, higher interest rates and capital costs, increased shipping costs, supply shortages, increased costs of labor, weakening exchange rates, and other similar effects.
+Added: Material shortages and delays due to inflation and other market constraints have caused, and could in the future cause, us to temporarily stop production of certain products or miss opportunities to pursue additional sales of some products.
+Added: We require certain raw materials, such as copper, nickel, silver, gold, lead, tungsten, iridium, rhenium, molybdenum, rhodium, niobium, zirconium, beryllium, and various high grades of steel alloy for X-ray tubes and industrial products.
Worldwide demand, availability, and pricing of these raw materials have been volatile.
−Removed: We have experienced and expect that we will continue to experience increases in raw material costs due to inflation and other market constraints.
−Removed: We expect that availability and pricing will continue to fluctuate in the future.
−Removed: If supplies are restricted or become unavailable or if prices increase further, this could constrain our manufacturing of affected products, reduce our profit margins, or otherwise materially and adversely affect our business.
−Removed: We are required to disclose (1) the presence in our products of certain metals known as “conflict minerals,” which are metals mined from the Democratic Republic of the Congo and adjoining countries, and (2) procedures regarding our efforts to identify the sourcing of those minerals from this region.
−Removed: Our complex supply chain may inhibit our ability to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation.
−Removed: In addition, we may encounter challenges in satisfying customers who require that all of the components of our products are certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.
−Removed: Moreover, complying with these rules requires investigative efforts, which has caused, and will continue to cause, us to incur associated costs and could materially and adversely affect the sourcing, supply, and pricing of materials used in our products or result in process or manufacturing modifications, all of which could materially and adversely affect our results of operations.
+Added: If we are unable to obtain the materials necessary to make certain products without unreasonable delay, our customers may seek alternative suppliers or decide to in-source certain products or if we must pay more for certain materials, it could reduce our profit margin or otherwise have a material adverse effect on our business and financial results.
+Added: Further, our competitors with greater financial resources may be better able to restructure their manufacturing and supply chains in response to geopolitical and economic trends and thereby have a competitive advantage over us.
+Added: We obtain some of the components included in our products from a limited group of suppliers or from sole-source suppliers, such as transistor arrays, cesium iodide coatings and specialized integrated circuits for flat panel detectors, X-ray tube targets, housings, glass frames, high-voltage cable, bearings, and various other components.
+Added: If current suppliers cease producing these or other components, fail to provide products on our delivery timelines, or become insufficiently solvent to continue operations, there can be no assurance that the components will be available from other suppliers on reasonable terms or at all, and this could materially and adversely affect our business and financial results.
+Added: Furthermore, we may be required to obtain and qualify one or more replacement suppliers or to manufacture the components internally.
+Added: Such an event (1) may then also require us to redesign or modify our products to incorporate new parts and/or further require us to obtain clearance, qualification, or certification of these products, including by the FDA, or obtain other applicable regulatory approvals in other countries, (2) could significantly increase costs for the affected products, (3) cause material delays in delivery of affected and other related products, or (4) could prevent us from meeting our delivery obligations to our customers.
If we are not able to match our manufacturing capacity with demand for our products, our financial results may suffer.
Many of our products have a long production cycle, and we must anticipate demand for our products to ensure adequate manufacturing and testing capacity.
−Removed: If we are unable to anticipate demand, and our manufacturing or testing capacity does not keep pace with product demand, we will not be able to fulfill orders in a timely manner, which may negatively impact our financial results and overall business.
+Added: If we are unable to anticipate demand, and our manufacturing or testing capacity does not keep pace with product demand, we will be unable to fulfill orders in a timely manner, which may negatively impact our financial results and overall business.
Conversely, if demand for our products decreases, the fixed costs associated with excess manufacturing capacity may harm our financial results, including by decreasing gross margins and increasing research and development costs as a percentage of revenue.
−Removed: A disruption at our manufacturing facilities, as well as fluctuating manufacturing costs, could materially and adversely affect our business.
−Removed: The majority of our products are manufactured at our facility in Salt Lake City, Utah.
−Removed: Our manufacturing operations are subject to potential power failures, the breakdown, failure, or substandard performance of equipment, the improper installation or operation of equipment, pandemics, and natural or other disasters.
−Removed: Loss or damage to our manufacturing facility due to any of these factors or otherwise could materially and adversely affect our ability to manufacture sufficient quantities of our products or otherwise deliver products to meet customer demand or contractual requirements, which may result in a loss of revenue and other adverse business consequences.
−Removed: Because of the time required to obtain regulatory approval and licensing of a manufacturing facility, we may not be able to replace any lost manufacturing capacity on a timely basis.
−Removed: The occurrence of these or any other operational issues at our manufacturing facilities could have a material and adverse effect on our business, financial condition, and results of operations.
−Removed: Some of our products are manufactured in Wuxi, China;
−Removed: Walluf, Germany;
−Removed: Doetinchem, the Netherlands;
−Removed: and Calamba City, Philippines, which are subject to similar risks but may also face additional regulatory and political risks, which could impact our ability to manufacture and ship products in a timely manner or at all.
−Removed: We also manufacture security products in Las Vegas, Nevada, and these operations are also subject to potential power failures, the breakdown, failure, or substandard performance of equipment, the improper installation or operation of equipment, earthquakes, and other disasters, all of which could materially and adversely affect our ability to deliver products to meet customer demand.
−Removed: In addition, our costs associated with manufacturing our products can vary significantly from quarter to quarter, and fluctuations thereof may adversely affect our business, operating results, and/or financial condition.
Delivery schedules for our security, industrial, and inspection products tend to be unpredictable.
−Removed: We design, manufacture, sell, and service Linatron® X-ray linear accelerators, image-processing software, and image detection products for security and inspection, such as cargo screening at ports and borders and nondestructive examination for a variety of applications, as well as industrial applications.
−Removed: We generally sell security and inspection products to OEMs who incorporate our products into their inspection or irradiation systems and processes, which are then sold to customs and other government agencies, as well as to commercial organizations in the casting, power, aerospace, chemical, petrochemical, and automotive industries.
−Removed: We believe growth in our security and inspection products will be driven by security cargo screening and border protection needs, as well as by the needs of customs agencies to verify shipments for assessing duties and taxes.
−Removed: This business is heavily influenced by domestic and international government policies on border and port security, political change, and government budgets.
−Removed: Orders for our security and inspection products have been and may continue to be unpredictable, as governmental agencies may place large orders with us or our OEM customers in a short time period and then may not place any orders for a long time period thereafter.
−Removed: Because it is difficult to predict our OEM customer delivery, the actual timing of sales and revenue recognition varies significantly.
The demand for our security and inspection products is heavily influenced by United States and foreign governmental policies on national and homeland security, border protection, and customs activities, which depend upon government budgets and appropriations that are subject to economic conditions, as well as political changes and oil prices.
−Removed: We have seen customers freeze or dramatically reduce purchases and capital project expenditures, delay projects, or act cautiously as governments around the world wrestle with spending priorities.
−Removed: As economic growth remains sluggish in various jurisdictions and appears to be deteriorating in others, and as concerns about levels of government employment and government debt continue, we expect that these effects will also continue.
−Removed: Bid awards in this business may be subject to challenge by third parties.
−Removed: These factors make this business more unpredictable and could cause volatility in our revenues and earnings.
−Removed: Our international manufacturing operations subject us to volatility and other risks, including high security risks, which could result in harm to our employees and contractors or substantial costs.
−Removed: We conduct certain manufacturing operations internationally to reduce costs and streamline our manufacturing operations.
−Removed: There are administrative, legal, and governmental risks to operating internationally that could increase operating expenses or hamper the development of these operations.
−Removed: The risks from operating internationally that could increase our operating expenses and materially and adversely affect our operating results, financial condition, and ability to deliver our products and grow our business include, among others:
−Removed: • difficulties in staffing and managing employee relations and foreign operations, particularly in attracting and retaining personnel qualified to design, test, sell, and support our products;
−Removed: • fluctuations in currency exchange rates;
−Removed: • difficulties in coordinating our operations globally and in maintaining uniform standards, controls, procedures, and policies across our operations;
−Removed: • difficulties in enforcing contracts and protecting intellectual property, including in connection with our joint ventures;
−Removed: • diversion of management attention;
−Removed: • imposition of burdensome governmental regulations, including changing laws and regulations with respect to collection and maintenance of personally identifiable data;
−Removed: • regional and country-specific political and economic instability, as discussed in greater detail below;
−Removed: • inadequacy of the local infrastructure to support our operations.
−Removed: Our international locations expose us to higher security risks compared to our United States locations, which could result in both harm to our employees and contractors or substantial costs.
−Removed: Some of our services are performed in or adjacent to high-risk locations where the country or location and surrounding area is suffering from political, social, or economic turmoil, war or civil unrest, or has a high level of criminal or terrorist activity.
−Removed: In those locations where we have employees or operations, we may incur substantial costs to maintain the safety of our personnel.
−Removed: Despite these precautions, the safety of our personnel in these locations may continue to be at risk, and we may in the future suffer the loss of employees and contractors, which could harm our business reputation and operating results.
+Added: As economic growth remains sluggish in various jurisdictions and appears to be deteriorating in others, and as concerns about levels of government employment and government debt continue, this could cause volatility in our revenues and earnings.
Our operations are vulnerable to interruption or loss due to natural or other disasters, the effects of climate change, power loss, strikes, and other events beyond our control.
We conduct some of our activities, including manufacturing, research and development, administration, and data processing at facilities located in areas that have in the past experienced or may in the future experience natural disasters.
−Removed: Our insurance coverage for such disasters may not be adequate or continue to be available at commercially-reasonable terms, or at all.
A major disaster (such as a major fire, hurricane, earthquake, flood, tsunami, volcanic eruption, or terrorist attack) or a climate change-related event affecting our facilities, or those of our suppliers, could significantly disrupt our operations and delay or prevent product manufacture and shipment during the time required to repair, rebuild, or replace our or our suppliers’ damaged manufacturing facilities.
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Additionally, customers may delay purchases of our products until our or their operations return to normal.
−Removed: For example, following the earthquake and tsunami disasters in Japan in 2011, the operations of Canon Medical Systems Corporation, our largest customer, were impacted, and, as a consequence, orders to and product shipment from our business were delayed for several months.
Even if our suppliers or customers are able to quickly respond to such a disaster or event, the ongoing effects could create some uncertainty in the operations of our business.
−Removed: In addition, our facilities may be subject to a shortage of available electrical power and other energy supplies.
−Removed: Any shortages may increase our costs for power and energy supplies or could result in blackouts, which could disrupt the operations of our affected facilities and harm our business.
−Removed: Further, our products are typically shipped from a limited number of ports, and any disaster, strike, or other event blocking shipment from these ports could delay or prevent shipments and harm our business.
In addition, concerns about terrorism, the effects of a terrorist attack, political turmoil, or an outbreak of epidemic diseases have in the past had, and could in the future have, a negative effect on our business operations, those of our suppliers and customers, and the ability to travel, resulting in adverse consequences on our revenues and financial performance.
Risks Relating to our Intellectual Property and Information Systems
−Removed: Our competitive position would be harmed if we are not able to maintain our intellectual property rights, and protecting our intellectual property and defending against infringement claims can be costly.
+Added: Our competitive position would be harmed if we are not able to maintain or defend our intellectual property rights, and protecting our intellectual property and defending against infringement claims can be costly.
We file applications as appropriate for patents covering new products and manufacturing processes.
−Removed: We cannot be sure, however, that patents will be issued from any of our pending or future patent applications.
−Removed: We also cannot be sure that our current patents, the claims allowed under our current patents, or patents for technologies licensed to us will be sufficiently broad to protect our technology position against competitors.
+Added: We cannot be sure, however, that patents will be issued from any of our pending or future patent applications or that our current patents, the claims allowed under our current patents, or patents for technologies licensed to us will be sufficiently broad to protect our technology position against competitors.
We also jointly develop intellectual property with third parties and seek to protect our rights to such intellectual property through licenses and other contractual arrangements.
−Removed: Issued patents owned by, or licensed to, us may be challenged, invalidated, or circumvented, and the rights granted under the patents, licenses or other contractual arrangements may not provide us with competitive advantages or otherwise protect our interests.
−Removed: Asserting our patent rights against others in litigation or other legal proceedings is costly and diverts managerial resources.
−Removed: An adverse finding in patent infringement litigation could adversely impact our competitive position.
−Removed: In addition, we may not be able to detect patent infringement by others or may lose our competitive position in the market before we are able to do so.
We also rely on a combination of copyright, trade secret, and other laws, and contractual restrictions on disclosure, copying and transferring title (including confidentiality agreements with vendors, strategic partners, co-developers, employees, consultants, and other third parties), to protect our proprietary, and other confidential rights.
−Removed: These protections may prove to be inadequate, since agreements may still be breached, and we may not have adequate remedies for a breach.
−Removed: Our trade secrets may become known to or be independently developed by others, including as a result of misappropriation by unauthorized access to our technology systems.
−Removed: If our proprietary or confidential information is misappropriated, our business and financial results could be materially and adversely impacted.
+Added: Our trade secrets may become known to or be independently developed by others, including as a result of misappropriation by unauthorized access to our technology systems, and our business and financial results could be materially and adversely impacted.
We have trademarks, both registered and unregistered, that are maintained and enforced to provide customer recognition for our products in the marketplace, but unauthorized parties may still use them.
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If we were to lose the rights to license these technologies, or our costs to license these technologies were to materially increase, our business would suffer.
−Removed: As we expand our manufacturing capabilities outside of the United States, more of our intellectual property may be held in jurisdictions that do not have robust intellectual property protections, which may make it harder for us to adequately protect our intellectual property.
−Removed: Third parties may claim that we are infringing upon their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling our products.
There is a substantial amount of litigation over patent and other intellectual property rights in the industries in which we compete.
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In addition, non-practicing entities may review our activities for conflicts with their patent rights.
−Removed: Determining whether a product infringes on a party’s intellectual property rights involves complex legal and factual issues, and the outcome of this type of litigation is often uncertain.
−Removed: Parties may claim that we are infringing upon their intellectual property rights or that we are in breach of related licensing agreements or other contractual arrangements.
−Removed: We may not be aware of intellectual property rights of others that relate to our products, services, or technologies.
From time to time, we have received notices from parties asserting infringement, and we have been subject to lawsuits alleging infringement of patent or other intellectual property rights.
+Added: In addition, from time to time we have entered, and in the future we may enter, into agreements that require us to indemnify our customers for intellectual property infringement, which agreements could subject us to liability.
+Added: One of our subsidiary's customers has been named as a defendant in a lawsuit alleging that the customer’s system (which incorporates our subsidiary’s products) infringes upon the plaintiff’s patent.
+Added: Under the contract with the customer, our subsidiary has an obligation to indemnify the customer for damages resulting from that lawsuit, which if determined adversely could have a negative impact of our results of operations.
+Added: Legal disputes relating to intellectual property have occurred, are occurring, and may occur in the future.
Any dispute regarding patents or other intellectual property, including with respect to breaches of licensing agreements or other contractual arrangements, could be costly and time consuming and could divert our management and key personnel from our business operations.
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We may also be subject to injunctions against development and sale of our products, the effect of which could be to materially reduce our revenues.
−Removed: Furthermore, a third party claiming infringement may not be willing to license our rights to us, and even if a third-party rights holder is willing to do so, the amounts we might be required to pay under the associated royalty or license agreement could be significant.
−Removed: We could decide to alter our business strategy or voluntarily cease the allegedly infringing actions rather than face litigation or pay a royalty, which could materially and adversely impact our business and results of operations.
+Added: Additionally, as we expand our manufacturing capabilities outside of the United States, more of our intellectual property may be held in jurisdictions that lack robust intellectual property protections, which may make it harder for us to adequately protect our intellectual property.
Disruption of critical information systems or material breaches in the security of our systems may materially and adversely affect our business and customer relations.
Information technology (including technology from third-party providers) helps us operate efficiently, interface with and support our customers, maintain financial accuracy and efficiency, and produce our financial statements.
−Removed: In the ordinary course of our business, we collect, process and store sensitive data, including intellectual property, proprietary business information and information of customers, suppliers and business partners, third parties accessing our website, patient data and personally identifiable information of customers and employees, in our data centers and on our networks, as well as in third party off-site data centers.
+Added: In the ordinary course of our business, we collect, process, and store sensitive data, including intellectual property, proprietary business information, and information of customers, suppliers, business partners, and third parties accessing our website, patient data, and personally identifiable information of customers and employees, in our data centers and on our networks, as well as in third-party off-site data centers.
Despite security measures, there is an increasing threat of information security attacks, including from computer viruses or other malicious codes, unauthorized access attempts, and cyber-attacks that pose risks to companies, including us.
−Removed: Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently, have become increasingly sophisticated and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures, which could result in data leaks or otherwise compromise our confidential or proprietary information and disrupt our operations.
−Removed: If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to, among other things, transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to intellectual property through a security breach or misappropriation of intellectual property.
−Removed: Such security breaches could expose us to a risk of loss of information, litigation, and possible liability to employees, customers, and/or regulatory authorities.
−Removed: If our data management systems do not effectively collect, secure, store, process, and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies, or human error, our ability to effectively plan, forecast, and execute our business plan and comply with applicable laws and regulations will be impaired, perhaps materially.
+Added: Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently, have become increasingly sophisticated, and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures, which could result in data leaks or otherwise compromise our confidential or proprietary information and materially disrupt our operations.
+Added: Such security breaches could expose us to a risk of loss of information and intellectual property, litigation, and possible liability to employees, customers, shareholders, and/or regulatory authorities.
+Added: If our data management systems do not effectively collect, secure, store, process, and report relevant data for the operation of our business, whether due to equipment malfunction or constraints, software deficiencies, or human error, our ability to effectively plan, forecast, and execute our business
+Added: plan and comply with applicable laws and regulations will be impaired, perhaps materially.
Any such impairment could materially and adversely affect our financial condition, results of operations, cash flows, and the timeliness with which we report our operating results internally and externally.
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Changes in import/export regulatory regimes, tariffs, and national policies could continue to negatively impact our business.
−Removed: Tariffs and changes in international trade agreements or trade-related laws and regulations may have an adverse impact on our business.
As a component manufacturer, our products are integrated into the systems and products of our OEM customers.
−Removed: If the United States, China or other countries levy tariffs, duties or other additional taxes or restrictions on our customer’s products, the demand for such products, and our components included in such products, could decrease, which could have a material adverse effect on our business.
+Added: If the United States, China or other countries levy tariffs, import restrictions, duties or other additional taxes or restrictions on our customer’s products, the demand for such products, and our components included in such products, could decrease, which could have a material adverse effect on our business.
Uncertainty over tariffs and trade wars could also cause our customers to delay or cancel orders for our products.
In the past, the United States has imposed tariffs on items imported from China and other countries that are incorporated into our products.
−Removed: Tariffs on items imported by us from China and other countries have increased our costs and have increased prices and lowered gross margins on some of our products, thereby having a direct adverse impact on our business and results of operations.
−Removed: China has imposed retaliatory tariffs that impact a number of our products, including United States origin X-ray tubes, heat exchange units, and certain flat panel detectors.
−Removed: The tariffs levied by China have increased our customers’ costs for products imported into China, which has caused us to make price concessions on some products and has caused some customers to stop purchasing our products.
−Removed: We expect that tariffs will continue to have a negative effect on our business and results of operations, including the possibility of continued price concessions or loss of business.
+Added: Tariffs on these items have increased our costs and prices and lowered gross margins on some of our products, thereby having a direct adverse impact on our business and results of operations.
+Added: China has also imposed retaliatory tariffs that impact a number of our products, including United States origin X-ray tubes, heat exchange units, and certain flat panel detectors.
+Added: These tariffs have increased our customers’ costs for products imported into China, which has caused us to make price concessions on some products and has caused some customers to stop purchasing our products.
Tariffs could limit our ability to compete for increased market share in China, which could cause our long-term prospects in China to suffer.
−Removed: In addition, future tariffs could have a more significant impact on our business.
The imposition of additional tariffs by the United States could result in the adoption of additional tariffs by China and other countries, as well as further retaliatory actions by any affected country, which could negatively impact the global market for imaging equipment and could have a significant adverse effect on our business.
−Removed: Both the governments of the United States and China have granted tariff exclusions that temporarily eliminate duties payable for specific commodities, providing partial relief from such tariffs.
−Removed: These exclusions are temporary and/or must be solicited and approved on a shipment-by-shipment basis.
−Removed: There is no guarantee that such exclusions will be granted or extended by either government, and the U.S.
−Removed: tariff exclusions are set to expire on September 30, 2023, unless extended.
−Removed: In addition to tariffs, China’s stated policy of reducing its dependence on foreign manufacturers and technology companies may result in reduced demand for our products in China.
−Removed: Both the United States and China could pursue policies to reduce their dependence on foreign goods, which could have a material adverse impact on our business, results of operations and financial position.
−Removed: In addition, as a consequence of such policies, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business, or provide incentives to government-backed local customers to buy from local suppliers rather than companies like ours, all of which could adversely impact our business, results of operations and financial position.
−Removed: Increasing tensions between China and Taiwan may cause the United States and/or China to impose higher tariffs, commence trade wars, move more quickly to reduce their dependence on each other’s goods, or enact boycotts against each other’s goods, this could cause significant disruptions in the markets and industries we serve, our supply chain, decrease demand from customers for the ultimate products using our solutions, and would materially harm our business, financial condition and results of operations.
−Removed: In response to Russia's ongoing aggression against Ukraine, as substantially enabled by Belarus, the Department of Commerce strengthened its existing sanctions under the Export Administration Regulations against Russia and Belarus.
−Removed: The enhanced sanctions would require Bureau of Industry export licenses in order to export our products, even products for medical, health and safety, or humanitarian purposes, to Russia and Belarus.
+Added: Both the governments of the United States and China have granted tariff exclusions that temporarily eliminate duties payable for specific commodities, providing partial relief from such tariffs, but they must be solicited and approved on a shipment-by-shipment basis.
+Added: There is no guarantee that such exclusions will be granted or extended by either government, and the United States tariff exclusions are set to expire on May 31, 2024, unless extended.
+Added: In addition to tariffs, China’s stated policy of reducing its dependence on foreign manufacturers and technology companies may result in reduced demand for our products in China, which could have a material adverse impact on our business, results of operations and financial position.
+Added: There are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business, or provide incentives to government-backed local customers to buy from local suppliers rather than companies like ours, all of which could adversely impact our business, results of operations and financial position.
+Added: The Chinese government recently initiated investigations into corruption in its healthcare industry.
+Added: This has had a broad-based impact on the healthcare industry in China and slowed sales of healthcare products there.
+Added: As a result, our sales in China have also slowed.
+Added: We expect the investigations to continue into fiscal year 2024, and this could continue to adversely impact revenues in our China business.
+Added: Increasing tensions between China and Taiwan may cause the United States and/or China to impose higher tariffs, commence trade wars, move more quickly to reduce their dependence on each other’s goods, or enact boycotts against each other’s goods, which could cause significant disruptions in the markets and industries we serve, and in our supply chain, decrease demand from customers for the ultimate products using our solutions, and materially harm our business, financial condition and results of operations.
+Added: In response to Russia's ongoing aggression against Ukraine, as substantially enabled by Belarus, the United States Department of Commerce strengthened its existing sanctions under the Export Administration Regulations against Russia and Belarus.
+Added: The enhanced sanctions would require Bureau of Industry and Security export licenses in order to export our products, including for medical, health and safety, or humanitarian purposes, to Russia and Belarus.
Applications for the export of products to Russia or Belarus will be reviewed under a policy of denial and reviewed on a case-by-case basis.
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A change in the percentage of our total earnings from international sales or additional changes in tax laws could increase our effective tax rate.
−Removed: Our effective tax rate is impacted by tax laws in both the United States and in foreign countries.
Earnings from our international subsidiaries are generally taxed at rates that differ from United States rates.
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Furthermore, while United States tax reform imposed a current tax on cumulative undistributed earnings, these earnings could also become subject to incremental foreign withholding or United States state taxes should they actually be remitted to the United States, in which case our financial results could be materially and adversely affected.
−Removed: Statutory changes included in proposed United States legislation, if passed, including interpretive guidance, could have a material impact on income tax expense, the effective tax rate, or the value of deferred tax assets and liabilities.
−Removed: Changes in the valuation of our deferred tax assets or liabilities, additional changes in tax laws or rates, changes in the interpretation of tax laws in other jurisdictions, or other changes beyond our control could materially and adversely affect our financial position and results of operations.
+Added: Statutory changes included in proposed United States legislation, if passed, including interpretive guidance, could materially impact our income tax expense, effective tax rate, or the value of deferred tax assets and liabilities.
+Added: Changes in the valuation of our deferred tax assets or liabilities, changes in tax laws or rates, changes in the interpretation of tax laws in other jurisdictions, or other changes beyond our control could materially and adversely affect our financial position and results of operations.
We have entities in certain jurisdictions with cumulative net operating losses for which no income tax benefit can be recorded due to full valuation allowance positions.
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Compliance with foreign laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure to comply may result in unfavorable legal proceedings, in significant penalties and other harm to our business.
−Removed: Regulatory requirements affecting our operations and sales outside the United States vary from country to country, often differing significantly from those in the United States.
−Removed: In general, outside the United States, some of our products are regulated as medical devices by foreign governmental agencies similar to the FDA.
−Removed: For us to market our products internationally, we must obtain clearances or approvals for products and product modifications.
−Removed: These processes (including, for example, the processes in the EU, the European Economic Area (“EEA”), Switzerland, Brazil, Australia, China, Japan and Canada) can be time consuming, expensive and uncertain, which can delay our ability to market products in those countries.
+Added: Outside the United States, some of our products are regulated as medical devices by foreign governmental agencies similar to the FDA.
+Added: For us to market our products internationally, we must obtain clearances or approvals for products and product modifications, which can be time consuming, expensive, uncertain, and which can delay our ability to market products.
Delays in the receipt of or failure to receive regulatory approvals, the inclusion of significant limitations on the indicated uses of a product, the loss of previously obtained approvals or failure to comply with existing or future regulatory requirements could restrict or prevent us from doing business in a country or subject us to a variety of enforcement actions and civil or criminal penalties, which would materially and adversely affect our business.
In addition, compliance with changing regulatory schemes may add additional complexity, cost, and delays in marketing, or selling our products.
−Removed: Within the EU/EEA, we must obtain, and in turn affix, a CE mark certification, which is a European marking of conformity that indicates that a product meets the essential requirements of the EU’s Medical Device Directive (“MDD”) and the EU Medical Device Regulations.
−Removed: Compliance with the MDD is done through a self-certification process that is then verified by an independent certification body called a “Notified Body,” which is an organization empowered by the legislature to conduct this verification.
−Removed: Once the CE mark is affixed, the Notified Body will regularly audit us to ensure that we remain in compliance with the applicable European laws and MDD.
+Added: Within the European Union ("EU") and the European Economic Area ("EEA"), we must obtain, and in turn affix, a CE mark certification, that indicates that a product meets the essential requirements of the EU’s Medical Device Directive (“MDD”) and the EU Medical Device Regulations.
By affixing the CE mark to our product, we are certifying that our products comply with the laws and regulations required by the EU/EEA countries, thereby allowing the free movement of our products within these countries and others that accept CE mark standards.
If we cannot support our performance claims and demonstrate compliance with the applicable European laws and the MDD, we would lose our right to affix the CE mark to our products, which would prevent us from selling our products within the EU/EEA/Switzerland territory and in other countries that recognize the CE mark.
−Removed: In April 2017, the European Commission adopted two regulations on medical devices that impose stricter requirements for placing medical devices in the EU market, as well as for Notified Bodies.
−Removed: These regulations have resulted in the limited availability of recognized Notified Bodies, which could delay our ability to obtain CE marks.
−Removed: We may be subject to risks associated with additional testing, modification, certification, or amendment of our existing market authorizations, or we may be required to modify products already installed at our customers’ facilities to comply with the official interpretations of these revised regulations.
−Removed: We are also subject to international laws and regulations of general applicability relating to matters such as environmental protection, safe working conditions, and manufacturing practices, as well as others.
−Removed: These are often comparable to, if not more stringent than, the equivalent regulations in the United States.
+Added: We are subject to international laws and regulations of general applicability relating to matters such as environmental protection, safe working conditions, and manufacturing practices, as well as others.
+Added: These are often comparable to, or more stringent than, equivalent regulations in the United States.
Sales overseas are also affected by regulation of matters such as product standards, packaging, labeling, environmental and product recycling requirements, import and export restrictions, tariffs, duties, and taxes.
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If these reports are not timely filed, regulators may impose sanctions, including temporarily suspending our market authorizations or CE mark, and sales of our products may suffer.
−Removed: Further, as we enter new businesses or pursue new business opportunities internationally, or as regulatory schemes change, we may become subject to additional laws, rules, and regulations.
−Removed: Becoming familiar with and implementing the infrastructure necessary to comply with these laws, rules, and regulations is costly.
−Removed: Additionally, in some countries, we rely or may rely in the future on foreign distributors and agents to assist in complying with foreign regulatory requirements, and we cannot be sure that they will always do so.
+Added: As we enter new businesses or pursue new business opportunities internationally, or as regulatory schemes change, we may become subject to additional laws, rules, and regulations, and compliance can be costly.
The failure by us or our agents to comply with these laws, rules, and regulations could delay the introduction of new products, cause reputational harm, or result in investigations, fines, injunctions, civil penalties, criminal prosecution, or an inability to sell our products in or to import our products into certain countries, which could materially and adversely affect our business.
−Removed: Compliance with United States laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure or delays in obtaining regulatory clearances or approvals or failure to comply with applicable laws and regulations could prevent us from distributing our products, require us to recall our products, or result in unfavorable legal proceedings, significant penalties or other harm to our business.
−Removed: Some of our products and those of OEMs that incorporate our products are subject to extensive and rigorous government regulation in the United States.
−Removed: Compliance with these laws and regulations is expensive and time-consuming, and failure to comply with these laws and regulations could materially and adversely affect our business.
−Removed: Generally, our manufacturing operations for medical devices, and those of our third-party manufacturers, are required to comply with the QSR of the FDA, as well as other federal and state regulations for medical devices and radiation-emitting products.
−Removed: The FDA, through authorized auditing organizations, makes announced and unannounced periodic and on-going inspections of medical device manufacturers to determine compliance with QSR and, in connection with these inspections, issues reports known as Form FDA 483 reports when the FDA believes the manufacturer has failed to comply with applicable regulations and/or procedures.
−Removed: If Form FDA 483 reports are not addressed or corrective action is not taken in a timely manner and to the FDA’s satisfaction, the FDA may issue a warning letter or proceed directly to an enforcement action.
−Removed: Failure to respond in a timely manner to a warning letter, or any other notice of noncompliance and to promptly come into compliance could result in the FDA bringing an enforcement action, which could include the total shutdown of our production facilities, denial of importation rights to the United States for products manufactured in overseas locations, adverse publicity, and criminal and civil fines.
−Removed: The expense and costs of any corrective actions that we may take, which may include product recalls, correction and removal of products from customer sites, or changes to our product manufacturing and quality systems, could materially and adversely impact our financial results and may also divert management resources, attention, and time.
−Removed: Additionally, if a warning letter were issued, customers could delay purchasing decisions or cancel orders, and we could face increased pressure from our competitors, who could use the warning letter against us in competitive sales situations, either of which could materially and adversely affect our reputation, business, and stock price.
−Removed: In addition, we are required to timely file various reports with the FDA, including reports required by the medical device reporting regulations (“MDRs”), that require we report to regulatory authorities if our devices may have caused or contributed to a death or serious injury, or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur.
−Removed: If we initiate a correction or removal of a device to reduce a risk to health posed by the device, we would be required to submit a publicly-available correction and removal report to the FDA and, in many cases, similar reports to other regulatory agencies.
−Removed: This report could be classified by the FDA as a device recall, which could lead to increased scrutiny by the FDA, other international regulatory agencies, and our customers regarding the quality and safety of our devices.
−Removed: If these MDRs or correction and removal reports are not filed on a timely basis, regulators may impose sanctions, sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.
−Removed: Government regulation may also cause significant delays or even prevent the marketing and full commercialization of future products or services that we may develop and/or may impose costly requirements on our business.
−Removed: Further, as we enter new businesses or pursue new business opportunities, we will become subject to additional laws, rules, and regulations, including FDA and foreign rules and regulations.
−Removed: Becoming familiar with and implementing the infrastructure necessary to comply with these laws, rules, and regulations is costly and time consuming.
−Removed: In addition, failure to comply with these laws, rules and regulations could delay the introduction of new products and could materially and adversely affect our business.
+Added: Compliance with United States laws and regulations applicable to the marketing, manufacturing, and distribution of our products may be costly, and failure or delays in obtaining regulatory clearances or approvals, or failure to comply with applicable laws and regulations could harm our business.
If we or any of our suppliers, distributors, agents, or customers fail to comply with FDA, Federal Trade Commission, or other applicable United States regulatory requirements or are perceived to have failed to comply with regulations, we may face:
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• difficulty in obtaining product liability or operating insurance at a reasonable cost, or at all.
+Added: Generally, our manufacturing operations for medical devices, and those of our third-party manufacturers, are required to comply with the QSR of the FDA, as well as other federal and state regulations for medical devices and radiation-emitting products.
+Added: Failure to respond in a timely manner to a warning letter or any other notice of noncompliance with applicable regulations and/or procedures and to promptly come into compliance could result in the FDA bringing an enforcement action, which could include the total shutdown of our production facilities, denial of importation rights to the United States for products manufactured in overseas locations, adverse publicity, and criminal and civil fines.
+Added: The expense and costs of any corrective actions that we may take, which may include product recalls, correction and removal of products from customer sites, or changes to our product manufacturing and quality systems, could materially and adversely impact our financial results and may also divert management resources, attention, and time.
+Added: Additionally, if a warning letter were issued, customers could delay purchasing decisions or cancel orders, and we could face increased pressure from our competitors, who could use the warning letter against us in competitive sales situations, either of which could materially and adversely affect our reputation, business, and stock price.
+Added: Our OEM customers are responsible for obtaining 510(k) pre-market notification clearance on their systems that integrate our products.
+Added: A substantial majority of our products are “Class I” devices that do not require 510(k) clearance, but we do produce software that is classified as a Class II device subject to 510(k) clearance.
+Added: Unless an exception applies, we may be required by FDA regulations to obtain a 510(k) pre-market notification clearance in connection with the manufacture of a new medical device or a new indication for use of, or other significant change in, an existing currently marketed medical device before we can market or sell those products in the United States or in connection with modifications or enhancements to a product that could significantly affect its safety or effectiveness, or that would constitute a major change in the intended use of the device, technology, materials, labeling, packaging, or manufacturing process.
+Added: We cannot ensure that the FDA will agree with our decisions not to seek additional approvals or clearances for particular modifications to our products or that we will be successful in obtaining new 510(k) clearances for modifications.
+Added: Obtaining clearances or approvals is time consuming, expensive, and uncertain.
+Added: Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses of the product, which may limit the market for the product.
+Added: If we are unable to obtain required FDA clearance or approval for a product or are unduly delayed in doing so, or the uses of that product were limited, our business could suffer.
+Added: We are required to timely file various reports with the FDA, including reports required by the medical device reporting regulations (“MDRs”), that require we report to regulatory authorities if our devices may have caused or contributed to a death or serious injury, or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur.
+Added: If we initiate a correction or removal of a device to reduce a risk to health posed by the device, we would be required to submit a publicly-available correction and removal report to the FDA and, in many cases, similar reports to other regulatory agencies.
+Added: This report could be classified by the FDA as a device recall, which could lead to increased scrutiny by the FDA, other international regulatory agencies, and our customers regarding the quality and safety of our devices.
+Added: If these MDRs or correction and removal reports are not filed on a timely basis, regulators may impose sanctions, sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.
+Added: Government regulation may also cause significant delays or prevent the marketing and full commercialization of future products or services that we may develop and/or may impose costly requirements on our business.
+Added: As we enter new businesses or pursue new business opportunities, we will become subject to additional laws, rules, and regulations, including FDA and foreign rules and regulations and compliance can be costly.
+Added: Failure to comply with these laws, rules and regulations could delay the introduction of new products and could materially and adversely affect our business.
We are also subject to federal and state laws and regulations of general applicability relating to matters such as environmental protection, safe working conditions, manufacturing practices, and other matters.
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Consequently, we do not have insurance that would cover this type of liability.
−Removed: We sell certain X-ray tube products as replacements which are subject to medical device certification and product registration laws and regulations, which vary by country and are subject to change, and we may be unable to receive registration approval or renewal of existing registrations if we fail to meet regulatory approval requirements or if the approval process becomes commercially infeasible or impractical.
+Added: We sell certain X-ray tube products as replacements which are subject to medical device certification and product registration laws and regulations, which vary by country and are subject to change, and we may be unable to receive registration approval or renewal of existing registrations.
We market and distribute certain X-ray tubes through distributors and third-party/multi-vendor service organizations that are used as equivalent replacements for specific OEM tubes.
We are subject to medical device certification and product registration laws, which vary by country and are subject to periodic reviews and changes by regulatory authorities in those countries.
−Removed: For example, to sell X-ray tubes for replacement applications in China, product registrations must be approved by the new National Medical Products Administration (“NMPA”).
−Removed: We must comply with the requirements of the NMPA, and we may not be able to receive registration approval or renewal of existing registrations if we fail to meet regulatory approval requirements or if the process of gaining approval becomes commercially infeasible or impractical.
Certain of these local laws and regulations have the effect of serving as a barrier to trade and can be difficult to navigate predictably.
−Removed: In addition, certain countries in which our products are sold require products to undergo re-registration if the product is altered in any significant way.
+Added: In addition, certain countries where we sell our products require products to undergo re-registration if the product is altered in any significant way.
These registration processes can be costly and time consuming, and customers may decide to purchase products from our competitors that do not have to be involved in a re-registration process.
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Medicare and Medicaid programs, foreign government programs, private insurance plans, health maintenance organizations, and preferred provider organizations.
−Removed: Without adequate reimbursement, the demand for our customers’ products, and therefore indirectly our products, may be limited.
+Added: Without adequate reimbursement, the demand for our customers’ products, and therefore indirectly our products, may be limited, which could harm our business, results of operations, financial condition, and prospects.
Healthcare reform proposals and medical cost containment measures in the United States and in many foreign countries could limit the use of both ours and our customers’ products, reduce reimbursement available for such use, further tax the sale or use of our products, and further increase the administrative and financial burden of compliance.
−Removed: These reforms and measures, including the uncertainty in the medical community regarding their nature and effect, could have a material and adverse effect on us and our customers’ purchasing decisions regarding our products and treatments and could harm our business, results of operations, financial condition, and prospects.
−Removed: We cannot predict the specific healthcare programs and regulations that will be ultimately implemented by local, regional, and national governments globally.
−Removed: However, any changes that lower reimbursements for us or our customers’ products and/or procedures using these products, including, for example, existing reimbursement incentives to convert from analog to digital X-ray systems, or changes that reduce medical procedure volumes or increase cost containment pressures on us or others in the healthcare sector could materially and adversely affect our business and results of operations.
+Added: Any changes that lower reimbursements for us or our customers’ products and/or procedures using these products, including, for example, existing reimbursement incentives to convert from analog to digital X-ray systems, or changes that reduce medical procedure volumes or increase cost containment pressures on us or others in the healthcare sector could materially and adversely affect our business and results of operations.
We are subject to federal, state, and foreign laws governing our business practices which, if violated, could result in substantial penalties.
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We are subject to the U.S.
−Removed: Foreign Corrupt Practices Act and anti-corruption laws, as well as similar laws in foreign countries, such as the U.K.
−Removed: In general, there is a worldwide trend to strengthen anti-corruption laws and their enforcement, and the healthcare industry and medical equipment manufacturers have been particular targets of these investigation and enforcement efforts.
+Added: Foreign Corrupt Practices Act and anti-corruption laws, and similar laws in foreign countries, such as the U.K.
Any violation of these laws by us or our agents or distributors could create substantial liability for us, subject our officers and directors to personal liability, and cause a loss of reputation in the market.
We operate in many countries, including India and China, where the public sector is perceived as being corrupt.
−Removed: Our strategic business plans include expanding our business in regions and countries that are rated as higher risk for corruption activity by Transparency International e.V., an international non-profit that publishes an annual corruption perception index.
+Added: Our strategic business plans include expanding our business in regions and countries that are rated as higher risk for corruption activity by Transparency International e.V., an international non-profit that publishes an annual corruption perception index, which could subject us and our officers and directors to increased scrutiny and increased liability from our business operations.
Becoming familiar with and implementing the infrastructure necessary to comply with laws, rules, and regulations applicable to new business activities and mitigating and protecting against corruption risks could be costly.
−Removed: Failure by us or our agents or distributors to comply with these laws, rules, and regulations could delay our expansion into high-growth markets and could materially and adversely affect our business.
−Removed: We will likely do more business, directly and potentially indirectly, in countries where the public sector is perceived to be corrupt.
−Removed: Increased business in higher-risk countries could subject us and our officers and directors to increased scrutiny and increased liability from our business operations.
+Added: Failure by us or our agents or distributors to comply with these laws, rules, and regulations could delay our expansion into high-growth markets and materially and adversely affect our business.
Competition and trade compliance laws .
−Removed: We are subject to various competition and trade compliance laws in the jurisdictions where we operate.
+Added: We are subject to various competition and trade compliance laws in the jurisdictions where we operate throughout the world.
Regulatory authorities in those jurisdictions may have the power to subject us to sanctions and impose changes or conditions in the way we conduct our business.
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Laws and ethical rules governing interactions with healthcare providers .
−Removed: We do not generally sell our products directly to healthcare providers, but may occasionally sell our products to healthcare providers through distributors or otherwise engage healthcare providers to provide services.
+Added: We may occasionally sell our products to healthcare providers through distributors or otherwise engage healthcare providers to provide services.
Medicare and Medicaid “anti-kickback” laws, and similar state laws, prohibit payments or other remuneration that is intended to induce hospitals, physicians, or others either to refer patients or to purchase, lease, or order, or to arrange for or recommend the purchase, lease, or order of healthcare products or services for which payment may be made under federal and state healthcare programs, such as Medicare and Medicaid.
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For example, within the EU, the control of unlawful marketing activities is a matter of national law in each of the member states.
−Removed: The member states of the EU closely monitor perceived unlawful marketing activity by companies.
−Removed: We could face civil, criminal, and administrative sanctions if any member state determines that we have breached our obligations under such state’s national laws.
+Added: The member states of the EU closely monitor perceived unlawful marketing activities.
+Added: We could face civil, criminal, and administrative sanctions if any member state determines that we have breached such state’s national laws.
Industry associations also closely monitor the activities of member companies.
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Disposal sites for the lawful disposal of materials generated by the manufacture, use, or decommissioning of our products may no longer accept these substances in the future or may accept them on unfavorable terms.
−Removed: If we are unable to obtain required FDA clearances or approvals for a product or are unduly delayed in doing so, or the uses of that product are limited, our business could suffer.
−Removed: Typically, our OEM customers are responsible for obtaining 510(k) pre-market notification clearance on their systems that integrate our products.
−Removed: A substantial majority of our products are “Class I” devices that do not require 510(k) clearance, but we do produce software that is classified as a Class II device subject to 510(k) clearance.
−Removed: Unless an exception applies, we may be required by FDA regulations to obtain a 510(k) pre-market notification clearance in connection with the manufacture of a new medical device or a new indication for use of, or other significant change in, an existing currently marketed medical device before we can market or sell those products in the United States.
−Removed: Modifications or enhancements to a product that could significantly affect its safety or effectiveness, or that would constitute a major change in the intended use of the device, technology, materials, labeling, packaging, or manufacturing process also require a new 510(k) clearance.
−Removed: We cannot ensure that the FDA will agree with our decisions not to seek additional approvals or clearances for particular modifications to our products or that we will be successful in obtaining new 510(k) clearances for modifications.
−Removed: Obtaining clearances or approvals is time consuming, expensive, and uncertain.
−Removed: We may not be able to obtain the necessary clearances or approvals or may be unduly delayed in doing so, which could harm our business.
−Removed: Furthermore, even if we are granted regulatory clearances or approvals, they may include significant limitations on the indicated uses of the product, which may limit the market for the product.
−Removed: If we are unable to obtain required FDA clearance or approval for a product or are unduly delayed in doing so, or the uses of that product were limited, our business could suffer.
−Removed: Initiation of legal proceedings, defense against legal proceedings, and unfavorable results of legal proceedings could materially and adversely affect our financial results.
−Removed: From time to time, we are a party to or otherwise involved in legal proceedings, claims, government inspections, audits or investigations, and other legal matters, both inside and outside the United States, arising in the ordinary course of our business or otherwise.
−Removed: Legal proceedings are often lengthy, taking place over a period of years with interim motions or judgments subject to multiple levels of review (such as appeals or rehearings) before the outcome is final.
−Removed: Litigation and other legal proceedings, claims, government inspections, audits and investigations are subject to significant uncertainty and may be expensive, time consuming, and disruptive to our operations.
−Removed: For these and other reasons, we may choose to settle legal proceedings and claims, regardless of their actual merit.
−Removed: If a legal proceeding were ultimately resolved against us, it could result in significant compensatory damages, and, in certain circumstances, punitive damages, disgorgement of revenue or profits, remedial corporate measures, or injunctive relief imposed on us and, in certain cases, potential civil or criminal action, including against our employees, officers or directors, for which we may be required to, or we may elect to, provide indemnification.
−Removed: If our existing insurance does not cover the amount or types of damages awarded, or if other resolution or actions taken as a result of such legal proceeding were to restrain our ability to market one or more of our material products or services, or if we were required to, or elected to, indemnify an employee, officer or director, our combined financial position, results of operations, or cash flows could be materially and adversely affected.
−Removed: In addition, legal proceedings, and any adverse resolution thereof, can result in adverse publicity and damage to our reputation, which could materially and adversely impact our business.
Environmental laws impose compliance costs on our business and may also result in liability.
−Removed: We are subject to environmental laws around the world.
−Removed: These laws regulate many aspects of our operations, including our handling, storage, transport, and disposal of hazardous substances, such as the chemicals and materials that we use in the course of our manufacturing operations.
+Added: Environmental laws regulate many aspects of our operations, including our handling, storage, transport, and disposal of hazardous substances, such as the chemicals and materials that we use in the course of our manufacturing operations.
They can also impose cleanup liabilities, including with respect to discontinued operations.
−Removed: As a consequence, we can incur significant environmental costs and liabilities, some recurring and others not recurring.
Like other businesses, we may mishandle or inadequately manage hazardous substances used in our manufacturing operations and can never completely eliminate the risk of contamination or injury from certain materials that we use in our business and, therefore, we cannot completely eliminate the prospect of resulting claims and damage payments.
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Insurance has provided coverage for portions of cleanup costs resulting from historical occurrences, but we do not expect to maintain insurance coverage for costs or claims that might result from any future contamination.
−Removed: Pursuant to the Separation and Distribution Agreement we entered into with Varian when we spun off from Varian, we are obligated to indemnify Varian for 20% of the cleanup liabilities related to prior corporate restructuring activities undertaken while we were a division of Varian.
+Added: Pursuant to the Separation and Distribution Agreement we entered into with Varian Medical Systems, Inc.
+Added: ("Varian") when we spun off from Varian, we are obligated to indemnify Varian for 20% of the cleanup liabilities related to prior corporate restructuring activities undertaken while we were a division of Varian.
This includes facilities sold as part of Varian’s electron devices business in 1995 and thin film systems business in 1997.
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All of these costs, and any future violations or liabilities under environmental laws or regulations, could have a material adverse effect on our business.
−Removed: Failure to maintain effective internal controls and procedures could negatively impact us.
−Removed: We must, among other things, maintain effective internal controls and procedures for financial reporting and disclosure purposes.
−Removed: In the past, we have not always been successful in maintaining effective internal controls and procedures.
−Removed: Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business or changes in applicable accounting rules.
−Removed: We cannot assure that our internal control over financial reporting will be effective in the future or that material weaknesses will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective.
−Removed: If our internal controls and procedures are not effective, our financial statements may not accurately reflect the results of our business and operations.
−Removed: In addition, there could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements, which could affect our stock price.
+Added: Environmental, Social, Governance Risks
+Added: Our business is subject to evolving Environmental, Social, and Governance (“ESG”) requirements and stakeholder expectations that could expose us to numerous risks.
+Added: Regulators, customers, investors, and other stakeholders are increasingly focusing on ESG issues and related disclosures.
+Added: Changing ESG requirements and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.
+Added: We may also communicate certain ESG initiatives and goals in our SEC filings or in other public disclosures.
+Added: If our ESG-related data, processes, and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG goals on a timely basis, or at all, our reputation, business, financial performance, and growth could be adversely affected.
+Added: In addition, our customers have adopted, and may continue to adopt, procurement policies that require us to comply with social and environmental provisions.
+Added: An increasing number of investors have adopted, and may continue to adopt, ESG policies for their portfolio companies, and various voluntary sustainability initiatives and organizations have promulgated different social and environmental and sustainability guidelines.
+Added: These practices, policies, provisions, and initiatives are under active development, subject to change, can be unpredictable and conflicting, and may prove difficult and expensive for us to comply with and could negatively affect our reputation, business, or financial condition.
+Added: If we are unable to retain, attract, expand, integrate, and train our management team and other key personnel, we may not be able to maintain or expand our business.
+Added: Our future success depends on our ability to retain, attract, expand, integrate, and train our management team and other key personnel, such as qualified engineering, service, sales, marketing, manufacturing, and other staff.
+Added: We compete for key personnel with other medical equipment and software manufacturers and technology companies, as well as universities and research institutions.
+Added: We have observed an overall tightening and increasingly competitive labor market over the past years, which has resulted in increased wages offered by other employers and voluntary attrition of employees in the industry, making it more difficult to recruit, hire, and retain talent.
+Added: Because competition is intense, particularly in Utah, where unemployment rates are relatively low, compensation-related costs have increased and could continue to increase, significantly.
+Added: Additionally, our United States-based employees, including our senior management team, work for us on an at-will basis, and there is no assurance that any such employees will remain with us.
+Added: Replacing key employees may take an extended period of time, and to the extent we hire employees from competitors, we also may be subject to allegations that they have been improperly solicited or divulged proprietary or other confidential information.
+Added: Freezing new positions or terminating existing ones could hinder our ability to execute our strategic plan and achieve growth targets, resulting in long-term sacrifices for short-term gains.
+Added: Further, potential employee turnover resulting from work from home policy changes, limited growth opportunities and competitive market conditions could lead to knowledge loss and decreased productivity.
+Added: If we are unable to retain or hire and train qualified personnel, we may not be able to maintain or expand our business.
+Added: Similarly, if we fail to adequately invest in leadership training and career development resources this could limit employee growth, lead to shortages of skilled personnel, hinder effective management and decision making, and hamper overall organizational success.
Risks Relating to Our Indebtedness
−Removed: We have significant debt obligations that could adversely affect our business, profitability, liquidity, and ability to meet our obligations.
−Removed: As of June 30, 2023, our total combined indebtedness was approximately $448.7 million.
−Removed: The borrowings under our Convertible Senior Unsecured Notes due 2025 (the “Convertible Notes”) bear interest at a fixed rate of 4.00% and borrowings under our Senior Secured Notes due 2027 (the “Senior Secured Notes”) bear interest at a fixed rate of 7.875%.
−Removed: For more information regarding our borrowings, see Note 10, Borrowings of the Notes to the Condensed Consolidated Financial Statements of this report.
−Removed: Our debt could potentially have important consequences to us and our investors, including:
−Removed: • limiting our flexibility in planning for, or reacting to, changes in our business and the industry;
−Removed: • limiting our ability to borrow additional funds as needed or increasing the costs of any such borrowing;
−Removed: • making it more difficult for us to satisfy our obligations, including our debt obligations;
−Removed: • increasing our vulnerability to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings are and will continue to be at variable rates of interest;
−Removed: • requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce the availability of our cash flow from operations to fund working capital, capital expenditures or other general corporate purposes;
−Removed: • placing us at a disadvantage compared to competitors that may have proportionately less debt;
−Removed: • limiting our ability to obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements.
−Removed: If our cash requirements in the future are greater than expected, our cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets, or otherwise raise funds on acceptable terms, or at all, to refinance our debt.
−Removed: For example, holders of the Convertible Notes will have the right to require us to repurchase all or a portion of the Convertible Notes on the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.
−Removed: Further, if a make-whole fundamental change as defined in the indenture governing the Convertible Notes occurs prior to the maturity date of the Convertible Notes, we will in some cases be required to increase the conversion rate for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change.
−Removed: Unless we elect to deliver solely shares of common stock to settle a conversion of the Convertible Notes (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments for those Convertible Notes being converted.
−Removed: However, we may not have enough available cash or be able to obtain financing at the time we are required to make such repurchases of the Convertible Notes surrendered or pay cash with respect to the Convertible Notes being converted.
−Removed: Despite our substantial indebtedness, we may still be able to incur significantly more debt.
−Removed: This could intensify the risks described above.
−Removed: We and our subsidiaries may be able to incur substantial indebtedness in the future.
−Removed: As of June 30, 2023, after adjustment to our available borrowing base under the $100 million revolving credit agreement we entered into on September 30, 2020 (the “Asset-Based Loan,” or "ABL Facility"), we had approximately $88 million of additional available borrowing capacity.
−Removed: In addition to any amounts that might be available to us for borrowing under the ABL Facility, subject to certain conditions, we will have the right to request an increase of aggregate commitments under the ABL Facility by an aggregate amount of up to $75 million by obtaining additional commitments either from one or more of the lenders under the ABL Facility or other lending institutions.
−Removed: The ABL Facility and the indenture governing our Senior Secured Notes contain restrictions on our and our subsidiaries’ ability to incur additional indebtedness, which are subject to a number of important qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.
−Removed: Furthermore, the covenants in the indenture governing our Convertible Notes do not restrict the incurrence of indebtedness by us or any of our subsidiaries, and the covenants that may be contained in any future debt instruments could allow us to incur a significant amount of additional indebtedness.
−Removed: The more leveraged we become, the more we, and in turn holders of our notes, will be exposed to certain risks described above under “ Risks Relating to Our Indebtedness—We have significant debt obligations that could adversely affect our business, profitability, liquidity, and ability to meet our obligations .”
The ABL Facility and the indenture governing our Senior Secured Notes impose significant operating and financial restrictions that may limit our current and future operating flexibility, particularly our ability to respond to changes in the economy or our industry or to take certain actions, which could harm our long-term interests and may limit our ability to make payments on the notes.
−Removed: Our ABL Facility and the indenture governing our Senior Secured Notes impose significant operational and financial restrictions on us that include, but are not limited to our ability to:
+Added: Because our Convertible Notes mature in June 2025, failure to maintain sufficient liquidity and/or to refinance our Convertible Notes could result in a material adverse effect on our results of operations and financial position.
+Added: As of December 29, 2023, our total combined indebtedness was approximately $447.8 million of principal, including our 4.00% Convertible Senior Unsecured Notes due 2025 (the "Convertible Notes") and our 7.875% Senior Secured Notes due 2027 (the “Senior Secured Notes”).
+Added: For more information regarding our borrowings, see Note 9, Borrowings of the Notes to the Condensed Consolidated Financial Statements of this report.
+Added: Our $100.0 million ABL Facility and the indenture governing our Senior Secured Notes impose significant operational and financial restrictions on us that include, but are not limited to our ability to:
• incur, assume, or permit to exist additional indebtedness (including guarantees thereof);
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• unable to raise additional debt or equity financing to operate during general economic or business downturns;
+Added: • limited in our ability to borrow additional funds as needed or increasing the cost of such borrowing;
+Added: • challenged in satisfying our obligations, including our debt obligations;
+Added: • vulnerable to adverse economic and general industry conditions, including interest rate fluctuations, because a portion of our borrowings are and will continue to be at variable rates of interest;
+Added: • required to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce the availability of our cash flow from operations to fund working capital, capital expenditures, or other general corporate purposes;
+Added: • at a disadvantage compared to competitors that may have proportionately less debt;
• unable to compete effectively or to take advantage of new business opportunities.
A breach of the covenants under the indenture governing our Senior Secured Notes or the ABL Facility could result in an event of default under the applicable indebtedness.
−Removed: Such a default, if not cured or waived, may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt that is subject to an applicable cross-acceleration or cross-default provision.
−Removed: In addition, an event of default under the ABL Facility would permit the lenders under the ABL Facility to terminate all commitments to extend further credit under the ABL Facility.
+Added: Such a default, if not cured or waived, may allow the creditors to accelerate the related debt, may result in the acceleration of any other debt that is subject to an applicable cross-acceleration or cross-default provision, and would permit the lenders under the ABL Facility to terminate all commitments to extend further credit under the ABL Facility.
Furthermore, if we were unable to repay the amounts due and payable under the ABL Facility, those lenders could proceed against the collateral securing such indebtedness.
In the event our lenders or holders of the notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
−Removed: Our ability to continue to have the necessary liquidity to operate our business may be adversely impacted by a number of factors, including uncertain conditions in the credit and financial markets, which could limit the availability and increase the cost of financing.
−Removed: A deterioration of our results of operations and cash flow resulting from decreases in consumer spending, could, among other things, impact our ability to comply with the fixed charge coverage ratio contained in our ABL Facility.
−Removed: Our historical sources of liquidity to fund ongoing cash requirements include cash flows from operations, cash and cash equivalents, borrowings through our previous credit facility and convertible debt offerings.
+Added: If our cash requirements in the future are greater than expected or our cash flow from operations is less than expected, our cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets, or otherwise raise funds on acceptable terms, or at all, to refinance our debt.
+Added: Our Convertible Notes mature in June 2025, and the conversion price is currently above the trading price of our common stock.
+Added: If the holders of the Convertible Notes have not converted their notes into our common stock, we currently anticipate we will need to refinance the Convertible Notes through a combination of borrowings under our ABL Facility, the entry into an expanded credit facility or the issuance of additional debt or equity securities, and cash.
+Added: Any future refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants which could further restrict our business operations.
+Added: Additionally, the indenture relating to our secured notes limit the use of the proceeds from any disposition of our assets.
+Added: As a result, the indenture may prevent us from using the proceeds from such dispositions to satisfy our debt service obligations.
+Added: Our ability to continue to have the necessary liquidity to operate our business may be adversely impacted by a number of factors, and a deterioration of our results of operations and cash flow resulting from decreases in consumer spending, could, among other things, impact our ability to comply with the fixed charge coverage ratio contained in our ABL Facility.
+Added: Our historical sources of liquidity to fund ongoing cash requirements include cash flows from operations, cash and cash equivalents, borrowings through our previous credit facility, and debt offerings.
The sufficiency and availability of credit may be adversely affected by a variety of factors, including, without limitation, the tightening of the credit markets, including lending by financial institutions who are sources of credit for our borrowing and liquidity;
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The ABL Facility contains a minimum Fixed Charge Coverage Ratio of 1.00 to 1.00 that is tested when excess availability under the ABL is less than the greater of (i) 10.0% of the Loan Cap (the lesser of (a) the aggregate commitments under the ABL Facility and (b) the aggregate borrowing base) and (ii) $7.5 million.
−Removed: If we have to borrow in excess of 10.0% of the Loan Cap and $7.5 million, and we do not increase our earnings, we also would be at risk of not being in compliance with the ABL Facility’s fixed charge coverage ratio.
−Removed: Compliance with the fixed charge coverage ratio is dependent on the results of our operations, which are subject to a number of factors including current economic conditions.
−Removed: Adverse developments in the economy, including as a result of a number of events described in these Risk Factors, in the past have led and in the future could lead to reduced spending by our customers and end-users which could adversely impact our net sales and cash flow, which could affect our ability to comply with the fixed charge coverage ratio.
−Removed: In addition, the ABL Facility contains other affirmative and negative covenants that restrict our operating and financing activities.
−Removed: These provisions may limit our ability to, among other things, incur future indebtedness, contingent obligations or liens, guarantee indebtedness, make certain investments and capital expenditures, sell stock or assets, pay dividends and consummate certain mergers or acquisitions.
−Removed: Failure to comply with the fixed charge coverage ratio and other covenants, including the requirement to timely deliver financial statements within applicable grace periods, could result in an event of default.
−Removed: Upon an event of default, if the ABL Facility is not amended or the event of default is not waived, the lender could declare all amounts then outstanding, together with accrued interest, to be immediately due and payable.
−Removed: If this happens, we may not be able to make those payments or borrow sufficient funds from alternative sources to make those payments.
−Removed: Even if we were to obtain additional financing, that financing may be on unfavorable terms.
−Removed: 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 under our indebtedness, which may not be successful.
−Removed: If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness, including the notes.
−Removed: These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.
−Removed: If our operating results and available cash are insufficient to meet our debt service obligations, 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.
−Removed: We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them, and these proceeds may not be adequate to meet any debt service obligations then due.
−Removed: Any future refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants which could further restrict our business operations.
−Removed: Additionally, the indentures relating to our notes limit the use of the proceeds from any disposition of our assets.
−Removed: As a result, the indentures may prevent us from using the proceeds from such dispositions to satisfy our debt service obligations.
−Removed: Our credit rating and ability to access well-functioning capital markets are important to our ability to secure future debt financing on acceptable terms.
−Removed: Our credit ratings may not reflect all risks associated with an investment in our secured notes.
−Removed: Our access to the debt markets and the terms of such access depend on multiple factors including the condition of the debt capital markets, our operating performance and our credit ratings.
−Removed: These ratings are based on a number of factors including an assessment of our financial strength and financial policies.
−Removed: Our borrowing costs will be dependent to some extent on the rating assigned to our debt.
−Removed: However, there can be no assurance that any particular rating assigned to us will remain in effect for any given period of time or that a rating will not be changed or withdrawn by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating so warrant.
−Removed: Incurrence of additional debt by us could adversely affect our credit rating.
−Removed: Any disruptions or turmoil in the capital markets or any downgrade of our credit rating could adversely affect our cost of funds, liquidity, competitive position and access to capital markets, which could materially and adversely affect our business operations, financial condition and results of operations.
−Removed: In addition, downgrading the credit rating of our debt securities or placing us on a watch list for possible future downgrading would likely have an adverse effect on the market price of our securities.
+Added: Adverse developments in the economy in the past have led and in the future could lead to reduced spending by our customers and end-users which could adversely impact our net sales and cash flow, which could affect our ability to comply with the fixed charge coverage ratio.
We entered into certain hedging positions that may affect the value of the Convertible Notes and the volatility and value of our common stock.
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These hedge transactions are expected generally to reduce potential dilution of our common stock on any conversion of the Convertible Notes or offset any cash payments we are required to make in excess of the principal amount of such converted Convertible Notes, as the case may be, with such reduction or offset subject to a cap.
−Removed: The counterparties to these hedging positions or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or selling our common stock in secondary market transactions prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes or following any repurchase of Convertible Notes by us on any fundamental change repurchase date or otherwise).
−Removed: This activity could cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes.
−Removed: In addition, if any such hedging positions fail to become effective, the counterparties to these hedging positions or their respective affiliates may unwind their hedge positions, which could adversely affect the value of our common stock.
+Added: The counterparties to these hedging positions or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock or purchasing or selling our common stock in secondary market transactions prior to the maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes or following any repurchase of Convertible Notes by us on any fundamental change repurchase date or otherwise) which could cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes and could adversely affect the value of our common stock.
Risks Relating to Our Common Stock
−Removed: The trading price of our common stock may decline or fluctuate significantly and fluctuations in our operating results, including quarterly revenues, and margins, may cause our stock price to be volatile, which could cause losses for our stockholders.
−Removed: During the year ended June 30, 2023, our stock price has ranged from a low of $17.11 to a high of $23.90.
−Removed: We cannot guarantee that an active trading market will be sustained for our common stock.
−Removed: Nor can we predict the prices at which shares of our common stock may trade.
−Removed: We have experienced and expect in the future to experience fluctuations in our operating results, including revenues and margins, from period to period.
−Removed: These fluctuations may cause our stock price to be volatile, which could cause losses for our stockholders.
−Removed: Our quarterly and annual operating results, including our revenues and margins, may be affected by a number of other factors, including:
−Removed: • the introduction and timing of announcement of new products or product enhancements by us and our competitors;
−Removed: • changes in our or our competitors’ pricing or discount levels;
−Removed: • changes in foreign currency exchange rates and other economic uncertainty;
−Removed: • changes in import/export regulatory regimes including the imposition of tariffs on our products or those of our customers;
−Removed: • changes in the relative portion of our revenues represented by our various products, including the relative mix between higher-margin and lower-margin products;
−Removed: • changes in the relative portion of our revenues represented by our international region as a whole and by regions within the overall region, as well as by individual countries (notably, those in emerging markets);
−Removed: • fluctuation in our effective tax rate, which may or may not be known to us in advance;
−Removed: • the availability of economic stimulus packages or other government funding, or reductions thereof;
−Removed: • disruptions in the supply or changes in the costs of raw materials, labor, product components or transportation services;
−Removed: • changes to our organizational structure, which may result in restructuring or other charges;
−Removed: • disruptions in our operations, including our ability to manufacture products, caused by events such as earthquakes, fires, floods, terrorist attacks or the outbreak of epidemic diseases;
−Removed: • developments relating to any litigation or administrative proceeding or inquiry, including governmental audits, as well as ongoing costs associated with legal proceedings and governmental audits;
−Removed: • accounting changes and adoption of new accounting pronouncements.
−Removed: Because many of our operating expenses are based on anticipated capacity levels, and a high percentage of these expenses are fixed for the short term, a small variation in the timing of revenue recognition can cause significant variations in operating results from quarter to quarter.
−Removed: If our gross margins fall below the expectation of securities analysts and investors, the trading price of our common stock has declined in the past and may decline again in the future.
−Removed: Conversion of the Convertible Notes may dilute the ownership interest of our stockholders or may otherwise depress the market price of our common stock.
−Removed: The conversion of the Convertible Notes may dilute the ownership interests of our stockholders.
−Removed: On conversion of the Convertible Notes, we have the option to pay or deliver, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock.
−Removed: If we elect to settle our conversion obligation in shares of common stock or a combination of cash and shares of common stock, any sales of our common stock issuable on such conversion could adversely affect prevailing market prices of our common stock.
−Removed: In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock, any of which could depress the market price of our common stock.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
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In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital and may seriously harm our business.
−Removed: Certain provisions in our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, our Indenture, and of Delaware law, may prevent or delay an acquisition of our Company, which could decrease the trading price of our common stock.
−Removed: Our Amended and Restated Certificate of Incorporation, our Amended and Restated Bylaws, and Delaware law contain, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover.
−Removed: These provisions include, among others:
−Removed: • the inability of our stockholders to call a special meeting;
−Removed: • the inability of our stockholders to act without a meeting of stockholders;
−Removed: • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;
−Removed: • the right of our board of directors to issue preferred stock without stockholder approval;
−Removed: • the ability of our directors, and not stockholders, to fill vacancies on our board of directors.
−Removed: In addition, because we did not elect to be exempt from Section 203 of the Delaware General Corporation Law (the “DGCL”), this provision could also delay or prevent a change of control that stockholders may favor.
−Removed: Section 203 provides that, subject to limited exceptions, persons that acquire, or who are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation (an “interested stockholder”) shall not engage in any business combination with that corporation, including by merger, consolidation, or acquisitions of additional shares, for a three-year period following the date on which the person became an interested stockholder, unless:
−Removed: (1) prior to such time, the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
−Removed: (2) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced;
−Removed: or (3) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder.
−Removed: These provisions are not intended to make us immune from takeovers.
−Removed: However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of us and our stockholders.
−Removed: These provisions may also prevent or discourage attempts to remove and replace incumbent directors.
−Removed: Furthermore, certain provisions in our indenture governing the Convertible Notes may make it more difficult or expensive for a third party to acquire us.
−Removed: For example, our indenture requires us, at the holders’ election, to repurchase the Convertible Notes for cash on the occurrence of a fundamental change and, in certain circumstances, to increase the conversion rate for a holder that converts our Convertible Notes in connection with a make-whole fundamental change.
−Removed: A takeover of us may trigger the requirement that we repurchase the Convertible Notes or increase the conversion rate, which could make it costlier for a third party to acquire us.
−Removed: Our indenture also prohibits us from engaging in a merger or acquisition unless, among other things, the surviving entity assumes the obligations under the Convertible Notes and our indenture.
−Removed: These and other provisions in our indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to holders of the Convertible Notes or our stockholders.
+Added: If we elect to settle our conversion obligation in shares of common stock or a combination of cash and shares of common stock, any sales of our common stock issuable on such conversion could adversely affect prevailing market prices of our common stock.
+Added: In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the Convertible Notes into shares of our common stock, any of which could depress the market price of our common stock.
+Added: Risks Relating to Our Spin-Off
Liabilities related to our operations when we were part of Varian, or liabilities associated with the spin-off from Varian, could materially and adversely affect our business, financial condition, results of operations, and cash flows.
We entered into a Separation and Distribution Agreement when we spun off from Varian.
−Removed: The agreement provides for, among other things, indemnification obligations designed to make Varex financially responsible for information contained in our registration statement that describes Varex, our separation from Varian, the transactions contemplated by the Separation and Distribution Agreement, and liabilities that were allocable to Varex before the spin-off.
+Added: This agreement provides for, among other things, indemnification obligations designed to make Varex financially responsible for information contained in our registration statement that describes Varex, our separation from Varian, the transactions contemplated by the Separation and Distribution Agreement, and liabilities that were allocable to Varex before the spin-off.
We may be subject to substantial liabilities if we were required to indemnify Varian or if Varian were required, but unable, to indemnify us.
Either of these could negatively affect our business, financial position, results of operations, and/or cash flows.
+Added: General Risks
+Added: Failure to maintain effective internal controls and procedures could negatively impact us.
+Added: In the past, we have not always been successful in maintaining effective internal controls and procedures.
+Added: Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business or changes in applicable accounting rules.
+Added: We cannot assure that our internal control over financial reporting will be effective in the future or that material weaknesses will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective.
+Added: If our internal controls and procedures are not effective, our financial statements may not accurately reflect the results of our business and operations.
+Added: In addition, there could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements, which could affect our stock price.
Unregistered Sales of Equity Securities and Use of Proceeds
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.