What changed in this filing

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Item 1A. Risk Factors

2022-08-25 compared with 2021-08-27 · 82 added, 74 removed, 330 unchanged (32% of the section changed)

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OPERATIONAL RISKS

The COVID-19 pandemic could negatively affect our business.

The COVID-19 pandemic has impacted and will continue to impact our workforce and operations, and those of our strategic partners, customers, suppliers and logistics providers.

These impacts have included and may continue to include under-absorbed overhead, increased logistics and other costs, decreased demand for our products and manufacturing challenges.

While our manufacturing facilities and those used by Flash Ventures are all currently operational, this is subject to change based on evolving conditions related to the pandemic.

The effects of the pandemic are uncertain and difficult to predict, but may include:

• Further disruptions to our supply chain, our operations or those of our strategic partners, customers or suppliers caused by employees or others contracting COVID-19, or governmental orders to contain the spread of COVID-19 such as travel restrictions, quarantines, shelter in place orders, trade controls and business shut-downs;

• A global economic downturn or a recession causing a decrease or shift in short- or long-term demand for our products, resulting in industry oversupply and decreases of average selling prices (“ASPs”);

• Deterioration of worldwide credit markets that may limit our ability or increase our cost to obtain external financing to fund our operations and capital expenditures and result in a higher rate of losses on our accounts receivables due to customer credit defaults;

• Extreme volatility in financial markets which may harm our ability to access the financial markets on acceptable terms;

• Increased data security and technology risk as many employees continue to work from home, including possible outages to systems and technologies critical to remote work and increased data privacy risk with cybercriminals attempting to take advantage of the disruption;

• Reduced productivity or other disruptions of our operations if essential workers in our factories or those returning to our worksites are exposed to or spread COVID-19 to other employees.

The degree to which the pandemic ultimately impacts our business will depend on future developments beyond our control which are highly uncertain and cannot be predicted at this time, including the severity and duration of the pandemic, the extent of actions to contain or treat COVID-19, the timing, distribution, efficacy and public acceptance of vaccines around the world, any possible resurgence of COVID-19, including the emergence of more contagious or vaccine-resistant variants and how quickly and to what extent normal economic and operating activity can resume.

Adverse global or regional conditions could harm our business.

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As a result, our business depends significantly on global and regional conditions.

Adverse changes in global or regional economic conditions, including, but not limited to, volatility in the financial markets, tighter credit, slower growth in certain geographic regions, political uncertainty, other macroeconomic factors, changes to social conditions and regulations, could significantly harm demand for our products, increase credit and collectability risks, result in revenue reductions, reduce profitability as a result of underutilization of our assets, cause us to change our business practices, increase manufacturing and operating costs or result in impairment charges or other expenses.

Adverse changes in global or regional economic conditions, including, but not limited to, volatility in the financial markets, tighter credit, recession, inflation, rising interest rates, slower growth in certain geographic regions, political uncertainty, geopolitical tensions or conflicts, other macroeconomic factors, changes to social conditions and regulations, could significantly harm demand for our products, increase credit and collectability risks, result in revenue reductions, reduce profitability as a result of underutilization of our assets, cause us to change our business practices, increase manufacturing and operating costs or result in impairment charges or other expenses.

Our revenue growth is significantly dependent on the growth of international markets, and we may face challenges in international sales markets.

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• the need to comply with regulations on international business, including the Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, the anti-bribery laws of other countries and rules regarding conflict minerals;

• copyright levies or similar fees or taxes imposed in European and other countries;

• exchange, currency and tax controls and reallocations;

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As a result of these risks, our business could be harmed.

Public health crises, including the COVID-19 pandemic, have had, and could in the future have, a negative effect on our business.

The COVID-19 pandemic has impacted and may continue to impact our workforce and operations, and those of our strategic partners, customers, suppliers and logistics providers.

These impacts include under-absorbed overhead, increased logistics, component and other costs, decreased demand for our products and manufacturing challenges.

While our manufacturing facilities and those used by Flash Ventures are all currently operational, we have experienced and may experience in the future temporary closures of certain manufacturing facilities related to the pandemic.

Future outbreaks of infectious disease or other public health crises may have a similar impact.

The effects of such health crises, including the COVID-19 pandemic, are uncertain and difficult to predict, but may include:

• Disruptions to our supply chain, our operations or those of our strategic partners, customers or suppliers caused by employees or others contracting infectious diseases, or governmental orders to contain the spread of infectious disease, such as travel restrictions, quarantines, shelter in place orders, trade controls and business shut-downs;

• Extreme volatility in financial markets, which may harm our ability to access the financial markets on acceptable terms;

• Increased data security and technology risk as some employees continue to work from home, including possible outages to systems and technologies critical to remote work and increased data privacy risk with cybercriminals attempting to take advantage of the disruption;

• Reduced productivity or other disruptions of our operations if workers in our factories or our other worksites are exposed to or spread infectious diseases to other employees.

The degree to which the COVID-19 pandemic or future public health crises ultimately impact our business will depend on many factors beyond our control, which are highly uncertain and cannot be predicted at this time.

We are dependent on a limited number of qualified suppliers who provide critical services, materials or components, and a disruption in our supply chain could negatively affect our business.

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We therefore depend on these suppliers to meet our business needs including dedicating adequate engineering resources to develop components that can be successfully integrated into our products.

Our suppliers have in the past been, and may in the future be, unable or unwilling to meet our requirements.

Our suppliers have in the past been, and may in the future be, unable or unwilling to meet our requirements, including as a result of events outside of their control such as trade restrictions (including tariffs, quotas and embargoes), geopolitical conflicts, public health emergencies, or natural disasters.

If we are unable to purchase sufficient quantities from our current suppliers or qualify and engage additional suppliers, or if we cannot purchase materials at a reasonable price, we may not be able to meet demand for our products.

Trade restrictions, including tariffs, quotas and embargoes, demand from other high-volume industries for materials or components used in our products, disruptions in supplier relationships or shortages in other components and materials used in our customers’ products could result in increased costs to us or decreased demand for our products, which could negatively impact our business.

Delays or cost increases experienced by our suppliers in developing or sourcing materials and components for use in our products or incompatibility or quality issues relating to our products, could also harm our business.

Delays, shortages or cost increases experienced by our suppliers in developing or sourcing materials and components for use in our products or incompatibility or quality issues relating to our products, could also harm our business.

We do not have long-term contracts with some of our existing suppliers, nor do we always have guaranteed manufacturing capacity with our suppliers, so we cannot guarantee that they will devote sufficient resources or capacity to manufacturing our products.

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The facilities of many of our customers, our suppliers and our customers’ suppliers are also concentrated in certain geographic locations throughout Asia and elsewhere.

A fire, flood, earthquake, tsunami or other natural disaster, condition or event such as a power outage, terrorist attack, physical security breach, political instability, civil unrest, localized labor unrest or other employment issues, or a health epidemic that negatively affects any of these facilities would significantly affect our ability to manufacture or sell our products and source components and harm our business.

Possible impacts include work and equipment stoppages and

damage to or closure of our facilities, or those of our suppliers or customers, for an indefinite period of time.

If a fire (including a climate change-related fire), flood, earthquake, tsunami or other natural disaster, condition or event such as a power outage, contamination event, terrorist attack, cybersecurity incident, physical security breach, political instability, civil unrest, localized labor unrest or other employment issues, or a health epidemic negatively affects any of these facilities, it would significantly affect our ability to manufacture or sell our products and source components and harm our business.

Possible impacts include work and equipment stoppages and damage to or closure of our

facilities, or those of our suppliers or customers, for an indefinite period of time.

Climate change has in the past and is expected to continue to increase the incidence and severity of certain natural disasters.

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We maintain limited insurance coverage and, in some cases, no coverage at all, for natural disasters and damage to our facilities, as these types of insurance are sometimes not available or available only at a prohibitive cost.

Climate change may reduce the availability and/or increase the cost of certain types of insurance by contributing to an increase in the incidence and severity of certain natural disasters.

We depend upon Kioxia to obtain and maintain sufficient property, business interruption and other insurance for Flash Ventures.

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Changes in our key management team can result in loss of continuity, loss of accumulated knowledge, departure of other key employees, disruptions to our operations and inefficiency during transitional periods.

Global competition for skilled employees in the technology industry is intense, and our business success becomes increasingly dependent on our ability to retain our key staff and skilled employees, to implement succession plans for our key management and staff, to attract, integrate and retain new skilled employees, including employees from acquisitions, and to make decisions to realign our business to take advantage of efficiencies or reduce redundancies.

Changes in immigration policies may impair our ability to recruit and hire technical and professional talent.

Additionally, uncertainty about the structure and organization of our business as a result of our ongoing strategic review could negatively impact our ability to recruit and retain key staff and skilled employees.

Changes in immigration policies may also impair our ability to recruit and hire technical and professional talent.

Our employee hiring and retention also depend on our ability to build and maintain a diverse and inclusive workplace culture and be viewed as an employer of choice.

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If our technology infrastructure, systems or products are compromised, damaged or interrupted by cyber attacks, data security breaches, other security problems, design defects or sustain system failures, our business could be negatively impacted.

We experience cyber attacks of varying degrees on our technology infrastructure and systems and, as a result, unauthorized parties have obtained in the past, and may in the future obtain, access to our computer systems and networks, including cloud-based platforms.

The technology infrastructure and systems of our suppliers, vendors, service providers, cloud solution providers and partners have in the past experienced and may in the future experience such attacks.

Cyber attacks can include ransomware, computer denial-of-service attacks, worms, and other malicious software programs or other attacks, covert introduction of malware to computers and networks, including those using techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event or that may continue undetected for an extended period of time, impersonation of authorized users, and efforts to discover and exploit any design flaws, bugs, security vulnerabilities or security weaknesses, as well as intentional or unintentional acts by employees or other insiders with access privileges, intentional acts of vandalism or fraud by third parties and sabotage.

We experience cyber attacks of varying degrees on our technology infrastructure and systems and, as a result, unauthorized parties have obtained in the past, and may obtain in the future, access to our computer systems and networks, including cloud-based platforms.

The technology infrastructure and systems of some of our suppliers, vendors, service providers, cloud solution providers and partners have in the past experienced, and may in the future experience, such attacks.

Cyber attacks can include ransomware, computer denial-of-service attacks, worms, and other malicious software programs or other attacks, and covert introduction of malware to computers and networks, including those using techniques that change frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event or that may continue undetected for an extended period of time.

Cyber attacks may also include impersonation of authorized users, efforts to discover and exploit any design flaws, bugs, security vulnerabilities or security weaknesses, intentional or unintentional acts by employees or other insiders with access privileges, intentional acts of vandalism or fraud by third parties and sabotage.

In some instances, efforts to correct vulnerabilities or prevent attacks may reduce the performance of our computer systems and networks, which could negatively impact our business.

We believe cyber attack attempts are increasing in number and that cyber attackers are increasingly organized and well-financed or supported by state actors, and are developing increasingly sophisticated systems and means to not only attack systems, but also to evade detection or to obscure their activities.

Geopolitical tensions or conflicts may create heightened risk of cyber attacks.

Our products are also targets for cyber attacks, including those products utilized in cloud-based environments as well as our cloud service offerings.

While some of our products contain encryption or security algorithms to protect third-party content or user-generated data stored on our products, these products could still be hacked or the encryption schemes could be compromised, breached, or circumvented by motivated and sophisticated attackers.

Further, our products contain sophisticated hardware and operating system software and applications that may contain security problems, security vulnerabilities, or defects in design or manufacture, including “bugs” and other problems that could interfere with the intended operation of our products.

To the extent our products are hacked or the encryption schemes are compromised or breached, this could harm our business by

requiring us to employ additional resources to fix the errors or defects, exposing us to litigation and indemnification claims and hurting our reputation.

Further, our products contain sophisticated

hardware and operating system software and applications that may contain security problems, security vulnerabilities, or defects in design or manufacture, including “bugs” and other problems that could interfere with the intended operation of our products.

To the extent our products are hacked or the encryption schemes are compromised or breached, this could harm our business by requiring us to employ additional resources to fix the errors or defects, exposing us to litigation and indemnification claims and hurting our reputation.

If efforts to breach our infrastructure, systems or products are successful or we are unable to protect against these risks, we could suffer interruptions, delays, or cessation of operations of our systems, and loss or misuse of proprietary or confidential information, IP, or sensitive or personal information.

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BUSINESS AND STRATEGIC RISKS

Our review of potential strategic alternatives may not result in an executed or consummated transaction or other strategic alternative, and the process of reviewing strategic alternatives or its conclusion could adversely affect our business and our stockholders.

In June 2022, we announced that we are reviewing potential strategic alternatives aimed at further optimizing long-term value for our stockholders.

The potential strategic alternatives include, among other things, the option to separate our Flash and HDD business units.

In conjunction with that review process, the Company announced that it had entered into a letter agreement with Elliott Investment Management L.P.

(“Elliott”), which had disclosed in May 2022 a $1 billion investment in our Company and called for a full strategic review of our business.

We are actively working with financial advisors and the Company’s legal counsel in this strategic review process.

Any potential transaction or other strategic alternative would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, regulatory approvals, and the availability of financing for a potential transaction on reasonable terms.

The process of reviewing potential strategic alternatives may be time consuming, distracting and disruptive to our business operations, which may cause concern to our current or potential customers, employees, investors, strategic partners and other constituencies and may have a material impact on our business and operating results and/or result in increased volatility in our share price.

We have and will continue to incur substantial

expenses associated with identifying, evaluating and negotiating potential strategic alternatives.

There can be no assurance that any potential transaction or other strategic alternative, if consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock.

Until the review process is concluded, perceived uncertainties related to our future may result in the loss of potential business opportunities and volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and business partners.

Similarly, other activist investors may engage in proxy solicitations or advance shareholder proposals, or otherwise attempt to affect changes and assert influence on our Board and management, which could lead to the impacts on our business, board, management and employees discussed above.

We rely substantially on strategic relationships with various partners, including Kioxia, which subjects us to risks and uncertainties that could harm our business.

We have entered into strategic relationships with various partners for product development, sales growth and the supply of technologies, components, equipment and materials for use in our product design and manufacturing, including our business ventures with Kioxia.

We have entered into and expect to continue to enter into strategic relationships with various partners for product development, manufacturing, sales growth and the supply of technologies, components, equipment and materials for use in our product design and manufacturing, including our business ventures with Kioxia.

We depend on Flash Ventures for the development and manufacture of flash-based memory.

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On the other hand, if we under-invest in Flash Ventures, or otherwise grow or transition Flash Ventures’ capacity too slowly, we may not have enough supply of flash-based memory, or the right type of flash-based memory, to meet demand on a timely and cost effective basis, and we may lose opportunities for revenue, gross margin and market share as a result.

If our supply is limited, we might make strategic decisions

with respect to the allocation of our supply among our products and customers, which could result in less favorable gross margins or damage customer relationships.

If our supply is limited, we might make strategic decisions with respect to the allocation of our supply among our products and customers, which could result in less favorable gross margins or damage customer relationships.

Our control over the operations of our business ventures may be limited, and our interests could diverge from our strategic partners’ interests regarding ongoing and future activities.

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Lack of alignment with Kioxia with respect to Flash Ventures could negatively impact our ability to stay at the forefront of technological advancement.

Misalignment could arise due to changes in Kioxia’s strategic priorities, management, ownership and/or access to capital, which has changed in recent years and could continue to change.

Kioxia’s stakeholders may include, or have included in the past, competitors, customers, a private equity firm, government entities and/or public shareholders.

Misalignment could arise due to changes in Kioxia’s strategic priorities, management, ownership and/or access to capital, which have changed in recent years and could continue to change.

Kioxia’s stakeholders may include, or have included in the past, competitors, customers, a private equity firm, government entities and/or public stockholders.

Kioxia’s management changes, ownership and capital structure could lead to delays in decision-making, disputes or changes in strategic direction that could negatively impact the strategic partnership, and therefore us.

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Together with Kioxia, we fund a portion of the investments required for Flash Ventures through lease financings.

Availability of lease financings for Flash Ventures could also be limited by our and/or Kioxia’s financial performance.

Continued availability of lease financings for Flash Ventures is not guaranteed and could be limited by several factors, including our and/or Kioxia’s financial performance and changes to our and/or Kioxia’s business, ownership or corporate structure.

To the extent that lease financings are not accessible on favorable terms or at all, more cash would be required to fund investments.

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• failure by our strategic partners to timely fund capital investments with us or otherwise meet their commitments, including paying amounts owed to us or third parties when due;

• we may lose the rights to technology or products being developed or manufactured by strategic partners, including if any of them is acquired by another company, files for bankruptcy or experiences financial or other losses;

• we may lose the rights to, or ability to independently manufacture, certain technology or products being developed or manufactured by strategic partners, including if any of them is acquired by another company, files for bankruptcy or experiences financial or other losses;

• a bankruptcy event involving a strategic partner could result in structural changes to and/or termination of the strategic partnership;

• changes in tax or regulatory requirements may necessitate changes to the agreements governing our strategic partnerships.

We participate in a highly competitive industry that is subject to declining ASPs, volatile demand, rapid technological change and industry consolidation, as well as lengthy product qualifications, all of which could negatively impact our business.

We participate in a highly competitive industry that is subject to declining average selling prices (“ASPs”), volatile demand, rapid technological change and industry consolidation, as well as lengthy product qualifications, all of which could negatively impact our business.

Demand for our devices, software and solutions, which we refer to in this Item 1A as our “products”, depends in large part on the demand for systems manufactured by our customers and on storage upgrades to existing systems.

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Rapid technological changes often reduce the volume and profitability of sales of existing products and increase the risk of inventory obsolescence.

Finally, the data storage industry has experienced consolidation over the past several years,

which could enhance the resources and lower the cost structure of some competitors.

Finally, the data storage industry has experienced consolidation over the past several years, which could enhance the resources and lower the cost structure of some competitors.

These factors could result in a substantial decrease in our market share and harm our business.

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Further, our competitors may utilize pricing strategies, including offering products at prices at or below cost, that we may be unable to competitively match.

We may also have difficulty effectively competing with manufacturers benefiting from governmental investments.

We may also have difficulty effectively competing with manufacturers benefiting from governmental investments and may be subject to increased complexity and reduced efficiency in our supply chain as a result of governmental efforts to promote domestic semiconductor industries in various jurisdictions.

If we do not properly manage technology transitions and product development and introduction, our competitiveness and operating results may be negatively affected.

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• the vertical integration of some of our products, which may result in more capital expenditures and greater fixed costs than if we were not vertically integrated;

• our ability to cost effectively respond to customer requests for new products or features and software associated with our products;

• our ability to cost effectively respond to customer requests for new products or features (including requests for more efficient and efficiently-produced products with reduced environmental impacts) and software associated with our products;

• our ability to increase our software development capability;

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Acquisitions of, investment opportunities in, or other significant transactions with companies that are complementary to our business are a key part of our overall business strategy.

In order to pursue this part of our growth strategy successfully, we must continue to identify attractive acquisition or investment opportunities, successfully complete the transactions, some of which may be large and complex, and manage post-closing issues such as integration of the acquired company or employees.

In order to pursue this part of our growth strategy successfully, we must

continue to identify attractive acquisition or investment opportunities, successfully complete the transactions, some of which may be large and complex, and manage post-closing issues such as integration of the acquired company or employees and integration of processes and systems.

We may not be able to continue to identify or complete appealing acquisition or investment opportunities given the intense competition for these transactions.

Even if we identify and complete suitable corporate transactions, we may not be able to successfully address any integration challenges in a timely manner, or at all.

There may be difficulties with implementing new systems and processes or with integrating systems and processes of companies with complex operations, which could result in inconsistencies in standards, controls, procedures and policies and may increase the risk that our internal controls are found to be ineffective.

There have been and may continue to be difficulties with implementing new systems and processes or with integrating systems and processes of companies with complex operations, which can result in inconsistencies in standards, controls, procedures and policies and may increase the risk that our internal controls are found to be ineffective.

Failing to successfully integrate or realign our business to take advantage of efficiencies or reduce redundancies of an acquisition may result in not realizing all or any of the anticipated benefits of the acquisition.

In addition, failing to achieve the financial model projections for an acquisition or changes in technology development and related roadmaps following an acquisition may result in the incurrence of impairment charges and other expenses, both of which could negatively impact our results of operations or financial condition.

Acquisitions and investments may also result in the issuance of equity securities that may be dilutive to our shareholders as well as earn-out or other contingent consideration payments and the issuance of additional indebtedness that would put additional pressure on liquidity.

Acquisitions and investments may also result in the issuance of equity securities that may be dilutive to our stockholders as well as earn-out or other contingent consideration payments and the issuance of additional indebtedness that would put additional pressure on liquidity.

Furthermore, we may agree to provide continuing service obligations or enter into other agreements in order to obtain certain regulatory approvals of our corporate transactions, and failure to satisfy these additional obligations could result in our failing to obtain regulatory approvals or the imposition of additional obligations on us, any of which could negatively affect our business.

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As a result of these actions, we may experience a loss of continuity, loss of accumulated knowledge, disruptions to our operations and inefficiency during transitional periods.

These actions could also impact employee

These actions could also impact employee retention.

In addition, we cannot be sure that these actions will be as successful in reducing our overall expenses as we expect, that additional costs will not offset any such reductions or consolidations or that we do not forego future business opportunities as a result of these actions.

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We have experienced and may in the future experience events such as the loss of a key customer, prohibition or restriction of sales to a key customer by law, regulation or other government action, reductions in sales to or orders by a key customer, customer requirements to reduce our prices before we are able to reduce costs or the acquisition of a key customer by one of our competitors.

These events would likely harm our operating results and financial condition.

These events have impacted, and may in the future impact, our operating results and financial condition.

Further, government authorities may implement laws or regulations or take other actions that could result in significant changes to the business or operating models of our customers.

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FINANCIAL RISKS

Our substantial level of debt may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

We have a substantial amount of debt and may incur additional debt, including under our revolving credit facility, subject to customary conditions in our credit agreement.

Our high level of debt could have significant consequences, which include, but are not limited to, the following:

Our level of debt may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

We utilize debt financing in our capital structure and may incur additional debt, including under our revolving credit facility, subject to customary conditions in our loan agreement.

Our level of debt could have significant consequences, which include, but are not limited to, the following:

• limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes;

• requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes;

• imposing financial and other restrictive covenants on our operations, including limiting our ability to (i) declare or pay dividends or repurchase shares of our common stock;

(ii) purchase assets, make investments, complete acquisitions, consolidate or merge with or into, or sell all or substantially all of our assets to, another person;

(iii) dispose of assets;

(iv) incur liens;

and (v) enter into transactions with affiliates;

• imposing financial and other restrictive covenants on our operations, including limiting our ability to (i) consolidate or merge with or into, or sell all or substantially all of our assets to, another person;

(ii) enter into sale/leaseback transactions;

(iii) incur additional indebtedness and (iv) incur liens and

• making us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures or take advantage of new opportunities to grow our business.

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Our inability to service our debt obligations or refinance our debt could harm our business.

Further, if we are unable to repay, refinance or restructure our secured indebtedness, the holder of such debt could proceed against the collateral securing that indebtedness.

Refinancing our indebtedness may also require us to expense previous debt issuance costs or to incur new debt issuance costs.

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In addition, our ratings impact the cost and availability of future borrowings and, accordingly, our cost of capital.

Our ratings reflect the opinions of the ratings agencies as to our financial strength, operating performance and ability to meet our debt obligations.

Our ratings reflect the opinions of the ratings agencies as to our

financial strength, operating performance and ability to meet our debt obligations.

There can be no assurance that we will achieve a particular rating or maintain a particular rating in the future.

Our credit agreement uses the London Interbank Offered Rate (“LIBOR”) as a reference rate for our term loans and revolving credit facility, such that the applicable interest rate may, at our option, be calculated based on LIBOR.

In July 2017, the U.K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR beginning at the end of 2021, and LIBOR remains subject to ongoing national, international and other regulatory guidance and proposals for reform.

As a result, LIBOR may perform differently than in the past and may ultimately cease to be utilized or to exist, either during or after 2021.

Alternative benchmark rates may replace LIBOR, and we cannot predict how markets will respond to these proposed alternative benchmark rates or the effect of any changes to LIBOR or the discontinuation of LIBOR.

If LIBOR is no longer available or if our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could negatively impact our interest expense, results of operations and cash flows.

In addition, replacing LIBOR with an alternative reference rate for any of our debt could be a taxable event.

We also guarantee a significant amount of lease obligations of Flash Ventures owed to third parties.

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The leases are subject to customary covenants and cancellation events that relate to Flash Ventures and each of the guarantors.

If a cancellation event

were to occur, Flash Ventures would be required to negotiate a resolution with the other parties to the lease transactions to avoid cancellation and acceleration of the lease obligations.

If a cancellation event were to occur, Flash Ventures would be required to negotiate a resolution with the other parties to the lease transactions to avoid cancellation and acceleration of the lease obligations.

Such resolution could include, among other things, supplementary security to be supplied by us, increased interest rates or waiver fees.

If a resolution is not reached, we may be required to pay all of the outstanding lease obligations covered by our guarantees, which would significantly reduce our cash position and may force us to seek additional financing, which may not be available on terms acceptable to us, if at all.

We may from time to time seek to further refinance our substantial indebtedness by issuing additional shares of common stock or other securities that are convertible into common stock or grant the holder the right to purchase common stock, each of which may dilute our existing shareholders, reduce the value of our common stock, or both.

We may from time to time seek to further refinance our substantial indebtedness by issuing additional shares of common stock or other securities that are convertible into common stock or grant the holder the right to purchase common stock, each of which may dilute our existing stockholders, reduce the value of our common stock, or both.

Tax matters may materially affect our financial position and results of operations.

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and international business activities, many of these enacted and proposed changes to the taxation of our activities, including cash movements, could increase our worldwide effective tax rate and harm our business.

Beginning in our fiscal year 2023, the Tax Cuts and Jobs Act of 2017 eliminates the option to deduct research and development expenditures in the year incurred, requiring amortization in accordance with IRC Section 174.

If this requirement is not repealed or otherwise modified, it will materially increase our effective tax rate and reduce our operating cash flows.

Additionally, portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays that expire in whole or in part from time to time, or may be terminated if certain conditions are not met.

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and other jurisdictions is subject to review by applicable domestic and foreign tax authorities.

For example, as disclosed in [Part I, Item 1, Note 14, Income Tax Expense, of the Notes to Consolidated Financial Statements] included in this Annual Report on Form 10-K, we are under examination by the Internal Revenue Service for certain fiscal years and in connection with that examination, we received statutory notices of deficiency seeking certain adjustments to income and have filed petitions with the U.S.

For example, as disclosed in Part I, Item 1, Note 14, Income Tax Expense, of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K, we are under examination by the Internal Revenue Service for certain fiscal years.

Although we believe our tax positions are properly supported, the final timing and resolution of any tax examinations are subject to significant uncertainty and could result in litigation or the payment of significant amounts to the applicable tax authority in order to resolve examination of our tax positions, which could result in an increase or decrease of our current estimate of unrecognized tax benefits and may harm our business.

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dollar denominated, even when sold to customers that are located outside the U.S.

Therefore, as a substantial portion of our sales are from countries outside the U.S., fluctuations in currency exchanges rates, most notably the strengthening of the U.S.

Therefore, as a substantial portion of our sales are from countries outside the U.S., fluctuations in currency exchanges

rates, most notably the strengthening of the U.S.

dollar against other foreign currencies, contribute to variations in sales of products in impacted jurisdictions and could negatively impact demand and revenue growth.

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Thus, our decisions and hedging strategy with respect to currency risks may not be successful and may actually harm our operating results.

Further, the ability to enter into foreign exchange contracts with

financial institutions is based upon our available credit from such institutions and compliance with covenants and other restrictions.

Further, the ability to enter into foreign exchange contracts with financial institutions is based upon our available credit from such institutions and compliance with covenants and other restrictions.

Operating losses, third party downgrades of our credit rating or instability in the worldwide financial markets could impact our ability to effectively manage our foreign currency exchange rate risk.

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Our agreements with our OEM customers may not permit us to increase our product prices to alleviate this increased credit risk.

Additionally, as we attempt to expand our OEM and distribution channel sales into emerging economies such as Brazil, Russia, India and China, the customers with the most success in these regions may have relatively short operating histories, making it more difficult for us to accurately assess the associated credit risks.

Additionally, as we attempt to expand our OEM and distribution channel sales into emerging economies, the customers with the most success in these regions may have relatively short operating histories, making it more difficult for us to accurately assess the associated credit risks.

Our customers’ credit risk may also be exacerbated by an economic downturn or other adverse global or regional economic conditions.

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LEGAL AND COMPLIANCE RISKS

We are subject to laws, rules, and regulations relating to the collection, use, sharing, and security of third-party data including personal data, and our failure to comply with these laws, rules and regulations could subject us to proceedings by governmental entities or others and cause us to incur penalties, significant legal liability, or loss of customers, loss of revenue, and reputational harm.

We are subject to laws, rules, and regulations relating to the collection, use, sharing, and security of data, including personal data, and our failure to comply with these laws, rules and regulations could subject us to proceedings by governmental entities or others and cause us to incur penalties, significant legal liability, or loss of customers, loss of revenue, and reputational harm.

We are subject to laws, rules, and regulations relating to the collection, use, and security and privacy of third-party data including data that relates to or identifies an individual person.

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Compliance requirements and even our inadvertent failure to comply with applicable laws may cause us to incur substantial costs, subject us to proceedings by governmental entities or others, and cause us to incur penalties or other significant legal liability, or lead us to change our business practices.

We are subject to state, federal and international legal and regulatory requirements, such as environmental, labor, trade, health and safety regulations, customers’ standards of corporate citizenship, and industry and coalition standards, such as those established by the Responsible Business Alliance (“RBA”), and compliance with those requirements could cause an increase in our operating costs and failure to comply may harm our business.

We are subject to, and may become subject to additional, state, federal and international laws and regulations governing our environmental, labor, trade, health and safety practices.

We are subject to state, federal and international legal and regulatory requirements, such as environmental, labor, health and safety, trade and public-company reporting and disclosure regulations, customers’ standards of corporate citizenship, and industry and coalition standards, such as those established by the Responsible Business Alliance (“RBA”), and compliance with those regulations and requirements could cause an increase in our operating costs and failure to comply may harm our business.

We are subject to, and may become subject to additional, state, federal and international laws and regulations governing our environmental, labor, trade, health and safety practices and public-company reporting and disclosures requirements.

These laws and regulations, particularly those applicable to our international operations, are or may be complex, extensive and subject to change.

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Legislation has been, and may in the future be, enacted in locations where we manufacture or sell our products, which could impair our ability to conduct business in certain jurisdictions or with certain customers and harm our operating results.

In addition, climate change and financial reform legislation is a significant topic of discussion and has generated and may continue to generate federal, international or other regulatory responses in the near future, which could substantially increase the complexity of our public-company reporting and disclosure requirements and our compliance and operating costs.

If we or our suppliers, customers or partners fail to timely comply with applicable legislation, certain customers may refuse to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, or legal liability and reputational damage, which could harm our business.

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In addition, if we or our suppliers, customers or partners were found to be in violation of these laws or noncompliant with these initiatives or standards of conduct, we could be subject to governmental fines, liability to our customers and damage to our reputation and corporate brand, which could cause our financial condition and operating results to suffer.

We and certain of our officers are at times involved in litigation, investigations and governmental proceedings, which may be costly, may divert the efforts of our key personnel and could result in adverse court rulings, fines or penalties, which could materially harm our business.

W e and certain of our officers are at times involved in litigation, investigations and governmental proceedings, which may be costly, may divert the efforts of our key personnel and could result in adverse court rulings, fines or penalties, which could materially harm our business.

From time to time, we are involved in litigation, including antitrust and commercial matters, putative securities class action suits and other actions.

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A future obligation to indemnify our customers or suppliers may harm our business.

Our reliance on IP and other proprietary information subjects us to the risk that these key ingredients of our business could be copied by competitors.

Our reliance on IP and other proprietary information subjects us to the risk that these key components of our business could be copied by competitors.

Our success depends, in significant part, on the proprietary nature of our technology, including non-patentable IP such as our process technology.

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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.

What changed 10-K

Item 1A. Risk Factors