1318310--3/14/2007--ev3

related topics

{property, intellectual, protect}

{product, liability, claim}

{product, market, service}

{customer, product, revenue}

{stock, price, operating}

{product, candidate, development}

{operation, international, foreign}

{regulation, government, change}

{control, financial, internal}

{cost, regulation, environmental}

{tax, income, asset}

{acquisition, growth, future}

{stock, price, share}

{provision, law, control}

{financial, litigation, operation}

{personnel, key, retain}

{debt, indebtedness, cash}

{system, service, information}

{loss, insurance, financial}

Risks Related to Our Business and Industry. We have a history of operating losses and negative cash flow. Some of our products are emerging technologies or have been recently introduced into the market and may not achieve market acceptance once they are introduced into their markets, which could adversely affect our business. Delays in product introductions could adversely affect our net sales. If third parties claim that we infringe upon their intellectual property rights, we may incur liabilities and costs and may have to redesign or discontinue selling the affected product. We are currently a party to a number of intellectual property claims, which are costly to defend and the resolution of which could have a material adverse effect on our business and results of operations. Our business strategy relies on assumptions about the market for our products, which, if incorrect, would adversely affect our business prospects and profitability. If our patents and other intellectual property rights do not adequately protect our products, we may lose market share to our competitors, which would harm our business. We may require additional capital in the future, which may not be available or may be available only on unfavorable terms. In addition, any equity financings may be dilutive to our stockholders. We manufacture our products at single locations. Any disruption in these manufacturing facilities, any patent infringement claims with respect to our manufacturing process or otherwise any inability to manufacture a sufficient number of our products to meet demand could adversely affect our business and results of operations. If we lose the services of our chief executive officer or other key personnel, we may not be able to manage our operations and meet our strategic objectives. Our dependence on key suppliers puts us at risk of interruptions in the availability of our products, which could reduce our net sales and adversely affect our results of operations. In addition, increases in prices for raw materials and components used in our products could adversely affect our results of operations. Significant and unexpected claims under our EverFlex self-expanding stent worldwide fracture-free guarantee program in excess of our reserves could significantly harm our business, operating results and financial condition. Our inability to successfully grow through acquisitions, our failure to integrate any acquired businesses successfully into our existing operations or our discovery of previously undisclosed liabilities could negatively affect our business and results of operations. The demand for our products, the prices which customers and patients are willing to pay for our products and the number of procedures performed using our products depend upon the ability of our customers and patients to obtain sufficient third party reimbursement for their purchases of our products. Consolidation in the healthcare industry could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, financial condition or results of operations. Our products and product development and marketing activities are subject to extensive regulation with which we may not be able to obtain required regulatory approvals for our products in a cost-effective manner or at all, which could adversely affect our business and results of operations. If we or others identify side effects after any of our products are on the market, we may be required to withdraw our products from the market, which would hinder or preclude our ability to generate revenues. Our manufacturing facilities are subject to extensive governmental regulation with which compliance is costly and which exposes us to penalties for non-compliance. Our operations are subject to environmental, health and safety, and other laws and regulations, with which compliance is costly and which exposes us to penalties for non-compliance. A number of our products are in clinical trials. If these trials are unsuccessful, or if the FDA or other regulatory agencies do not accept the results of such trials, these products may not successfully come to market and our business prospects may suffer. The risks inherent in operating internationally and the risks of selling and shipping our products and of purchasing our components and products internationally may adversely impact our net sales, results of operations and financial condition. Fluctuations in foreign currency exchange rates could result in declines in our reported net sales and earnings. We may become obligated to make large milestone payments that are not currently reflected in our financial statements in certain circumstances, which would negatively impact our cash flows from operations. We rely on our independent sales distributors and sales associates to market and sell our products outside of the United States, Canada and Europe. If physicians do not recommend and endorse our products or if our working relationships with physicians deteriorate, our products may not be accepted in the market place, which would adversely affect our sales. If we fail to comply with the U.S. Federal Anti-Kickback Statute and similar state laws, we could be subject to criminal and civil penalties and exclusion from the Medicare and Medicaid and other federal health care programs, which could have a material adverse effect on our business and results of operations. If there is a disruption in the supply of the products of Invatec Technology Center GmbH that we distribute or if our relationship with Invatec is impaired, our net sales and results of operations would be adversely impacted. Our family of self-expanding stent products generates a large portion of our net sales. Our net sales and business prospects would be adversely affected if sales of this product were to decline. We are exposed to product liability claims that could have an adverse effect on our business and results of operations. Our net sales could decline significantly if drug-eluting stents become a dominant therapy in the peripheral vascular stent market and we are not able to develop or acquire a drug-eluting stent to market and sell. If we are unable to continue to develop and market new products and technologies that are accepted by the marketplace, we may experience a decrease in demand for our products or our products could become obsolete, and our business would suffer. The marketing of our products requires a significant amount of time and expense and we may not have the resources to successfully market our products, which would adversely affect our business and results of operations. We face competition from other companies, many of which have substantially greater resources than we do and may be able to more effectively develop, market and sell their products than we can, which could adversely impact our business, net sales and results of operations. Consolidation in the medical technology industry would exacerbate these risks. We rely on our management information systems for inventory management, distribution and other functions and to maintain our research and development and clinical data. If our information systems fail to adequately perform these functions or if we experience an interruption in their operation, our business and results of operations could be adversely affected. The restrictive covenants in our loan agreement could limit our ability to conduct our business and respond to changing economic and business conditions and may place us at a competitive disadvantage relative to other companies that are subject to fewer restrictions. If we become profitable, we cannot assure you that our net operating losses will be available to reduce our tax liability. A substantial portion of our assets consists of goodwill and an impairment in the value of our goodwill would have the effect of decreasing our earnings or increasing our losses. Our quarterly operating and financial results may fluctuate in future periods. Risks Related to our Common Stock One of our principal stockholders and its affiliates are able to influence matters requiring stockholder approval and could discourage the purchase of our outstanding shares at a premium. Certain of our principal stockholders may have conflicts of interests with our other stockholders or our company in the future. We currently are a controlled company within the meaning of the NASDAQ Global Select Market listing requirements and, as a result, are exempt from certain corporate governance requirements. We previously identified a material weakness in the internal controls over our ability to produce financial statements free from material misstatements. Our failure to maintain effective internal controls could have a material adverse effect on our business, operating results and financial condition and cause our investors, shareholders, lenders, suppliers and others to lose confidence in the accuracy or completeness of our financial reports. Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company.

Full 10-K form ▸

1318310--3/14/2007--ev3_Inc.