Technology and Innovation - SCHMID is currently in the process of patenting the technology for embedded traces (ET), which is expected to drive significant sales growth in the high-end market, particularly in North America, with substantial sales anticipated in 2026[66] - The company is investing in new product development to expand beyond traditional offerings, but market acceptance of new products is uncertain and could impact revenues[70] - The company relies on continuous development of new, improved, and cost-effective technologies and products to maintain satisfactory margins amid market commoditization[76] - The company is currently patenting technology for embedded traces, which is a next-level technology for high-end PCBs and substrates, but the official patent process is not yet completed[183] Market and Economic Conditions - The electronics industry is highly competitive, with significant pressure from large Chinese manufacturers and the need for continuous innovation to maintain market share[59][60] - Economic, financial, and geopolitical conditions could lead to business disruptions, significantly impacting future revenue and financial health[56] - Revenue and profitability are subject to fluctuations due to economic conditions, impacting future operating results[81] - The company generated a significant percentage of its revenue from the USA, China, and Europe, with potential adverse effects from economic downturns in these regions[85] - The company is sensitive to general trends in key markets, with demand for its products impacted by macroeconomic conditions and consumer confidence[87] - Economic instability, including inflation and geopolitical issues, may lead to decreased consumer confidence and increased costs, adversely affecting the company's operations and financial objectives[103] Financial Performance and Risks - SCHMID's profitability is at risk if cost management strategies fail or if competitors develop a more advantageous cost structure[74] - The company faces risks related to supply chain disruptions, material cost increases, and geopolitical tensions, which could adversely affect operations and financial condition[65] - Any disruptions in the supply chain or significant increases in material costs could adversely affect the company's operations and financial results[84] - The company’s performance is closely tied to the financial health of its customers, which may lead to reduced purchases during economic uncertainties[86] - The company may face significant revenue decreases if key customers fail to grow their own sales, potentially leading to a material adverse effect on its business and financial condition[100] - Decreases in average selling prices of products could adversely affect profitability, necessitating improvements in production efficiency or shifts to higher margin products to maintain financial health[101] - The company is at risk of recording impairment charges on accounts receivable if it cannot collect outstanding balances, which could materially impact its financial condition[102] - The company may need to seek additional financing to support ongoing operations and product development, which could restrict its ability to introduce new products and increase vulnerability to economic downturns[127] - The company’s cash and cash equivalents, along with expected operational cash flow, are believed to be adequate for ongoing requirements, but additional financing may be necessary to compete effectively[126] Regulatory and Compliance Issues - The company is subject to substantial regulation, and any unfavorable changes could harm business operations and results[58] - The company operates in various jurisdictions, exposing it to risks from differing legal and regulatory environments, which could negatively impact its global operations[106] - The company is subject to extensive regulations, and non-compliance could result in significant fines, penalties, and reputational harm[139] - Compliance with GDPR and CCPA imposes additional obligations on the company regarding personal data handling, which can be costly and may expose the company to legal and reputational risks[146] - The company faces challenges in managing an internationally dispersed business, including compliance with varying laws and regulations, which could adversely affect its financial performance[110] Corporate Governance and Shareholder Issues - Anette Schmid and Christian Schmid jointly control 56.77% of the outstanding Ordinary Shares, which may limit shareholder protections and influence company decisions[197] - As a foreign private issuer, SCHMID is exempt from certain U.S. corporate governance requirements, which may affect investor confidence and share attractiveness[206] - The company is classified as an "emerging growth company" and intends to utilize exemptions from various reporting requirements, potentially impacting market perception[204] - The company acknowledges the importance of good corporate governance but does not comply with all provisions of the Dutch Corporate Governance Code due to conflicts with NASDAQ rules[210] - Shareholders may experience substantial dilution upon future issuances of shares due to restrictions on exercising pre-emptive rights[211] Internal Controls and Reporting - SCHMID identified two material weaknesses in internal control over financial reporting as of December 31, 2023, which persisted into 2024 despite remediation efforts[192] - The company failed to finalize its financial reporting for 2024 or publish its annual report on Form 20-F in a timely manner due to accounting and liquidity issues, receiving delinquency and delisting notices from NASDAQ[200] - The inability to maintain effective internal controls could adversely affect investor confidence and the company's operating results[190] - The company’s operational and financial systems may require improvements to support growth goals, with potential adverse effects on billing and reporting if not addressed[189] Legal and Litigation Risks - The company operates in a litigious environment, which may lead to legal actions that could materially affect its financial condition and results of operations[140] - The company may be subject to claims regarding the infringement of third-party intellectual property, which could lead to costly litigation and loss of valuable rights[179] - The company may need to defend against patent or trademark infringement claims, which could incur substantial costs and distract from core operations[186] Financing and Debt Management - The company has entered into an investment agreement to sell senior convertible notes totaling $30 million, with $15 million funded on January 21, 2026, and the second tranche contingent on a registration statement being effective by June 30, 2026[128] - The company entered into a subscription agreement with XJ Harbour to issue 12,540,539 shares at $2.15 per share to offset liabilities of approximately $26.96 million[238] - A secured term loan facility of up to €10 million was signed with Black Forest Special Situations I, with the first tranche of €2.5 million drawn down in December 2025[241] - The company issued $30 million in senior convertible notes due 2028, with a 7% annual interest rate, to be funded in two tranches[245] Operational Challenges - The company faces challenges in adapting and expanding its research and development activities, which may hinder its ability to respond to market trends and technological changes[77] - The company relies on a limited number of suppliers for raw materials, and any financial distress among these suppliers could disrupt production and increase costs[159] - The company’s information technology systems are critical for operations, and failures could lead to transaction errors and loss of sales[164] - Cybersecurity risks are increasing, necessitating additional resources to mitigate new threats and enhance information security capabilities[167] Tax and Financial Regulations - The company has incurred significant tax losses, which may be limited in usability under German tax laws following shareholder changes[222] - Future changes to tax laws, including the implementation of a Global Minimum Tax regime in Germany, could adversely affect the company's tax profile and financial results[223] - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes in the foreseeable future, but this status could change based on future operations[226]
SCHMID Group N.V.(SHMD) - 2024 Q4 - Annual Report