Kornit Digital(US:KRNT)2022-03-30 20:08Financial Position - The company has raised $339.8 million in net proceeds from its November 2021 follow-on public offering and had approximately $798.1 million in cash, cash equivalents, short-term deposits, and marketable securities as of December 31, 2021[89]. - The company may need additional capital in the future, which could lead to dilution of existing shareholders and restrict operations[89]. - The company may incur significant expenses related to product liability and warranty claims, which could adversely affect its financial condition[88]. - The company may face increased credit loss reserves as customers experience economic hardship, impacting financial condition and liquidity[100]. - The company is subject to income taxes in multiple jurisdictions and may face additional tax liabilities as a result of audits[92]. International Operations - The company plans to continue expanding its international operations, which includes increasing sales headcount and establishing new distributor relationships in markets without current sales presence[83]. - The company is exposed to risks from currency exchange rate fluctuations, particularly with a significant portion of operating expenses incurred in NIS[1]. - The company has experienced changes in senior personnel, including the CFO in December 2020 and the President of KornitX in November 2021, which could affect its performance[80]. Acquisitions and Growth - The company has acquired Custom Gateway and Voxel8 in 2020 and 2021, respectively, and announced an agreement to acquire Tesoma, expected to close in April 2022[91]. - KornitX has approximately 250 customers, including leading brands and retailers, following the acquisition of Custom Gateway[94]. - The company has experienced strong year-over-year growth in revenues during 2021 as economies began to open up[99]. Legal and Compliance Risks - The company is required to comply with the Sarbanes-Oxley Act, which imposes significant legal and accounting expenses[122]. - The company may face claims for remuneration related to service inventions, despite employees waiving their rights to special remuneration beyond regular salary[111]. - The company may face adverse U.S. federal income tax consequences if any of its non-U.S. subsidiaries are classified as a "controlled foreign corporation" (CFC) under U.S. tax law[127]. - Changes to CFC constructive ownership rules could impact the company's CFC status and result in adverse tax consequences for 10% U.S. shareholders, including current taxation of Subpart F income[128]. Taxation and Grants - The company is eligible for tax benefits under Israeli law, but these benefits may be reduced or terminated, increasing costs and taxes[134]. - The company received grants from the Israeli Innovation Authority to reimburse up to 55% of research and development expenses, totaling approximately $0.61 million and $0.65 million in 2020 and 2021, respectively[135]. - The statutory corporate tax rate for Israeli companies is 23% from January 1, 2018, onward, which could impact the company's tax liabilities[134]. Operational Challenges - The COVID-19 pandemic has led to longer sales cycles due to the inability to conduct in-person meetings and attend industry events[99]. - The company has faced challenges in employee productivity and sales efforts due to remote work arrangements during the pandemic[100]. - The full impact of COVID-19 on the company's business and future performance remains difficult to predict, increasing the risk of incorrect market guidance[102]. Intellectual Property - As of December 31, 2021, the company owned 37 issued patents in the United States and 43 provisional or pending U.S. patent applications[104]. - The company has registered trademarks in key markets, including "Kornit" and "NeoPigment," but faces risks of unauthorized use[106]. Shareholder Matters - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future, intending to retain all available funds for business development[114]. - Future sales of a substantial number of ordinary shares could negatively affect the market price of the company's shares[119]. - The company is classified as a foreign private issuer, which allows it to follow certain home country corporate governance practices, potentially providing less protection to investors[115]. Employee and Market Risks - The company may face challenges in attracting and retaining qualified personnel due to competition and non-competition agreements in certain jurisdictions[81]. - The company has 499 employees based in Israel, some of whom may be called for military service, potentially disrupting operations[131]. - Political, economic, and military instability in Israel could adversely affect the company's business operations and results[130].