AORT

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How AORT rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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New in FY2025

Our international operations subject us to a number of risks, which may vary significantly from the risks we face in our US operations, including: • Greater difficulties and costs associated with staffing at all levels, establishing and maintaining internal controls, managing foreign operations and distributor relationships, and selling directly to customers; • Broader exposure to corruption and expanded compliance obligations, including under the Foreign Corrupt Practices Act, the UK Bribery Law, local anti-corruption laws, Office of Foreign Asset Control administered sanction programs, the European Union’s General Data Protection Regulation and Corporate Sustainability Reporting Directive, and other emerging corruption, sustainability, and data privacy and cybersecurity regulations; • Overlapping, ambiguous, and potentially conflicting, or unexpected changes in, international legal and regulatory requirements or reimbursement policies and programs; • Longer and more expensive collection cycles in certain countries, particularly those in which our primary customers are government-funded hospitals; • Changes in currency exchange rates, particularly fluctuations in the Euro as compared to the US Dollar and other inflationary pressures, given sensitivity to exchange rates that we experience from our product revenue streams and account balances; • Potential exposure to adverse financial impact and negative erosion of our operating profit margin over time due to increasing inflationary pressures, including impact felt through our supply chain, and this exposure may be increased through our limited ability to raise prices and through global expansion where business occurs with, or pricing is set directly by, government entities, or we are party to long term pricing agreements with governments or local distributors, impacting our ability to pass on rising costs; • Potential adverse tax consequences of overlapping tax structures or potential changes in domestic and international tax policy, laws, and treaties; and • Potential adverse consequences from unexpected global regulatory or tariff and trade developments.
Ultimately, following the conclusion of judicial challenges, in August 2025, the Italian parliament agreed to a 75% reduction in the amounts due for the 2015–2018 period.
The Italian government is currently assessing the amounts due for the 2019–2024 period, and while there are ongoing challenges and negotiations between industry and the government regarding these amounts, our potential repayment exposure for the entire 2019–2025 period is estimated at approximately $2.3 million, which is reflected in accrued expenses in the Consolidated Balance Sheets as of December 31, 2025.
To date, sanctions and other disruptions in the Eastern European region have not materially impacted our business or ability to supply products to Russia, Belarus, Ukraine, and the region generally; however, continuation or escalation of the wars in Ukraine or instability in the Middle East, and in particular Iran, or increased export controls or additional sanctions imposed on or by impacted countries, their allies, or related entities could adversely affect our financial performance.
We have not experienced any material disruption of supply from Endospan; however, it is difficult to predict the ultimate course of these conflicts and we may face business operations and supply chain disruptions as a result, including disruptions related to shortages of materials and finished goods, higher costs of materials and freight, freight delays, increased energy costs or energy shortages, travel disruptions, currency fluctuation, and disruptions to banking systems or capital markets.
We face intense competition in virtually all of our product lines, from, among others, Baxter, Ethicon (a Johnson & Johnson Company), Medtronic, Abbott Laboratories, Edwards Lifesciences, Becton, Dickinson and Company, Integra Life Sciences, LifeNet Health, Corcym, Anteris Technologies, Elutia (formerly Aziyo Biologics), Cook Medical, Gore & Associates, Terumo, LeMaitre Vascular, Maquet, Pfizer, BioCer Entwicklungs-GmbH, and Grena Limited.
Factors beyond our control such as supply, regulatory changes, negative publicity concerning methods of tissue recovery or disease transmission from donated tissue, or public opinion of the donor process as well as our own reputation in the industry can negatively impact the supply of tissue; • Timely receive and process tissues; • Capitalize on our clinical advantages that we rely on as competitive strengths; or • Mitigate sufficiently the risk that tissue can become contaminated during processing; that processed tissue cannot be end-sterilized and hence carries an inherent risk of infection or disease transmission or that our quality controls can eliminate that risk.
In May 2025, the “final” Guidances were withdrawn and re-issued as drafts, with a public comment period that ended in July 2025.
We and a number of other parties filed comments, the vast majority of which sought substantial modifications of the Guidances.
We believe these Guidances, if implemented as written, could significantly reduce the supply of safe implantable human tissue without simultaneously reducing the risk of Mtb transmission sufficient to offset the harm to patients caused by reduced safe-tissue supply.
Although some industry advocates and health care practitioners have expressed strong opposition to these new Guidances, and a number of them submitted comments regarding the Guidances during the recent comment period, if and how they may ultimately be implemented and enforced, and how they may actually impact the availability of our donated tissue, remains to be seen and is difficult to predict.
We also may not be able to capitalize on new BioGlue approvals, including for new indications, in non-US countries; BioGlue contains a bovine blood protein.
Animal-based products are subject to increased scrutiny from the public and regulators, who may seek to impose additional regulations, regulatory hurdles or product bans in certain countries on such products; and • BioGlue is a mature product and other companies may use the inventions disclosed in expired BioGlue patents to develop and make competing products.
Although we received approval to market BioGlue in China during the third quarter of 2024, we did not recognize any revenue until the second quarter of 2025.
The delivery systems we manufacture are comprised of several different raw materials and subassemblies, some of which are sourced from external suppliers, including single suppliers.
Although the Endospan Option and our loan to Endospan were partially written back up to fair value in the third quarter of 2024 and subsequent quarters, similar impairments, and other potential risks like those mentioned above, may adversely affect the market value of our common stock.
Our ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of these and other transactions depends on a number of factors including our ability to: • Leverage our global infrastructure to sell and cross-market the acquired products; • Drive adoption of the NEXUS family of products and AMDS in the US, European, and other markets, including our ability to manage the substantial product training, implant support, and proctoring requirements for NEXUS procedures; • Bring acquired products to the US market, including our acquired aortic stent grafts; • Harness the aortic stent graft product pipeline and our research and development capabilities; • Obtain regulatory approvals in relevant markets, including our ability to timely obtain or maintain CE Mark product certifications for pipeline and current products; • Execute on development and clinical trial timelines for acquired products; • Manage global inventories, including our ability to manage inventories for product lines with large numbers of product configurations and manage manufacturing and demand cycles to avoid excess inventory obsolescence due to shelf life expiration, particularly for processed tissues and aortic stent grafts; • Carry, service, and manage significant debt and repayment obligations; and • Manage the unforeseen risks and uncertainties related to these transactions, including any related to intellectual property rights.
Additionally, our ability to realize the anticipated business opportunities, growth prospects, synergies, and other benefits of our 2019 Endospan transaction depends on a number of additional factors including Endospan’s ability to: (a) comply with the Endospan Loan and other debt obligations, and avoid an event of default; (b) successfully commercialize the NEXUS family of products, raise capital, and drive adoption in markets in and outside of Europe; (c) meet demand for the NEXUS family of products; (d) meet quality and regulatory requirements for the NEXUS family of products; (e) manage any intellectual property risks and uncertainties associated with the NEXUS family of products; (f) obtain FDA approval of the NEXUS family of products; (g) remain as a going concern; and (h) develop the NEXUS family of products, and other product improvements to meet competitive threats and physician demand.
For example, we experienced a previously-disclosed cybersecurity incident in the fourth quarter of 2024 that temporarily disrupted our business operations, including our ERP systems, and had an impact on revenue, manufacturing, order processing, shipping, and other corporate operations.
Our claims for reimbursement with our insurer remain outstanding and we continue to incur expenses in connection with improving our global infrastructure and cybersecurity posture.
Additionally, we remain subject to other risks and uncertainties as a result of the incident, including those related to scrap, inventory levels, and timely shipping releases, as well as the potential to incur additional expenses.
Our business could be impacted by environmental, workforce, and governance-related matters.
Certain governments, investors, customers, employees and other stakeholders are continuing to focus on areas of corporate responsibility, including matters related to environmental impacts, workforce practices, and governance and risk oversight.
In some cases, stakeholders are looking to companies that demonstrate strong performance in these areas as being better positioned for long-term resilience.
However, there is an increasing number of state-level and federal legislation, executive orders, and other backlash against such matters that may conflict with other regulatory requirements or our various stakeholders’ expectations.
Keeping up with and meeting these sometimes contradictory and evolving expectations can be difficult and expensive, may disrupt our business, and may divert the attention of our management.
We may be unable to make the investments related to environmental, workforce, or governance initiatives at the same level as our competitors with greater financial resources, or we may be challenged by governmental authorities if we choose to make such investments.
As a result, we face increased risks related to: • Our Custom Devices: Stricter requirements on manufacturers of custom-made devices may delay, impede, or otherwise impact the availability of our E-xtra Design Engineering services and custom-made products; • Our Existing CE Marks: In the past, the extended timeline for the MDR transition has resulted in certain MDD-based CE Marks expiring prior to the completion of the transition; however, we were able to successfully renew such CE Marks under the MDR; • Our Notified Bodies: The combination of the increased regulatory framework under the MDR and the UK’s exit from the European Union have both had an impact on notified bodies.
We have been able to transition our LRQA-issued certification for BioGlue and PhotoFix to a new notified body, DEKRA; and • New CE Marks: The increased workload on notified bodies and other uncertainties around the transition to the MDR will likely cause delays in the approval for any new products that we may wish to bring to the EU market.
Finally, although we have received regulatory approval to market BioGlue in China, it was only after a significantly longer and more expensive regulatory approval process than likely could reasonably have been anticipated when the program began.
Pre- and post-market clinical studies may also be delayed or halted due to many factors beyond our control, including, for example, reductions in FDA staff that may affect the agency’s response time.
PFAS have been subject to increasing global regulations, and in some cases bans, by the Environmental Protection Agency and numerous states.
The policies of the current presidential administration in the US continues to bring several potential risks that could impact our business operations and financial performance.
Changes in policy regarding international trade, including import and export regulation and international trade agreements, along with resulting volatility, could negatively impact our business.
In addition, political tensions between the US and certain other countries have escalated in recent years.
Changes in tax policy, including changes to corporate tax rates or changes in tax incentives that we currently benefit from, could also negatively impact our results of operations and financial condition.
The new administration has taken steps that have impacted federal spending and the federal workforce.
Regulatory focus, particularly with respect to sustainability matters, may change, reducing or changing regulations relating to ethylene oxide (EtO), PFAS, or other sustainability initiatives, potentially requiring us to make additional expenditures to comply with new regulations, or abandon programs we have already invested in.
Many US healthcare laws, including the Affordable Care Act and the Federal Food, Drug, and Cosmetics Act, are complex, subject to change, and dependent on interpretation and enforcement decisions from government agencies with broad discretion.
Changes in regulations, federal funding or staffing at administrative agencies like the FDA may impact, for example, the speed at which we are able to obtain regulatory reviews and approvals.

and 11 more.

Gone since FY2024

Our international operations subject us to a number of risks, which may vary significantly from the risks we face in our US operations, including: • Greater difficulties and costs associated with staffing at all levels, establishing and maintaining internal controls, managing foreign operations and distributor relationships, and selling directly to customers; • Broader exposure to corruption and expanded compliance obligations, including under the Foreign Corrupt Practices Act, the UK Bribery Law, local anti-corruption laws, Office of Foreign Asset Control administered sanction programs, the European Union’s General Data Protection Regulation and Corporate Sustainability Reporting Directive, and other emerging corruption, sustainability, and data privacy and cybersecurity regulations; • Overlapping, ambiguous, and potentially conflicting, or unexpected changes in, international legal and regulatory requirements or reimbursement policies and programs; • Longer and more expensive collection cycles in certain countries, particularly those in which our primary customers are government-funded hospitals; • Changes in currency exchange rates, particularly fluctuations in the Euro as compared to the US Dollar and other inflationary pressures, given sensitivity to exchange rates that we experience from our product revenue streams and account balances; • Potential exposure to adverse financial impact and negative erosion of our operating profit margin over time due to increasing inflationary pressures, including impact felt through our supply chain, and this exposure may be increased through our limited ability to raise prices and through global expansion where business occurs with, or pricing is set directly by, government entities, or we are party to long term pricing agreements with governments or local distributors, impacting our ability to pass on rising costs; • Potential adverse tax consequences of overlapping tax structures or potential changes in domestic and international tax policy, laws, and treaties; and • Potential adverse consequences from unexpected global regulatory and trade developments.
Ultimately, we were subject to an immaterial payment obligation following the conclusion of judicial challenges and negotiations between us, industry, US government representatives, and the Italian government.
To date, sanctions and other disruptions in the Eastern European region have not materially impacted our business or ability to supply products to Russia, Belarus, Ukraine, and the region generally; however, continuation or escalation of the wars in Ukraine or instability in the Middle East, or increased export controls or additional sanctions imposed on or by impacted countries, their allies, or related entities could adversely affect our financial performance.
Although we have not experienced any material disruption of supply from Endospan, it is difficult to predict the ultimate course of these conflicts and we may face business operations and supply chain disruptions as a result, including disruptions related to shortages of materials and finished goods, higher costs of materials and freight, freight delays, increased energy costs or energy shortages, travel disruptions, currency fluctuation, and disruptions to banking systems or capital markets.
We face intense competition in virtually all of our product lines.
A significant percentage of market revenues from competitive products are generated by Baxter, Ethicon (a Johnson & Johnson Company), Medtronic, Abbott Laboratories, Edwards Lifesciences, C.R.
Bard (a subsidiary of Becton, Dickinson and Company), Integra Life Sciences, LifeNet, Corcym, Anteris Technologies, Elutia (formerly Aziyo Biologics), Cook Medical, Gore & Associates, Terumo, LeMaitre Vascular, Maquet, Pfizer, and BioCer Entwicklungs-GmbH.
Factors beyond our control such as supply, regulatory changes, negative publicity concerning methods of tissue recovery or disease transmission from donated tissue, or public opinion of the donor process as well as our own reputation in the industry can negatively impact the supply of tissue; • Capitalize on our clinical advantages that we rely on as competitive strengths; or • Mitigate sufficiently the risk that tissue can become contaminated during processing; that processed tissue cannot be end-sterilized and hence carries an inherent risk of infection or disease transmission or that our quality controls can eliminate that risk.
We believe these Guidances, if implemented as written, could significantly reduce the supply of safe implantable human tissue without simultaneously reducing the risk of Mtb transmission.
Although some industry advocates and health care practitioners have expressed strong opposition to these new Guidances, and their implementation has been paused until at least May 2025, if and how they may ultimately be implemented and enforced, and how they may actually impact the availability of our donated tissue, remains to be seen and is difficult to predict.
We also may not be able to capitalize on new BioGlue approvals, including for new indications, in non-US countries; and • BioGlue contains a bovine blood protein.
Animal-based products are subject to increased scrutiny from the public and regulators, who may seek to impose additional regulations, regulatory hurdles or product bans in certain countries on such products; BioGlue is a mature product and other companies may use the inventions disclosed in expired BioGlue patents to develop and make competing products.
Although we received approval to market BioGlue in China during the third quarter of 2024, we do not expect any revenue until at least the second half of 2025.
The delivery systems we manufacture are comprised of several different raw materials and subassemblies.
Although the Endospan Option and our loan to Endospan were partially written back up to fair value in the third quarter of 2024, similar impairments, and other potential risks like those mentioned above, may adversely affect the market value of our common stock.
Our ability to realize the anticipated business opportunities, growth prospects, cost savings, synergies, and other benefits of these and other transactions depends on a number of factors including our ability to: • Leverage our global infrastructure to sell and cross-market the acquired products; • Drive adoption of the NEXUS family of products and AMDS in the European and other markets, including our ability to manage the substantial product training, implant support, and proctoring requirements for NEXUS procedures; • Bring acquired products to the US market, including our acquired aortic stent grafts; • Harness the aortic stent graft product pipeline and our research and development capabilities; • Obtain regulatory approvals in relevant markets, including our ability to timely obtain or maintain CE Mark product certifications for pipeline and current products; • Execute on development and clinical trial timelines for acquired products; • Manage global inventories, including our ability to manage inventories for product lines with large numbers of product configurations and manage manufacturing and demand cycles to avoid excess inventory obsolescence due to shelf life expiration, particularly for processed tissues and aortic stent grafts; • Carry, service, and manage significant debt and repayment obligations; and • Manage the unforeseen risks and uncertainties related to these transactions, including any related to intellectual property rights.
Additionally, our ability to realize the anticipated business opportunities, growth prospects, synergies, and other benefits of our 2019 Endospan transaction depends on a number of additional factors including Endospan’s ability to: (a) comply with the Endospan Loan and other debt obligations, and avoid an event of default; (b) successfully commercialize the NEXUS family of products, raise capital and drive adoption in markets in and outside of Europe; (c) meet demand for the NEXUS family of products; (d) meet quality and regulatory requirements for the NEXUS family of products; (e) manage any intellectual property risks and uncertainties associated with the NEXUS family of products; (f) obtain FDA approval of the NEXUS family of products; (g) remain a going concern; and (h) develop the NEXUS family of products, and other product improvements to meet competitive threats and physician demand.
For example, we experienced a previously-disclosed cyber-attack in the fourth quarter of 2024 that temporarily disrupted our business operations, including our ERP systems, and had an impact on revenue, manufacturing, order processing, shipping, and other corporate operations (the “Cybersecurity Incident”).
Our claims for reimbursement with our insurer remain outstanding and we continue to incur expenses in connection with improving our global infrastructure and cybersecurity posture, additionally, we remain subject to other risks and uncertainties as a result of the incident, including those related to scrap, inventory levels, and timely shipping releases, as well as the potential to incur additional expenses.
Our business could be impacted by environmental, social, and governance matters.
Governments, investors, customers, employees and other stakeholders are continuing to focus on areas of corporate responsibility, and particularly matters related to environmental, social, and governance (“ESG”) factors.
Stakeholders are looking to companies that demonstrate strong ESG and sustainability practices as an indicator of long-term resilience.
Keeping up with and meeting these sometimes contradictory and evolving expectations can be difficult and expensive, and may disrupt our business and divert the attention of our management.
We may be unable to make the investments in ESG programs that our competitors with greater financial resources are able to make or we may be challenged by governmental authorities if we choose to make such investments.
As a result, we face increased risks related to: • Our Custom Devices: Stricter requirements on manufacturers of custom-made devices may delay, impede, or otherwise impact the availability of our E-xtra Design Engineering services and custom-made products; • Our Existing CE Marks: The extended timeline for the MDR transition has resulted in certain MDD-based CE Marks expiring prior to the completion of the transition.
Our MDD-based CE Mark for BioGlue expired in December 2021, and for Chord-X in September 2022.
We have since been able to successfully renew the CE Mark for BioGlue and Chord-X under the MDR; • Our Notified Bodies: The combination of the increased regulatory framework under the MDR and the UK’s exit from the European Union have both had an impact on notified bodies.
Although we were able to transition our LRQA-issued certification for BioGlue to a new notified body, DEKRA, we are still in the process of transitioning the LRQA-issue certification for PhotoFix; and • New CE Marks: The increased workload on notified bodies and other uncertainties around the transition to the MDR will likely cause delays in the approval for any new products that we may wish to bring to the EU market.
Finally, although we recently received regulatory approval to market BioGlue in China, it was only after a significantly longer and more expensive regulatory approval process than likely could reasonably have been anticipated when the program began.
Pre- and post-market clinical studies may also be delayed or halted due to many factors beyond our control.
PFAS have been subject to increasing regulations, and in some cases bans, by the Environmental Protection Agency and numerous states.
The transition to a new presidential administration in the US brings several potential risks that could impact our business operations and financial performance.
Changes in policy regarding international trade, including import and export regulation and international trade agreements, could negatively impact our business.
In addition, political tensions between the US and certain other countries have escalated in recent years between and among these countries.
The new administration may introduce regulatory changes that could impact the speed to market and our ability to obtain timely reviews for our products.
Changes in tax policy, including changes to corporate tax rates or changes in tax incentives that we currently benefit from, could negatively impact our results of operations and financial condition.
The new administration has already taken numerous steps impacting federal spending and the federal workforce.
Regulatory focus, particularly with respect to sustainability matters, may change, reducing or changing regulations relating to ethylene oxide (EtO), per- and polyfluoroalkyl substances (PFAs), or other sustainability initiatives, potentially requiring us to make additional expenditures to comply with new regulations, or abandon programs we have already invested in.
Many US healthcare laws, including the Affordable Care Act and the Federal Food, Drug, and Cosmetics Act, are complex, subject to change particularly during a change in administrations, and dependent on interpretation and enforcement decisions from government agencies with broad discretion.
Changes in federal funding or staffing at administrative agencies like the FDA may impact, for example, the speed at which we are able to obtain regulatory approvals, and changes in the focus of those administrative agencies may result in the repeal of applicable regulations or guidance or impact us in other ways we can not anticipate.

and 3 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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