Surmodics Inc

Item 1A. Risk Factors

The information presented below updates, and should be read in conjunction with, the risk factors identified in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission on November 20, 2024, under Part I, Item 1A, Risk Factors. Sucand the risk factors identified in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025, filed with the SEC on April 30,2025, under Part II, Item 1A, "Risk Factors". Such risks could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Quarterly Report on Form 10-Q. Except as presented below, there were no other significant changes in our risk factors during the quarter ended March 31June 30, 2025.

The completion of the Merger is subject to the resolution of litigation initiated by the U.S. Federal Trade Commission (FTC) and a number of closing conditions, many of which aWe have experienced a cyber incident and could be subject to future largely outside of the parties control, and, if such FTC Litigcyber incidents or information is not successfully resolved, and such closing conditions are not satisfied or waived on a timely basis, the Merger Agreement may be terminated and the Merger may not be technology disruptions, which could completed. 

On March 6, 2025, the FTC issued an administrromise our informative complaint, styled In the Matter of GTCR BC Holdings, LLC and Surmodics, Inc. (the Administrative Complaint), seeking to block the Merger on, expose us to liability, and alleging that the Merger if fully consummated, may substantially lcause our businessen competition in the purported market for outsourced hydrophilic co and reputatings throughout theon to suffer.

We country in violation of Sllection 7 of the Clayton Act, and Section 5 of the Federal Trade Commission Act (the FTC Act). On the same day, the FTC filed a parallel complaint and store sensitive data, including in the United States District Court for the Northern District of Illinois (the Federal Complaint) seeking a temportellectual property, our proprietary restraining order and a preliminary injuncbusiness information enjoiningand the Merger pursuant to Section 13(b) of the FTC Act.

In addition, the Merger isat of our customers, subject to various closing conditions that remain open, including: 

1.the expiration or termination of the waitingppliers and business partners, and period applicable to the consummation of the Merger under the HSR Act and no voluntary agreement being in effect with either the FTC or Antitrust Divisisonally identifiable information of the Department of Jour custice not to consummate the transaction for any period of time;

2.the absence of any judgment, ruling, order, writ, injunctiomers and employees, on or decree of any governmental authority, nor any statute, code, decree, law, healthcare law, act, ordinance, rule, regulation or order of any governmental authority or other legal restraint or prohibition, that ur networks. Maintaining the security of this in effect that would make the Merger illegal or otherwise prevent or prohibit its consummation;

3.subjectformation is critical to specific standards, the accuracy of the representour operations and warranties of the other party or parties;

4.the performance obusiness strategy, and our compliance in all material resustomers expects by the other party or parties of such partys or parties covenants, obligations, and agreements under the Merger Agreement;

5.with respect to Parents and Merger Subs obligations to consummate the merger, the absence of a material adverse effect (as defined that we will securely maintain their information. Despite our security measures, our in the Merger Agreement) and the absence of any changes having occurred that would reasonablformation technology and infrastructure may be expected to have, individually or in the aggregate, a material adverse effect;

6.our having delivered to Parent a certificate, dated as of the closing date and signed by one of our executive officers, certifying to the satisfaction of vulnerable to attacks by hackers resulting from employee error, malfeasance or othe foregoing condir disruptions; and

7.Parent and Merger Sub having deli. 

On June 5, 2025, we discovered to us a certificate, dated as of the closing date and sighat a threat actor had gained by an executive officer, certifying to the satisfaction of the foregoing conditions.

The failure to suunauthorized accessfully resolve the FTC Litigation, or to satisfy all of the required condi to certain of our informations, could delay the completion of the Merger by a significant period of time or prevent it from closing. Any delay in completing  technology (IT) systems and data (the Merger could cause the parties to not realize some or all"Cyber Incident"). As a result of the benefits that are expected to be achieved if the Merger is successfully completed within the expected timeframe. There can be no assurance that the FTC Litigation will be resolved successfully, or that the conditions to the closing of the Merger will be satisfied or waived Cyber Incident and our response to it, certain IT systems and data were unavailable to us for that the Merger will be completed within the expected ta period of timeframe, or at all.

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. We have incurred and will continue to incur substantial transaction fees and certain costs in connection with the Merger that could adversely affect our business and operations if and expenditures related to the Merger is not completed. 

Cyber Incident. We have incurred and will incur significant non-recurring transaction fees, which include legal and advisory fees and substantial costs associated with completingremain subject to various risks due to the MergerCyber Incident, including costs related to tthe FTC Litigation and any divestitures required to obtain regulatory approvals, and which could adversely affect our business oadequacy of processes during the perations and cash posiiod of disruption if the Merger is not completed. 

Changing conditions and uncertainty in globalof our IT systems, diversion of markets including the impact of tariffs, sancnagement's attentions, quotas, import restric, potential litigations, and other trade actions may adversely affect our operations, changes in customer behavior, and financial results. 

A substantial portion of oregulatory scrutiny. 

Our business is impacted by international trade. Many customers for our performance coating business manufacIT systems and infrastructure may be vulnerable to future their products that utilize our coatings outside the U.S. and then ship those products for distribution within the U.S. and abroad. Other customerscyber incidents, attacks by hackers resulting from employee error or manufacture lfeasance, or otheir products that utilize our coatings in the U.S. for domestic and international sale. A significar disruptions. Any future cyber incident portion of our sales of In Vitro Diagnostics products are to international customers, including customersor IT breach could compromise our networks and the in China. In addiformation, we are  stored on the exclusive distributor in the U.S., Canada and Puerto Rico (and non-exclusive distributm could be accessed, publicly disclosed, lost or in Japan) of the BBI Solutions DIARECT line of antigens and antibodies, which are imported from Germstolen. The Cyber Incident or any. We manufac future medical device products and componcyber incidents at our facility could result in Ballinasloe, Ireland. Thoselegal claims or products and components include (i) vascular intention products that we sell directly to physician in the U.S., ceedings, liability under personal privacy laws and (ii) the balloon catheter component used in our SurVeil drug-coated balloons (DCBs).

Since February 1, 2025, the Trump administratregulatory penalties, disrupt our operation, through executive order s and other executive actions, has threatened, announced, or implemented a broad spectrum of tariffs on goods imported into the U.S. from a wide ran services that we provide to our customers, damage of countries. From time to time, various of those tariffs have been pur reputation and caused, suspended, or rescinded. Limited exemptions have been announced to certain recent tariff a loss of confidence in our products and services, although the scope of any exemption is not always clear. In response, otherof which countries, including notably China, have threatened or imposed tariffs or other trade sanctions on products manufactured in the U.S. The system of U.S. ld adversely affect our business and international tariffs, trade sanccompetitive positions, quotas, import restriction.

Our IT systems, and other trade actions and is fluid and unpredictable.

International trade actions announced, threatened or implemented by the U.S. or other couthose of third-party suppliers with whom we contries, and uncertaintyact, related to such tradquire actions,n ongoing could have material adverse impacts on our operations and financialmmitment of significant results, including the following, among others:

U.S. tariffs on medical device products utilizing our performance coating technologies that are manufactured outside the U.S. may increase the price of such products, reduce demand for themources to maintain, protect and enhance existing systems and adversely impact the royalty revenue we receive upon their sale;

Foreign tariffs, sanctions, quotas or other trade restrictions may adversely impact sales outside the U.S. of medical device products manufactured in the U.S. utilizing our performance coating technologies, reducidevelop new systems to keep pace with continuing changes in IT, evolving systems and regulatory standards, and changing the royalty revenue we receive upon the sale of such products;

U.S. tariffs may increase the cost of the DIARECT line of antigens and antibodies that we distributreats. These systems could be vulnerable to service in the U.S., thereby reducing our gross profits for such products, and reducing demand for such products if we implemeterruptions or to security breaches from inadvertent priceor increases, or both;

Foreign tariffs, santentional actions, quotas or other trade restrictions may adversely impact sales and gross margins outside the U.S. for our In Vitro Diagnostic reagent products manufactured in the U.S. reducing by our employees, third-party vendors and/or business partners, or from cyber-attacks by malicious the revenue we receive and gross profit received upon the sale of such products;

Customers may try to mitigate the impaird parties. We also are subject of announced or threatened tariffs by making bulk purchases of our products well in advance of their need for such products or managingto other cyber-attacks, including state-sponsored cyber-attacks, inventory levels. A result could be unevenness and unpredictability in our product sales;

Tariffs on medical dedustrial espionage, insider threats, computer denial-of-service products and attacks, components at our facility in Ballinasloe, Ireland could reduce demuter viruses, ransomware and for those products. Such tariffs also could increase the cost of the vasculaother malware, payment fraud or other cyber intcidention products that we sell directly to physician in the U.S. and of our SurVeil DCBs, thereby reducing our gross profits on such products; and

Uncertainty and apprehensis. Any significant breakdown, intrusion, breach, interruption, corruption regarding global trade may lead to reduced economic activity in the U.S. or globally, which cor destruction of these systems could triggerhave a recession in the U.S. or globally and admaterial adversely a effect our financial performance.

Given the uncertainty regarding the scopen our business and duration of trade acreputations by the U.S.  and other countries, their potentld materially adverse impaly affect on our oresults of operations and financial results is difficult to quantify, but could be materialcondition.

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