What changed in this filing

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Item 1A. Risk Factors

2021-05-05 compared with 2020-05-06 · 100 added, 91 removed, 298 unchanged (39% of the section changed)

21 unchanged sentences

These large customers include Abbott Laboratories,

Sonova AG, certain other medical device manufacturers, and certain

distributors.

Although we have agreements with certain large customers,

these agreements do not obligate customers to purchase from us and may not prevent

price reductions.

Furthermore, orders from our large customers can generally be

reduced, postponed, or canceled, and a number of orders

have already been delayed or canceled due to the effects of the COVID-19 pandemic.

Any decreases in purchases, or the loss of any of our large customers, could have

a significant impact on our revenue and our profitability.

Sonova AG, certain other medical device manufacturers, and certain distributors.

Although we have agreements with certain large customers, these agreements do

not obligate customers to purchase from us and may not prevent price reductions.

Furthermore, orders from our large customers can generally be reduced, postponed,

or canceled, and some orders were delayed or canceled due to the effects of the

COVID-19 pandemic.

Any decreases in purchases,

or the loss of any of our large customers, could have a significant impact on

our revenue and our profitability.

We risk losing business to our competitors.

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a Supplier Partnering Agreement, as amended, with Abbott Laboratories, which expires

January 1, 2021, and Supply Agreement, as amended, with Sonova AG, which expires

March 31, 2025.

We cannot predict if these agreements will be renewed, or if renewed,

under what terms.

Although it is possible we could continue to sell products to

these customers without formal agreements, an inability to agree on mutually acceptable

terms or the loss of these customers could have a significant adverse impact on

our revenue and our profitability.

We will lose revenue if government contract funding is reduced, delayed, or

November 30, 2021, and Supply Agreement, as amended, with Sonova AG,

which expires March 31, 2025.

We cannot predict if these agreements will

be renewed, or if renewed, under what terms.

Although it is possible we could

continue to sell products to these customers without formal agreements, an inability

to agree on mutually acceptable terms or the loss of these customers could have

a significant adverse impact on our revenue and our profitability.

Changes in tax law, in our tax rates or in exposure to additional income

tax liabilities may materially and adversely affect our financial condition, results

of operations, and cash flows.

Changes in law and policy relating to taxes

may materially and adversely affect our financial condition, results of operations

and cash flows.

For example, the 2017 Federal Tax Reform Act significantly decreased

our Federal income tax rate.

The current administration and Congress could make

changes to existing tax law such as an increase in the corporate tax rate.

to existing Federal or state tax laws could adversely affect our financial condition

and results of operations.

We will lose revenue if government contract funding is reduced, delayed,

or eliminated.

A decrease in U.S.

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and their programs.

Such funding is subject to the availability

of Congressional appropriations and that, as a result, long-term government contracts

are partially funded initially with additional funds committed only as Congress

makes further appropriations.

We may be required to maintain security clearances

for facilities and personnel in order to protect classified information.

Furthermore, some of our Government funding has been through Small Business Innovation

Research (SBIR) or Small Business Technology Transfer Research (STTR) contracts.

SBIR and STTR budgets, eligibility, or funding limits may be changed by legislation

or by agencies such as the Department of Defense.

Such funding is subject to the availability of Congressional

appropriations and that, as a result, long-term government contracts are partially

funded initially with additional funds committed only as Congress makes further

appropriations.

Certain contracts require us to maintain facilities and personnel

security clearances to protect classified information.

Such clearances are subject

Government audits and investigations, and any deficiencies or illegal activities

identified during the audits or investigations could result in the forfeiture

or suspension of payments and civil or criminal penalties.

Furthermore, some of

our Government funding has been through Small Business Innovation Research (SBIR)

or Small Business Technology Transfer Research (STTR) contracts.

SBIR and STTR

budgets, eligibility, or funding limits may be changed by legislation or by agencies

such as the Department of Defense.

If we were barred for any reason from U.S.

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equipment were it to fail.

The loss of supply from any of our key single-source wafer suppliers could impact

our ability to produce and deliver products and cause loss of revenue.

The loss of supply from any of our key single-source wafer suppliers could substantially

impact our ability to produce and deliver products and seriously harm our business

and financial condition.

Our critical suppliers include suppliers of certain

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alternate suppliers for many of the wafers now being obtained from single sources.

The COVID-19 pandemic has caused shortages of the ingots and wafer substrates

that are used to make the wafers we buy, and leadtimes have increased for certain

of our foundry wafers.

Wafer supply interruptions for any reason, including acts

of God such as floods, typhoons, cyclones, earthquakes, or pandemics could seriously

jeopardize our ability to provide products that are critical to our business and

operations, and may cause us to lose revenue.

In the past fiscal year there have been industry-wide semiconductor

wafer shortages and leadtimes have increased for certain of our foundry wafers.

Wafer supply interruptions for any reason, including acts of God such as floods,

typhoons, cyclones, earthquakes, or pandemics could seriously jeopardize our ability

to provide products that are critical to our business and operations, and may

cause us to lose revenue.

The loss of supply of any critical chemicals or supplies could impact our

7 unchanged sentences

materials could be subject to shortages or be discontinued by their suppliers

Supply interruptions or shortages for any reason, including interruptions

due to effects of the COVID-19 pandemic, could seriously jeopardize our ability

to provide products that are critical to our business and operations and may cause

us to lose revenue.

Supply interruptions or shortages for any reason could seriously

jeopardize our ability to provide products that are critical to our business and

operations and may cause us to lose revenue.

The loss of supply from any of our packaging vendors could impact our ability

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or pandemics.

One of our packaging vendors was forced to suspend its factory operations

in late March 2020 pursuant to a COVID-19 lockdown order and it

is uncertain when they will resume operations.

The COVID-19 pandemic

has also caused shortages of materials and subassemblies our packaging vendors

need for the packaging process.

Additionally, certain of our packaging vendors

are in flood-susceptible areas.

Flooding risks to such vendors may increase in

the future due to possible higher ocean levels, extreme weather, and other potential

effects of climate change.

We have alternate vendors or potential alternate vendors

for the majority of our products, but it can be expensive, time-consuming, and

technically challenging to convert to alternate vendors.

Furthermore, we may not

be able to recover work in process or finished goods at a packaging vendor in

the event of a disruption.

Any supply interruptions or loss of inventory could

seriously jeopardize our ability to provide products that are critical to our

business and operations and may cause us to lose revenue.

Leadtimes for packaging services have increased during the COVID-19

pandemic and there have been shortages of raw materials and equipment our packaging

vendors need for their process.

One of our packaging vendors in India was forced

to suspend its factory operations from late March 2020 until mid-May 2020 and

was permitted only limited operation from mid-May through August 2020 pursuant

to COVID-19 government orders, and is still not fully operational.

on our packaging vendors could be reimposed in the future.

Additionally, certain

of our packaging vendors are in flood-susceptible areas.

Flooding risks to such

vendors may increase in the future due to possible higher ocean levels, extreme

weather, and other potential effects of climate change.

We have alternate vendors

or potential alternate vendors for the majority of our products, but it can be

expensive, time-consuming, and technically challenging to convert to alternate

Furthermore, we may not be able to recover work in process or finished

goods at a packaging vendor in the event of a disruption.

Any supply interruptions

or loss of inventory could seriously jeopardize our ability to provide products

that are critical to our business and operations and may cause us to lose revenue.

We are subject to risks inherent in doing business in foreign countries

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ongoing business operations.

In particular, the COVID-19 pandemic has severely

impacted global economic activity and caused many of our important customers to

delay or cancel orders.

We are operating under Minnesota Emergency Executive

Order 20-20 Directing Minnesotans to Stay at Home, which has been in effect

since March 27, 2020.

We are allowed to operate under the Order because the

Company is in several Critical Sectors as defined in the Order, however

future orders could be imposed by State or Federal authorities that could limit

or prohibit our normal operation.

Furthermore, if one or more of our employees

become infected with COVID-19, we could be forced to curtail or cease operations

to protect the health of our employees or to prevent the spread of the disease.

Additionally, any customer or supplier disruptions could affect our ability to

These and other impacts of COVID-19 pandemic or other public health crises

could have a material adverse effect on our results of operations or our financial

In particular, the COVID-19 pandemic has impacted

global economic activity, caused many of our important customers to delay or cancel

orders, and disrupted our supply chains.

Any customer or supplier disruptions

could affect our ability to operate.

These and other impacts of COVID-19 pandemic

or other public health crises could have a material adverse effect on our results

of operations or our financial condition.

We may not be able to enforce our intellectual property rights.

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to anticipate, including the effects of the COVID-19 pandemic, can cause downgrades

and increased default risk, and such downgrades or increases in default risk are

possible at any time.

Additionally, the assignment of a high credit rating does

not preclude the risk of default on any marketable security.

Defaults, default

risks, or changes in market conditions could cause us to incur losses on our marketable

securities, which could have a material adverse impact on our financial condition,

income, or cash flows, and our ability to pay dividends.

and increased default risk, and such downgrades

or increases in default risk are possible at any time.

Additionally, the assignment

of a high credit rating does not preclude the risk of default on any marketable

Defaults, default risks, or changes in market conditions could cause

us to incur losses on our marketable securities, which could have a material adverse

impact on our financial condition, income, or cash flows, and our ability to pay

Risks Related to our Industry

2 unchanged sentences

We sell our products into the semiconductor market,

which is highly cyclical and is currently being significantly affected by the

COVID-19 pandemic.

We cannot predict the timing, strength, or duration of any

economic slowdown or subsequent recovery, worldwide or in the industries we serve.

The economic environment could have a material adverse impact on our business

which is highly cyclical.

We cannot predict the timing, strength, or duration

of any economic slowdown or subsequent recovery, worldwide or in the industries

The economic environment could have a material adverse impact on our

business and revenue.

Our business and our reliance on intellectual property exposes us to litigation

54 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors