What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-05-03 compared with 2022-05-04 · 62 added, 61 removed, 87 unchanged (59% of the section changed)

5 unchanged sentences

Risks Related to Our Business

We may lose revenue if any of our large customers cancel, postpone, or reduce their purchases.

We rely on several large customers for a significant percentage of our revenue.

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.

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 face a tight labor market, competition for employees, and wage inflation.

In the past two fiscal years, we have experienced increased competition for employees, increased employee turnover, and increased wage inflation.

The labor market has been especially tight in Minnesota.

We have significantly increased the wages we pay to remain competitive and attract new workers, especially production workers.

Labor shortages could impact our revenue and profitability, and increases in labor cost could adversely affect our profit margins and results of operations.

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 raw silicon and semiconductor foundry wafers that are incorporated in our products.

We maintain inventory of some critical wafers, but we have not identified or qualified alternate suppliers for many of the wafers now being obtained from single sources.

In the past fiscal year, there were industry-wide semiconductor wafer shortages.

We purchase some wafers from manufacturers in China, which have been subject to tariffs and could be subject to further tariffs or restrictions in the future.

Wafer supply could be affected by acts of God such as floods, typhoons, cyclones, earthquakes, or pandemics, and risks related to extreme weather may be exacerbated by the effects of climate change.

Wafer supply interruptions 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 of any critical chemicals or supplies could impact our ability to produce and deliver products and cause loss of revenue.

There are a number of critical chemicals and supplies that we require to make products.

These include certain gases, photoresists, polymers, metals, and specialized alloys.

We maintain inventory of critical chemicals and materials, but in many cases, we are dependent on single sources, and some of the materials could be subject to shortages or be discontinued by their suppliers at any time.

The Russia-Ukraine crisis could cause or exacerbate shortages.

Sanctions against Russia could affect supplies or prices of materials supplied by Russia, including materials we use such as aluminum, copper, helium, magnesium, manganese, nickel, palladium, platinum, and titanium.

Materials supplied by Ukraine include neon, which may be used to produce some of our foundry wafers.

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 to produce and deliver products and cause loss of revenue.

We are dependent on our packaging vendors.

Because of the unique materials our products use, the complexity of some of our products, unique magnetic requirements, and high isolation voltage specifications, many of our products are more challenging to package than conventional integrated circuits.

Some of our products use processes or tooling unique to a particular packaging vendor, and it might be expensive, time-consuming, or impractical to convert to another vendor in the event of a supply interruption due to vendors’ business decisions, business condition, or acts of God, including floods, typhoons, earthquakes, or pandemics.

Lead times for packaging services increased during the COVID-19 pandemic and there have been shortages of raw materials our packaging vendors need for their processes.

Government lockdown restrictions, labor shortages, raw-material shortages, and supply-chain disruptions have reduced our vendors’ capacity and increased their lead times.

These conditions could continue, worsen, or recur.

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.

Supply delays, 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 risk losing business to our competitors.

We have a number of competitors and potential competitors, many of whom have significantly greater financial, technical, and marketing resources than us.

We believe that our competition is increasing as the technology and markets mature.

We believe that our competition is increasing as technology and markets mature.

This has meant more competitors and more severe pricing pressure.

In addition, our competitors may be narrowing or eliminating our performance advantages.

We expect these trends to continue, and we may lose business to competitors or it may be necessary to significantly reduce our prices in order to acquire or retain business.

We expect these trends to continue, and we may lose business to competitors or it may be necessary to significantly reduce our prices to acquire or retain business.

These factors could cause a material adverse impact on our financial condition, revenue, gross profit margins, or income.

6 unchanged sentences

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.

Although it is possible we could continue to sell products to these customers without formal agreements, an inability to agree on mutually acceptable terms could have a significant adverse impact on our revenue or 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 or changes in tax rates may materially and adversely affect our financial condition, results of operations and cash flows.

Changes in law and policy relating to Federal or state corporate taxes, changes in tax rates, or changes in our eligibility for tax credits could materially and adversely affect our financial condition, results of operations, and cash flows.

Some of our products are incorporated into medical devices, which could expose us to a risk of product liability claims and such claims could seriously harm our business and financial condition.

6 unchanged sentences

We may lose revenue if we are unable to maintain important certifications.

Our quality management system is certified to the ISO 9001 standard, and some of our products are also subject to independent certification and listings including by the VDE Institute and UL LLC.

Our quality management system is certified to the ISO 9001 standard, and some of our products are also subject to independent certification and listings including by the VDE Institute and UL LLC.

These certifications are subject to a number of rigorous conditions.

Failure to achieve or maintain any of these certifications or listings could cause us to be disqualified by one or more of our customers, and could have a material adverse impact on our business and revenue.

Failure to achieve or maintain any of our certifications or listings could cause us to be disqualified by one or more of our customers and could have a material adverse impact on our business and revenue.

Federal legislation may not protect us against liability for the use of our products in medical devices and a successful liability claim could seriously harm our business and financial condition.

4 unchanged sentences

The malfunction of our products that are incorporated in medical devices could lead to the recall of existing medical devices incorporating our products.

Such a recall could be harmful to our reputation for product safety and efficacy.

Even if assertions that our products caused or contributed to device failure do not lead to product liability or contract claims, such assertions could harm our reputation and customer relationships.

Any damage to our reputation and/or the reputation of our products, or the reputation of our customers or their products could limit the market for our and our customers’

products and harm our results of operations.

Any damage to our reputation and/or the reputation of our products, or the reputation of our customers or their products could limit the market for our and our customers’ products and harm our results of operations.

We may lose business and revenue if our critical production equipment fails.

2 unchanged sentences

While we have an in-house maintenance staff, maintenance agreements for certain equipment, some critical spare parts, and back-ups for some of the equipment, we cannot be sure we could repair or replace critical manufacturing equipment were it to fail.

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 raw silicon and semiconductor foundry wafers that are incorporated in our products.

We maintain inventory of some critical wafers, but we have not identified or qualified alternate suppliers for many of the wafers now being obtained from single sources.

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.

Risks related to extreme weather may be exacerbated by the effects of climate change.

The loss of supply of any critical chemicals or supplies could impact our ability to produce and deliver products and cause loss of revenue.

There are a number of critical chemicals and supplies that we require to make products.

These include certain gases, photoresists, polymers, metals, and specialized alloys.

We maintain inventory of critical chemicals and materials, but in many cases we are dependent on single sources, and some of the materials could be subject to shortages or be discontinued by their suppliers at any time.

The Russia-Ukraine crisis could cause or exacerbate shortages.

Materials supplied by Ukraine include neon, which may be used to produce some of our foundry warfers.

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 to produce and deliver products and cause loss of revenue.

We are dependent on our packaging vendors.

Some of our products use processes or tooling unique to a particular packaging vendor, and it might be expensive, time-consuming, or impractical to convert to another vendor in the event of a supply interruption due to vendors' business decisions, business condition, or acts of God, including floods, typhoons, earthquakes, or pandemics.

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.

Government lockdown restrictions, labor shortages, and raw-material shortages have reduced our vendors' capacity and increased their lead-times.

These conditions could continue, worsen, or recur.

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.

Supply delays, 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 that could impair our results of operations.

2 unchanged sentences

acts of God, including floods, typhoons, cyclones, and earthquakes;

public health crises including, but not limited to, the COVID-19 pandemic;

difficulties in enforcement of contractual obligations and intellectual property rights;

changes in regulatory requirements, tariffs, customs, duties, and other trade barriers;

public health crises including, but not limited to, difficulties in enforcement of contractual obligations and intellectual property rights;

changes in regulatory requirements;

changes in import/export regulations and tariffs;

transportation delays;

1 unchanged sentence

Public health crises could have an adverse effect on our operations and financial results.

Public health crises could adversely affect our ongoing business operations.

In particular, the COVID-19 pandemic has disrupted our supply chains and caused employee absences.

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.

Our business could be negatively impacted by cyber security events or information technology disruptions.

The COVID-19 pandemic disrupted our supply chains and caused employee absences.

Impacts of the COVID-19 pandemic or other public health crises could have a material adverse effect on our results of operations or our financial condition.

We are subject to risks associated with the availability of natural resources and energy.

We use significant resources such as electricity, natural gas, and water in our production processes.

New or increased climate change regulation could increase our energy costs, for example as a result of carbon pricing impacts on natural gas or electrical utilities.

Furthermore, environmental regulations or the impacts of climate change could curtail the availability of electricity we need for production or increase the number of incidents of power outages.

Increased natural resource or energy costs, or decreased availability, could have adverse effects on our results of operations by increasing our costs and expenses or requiring us to change our production processes.

Our business could be negatively impacted by cybersecurity events or information technology disruptions.

We face various cyber security threats, including threats to our information technology infrastructure and attempts to gain access to our proprietary or classified information, and denial-of-service attacks.

4 unchanged sentences

We could incur losses on our marketable securities.

As of March 31, 2022, we held $45,153,894 in short-term and long-term marketable securities, representing approximately 67% of our total assets.

Conditions and circumstances beyond our control or ability to anticipate can cause downgrades and increased default risk, and such downgrades or increases in default risk are possible at any time.

As of March 31, 2023, we held $52,544,283 in short-term and long-term marketable securities, representing approximately 76% of our total assets.

Business conditions, bond-market conditions, and interest rates increases beyond our control or ability to anticipate can cause credit-rating downgrades, increased default risk, or unrealized losses.

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.

Any losses on our marketable securities could impact our financial condition, income, or cash flows, or our ability to pay dividends.

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

We protect our proprietary technology and intellectual property by seeking patents, trademarks, and copyrights, and by maintaining trade secrets through entering into confidentiality agreements with employees, suppliers, customers, and prospective customers depending on the circumstances.

We protect our proprietary technology and intellectual property by seeking patents, trademarks, and copyrights, and by maintaining trade secrets by entering into confidentiality agreements with employees, suppliers, customers, and prospective customers depending on the circumstances.

We hold patents or are the licensee of others owning patented technology covering certain aspects of our products and technology.

8 unchanged sentences

We face an uncertain economic environment in the industries we serve, which could adversely affect our business.

We sell our products into the semiconductor market, which is highly cyclical.

We cannot predict the timing, strength, or duration of any economic slowdown or subsequent recovery, worldwide or in the industries we serve.

We sell our products into the semiconductor market, which has been highly cyclical.

We cannot predict the timing, strength, or duration of any economic slowdown, recession, semiconductor-industry slowdown or subsequent recovery.

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

9 unchanged sentences

Any decisions to reduce or discontinue paying cash dividends to our shareholders could cause the market price of our common stock to decline.

Future dividends will be subject to Board approval and will take into account factors including our results of operations, cash and marketable security balances, the timing of securities maturations, estimates of future cash requirements, fixed asset requirements, the impacts of the COVID-19 pandemic, and other factors our Board may deem relevant.

Because they are generally more than our current cash flow from operations, recent and declared dividend amounts may be unsustainable.

3 unchanged sentences

The market price of our common stock may be significantly affected by many factors, some of which are beyond our control, including:

the announcement of new products, product enhancements, or contracts by us or our competitors;

the announcement of new products or product enhancements by us or our competitors;

delays in our introduction of new products or technologies or market acceptance of these products or technologies;

loss of customers, decreases in customers’ purchases, or decreases in customers’ purchase prices;

changes in demand for our customers’ products;

loss of customers, decreases in customers’ purchases, or decreases in customers’ purchase prices;

changes in demand for our customers’ products;

quarterly variations in our financial results, revenue, or revenue growth rates;

speculation in the press or analyst community about our business, potential revenue, or potential earnings;

speculation in the press or elsewhere about our business, potential revenue, or potential earnings;

general economic conditions or market conditions specific to industries we or our customers serve or may serve;

legal proceedings involving us, including intellectual property litigation or class action litigation;

changes in Federal corporate income tax rates or changes in other tax provisions;

changes in Federal or state corporate income tax rates, tax credits, or other changes in tax policies;

changes in tariffs, customs, duties, or other trade barriers in foreign jurisdictions where we purchase raw materials or sell our products;

the impact or perceived impact of the COVID-19 pandemic on general economic conditions, our industry, or our supply chain;

our stock repurchase and dividend policies and decisions.

1 unchanged sentence

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