What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-03-11 compared with 2020-03-11 · 104 added, 106 removed, 277 unchanged (43% of the section changed)

2 unchanged sentences

Risks Related to Our Business

The COVID-19 outbreak has adversely impacted and could continue to adversely impact our results of operations.

The impact of the COVID-19 outbreak and the spread of the novel coronavirus on a global basis have adversely affected and are likely to continue to adversely affect our business in a number of respects, although the further extent, nature and timing of such impact cannot be predicted at this time.

The COVID-19 outbreak has led countries around the world, as well as most states in the U.S., to implement restrictions relating to the operation of almost all types of businesses.

The closure standards vary from jurisdiction to jurisdiction, but they typically require all but “critical”, “essential” or “life-sustaining” businesses to close all offices and facilities.

We believe, based on the various standards published to date, that our businesses meet the requisite standards to remain open, at least partially, in all jurisdictions in which we operate, although there is no assurance that our decision to remain open will not be challenged.

As of the date of this filing, all of our manufacturing and other facilities are operating at adequate capacity while following procedures designed to prevent the spread of the virus, such as social distancing, reduced personnel and staggered shifts.

Changing standards regarding what type of facilities are permitted to remain open, as well as evolving interpretations of existing standards, in both the United States and around the globe, could result in the closure of some or all of our facilities.

To date, our supply chain has not experienced significant disruptions, and at this time we do not anticipate any such significant disruptions in the near term.

However, our suppliers could be required by government authorities to temporarily cease operations in accordance with the various restrictions discussed above, might be limited in their production capacity due to complying with restrictions relating to the operation of businesses during the COVID-19 pandemic, or could suffer their own supply chain disruptions, impacting their ability to continue to supply us with the quantity of materials required by us.

If as a result of the COVID-19 outbreak governments take additional protective actions, or extend the time period for existing protective actions, or the distribution and administration of the vaccines for COVID-19 are delayed or prolonged, such actions or events may have a material adverse impact on our business and operating results.

This could include closures of our facilities or the closure of the facilities of our customers, suppliers, or other vendors in our supply chain.

Any disruption of our supply chain or the businesses of our customers could adversely impact our business and results of operations.

In addition, the widespread public health crisis caused by the COVID-19 outbreak has adversely impacted the economies and financial markets worldwide, resulting in an economic downturn that has adversely impacted many businesses, including ours.

The extent and duration of the impact on the global economy and financial markets from COVID-19 is difficult to predict, and the extent to which the COVID-19 will negatively affect us and the duration of any potential business disruption is uncertain.

The impact to our business and results of operation will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the COVID-19 outbreak and the actions taken by authorities and other entities to contain COVID-19 or treat its impact, and the impact of such actions, all of which are beyond our control.

These potential impacts, while uncertain, could adversely affect our operating results.

We face intense competition in our business.

11 unchanged sentences

Competition for modules and systems is most often based on customer relationships, product reliability, technical performance, and the ability to anticipate and satisfy customer needs for specific design configurations.

Many other manufacturers have more experience in particular geographic markets and specific applications than we do, and may be better positioned to compete in these areas.

Many other manufacturers have more experience in particular geographic

markets and specific applications than we do, and may be better positioned to compete in these areas.

We cannot assure you that we will be able to successfully grow our business in the face of these competitive challenges.

12 unchanged sentences

We also cannot assure that any such transactions that we do complete in the future will be successful.

Such transactions, including our recent acquisition of DSI, involve a number of risks, including the following:

Such transactions, including our acquisition of DSI in November 2019, involve a number of risks, including the following:

• we may incur substantial costs, including advisory fees and diversion of management attention, in evaluating a potential transaction;

10 unchanged sentences

If we were to undertake future substantial acquisitions for cash, these acquisitions would likely need to be financed in part through bank borrowings, or the issuance of public or private debt.

This acquisition financing would likely decrease our ratio of earnings to fixed charges and adversely affect other credit metrics.

This acquisition financing would likely adversely affect certain credit metrics.

Our revolving credit facilities require us to obtain the lenders’ consent for certain additional debt financing and to comply with other covenants, including the application of specific financial ratios.

8 unchanged sentences

These losses could have an adverse effect on our operations, financial condition, and results of operations.

We might require additional capital to support business growth and this capital might not be available.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges or opportunities, including the need to develop new offerings or enhance our existing offerings, enhance our operating infrastructure, or acquire complementary businesses and technologies.

Accordingly, we may need to engage in equity or debt financings to secure additional funds.

If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock.

Any debt financing secured by us in the future could involve additional restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

In addition, we may not be able to obtain additional financing on terms favorable to us, if at all.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.

We may encounter difficulties in the implementation or operation of new enterprise resource planning systems.

13 unchanged sentences

In the Office of the United States Trade Representative (“USTR”) annual "Special 301" Report released in April 2020, the adequacy and effectiveness of intellectual property protection in a number of foreign countries were analyzed.

A number of countries in which we manufacture are identified in the report as being on the Priority Watch List.

A number of countries in which we manufacture or do business in are identified in the report as being on the Priority Watch List or the Watch List.

In China, for instance, the USTR is concerned about the urgent need to remediate a range of IP-related concerns, including trade secret theft, online piracy and counterfeiting, the high-volume manufacture and export of counterfeit goods, technology transfer requirements imposed as a condition to access the Chinese market, the mandatory application of adverse terms to foreign IP licensors, and IP ownership and research and development localization requirements.

11 unchanged sentences

All of these types of agreements may be breached or be found unenforceable, and we may not have an adequate remedy for any such breach of, or inability to enforce, these agreements.

We may initiate, or be subject to, claims or litigation for infringement of proprietary rights, or to establish the validity of our proprietary rights, which could result in significant expense to us, cause product shipment delays, require us to enter royalty or licensing agreements, and divert the efforts of our technical and management personnel from productive tasks, whether or not such litigation were determined in our favor.

product shipment delays, require us to enter royalty or licensing agreements, and divert the efforts of our technical and management personnel from productive tasks, whether or not such litigation were determined in our favor.

We may be exposed to product liability claims.

7 unchanged sentences

Also, customers will often require a lengthy period of on-site testing before committing to purchase a product or system, during which period we will not receive material revenue from the customer.

While a design win for our products and systems may result in a long period of recurring revenue during which we hope to recover our costs, we must often internally finance our development

costs over significant time periods.

While a design win for our products and systems may result in a long period of recurring revenue during which we hope to recover our costs, we must often internally finance our development costs over significant time periods.

If our products or systems fail to gain acceptance with our customers, we will be forced to absorb any NRE costs, which could adversely affect our business if these costs are substantial.

57 unchanged sentences

During the time that the classification is suspended or reduced to a lower level, net revenues and earnings attributable to that product may be adversely affected.

Our future success is substantially dependent on our ability to attract and retain highly qualified technical, managerial, marketing, finance, and administrative personnel.

The competitive environment of our business requires us to attract and retain highly qualified personnel to develop technological innovations and bring them to market on a timely basis.

Our complex operations also require us to attract and retain highly qualified administrative personnel in functions such as legal, tax, accounting, business development, financial reporting, and treasury.

The market for personnel with such qualifications is highly competitive.

We have not entered into employment or non-competition agreements with many of our key personnel.

The loss of the services of, or the failure to effectively recruit, qualified personnel, including for key executive positions, could have a material adverse effect on our business.

Failure to maintain effective internal control over financial reporting could adversely affect our ability to meet our reporting requirements.

5 unchanged sentences

We have since remediated the material weakness through updates to our control activities documentation and process in numerous locations and improved processes related to monitoring of the design and effectiveness of internal controls.

If we fail to maintain the effectiveness of our internal control over financial

reporting, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could be a material adverse effect on our stock price.

We are exposed to, and may be adversely affected by, interruptions to our computer and information technology systems and sophisticated cyber-attacks.

We rely on our information technology systems and networks in connection with many of our business activities.

Some of these networks and systems are managed by third party service providers and are not under our direct control.

Our operations routinely involve receiving, storing, processing, and transmitting sensitive information pertaining to our business, customers, suppliers, employees, and other sensitive matters.

Any cyber incidents could materially disrupt operational systems;

result in loss of trade secrets or other proprietary or competitively sensitive information;

compromise personally identifiable information regarding customers or employees;

and jeopardize the security of our facilities.

Because techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques, or to implement adequate preventative measures.

Information technology security threats, including security breaches, computer malware, and other cyber-attacks are increasing in both frequency and sophistication, and could create financial liability, subject us to legal or regulatory sanctions, or damage our reputation with customers, suppliers, and other stakeholders.

We continuously seek to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on our competitive position, reputation, results of operations, financial condition, and cash flows.

Interruptions in our information technology systems could adversely affect our business.

We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our business.

Any significant system or network disruption, including, but not limited to, new system implementations, computer viruses, security breaches, facility issues or energy blackouts could have a material adverse impact on our operations and results of operations.

Such network disruption could result in a loss of the confidentiality of our intellectual property or the release of sensitive competitive information or customer or employee personal data.

Any loss of such information could harm our competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages caused by the disruptions or security breaches.

We have implemented protective measures to prevent against and limit the effects of system or network disruptions, but there can be no assurance that such measures will be sufficient to prevent or limit the damage from any future disruptions and any such disruption could have a material adverse impact on our business and results of operations.

Third-party service providers, such as subcontractors, distributors and vendors have access to certain portions of our sensitive data.

In the event that these service providers do not properly safeguard our data that they hold, security breaches and loss of our data could result.

Any such loss of data by our third-party service providers could have a material adverse impact on our business and results of operations.

If we fail to maintain the effectiveness of our internal control over financial reporting, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could be a material adverse effect on our stock price.

Future changes in our environmental liability and compliance obligations may harm our ability to operate or increase costs.

4 unchanged sentences

Our credit facilities subject us to financial and operating restrictions.

We maintain revolving credit agreements and term loans with banks that we use, or may use, for working capital, acquisition financing, and other purposes.

These credit facilities subject us to certain restrictions which may affect, and in some cases significantly limit or prohibit, among other things, our ability to:

We maintain a revolving credit facility with banks that we use, or may use, for working capital, acquisition financing, and other purposes.

This credit facility subjects us to certain restrictions which may affect, and in some cases significantly limit or prohibit, among other things, our ability to:

• borrow additional funds;

5 unchanged sentences

• create liens on our assets.

Our primary credit facility requires us to maintain certain financial ratios.

Our credit facility requires us to maintain certain financial ratios.

If we fail to comply with the covenant restrictions contained in the credit facility, that failure could result in termination of the facility, and all amounts outstanding could become immediately payable.

Unexpected events, such as a natural disaster, could disrupt our operations and adversely affect our results of operations.

We have manufacturing and other facilities in countries around the world.

Unexpected events, including fires or explosions at facilities;

natural disasters, such as flooding, hurricanes, and earthquakes;

war or terrorist activities;

civil unrest;

unplanned outages;

supply or labor disruptions;

and failures of equipment or systems at any of our facilities could adversely affect our results of operation.

If adverse conditions were to arise with respect to any of our facilities as a result of a natural disaster or other unexpected event, they may result in customer disruption, physical damage to one or more key operating facilities, the temporary closure of one or more key operating facilities, the temporary disruptions of information systems, and/or an adverse effect on our results of operations.

A significant portion of our cash and cash equivalents and short-term investments balances were held by our non-U.S.

A significant portion of our cash and cash equivalents and short-term investments balances are held by our non-U.S.

subsidiaries.

2 unchanged sentences

As of December 31, 2020, $88.8 million of our cash and cash equivalents and short-term investments were held by subsidiaries outside of the United States.

The Tax Cuts and Jobs Act (“2017 Tax Act”), enacted on December 22, 2017, transitioned the U.S.

from a worldwide tax system to a modified territorial tax system.

Under previous law, companies could indefinitely defer U.S.

income taxation on unremitted foreign earnings.

The 2017 Tax Act imposes a one-time transition tax on deferred foreign earnings of 15.5% for liquid assets and 8% for illiquid assets, payable in defined increments over eight years.

In 2017, we provided a provisional amount of $0.2 million.

After finalizing the amount of earnings and profits subject to the transition tax and our foreign tax credit calculation in 2018, we determined the final current portion of transition tax to be immaterial.

We did not need to repatriate amounts from our non-U.S.

subsidiaries to the United States to satisfy this tax obligation.

These previously deferred foreign earnings may now be repatriated to the United States with little to no additional U.S.

federal taxation.

However, any such repatriation could incur local withholding tax in the source and intervening foreign jurisdictions.

Any repatriation of such funds could incur local withholding tax in the source and intervening foreign jurisdictions.

These amounts could also be subject to certain U.S.

51 unchanged sentences

The long-term nature of the United Kingdom’s relationship with the European Union is unclear and there is considerable uncertainty when any relationship will be agreed and established.

Withdrawal from the European Union is controversial in the United Kingdom

notwithstanding the 2016 vote.In January 2020, the United Kingdom and the European Union approved of an agreement between the United Kingdom and the European Union, and the United Kingdom officially departed from the European Union.

Withdrawal from the European Union is controversial in the United Kingdom notwithstanding the 2016 vote.

In January 2020, the United Kingdom and the European Union approved of an agreement between the United Kingdom and the European Union, and the United Kingdom officially departed from the European Union.

On February 1, 2020, the United Kingdom entered into a transition and implementation period, during which all European Union laws regulations, court decisions, trading agreements and other obligations continue to apply to the United Kingdom.

During this period, which is set to expire on December 31, 2020, the United Kingdom and the European Union will negotiate additional terms.

At this stage, it is uncertain what the final results of these negotiations will be and, given the lack of comparable precedent, it is unclear how Brexit, will affect economic conditions in the United Kingdom, the European Union, or globally.

Because we have sales throughout the European Union and offices in England and throughout the European Union, it is possible that Brexit may require us to restructure our European operations, and depending on what is negotiated, could impair our ability to transact business in other countries in the European Union.

As of January 1, 2021, the United Kingdom and the European Union entered into a Trade and Cooperation Agreement that included a Free Trade Agreement.

At this stage, it is uncertain what the effects of the Trade and Cooperation Agreement will be on our United Kingdom and European operations in fiscal 2021 and beyond, and it is possible that the Trade and Cooperation Agreement or other agreements entered into between the United Kingdom and other jurisdictions could impair our ability to transaction business in the United Kingdom or countries in the European Union.

Significant developments from the recent and potential changes in tariffs, trade regulation or other restrictions may adversely impact our business, financial condition and results of operations.

1 unchanged sentence

Significant tariffs or other restrictions which are placed on Chinese, European, Canadian or Israeli imports to the United States, or any related counter-measures which are taken by the countries involved, may materially harm our revenues and results of operations.

Examples of recent actions are Section 232 tariffs on steel and aluminum product imports announced by the U.S.

Examples of past actions are Section 232 tariffs on steel and aluminum product imports announced by the U.S.

Department of Commerce in March 2018, and Section 301 tariffs on certain products that originate in China announced by the United States Trade Representative that first started in June 2018 and now are in four separate lists with varying tariff increases.

Despite recent progress on the first-phase of an agreement with China, the current U.S.

administration continues to signal that it may alter trade agreements and terms between China and the United States, including limiting trade with China, and may impose additional tariffs on imports from China.

We are implementing operational changes that we intend to mitigate these recent tariff increase actions.

These new tariffs, or other changes in U.S.

These tariffs, or other changes in U.S.

trade policy, could trigger retaliatory actions by affected countries.

3 unchanged sentences

We are subject to the risks of political, economic, health, and military instability in countries outside the United States in which we operate.

Some of our products are produced in Israel, India, China, and other countries which are particularly subject to risks of political, economic, health (including the COVID-19 "coronavirus")and military instability.

Some of our products are produced in Israel, India, China, and other countries which are particularly subject to risks of political, economic, health and military instability.

This instability could result in wars, riots, nationalization of industry, currency fluctuations, and labor unrest or unavailability.

5 unchanged sentences

A change in the security and political situation in Israel and in the economy could have a material adverse effect on our business, operating results and financial condition.

We face risks related to health epidemics and other outbreaks, which could significantly disrupt our operations and/or business.

Our business could be adversely impacted by the effects of the COVID-19 “coronavirus” outbreak originating in China, or by other health epidemics or pandemics.

We currently rely on our Chinese facility to manufacture load cells.

Accordingly, there is a risk that supplies of our product and services may be significantly delayed by or may become unavailable as a result of COVID-19 or other health epidemic.

Although currently there has been no material impact on our operations and we have mitigation plans in place, there can be no assurance that operations would not be negatively impacted in the future.

Such impacts might include disruptions in our ability to manufacture products and disruptions in the operations of our business, resulting in negative impacts on our financial condition and results of operations.

Operational difficulties, including those associated with a planned new facility in Israel, could adversely impact our business.

We have entered into a long term lease for property in Israel on which a new approximately 121,400 square foot facility will be constructed.

We intend to consolidate certain of our operations in Israel in this facility, including expanding the capability of our advance sensors product line.

Any delay in constructing and opening this new facility and in consolidating our operations could adversely affect our future business and results of operations.

We cannot guarantee that this facility will be completed in a timely manner or that the consolidation of operations in Israel will be completed successfully.

Operational difficulties, including those associated with our new facility in Israel, could adversely impact our business.

In 2019, we entered into a long-term lease for a newly-constructed 121,400 square foot facility in Israel, as part of a strategic initiative to expand the manufacturing capacity of our advance sensors product line.

We have begun to transition certain of our manufacturing operations in Israel into this facility, and we expect to complete this transition in 2021.

Any delay in transitioning our operations could adversely affect our future business and results of operations.

We cannot guarantee that the consolidation of operations in Israel will be completed successfully, without delays or on the terms that we currently expect.

We are subject to foreign currency exchange rate risks which may impact our results of operations.

14 unchanged sentences

Risks Relating to Our Common Stock

The holders of Class B convertible common stock have effective voting control of our company.

We have two classes of common stock:

common stock and Class B convertible common stock.

The holders of common stock are entitled to one vote for each share held, while the holders of Class B convertible common stock are entitled to 10 votes for each share held.

The ownership of Class B convertible common stock is highly concentrated, and holders of Class B convertible common stock effectively can cause the election of directors and the approval/or disapproval of other matters requiring stockholder approval.

Ruta Zandman, the wife of the late founder of our technology, Dr.

Felix Zandman, controls the voting of, solely or on a shared basis with Marc Zandman (the Chairman of our Board of Directors) and Ziv Shoshani (our Chief Executive Officer and a member of our Board of Directors), approximately 76.9% of our Class B convertible common stock, representing 34.5% of the total voting power of our capital stock as of December 31, 2020.

Holders of our Class B convertible common stock may act in ways that are contrary to, or not in the best interests of, holders of our common stock.

The voting rights of the holders of our Class B convertible common stock effectively give such holders the ability to prevent transactions that would result in a change in control of us, including transactions in which holders of our common stock might otherwise receive a premium for their shares over the then-current market price.

Certain provisions of our certificate of incorporation and bylaws may reduce the likelihood of any unsolicited acquisition proposal or potential change of control that you might consider favorable.

Our bylaws contain provisions that could be considered “anti-takeover” provisions because they make it harder for a third party to acquire us without the consent of our incumbent board of directors.

Under these by-law provisions:

• stockholders may not change the size of the board of directors or, except in limited circumstances, fill vacancies on the board of directors;

• stockholders may not call special meetings of stockholders;

• stockholders must comply with advance notice provisions for nominating directors or presenting other proposals at stockholder meetings;

• our Board of Directors, may without stockholder approval, issue preferred shares and determine their rights and terms, including voting rights, or adopt a stockholder rights plan.

These provisions could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring, or preventing a change of control transaction that might involve a premium price or otherwise be considered favorable by our stockholders.

General Risk Factors