10-Q

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One) 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended September 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 1-5005

INTRICON CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	23-1069060
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
1260 Red Fox Road
Arden Hills, Minnesota	55112
(Address of principal executive offices)	(Zip Code)

(651) 636-9770

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, par value $1.00 per share	IIN	Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of outstanding shares of the registrant’s common stock, $1.00 par value, on October 31, 2019 was 8,778,963. 

 1

INTRICON CORPORATION

I N D E X

			Page Numbers
PART I: FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Condensed Balance Sheets (Unaudited) as of September 30, 2019 and December 31, 2018	3
		Consolidated Condensed Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	4
		Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	5
		Consolidated Condensed Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2019 and 2018	6
		Consolidated Condensed Statements of Equity (Unaudited) for the Nine Months Ended September 30, 2019 and 2018	7
		Notes to Consolidated Condensed Financial Statements (Unaudited)	8-20
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21-31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
	Item 4.	Controls and Procedures	31
PART II: OTHER INFORMATION
	Item 1.	Legal Proceedings	32
	Item 1A.	Risk Factors	32
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
	Item 3.	Defaults Upon Senior Securities	32
	Item 4.	Mine Safety Disclosures	32
	Item 5.	Other Information	32
	Item 6.	Exhibits	33
	Signatures		34

 2

PART I: FINANCIAL INFORMATION

ITEM 1. Financial Statements 

INTRICON CORPORATION

Consolidated Condensed Balance Sheets

(In Thousands, Except Per Share Amounts)

	September 30,			December 31,
	2019			2018
	(Unaudited)			(Unaudited)
Current assets:
Cash, cash equivalents and restricted cash	$	8,688		$	8,047
Short-term investments		20,315			38,093
Accounts receivable, less allowance for doubtful accounts of $306 at September 30, 2019 and $807 at December 31, 2018		8,425			11,266
Inventories		17,883			18,163
Contract assets		8,513			5,624
Other current assets		2,290			2,146
Current assets of discontinued operations		239			1,205
Total current assets		66,353			84,544
Machinery and equipment		40,525			36,725
Less: Accumulated depreciation		26,867			25,303
Net machinery and equipment		13,658			11,422
Goodwill		9,551			10,808
Intangible assets, net		—			2,585
Operating lease right of use assets, net		4,749			—
Investment in partnerships		1,409			2,091
Long-term investments		13,764			—
Other assets, net		6,196			3,427
Noncurrent assets of discontinued operations		—			371
Total assets	$	115,680		$	115,248
Current liabilities:
Current financing leases	$	108		$	—
Current operating leases		1,790			—
Accounts payable		11,407			12,871
Accrued salaries, wages and commissions		3,063			4,409
Other accrued liabilities		4,033			4,031
Liabilities of discontinued operations		393			336
Total current liabilities		20,794			21,647
Noncurrent financing leases		55			—
Noncurrent operating leases		3,296			—
Other postretirement benefit obligations		343			377
Accrued pension liabilities		725			706
Other long-term liabilities		1,162			544
Total liabilities		26,375			23,274
Commitments and contingencies
Shareholders’ equity:
Common stock, $1.00 par value per share; 20,000 shares authorized; 8,778 and 8,664 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		8,778			8,664
Additional paid-in capital		86,358			84,999
Accumulated deficit		(5,054	)		(509	)
Accumulated other comprehensive loss		(524	)		(927	)
Total shareholders’ equity		89,558			92,227
Non-controlling interest		(253	)		(253	)
Total equity		89,305			91,974
Total liabilities and equity	$	115,680		$	115,248

(See accompanying notes to the consolidated condensed financial statements)

 3

INTRICON CORPORATION

Consolidated Condensed Statements of Operations

(In Thousands, Except Per Share Amounts)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue, net	$	26,893		$	29,566		$	85,800		$	83,590
Cost of goods sold		20,120			20,236			62,253			56,435
Gross profit		6,773			9,330			23,547			27,155
Operating expenses:
Sales and marketing		2,609			2,784			9,071			8,023
General and administrative		3,715			2,921			10,551			8,429
Research and development		840			1,251			2,902			3,693
Impairment loss (Note 10)		—			—			3,765			—
Total operating expenses		7,164			6,956			26,289			20,145
Operating income (loss)		(391	)		2,374			(2,742	)		7,010
Interest income (expense), net		240			(48	)		703			(453	)
Other expense, net		(52	)		(221	)		(458	)		(650	)
Income (loss) from continuing operations before income taxes and discontinued operations		(203	)		2,105			(2,497	)		5,907
Income tax expense (benefit)		87			(97	)		334			358
Income (loss) from continuing operations before discontinued operations		(290	)		2,202			(2,831	)		5,549
Loss on disposal of discontinued operations (Note 3)		—			—			(1,116	)		—
Loss from discontinued operations, net of income taxes (Note 3)		—			(299	)		(597	)		(870	)
Net income (loss)	$	(290	)	$	1,903		$	(4,544	)	$	4,679
Basic income (loss) per share:
Continuing operations	$	(0.03	)	$	0.28		$	(0.32	)	$	0.77
Discontinued operations		—			(0.04	)		(0.20	)		(0.12	)
Net income (loss) per share:	$	(0.03	)	$	0.24		$	(0.52	)	$	0.65
Diluted income (loss) per share:
Continuing operations	$	(0.03	)	$	0.25		$	(0.32	)	$	0.66
Discontinued operations		—			(0.03	)		(0.20	)		(0.10	)
Net income (loss) per share:	$	(0.03	)	$	0.22		$	(0.52	)	$	0.56
Average shares outstanding:
Basic		8,764			7,825			8,738			7,249
Diluted		8,764			8,822			8,738			8,360

(See accompanying notes to the consolidated condensed financial statements)

 4

INTRICON CORPORATION

Consolidated Condensed Statements of Comprehensive Income (Loss)

 (In Thousands)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2019			2018			2019			2018
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net income (loss)	$	(290	)	$	1,903		$	(4,544	)	$	4,679
Realized foreign currency translation loss from discontinued operations previously unrealized, net of taxes of $0		—			—			280			—
Unrealized foreign currency translation adjustment from continuing operations, net of taxes of $0		9			9			(10	)		(171	)
Interest rate swap, net of taxes of $0		—			(4	)		—			(1	)
Investment in partnerships, net of taxes of $0		—			—			118			—
Pension and postretirement obligations, net of taxes of $0		5			5			15			15
Comprehensive income (loss)	$	(276	)	$	1,913		$	(4,141	)	$	4,522

(See accompanying notes to the consolidated condensed financial statements)

 5

INTRICON CORPORATION
Consolidated Condensed Statements of Cash Flows
(In Thousands)
	Nine Months Ended
	September 30,			September 30,
	2019			2018
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	(4,544	)	$	4,679
Loss from discontinued operations, net of tax		1,713			870
Income (loss) from continuing operations		(2,831	)		5,549
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:
Depreciation and amortization		2,448			2,107
Impairment loss		3,765			—
Equity in loss of partnerships		206			300
Stock-based compensation		1,514			1,025
Change in allowance for doubtful accounts		(501	)		368
Changes in operating assets and liabilities:
Accounts receivable		3,394			(5,110	)
Inventories		110			(4,856	)
Contract assets		(2,889	)		(3,345	)
Other assets		(165	)		(391	)
Accounts payable		(1,773	)		2,722
Accrued expenses		(1,372	)		49
Other liabilities		(123	)		(146	)
Net cash provided by (used in) operating activities of continuing operations		1,783			(1,728	)
Net cash (used in) operating activities of discontinued operations		(24	)		(984	)
Net cash provided by (used in) operating activities		1,759			(2,712	)
Cash flows from investing activities:
Purchases of machinery and equipment		(3,787	)		(3,496	)
Payments for acquisition of other assets		(696	)		—
Purchase of investment securities		(40,590	)		—
Proceeds from sale of investment securities		38,015			—
Proceeds from maturities of investment securities		6,425			—
Investment in partnerships		(296	)		(843	)
Net cash (used in) investing activities of continuing operations		(929	)		(4,339	)
Net cash (used in) investing activities of discontinued operations		(16	)		—
Net cash (used in) investing activities		(945	)		(4,339	)
Cash flows from financing activities:
Proceeds from long-term debt		—			14,195
Repayments of long-term debt		—			(25,539	)
Proceeds from issuance of common stock, net of costs		—			88,967
Payments for repurchase of common stock and related costs		—			(25,907	)
Payment of financing leases		(82	)		—
Exercise of stock options and employee stock purchase plan shares		263			584
Withholding of common stock upon vesting of restricted stock units		(304	)		—
Net cash provided by (used in) financing activities		(123	)		52,300
Effect of exchange rate changes on cash of continuing operations		(46	)		(24	)
Effect of exchange rate changes on cash of discontinued operations		(4	)		(2	)
Effect of exchange rate changes on cash		(50	)		(26	)
Net increase in cash		641			45,223
Cash, cash equivalents and restricted cash, beginning of period		8,047			1,017
Cash, cash equivalents and restricted cash, end of period	$	8,688		$	46,240
Non-cash investing and financing:
Acquisition of machinery and equipment in accounts payable	$	305		$	2,098
Investment in partnership through liability incurred		—			86
Fitting software other asset through liabilities incurred and exchange of investment in partnership		3,093			—

 (See accompanying notes to the consolidated condensed financial statements)

 6

INTRICON CORPORATION

Consolidated Condensed Statements of Equity

 (In Thousands)

	Shareholders’ Equity, Nine Months Ended September 30, 2019 (Unaudited)
	Common Stock Number of Shares			Common Stock Amount			Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total Equity
Balance December 31, 2018		8,664		$	8,664		$	84,999		$	(509	)	$	(927	)	$	(253	)	$	91,974
Exercise of stock options, net		27			27			(9	)		—			—			—			18
Withholding of common stock upon vesting of restricted stock units		20			20			(255	)		—			—			—			(235	)
Shares issued under the employee stock purchase plan		3			3			67			—			—			—			70
Stock-based compensation		—			—			329			—			—			—			329
Net income		—			—			—			775			—			—			775
Comprehensive income		—			—			—			—			130			—			130
Balance March 31, 2019		8,714		$	8,714		$	85,131		$	266		$	(797	)	$	(253	)	$	93,061
Exercise of stock options, net		29			29			22			—			—			—			51
Withholding of common stock upon vesting of restricted stock units		6			6			(6	)		—			—			—			—
Shares issued under the employee stock purchase plan		2			2			48			—			—			—			50
Stock-based compensation		3			3			534			—			—			—			537
Net (loss)		—			—			—			(5,030	)		—			—			(5,030	)
Comprehensive income		—			—			—			—			259			—			259
Balance June 30, 2019		8,754		$	8,754		$	85,729		$	(4,764	)	$	(538	)	$	(253	)	$	88,928
Exercise of stock options, net		12			12			16			—			—			—			28
Withholding of common stock upon vesting of restricted stock units		10			10			(79	)		—			—			—			(69	)
Shares issued under the employee stock purchase plan		2			2			44			—			—			—			46
Stock-based compensation		—			—			648			—			—			—			648
Net (loss)		—			—			—			(290	)		—			—			(290	)
Comprehensive income		—			—			—			—			14			—			14
Balance September 30, 2019		8,778		$	8,778		$	86,358		$	(5,054	)	$	(524	)	$	(253	)	$	89,305
	Shareholders’ Equity, Nine Months Ended September 30, 2018 (Unaudited)
	Common Stock Number of Shares			Common Stock Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Non-Controlling Interest			Total Equity
Balance December 31, 2017		6,900		$	6,900		$	21,581		$	(6,056	)	$	(733	)	$	(253	)	$	21,439
Exercise of stock options, net		41			41			167			—			—			—			208
Shares issued under the employee stock purchase plan		3			3			57			—			—			—			60
Stock-based compensation		—			—			333			—			—			—			333
Net income		—			—			—			757			—			—			757
Comprehensive income		—			—			—			—			86			—			86
Balance March 31, 2018		6,944		$	6,944		$	22,138		$	(5,299	)	$	(647	)	$	(253	)	$	22,883
Exercise of stock options, net		92			92			(37	)		—			—			—			55
Shares issued under the employee stock purchase plan		1			1			54			—			—			—			55
Stock-based compensation		—			—			334			—			—			—			334
Net income		—			—			—			1,992			—			—			1,992
Comprehensive (loss)		—			—			—			—			(252	)		—			(252	)
Balance June 30, 2018		7,037		$	7,037		$	22,489		$	(3,307	)	$	(899	)	$	(253	)	$	25,067
Exercise of stock options, net		377			377			(227	)		—			—			—			150
Shares issued under the employee stock purchase plan		1			1			55			—			—			—			56
Stock-based compensation		—			—			358			—			—			—			358
Issuance of common stock		1,725			1,725			87,242			—			—			—			88,967
Repurchase of common stock		(500	)		(500	)		(25,407	)		—			—			—			(25,907	)
Net income		—			—			—			1,903			—			—			1,903
Comprehensive income		—			—			—			—			10			—			10
Balance September 30, 2018		8,640		$	8,640		$	84,510		$	(1,404	)	$	(889	)	$	(253	)	$	90,604

(See accompanying notes to the consolidated financial statements)

 7

INTRICON CORPORATION

Notes to Consolidated Condensed Financial Statements (Unaudited) (In Thousands, Except Per Share Data)

1. General

In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly IntriCon Corporation’s (“IntriCon” or the “Company”) consolidated financial position as of September 30, 2019 and December 31, 2018, the consolidated results of its operations for the three and nine months ended September 30, 2019 and 2018 and the consolidated statements of equity and cash flows for the nine months ended September 30, 2019 and 2018. Results of operations for the interim periods are not necessarily indicative of the results of operations expected for the full year or any other interim period. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2018 Annual Report on Form 10-K filed with the SEC.

On June 25, 2019, the Company’s officers, pursuant to delegated authority from the board, approved plans to discontinue the operations of its United Kingdom (UK) subsidiary within our body worn device segment. For all periods presented, the Company classified this business as discontinued operations, and accordingly, has reclassified historical financial data presented herein. See Note 3.

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The Company evaluates its voting and variable interests in entities on a qualitative and quantitative basis. The Company consolidates entities in which it concludes it has the power to direct the activities that most significantly impact an entity’s economic success and has the obligation to absorb losses or the right to receive benefits that could be significant to the entity.

The Company has evaluated subsequent events occurring after the date of the consolidated financial statements for events requiring recording or disclosure in the consolidated financial statements.

2. Changes in Accounting Policies

The Company’s significant accounting policies are detailed in “Note 1: Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842). Topic 842 supersedes the lease accounting guidance previously set forth in the Accounting Standards Codification (ASC) Topic 840 “Leases,” and requires lessees to recognize a lease liability and a right-of-use asset (ROU) for all leases that extend beyond one year. The Company adopted Topic 842 with a date of initial application of January 1, 2019, which resulted in a ROU asset and lease liability of approximately $6.0M.

The Company did not apply Topic 842 retrospectively using the transition option in ASU 2018-11, “Targeted Improvements” to ASC 842, to not restate comparative periods in transition and instead to use the effective date of ASC 842, “Leases”, as the date of initial application of transition. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification.

Changes to the Company’s accounting policies as a result of adopting Topic 842 are discussed below:

Short-term lease recognition exemption. The Company adopted the short-term lease recognition exemption as an accounting policy. Accordingly, the Company will not recognize a lease liability and ROU asset for short-term leases in transition and, post-effective date, will continue to recognize short-term leases as expense on a straight-line basis over the lease term. Renewal and purchase options for a lease will be reassessed upon the occurrence of certain discrete reassessment events: (1) the lease term is extended more than 12 months beyond the end of the previously determined lease term or (2) the lessee now concludes that the lessee’s exercise of a purchase option is reasonably certain. When a lease no longer qualifies for the short-term lease exemption, the Company will apply ASC 842 guidance on initial recognition and measurement; the commencement date of the lease for this purpose is the date of the change in circumstances.

 8

Accounting for certain leases at a portfolio level. The Company accounts for leases at a portfolio level when the criteria described below are met and it reasonably expects that the application of the lease model to the portfolio will not differ materially from the application to the individual leases in that portfolio. If the applicable criteria are met, the start of the lease term is expected to be the first of the month. The criteria are: 

1. Leases are similar in nature (e.g. similar underlying asset such as vehicles);

2. Leases have identical or nearly identical contract provisions, including same lessor; and

3. Leases with effective dates that fall within a narrow window of time (month or quarter) and have the same lease term.

For purposes of arriving at the transition adjustment on the effective date, a total of seven vehicle leases were combined into three portfolios.

Combining lease and non-lease components into a single component. The Company elected to adopt this practical expedient for all asset classes. As a result of this election, the consideration included in the lease payments for these asset classes will be greater, resulting in a larger lease liability and ROU asset.

3. Discontinued Operations

On June 25, 2019, the Company’s officers, pursuant to delegated authority from the board, approved plans to discontinue the operations of its UK subsidiary within the body worn device segment. As of September 30, 2019, we continue to settle the remaining assets and liabilities of the subsidiary. The final closing of the UK subsidiary is expected to occur during the fourth quarter of 2019.

At June 30, 2019, the net realizable value of certain assets was less than their carrying value resulting in a loss on disposal of $1.0M. There were no further adjustments made to the net realizable value of assets during the period ended September 30, 2019.

As the disposal meets the definition of a strategic shift in accordance with ASC 205, the results of the UK operations have been classified as loss on discontinued operations, net of income taxes, in the accompanying Consolidated Condensed Statements of Operations, Comprehensive Income (Loss) and Cash Flows. Current assets, noncurrent assets, and liabilities of the discontinued operations have been reclassified and reflected on the accompanying Consolidated Condensed Balance Sheets as “Current assets of discontinued operations,” “Noncurrent assets of discontinued operations,” and “Liabilities of discontinued operations”, respectively. Prior periods relating to our discontinued operations have also been reclassified to reflect consistency within our condensed consolidated financial statements.

The total assets and liabilities of the UK subsidiary at September 30, 2019 and December 31, 2018 were as follows:

	September 30, 2019			December 31, 2018
Accounts receivable, net	$	1		$	213
Inventories		21			818
Other current assets		217			174
Current assets of discontinued operations		239			1,205
Machinery and equipment		—			436
Less: Accumulated depreciation		—			126
Net machinery and equipment		—			310
Other assets, net		—			61
Total assets	$	239		$	1,576
Accounts payable		—			320
Other accrued liabilities		393			16
Current liabilities of discontinued operations		393			336
Net assets (liabilities)	$	(154	)	$	1,240

 9

The loss on disposal of discontinued operations, as a result of the plan to discontinue the operations of the UK, for the nine months ended September 30, 2019 was computed as follows:

Cash and cash equivalents	$	5
Accounts receivable, net		72
Write-down of inventory to net realizable value		278
Write-down of property, plant and equipment to salvage value		298
Other assets and liabilities, net		71
Realized loss on foreign currency		280
Net assets disposed		1,004
Additional disposal costs, net		112
Loss on disposal of discontinued operations	$	1,116

The following table shows the results of the UK subsidiary’s discontinued operations:

	Three Months Ended					Nine Months Ended
	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018
Revenue, net	$	—	$	568		$	1,068		$	2,067
Cost of goods sold		—		373			667			1,296
Gross profit		—		195			401			771
Sales and marketing		—		225			314			706
General and administrative		—		311			684			1,005
Total operating expenses		—		536			998			1,711
Other income, net		—		42			—			70
Loss from discontinued operations, net of taxes	$	—	$	(299	)	$	(597	)	$	(870	)

4. Segment Reporting

The Company currently operates in two reportable segments: body-worn devices and hearing health direct-to-end-consumer (DTEC). The nature of distribution and services has been deemed separately identifiable. Therefore, segment reporting has been applied. The following table summarizes certain data from continuing operations by industry segment:

For the Three Months Ended September 30, 2019	Body Worn Devices		Hearing Health DTEC			Total
Revenue, net	$	25,383	$	1,510		$	26,893
Income (loss) from continuing operations before income taxes and discontinued operations		750		(953	)		(203	)
Depreciation and amortization		712		108			820
Capital expenditures		1,374		54			1,428

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For the Nine Months Ended September 30, 2019		Body Worn Devices		Hearing Health DTEC			Total
Revenue, net	$	80,924	$	4,876		$	85,800
Impairment loss		—		(3,765	)		(3,765	)
Income (loss) from continuing operations before income taxes and discontinued operations		5,106		(7,603	)		(2,497	)
Depreciation and amortization		2,210		238			2,448
Capital expenditures		3,651		136			3,787

For the Three Months Ended September 30, 2018	Body Worn Devices		Hearing Health DTEC			Total
Revenue, net	$	28,076	$	1,490		$	29,566
Income (loss) from continuing operations before income taxes and discontinued operations		3,146		(1,041	)		2,105
Depreciation and amortization		642		55			697
Capital expenditures		1,884		4			1,888

For the Nine Months Ended September 30, 2018	Body Worn Devices		Hearing Health DTEC			Total
Revenue, net	$	78,263	$	5,327		$	83,590
Income (loss) from continuing operations before income taxes and discontinued operations		7,899		(1,992	)		5,907
Depreciation and amortization		1,952		155			2,107
Capital expenditures		3,426		70			3,496

The following table summarizes the identifiable assets (excluding goodwill) and goodwill by industry segment as of the following dates:

	September 30, 2019		December 31, 2018
Body Worn Devices:
Identifiable assets (excluding goodwill)	$	103,158	$	97,725
Goodwill		9,551		9,551
Hearing Health DTEC:
Identifiable assets (excluding goodwill)		2,732		5,139
Goodwill		—		1,257

5. Geographic Information

The geographical distribution of long-lived assets to geographical areas consisted of the following at:

	September 30, 2019		December 31, 2018
United States	$	12,264	$	10,065
Singapore		1,311		1,240
Other		83		117
Consolidated	$	13,658	$	11,422

 11

Long-lived assets consist of machinery and equipment. Excluded from long-lived assets are investments in partnerships, patents, goodwill, operating lease ROU assets and certain other assets. The Company capitalizes long-lived assets pertaining to the production of specialized parts. These assets are periodically reviewed to ensure the net realizable value from the estimated future production based on forecasted cash flows exceeds the carrying value of the assets.

The geographical distribution of net revenue to geographical areas for the three and nine months ended September 30, 2019 and 2018 were as follows:

	Three Months Ended				Nine Months Ended
Net Revenue to Geographical Areas	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
United States	$	22,483	$	25,157	$	71,059	$	70,871
Europe		1,248		1,500		4,480		4,163
Asia		2,780		2,472		9,508		7,639
All other countries		382		437		753		917
Consolidated	$	26,893	$	29,566	$	85,800	$	83,590

Geographic net revenue is allocated based on the location of the customer.

For the three and nine months ended September 30, 2019, one customer accounted for 59% of the Company’s consolidated net revenue. For the three and nine months ended September 30, 2018, one customer accounted for 56% and 57%, respectively, of the Company’s consolidated net revenue.

Two customers combined accounted for 43% and 52% of the Company’s consolidated accounts receivable at September 30, 2019 and December 31, 2018, respectively.

One customer accounted for 84% and 78% of the Company’s consolidated contract assets at September 30, 2019 and December 31, 2018, respectively.

6. Investment in Partnerships

Investment in partnerships consisted of the following:

	September 30, 2019		December 31, 2018
Investment in Signison	$	1,246	$	865
Investment in and cash advance for Soundperience		—		1,022
Other		163		204
Total	$	1,409	$	2,091

The Company has a 50% ownership interest in Signison as of September 30, 2019. Signison is accounted for in the Company’s consolidated financial statements using the equity method.

As of December 31, 2018, the Company held a 49% ownership interest in Soundperience, which was accounted for using the equity method. In January 2019, the Company purchased the source code for the Sentibo Smart Brain self-fitting software from Soundperience in exchange for 1,750 Euros, our 49% ownership in Soundperience and the related license agreement. See Note 9.

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7. Investment Securities

The Company currently invests in commercial paper, US government agencies and corporate notes and bonds with original maturities of not more than two years. The Company classifies these investments as held to maturity based on our intent and ability to hold these investments until maturity. As a result, these investments are recorded at amortized cost, which approximates fair value as of September 30, 2019. As of December 31, 2018, the Company invested in certain liquid investment securities which were classified as available for sale investments and measured at fair value based on Level 1 inputs.

The maturity dates of our investments as of September 30, 2019 are as follows:

	Less than one year		1-5 years		Total
Commercial Paper Original Maturities of 91 Days or More	$	6,824	$	—	$	6,824
US Government Agencies		—		1,900		1,900
Corporate Notes and Bonds		13,491		11,864		25,355
Total Investments	$	20,315	$	13,764	$	34,079

8. Inventories

Inventories consisted of the following at:

	Raw materials		Work-in process		Finished products and components		Total
September 30, 2019
Domestic	$	11,579	$	3,103	$	405	$	15,087
Foreign		2,315		368		113		2,796
Total	$	13,894	$	3,471	$	518	$	17,883
December 31, 2018
Domestic	$	10,657	$	2,484	$	1,583	$	14,724
Foreign		2,671		653		115		3,439
Total	$	13,328	$	3,137	$	1,698	$	18,163

9. Other Assets, Net

Other assets, net consisted of the following at:

	September 30, 2019		December 31, 2018
Fitting Software	$	3,679	$	—
NXP Tech		1,964		2,259
Other		553		1,168
Total	$	6,196	$	3,427

 13

In January 2019, the Company purchased the source code for self-fitting software from Soundperience for 1,750 Euros and also transferred our 49% ownership interest in Soundperience to the majority owner, positioning the Company to capitalize on the upcoming over-the-counter (OTC) hearing aid regulations. The Company has capitalized the self-fitting software within other assets, net based on the cost of the consideration transferred and will begin amortizing the asset when it is placed into service. Included in the capitalized cost of the self-fitting software is $586 of cash paid at closing as well as non-cash amounts of $869 due in future quarterly installments over the next four years, $533 due in January 2023 and $1,691 for the value of the partnership and license agreement transferred. The future payments are due in Euros and the related liabilities will be revalued based on exchange rates as of each reporting period. As of September 30, 2019, outstanding liabilities are $1,260.

10. Goodwill and Intangible Assets

As of and for the period ended June 30, 2019, the fair value of the goodwill within our Hearing Help Express reporting unit was less than its carrying amount and resulted in a non-cash impairment charge on goodwill of $1,257 and intangible assets of $2,508. There were no further adjustments made to the carrying amount of goodwill and intangible assets as of September 30, 2019.

The following summarizes the consolidated carrying amount of goodwill by period:

Carrying amount at December 31, 2018	$	10,808
Impairment of goodwill of Hearing Help Express		(1,257	)
Carrying amount at September 30, 2019	$	9,551

The following summarizes the consolidated carrying amounts of intangible assets by period:

Carrying amount at December 31, 2018	$	2,585
Amortization of intangible assets of Hearing Help Express		(77	)
Impairment of intangible assets of Hearing Help Express		(2,508	)
Carrying amount at September 30, 2019	$	—

11. Leases

The Company’s leases pertain primarily to engineering, manufacturing, sales and administrative facilities, with an initial term of one year or more. The Company has three leased facilities in Minnesota, two that expire in 2022 and one that expires in 2023, one leased facility in Illinois that expires in 2021, one leased facility in Singapore that expires in 2020, one leased facility in Indonesia that expires in 2024, and one leased facility in Germany that expires in 2022.

Certain foreign leases allow for variable lease payments that depend on an index or a market rate adjustment for the respective country and are adjusted on an annual basis. The adjustment is recognized as incurred in profit and loss. The facility leases include options to extend for terms ranging from one to five years. Lease options that the Company is reasonably certain to execute, are included in the determination of the ROU asset and lease liability. Our Indonesia lease includes embedded forward starting leases that will begin in 2022 and 2024 for additional square footage, which will result in the recognition of an additional ROU asset and lease liability in those periods of approximately $103 and $72, respectively. The Company also leases various computer equipment that include bargain purchase options at termination. These leases have been classified as finance leases.

As of September 30, 2019, the Company has a weighted-average lease term of 1.6 years for its finance leases, and 3.3 years for its operating leases. As of September 30, 2019, the Company has a weighted-average discount rate of 5.56% for its finance leases, and 5.25% for its operating leases. Operating cash flows from continuing operations for the nine months ended September 30, 2019 from operating leases were $1,406. Operating cash flows from discontinued operations for the nine months ended September 30, 2019 from operating leases were $84. Non-cash increases for the nine months ended September 30, 2019, to the operating lease ROU assets, lease incentive other assets and lease liabilities from continuing operations were $772, $150, and $922, respectively. During the nine months ended September 30, 2019, we derecognized approximately $761 of non-cash operating lease ROU assets and liabilities from our discontinued operations. Financing lease assets are classified as machinery and equipment within the consolidated balance sheet. Short term leases are not significant.

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The following tables summarizes lease costs by type:

	Three Months Ended  September 30, 2019		Nine Months Ended  September 30, 2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$	27	$	76
Interest on lease liabilities		3		8
Operating lease cost*		462		1,379
Variable lease cost**		138		417
Total lease cost	$	630	$	1,880

*Operating lease cost excludes $0 and $86 related to discontinued operations of the UK for the three and nine months ended September 30, 2019, respectively.

**Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our domestic and foreign building leases, excluding approximately $0 and $11 related to discontinued operations of the UK for the three and nine months ended September 30, 2019, respectively.            

Maturities of lease liabilities are as follows:

	Operating Leases			Financing Leases			Total
2019	$	503		$	29		$	532
2020		1,919			105			2,024
2021		1,588			31			1,619
2022		1,023			3			1,026
2023		416			—			416
2024 and thereafter		93			—			93
Total lease payments		5,542			168			5,710
Less: Interest		(456	)		(5	)		(461	)
Present value of lease liabilities	$	5,086		$	163		$	5,249

As previously disclosed in Note 20 of the Notes to the Consolidated Financial Statements in our 2018 Annual Report on Form 10-K, prior to the adoption of ASU 2016-02, Leases (Topic 842), the future minimum payments required under lease agreements as of December 31, 2018 were 2019 - $2,417; 2020 - $2,255; 2021 - $1,689; 2022 - $950; 2023 - $188.

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12. Income Taxes

Income tax expense (benefit) for the three and nine months ended September 30, 2019 was $87 and $334 compared to ($97) and $358 for the same period in 2018. The expense was largely due to our foreign operations. The Company has net operating loss carryforwards for U.S. federal income tax purposes. Due to the new tax legislation, there are limitations on the use of certain of the carryforwards. The Company has recorded a full valuation allowance against the deferred tax asset as of September 30, 2019.

The following was the income (loss) from continuing operations before income taxes and discontinued operations for each jurisdiction in which the Company has operations for the three and nine months ended September 30, 2019 and 2018.

	Three Months Ended					Nine Months Ended
	September 30, 2019			September 30, 2018		September 30, 2019			September 30, 2018
United States	$	(261	)	$	1,575	$	(3,015	)	$	4,876
Singapore		(90	)		378		131			724
Indonesia		18			18		58			60
Germany		130			134		329			247
Income (loss) from continuing operations before income taxes and discontinued operations	$	(203	)	$	2,105	$	(2,497	)	$	5,907

The Company expects impairment losses to be an adjustment to the net loss for the three and nine months ended September 30, 2019 for income tax purposes.

13. Shareholders’ Equity and Stock-based Compensation

The Company has a 2006 Equity Incentive Plan and a 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan replaced the 2006 Equity Incentive Plan and new grants may not be made under the 2006 Plan.

Under the 2015 Equity Incentive Plan, the Company may grant stock options, stock awards, stock appreciation rights, restricted stock units (“RSUs”) and other equity-based awards. Under all awards, the terms are fixed on the grant date.

The Company granted 4 and 79 RSUs for the three and nine months ended September 30, 2019, respectively. The weighted average closing price of the Company’s common stock on the date of grant was $19.19 and $23.83, respectively, for the RSUs granted in the three and nine months ended September 30, 2019. The RSUs vest in equal, annual installments over a three year period beginning on the first anniversary of the date of grant at which time common stock is issued with respect to vested units.

The Company has also granted stock options under the plans. Options granted under the plans generally vest in equal, annual installments over a three year period beginning on the first anniversary of the date of grant and have a maximum term of 10 years.

Stock award activity as of and during the nine months ended September 30, 2019 was as follows:

	Outstanding Awards									Stock Option  Weighted-
	Stock Options			RSUs			Total			Average Exercise Price (a)		Aggregate Intrinsic Value
Outstanding at December 31, 2018		830			98			928		$	6.25
Forfeited, cancelled or expired		(3	)		—			(3	)		6.42
Granted		—			79			79			—
Exercised or vested		(79	)		(49	)		(128	)		4.87
Outstanding at September 30, 2019		748			128			876		$	6.39	$	12,241
Exercisable at September 30, 2019		670			—			670		$	6.30	$	8,799
Available for future grant at December 31, 2018								249
Available for future grant at September 30, 2019								183

(a) The weighted average exercise price calculation does not include outstanding RSUs                                        

 16

The number of shares available for future grants at September 30, 2019 does not include a total of up to 369 shares subject to options outstanding under the 2006 Equity Incentive Plan, which will become available for grant under the 2015 Equity Incentive Plan as outstanding options under the 2006 Equity Incentive Plan expire, terminate, are cancelled or forfeited or are withheld in a net exercise of such options.

The Company recorded $648 and $1,514 of non-cash stock compensation expense for the three and nine months ended September 30, 2019, respectively. The Company recorded $358 and $1,025 of non-cash stock compensation expense for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019, there was $2,321 of total unrecognized compensation costs related to non-vested stock option and RSU awards that are expected to be recognized over a weighted-average period of 1.99 years. The total intrinsic value of options exercised during the three and nine months ended September 30, 2019 was $196 and $1,609, respectively.

The Company also has an Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan, as amended, through September 30, 2019, provides that a maximum of 300 shares may be sold under the Purchase Plan. There were 2 and 7 shares purchased under the plan for the three and nine months ended September 30, 2019, respectively, and a total of 1 and 5 shares purchased for the three and nine months ended September 30, 2018, respectively.

14. Income Per Share

The following table presents a reconciliation between basic and diluted earnings per share:

	Three Months Ended						Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Numerator:
Income (loss) from continuing operations before discontinued operations	$	(290	)	$	2,202		$	(2,831	)	$	5,549
Loss on disposal of discontinued operations (Note 3)		—			—			(1,116	)		—
Loss from discontinued operations, net of income taxes (Note 3)		—			(299	)		(597	)		(870	)
Net income (loss)	$	(290	)	$	1,903		$	(4,544	)	$	4,679
Denominator:
Basic – weighted shares outstanding		8,764			7,825			8,738			7,249
Weighted shares assumed upon exercise of stock awards		—			997			—			1,111
Diluted – weighted shares outstanding		8,764			8,822			8,738			8,360
Basic income (loss) per share attributable to IntriCon shareholders:
Continuing operations	$	(0.03	)	$	0.28		$	(0.32	)	$	0.77
Discontinued operations		—			(0.04	)		(0.20	)		(0.12	)
Net income (loss) per share:	$	(0.03	)	$	0.24		$	(0.52	)	$	0.65
Diluted income (loss) per share attributable to IntriCon shareholders:
Continuing operations	$	(0.03	)	$	0.25		$	(0.32	)	$	0.66
Discontinued operations		—			(0.03	)		(0.20	)		(0.10	)
Net income (loss) per share:	$	(0.03	)	$	0.22		$	(0.52	)	$	0.56

 17

The dilutive impact summarized above relates to the periods when the average market price of Company stock exceeded the exercise price of the potentially dilutive options. Earnings per common share was based on the weighted average number of common shares outstanding during the periods when computing the basic earnings per share. When dilutive, stock options are included as equivalents using the treasury stock method when computing the diluted earnings per share. Shares represented by RSUs are also included in the dilution calculation. Individual components of basic and diluted income per share may not sum to the total income per share due to rounding.

For the three and nine months ended September 30, 2019, weighted average options and RSU’s outstanding of 755 and 125, and 778 and 125 were excluded from the dilutive calculation, respectively, as their effect would have been antidilutive based on losses in the period.

15. Legal Proceedings

The Company is a defendant along with a number of other parties in lawsuits alleging that plaintiffs have or may have contracted asbestos-related diseases as a result of exposure to asbestos products or equipment containing asbestos sold by one or more named defendants. These lawsuits relate to the discontinued heat technologies segment which was sold in March 2005. Due to the non-informative nature of the complaints, the Company does not know whether any of the complaints state valid claims against the Company. Certain insurance carriers have informed the Company that the primary policies for the period August 1, 1970-1978 have been exhausted and that the carriers will no longer provide defense and insurance coverage under those policies. However, the Company has other primary and excess insurance policies that the Company believes afford coverage for later years. Some of these other primary insurers have accepted defense and insurance coverage for these suits, and some of them have either ignored the Company’s tender of defense of these cases, or have denied coverage, or have accepted the tenders but asserted a reservation of rights and/or advised the Company that they need to investigate further. Because settlement payments are applied to all years a litigant was deemed to have been exposed to asbestos, the Company believes that it will have funds available for defense and insurance coverage under the non-exhausted primary and excess insurance policies. However, unlike the older policies, the more recent policies have deductible amounts for defense and settlements costs that the Company will be required to pay; accordingly, the Company expects that its litigation costs will increase in the future. Further, many of the policies covering later years (approximately 1984 and thereafter) have exclusions for any asbestos products or operations, and thus do not provide insurance coverage for asbestos-related lawsuits. The Company does not believe that the asserted exhaustion of some of the primary insurance coverage for the 1970-1978 period will have a material adverse effect on its financial condition, liquidity, or results of operations. Management believes that the number of insurance carriers involved in the defense of the suits, and the significant number of policy years and policy limits under which these insurance carriers are insuring the Company, make the ultimate disposition of these lawsuits not material to the Company’s consolidated financial position or results of operations.

The Company is also involved in other lawsuits arising in the normal course of business. While it is not possible to predict with certainty the outcome of these matters, management is of the opinion that the disposition of these lawsuits and claims will not materially affect our consolidated financial position, liquidity or results of operations.

16. Related-Party Transactions

The Company uses the law firm of Blank Rome LLP for legal services. A partner of that firm is the son-in-law of the Chairman of the Company’s Board of Directors, however, on May 1, 2019, the Chairman retired from the Company’s Board of Directors. For the three and nine months ended September 30, 2019, the Company paid that firm approximately $63 and $169 for legal services and costs. For the three and nine months ended September 30, 2018, the Company paid that firm approximately $238 and $413, respectively, for legal services and costs. The prior Chairman of our Board of Directors was considered independent under applicable Nasdaq and Securities and Exchange Commission rules because (i) no payments were made to the Chairman or the partner directly in exchange for the services provided by the law firm and (ii) the amounts paid to the law firm did not exceed the thresholds contained in the Nasdaq standards. Furthermore, the aforementioned partner does not provide any legal services to the Company and is not involved in billing matters.

 18

In January 2019, the Company purchased the source code for the Sentibo Smart Brain self-fitting software from Soundperience, an entity in which we owned 49% of the equity, for 1,750 Euros and the transfer back of our 49% ownership interest in Soundperience. See Note 9.

17. Revenue by Market

The following tables set forth, for the periods indicated, timing of revenue recognition by market:

Timing of revenue recognition for the three months ended September 30, 2019:
	Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	—	$	15,723	$	15,723
Other Medical		—		3,376		3,376
Hearing Health:
Value Based DTEC		1,510		—		1,510
Value Based ITEC		2,443		—		2,443
Legacy OEM		2,405		—		2,405
Professional Audio Communications:		1,436		—		1,436
Total Net Revenue	$	7,794	$	19,099	$	26,893

Timing of revenue recognition for the nine months ended September 30, 2019:                        

	Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	—	$	50,837	$	50,837
Other Medical		—		9,947		9,947
Hearing Health:
Value Based DTEC		4,876		—		4,876
Value Based ITEC		7,419		—		7,419
Legacy OEM		7,749		—		7,749
Professional Audio Communications:		4,972		—		4,972
Total Net Revenue	$	25,016	$	60,784	$	85,800
Timing of revenue recognition for the three months ended September 30, 2018:
	Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	—	$	16,662	$	16,662
Other Medical		—		2,694		2,694
Hearing Health:
Value Based DTEC		1,490		—		1,490
Value Based ITEC		3,660		—		3,660
Legacy OEM		3,056		—		3,056
Professional Audio Communications:		2,004		—		2,004
Total Net Revenue	$	10,210	$	19,356	$	29,566

 19

Timing of revenue recognition for the nine months ended September 30, 2018:
	Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	—	$	47,531	$	47,531
Other Medical		—		7,956		7,956
Hearing Health:
Value Based DTEC		5,327		—		5,327
Value Based ITEC		8,923		—		8,923
Legacy OEM		8,500		—		8,500
Professional Audio Communications:		5,353		—		5,353
Total Net Revenue	$	28,103	$	55,487	$	83,590

 20

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Headquartered in Arden Hills, Minnesota, IntriCon Corporation (together with its subsidiaries referred to as the “Company”, “IntriCon,” “we”, “us” or “our”) is an international company engaged in designing, developing, engineering, manufacturing and distributing body-worn devices. In addition to its operations in Minnesota, the Company has facilities in Illinois, Singapore, Indonesia, and Germany.

On June 25, 2019, the Company’s officers, pursuant to delegated authority from the board, approved plans to discontinue the operations of its United Kingdom (UK) subsidiary within our body worn device segment. For all periods presented, the Company classified this business as discontinued operations, and accordingly, has reclassified historical financial data presented herein.

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The Company evaluates its voting and variable interests in entities on a qualitative and quantitative basis. The Company consolidates entities in which it concludes it has the power to direct the activities that most significantly impact an entity’s economic success and has the obligation to absorb losses or the right to receive benefits that could be significant to the entity.

The Company’s significant accounting policies are detailed in “Note 1: Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842). Topic 842 supersedes the lease accounting guidance previously set forth in the Accounting Standards Codification (ASC) Topic 840 “Leases,” and requires lessees to recognize a lease liability and a right-of-use asset for all leases that extend beyond one year. The Company adopted Topic 842 with a date of initial application of January 1, 2019.

Information contained in this section of this Quarterly Report on Form 10-Q and expressed in U.S. dollars is presented in thousands (000s), except for per share data and as otherwise noted. In addition, information in Item 2 excludes discontinued operations unless otherwise noted.

Market Overview

IntriCon serves the body-worn device market by designing, developing, engineering, manufacturing and distributing micro-miniature products, microelectronics, micro-mechanical assemblies, complete assemblies and software solutions, primarily for the medical biotelemetry market, the emerging value based hearing healthcare market, the hearing health direct-to-end-consumer and indirect-to-end-consumer markets and the professional audio communication market. Revenue from markets is reported on the respective medical biotelemetry, hearing health, hearing health direct-to-end-consumer and indirect-to-end-consumer and professional audio lines in the discussion of our results of operations in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 17 “Revenue by Market” to the Company’s consolidated condensed financial statements included herein.

Hearing Healthcare Market

In the United States alone, there are approximately 40 million adults that report some degree of hearing loss. In adults, the most common cause of hearing loss is aging and noise. In fact, by the age of 65, one out of three people have hearing loss. The hearing-impaired population is expected to grow significantly over the next decade due to an aging population and more frequent exposure to loud sounds that can cause noise-induced hearing loss. It is estimated that hearing aids can help more than 90 percent of people with hearing loss, however the current market penetration into the U.S. hearing impaired population is approximately 20 percent, a percentage that has remained essentially unchanged for the last four decades. The primary deterrents to greater penetration are cost and access. Along with this, the legacy hearing aid distribution channel is an oligopoly of six large hearing aid manufacturers who utilize bricks and mortar and licensed audiologists to sell devices while controlling the channel dynamics. As a result, the average cost of a hearing aid sold in the US market today is over $2,400 per device, more than double the cost from fifteen years ago. Approximately 70 percent of the hearing impaired have hearing loss in both ears (referred to as a binaural loss), driving the total cost to almost $5,000 on average for a set of hearing aids.

Today in the US market, the legacy channel pushes all hearing impaired through the same inefficient, costly channel. However, a very large portion of the hearing-impaired market – mostly notably those with mild to moderate losses – could be better served with the proper combination of high quality, outcome-based devices, advanced fitting software and consumer services/care best practices – all at much lower cost. We believe fundamental change is needed and are excited about the opportunity that we created through thoughtful hard work and planning: a chance to deliver superior outcomes-based affordable hearing healthcare, by combining state-of-the-art devices and software technology, along with best practices customer service and at a much lower cost directly to consumers across the country, many of whom have not been able to afford care previously.

We believe a perfect vortex of factors has come together over the last few years to enable the emergence of a market disruptive, high-quality, low cost distribution model. These factors include the continued consolidation of retail (causing escalating hearing aid prices), consumer outcry, consumer education, advancements in technology (such as behind-the-ear devices, advanced digital signal processing, low-power wireless, and self-fitting software) as well as regulatory actions and pronouncements by the U.S. Food and Drug Administration (FDA), the President’s Council of Advisors on Science and Technology and the National Academies of Science, Engineering and Medicine.

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In early January 2016, the FDA weighed in on low hearing aid penetration rates with an announcement that highlighted statistics from the National Institute on Deafness and Other Communication Disorders. They found that 37.5 million U.S. adults aged 18 and older report some form of hearing loss. However, only 30 percent of adults over 70, and 16 percent of those aged 20 to 69, who could benefit from wearing hearing aids, have ever used them. Based on these statistics, the FDA reopened the public comment period on draft guidance related to the agency’s premarket requirements for hearing aids and personal sound amplifiers (PSAPs). In April 2016, the FDA hosted a public workshop to, among other things, gather stakeholder and public input on draft guidance related to the agency’s premarket requirements for hearing aids and PSAPs. The FDA’s intent was to consider ways in which it can most effectively regulate hearing aids to promote accessibility and affordability while encouraging innovation. In December 2016, the FDA announced important steps to better support consumer access to hearing aids. The agency issued a guidance document explaining that it does not intend to enforce the requirement that individuals age 18 and older receive a medical evaluation or sign a waiver prior to purchasing most hearing aids, effective immediately. It also announced its commitment to consider creating a category of over-the-counter (OTC) hearing aids.

Furthermore, there were significant public policy developments during 2017. On August 18, 2017, President Donald Trump signed into law H.R. 2430, the FDA Reauthorization Act of 2017, which included a section concerning the regulation of OTC hearing aids. The law is designed to enable adults with mild to moderate hearing loss to access OTC hearing aids without being seen by a hearing care professional. The law requires the FDA to create and regulate a category of OTC hearing aids to ensure they meet the same high standards for safety, consumer labeling, and manufacturing protection that all other medical devices must meet. Additionally, the law mandates that the FDA establish an OTC hearing aid category for adults with “perceived” mild to moderate hearing loss within three years of passage of the legislation. The FDA also must finalize a rule within 180 days after the close of the comment period, detailing what level of safety, labeling and consumer protections will be included. We believe this law has the potential to remove the significant barriers existing today that prevent innovative hearing health solutions. We believe that this law will invigorate competition, spur innovation and facilitate the development of an ecosystem of hearing health care that provides affordable and accessible solutions to millions of unserved or underserved Americans. Today, IntriCon serves both the value-based hearing healthcare channel and the legacy hearing health channel.

Value-Based Hearing Healthcare

The Company believes the value-based hearing healthcare (VBHH) market offers significant growth opportunities. In contrast to the legacy channel dynamics, the VBHH market channel is flexible and able to serve the end consumer through a variety of modalities which may include self-fitting, remote programing and adjustments, customer support call centers and bricks and mortar stores. The average price of a hearing aid sold through this channel is less than twenty-five percent of the average $2,400 device price typically sold through the legacy channel. The Company recently commissioned an ethnographic research study, which identified a $3+ billion annual VBHH market opportunity, fueled by an immediate addressable market of 6.8 million dissatisfied hearing aid users and 6.6 million current non-hearing aid users. In addition, this study assisted us in identifying our customer, various customer segmentations and personas. To best approach this market opportunity, we have focused our efforts to serve both the value-based Direct-to-End-Consumer (DTEC) and value-based Indirect-to-End-Consumer (ITEC) channels. Over the past decade we have invested in the manufacturing footprint, product technology and fitting software to provide individuals access to affordable, quality outcomes-based hearing healthcare.

Our DTEC represents a channel that sells products and services directly to the end consumer, which today consists of our Hearing Help Express (HHE) business. In December of 2017, we purchased the remaining 80% of HHE, a direct-to-end-consumer mail order hearing aid provider. However, the Company had been preparing to address this market long before the acquisition of HHE and has spent the last decade investing in the technology and low-cost manufacturing to design and build superior devices and fitting solutions. With this acquisition, we believe we now have the channel infrastructure to directly reach consumers and—importantly for millions—the ability to offer high-quality hearing healthcare at a fraction of the cost. The Company’s devices and technologies coupled with HHE’s high-touch care, outcomes based, and hassle free telemedicine model has created a complete eco-system of hearing healthcare in which the Company intends to serve the $3+ billion market. Through our other VBHH initiatives and tests, we have formed alliances with other key partners, which have given us experience and vital insight as we move aggressively into a more consumer-facing role. HHE provides an efficient, direct-to-end-consumer channel to reach consumers who likely do not have insurance covering hearing devices. This is a channel that we can build on and expand via technology—and one that is complementary with many of our existing relationships.

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The Company is also focused on serving its value-based ITEC customers, who also sell products and services directly to the end consumer. We have established ourselves as a leader in supplying this portion of the market with advanced, outcome-based products and accessories. The Company has formed strong relationships with various customers in the channel, including geriatric product retailers and other indirect-to-end-consumer hearing aid providers.

In January 2019, the Company purchased the source code for the Sentibo Smart Brain self-fitting software from Soundperience, positioning the Company to capitalize on the upcoming OTC hearing aid regulations. Sentibo Smart Brain self-fitting software is designed to improve both channel productivity and the quality of first-time fittings, resulting in lower prices, greater access and increased customer satisfaction.

We strongly believe that incorporating self-fitting technology is a critical step in creating our high-quality, low-cost hearing healthcare ecosystem. The Sentibo Smart Brain self-fitting software technology has the potential to drastically reduce the price of hearing aids, drive greater access and increase customer satisfaction.

Legacy Hearing Health Channel

We also believe there are niches in the legacy hearing health channel that will embrace our outcomes-based products and technologies in the United States and Europe. High costs of legacy devices and retail consolidation have constrained the growth potential of the independent audiologist and dispenser. We believe our software and product offering can provide independent audiologists and dispensers the ability to compete with larger retailers, such as Costco, and manufacturer owned retail distributors.

Medical Biotelemetry

In the medical biotelemetry market, the Company is focused on sales of biotelemetry devices for life-critical diagnostic monitoring. The Company manufactures microelectronics, micro-mechanical assemblies, high-precision injection-molded plastic components and complete biotelemetry devices for leading and emerging medical device manufacturers. The medical industry is faced with pressures to reduce the cost of healthcare. Driven by its core technologies, IntriCon helps shift the point of care from expensive traditional settings, such as hospitals, to less expensive non-traditional settings like the home. IntriCon currently serves this market by offering medical manufacturers the capabilities to design, develop, manufacture and distribute medical devices that are easier to use, are more miniature, use less power, and are lighter.

IntriCon currently has a presence in the diabetes, cardiac and surgical navigation markets. For diabetes, IntriCon works with Medtronic to manufacture their wireless continuous glucose monitors (CGM), sensor assemblies, and accessories associated with Medtronic’s insulin pump and standalone CGM system. In September 2016, the FDA approved the MiniMed 670G, the world’s first hybrid closed loop insulin delivery system and we are excited that our components are designed into and support such a revolutionary diabetes management system. In June 2017, the MiniMed 670G was launched in the U.S. and Medtronic began fulfilling orders from patients enrolled in their Priority Access Program. In addition to the continued roll-out in the U.S., we anticipate seeing momentum of continuous glucose monitoring adoption and increased penetration in international markets commencing in the next few months following clearance in Germany, and other targeted EU countries. On the standalone CGM front, in March 2018, the FDA approved the Guardian Connect, Medtronic’s standalone CGM system that allows patients to stay ahead of high and low glucose events. Looking ahead, we believe there are opportunities to expand our diabetes product offering with Medtronic, as well as move into new markets outside of the diabetes market.

IntriCon has a suite of medical coils and micro coils that it offers to various original equipment manufacturing (OEM) customers. These products are currently used in pacemaker programming and interventional catheter positioning applications. In 2019, we secured a new large medical customer for our proprietary medical coils to be used for pacemaker programming in their devices.

IntriCon manufactures bubble sensors and flow restrictors that monitor and control the flow of fluid in an intravenous infusion system as well as a family of safety needle products for an OEM customer that utilizes IntriCon’s insert and straight molding capabilities. These products are assembled using full automation, including built-in quality checks within the production lines.

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Throughout 2018, we expanded our infrastructure to support anticipated growth from current medical biotelemetry customers and future growth from increased business development. Expansion efforts in 2018 included a newly leased 37,000-square-foot medical biotelemetry manufacturing and clean room facility in Minnesota, an additional 10,000-square-foot medical assembly space in Singapore, 13 new molding presses and a high-speed printed circuit board assembly line. In addition to these investments, our current customers invested several million dollars in tooling and automation within our facilities. While we have begun limited production on certain products in our new facilities, we are still working with current medical biotelemetry customers to complete required validation and qualification of several key production lines.

The Company is committed to increasing investments to support its medical biotelemetry business development efforts. In early 2019, the Company hired a vice president of medical business development to leverage our core competencies and diversify our medical revenue base. The Company believes it has significant opportunities to serve the emerging biotelemetry and home care markets through its already developed core competencies and capabilities to develop devices that are more technologically advanced, smaller and lightweight.

Professional Audio Communications

IntriCon entered the high-quality audio communication device market in 2001, and now has a line of miniature, professional audio headset products used by customers focusing on emergency response needs. The line includes several communication devices that are extremely portable and perform well in noisy or hazardous environments. These products are well suited for applications in the fire, law enforcement, safety, aviation and military markets. In addition, the Company has a line of miniature ear- and head-worn devices used by performers and support staff in the music and stage performance markets.

Core Technologies Overview:

Our core technologies expertise is focused on four main markets: medical biotelemetry, hearing health, hearing health direct-to-end-consumer and professional audio communications. Over the past several years, the Company has increased investments in the continued development of five critical core technologies: Ultra-Low-Power (ULP) Digital Signal Processing (DSP), ULP Wireless, Fitting Software, Microminiaturization, and Miniature Transducers. These five core technologies serve as the foundation of current and future product platform development, designed to meet the rising demand for smaller, portable, more advanced devices and the need for greater efficiencies in the delivery models. The continued advancements in this area have allowed the Company to further enhance the mobility and effectiveness of miniature body-worn devices.

ULP DSP

DSP converts real-world analog signals into a digital format. Through our nanoDSP™ technology, IntriCon offers an extensive range of ULP DSP amplifiers for hearing, medical and professional audio applications. Our proprietary nanoDSP incorporates advanced ultra-miniature hardware with sophisticated signal processing algorithms to produce devices that are smaller and more effective. The Company further expanded its DSP portfolio including improvements to its Reliant CLEAR™ feedback canceller, offering increased added stable gain and faster reaction time. Additionally, the DSP technologies are utilized in the Audion8™, our eight-channel hearing aid amplifier, and the Audion16™, our wide dynamic range compression sixteen-channel hearing aid amplifier. The amplifiers are feature-rich and are designed to fit a wide array of applications. In addition to multiple compression channels, the amplifiers have a complete set of proven adaptive features which greatly improve the user experience.

ULP Wireless

Wireless connectivity is fast becoming a required technology, and wireless capabilities are especially critical in new body-worn devices. IntriCon’s platform of wireless technology offers solutions for transmitting the body’s activities to caregivers and wireless audio links for professional communications and surveillance products, including diabetes monitoring and audio streaming for hearing devices.

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IntriCon has completed the commercialization of the third generation of Physiolink (Physiolink 3) wireless technology, which will be incorporated into product platforms serving the medical biotelemetry, hearing health, hearing health direct-to-end-consumer and professional audio communication markets. This system is based on 2.4GHz proprietary digital radio protocol in the industrial-scientific-medical (ISM) frequency band and enables audio and data streaming and command and control to ear-worn and body-worn applications over distances of up to ten meters. The Physiolink 3 technology can be used to increase productivity in the emerging VBHH channels through in office wireless programming, remote cloud based fitting and consumer directed self-fitting of hearing aids. This will provide both greater access and lower costs for patients. In addition, remote control functions will improve the patient experience while using the device especially for those with diminished dexterity. The Physiolink 3 technology builds on the Physiolink 2 capabilities by adding wireless streaming at, what we believe, are much lower power levels than any technology currently on the market. This will allow for accessories to enhance the user experience in noisy environments by allowing audio streaming directly to the hearing aid.

Fitting Software

The ability to efficiently and effectively fit hearing aids is critical to building a value based eco-system of hearing healthcare. By developing more advanced fitting software systems, individuals can benefit from fittings that conform to their specific loss, while eliminating the need for an in-person appointment. In addition to the traditional fitting software, IntriFit, used in the conventional channel, IntriCon has made significant investments in various advanced fitting software solutions, including its purchase of the source code for the Sentibo Smart Brain self-fitting software, that can enable remote and self-fitting solutions. IntriCon believes these advanced fitting solutions, along with the other components of the eco-system, will drive access, affordability and superior customer satisfaction to the millions of individuals that cannot receive care today, primarily due to high cost and low access.

In January 2019, the Company purchased the source code for the Sentibo Smart Brain self-fitting software from Soundperience. The Sentibo Smart Brain System is the first psycho-acoustic way of analyzing peripheral hearing and central hearing processing. It was developed by an international research team based on the latest scientific findings from the fields of audiology and brain research. We believe this software technology is a critical component to our domestic value-based hearing healthcare model. Sentibo, as well as our other proprietary fitting systems, are designed to improve both channel productivity and the quality of first-time fittings, resulting in lower prices, greater access and increased customer satisfaction. IntriCon expects to expand its advanced fitting solutions in select domestic VBHH channels in 2020.

Microminiaturization

IntriCon excels at miniaturizing body-worn devices. We began honing our microminiaturization skills over 30 years ago, supplying components to the hearing health industry. Our core miniaturization technology allows us to make devices for our markets that are one cubic inch and smaller. We also are specialists in devices that run on very low power, as evidenced by our ULP wireless and DSP. Less power means a smaller battery, which enables us to reduce size even further, and develop devices that fit into the palm of one’s hand.

Miniature Transducers

IntriCon’s advanced transducer technology has been pushing the limits of size and performance for over a decade. Included in our transducer line are our miniature medical coils and micro coils used in pacemaker programming and interventional catheter positioning applications. We believe that with the increase of greater interventional care, our coil technology harbors significant value.

Forward-Looking and Cautionary Statements

Certain statements included in this Quarterly Report on Form 10-Q or documents the Company files with the Securities and Exchange Commission, which are not historical facts, or that include forward-looking terminology such as “may”, “will”, “believe”, “anticipate”, “expect”, “should”, “optimistic” “continue”, “estimate”, “intend”, “plan”, “would”, “could”, “guidance”, “potential”, “opportunity”, “project”, “forecast”, “confident”, “projections”, “schedule”, “designed”, “future”, “discussion”, “if” or the negative thereof or other variations thereof, are forward-looking statements (as such term is defined in Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933, and the regulations thereunder), which are intended to be covered by the safe harbors created thereby. These statements may include, but are not limited to statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to the Company’s Condensed Consolidated Financial Statements” such as net operating loss carryforwards, the ability to meet cash requirements for operating needs, the ability to meet liquidity needs, assumptions used to calculate future level of funding of employee benefit plans, the adequacy of insurance coverage and the impact of new accounting pronouncements and litigation. Forward-looking statements also include, without limitation, statements as to the Company’s expected future results of operations and growth, strategic alliances and their benefits, government regulation, potential increases in demand for the Company’s products, the Company’s ability to meet working capital requirements, the Company’s business strategy, the expected increases in operating efficiencies, anticipated trends in the Company’s markets, estimates of goodwill impairments and amortization expense of other intangible assets, the effects of litigation and the amount of insurance coverage, and statements as to trends or the Company’s or management’s beliefs, expectations and opinions.

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Forward-looking statements are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially from those in the forward-looking statements. In addition to the factors discussed in this Quarterly Report on Form 10-Q, certain risks, uncertainties and other factors can cause actual results and developments to be materially different from those expressed or implied by such forward-looking statements, including, without limitation, the following:

▪ our ability to successfully implement our business and growth strategy;

▪ the volume and timing of orders received by the Company, particularly from Medtronic;

▪ changes in estimated future cash flows;

▪ our ability to collect our accounts receivable;

▪ foreign currency movements in markets that we serve;

▪ changes in the global economy and financial markets;

▪ weakening demand for our products due to general economic conditions;

▪ changes in the mix of products sold;

▪ our ability to meet demand;

▪ changes in customer requirements;

▪ FDA approval, timely release and acceptance of our products and the products of our customers;

▪ competitive pricing pressures;

▪ pending and potential future litigation;

▪ cost and availability of electronic components and commodities for our products;

▪ our ability to create and market products in a timely manner and develop products that are inexpensive to manufacture;

▪ the loss of one or more of our major customers;

▪ our ability to identify, complete and integrate acquisitions;

▪ effects of legislation and regulation, including the final OTC regulations;

▪ effects of foreign operations;

▪ our ability to develop new products;

▪ our ability to recruit and retain engineering and technical personnel;

▪ the costs and risks associated with research and development investments;

▪ our ability and the ability of our customers to protect intellectual property;

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▪ cybersecurity threats;

▪ loss of members of our senior management team; and

▪ other risk factors set forth in our most recent Annual Report on Form 10-K or any prior Quarterly Report on Form 10-Q, which are incorporated by reference into this Report.

For a description of these and other risks, see Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and other risks described elsewhere in this Quarterly Report on Form 10-Q, or in other filings the Company makes from time to time with the Securities and Exchange Commission. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period.

Certain accounting estimates and assumptions are particularly sensitive because their significance to the consolidated condensed financial statements and the possibility that future events affecting them may differ markedly. The accounting policies of the Company with significant estimates and assumptions include the Company’s revenue recognition, accounts receivable reserves, inventory valuation, goodwill, long-lived assets, deferred taxes policies, employee benefit obligations, lease assets and liabilities and investment securities. These and other significant accounting policies are described in and incorporated by reference from “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 1 to the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Results of Operations

Revenue, net

Below is a summary of our revenue by main markets for the three and nine months ended September 30, 2019 and 2018:

					Change
Three Months Ended September 30	2019		2018		Dollars			Percent
Medical Biotelemetry:
Diabetes	$	15,723	$	16,662	$	(939	)		-5.6%
Other Medical		3,376		2,694		682			25.3%
Total	$	19,099	$	19,356	$	(257	)		-1.3%
Hearing Health:
Value Based DTEC	$	1,510	$	1,490	$	20			1.3%
Value Based ITEC		2,443		3,660		(1,217	)		-33.3%
Legacy OEM		2,405		3,056		(651	)		-21.3%
Total	$	6,358	$	8,206	$	(1,848	)		-22.5%
Professional Audio Communications	$	1,436	$	2,004	$	(568	)		-28.3%
Total Net Revenue	$	26,893	$	29,566	$	(2,673	)		-9.0%

					Change
Nine Months Ended September 30	2019		2018		Dollars			Percent
Medical Biotelemetry:
Diabetes	$	50,837	$	47,531	$	3,306			7.0%
Other Medical		9,947		7,956		1,991			25.0%
Total	$	60,784	$	55,487	$	5,297			9.5%
Hearing Health:
Value Based DTEC	$	4,876	$	5,327	$	(451	)		-8.5%
Value Based ITEC		7,419		8,923		(1,504	)		-16.9%
Legacy OEM		7,749		8,500		(751	)		-8.8%
Total	$	20,044	$	22,750	$	(2,706	)		-11.9%
Professional Audio Communications	$	4,972	$	5,353	$	(381	)		-7.1%
Total Net Revenue	$	85,800	$	83,590	$	2,210			2.6%

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For the three months ended September 30, 2019, we experienced a decrease of 5.6% in net revenue in the diabetes medical biotelemetry market compared to the same period in 2018 driven by the timing of certain international orders filtering through various local regulatory requirements. For the nine months ended September 30, 2019, we experienced an increase of 7.0% in net revenue in the diabetes medical biotelemetry market compared to the same period in 2018 driven by market share growth for legacy products and the introduction of new products. IntriCon currently serves this market by offering medical manufacturers the capabilities to design, develop and manufacture medical devices that are easier to use, are more miniature, use less power, and are lighter. IntriCon has a strong presence in the diabetes market with its Medtronic partnership. The Company believes there are growth opportunities in this market as well as other emerging biotelemetry and home care markets that could benefit from its capabilities to develop devices that are more technologically advanced, smaller and lightweight.

All other medical net revenue for the three and nine months ended September 30, 2019 increased 25.3% and 25.0%, respectively, compared to the same period in 2018. The increase was driven by the addition of a new customer in our medical coils business.

Net revenue in our hearing health value based direct-to-end-consumer (DTEC) business for the three and nine months ended September 30, 2019 increased 1.3% and decreased 8.5%, respectively, compared to the same period in 2018 due to timing of orders and sales mix.

Net revenue in our hearing health value based indirect-to-end-consumer (ITEC) business for the three and nine months ended September 30, 2019 decreased 33.3% and 16.9%, respectively, compared to the same period in 2018. The revenue decline during the third quarter was largely attributed to restructuring activities within a large insurance customer’s hearing health business, as they pivot towards a more traditional “brick-and-mortar” approach that no longer aligns with our partnership strategy to reach the end customer.

Net revenue in our hearing health legacy OEM business for the three and nine months ended September 30, 2019 decreased 21.3% and 8.8%, respectively, compared to the same period in 2018 due to sales mix.

Net revenue to the professional audio device sector decreased 28.3% and 7.1% for the three and nine months ended September 30, 2019, respectively, compared to the same period in 2018. IntriCon will continue to leverage its core technology in professional audio to support existing customers, as well as pursue related hearing health and medical product opportunities.

Gross profit

Gross profit, both in dollars and as a percent of revenue, for the three and nine months ended September 30, 2019 and 2018, was as follows:

	2019				2018				Change
			Percent				Percent
Three Months Ended September 30	Dollars		of Revenue		Dollars		of Revenue		Dollars			Percent
Gross Profit	$	6,773		25.2%	$	9,330		31.6%	$	(2,557	)		-27.4%

	2019				2018				Change
			Percent				Percent
Nine Months Ended September 30	Dollars		of Revenue		Dollars		of Revenue		Dollars			Percent
Gross Profit	$	23,547		27.4%	$	27,155		32.5%	$	(3,608	)		-13.3%

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The 2019 gross profit decreased over the comparable prior year period primarily due to the ongoing validation and qualification expense as well as excess capacity related to the recent manufacturing expansion to meet the higher volume requirements of our existing and future customers.

Sales and Marketing, General and Administrative and Research and Development Expenses

Sales and marketing, general and administrative and research and development expenses for the three and nine months ended September 30, 2019 and 2018 were as follows:

	2019				2018				Change
			Percent				Percent
Three Months Ended September 30	Dollars		of Revenue		Dollars		of Revenue		Dollars			Percent
Sales and Marketing	$	2,609		9.7%	$	2,784		9.4%	$	(175	)		-6.3%
General and Administrative		3,715		13.8%		2,921		9.9%		794			27.2%
Research and Development		840		3.1%		1,251		4.2%		(411	)		-32.9%

	2019				2018				Change
			Percent				Percent
Nine Months Ended September 30	Dollars		of Revenue		Dollars		of Revenue		Dollars			Percent
Sales and Marketing	$	9,071		10.6%	$	8,023		9.6%	$	1,048			13.1%
General and Administrative		10,551		12.3%		8,429		10.1%		2,122			25.2%
Research and Development		2,902		3.4%		3,693		4.4%		(791	)		-21.4%

Sales and marketing expense for the three months ended September 30, 2019 was $2,609 compared to $2,784 for the comparable period in 2018. The decrease was due to lower DTEC marketing, support costs and wages. Sales and marketing expense for the nine months ended September 30, 2019 was $9,071 compared to $8,023 for the comparable period in 2018. The increase was primarily due to additional support costs and wages. General and administrative expenses were greater than the prior year periods primarily due to increased other outside services, support costs, non-cash stock compensation and severance expense. Research and development decreased over the prior year periods due to a reduction in outside service and support costs.

Impairment loss

Impairment loss for the three and nine months ended September 30, 2019 was $0 and $3,765, respectively. There were no impairment losses identified for the comparable prior year periods. The impairment losses related to a write-off of goodwill and intangible assets due to negative cash flows within our Hearing Help Express reporting unit.

Interest income (expense), net

Interest income (expense), net for the three and nine months ended September 30, 2019 was $240 and $703 compared to ($48) and ($453) for the comparable three and nine month periods in 2018. This increase was due to the payoff of all of our credit facility debt in 2018 which reduced our interest expense along with interest income earned in the current year on our investment accounts.

Other expense, net

Other expense, net for the three and nine months ended September 30, 2019 was $52 and $458 compared to $221 and $650 for the same period in 2018.

Income tax expense (benefit)

Income tax expense (benefit) for the three and nine months ended September 30, 2019 was $87 and $334 compared to ($97) and $358 for the same period in 2018.

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Liquidity and Capital Resources

As of September 30, 2019, we had $8,688 of cash on hand. Sources of our cash for the nine months ended September 30, 2019 have been from our operating activities, as described below. The Company’s cash flows from operating, investing and financing activities, as reflected in the statement of cash flows, are summarized as follows:

	Nine Months Ended
	September 30, 2019			September 30, 2018
Cash provided by (used in) from continuing operations:
Operating activities	$	1,783		$	(1,728	)
Investing activities		(929	)		(4,339	)
Financing activities		(123	)		52,300
Effect of exchange rate changes on cash		(46	)		(24	)
Net increase in cash from continuing operations	$	685		$	46,209

The most significant items that contributed to the $1,783 of cash provided by operating activities were non-cash add backs for impairment loss, depreciation and amortization and stock-based compensation expense, as well as a decrease in accounts receivable and inventory partially offset by decreases in accounts payable and accrued expenses as well as increases in contract assets.

Net cash used in investing activities of ($929) primarily consisted of purchases of machinery and equipment, investment securities and other assets along with our investments in partnerships partially offset by proceeds from sale and maturity of investment securities.

Net cash used in financing activities of ($123) was comprised primarily from the withholding of shares from vesting RSU awards to pay withholding taxes and the payment of financing leases partially offset by cash received from the exercise of stock options and employee stock purchase plan shares.

The Company had the following bank arrangements:

Domestic Credit Facilities

The Company and its domestic subsidiaries are parties to a credit facility with CIBC Bank USA. The credit facility, as amended through September 30, 2019, provides for a $7,000 revolving credit facility, with a $200 sub facility for letters of credit. Under the revolving credit facility, the availability of funds depends on a borrowing base composed of stated percentages of the Company’s eligible trade receivables and eligible inventory, and eligible equipment less a reserve. The credit facility matures on December 15, 2022.

On April 17, 2019, the Company entered into a Thirteenth Amendment to the Loan and Security Agreement with CIBC Bank USA which: reduced our borrowing capacity to its current $7,000 level; lessened restrictions surrounding acquisitions, business investments, distributions and disposition of assets; eliminated the mandatory prepayment requirement with respect to proceeds from asset sales and capital and debt financings; and eliminated the annual capital expenditure covenant.

We obtained a waiver for our failure to meet the fixed charge coverage ratio covenant in the credit facility as of September 30, 2019. After giving effect to the waiver, the Company was in compliance with all applicable covenants under the credit facility as of September 30, 2019.

Foreign Credit Facility

In addition to its domestic credit facilities, the Company’s wholly-owned subsidiary, IntriCon, PTE LTD., has an international senior secured credit agreement with Oversea-Chinese Banking Corporation Ltd. that provides for an asset-based line of credit. Borrowings bear interest at a rate of .75% to 2.5% over the lender’s prevailing prime lending rate.

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Capital Adequacy

We believe that funds raised from our August 2018 public offering, funds expected to be generated from operations and funds available under our revolving credit loan facility will be sufficient to meet our anticipated cash requirements for operating needs for at least the next 12 months. While management believes that we will be able to meet our liquidity needs for at least the next 12 months, no assurance can be given that we will be able to do so.

As of September 30, 2019, and December 31, 2018, the Company had a total borrowing capacity of $10,572 and $13,884, respectively, with no borrowings outstanding at each reporting period.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

ITEM 4. Controls and Procedures

The Company’s management, with the participation of its chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), as of September 30, 2019 (the “Disclosure Controls Evaluation”). Based on the Disclosure Controls Evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective to provide a reasonable level of assurance that: (i) information required to be disclosed by the Company in the reports the Company files or submits under the Securities Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed in the reports the Company files or submits under Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, all in accordance with Exchange Act Rule 13a-15(e).

There were no changes in our internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings

The information contained in Note 15 to the Consolidated Condensed Financial Statements in Part I of this quarterly report is incorporated by reference herein.

ITEM 1A. Risk Factors

In addition to the foregoing and the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could materially affect the Company’s business, financial condition or future results. The risk factors in the Company’s Annual Report on Form 10-K have not materially changed. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures.

Not applicable.

ITEM 5. Other Information

None.

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ITEM 6. Exhibits

(a) Exhibits

10.1 Master Supply Agreement effective as of May 14, 2019 between Medtronic, Inc. and the Company and related Business Unit Supply Agreement and Automation Agreement (Certain provisions of this exhibit have been omitted pursuant to Item 601 (b)(10)(iv) of Regulation S-K.)*

31.1* Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2* Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1* Certification of principal executive officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2* Certification of principal financial officer to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101* The following materials from IntriCon Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Condensed Balance Sheets (Unaudited) as of September 30, 2019 and December 31, 2018; (ii) Consolidated Condensed Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2019, and 2018; (iii) Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2019, and 2018; (iv) Consolidated Condensed Statements of Equity (Unaudited) for the Nine Months Ended September 30, 2019, and 2018; (v) Consolidated Condensed Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2019, and 2018; and (vi) Notes to Consolidated Condensed Financial Statements (Unaudited)*

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		INTRICON CORPORATION
		(Registrant)
Date: November 8, 2019	By:	/s/ Mark S. Gorder
	Mark S. Gorder
	President and Chief Executive Officer
	(principal executive officer)
Date: November 8, 2019	By:	/s/ Scott Longval
	Scott Longval
	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary
	(principal financial officer)

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EX-10.1

EXHIBIT 10.1

THE SYMBOL “[****]” DENOTES PLACES WHERE CERTAIN IDENTIFIED

INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE

IT IS BOTH (i) NOT MATERIAL, AND (ii) WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

MASTER SUPPLY AGREEMENT

This Master Supply Agreement is effective May 14, 2019 (the “Effective Date”) between:

MEDTRONIC, INC. 

710 Medtronic Parkway

Minneapolis, MN 55432

and

INTRICON CORPORATION 

1260 Red Fox Road

Arden Hills, MN 55112

(“Supplier”)

BACKGROUND

A. Supplier manufactures and/or supplies the Products listed in an attachment to a BUSA, and

B. Medtronic (as defined in Section 1 below) designs, manufactures and sells medical devices some of which are for human implant and wishes to purchase the Products for use in its business.

TERMS OF AGREEMENT

For good, valuable and sufficient consideration, Medtronic and Supplier agree as follows:

1. DEFINITIONS; AGREEMENT STRUCTURE

1.1 In addition to capitalized terms defined elsewhere in this Master Agreement, when used in the Agreement the following capitalized terms have the meanings indicated below:

"Agreement” means this Master Agreement and all its exhibits, the BUSAs, purchase orders placed under a BUSA, and Other Agreements.

“Applicable Law” means any law, statute, code, rule, regulation, published interpretation, ordinance, directive, regulatory bulletin or guidance, regulatory examination or order, treaty, judgment, order, decree or injunction of any Governmental Authority that is applicable to or binding in the situation in which the term is used.

“Business Day” means any day other than Saturdays, Sundays and the following US holidays: New Year's Day, Martin Luther King Jr. Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, the Friday after Thanksgiving and Christmas Day.

“Business Unit” means a Medtronic Affiliate or division thereof which elects to participate in this Agreement by entering into a Business Unit Supply Agreement with Supplier.

“Business Unit Supply Agreement” or “BUSA”, means an agreement (in substantially the form

1

attached as Exhibit A), executed by Supplier and a Business Unit and covering Products to be supplied to such Business Unit by Supplier and purchase orders placed thereunder. Each BUSA incorporates by reference the terms and conditions of this Master Agreement.

“Conforming Product” means any Product that meets the Product Specifications and the applicable Quality Requirements.

“Developed Intellectual Property” means Intellectual Property that comes into existence in the course of or relating to Supplier’s performance of its obligations under this Agreement (whether such conception occurred prior to, on or after the Effective Date) or that is derived from Medtronic’s Confidential Information. Notwithstanding anything in the Agreement to the contrary, Supplier shall retain all right, title and interest in and to (a) any original ideas, inventions, developments and improvements (“New Inventions”) conceived or reduced to practice by Supplier alone or with others during the term of this Agreement to the extent not derived from Medtronic Intellectual Property or Confidential Information, (b) any original works of authorship generated by Supplier alone or with others other than Medtronic during the term of this Agreement, and (c) any other Intellectual Property and/or know how and/or manufacturing processes owned or otherwise licensable by Supplier prior to the date of this Agreement and used in creating the Products. Medtronic shall own (x) all New Inventions conceived or reduced to practice by Supplier alone or with others during the term of this Agreement to the extent derived from Medtronic Intellectual Property or Confidential Information, (y) any original works of authorship generated by Supplier with Medtronic during the term of this Agreement, and (z) any other Intellectual Property and/or know how and/or manufacturing processes developed after the date of this Agreement and that (i) is an intended deliverable under this Agreement or any BUSA or (ii) is necessary for the Manufacture of the Products as contemplated by the Specifications.

“FDA” means the United States Food and Drug Administration, and any successor agency having substantially the same functions.

“Force Majeure” means riots, war, terrorism, invasion, acts of God, fire, explosion, floods, and orders of a Governmental Authority that prevent such party’s performance under this Agreement.

“Governmental Authority” means any government, state or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including federal, state or local.

“Import/Export Laws” means all laws, treaties, governmental orders and regulations of the countries from which a Product is exported and to which a Product is imported, including rules regarding classification, marking, packaging, and payments of tariffs and duties.

“Intellectual Property” means ideas, design specifications, inventions, proprietary information, trade secrets, research and development data, manufacturing procedures, software, works of authorship, improvements, or suggestions, whether or not patentable or copyrightable, conceived, created, adapted, or reduced to practice by or for a party, whether made alone or in conjunction with others, .

“Manufacture” and “Manufacturing” means all steps, processes and activities necessary to produce Product(s), including without limitation, the design, manufacturing, processing, quality control testing, release and storage of Product(s) in accordance with the terms and conditions of this Agreement.

“Master Agreement” means this Master Supply Agreement and the exhibits attached to it, but excludes BUSAs, purchase orders placed thereunder and Other Agreements.

"Medtronic” means a Business Unit that is a party to a BUSA with respect only to the Products purchased by such Business Unit under such BUSA.

"Medtronic Affiliate” means Medtronic, Inc., a Minnesota, U.S.A. company and any corporation or other business entity directly or indirectly (through one or more intermediaries) controlling, controlled by, or under common control with Medtronic, Inc.  The term “controlling” (with correlative meanings for the terms “controlled by” and “under common control with”) as used in this definition means either (a) possession of the direct or indirect ownership of more than fifty percent (50%) of the voting or

2

income interest of the applicable corporation or other business entity, or (b) the ability, by contract or otherwise, to control the management of the applicable corporation or other business entity. 

“Medtronic fiscal year” or “fiscal year” means the 52 or 53-week period ending on the last Friday in April of each calendar year.

“Medtronic Intellectual Property” means Intellectual Property that is owned or controlled by any Medtronic Affiliate as of the Effective Date or comes into any Medtronic Affiliate’s possession or control after the Effective Date.

“Nonconforming Product” means any Product that does not meet the Product Specifications or all the applicable Quality Requirements.

"Other Agreements" means the separate written agreements, if any, between any of the Business Units and Supplier that set forth Quality Requirements, SMI terms and the like, applicable to the Manufacture of the Products for such Business Unit(s).

"Personnel" means Supplier’s employees, agents, contractors, consultants and subcontractors whose services are used to perform this Agreement.

"Product" means the goods purchased by Medtronic from or through Supplier, including any goods listed in Attachment A to a particular BUSA.

“Publicly Available Software” means (a) any software that contains, or is derived in any manner (in whole or in part) from, any software that is distributed as free software, open source software (e.g., Linux) or similar licensing or distribution models; and (b) any software that requires as a condition of use, modification, and/or distribution of such software that such software or other software incorporated into, derived from, or distributed with such software (i) be disclosed or distributed in source code from, (ii) be licensed for the purpose of making derivative works, or (iii) be redistributable at no charge. Publicly Available Software includes, without limitation, software licensed or distributed under any of the following licenses or distribution modes, or licenses or distribution models similar to any of the following: (1) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); (2) the Artistic License (e.g., PERL); (3) the Mozilla Public License; (4) the Netscape Public License; (5) the Sun Community Source License (SCSL); (6) the Sun Industry Standard Source License (SISL); and (7) the Apache Software License.

“Quality Requirements” means, with respect to a Product, the requirements set forth in this Master Agreement and in any written quality agreement covering such Product between the applicable Business Unit and Supplier, including in any applicable BUSA.

“Restricted Party” means (a) any entity or individual listed on (i) any of the restricted party lists maintained by the U.S. Government, including the Specially Designated Nationals List and Foreign Sanctions Evaders List administered by the U.S. Department of Treasury’s Office of Foreign Assets Controls (“OFAC”), the Denied Parties List, Unverified List or Entity List maintained by the U.S. Department of Commerce Bureau of Industry and Security, and the List of Statutorily Debarred Parties maintained by the U.S. State Department’s Directorate of Defense Trade Controls, (ii) the consolidated list of asset freeze targets designated by the United Nations, European Union, and United Kingdom, and any other applicable jurisdictions, and (iii) any other restricted party lists maintained by any governmental or non-governmental entity or agency, or (b) any entity or individual fifty percent (50%) or more owned (either individually or in the aggregate, directly or indirectly) by any entity or individual described in clause (a).

“SMI” means Medtronic’s supplier managed inventory program, and “SMI Agreement” means any SMI agreement between a Business Unit and Supplier covering one or more Products.

“Specifications” means all applicable specifications and protocols relative to the design, physical characteristics, function, performance, Manufacture, packaging and quality of the Products communicated in writing by Medtronic and which have been specifically agreed in writing by the parties.

"Supplier Affiliate” means IntriCon Corporation, a Pennsylvania corporation, and any corporation or other business entity directly or indirectly (through one or more intermediaries) controlling, controlled

3

by, or under common control with IntriCon Corporation.  The term “controlling” (with correlative meanings for the terms “controlled by” and “under common control with”) as used in this definition means either (a) possession of the direct or indirect ownership of more than fifty percent (50%) of the voting or income interest of the applicable corporation or other business entity, or (b) the ability, by contract or otherwise, to control the management of the applicable corporation or other business entity. 

“Supplier Facility” means the manufacturing facility where Supplier will Manufacture a Product, which facility is located as specified in the BUSA or purchase order placed thereunder, quality agreement, or such other facility designated in Supplier’s approved disaster recovery plan when such plan is triggered.

“Supplier Intellectual Property” means Intellectual Property that is owned by or licensed to (with the right to grant sublicenses) Supplier and exists on the Effective Date or is thereafter developed by or licensed to Supplier independent of Supplier’s performance of its obligations to Medtronic under the Agreement. For clarity, Supplier Intellectual Property does not include Developed Intellectual Property.

“Third Party Purchaser” means any third party or entity that purchases Products for the benefit of Medtronic or for incorporation into any Medtronic product, but only to the extent that such person or entity is buying Products for the benefit of Medtronic or for incorporation into any Medtronic products.

“Trade Control Laws” means all applicable export control and economic sanctions laws and regulations of the United States, the European Union and all other applicable jurisdictions, including but not limited to the U.S. Department of Commerce Bureau of Industry and Security’s Export Administration Regulations, 15 C.F.R. 730-774, the economic sanctions programs administered by OFAC, as set forth in 31 C.F.R. 500-598 and certain executive orders, EU Regulation 428/2009 imposing controls on exports of dual-use items, OJ L 134, 29.5.2009, p. 1, and economic sanctions regulations implemented by the European Council, and any export controls or economic sanctions measures implemented by EU Member States.

1.2 Agreement Structure. Upon execution of this Master Agreement, Supplier and Business Units will enter into one or more written BUSAs pursuant to which Supplier shall provide certain Products as set forth in the BUSA to the Business Unit that is a party thereto. Each BUSA shall be binding when signed by the Supplier and the applicable Business Unit. Any Medtronic Business Unit and Supplier may enter into additional BUSAs during the term of the Agreement. Even though each BUSA shall be governed by the terms of this Master Agreement, the BUSA shall be between Supplier and the Business Unit that is a party to such BUSA, and not any other Medtronic Affiliate. Supplier will bill each Business Unit separately for all Products provided to such Business Unit and the liability of each individual Business Unit will be several and not joint. Each Business Unit will only be liable for those obligations expressly applicable to such Business Unit set forth in this Agreement or the BUSA to which it is a party. Throughout this Master Agreement, unless otherwise expressly indicated, references to Medtronic apply to the Business Unit that is a party to a BUSA with respect only to the Products purchased by such Business Unit under such BUSA. The terms of any BUSA may modify the terms of this Master Agreement by specific reference to the modified section(s).

2. PRODUCT ORDERING AND SALE

2.1 Sale of Products. Supplier shall sell and supply the Products to Medtronic and/or any Third Party Purchaser at the prices established pursuant to Section 3. To the extent a Product includes embedded software, the term “sell” means, with respect to such software, the grant of a non-exclusive, fully-paid, perpetual, worldwide license for all Medtronic Affiliates to use and to allow the Medtronic Affiliates’ customers and end-users to use such software in connection with the Product. Purchases by a Third Party Purchaser for use in Products shall also receive the benefit of and be governed by the applicable terms of the Agreement, including with respect to Quality Requirements, pricing, supply continuity provisions, and discontinuation rights, and other applicable terms. Supplier will invoice such Third Party Purchaser and look solely to the Third Party Purchaser for payment. Purchases by Third Party Purchasers shall be included in the

4

annual revenue received by Supplier from Medtronic, including with respect to establishing the pricing as set forth in Section 3 of this Agreement. Medtronic retains all right, title and interest in and to any software and/or firmware contained in the memory devices to be included in Products purchased hereunder, which Supplier will be purchasing, preprogrammed, from Medtronic’s approved supplier. Medtronic grants Supplier a perpetual, non-exclusive, world-wide, royalty-free license to use such software/firmware in the Products Manufactured for Medtronic.

From time to time, the parties may mutually agree to add Products to this Agreement by executing an amended Attachment A to a BUSA. However, in the absence of an amended Attachment A, if Supplier issues a written price quotation to a Business Unit who has executed a BUSA, and such Business Unit places order(s) for such Product, then such Product shall automatically be deemed added to Addendum A at the price quoted and shall be deemed a Product under this Agreement.

2.2 Other Sales. Supplier will not, during the term of the Agreement, provide any Product or any product substantially similar in form, fit and function to a Product to any third party without the prior written approval of Medtronic. This obligation survives the expiration or termination of the Agreement for a period of one (1) year and indefinitely with respect to Products that utilize, are derived from or embody any Medtronic Intellectual Property or Medtronic Confidential Information, including any Specification. The obligations in this Section 2.2 shall not apply with respect to Products that Supplier offered for sale to third parties and which were developed by Supplier or a third party without the use of Medtronic Intellectual Property or Medtronic Confidential Information.

2.3 Supplier Managed Inventory. Medtronic will give Supplier at least thirty (30) days’ notice that a Product is to be covered by Medtronic’s SMI. If SMI is utilized, the parties will execute an SMI Agreement and Medtronic will notify Supplier of current Medtronic inventory levels electronically via the SMI software (“SMI Software”) utilized by Medtronic.

2.4 Firm Order and Forecasting. Medtronic will submit to Supplier the orders and forecasts below to assist Supplier in anticipating Medtronic’s Product needs for twelve (12)-months into the future. In addition, any Third Party Purchaser may submit to Supplier monthly rolling twelve (12)-month forecasts covering its anticipated purchases of Products. Except as set forth in any separate agreements between Supplier and the Third Party Purchaser, all such Third Party Purchaser forecasts will be informational and non-binding.

2.4.1 Firm Orders. An order to which Medtronic is bound will be referred to in this Section 2.4 as a “Firm Order.” Firm Orders may be rescheduled only by mutual agreement or cancelled in accordance with Section 2.5.4 (Termination of Orders), or in accordance with the Flexibility Table that is an Attachment to a BUSA. Medtronic shall provide Supplier with an initial Firm Order for Product for three (3) months.

2.4.2 Product Order Process. Unless otherwise provided in an SMI Agreement, Products will be ordered via standard Medtronic purchase orders, which shall, at a minimum, identify the Product and set forth the corresponding quantities, confirmation of price, delivery dates, shipping instructions and shipping addresses. Medtronic may submit purchase orders via mail, fax, email or, if mutually agreed by the parties, electronic data interchange (EDI). Orders placed by Third Party Purchasers shall be via the normal business practices of those Third Party Purchasers. Orders will be deemed accepted upon receipt unless notice of non-acceptance is provided by Supplier within five (5) Business Days thereafter.

2.4.3 Initial Forecast. Medtronic shall also provide Supplier with a written, non-binding, Product purchase forecast in monthly increments consisting of a forecast for the nine (9) months after the end of the Firm Order (“Planning Period”). The above forecasts are non-binding and Medtronic may change them at any time by providing a new written forecast to Supplier.

2.4.4 Subsequent Forecasts and Orders. At the start of each calendar month, the Products forecast for the first month of the Planning Period forecast automatically become part of

5

an additional month at the end of the Firm Order, so that a rolling Firm Order of three (3) months is always maintained. Within the first five (5) Business Days after the start of each calendar month, Medtronic shall deliver a new Planning Period forecast, revised so that forecasts for nine (9) month periods are always maintained.

2.5 Order Terms.

2.5.1 Surge Capacity. Supplier shall satisfy all Medtronic orders that are submitted in a manner consistent with the terms of this Agreement. Supplier shall have the capacity to satisfy at least a [****] increase over the forecasted amount.

2.5.2 Allocation. Supplier will satisfy orders submitted by Medtronic and Third Party Purchasers. If Supplier cannot deliver all Products when due, Supplier shall give Medtronic and any Third Party Purchaser orders first priority to capacity for production and delivery of Product other than only as to capacity necessary to fulfill mandatory government contract commitments. Should any material or component be in short supply so that Supplier's needs exceed market availability, then Supplier agrees that, with respect to materials or components purchased or ordered specifically for Manufacture of the Products, Supplier will not utilize such material or components other than for the Manufacture of Products for Medtronic. In addition, and not in lieu of the foregoing, if Supplier fails to deliver Product on a timely basis and Medtronic is required to procure such Product from another supplier, Supplier shall pay for qualification costs and shall be liable for any increase over the relevant price listed in a BUSA or purchase order submitted thereunder. In any event, if Supplier cannot supply the full amount of the order within the time requested, Medtronic may cancel any or all of such order.

2.5.3 Cancellation of Orders. Medtronic may cancel, in whole or in part, any order for Product by giving Supplier written notice. Upon receipt of such notice, Supplier will immediately stop any Manufacturing work in process covered by such cancellation notice. Medtronic will reimburse Supplier for the actual, non-recoverable Manufacturing costs incurred up to such cancellation time only for orders corresponding to the three (3) month period from the date of delivery of Medtronic’s cancellation (but not in excess of the cancelled Product price for up to the number of cancelled Products), provided that:

(i) Supplier submits a written claim, to Medtronic within thirty (30) days of Medtronic’s notice of cancellation, detailing the reasonable and actual additional costs directly attributable to the cancellation; and

(ii) Supplier transfers to Medtronic ownership of and, upon Medtronic’s request, delivers the raw material, component and work in process inventory, and the finished goods inventory paid for by Medtronic; and

(iii) Supplier uses its best efforts to mitigate the liability of Medtronic by, for example, cancelling or returning components to Supplier’s vendors, or by using raw material, component and work in process inventory, or finished goods inventory in other Medtronic or Third Party Purchaser orders, or for Supplier’s other customers.

2.5.4 Termination of Orders. Medtronic may terminate in whole or in part an order or orders by written notice to Supplier (i) for safety or regulatory reasons, (ii) if, as a result of a Force Majeure event, Supplier remains unable to deliver such Product for more than thirty (30) days, or (iii) if Supplier fails to cure a material breach with respect to the order within thirty (30) days after written notice.

2.6 Delivery.

2.6.1 Shipping Terms. Unless otherwise specified in an applicable order, delivery of Products will be F.O.B. Supplier’s Facility, and title and risk of loss will pass at that point. Medtronic shall pay all shipping costs.

2.6.2 Shipment. Shipment of the Products will be freight collect via Medtronic-designated mode and carrier. Supplier will ship Products using the method of shipment and carrier specified on Medtronic’s purchase order, or if none is specified, via Medtronic’s preferred

6

carrier such that the Products will be delivered by the requested delivery dates and to the locations specified in Medtronic’s purchase orders or as indicated by the SMI program, if applicable. Supplier shall use the Medtronic account number, if available, with such carriers when shipping Products. Unless the carrier is specified on the purchase order, Supplier shall verify with Medtronic that the carrier is a preferred Medtronic carrier before shipping Products or within specified lead time if SMI program is utilized. If Supplier fails to comply, shipment is FOB destination with Supplier bearing the risk of loss and cost of delivery. Supplier shall provide Medtronic electronic notice of each Product shipment on the shipment/delivery date.

2.6.3 Delays. Supplier shall promptly notify Medtronic of any actual or prospective delay in delivery and Supplier shall obtain Medtronic’s approval prior to making any partial deliveries. If the delivery of Product is delayed through no fault of Medtronic and without a Force Majeure event, Medtronic may, at its option, in addition to its other rights and remedies under this Agreement, cancel or reschedule the order in whole or in part without liability or require Supplier to deliver Product by means of commercially reasonable premium transport identified by Medtronic, at Supplier’s cost or take a five percent (5%) discount on all orders delayed more than ten (10) days or a ten percent (10%) discount on all orders delayed more than thirty (30) days. Product shall not be delivered early without Medtronic’s prior written consent. In the event of a rescheduled or cancelled order per this section, Medtronic still shall be considered to have met all firm or other commitments set forth in Section 2.3 as to the period in which such orders were originally scheduled and any rescheduled amount shall further count toward any firm commitment for the period in which it is actually delivered.

2.7 Shipments to Third Parties. If requested by Medtronic, Supplier will drop ship Product to a third party identified by Medtronic at Medtronic’s cost.

3.        PRICING AND PAYMENT

3.1 Prices.

3.1.1 Product Pricing. Product prices shall be calculated as provided in the BUSA placed thereunder and will be firm for the Initial Term, except as set forth below. The pricing in the BUSA or purchase order may be amended by authorized representatives of Supplier and Medtronic by executing an amended BUSA in the manner set forth in Section 11.9 (Order of Precedence; Entire Agreement and Modifications), which must include the effective date of the amended BUSA. Thereafter such prices will be subject to review and good faith negotiation at the request of either party, not more than once per year. Mutually agreed prices will remain in effect until changed on the basis specified in this Section.

3.1.2 Open Book Costing. Supplier shall provide open book costing on selected components as requested by Medtronic. Component cost elements required by Medtronic include, but are not limited to, the items listed in the Component Costing Matrix below.

Component Costing Matrix

Medtronic Material Number Supplier Material Number Material Number Description Raw Material Type Raw Material Content (U/M) Raw Material Cost Raw Material Mark Up Labor Cost Machine Cost Burden Rate Process Yield Secondary Process Description Secondary Process Cost Supplier Margin Total Component Cost

*Note: All costs are documented per unit produced.

Supplier shall maintain complete and accurate accounting records, in a form in accordance with generally accepted accounting principles, to substantiate Supplier’s fees, charges and expenses under the Agreement. Supplier shall retain such records for a period of three (3) years from the date of final payment or termination or expiration of the Agreement. Medtronic may audit (or have audited), on behalf of itself and/or any Third Party Purchasers, Supplier’s records pertaining to the Agreement. Upon request

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and reasonable advance notice, Supplier shall permit Medtronic’s representatives to enter the place where such records are kept during reasonable hours for purposes of inspecting, copying, and auditing such records. Supplier shall reasonably cooperate as requested with the audit. All information produced during such audit shall not be disclosed to third parties without Supplier’s consent, except when required by law or regulation. In the event that an audit reveals that Supplier has overcharged Medtronic or any Third Party Purchaser, Supplier shall refund such overpayment to Medtronic or the applicable Third Party Purchasers within ten (10) Business Days following written demand by Medtronic. In addition, in the event that an audit reveals that Supplier has overcharged Medtronic or any Third Party Purchasers by more than five percent (5%) in any given quarter, Supplier shall pay all reasonable fees and costs for such audit.

3.1.3 Cost Reductions. Supplier shall reduce the aggregate cost of Products by at least [****] each year over year. The price reductions will commence on the first day of the Medtronic fiscal year following the Effective Date and will thereafter occur on the first day of each subsequent fiscal year. Cost reduction efforts shall not compromise quality or reliability, and Supplier shall comply with the Quality Requirements with respect to design and process changes. Supplier shall give Medtronic notice of the cost reductions as soon as practicable, but in any event within thirty (30) days of the accomplished reduction. Thereafter, all invoices shall reflect such reduced pricing.

3.1.4 Value Analysis Value Engineering (“VAVE”) and Productivity Improvements. Medtronic and Supplier intend to work together throughout the term to reduce prices. Supplier shall at the request of Medtronic or a Business Unit form a team at its cost to work on VAVE and/or productivity improvement projects to support any cost down initiatives. If the cost improvement opportunity is identified by Medtronic, the savings will apply 100% to the Product associated with the reduction. If the cost improvement is identified by the Supplier, Supplier may apply fifty percent (50%) of the savings towards the Products associated with the reduction in the first year and the balance in the second year. Unless otherwise agreed upon by Medtronic, cost savings that are identified by Medtronic are in addition to the annual price reduction while cost savings that are identified by the Supplier can be applied towards the annual price reduction initiative set forth above.

3.1.5 Favored-Customer Pricing and Terms. If Supplier offers a product substantially comparable in quality and design to any Product covered by the Agreement to any third party at pricing or terms more favorable (based on comparable quantities) than the prices or terms in the Agreement, Supplier will promptly notify Medtronic and extend the more favorable pricing or terms to Medtronic and any Third Party Purchasers.

3.2 Volume Growth Reduction. In addition to the annual price reduction, Medtronic shall receive a [****] price reduction for all Products for every [****] ($[****]) cumulative across all BUSAs and through a Third Party Purchaser) increase in business from a baseline spend of $XXXXXXX. Volume growth price reductions shall be applied on May of each subsequent year during the term of this Master Agreement. If there is a dispute and the parties are unable to agree on the volume growth price reduction, either party may submit the matter to the Dispute Escalation mechanism set forth in Section 11.8 (Dispute Escalation).

3.3 Payment Terms. Payment terms shall be NET ninety (90) after the date of invoice or the date of delivery, whichever is longer. Invoicing requirements, if any, will be as specified in a mutually agreed electronic format, or if there is no such format, in the applicable order. Medtronic may pay invoices electronically via a means that is in reasonably common commercial use, which as of the Effective Date is by Automated Clearing House in the CTX format, or such other means as designated by Medtronic. Following request by Medtronic, Supplier shall submit invoices electronically via a means specified by Medtronic. Supplier may enroll in the Supplier Program offered by CitiBank N.A.

4. PRODUCTION AND QUALITY

4.1 Production.

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4.1.1 Product Manufacturing. Supplier shall Manufacture, package and label the Products in strict accordance with the applicable Specifications and the Quality Requirements. Except as expressly provided for in Supplier’s approved disaster recovery plan (in which case Medtronic shall receive notice of such change immediately), Products shall be Manufactured only at the Supplier Facility designated in the BUSA or purchase orders placed thereunder unless Medtronic, in its sole discretion, provides advance written approval of an alternative facility. Supplier shall comply with the applicable Quality Requirements when making any changes permitted by Medtronic to Product Specifications, design, materials, production processes or production testing.

4.2 Risk Management.

4.2.1 Disaster Recovery. Supplier shall practice ongoing business continuity planning to minimize disruptions to its ability to fulfill its obligations under the Agreement. Supplier shall maintain a written disaster recovery plan approved by Medtronic and shall cooperate with Medtronic’s efforts to periodically review Supplier’s plan and planning. The current plan is attached as Exhibit B. Supplier shall notify Medtronic within twenty-four (24) hours if, in accordance with the disaster recovery plan, Supplier plans to move the Manufacture of any Product to a different Supplier facility.

4.2.2 Single and Sole Source Risk Management. Supplier shall practice ongoing single- and sole-source, supplier risk management. For each BUSA, on a mutually agreed schedule, Supplier shall provide Medtronic with written sole source supplier information that includes an assessment of the risk associated with the sole-sourced material and processes and a risk-mitigation plan for those materials and processes that are determined to be high risk.

4.3 Quality. Supplier shall comply with the Quality Requirements in its performance of the Agreement. Supplier shall also comply with Applicable Laws, applicable standards of the International Standards Organization (ISO) and all other quality standards and quality assurance plans referenced in the Agreement and the Specifications. Each set of applicable Quality Requirements for a particular Product survive until such Quality Requirements are replaced with other Quality Requirements, or such Products are no longer provided by this Supplier under the Agreement or otherwise.

4.4 Epidemic Failure Event. Upon occurrence of a suspected Epidemic Failure Event, Medtronic shall promptly notify Supplier, and shall provide, if known and as may exist, a description of the failure, and the suspected lot numbers, serial numbers or other identifiers, and delivery dates, of the Nonconforming Products. Medtronic shall make available to Supplier samples of the Nonconforming Products for testing and analysis. Upon receipt of Product from Medtronic, Supplier shall promptly provide its preliminary findings regarding the cause of the nonconformance. The parties shall cooperate and work together to determine root cause. Thereafter, Supplier shall promptly provide the results of its root cause corrective analysis, and if it is determined to be an Epidemic Failure Event, its proposed plan for the identification of and the repair and/or replacement of the affected Products, and such other appropriate information. Supplier shall recommend a corrective and preventative action program which identifies the affected units for repair or replacement, and which minimizes disruption to the end user and eliminates the failure going forward. Medtronic and Supplier shall consider, evaluate and determine the corrective and preventative action program. In the event the test equipment necessary to test and analyze the Nonconforming Product is no longer in Supplier’s possession due to a planned phase-out of such equipment, Medtronic and Supplier shall identify an alternative method (including without limitation timing and cost elements) by which to test and analyze the Epidemic Failure Event to both parties’ satisfaction.

In the event of an Epidemic Failure Event, Supplier shall, in addition to any remedies related to Nonconforming Product set forth in a Quality Agreement, reimburse all direct, reasonable, and documented labor, equipment and processing costs incurred by Medtronic solely as a result of the implementation of the corrective action program for such Epidemic Failure Event, including test procedures, test equipment, the testing of Products.

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4.4.1 For purposes of this Agreement, “Epidemic Failure Event” shall mean the occurrence of the same nonconformance (i) attributable to the same root cause found in five percent (5%) or more of units of a particular Product, with a minimum of twenty (20) units, shipped by Supplier during a consecutive three (3) month period where such nonconformance is verified by Supplier and by Medtronic, or an independent third party determined by Medtronic subject to Supplier’s reasonable consent, such consent not unreasonably withheld; (ii) occurring within fifteen (15) months after the date of delivery of such Products; and (iii) resulting from (w) defects in workmanship, including Supplier’s failure to identify defects in any components or materials that Supplier could have identified by following the Supplier’s documented processes (which have been provided to Medtronic) or such other mutually agreed to processes for inspection or testing at incoming inspection of such components and materials, or following agreed upon testing procedures for Products during Supplier’s manufacturing process or at final testing, but excluding Manufacturing defects that are Medtronic’s Responsibility (as defined below), (x) the Manufacturing process, (y) Supplier’s Manufacturing process design, or (z) Supplier’s failure to Manufacture the Product in accordance with the Specifications in effect at the time of production.

4.4.2 “Medtronic’s Responsibility” shall consist of any of the following: (i) a design defect in any aspect of the Product other than Manufacturing process design defects that are Supplier’s responsibility as set forth above in 4.4.1 if the design is Medtronic’s design; (ii) a Manufacturing defect in any components Manufactured or supplied by Medtronic; (iii) misinformation from Medtronic; (iv) Medtronic’s negligent or knowing release of any Non-conforming Products, where such Products have caused a safety hazard, regulatory violation or Epidemic Failure Event; or (v) any other failure of Medtronic to properly carry out actions which are Medtronic’s responsibility under this Agreement.

4.5 Specification Changes. Specifications may be revised from time to time as mutually agreed in writing between the parties (either by execution of an amended BUSA Attachment A that references the new revision level or other writings of the parties). Supplier shall not unreasonably withhold approval to Specifications changes proposed in writing by Medtronic (each change a “PCN”). Supplier will use commercially reasonable efforts to evaluate the feasibility of the PCN requested by Medtronic within ten (10) Business Days of receipt and respond to Medtronic in writing with the potential impact of the PCN on current on-hand or on-order component inventory, work-in-progress Products (“WIP”), finished goods Products, and/or the delivery schedule. In addition to the written response provided above, Supplier will use commercially reasonable efforts to respond to Medtronic within ten (10) business days with a written evaluation of the PCN including: (i) engineering time to implement the PCN, (ii) the cost to modify tools or test fixtures or similar non-recurring expenses, (iii) the quantity of components Supplier has on hand and/or on order with its suppliers related that can no longer be used due to the PCN, (iv) the cost to rework WIP (if applicable) and any impacts to Product price resulting from the PCN, (v) the expected effect on the delivery schedule to include (if applicable) the effect on all in-process work (e.g., re-workable, repairable, etc.), and (vi) the manner in which the PCN will be implemented by Supplier. Supplier will not proceed to implement the PCN until Medtronic has approved the charges and Supplier actions described in the Supplier evaluation that is provided to Medtronic. The price for a Product covered by a revised Specification shall remain the same as before the revision, unless the revisions will result in an increase or decrease in costs at least +/- 5% of any cost element of the applicable quote (e.g. materials, components, labor, test); in that case, the Supplier will notify Medtronic of the anticipated change in costs, and the parties will negotiate a new price (based on the increase or decrease in costs) and the BUSA Attachment A will be amended accordingly.

4.6 Use and Return of Medtronic Property. Any equipment and tooling that Medtronic furnishes to Supplier or Supplier purchases at Medtronic’s expense shall be pursuant to the Terms and Conditions for Tooling attached as Exhibit D and incorporated by reference

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4.7 Subcontracting. Supplier may not subcontract any of its obligations under the Agreement without Medtronic’s prior written consent signed by an authorized representative of Medtronic. If Medtronic consents to such an arrangement, any subcontracting will be subject to the following terms:

4.7.1 The subcontracting must be under a written agreement which (i) obligates the subcontractor to comply with all relevant terms and conditions of this Agreement as though it were Supplier, (ii) names Medtronic as a third party beneficiary with the right to enforce the rights of Supplier under such subcontract agreement, and (iii) authorizes Supplier to disclose the terms of the subcontract agreement to Medtronic. Supplier shall provide Medtronic with a copy of a subcontract agreement promptly after Medtronic’s request.

4.7.2 Supplier is responsible for all acts and omissions of its subcontractor and guarantees the subcontractor’s performance.

4.8 Discontinuation. Supplier shall not discontinue a Product during the Initial Term (defined in 10.1) or as noted in a BUSA for that BUSA only. Following such Initial Term, if Supplier desires to stop making a Product, Supplier shall give Medtronic and any Third Party Purchasers written notice (“Discontinuation Notice”) at least two (2) years before the date on which Supplier is planning to stop making a Product (“Discontinuation Date”). In such case, Supplier will provide a backup plan for Medtronic to mitigate risk to Medtronic. Medtronic is not obligated to accept such plan. So long as Medtronic and any Third Party Purchasers place orders at least three (3) months before the planned Discontinuation Date, Supplier shall accept last time buy orders for the discontinued Product(s) at the prices in effect as of the Discontinuation Notice provided, however, that Supplier shall additionally pass on any savings that result due to the increased volumes ordered. Unless the parties agree otherwise in the order document, delivery of the Product in a last time buy order shall be within one (1) year of the Discontinuation Date. Medtronic’s rights hereunder extend to volumes of Products for Third Party Purchasers. Medtronic may invoke the license and technology transfer specified under Section 7.3 (Failure to Supply License) for discontinued Products by written notice to Supplier given no more than three (3) months after receipt of the Discontinuation Notice.

5. REGULATORY COMPLIANCE

5.1 Supplier Diversity.

5.1.1 Flow Down. For all supplies, goods, materials or services provided pursuant to the Agreement, Supplier shall comply with the requirements of the Federal Acquisition Regulation (FAR) clause 52.219-8, entitled “Utilization of Small Business Concerns (October 2014),” which is incorporated into this Agreement. Supplier shall review and be familiar with all of the requirements of 52.219-8 which may be viewed at www.acquisition.gov/far/. If the value of the Agreement is greater than $700,000, and Supplier is not a “small business” under applicable rules of the Small Business Administration, 13 C.F.R. Part 121, Supplier must include FAR 52.219-8 in all subcontracts that offer further subcontracting opportunities.

5.1.2 Policy. It is Medtronic’s policy that Diverse Subcontractors, as defined below, shall have the maximum practicable opportunity to participate in the performance of work and services for Medtronic and Medtronic’s subcontractors and suppliers. If there is a conflict between FAR 52.219-8 and the following, the requirements of FAR 52.219-8 will take precedence.

5.1.3 Section Definitions.

"Diverse Subcontractors" means suppliers and subcontractors that are small, "HUBZone small business concerns," “women-owned small business concerns,” "small disadvantaged business concerns," “veteran-owned small business concerns”, and “service disabled veteran-owned small business concerns,” each as defined in FAR 52.219-8.

“Diverse Subcontractors” also includes “Women Business Enterprise” concerns and

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“Minority Business Enterprise” concerns.

“Women Business Enterprise” concern is one that is unconditionally owned and controlled by one or more women and certified as a woman-owned business concern by an independent agency approved by Medtronic.

"Minority Business Enterprise” concern is one that is unconditionally owned and controlled by a member or members of a group listed in 13 C.F.R. §124.103 and certified as a minority-owned business concern by an independent agency approved by Medtronic. Ownership and control of a Minority Business Enterprise will be determined in accordance with the principles of ownership and control found in 13 C.F.R. §§124.105 and 124.106. See www.medtronic.com/supplierdiversity for socio-economic category definitions and certification processes.

5.1.4 Requirement. Supplier agrees that Diverse Subcontractors shall have the maximum practicable opportunity to participate in performing subcontracts and in supplying goods and services used in the performance of the Agreement.

5.1.5 Diversity Commitment. Upon request, Supplier shall provide Medtronic with periodic reports, identifying its Diverse Subcontractors and the total amount paid in the subject period to each Diverse Subcontractor, and description of Supplier’s efforts to comply with this clause. Medtronic may consider the extent of good faith efforts by potential subcontractors and suppliers and existing subcontractors and suppliers in carrying out the purpose of this clause in determining whether to award or extend a subcontract or supplier agreement. Supplier agrees to establish and update any changes to its profile and certifications throughout the term of the Master Agreement on the Medtronic Supplier Registration Portal (MSRP), at www.medtronic.com/supplierdiversity.

5.2 Import/Export and Trade Control Compliance.

5.2.1 Supplier shall comply with the applicable Import/Export Laws and Trade Control Laws regarding the shipping, purchase, procurement, import, export, and any other transfer of all Products and any parts, components or materials incorporated into all Products. For purposes of Sections 5.2.1 and 5.2.2, Products includes product-associated technology and technical data, whether provided by Medtronic or Supplier, and the documents related to that technology and data. Supplier represents and warrants that all provision of Products and services by Supplier under this Agreement and all payments for such activities comply with the Import/Export Laws and Trade Control Laws, including the terms of any relevant authorizations issued by the U.S. or other governments. Supplier shall immediately notify Medtronic if Supplier’s export privileges are denied, suspended or revoked in whole or in part by any U.S. or non-U.S. government or non-governmental entity or agency.

5.2.2 Supplier hereby acknowledges and confirms that, unless specifically authorized in this Agreement and under applicable Import/Export Laws or Trade Control Laws, it will not sell, ship, export, re-export, re-transfer or divert Products, product-associated technology or technical data that are sold or otherwise provided hereunder (including samples), directly or indirectly through third parties or otherwise, to any Restricted Party or to or through countries or regions that are the target of sanctions under Trade Control Laws (presently, Cuba, Iran, North Korea, Sudan, Syria, and the Crimea region).

5.2.3 Supplier understands that Medtronic’s participation, directly or indirectly, in any business under terms that would support or facilitate a boycott against Israel or any other boycott not recognized by the U.S., is prohibited. Notwithstanding any other provision of this Agreement, neither Medtronic nor Supplier shall be required to take, or to refrain from taking, any action where to do so would be inconsistent with or penalized under the laws of the U.S. or any foreign jurisdiction, including without limitation the anti-boycott laws administered by the U.S. Commerce and Treasury Departments.

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5.2.4 U.S. Customs-Trade Pact Against Terrorism (C-TPAT). Supplier will: (i) obtain certification under the U.S. C-TPAT program, as described https://www.cbp.gov/border-security/ports-entry/cargo-security/c-tpat-customs-trade-partnership-against-terrorism and provide evidence of such certification to Medtronic; or (ii) demonstrate to Medtronic that it meets the criteria for such certification and has policies and procedures in place that meet C-TPAT requirements.

5.2.5 Notwithstanding the foregoing, Medtronic shall serve as the official importer of record for customs purposes for Products delivered to Medtronic under the Agreement.

5.2.5.a Supplier Instructions. Supplier will provide, completely and accurately, all information required in the current version of the supplier instructions, the current version of which as of the Effective Date is attached to this Agreement as Exhibit C, and such other information as otherwise reasonably requested by Medtronic. Supplier will deliver the completed supplier instructions form at the time that Medtronic places the order, and in no event later than the date of arrival of the Product into the United States. Supplier will provide the other information in a timely manner.

5.2.5.b Certificates of Origin and other Customs Information.  

i. No later than thirty (30) days before the first shipment of Products to Medtronic, Supplier must provide Medtronic a statement specifying, for each Product, the Product name and description, Medtronic and Supplier part numbers, Harmonized Tariff Schedule (HTS) number, the country of origin under U.S. and non-U.S. Customs laws and regulations (“Origin”), and the manufacturer name and location. Supplier will also provide, as requested, any other documentation that is required for the relevant customs authority and other government agency compliance.

ii. If the Products provided under this Agreement qualify for preferential duty treatment under a Free Trade Agreement such as the North American Free Trade Agreement (NAFTA), Supplier must provide Medtronic’s Global Trade Operations Department with a Certificate of Origin (“Certificate”) to enable Medtronic to claim preferential duty treatment at the time of entry. Supplier acknowledges that the Certificate will be used by Medtronic as proof of eligibility for preferential duty treatment, and agrees to provide full cooperation to Medtronic for any U.S. or non-U.S. Customs inquiries into preferential duty claims that arise out of any Product furnished under this Agreement. Unless Medtronic requests individual Certificates for each shipment, Supplier may provide annual blanket Certificates to cover multiple shipments during the calendar year.

iii. Supplier shall send all Product information, Certificates, and other documentation described in paragraphs i. and ii. of this clause to Medtronic’s Global Trade Operations Department at the following e-mail address: rs.originverification@medtronic.com.

iv. Supplier must notify Medtronic in writing of any change in the Origin of any Product within thirty (30) days.

v. Medtronic will notify Supplier in writing if Supplier fails to supply documentation required under paragraphs i. through iv. of this clause, and Supplier agrees to provide Medtronic the relevant documentation within 30 days of receipt of notice from Medtronic.

5.2.5.c Trade Remedy Proceedings.  Supplier understands that the Products it produces may be, either now or in the future, subject to one or more trade

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remedy proceedings (e.g., anti-dumping, countervailing duty, safeguard) in the U.S. or another country, which may result in the imposition of additional duties or other charges on the Products. If such proceedings are initiated, Supplier agrees to notify Medtronic’s Global Trade Operations Department in writing at the following email address: rs.globaltradeoperations@medtronic.com within seven (7) days, and at Medtronic’s request, Supplier will cooperate fully with Medtronic and with requests for information required from the competent government authorities in the importing country. Supplier further understands and agrees that such cooperation may require it to provide confidential sales and cost information to Medtronic, and if necessary the competent authorities, to determine whether the Products are included in the scope of a trade remedy proceeding and/or calculate the amount of the duty or other charge on the Products.

At all times before, during, or after the initiation of a trade remedy proceeding in the U.S. or another country, Supplier agrees to take all available steps necessary to minimize the risk that additional duties or other charges may be imposed on its Products sold to Medtronic. Medtronic retains the right to terminate the Agreement if additional duties or other charges are imposed on the Products produced by Supplier.

5.3 Conflict Minerals. For Products delivered to Medtronic or a Third Party Purchaser under this Agreement, Supplier shall provide Medtronic, at no additional cost, with assistance and sufficient documentation, as reasonably determined by Medtronic, to enable Medtronic to comply with its obligations under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) and the rules and regulations promulgated thereunder relating to Conflict Minerals as defined in the Reform Act, and other similar laws or regulations. Such assistance and documentation may include but shall not be limited to (i) completing and submitting questionnaires or templates relating to the origin of products, materials, parts, components, metals or any Conflict Minerals contained in the Products (collectively, “Surveys”) within the deadline requested by Medtronic; (ii) promptly responding to Medtronic’s questions or request for additional information with respect to Supplier’s Survey; and (iii) to the extent the Products contain Conflict Minerals, using diligent efforts to ensure traceability of those metals to the smelter level, including working with Supplier’s sub-suppliers to identify the origin of the Conflict Minerals. Supplier agrees to maintain any documentation and data related to Supplier’s obligations under this Section, including any traceability data, for a period of five (5) years and agrees to provide Medtronic with a copy of such documentation or data promptly upon request. This obligation survives termination or expiration of this Agreement. From time to time, Medtronic has the right to notify Supplier of changes to the requirements of this Section.

5.4 Environmental Product Regulation Compliance. Supplier shall comply with the following terms and conditions for all Products provided to Medtronic:

5.4.1 Supplier shall provide full disclosure of all materials and components used in the Products (“Materials Disclosure”) to Medtronic to enable Medtronic to comply with all obligations regarding restrictions on certain substances in Products as required by Environmental Regulation. Further, Supplier shall comply with all Environmental Regulations applicable to the Products. For the purposes of this section, “Environmental Regulations” shall include any and all laws, regulations, directives, ordinances, orders and decrees of any kind, adopted or implemented in any country, state, region or jurisdiction, which govern, regulate or restrict: (i) the use of hazardous substances; (ii) restrictions on batteries, accumulators and waste batteries and accumulators; and (iii) materials used in packaging and packing materials in Products, including, but not limited to, the registration, evaluation, authorization and restriction of chemicals (REACH) and Restriction of Hazardous Substances (RoHS). Supplier shall provide Medtronic with assistance and sufficient documentation, as reasonably determined by Medtronic, to

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enable Medtronic to verify the materials used in the Products and that Products are in full compliance with Environmental Regulations.

5.4.2 Upon request, Supplier shall provide Medtronic with a report on the status of the Products’ ongoing compliance with Environmental Regulations in an electronic format prescribed by Medtronic. Any such report shall include Supplier’s representation and warranty that, as of the date of the report, the Products are in full compliance with all applicable Environmental Regulations.

5.4.3 Intentionally omitted.

5.4.4 During the term of this Agreement, in accordance with applicable Quality Requirements, Supplier shall promptly notify Medtronic of any changes in the Products’ design, technical specification, composition, components, substances or materials, or any changes in a supplier of a component, substance or material, that may have an impact on the ongoing compliance of the Products with Environmental Regulations.

5.4.5 Supplier represents that it gathered the information required by this Agreement and that all information submitted to Medtronic in connection with this Agreement is accurate. Supplier acknowledges that Medtronic will rely on this representation in determining the compliance of its products.

5.5 Responsible Sourcing. Supplier shall comply with all applicable laws relating to human rights, health/safety and ethics. Medtronic’s Global Supplier Standards are posted in the Responsible Supply Management section of Medtronic’s website.

5.6 Equal Opportunity. Medtronic and Supplier shall, to the extent they apply, abide by the requirements of 41 CFR §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a). These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin and require affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability. Supplier shall comply with all applicable labor laws, rules, and regulations, including but not limited to, all laws forbidding the solicitation, facilitation, or any other use of slavery or human trafficking.

To the extent applicable, Medtronic incorporates by reference 29 Code of Federal Regulations (C.F.R.) Part 471, Appendix A to Subpart A. Vendor further understands that Medtronic is a prime contractor to the United States Government.  Accordingly, this Agreement incorporates CFR 52.212-5(e)(1) and CFR 52.244-6 of the Federal Acquisition Regulation (“FAR”) by reference, with the same force and effect as if it were given in full text herein.

If Supplier is required by federal regulations to file Employer Information Report EEO-1 (standard form 100) or Federal Contractor Veterans Employment Report VETS-100A, Supplier certifies that it has done so or will file such reports in accordance with applicable instructions and will continue to file such reports unless or until no longer required by law or regulation.

5.7 Regulatory Support. Supplier agrees to provide Medtronic with all information about the Products necessary, in Medtronic’s reasonable opinion, to enable Medtronic to take the steps needed to permit the marketing and sale of Medtronic products into which the Products are incorporated (and to permit the marketing and sale of any other Products which are sold as accessories to any Medtronic products) in all jurisdictions in the world in which Medtronic chooses to market and sell the Products and such Medtronic products. Such steps include making regulatory submissions and/or self-certifications, as applicable, and successfully obtaining such regulatory registrations, clearances and approvals as are needed to permit such marketing and sale. The relevant United States Food and Drug Administration (“FDA”) reviewer guidance documents or relevant requirements of other regulatory bodies shall be considered for the purposes of determining what information is necessary.

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Where specific testing is required to comply with the laws governing such regulatory registrations, clearances, approvals and self-certifications, then Medtronic shall be responsible for obtaining such testing except where Supplier specifically commits to undertake such testing. Supplier agrees to assist Medtronic in developing test protocols for the Medtronic products that incorporate the Products and in answering questions from FDA and other regulatory authorities concerning Medtronic’s submissions, insofar as such questions relate to any of the Products. Medtronic is solely responsible for determining the intended use of the Products and for the validation of the Products and their respective drawings and Specifications for such intended use.

5.8 Federal Acquisition Regulation. Seller understands that Medtronic sells its products to the United States Government. Accordingly, this Agreement incorporates CFR 52.212-5(e)(1) and CFR 52.244-6 of the Federal Acquisition Regulation (“FAR”) by reference, with the same force and effect as if it were given in full text herein. Supplier agrees to comply with the aforementioned applicable provisions of the FAR and other legal requirements applicable to a U.S. government subcontractor.

6.       CONFIDENTIALITY AND PUBLICITY

6.1.1 Medtronic Confidential Information. “Medtronic Confidential Information” means any information or tangible item that:

(i) is acquired by Supplier from any Business Unit or from a Third Party Purchaser (to the extent that such information is Medtronic information) that:

(a) is identified as confidential at the time of disclosure to Supplier, or within a reasonable time after such disclosure;

(b) is non-public information relating to medical or diagnostic devices, components, accessories and attachments, including Specifications and drawings, Medtronic Intellectual Property, Developed Intellectual Property, business plans and other financial or marketing information; or

(c) Supplier has a reasonable basis to believe is confidential;

(ii) relates to Medtronic Intellectual Property or Developed Intellectual Property; or

(iii) is furnished by such party that relates to discussions regarding entering into a BUSA.

All Medtronic Confidential Information remains the property of the Medtronic Affiliates.

6.1.2 Supplier Confidential Information. “Supplier Confidential Information” means any information or tangible item that:

(i) is acquired by Medtronic or any Business Unit from any Supplier Affiliate that:

(a) is identified as confidential at the time of disclosure to Medtronic or any Business Unit, or within a reasonable time after such disclosure;

(b) is non-public information pertaining to Supplier Affiliates, Supplier Intellectual Property, business plans and other financial or marketing information; or

(c) Medtronic or any Business Unit has a reasonable basis to believe is confidential;

(ii) relates to Supplier Intellectual Property; or

(iii) is furnished by such party that relates to discussions regarding entering into a BUSA.

All Supplier Confidential Information remains the property of the Supplier Affiliates.

6.1.3 Certain Definitions. “Confidential Information” means the Medtronic Confidential Information or the Supplier Confidential Information, as applicable. “Disclosing Party” means the party disclosing its Confidential Information and “Receiving Party” means the party receiving the other party’s Confidential Information.

6.2 Obligations. Receiving Party will keep the Confidential Information secret and confidential and will protect the Confidential Information from disclosure, accidental loss or unauthorized access or use. Receiving Party will not use or exploit the Confidential Information for the benefit of Receiving Party or any third party and may only use the Confidential Information for the conduct of Receiving Party’s performance under the Agreement or as specifically authorized by Disclosing

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Party in writing. Any disclosure of Confidential Information by Receiving Party to Receiving Party’s employees or contractors will be to only those who have a need to know the Confidential Information. To the extent necessary to protect Disclosing Party's rights, Receiving Party will have appropriate agreements with its employees or contractors whose services it may require sufficient to enable it to comply with all the terms of this Agreement. Receiving Party is responsible for any disclosure or use of Confidential Information by their employees or contractors other than pursuant to the terms of the Agreement. Receiving Party shall notify Disclosing Party immediately upon discovery of any unauthorized use or disclosure of Confidential Information, and will cooperate with Disclosing Party to help Disclosing Party regain possession of the Confidential Information, mitigate any harmful effects and prevent its further unauthorized use or disclosure.

6.3 Exclusions. Confidential Information does not include information that:

(i) is known to Receiving Party prior to receipt thereof under the Agreement, as demonstrated by reliable evidence;

(ii) is disclosed without restriction or following expiration of a restriction to Receiving Party in good faith by a third party who is in lawful possession thereof and who has the right to make such disclosure;

(iii) is or becomes public knowledge, by publication or otherwise, through no fault of Receiving Party; or

(iv) is independently developed by Receiving Party, without utilizing the Confidential Information.

6.4 [intentionally omitted].

6.5 Required Disclosure. In the event that, on the advice of legal counsel, Receiving Party is compelled by law to disclose Confidential Information, Receiving Party will notify Disclosing Party in advance of such disclosure about the need for any such disclosure so that Disclosing Party may seek a protective order or other remedy. Receiving Party will take every reasonable action to ensure protection of the disclosed Confidential Information to the extent allowable by law.

6.6 Copies, Return or Destruction. Receiving Party shall not copy or duplicate any materials containing Confidential Information except as necessary to accomplish the purposes of the Agreement. Receiving Party will, return all materials containing Confidential Information that have been provided by any Business Unit, including all copies, upon demand by Disclosing Party, provided that Receiving Party may retain copies as required by Applicable Law or the Other Agreements. Receiving Party shall continue to treat any materials containing Disclosing Party’s Confidential Information that are not returned to Disclosing Party in accordance with this Section 6.

6.7 Publicity. Receiving Party shall not make any public announcement about or advertise the existence of the Agreement or divulge its terms and conditions without the prior written agreement of Disclosing Party. Nothing in this Agreement shall prohibit a Party from making disclosures required by applicable federal and state securities laws and regulations or stock exchange requirements.

6.8 Term of Obligation. The restrictions and obligations assumed by Receiving Party under this section shall survive the termination or expiration of the Agreement.

7. INTELLECTUAL PROPERTY RIGHTS

7.1 License to Supplier. Medtronic hereby grants to Supplier a non-exclusive, nontransferable, non-sublicensable, revocable, fully paid up license to use Medtronic Intellectual Property that is used or employed to perform Supplier’s obligations under the Agreement. Such use shall be solely to produce and have produced the Products for supply to Medtronic or a Third Party Purchaser for the benefit of Medtronic at the applicable Supplier Facility during the term of and pursuant to the Agreement, and for no other purpose. No other license to any other Medtronic Intellectual Property is granted, and none is to be implied.

7.2 Intellectual Property Ownership.

7.2.1 Supplier Intellectual Property. Supplier owns all Supplier Intellectual Property. Any and all rights in Supplier Intellectual Property not explicitly granted under this Agreement are

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expressly reserved by and to Supplier.

7.2.2 Medtronic Intellectual Property. Medtronic owns all Medtronic Intellectual Property.

7.2.3 Developed Intellectual Property. The Medtronic Affiliates own all Developed Intellectual Property, whether developed solely by Supplier or jointly by Supplier and Medtronic or any third party. Supplier shall assign and hereby assigns all of its rights in and to such Developed Intellectual Property collectively to the Medtronic Affiliates. Supplier shall promptly disclose Developed Intellectual Property to and shall execute and deliver documents appropriate to evidence ownership of the Developed Intellectual Property to the Medtronic Affiliates. All Product documentation, drawings, prototypes and the like related to Developed Intellectual Property are also the property of the Medtronic Affiliates.

7.2.4 Supplier represents and warrants that neither it nor its personnel will decompile, reverse engineer, or disassemble any sample, device, prototype, hardware, software or other material, or portion thereof, made available to Suppler by any Medtronic Affiliate, or their respective agents or consultants without Medtronic’s prior written consent.

7.3 Failure to Supply License.

7.3.1 Supplier License to Medtronic. Supplier hereby grants to the Medtronic Affiliates a non-exclusive, nontransferable, sub-licensable, worldwide, fully paid license to Supplier Intellectual Property and any other Intellectual Property that is used, employed or necessary to make, have made, import, export, and to use and sell Products and replacements for Products. The scope of use of the above license grant is to make, have made, import, export, and to use and sell Products and replacements for Products, and for no other purpose and is granted the right to sublicense Supplier Intellectual Property for manufacturing purposes only.

7.3.2 Limitation on Supplier License. Subject to the terms and conditions of the Agreement, The Medtronic Affiliates shall not exercise the Supplier license granted in Section 7.3.1, unless and until the occurrence of any one of the following events (“Trigger Condition”):

(i) Supplier fails for any reason to timely deliver units of the Product ordered by Medtronic or any Third Party Purchasers, including but not limited to a failure to deliver Products which conform to the Specifications, which failure is not cured within thirty (30) days after written notice from Medtronic;

(ii) Supplier fails to execute its business continuity plan upon a supply disruption and such failure is not cured with twenty (20) days after written notice from Medtronic;

(iii) The Medtronic Affiliate terminates a BUSA due to a Supplier breach of the BUSA or the Agreement in accordance with Section 10.2;

(iv) Supplier wrongfully terminates the Agreement;

(v) Supplier fails to comply with the requirements of Section 4.8;

(vi) The insolvency or adjudication of bankruptcy of Supplier, other than a debtor in possession basis;

(vii) Supplier petitions for, consents to, or becomes subject to any relief under any bankruptcy, reorganization, or moratorium statues or similar debtor relief laws;

(viii) Supplier is the subject of any proceedings related to its liquidation, insolvency or the appointment of a receiver or similar officer for it, or Supplier makes an assignment for the benefit of all or substantially all of its creditors;

(ix) Supplier fails to continue to do business in the ordinary course, either in general or with regard to the Products; or

(x) The sale of all or substantially all of the assets of Supplier that are used in the design, development or Manufacture of a Product.

7.3.3 Intentionally blank

7.3.4 Technical Support; Technology Transfer. In the event a Medtronic Affiliate undertakes to exercise its license rights following a Trigger Condition, Supplier shall provide technical support and training and otherwise assist the Medtronic Affiliate in establishing manufacturing operations equivalent to the Manufacturing operations under this

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Agreement for the production of each Product that utilizes Supplier Intellectual Property. Supplier shall provide the Medtronic Affiliate with a full and enabling technology transfer (including any tooling, mask works, foundry access, or other critical items necessary for production) relative to each Product.

7.3.5 Access to Supplier Intellectual Property. Upon the occurrence of a Trigger Condition, Supplier shall promptly provide a Medtronic Affiliates or its designee with access to all of Supplier Intellectual Property, Supplier Confidential Information and other items used, employed or necessary for the Manufacturing of the Product (including all specialized items, such as tooling, molds, etc.) together with information and training reasonably necessary for the Manufacture of the Products, as well as training for the use thereof, to the extent possible, use of the Supplier Facility for production of the Product.

7.3.6 Bankruptcy. In the event that a bankruptcy petition is filed by or on behalf of Supplier and Supplier, or a custodian or trustee acting on behalf of Supplier, rejects this Agreement, the Medtronic Affiliates may elect to retain the license from Supplier pursuant to §365(n) of the federal bankruptcy code (11 U.S.C. § et seq.) or exercise any of its other rights or elections under the bankruptcy code and shall be entitled to retain all of its license and use rights granted under the Agreement.

7.4 Notification of Intellectual Property Use. Supplier represents and warrants that to the best of its knowledge all Supplier Intellectual Property and all Intellectual Property licensed to Supplier by third parties that is required for a Medtronic Affiliate to make, have made, and use and sell Products as of the Effective Date is disclosed in an Attachment to each BUSA. Supplier shall disclose to Medtronic in writing any additional Intellectual Property at least ninety (90) days before Supplier uses it to provide a Product. Supplier shall not use the additional Intellectual Property to which Medtronic objects in writing within sixty (60) days after Medtronic receives Supplier’s written disclosure of proposed use.

7.5 Third Party Licenses. Supplier shall comply with and maintain in full force and effect all license agreements with third parties pursuant to which Supplier is licensed to use the Intellectual Property of third parties that is used or employed for Supplier to perform its obligations under this Agreement. Supplier shall promptly notify Medtronic in writing of any allegation that Supplier is in breach of any such license agreement. Medtronic may, but is not obligated to, cure any such alleged breach and recover the cost of such cure from Supplier, including without limitation, by set-off against amounts Medtronic owes Supplier hereunder.

7.6 Intellectual Property Warranty and Indemnification.

7.6.1 Non-Infringement. Supplier shall not provide the Medtronic Affiliates or any Third Party Purchaser in connection with the work performed for benefit of Medtronic with any designs, plans, models, samples, software, integrated circuits, reports, or other writings or products which it either knows or has reason to believe violate the valid patent, copyright, or other form of Intellectual Property right of a third party. Supplier represents and warrants that the manufacture, use, sale and provision of the Product(s) by Supplier, and the Medtronic Affiliates’ subsequent use and sale of the Product, will not infringe, misappropriate or otherwise violate the patent, copyright, or other property or proprietary rights of any third party, except that the warranty in this subsection does not apply to any infringement or violation resulting from: (i) Specifications provided by Medtronic without any material input from Supplier; (ii) that portion of a Product based on Specifications provided by Medtronic without any material input from Supplier; (iii) a combination of other products with the Product when Supplier did not supply, recommend, or procure such other products or when Supplier objected to the combination of such other products with the Product; or (iv) Medtronic Intellectual Property.

7.6.2 Rights in Intellectual Property. (a) Supplier represents and warrants that, subject to the Medtronic Affiliates’ rights under the Agreement, Supplier owns or has the right to use the entire right, title and interest in the Intellectual Property used or employed by Supplier to Manufacture Products, without restriction or encumbrance. (b) Medtronic represents and

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warrants that, subject to the Supplier Affiliates’ rights under the Agreement, Medtronic owns or has the right to use the entire right, title and interest in the Medtronic Intellectual Property used or employed by Supplier to Manufacture Products, without restriction or encumbrance.

7.6.3 Indemnity by Supplier. Supplier shall give Medtronic notice of any claim or allegation that would implicate the warranty under Sections 7.6.1 and 7.6.2 as soon as possible but in no event more than thirty (30) days after receipt of such claim or allegation. Supplier shall defend, indemnify and save harmless the Medtronic Affiliates, and at Medtronic’s request in its sole discretion, any Third Party Purchaser, from all damages, costs and expenses (including attorney fees and any costs incurred by Medtronic on behalf of any Third Party Purchaser) related to a claim that Product infringes or misappropriates a patent or other Intellectual Property right (or other property or proprietary rights) of any third party, which infringement or misappropriation constitutes a breach of Sections 7.6.1 or 7.6.2(a), provided Medtronic provides notice to Supplier of such claim no more than thirty (30) days after receipt of such claim. If Medtronic fails to notify Supplier within thirty (30) days, Supplier’s obligation to defend, indemnify and save harmless the Medtronic Affiliates (and, as applicable, any Third Party Purchaser) shall be reduced only to the extent Supplier is prejudiced by the delay beyond thirty (30) days. If the use of any Products is enjoined due to an infringement or misappropriation that constitutes a breach of Sections 7.6.1 or 7.6.2(a), at Medtronic’s option, Supplier shall at its expense and as a first priority, work to either substitute a fully functionally equivalent product or process (as applicable) not subject to such injunction, modify such Product or process (as applicable) so that it is no longer subject to such injunction, or obtain the right to continue using such Product or process (as applicable) so long as such Product or process meets all Medtronic and regulatory requirements.

7.6.4 Indemnity by Medtronic. Medtronic shall defend, indemnify and save harmless the Supplier Affiliates, and at Supplier’s request in its sole discretion, any Third Party Purchaser, from all damages, costs and expenses (including attorney fees and any costs incurred by Supplier on behalf of any Third Party Purchaser) related to a claim that any of the following infringes or misappropriates a patent or other Intellectual Property right (or other property or proprietary rights) of any third party: (i) Specifications provided by Medtronic without any material input from Supplier; (ii) that portion of a Product based on Specifications provided by Medtronic without any material input from Supplier; (iii) a combination of other products with the Product when Supplier did not supply, recommend, or procure such other products or when Supplier objected to the combination of such other products with the Product; or (iv) Medtronic Intellectual Property; provided Supplier provides notice to Medtronic of such claim no more than thirty (30) days after receipt of such claim. If Supplier fails to notify Medtronic within thirty (30) days, Medtronic’s obligation to defend, indemnify and save harmless the Supplier Affiliates (and, as applicable, any Third Party Purchaser) shall be reduced only to the extent Medtronic is prejudiced by the delay beyond thirty (30) days.

7.7 Patent Marking. Supplier shall ensure that any patent markings it places or causes to be placed on, about or within Products or components is accurate and in conformance with Applicable Law at all times. Supplier agrees to indemnify and hold harmless Medtronic and Medtronic Affiliates, and their respective officers, directors, employees, shareholders, agents or representatives pursuant to Section 9.1 in the event a third party asserts Claims arising out of or related to Supplier’s patent marking.

8. WARRANTIES AND REPRESENTATIONS

8.1 Compliance Covenants and Representations. Supplier represents and warrants to Medtronic that: (i) the Products delivered to Medtronic or any Third Party Purchaser for Medtronic’s benefit are not adulterated or misbranded within the meaning of the United States Food, Drug, and Cosmetic Act, (ii) all Products delivered to Medtronic or any Third Party Purchaser for Medtronic’s benefit have been Manufactured in accordance with a quality system that is consistent with the

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applicable Quality Requirements; and (iii) any services provided and the Manufacture, sale and delivery of Products does not violate any, and the Products conform to all Applicable Laws, including without limitation, the FDA and, if applicable, equivalent non-U.S. regulatory authorities. Supplier shall promptly notify Medtronic in writing if Supplier becomes aware that a Product or any applicable Quality Requirements may not comply with Applicable Law.

8.2 Product Warranty. Supplier represents and warrants that each Product fully complies and will comply with all applicable Specifications and applicable Quality Requirements, and is and will be free from defects in design, materials and workmanship for a period of fifteen (15) months from date of delivery. If Product includes software, Supplier warrants that any computer software provided with or incorporated into a Product (i) is and will be free of viruses, worms, and other components designed to erase, disable, or otherwise cause harm to computer systems, and (ii) does not contain Publicly Available Software. If Publicly Available Software is included in a Product, Supplier represents and warrants that it has complied with all licensing requirements associated with the use of such software in the Publicly Available Software Products and agrees to provide information about such compliance in response to a written request from Medtronic. Supplier shall inform Medtronic and/or any Third Party Purchasers in writing no more than two (2) days after Supplier learns of any actual or potential problems relating to the performance of any Product or any similar product manufactured by Supplier for a third party. THE EXPRESS WARRANTIES SET FORTH IN THIS SECTION 8 ARE THE SOLE AND EXCLUSIVE WARRANTY GIVEN BY SUPPLIER WITH RESPECT TO THE PRODUCT.

8.3 Government Watch List. Supplier represents and warrants that neither Supplier, nor any parent, subsidiary, or affiliate of Supplier, nor any of their officers, directors, or Personnel, nor any sub-supplier of Supplier or any other third parties, is: (i) a Restricted Party; (ii) included on the List of Excluded Individuals/Entities maintained by the HHS Office of Inspector General pursuant to 42 U.S.C. Sections 1320a-7, 13955ccc, 1320c-5 and regulations promulgated thereunder, which, as of the Effective Date, can be searched at the internet website of http://exclusions.oig.hhs.gov/ (“OIG List”); or (iii) listed as excluded on the list maintained by the United States General Services Administration which, as of the Effective Date, can be searched at the internet website of System for Award Management https://www.sam.gov (the “SAM List”).  Supplier shall immediately notify Medtronic if Supplier, any parent, subsidiary, or affiliate of Supplier, or their officers, directors, or Personnel, or any sub-supplier of Supplier or any other third parties, should come to be (a) a Restricted Party, (b) included on the OIG List, or (c) listed as excluded on the SAM List

8.4 Compliance with Agreement. Supplier represents and warrants that all of its employees, agents, contractors and consultants whose services may be used to fulfill the obligations under the Agreement are or will be informed of the terms of the Agreement to the extent necessary to comply with its terms, and that all such persons are sufficiently obligated to Supplier, by contract or otherwise, to fully comply with all provisions of the Agreement.

8.5 Conflicts. Supplier represents and warrants to Medtronic that the execution of this Master Agreement, any BUSA or purchase order placed thereunder and the Other Agreements and Supplier's performance thereunder is within its duly authorized powers and does not conflict with any other contract or obligation of Supplier. Supplier shall not enter into any agreement or understanding whether written or oral, during the term of the Agreement which conflicts or is inconsistent with the terms of this Master Agreement.

8.6 Disclaimer. SUPPLIER MAKES NO OTHER REPRESENTATION OR WARRANTY AND HEREBY EXPRESSLY DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED. NO IMPLIED WARRANTY OF MERCHANTABILITY, NO IMPLIED WARRANTY OF FITNESS FOR ANY PARTICULAR PURPOSE, AND NO IMPLIED WARRANTY ARISING BY USAGE OF TRADE, COURSE OF DEALING OR COURSE OF PERFORMANCE IS MADE BY SUPPLIER. NO REPRESENTATIVE OR SUPPLIER IS AUTHORIZED TO GIVE OR MAKE ANY OTHER REPRESENTATION OR WARRANTY OR TO MODIFY THE FOREGOING WARRANTY IN ANY WAY.

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9. INDEMNIFICATION

9.1 Indemnification by Supplier. Supplier shall indemnify, defend and hold harmless the Medtronic Affiliates, and their respective officers, directors, employees, shareholders, agents and representatives, and, at Medtronic’s request in its sole discretion, any Third Party Purchasers, from and against and in respect of any and all alleged or actual demands, claims, actions or causes of action, alleged or actual claims of negligence, assessments, losses, damages, liabilities, interest and penalties, costs and expenses (including, without limitation, reasonable legal fees and disbursements incurred in connection therewith and any costs incurred by Medtronic on behalf of any Third Party Purchaser) (“Medtronic Claims”) resulting from, arising out of, imposed upon or incurred by any person or entity to be indemnified hereunder by reason of (i) Supplier’s negligence or breach of the Agreement, or (ii) death or bodily injury caused by a Nonconforming Product. Medtronic will notify Supplier promptly after Medtronic becomes aware of any claim by any third party with respect to which a Medtronic Affiliate or a Third Party Purchaser would be entitled to indemnification hereunder. Supplier shall, at no cost to Medtronic, cooperate as requested by Medtronic in the defense of any Medtronic Claim for which indemnity may be sought.

9.2 Indemnification by Medtronic. Medtronic shall indemnify, defend and hold harmless the Supplier Affiliates, and their respective officers, directors, employees, shareholders, agents and representatives, and, at Supplier’s request in its sole discretion, any Third Party Purchasers, from and against and in respect of any and all alleged or actual demands, claims, actions or causes of action, alleged or actual claims of negligence, assessments, losses, damages, liabilities, interest and penalties, costs and expenses (including, without limitation, reasonable legal fees and disbursements incurred in connection therewith and any costs incurred by Medtronic on behalf of any Third Party Purchaser) (“Supplier Claims”) resulting from, arising out of, imposed upon or incurred by any person or entity to be indemnified hereunder by reason of (i) Medtronic’s negligence or breach of the Agreement, or (ii) death or bodily injury caused by a Conforming Product. Supplier will notify Medtronic promptly after Supplier becomes aware of any claim by any third party with respect to which a Supplier Affiliate or a Third Party Purchaser would be entitled to indemnification hereunder. Medtronic shall, at no cost to Supplier, cooperate as requested by Supplier in the defense of any Supplier Claim for which indemnity may be sought.

9.3 Limitation of Remedies. Except for breaches of their obligations under Sections 6 (Confidentiality and Publicity) and 7.6 (Intellectual Property Warranty and Indemnification), or for willful misconduct. IN NO EVENT WILL A PARTY BE LIABLE TO THE OTHER PARTY OR ITS AFFILIATES FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, EXEMPLARY OR SPECIAL DAMAGES OF ANY KIND.

9.4. Insurance. Supplier shall, at its sole cost and expense, obtain and at all times during the term of this Agreement maintain insurance with the following minimum coverage and limits: (a) workers' compensation insurance in accordance with all applicable federal, state and local statutory requirements; (b) commercial general liability insurance on an occurrence basis with minimum combined single limit coverage of $1,000,000 per occurrence and $2,000,000 general aggregate for bodily injury and property damage liability; (c) automobile liability with a combined single limit of $1,000,000 for bodily injury and property damage liability (coverage will apply to non-owned and hired automobiles); (d) product liability of $2,000,000 per occurrence covering all Products; (e) employer’s liability insurance with limits of $1,000,000 by accident each accident, $1,000,000 by disease each employee, $1,000,000 by disease policy limit; (f) excess or umbrella insurance with limits of $5,000,000 per occurrence in excess of the limits specified above for employer’s liability and commercial general liability insurance; and (g) errors and omissions liability insurance (including technology errors and omissions, network and information security liability and communications and media liability) with a limit of $5,000,000 per occurrence and $5,000,000 aggregate.  Supplier will name “Medtronic, Inc., its subsidiaries and affiliates” as “Additional Insured”, with primary, non-contributory coverage, under Supplier’s insurance policies. Supplier shall furnish Medtronic written evidence of such insurance and shall provide at least thirty (30) days prior written notice of reduction in coverage levels or termination of such insurance.

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10. TERM AND TERMINATION

10.1 Term. The Master Agreement will become effective on the Effective Date for an initial term of three (3) years and, with respect to any BUSA or purchase order placed thereunder, the number of years designated therein as any initial set of years (the “Initial Term”). Unless earlier terminated, the Master Agreement will thereafter automatically renew for up to three (3) additional periods of one (1) year each, unless either party provides the other with notice of non-renewal at least one (1) year before the end of the then-current term.

10.2 Termination. BUSAs and Other Agreements may be terminated only in accordance with their own terms. In the event all BUSAs have been terminated or are expired, either party may terminate the Master Agreement upon written notice to the other of no less than ninety (90) days.

10.3 Effect of Expiration or Termination:

10.3.1 Master Agreement. The parties acknowledge and agree that the termination or expiration of any individual BUSA shall not in itself terminate this Master Agreement or have any effect on the rights and obligations of third parties or any other BUSA or purchase order placed thereunder. If this Master Agreement expires or is terminated under Section 10, no further BUSAs may be entered into by the parties under the Master Agreement.

10.3.2 Orders. Unless otherwise provided in a BUSA, upon termination or expiration of the Master Agreement or any BUSA, all then outstanding accepted orders thereunder for Products shall survive.

10.3.3 License. In the event of a non-renewal or termination by Supplier of the Master Agreement or any BUSA with less notice than required by Section 4.8 (Discontinuation), the Medtronic Affiliates will have the rights accorded to it under Section 7.3 (Failure to Supply License), as though Supplier had elected to exit the business.

10.3.4 Last Time Buy. In event of termination or expiration of the Master Agreement or any BUSA, Medtronic shall have a right to place an order for a last time buy pursuant to Section 4.8 (Discontinuation) during the remainder of the term of the Master Agreement or the BUSA and for thirty (30) days thereafter, as though Supplier had elected to exit the business.

10.3.5 Return to Medtronic. At the earlier of the Business Unit’s written request or Product delivery to fulfill the last order placed under a BUSA that has been terminated or has expired, Supplier shall promptly return all applicable Business Unit’s property, return or securely destroy the records in Supplier’s possession as directed by the applicable Business Unit, and execute such documents and take other action as reasonably requested by such Business Unit in connection therewith.

10.4 Survival. All provisions which are continuing in nature, including but not limited to Sections 4.1.2 (Production/Compliance with Law, Indemnity), 4.3 (Quality), 4.4 (Use and Return of Medtronic Property), 5.4 (Conflict Minerals), 6 (Confidentiality and Publicity), 7 (Intellectual Property Rights), 8 (Warranties and Representations), 9 (Indemnification) and 10 (Term and Termination), will survive termination of this Master Agreement and each BUSA.

11. MISCELLANEOUS

11.1 Force Majeure. A party’s obligations under a BUSA, including any delays in Product deliveries, will be excused by a Force Majeure event as to such BUSA only to the degree affected, provided that the party affected by the Force Majeure event makes reasonable efforts to avoid being so affected and promptly delivers written notice to the other party upon learning of the Force Majeure event, which notice must include a detailed description of the event and its anticipated effect on the party’s ability to perform its obligations. Upon giving notice to the other party, the affected party is excused from the performance of its obligations under the BUSA only to the extent and only for the period that its performance of such obligations is prevented by the Force Majeure event, except that this clause does not apply to a party’s obligation to perform its disaster recovery plan. During the period that the performance by a party has been suspended by reason

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of a Force Majeure event, the other party may suspend the performance of all or part of its obligations to the extent that such suspension is commercially reasonable.

11.2 Assignment. This Agreement and/or any portion thereof is assignable by Medtronic, provided that beginning as of the date of such assignment the assignee assumes the rights and obligations of Medtronic corresponding to the entire Agreement or the assigned portions thereof. The Agreement or any portion of it may not be assigned by Supplier, without at least ninety (90) days prior written notice to and the written consent of Medtronic, which shall not be unreasonably withheld. If the proposed assignment, in Medtronic’s good faith opinion may impact quality or continuity of supply, Medtronic may implement license in Section 7.3 (Failure to Supply License) and/or trigger the last time purchase as set forth in Section 4.8 (Discontinuation) as a condition of its consent. Assignment does not relieve the assigning party of its obligations hereunder. If Supplier experiences a change of control or sells substantially all of its assets associated with any of the Products, and the Agreement is not assigned, then the Medtronic Affiliates may implement the license in Section 7.3 and/or trigger the last time purchase as set forth in Section 4.8 (Discontinuation) so long as Medtronic places its order within ninety (90) days of the later of the effective date of the change in control or sale or Medtronic’s receipt of written notice by Supplier of such change in control or sale which will be honored by the successor in interest to Supplier.

11.3 Notices. Notices given under the Agreement must be in writing and must be either delivered in person (including express courier, such as Federal Express) or sent by United States certified or registered mail, postage and certification prepaid, to the other party, at the address at the beginning of this Agreement and, with respect to each BUSA or purchase order placed thereunder, the address noted therein. Notices are effective upon delivery. A party may change its address for notice by giving the other party notice in accordance with this section.

11.4 Consents. Any approval, authorization or consent required by the Agreement must be in writing, duly signed by an authorized representative of the granting party. The withholding of an approval, authorization or consent for regulatory, quality, or competitive reasons shall not be deemed unreasonable.

11.5 Business Reviews. Business Reviews will be held by Medtronic and Supplier at the Business Unit and corporate levels (including participation of appropriate level decision makers from both Parties to address both tactical and strategic business initiatives and objectives), on a periodic basis agreed to by the parties, to discuss topics of interest, including but not limited to the following issues:

(i) General business update.

(ii) Quality Performance and any open corrective actions.

(iii) Delivery performance and any open corrective actions.

(iv) Forecast and capacity Review.

(v) Other existing and planned projects

(vi) Cost reduction activities.

(vii) Litigation/Intellectual Property update

Failure to hold a Business Review will not relieve Supplier or Medtronic from its obligations under this Agreement.

11.6 Relationship of the Parties. Nothing contained in the Agreement creates a joint venture, partnership, agency or similar endeavor between the parties. Each party is acting solely as an independent contractor and neither party has any power or authority to direct or indirectly bind or act on behalf of the other. It is understood that except as expressly provided in the Agreement, nothing prevents the Medtronic Affiliates from developing products similar to the Products or from sourcing Products, other products or services from another vendor.

11.7 Governing Law and Venue. The Agreement will be construed in accordance with and governed by the laws of the State of Minnesota, USA, and federal law that applies in Minnesota, without

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giving effect to any choice of law rule that would cause the application of the laws of any other jurisdiction. The exclusive venue for actions relating to the Agreement is the federal and state courts for Hennepin County, Minnesota.

11.8 Dispute Escalation. The parties will in good faith endeavor to resolve any disputes or differences of interpretation of the Agreement amicably, through dialog and cooperation. In the event a dispute or difference is not promptly resolved at operational levels of the two organizations, the parties shall escalate it for a good faith effort to achieve an amicable resolution at a senior business management level.

11.9 Order of Precedence, Entire Agreement and Modifications.

11.9.1 Order of Precedence. In the event of a conflict in the terms of the documents governing an order placed pursuant to the Agreement, the terms of the documents will control in the following order of precedence (from higher to lower): (a) the applicable BUSA for additional or expressly conflicting terms (but only with respect to Products supplied under such BUSA), (b) this Master Agreement, (c) the Other Agreements, (d) the typed portions of Medtronic’s purchase order, and (e) the pre-printed terms of Medtronic’s order; provided, that Supplier shall not be bound by typed or pre-printed purchase orders unless it expressly accepts such orders. Each BUSA shall be subject to and shall incorporate by reference the terms and conditions of this Master Agreement, provided, however, the express terms and conditions of a BUSA shall prevail over any inconsistent or conflicting terms in this Master Agreement with respect to the Product(s) governed by such BUSA only.

11.9.2 Entire Agreement, Modifications. The Agreement (including the Other Agreements, the BUSAs and purchase orders placed thereunder) sets forth the entire agreement between the parties and supersedes all prior agreements, understandings and discussions regarding the subject matter hereof. The parties intend that this clause does not supersede any other written agreements that are in existence as of the Effective Date between Supplier and a Business Unit other than the one signing this Master Agreement unless and until such Business Unit enters into its own BUSA. No amendment, change, modification of any provision of this Agreement will be binding unless set forth in a written document signed by the parties.

11.10 Waiver. No waiver by either party of any default of the other party will be held to be a waiver of any other or subsequent default. Additionally, a Party’s failure on any occasion to insist on strict performance of any term or condition hereof shall not constitute a waiver of compliance with such term or condition on any other occasion or a waiver of default. No waiver shall be effective unless it is in writing and is signed by the party against which it is asserted.

11.11 Severability. If a provision contained or referred to in the Agreement is determined to be legally invalid or unenforceable, that provision will be ineffective to the extent of the invalidity or unenforceability without affecting the remaining provisions of the Agreement, which will continue to be valid and enforceable to the fullest extent permitted by law.

11.12 Counterparts. This Master Agreement and any BUSA may be executed in counterparts, each of which shall be an original as against either party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument upon delivery.

11.13. Signature. This Master Agreement and any BUSA may be signed in any manner that clearly evidences the parties’ intent to be bound, including via faxed, imaged, electronic or digital signatures.

The parties have caused this Master Agreement to be executed as of the Effective Date.

MEDTRONIC		INTRICON CORPORATION
By	/s/ Kenneth A. Patterson	By	/s/ Michael P. Geraci

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Ken Patterson
Sr. Director, Strategic Sourcing	Michael P. Geraci
Diabetes	(print name)

Date	12 July 2019	Title	Sr. Vice President Sales & Marketing
		Date	May 14, 2019

By	/s/ Leonel Peralta
	Leonel Peralta
	Vice President, Global Operations
	Diabetes

Date  July 11^th, 2019

LIST OF EXHIBITS

● Exhibit A: Form BUSA and Product and Price List

● Exhibit B: Disaster Recovery Plan

● Exhibit C: Supplier Instructions

● Exhibit D: Terms and Conditions for Tooling

Exhibits B-D are omitted pursuant to Item 601(a)(5) of Regulation S-K. Intricon agrees to furnish supplementally to the SEC, upon request, a copy of any omitted exhibit.

26

BUSINESS UNIT SUPPLY AGREEMENT

This Business Unit Supply Agreement (“BUSA”) is made by and between the Medtronic Business Units set forth below (“Medtronic”) and IntriCon Corporation on behalf of itself, its subsidiaries and Affiliated Companies performing services under the Master Agreement (“Supplier”) under the terms and conditions of the Master Supply Agreement (the “Master Agreement”) dated May 14, 2019 between Medtronic Inc. and Supplier.

MEDTRONIC BUSINESS UNITS:	Medtronic MiniMed, Inc.
EFFECTIVE DATE:	June 15, 2019

This BUSA sets forth certain terms applicable only to the sale by Supplier and purchase by the above referenced Business Units of Products (as defined below). This BUSA is between Supplier and the specific Business Units that are a party to this BUSA only and not any other Business Unit. For purposes of this BUSA only, when the term “Medtronic” is used in the Master Agreement, it means the specific Business Units that are a party to this BUSA.

All terms and conditions of the Master Agreement are incorporated by reference into this BUSA except as may be expressly and directly modified by, or conflict with, the terms of this BUSA or the attachments hereto. Nothing in the contents of this BUSA amends the Master Agreement in applications other than to this BUSA. In the event of any conflict between the terms of this BUSA, the terms of the Master Agreement, and/or the terms of the Automation Agreement, the terms of the agreements shall control in the following order of priority: (a) first, the Automation Agreement, (b) second, this BUSA and (c) third, the Master Agreement.

1. BUSA SPECIFIC DEFINITIONS

Terms capitalized but undefined in this BUSA have the meaning given to such terms in the Master Agreement, except that the following terms shall have the following meanings when used in this BUSA only:

“Automation Agreement” means the Automation Agreement to Business Unit Supply Agreement attached hereto as Attachment C.

Business Unit” means the above referenced Medtronic facilities, subsidiaries, business units or entities.

“Product” means the goods listed in Attachment A to this BUSA, all of which are Components as defined in the Master Agreement in that they are not Manufactured by Supplier.

“System” shall have the meaning given to it in the Automation Agreement.

2. BUSA PRODUCT ORDERING AND SALE REQUIREMENTS

The provisions of the Product Ordering and Sale section of the Master Agreement shall govern the order and sale of Products under this BUSA except as follows:

Capacity

a. Normal Capacity: Supplier Arden Hills/Singapore plants will manufacture to forecast at 5 days a week, 2 shifts. Vadnais Heights plant will manufacture to forecasts at 5 days a week, 3 shifts. Supplier shall develop build plan to support forecasted demand from Medtronic with the normal capacity supporting the build.

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b. Capital Equipment for Capacity Ramp: Supplier will be responsible for identifying, and implementing capital equipment needed to expand capacity. Supplier and Medtronic shall jointly review, approve and procure the needed additional capital equipment to meet the forecasted demand. Supplier shall not purchase capital equipment solely for use on the Products without first consulting with Medtronic. This section (b) shall not apply to the equipment covered by the Automation Agreement (as hereinafter defined).

c. Surge Capacity: Surge capacity available will be [****] above regular capacity and this covers materials, resources and equipment availability to support this surge in the same timeframe of the normal forecast.

d. Capacity Planning: Supplier shall make every effort to model the capacity plan to the forecast provided by Medtronic. Supplier shall communicate performance to capacity plans and will make every effort to adhere to meeting the capacity plan communicated.

e. Raw Material: Supplier shall maintain sufficient raw material and/or production capacity to support the 90 day demand plus [****] of production relative to the current month. Both parties in good faith shall work on ways to reduce component inventory holding cost at Supplier facilities. Both parties shall meet bi-annually on lead-time reduction projects to reduce component level inventory holding, while maintaining sufficient inventory to meet Product(s) demand.

f. End Of Life [EOL] Components: Supplier will drive and assist Medtronic in end of life component strategy. Based on Medtronic forecasts and Product strategy, supplier will drive and manage the procurement strategy to ensure continuity of supply. Procurement of the EOL components will be made by either Medtronic or Supplier as appropriate and agreed upon. Supplier will notify Medtronic in writing at least one hundred eighty days (180) days or as soon as practical (in case of exceptions) prior to the discontinuation of any Component(s). Medtronic will have the option as an end-of-life buy to purchase an unlimited quantity of the Component(s) prior to its discontinuation, with Supplier using its commercially reasonable efforts to ensure availability of any sub-supplier components. Supplier will hold as inventory any Component(s) purchased as an end-of-life buy pursuant to the terms of the raw materials program in section 2.e in the BUSA. If a Component is discontinued, Medtronic has the option to select an alternate Component. This Section 2.f shall replace and supersede Section 4.8 of the Master Agreement.

g. Materials with Shelf Life: Supplier will assist in identifying, procuring and managing materials with shelf life impact based on Medtronic forecasts provided. Supplier shall use commercially reasonable efforts to notify customer should forecasts change and material expiration should become an issue ensuring no interruption in supply to forecasted demand. Supplier and customer will negotiate in good faith based on situation.

h. Re-cycled Shipping Supplies: Custom customer / Product specific shipping containers are to be re-used and re-cycled back to Supplier. In the event more are needed by Supplier or Medtronic fails to re-cycle then Supplier will purchase and charge Medtronic.

i. Buffer Inventory: Supplier shall maintain a previously agreed upon buffer stock for agreed upon products as described in Attachment A.

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j. Minimum Purchase Requirements. The parties agree that Medtronic shall purchase and take ownership of a minimum of an aggregate of [****] Needle Assembly Units during the Initial Term based on two Systems and manually assembly units built within IntriCon.

k. Orders will be deemed accepted upon receipt unless notice of non-acceptance is provided by Supplier within five (5) Business Days thereafter

l. Certain Changes: Sections 2.5.2, 2.5.3, 2.5.4, 2.6.1 and 2.6.3 of the Master Agreement shall be amended and restated for the purposes of this BUSA as follows:

“2.5.2       Allocation. Supplier will satisfy orders submitted by Medtronic and Third Party Purchasers. If Supplier cannot deliver all Products when due, Supplier shall use commercially reasonable efforts to prioritize supply to Medtronic.

2.5.3       Cancellation of Orders. Medtronic may cancel, in whole or in part, any order for Product by giving Supplier written notice. Upon receipt of such notice, Supplier will immediately stop any Manufacturing work in process covered by such cancellation notice. Medtronic will reimburse Supplier for the actual, non-recoverable Manufacturing costs incurred up to such cancellation time only for orders corresponding to the three (3) month period (or, if greater, the amount of safety stock the parties have agreed upon in writing) from the date of delivery of Medtronic’s cancellation (but not in excess of the cancelled Product price for up to the number of cancelled Products), provided that:

(i)     Supplier submits a written claim, to Medtronic within thirty (30) days of Medtronic’s notice of cancellation, detailing the reasonable and actual additional costs directly attributable to the cancellation; and

(ii)    Supplier transfers to Medtronic ownership of and, upon Medtronic’s request, delivers the raw material, component and work in process inventory, and the finished goods inventory paid for by Medtronic; and

(iii)   Supplier uses its commercially reasonable efforts to mitigate the liability of Medtronic by, for example, cancelling or returning components to Supplier’s vendors, or by using raw material, component and work in process inventory, or finished goods inventory in other Medtronic or Third Party Purchaser orders, or for Supplier’s other customers.

(iv)   Supplier and Medtronic will work together in good faith to address cancellation of components, parts and sub-assemblies for any long lead time, End of life, and shelf life items to be mutually agreed upon.

2.5.4       Termination of Orders. Medtronic may terminate in whole or in part an order or orders by written notice to Supplier (i) for safety or regulatory reasons, (ii) if, as a result of a Force Majeure event, Supplier remains unable to deliver such Product for more than thirty (30) days, or (iii) if Supplier fails to cure a material breach with respect to the order within thirty (30) days after written notice. Any termination of any order will be subject to the provisions of Section 2.5.3, provided that if Medtronic terminates pursuant to (ii) or (iii), Medtronic shall not be obligated to pay for any non-conforming raw material, component, work in process, or finished goods inventory.

2.6.1       Shipping Terms. Unless other agreed to by Supplier in writing, delivery of Products will be F.O.B. Supplier’s Facility, and title and risk of loss will pass at that point.

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2.6.3        Delays. Supplier shall promptly notify Medtronic of any actual or prospective delay in delivery and Supplier shall obtain Medtronic’s approval prior to making any partial deliveries. If the delivery of Product is delayed, the parties shall mutually agree to a course of action.The MSA section of 2.6.3 will not apply at this time, when Medtronic mechanism is capable of being put in place we will re-visit this section of the agreement and mutually agree upon any changes.

3. BUSA PRICING AND PAYMENT REQUIREMENTS

The provisions of the Pricing and Payment section of the Master Agreement shall govern the pricing and payment of Products under this BUSA except as follows:

a. The pricing Terms are shown in Attachment A. Prices under the column heading “New Part Price” will be effective immediately following the execution of the agreement. Supplier agrees to provide to Medtronic reduced prices for certain Products sold to Medtronic as set forth under the column heading “New Part Price” set forth on Attachment A [with respect to those Products which have been manufactured using the System.].

b. Cost reductions. On an ongoing basis, Supplier shall use reasonable commercial efforts to reduce the cost of Products (subject to the provisions of this Agreement) and all attachments thereto including without limitation, Section 1.2.8 of the Quality Agreement (relative to design and process changes) and shall in good faith negotiate price reductions to share savings with Medtronic on a 50-50 basis, which reductions will be implemented immediately as agreed upon. Medtronic shall use reasonable efforts to process Supplier Change Notifications in a timely manner related to cost savings initiatives (SCN delays by Medtronic will still be credited to Supplier to achieve annual target cost reduction expectations). Target expectations are to provide [****] reductions per year based on conditions, volumes, locations and tool status, contingent upon Medtronic support and implementation. Section 3.1.2, 3.1.3, Section 3.1.4 and Section 3.2 of the Master Agreement shall not apply to this BUSA.

c. Payment Terms for Items other than Products. Notwithstanding Section 3.3 of the Master Agreement, payment terms for items other than Products (for example, tooling and other non-Products) shall be as set forth in the quotation provided by Supplier as accepted by Medtronic’s purchase order.

4. BUSA PRODUCTION, QUALITY and REGULATORY COMPLIANCE

The provisions of the Production and Quality is set forth as the quality agreement attached in Exhibit C.

a. Non-Conforming Product.

a. Right to Reject. Medtronic shall have the right to reject any Products which do not meet the applicable Specifications, within ninety (90) days after actual delivery for all parameters that can be tested at the time of receipt. For parameters that cannot be tested at that time, such as shelf life, Supplier's warranty shall extend for the stated shelf life.

b. Replacement. In the event that any Products do not meet applicable Specifications and Medtronic has notified Supplier, Supplier shall replace such Products free of charge and Supplier shall cover expenses (including freight and customs clearance, if any) incurred by Medtronic in connection with (a) shipment of replacement Products to the same location; and (b) shipment of the nonconforming Products to Supplier (if so requested by Supplier). In the event of a rejection of a defective Product, Supplier

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shall ship replacement Products within thirty (30) days of its receipt of a proper rejection notice from Medtronic.

b. Approvals. Medtronic shall be responsible for obtaining any regulatory and agency approvals for any Medtronic device which contains the Products. Supplier shall provide reasonably necessary assistance to Medtronic in obtaining those approvals with documentation and supporting evidence as required.

c. Risk Management. Attached as Attachment D is Supplier’s Business Continuity Plan which shall satisfy the requirement of Section 4.2.1 of the Master Agreement. In lieu of the requirements of Section 4.2.2 of the Master Agreement, Supplier shall address any risks arising from single and sole source suppliers.

d. With regard to provisions of the Master Agreement:

i. With regard to section 5.4.1, Medtronic will use reasonable efforts to provide Supplier with information on Environmental Regulations known to Medtronic to be applicable to the Products, to assist Supplier in complying with its obligations.

ii. With regard to section 5.7, Medtronic will use reasonable efforts to provide Supplier with information on regulatory submissions and/or self-certifications, clearances and approvals, where Medtronic may require additional information from Supplier to complete and/or submit same.

iii. The parties will cooperate in good faith to ensure regulatory compliance, and Medtronic will use good faith, reasonable efforts to provide Supplier with advance notice, where possible, and other guidance Medtronic has, with regard to new or different regulatory requirements applicable to the Products. It is understood that notwithstanding the foregoing, Supplier remains responsible for using its independent judgment to comply with its obligations under the Master Agreement.

5. BUSA TERM AND TERMINATION

5.1 The term of this BUSA shall be as set forth in the Automation Agreement.

5.2 This BUSA may be terminated as follows:

5.2.1 By a party for a material breach by the other party of the BUSA. Written notice of default must be given, including specific charges of default and reasonable requirements to cure. The party in default will have thirty (30) days after notice to cure. If the defaulting part fails to cure within that time, the party giving notice may terminate the BUSA immediately upon written notice to the other party.

5.2.2 By Medtronic upon written notice of termination to Supplier if Product purchased under such BUSA is delivered late or is defective, as agreed to by both parties, more than twelve (12) times in any twelve (12) month period.

5.2.3 By Medtronic if Supplier fails to perform its Disaster Recovery Plan as required by Section 4.2.1 of the Master Agreement, and such failure to enact the Disaster Recovery Plan within twenty (60) days after written notice by Medtronic of such failure.

5.2.4 By either party upon written notice to the other party if a Force Majeure event of such part with respect to this BUSA continues for more than one hundred eighty (180) consecutive days.

5.2.5 By either party upon written notice to the other party following bankruptcy, liquidation, or dissolution of the other party.

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this BUSA may be terminated in accordance within Section 10.2, Termination, and 10.3, Effect of Expiration or Termination, of the Master Agreement shall apply.

6. BUSA MEDTRONIC PROPERTY

All tooling, patterns, dies, gauges, jobs, fixtures, and all specifications, drawings, samples, designs, software, firmware, programs, formulae, and other items and information, including, without limitations, improvements to the Products furnished by Medtronic to Supplier in connection with this Agreement shall be used only in the performance of work for Medtronic; and shall remain the property of Medtronic; and, together with all copies thereof shall be disposed of or returned in good repair, normal wear and tear excepted, by Supplier to Medtronic, at Medtronic's direction and expense, upon Medtronic's request. Supplier assumes risk of loss and damage to said items while in its possession or under its control. Supplier shall notify Medtronic promptly whenever any items of Medtronic's tangible property are in need of repair or replacement. Medtronic's property shall be marked or otherwise adequately identified by Supplier as property of Medtronic for use only under this Agreement and shall be safely stored. Supplier waives any right it may have in law or equity to withhold Medtronic's property.

A. Medtronic Tooling and Components: Medtronic, at its discretion, may provide to Supplier certain Product-specific tooling for use in the production of Products. All molds, tooling and related components delivered to Supplier for use in the production of Products shall be the property of Medtronic and Supplier shall not use them for any purposes, except as expressly authorized in writing by Medtronic. Supplier shall take no action that could result in a lien on or other encumbrance of, or that could otherwise compromise Medtronic's ownership of, such molds, tooling or components. Upon the termination or expiration of this Agreement or the earlier request of Medtronic, all such molds, tooling and components shall be returned to Medtronic in good condition, except in the case of molds and tooling for reasonable wear and tear. Supplier shall at all times during the Term (as defined in Section 8 herein) maintain adequate insurance to cover any damage or loss with respect to such molds, tooling and components, and, upon request by Medtronic, deliver a certificate of insurance evidencing such coverage. The ownership and coverage clauses for the automation equipment for building the automated needle carrier assemblies is covered separately in Attachment C.

B. Maintenance of Tooling: Supplier shall maintain all of Medtronic's molds and tooling in good working condition at all times while in Supplier's possession. Routine maintenance of molds and tooling shall be carried out at Supplier's expense. "Routine Maintenance" shall include cleaning standard components and repairing any damage caused by neglect or negligence. Subject to Medtronic's prior written authorization, Medtronic shall be responsible for the cost of replacing molds and tooling, except to the extent that such replacement is necessary due to Supplier's failure to maintain the molds and tooling or thru Supplier's negligence or intentional acts.

C. Records: Supplier shall at all times maintain, and make available to Medtronic upon request, a complete list of all Medtronic molds, tooling and components in Supplier's possession. Supplier shall evaluate in writing the condition of all molds and tooling upon receipt from Medtronic and shall submit such evaluations to Medtronic for its review. Upon request by Medtronic, Supplier shall prepare and deliver to Medtronic a written report of the condition, maintenance, and usage history for all Medtronic molds and tooling.

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The parties have caused this BUSA to be executed as of the Effective Date.

MEDTRONIC MINIMED, INC.		INTRICON CORPORATION
By	/s/ Kenneth A. Patterson	By	/s/ Michael P. Geraci
	Ken Patterson
	Sr. Director, Strategic Sourcing	Michael P. Geraci
	Diabetes	(print name)

Date	12 July 2019	Title	Sr. Vice President Sales & Marketing
		Date	June 12, 2019

By	/s/ Leonel Peralta
	Leonel Peralta
	Vice President, Global Operations
	Diabetes

Date  July 11^th, 2019

LIST OF BUSA ATTACHMENTS

● Attachment A: Product and Price List

● Attachment B: Quality Agreement

● Attachment C: Automation Agreement

● Attachment D: Business Continuity Plan

Attachments A, B and D are omitted pursuant to Item 601(a)(5) of Regulation S-K. Intricon agrees to furnish supplementally to the SEC, upon request, a copy of any omitted attachment.

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BUSINESS UNIT SUPPLY AGREEMENT - ATTACHMENT A

PRODUCT AND PRICE LIST

Omitted pursuant to Item 601(a)(5) of Regulation S-K

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BUSINESS UNIT SUPPLY AGREEMENT - ATTACHMENT B__

Quality Agreement

Omitted pursuant to Item 601(a)(5) of Regulation S-K

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BUSINESS UNIT SUPPLY AGREEMENT – ATTACHMENT C

Automation Agreement

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ATTACHMENT C – AUTOMATION AGREEMENT TO

BUSINESS UNIT SUPPLY AGREEMENT

This Automation Agreement (“Automation Agreement”) is made by and between the Medtronic Business Units set forth below and IntriCon Corporation on behalf of itself, its subsidiaries and Affiliated Companies (“Supplier”) under the terms and conditions of the Master Supply Agreement (the “Master Agreement”) dated May 14, 2019 between Medtronic Inc. and Supplier and the Business Unit Supply Agreement (“BUSA”) dated May 14, 2019 between the Medtronic Business Units set forth below and Supplier. In the event of any conflict between or among the terms of this Automation Agreement and the terms of the Master Agreement and/or the BUSA, the terms of this Automation Agreement shall control. Terms capitalized but undefined in this Automation Agreement shall have the meaning given to such terms in the Master Agreement, except that terms “Business Unit” and “Product” shall have the meanings given to them in the BUSA.

MEDTRONIC BUSINESS UNITS:	Medtronic MiniMed, Inc. (“Medtronic”)
EFFECTIVE DATE:	June 15, 2019

1. PURCHASE OF SYSTEMS

Pursuant to the BUSA and at the request of Medtronic, Supplier has purchased two (2) Enlite Needle Automation Assembly Equipment Systems (each a “System” and collectively, the “Systems”; also referred to as “ANH 2” and “ANH3”, respectively) for a total purchase price of $[****], which amount includes the cost of IPARC, ovens and tray re-packaging system but does not include the cost of reusable items such as metal pins and trays and other manufacturing consumables (which shall be charged to Medtronic as separate costs).

2. PAYMENT FOR AND OWNERSHIP OF SYSTEMS

Medtronic shall purchase the first System (ANH2) and deliver to Supplier for the purchase price of $[****]. Upon signing of the Master Agreement and BUSA, Supplier shall purchase the second System (ANH3) for the purchase price of $[****], (which amount includes IPARC systems and tray handler). Supplier shall assign to Medtronic a 50% undivided ownership interest in the two Systems; Medtronic and supplier each shall have the right to file a UCC financing statement evidencing their respective 50% undivided ownership interest in the Systems. The interest of the parties in the Systems shall be as joint owners but neither party shall sell, transfer, assign, pledge or otherwise encumber its interest in the Systems. Section 4.6 of the Master Agreement shall not apply with respect to the Systems.

3. MAINTENANCE OF SYSTEMS

Supplier shall be responsible for routine and repair maintenance of the Systems; provided, that any repairs in excess of $50,000.00 in any twelve (12) month period shall be shared one-half by each party.

4. FINAL ACCEPTANCE TESTING

Medtronic and IntriCon will collaborate and be responsible for completing final acceptance testing (“FAT”) on the ANH3. This will include all mechanical and software functional testing, software code review and sustaining runs to prove each System’s performance fit for production. Upon completion of the FAT, Medtronic will provide Supplier with a signed FAT Report as per MPROC’s CSV policy. IntriCon’s quality system allows linkage for IIN software validation in the IQ. Initially the automation will be qualified without the IPARC, Oven and tray re-package system.

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5. TERM OF AGREEMENT; DISPOSITION OF SYSTEMS

The term of this Automation Agreement and the BUSA shall begin on the Effective Date and continue for a period of 48 months after the Final Approval Date (as hereinafter defined) (the “Initial Term”). Unless earlier terminated, this Automation Agreement and the BUSA will thereafter automatically renew for one additional period of twelve (12) months (the “Renewal Period”), unless either party provides the other with notice of non-renewal at least ninety (90) days before the end of the Initial Term. Upon the end of the Initial Term (or the end of the Renewal Period, if applicable), [****], and Supplier shall remove and ship the Systems at Medtronic’s expense to Medtronic’s facility. “Final Approval Date” means that date on which the last of the two Systems has been installed at Supplier’s facility and has received all required government and Medtronic approvals.

6. PRICING AND MINIMUM PURCHASE REQUIREMENTS

In consideration of the mutual agreements of the parties set forth herein:

a. Supplier agrees to provide to Medtronic reduced prices for certain Products sold to Medtronic as set forth in Attachment A – Product and Price List to the BUSA with respect to those Products which have been manufactured using the System.

b. The parties agree that Medtronic shall purchase and take ownership of a minimum of an aggregate of [****] Needle Assembly Units during the Initial Term based on two Systems and manually assembly units built within IntriCon.

The parties have caused this Automation Agreement to be executed as of the Effective Date.

MEDTRONIC MINIMED, INC.		INTRICON CORPORATION
By	/s/ Kenneth A. Patterson	By	/s/ Michael P. Geraci
	Ken Patterson
	Sr. Director, Strategic Sourcing	Michael P. Geraci
	Diabetes	(print name)

Date	12 July 2019	Title	Sr. Vice President Sales & Marketing
		Date	June 12, 2019

By	/s/ Leonel Peralta
	Leonel Peralta
	Vice President, Global Operations
	Diabetes

Date  July 11^th, 2019

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BUSINESS UNIT SUPPLY AGREEMENT – ATTACHMENT D

BuSINESS CONTINUITY PLAN

Omitted pursuant to Item 601(a)(5) of Regulation S-K

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BUSINESS UNIT SUPPLY AGREEMENT – ATTACHMENT E

Additional Product Quality Requirements

Nothing Follows

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BUSINESS UNIT SUPPLY AGREEMENT – ATTACHMENT F

Supplier Instructions

Nothing Follows

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EX-31.1

EXHIBIT 31.1

CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

I, Mark S. Gorder, certify that:

1. I have reviewed this quarterly report on Form 10-Q of IntriCon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2019	/s/ Mark S. Gorder
	Mark S. Gorder
	Chief Executive Officer
	(principal executive officer)

 35

EX-31.2

EXHIBIT 31.2

CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

I, Scott Longval, certify that:

1. I have reviewed this quarterly report on Form 10-Q of IntriCon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2019
	/s/ Scott Longval
	Scott Longval
	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary
	(principal financial officer)

 36

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark S. Gorder, Chief Executive Officer (principal executive officer) of IntriCon Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1) the quarterly report on Form 10-Q of the Company for the quarterly period ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2019
	Mark S. Gorder
	/s/ Mark S. Gorder President and Chief Executive Officer
	(principal executive officer)

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

 37

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott Longval, Executive Vice President, Chief Operating Officer and Chief Financial Officer (principal financial officer) of IntriCon Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1) the quarterly report on Form 10-Q of the Company for the quarterly period ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 8, 2019
	/s/ Scott Longval
	Scott Longval
	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Secretary
	(principal financial officer)

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

 38

XML

Revenue By Market (Schedule Of Net Revenue By Market) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue, Major Customer [Line Items]
Total Net Revenue	$ 26,893	$ 29,566	$ 85,800	$ 83,590
Products and Services Transferred at Point in Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	7,794	10,210	25,016	28,103
Products and Services Transferred over Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	19,099	19,356	60,784	55,487
Medical Biotelemetry, Diabetes [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	15,723	16,662	50,837	47,531
Medical Biotelemetry, Diabetes [Member] | Products and Services Transferred over Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	15,723	16,662	50,837	47,531
Medical Biotelemetry, Other Medical [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	3,376	2,694	9,947	7,956
Medical Biotelemetry, Other Medical [Member] | Products and Services Transferred over Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	3,376	2,694	9,947	7,956
Hearing Health Value Based DTEC [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	1,510	1,490	4,876	5,327
Hearing Health Value Based DTEC [Member] | Products and Services Transferred at Point in Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	1,510	1,490	4,876	5,327
Hearing Health Value Based ITEC [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	2,443	3,660	7,419	8,923
Hearing Health Value Based ITEC [Member] | Products and Services Transferred at Point in Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	2,443	3,660	7,419	8,923
Legacy OEM [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	2,405	3,056	7,749	8,500
Legacy OEM [Member] | Products and Services Transferred at Point in Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	2,405	3,056	7,749	8,500
Professional Audio Communications [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	1,436	2,004	4,972	5,353
Professional Audio Communications [Member] | Products and Services Transferred at Point in Time [Member]
Revenue, Major Customer [Line Items]
Total Net Revenue	$ 1,436	$ 2,004	$ 4,972	$ 5,353

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Shareholders' Equity And Stock-Based Compensation (Summary Of Stock Option Activity) (Details) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019 USD ($) $ / shares shares	Sep. 30, 2019 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding		928
Number of Shares, Options forfeited, cancelled or expired		(3)
Number of Shares, Awards granted		79
Number of Shares, Awards exercised or vested		(128)
Number of Shares, Outstanding	876	876
Number of Shares, Exercisable	670	670
Number of Shares, Available for future grant at beginning of period		249
Number of Shares, Available for future grant at end of period	183	183
Weighted-average Exercise Price, Outstanding | $ / shares		$ 6.25
Weighted-average Exercise Price, Awards forfeited, cancelled or expired | $ / shares		6.42
Weighted-average Exercise Price, Awards exercised or vested | $ / shares		4.87
Weighted-average Exercise Price, Outstanding | $ / shares	$ 6.39	6.39
Weighted-average Exercise Price, Exercisable | $ / shares	$ 6.30	$ 6.30
Aggregate Intrinsic Value, Outstanding | $	$ 12,241	$ 12,241
Aggregate Intrinsic Value, Exercisable | $	$ 8,799	$ 8,799
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding		830
Number of Shares, Options forfeited, cancelled or expired		(3)
Number of Shares, Awards exercised or vested		(79)
Number of Shares, Outstanding	748	748
Number of Shares, Exercisable	670	670
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Outstanding		98
Number of Shares, Awards granted	4	79
Number of Shares, Awards exercised or vested		(49)
Number of Shares, Outstanding	128	128

XML

Leases (Maturities Of Lease Liabilities) (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
Operating Leases, 2019	$ 503
Operating Leases, 2020	1,919
Operating Leases, 2021	1,588
Operating Leases, 2022	1,023
Operating Leases, 2023	416
Operating Leases, 2024 and thereafter	93
Operating Leases, Total lease payments	5,542
Operating Leases, Less: Interest	(456)
Operating Leases, Present value of lease liabilities	5,086
Financing Leases, 2019	29
Financing Leases, 2020	105
Financing Leases, 2021	31
Financing Leases, 2022	3
Financing Leases, Total lease payments	168
Financing Leases, Less: Interest	(5)
Finaning Leases, Present value of lease liabilities	163
Leases, Liability Payments Remainder Of Fiscal Year	532
Lease, Liability, Payments, Due Year Two	2,024
Lease, Liability, Payments, Due Year Three	1,619
Lease, Liability, Payments, Due Year Four	1,026
Lease, Liability, Payments, Due Year Five	416
Lease, Liability, Payments, Due after Year Five	93
Lease, Liability, Payments, Due	5,710
Lease, Liability, Undiscounted Excess Amount	(461)
Lease, Liability	$ 5,249

XML

Discontinued Operations (Schedule Of Loss On Sale Of Discontinued Operations) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Loss on disposal of discontinued operations	$ 1,116
Discontinued Operations, Disposed of by Sale [Member]
Cash and cash equivalents	5
Accounts receivable, net	72
Write-down of inventory to realizable value	278
Write-down of property, plant and equipment to salvage value	298
Other assets and liabilities, net	71
Realized loss on foreign currency	280
Net assets disposed	1,004
Additional disposal costs, net	112
Loss on disposal of discontinued operations	$ 1,116

XML

Geographic Information (Narrative) (Details) - customer	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Net Revenue [Member]
Revenue, Major Customer [Line Items]
Number of customers	1	1	1	1
Percentage of risk	59.00%	56.00%	59.00%	57.00%
Accounts Receivable [Member]
Revenue, Major Customer [Line Items]
Number of customers			2		2
Percentage of risk			43.00%		52.00%
Contract Assets [Member]
Revenue, Major Customer [Line Items]
Number of customers			1		1
Percentage of risk			84.00%		78.00%

XML

Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Summary Of Data By Industry Segment

For the Three Months Ended September 30, 2019	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  25,383	$                      1,510	$       26,893
Income (loss) from continuing operations before income taxes and discontinued operations	750	(953)	(203)
Depreciation and amortization	712	108	820
Capital expenditures	1,374	54	1,428
For the Nine Months Ended September 30, 2019	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  80,924	$                      4,876	$       85,800
Impairment loss	-	(3,765)	(3,765)
Income (loss) from continuing operations before income taxes and discontinued operations	5,106	(7,603)	(2,497)
Depreciation and amortization	2,210	238	2,448
Capital expenditures	3,651	136	3,787

For the Three Months Ended September 30, 2018	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  28,076	$                      1,490	$       29,566
Income (loss) from continuing operations before income taxes and discontinued operations	3,146	(1,041)	2,105
Depreciation and amortization	642	55	697
Capital expenditures	1,884	4	1,888
For the Nine Months Ended September 30, 2018	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  78,263	$                      5,327	$       83,590
Income (loss) from continuing operations before income taxes and discontinued operations	7,899	(1,992)	5,907
Depreciation and amortization	1,952	155	2,107
Capital expenditures	3,426	70	3,496

The following table summarizes the identifiable assets (excluding goodwill) and goodwill by industry segment as of the following dates:

	September 30,	December 31,
	2019	2018
Body Worn Devices:
Identifiable assets (excluding goodwill)	$                103,158	$                     97,725
Goodwill	9,551	9,551
Hearing Health DTEC:
Identifiable assets (excluding goodwill)	2,732	5,139
Goodwill	-	1,257

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Legal Proceedings

9 Months Ended

Sep. 30, 2019

Legal Proceedings [Abstract]

Legal Proceedings

15. Legal Proceedings

The Company is a defendant along with a number of other parties in lawsuits alleging that plaintiffs have or may have contracted asbestos-related diseases as a result of exposure to asbestos products or equipment containing asbestos sold by one or more named defendants. These lawsuits relate to the discontinued heat technologies segment which was sold in March 2005. Due to the non-informative nature of the complaints, the Company does not know whether any of the complaints state valid claims against the Company. Certain insurance carriers have informed the Company that the primary policies for the period August 1, 1970-1978 have been exhausted and that the carriers will no longer provide defense and insurance coverage under those policies. However, the Company has other primary and excess insurance policies that the Company believes afford coverage for later years.  Some of these other primary insurers have accepted defense and insurance coverage for these suits, and some of them have either ignored the Company’s tender of defense of these cases, or have denied coverage, or have accepted the tenders but asserted a reservation of rights and/or advised the Company that they need to investigate further.  Because settlement payments are applied to all years a litigant was deemed to have been exposed to asbestos, the Company believes that it will have funds available for defense and insurance coverage under the non-exhausted primary and excess insurance policies. However, unlike the older policies, the more recent policies have deductible amounts for defense and settlements costs that the Company will be required to pay; accordingly, the Company expects that its litigation costs will increase in the future. Further, many of the policies covering later years (approximately 1984 and thereafter) have exclusions for any asbestos products or operations, and thus do not provide insurance coverage for asbestos-related lawsuits. The Company does not believe that the asserted exhaustion of some of the primary insurance coverage for the 1970-1978 period will have a material adverse effect on its financial condition, liquidity, or results of operations. Management believes that the number of insurance carriers involved in the defense of the suits, and the significant number of policy years and policy limits under which these insurance carriers are insuring the Company, make the ultimate disposition of these lawsuits not material to the Company's consolidated financial position or results of operations.

The Company is also involved in other lawsuits arising in the normal course of business. While it is not possible to predict with certainty the outcome of these matters, management is of the opinion that the disposition of these lawsuits and claims will not materially affect our consolidated financial position, liquidity or results of operations.

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Consolidated Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash, cash equivalents and restricted cash	$ 8,688	$ 8,047
Short-term investments	20,315	38,093
Accounts receivable, less allowance for doubtful accounts of $306 at September 30, 2019 and $807 at December 31, 2018	8,425	11,266
Inventories	17,883	18,163
Contract assets	8,513	5,624
Other current assets	2,290	2,146
Current assets of discontinued operations	239	1,205
Total current assets	66,353	84,544
Machinery and equipment	40,525	36,725
Less: Accumulated depreciation	26,867	25,303
Net machinery and equipment	13,658	11,422
Goodwill	9,551	10,808
Intangible assets, net		2,585
Operating lease right of use assets, net	4,749
Investment in partnerships	1,409	2,091
Long-term investments	13,764
Other assets, net	6,196	3,427
Noncurrent assets of discontinued operations		371
Total assets	115,680	115,248
Current liabilities:
Current financing leases	108
Current operating leases	1,790
Accounts payable	11,407	12,871
Accrued salaries, wages and commissions	3,063	4,409
Other accrued liabilities	4,033	4,031
Liabilities of discontinued operations	393	336
Total current liabilities	20,794	21,647
Noncurrent financing leases	55
Noncurrent operating leases	3,296
Other postretirement benefit obligations	343	377
Accrued pension liabilities	725	706
Other long-term liabilities	1,162	544
Total liabilities	26,375	23,274
Commitments and contingencies
Shareholders' equity:
Common stock, $1.00 par value per share; 20,000 shares authorized; 8,778 and 8,664 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	8,778	8,664
Additional paid-in capital	86,358	84,999
Accumulated deficit	(5,054)	(509)
Accumulated other comprehensive loss	(524)	(927)
Total shareholders' equity	89,558	92,227
Non-controlling interest	(253)	(253)
Total equity	89,305	91,974
Total liabilities and equity	$ 115,680	$ 115,248

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Consolidated Condensed Statements Of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Consolidated Condensed Statements Of Comprehensive Income (Loss) [Abstract]
Realized foreign currency translation loss from discontinued operations previously unrealized, tax			$ 0
Unrealized foreign currency translation adjustment from continuing operations, tax	$ 0	$ 0	0	$ 0
Interest rate swap, tax		0		0
Investment in partnerships, tax			0
Pension and postretirement obligations, tax	$ 0	$ 0	$ 0	$ 0

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Other Assets, Net (Tables)

9 Months Ended

Sep. 30, 2019

Other Assets, Net [Abstract]

Schedule Of Other Assets, Net

		September 30,		December 31,
		2019		2018
Fitting Software	$	3,679	$	-
NXP Tech		1,964		2,259
Other		553		1,168
Total	$	6,196	$	3,427

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Shareholders' Equity And Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Shareholders' Equity And Stock-Based Compensation [Abstract]

Summary Of Stock Option Activity

	Outstanding Awards				Stock Option Weighted-Average Exercise Price (a)		Aggregate   Intrinsic Value
	Stock Options	RSUs	Total
Outstanding at December 31, 2018	830	98	928	$	6.25
Forfeited, cancelled or expired	(3)	-	(3)		6.42
Granted	-	79	79		-
Exercised or vested	(79)	(49)	(128)		4.87
Outstanding at September 30, 2019	748	128	876	$	6.39	$	12,241
Exercisable at September 30, 2019	670	-	670	$	6.30	$	8,799
Available for future grant at December 31, 2018	249
Available for future grant at September 30, 2019	183
(a) The weighted average exercise price calculation does not include outstanding RSUs

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

11.   Leases

The Company’s leases pertain primarily to engineering, manufacturing, sales and administrative facilities, with an initial term of one year or more. The Company has three leased facilities in Minnesota, two that expire in 2022 and one that expires in 2023, one leased facility in Illinois that expires in 2021, one leased facility in Singapore that expires in 2020, one leased facility in Indonesia that expires in 2024, and one leased facility in Germany that expires in 2022.

Certain foreign leases allow for variable lease payments that depend on an index or a market rate adjustment for the respective country and are adjusted on an annual basis. The adjustment is recognized as incurred in profit and loss. The facility leases include options to extend for terms ranging from one to five years. Lease options that the Company is reasonably certain to execute, are included in the determination of the ROU asset and lease liability. Our Indonesia lease includes embedded forward starting leases that will begin in 2022 and 2024 for additional square footage, which will result in the recognition of an additional ROU asset and lease liability in those periods of approximately $103 and $72, respectively. The Company also leases various computer equipment that include bargain purchase options at termination. These leases have been classified as finance leases.

As of September 30, 2019, the Company has a weighted-average lease term of 1.6 years for its finance leases, and 3.3 years for its operating leases. As of September 30, 2019, the Company has a weighted-average discount rate of 5.56% for its finance leases, and 5.25% for its operating leases. Operating cash flows from continuing operations for the nine months ended September 30, 2019 from operating leases were $1,406. Operating cash flows from discontinued operations for the nine months ended September 30, 2019 from operating leases were $84. Non-cash increases for the nine months ended September 30, 2019, to the operating lease ROU assets, lease incentive other assets and lease liabilities from continuing operations were $772,  $150, and $922, respectively. During the nine months ended September 30, 2019, we derecognized approximately $761 of non-cash operating lease ROU assets and liabilities from our discontinued operations. Financing lease assets are classified as machinery and equipment within the consolidated balance sheet. Short term leases are not significant.

      The following tables summarizes lease costs by type:

	Three Months Ended September 30, 2019	Nine Months Ended September 30, 2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$                       27	$                     76
Interest on lease liabilities	3	8
Operating lease cost*	462	1,379
Variable lease cost**	138	417
Total lease cost	$                     630	$                1,880
*Operating lease cost excludes $0 and $86 related to discontinued operations of the UK for the three and nine months ended September 30, 2019, respectively.
**Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our domestic and foreign building leases, excluding approximately $0 and $11 related to discontinued operations of the UK for the three and nine months ended September 30, 2019, respectively.

     Maturities of lease liabilities are as follows:

		Operating Leases		Financing Leases		Total
2019	$	503	$	29	$	532
2020		1,919		105		2,024
2021		1,588		31		1,619
2022		1,023		3		1,026
2023		416		-		416
2024 and thereafter		93		-		93
Total lease payments		5,542		168		5,710
Less: Interest		(456)		(5)		(461)
Present value of lease liabilities	$	5,086	$	163	$	5,249

As previously disclosed in Note 20 of the Notes to the Consolidated Financial Statements in our 2018 Annual Report on Form 10-K, prior to the adoption of ASU 2016-02, Leases (Topic 842), the future minimum payments required under lease agreements as of December 31, 2018 were 2019 - $2,417; 2020 - $2,255; 2021 - $1,689; 2022 - $950; 2023 - $188.

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Investment Securities

9 Months Ended

Sep. 30, 2019

Investments Securities [Abstract]

Investment Securities

7.   Investment Securities

The Company currently invests in commercial paper, US government agencies and corporate notes and bonds with original maturities of not more than two years. The Company classifies these investments as held to maturity based on our intent and ability to hold these investments until maturity. As a result, these investments are recorded at amortized cost, which approximates fair value as of September 30, 2019. As of December 31, 2018, the Company invested in certain liquid investment securities which were classified as available for sale investments and measured at fair value based on Level 1 inputs.

The maturity dates of our investments as of September 30, 2019 are as follows:
		Less than one year		1-5 years		Total
Commercial Paper Original Maturities of 91 Days or More	$	6,824	$	-	$	6,824
US Government Agencies		-		1,900		1,900
Corporate Notes and Bonds		13,491		11,864		25,355
Total Investments	$	20,315	$	13,764	$	34,079

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Discontinued Operations

9 Months Ended

Sep. 30, 2019

Discontinued Operations [Abstract]

Discontinued Operations

3.  Discontinued Operations

On June 25, 2019, the Company’s officers, pursuant to delegated authority from the board, approved plans to discontinue the operations of its UK subsidiary within the body worn device segment. As of September 30, 2019, we continue to settle the remaining assets and liabilities of the subsidiary. The final closingof the UK subsidiaryis expected to occur during the fourth quarter of 2019.

At June 30, 2019, the net realizable value of certain assets was less than their carrying value resulting in a loss on disposal of $1.0M.  There were no further adjustments made to the net realizable value of assets during the period ended September 30, 2019.

As the disposal meets the definition of a strategic shift in accordance with ASC 205, the results of the UK operations have been classified as loss on discontinued operations, net of income taxes, in the accompanying Consolidated Condensed Statements of Operations, Comprehensive Income (Loss) and Cash Flows. Current assets, noncurrent assets, and liabilities of the discontinued operations have been reclassified and reflected on the accompanying Consolidated Condensed Balance Sheets as “Current assets of discontinued operations,” “Noncurrent assets of discontinued operations,” and “Liabilities of discontinued operations”, respectively. Prior periods relating to our discontinued operations have also been reclassified to reflect consistency within our condensed consolidated financial statements.

The total assets and liabilities of the UK subsidiary at September 30, 2019 and December 31, 2018 were as follows:

		September 30,		December 31,
		2019		2018
Accounts receivable, net	$	1	$	213
Inventories		21		818
Other current assets		217		174
Current assets of discontinued operations		239		1,205
Machinery and equipment		-		436
Less:  Accumulated depreciation		-		126
Net machinery and equipment		-		310
Other assets, net		-		61
Total assets	$	239	$	1,576
Accounts payable		-		320
Other accrued liabilities		393		16
Current liabilities of discontinued operations		393		336
Net assets (liabilities)	$	(154)	$	1,240

The loss on disposal of discontinued operations, as a result of the plan to discontinue the operations of the UK, for the nine months ended September 30, 2019 was computed as follows:

Cash and cash equivalents	$	5
Accounts receivable, net		72
Write-down of inventory to net realizable value		278
Write-down of property, plant and equipment to salvage value		298
Other assets and liabilities, net		71
Realized loss on foreign currency		280
Net assets disposed		1,004
Additional disposal costs, net		112
Loss on disposal of discontinued operations	$	1,116

The following table shows the results of the UK subsidiary’s discontinued operations:

		Three Months Ended				Nine Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Revenue, net	$	-	$	568	$	1,068	$	2,067
Cost of goods sold		-		373		667		1,296
Gross profit		-		195		401		771
Sales and marketing		-		225		314		706
General and administrative		-		311		684		1,005
Total operating expenses		-		536		998		1,711
Other income, net		-		42		-		70
Loss from discontinued operations, net of taxes	$	-	$	(299)	$	(597)	$	(870)

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Goodwill And Intangible Assets (Schedule Of Goodwill) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Goodwill and Intangible Assets [Abstract]
Goodwill, Beginning Balance	$ 10,808
Impairment of goodwill of Hearing Help Express	(1,257)
Goodwill, Ending Balance	$ 9,551

XML

Inventories (Schedule Of Inventories) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Inventory [Line Items]
Raw materials	$ 13,894	$ 13,328
Work-in process	3,471	3,137
Finished products and components	518	1,698
Total	17,883	18,163
Domestic [Member]
Inventory [Line Items]
Raw materials	11,579	10,657
Work-in process	3,103	2,484
Finished products and components	405	1,583
Total	15,087	14,724
Foreign [Member]
Inventory [Line Items]
Raw materials	2,315	2,671
Work-in process	368	653
Finished products and components	113	115
Total	$ 2,796	$ 3,439

XML

Goodwill And Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets [Abstract]

Schedule Of Goodwill

Carrying amount at December 31, 2018	$	10,808
Impairment of goodwill of Hearing Help Express		(1,257)
Carrying amount at September 30, 2019	$	9,551

Summary of Intangible Assets

Carrying amount at December 31, 2018	$	2,585
Amortization of intangible assets of Hearing Help Express		(77)
Impairment of intangible assets of Hearing Help Express		(2,508)
Carrying amount at September 30, 2019	$	-

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Income Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Income Per Share [Abstract]

Reconciliation Between Basic And Diluted Earnings Per Share

	Three Months Ended				Nine Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Numerator:
Income (loss) from continuing operations before discontinued operations	$	(290)	$	2,202	$	(2,831)	$	5,549
Loss on disposal of discontinued operations (Note 3)		-		-		(1,116)		-
Loss from discontinued operations, net of income taxes (Note 3)		-		(299)		(597)		(870)
Net income (loss)	$	(290)	$	1,903	$	(4,544)	$	4,679
Denominator:
Basic – weighted shares outstanding		8,764		7,825		8,738		7,249
Weighted shares assumed upon exercise of stock awards		-		997		-		1,111
Diluted – weighted shares outstanding		8,764		8,822		8,738		8,360
Basic income (loss) per share attributable to IntriCon shareholders:
Continuing operations	$	(0.03)	$	0.28	$	(0.32)	$	0.77
Discontinued operations		-		(0.04)		(0.20)		(0.12)
Net income (loss) per share:	$	(0.03)	$	0.24	$	(0.52)	$	0.65
Diluted income (loss) per share attributable to IntriCon shareholders:
Continuing operations	$	(0.03)	$	0.25	$	(0.32)	$	0.66
Discontinued operations		-		(0.03)		(0.20)		(0.10)
Net income (loss) per share:	$	(0.03)	$	0.22	$	(0.52)	$	0.56

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Investment In Partnerships

9 Months Ended

Sep. 30, 2019

Investment In Partnerships [Abstract]

Investment In Partnerships

6.   Investment in Partnerships

Investment in partnerships consisted of the following:

		September 30,		December 31,
		2019		2018
Investment in Signison	$	1,246	$	865
Investment in and cash advance for Soundperience		-		1,022
Other		163		204
Total	$	1,409	$	2,091

The Company has a 50% ownership interest in Signison as of September 30, 2019. Signison is accounted for in the Company’s consolidated financial statements using the equity method.

As of December 31, 2018, the Company held a 49% ownership interest in Soundperience, which was accounted for using the equity method. In January 2019, the Company purchased the source code for the Sentibo Smart Brain self-fitting software from Soundperience in exchange for 1,750 Euros, our 49% ownership in Soundperience and the related license agreement. See Note 9.

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Changes In Accounting Policies

9 Months Ended

Sep. 30, 2019

Changes In Accounting Policies [Abstract]

Changes In Accounting Policies

2.   Changes in Accounting Policies

The Company’s significant accounting policies are detailed in “Note 1: Summary of Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842). Topic 842 supersedes the lease accounting guidance previously set forth in the Accounting Standards Codification (ASC) Topic 840 “Leases,” and requires lessees to recognize a lease liability and a right-of-use asset (ROU) for all leases that extend beyond one year. The Company adopted Topic 842 with a date of initial application of January 1, 2019, which resulted in a ROU asset and lease liability of approximately $6.0M.

The Company did not apply Topic 842 retrospectively using the transition option in ASU 2018-11, “Targeted Improvements” to ASC 842, to not restate comparative periods in transition and instead to use the effective date of ASC 842, “Leases”, as the date of initial application of transition. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification.

Changes to the Company’s accounting policies as a result of adopting Topic 842 are discussed below:

Short-term lease recognition exemption. The Company adopted the short-term lease recognition exemption as an accounting policy. Accordingly, the Company will not recognize a lease liability and ROU asset for short-term leases in transition and, post-effective date, will continue to recognize short-term leases as expense on a straight-line basis over the lease term. Renewal and purchase options for a lease will be reassessed upon the occurrence of certain discrete reassessment events: (1) the lease term is extended more than 12 months beyond the end of the previously determined lease term or (2) the lessee now concludes that the lessee’s exercise of a purchase option is reasonably certain. When a lease no longer qualifies for the short-term lease exemption, the Company will apply ASC 842 guidance on initial recognition and measurement; the commencement date of the lease for this purpose is the date of the change in circumstances.

Accounting for certain leases at a portfolio level. The Company accounts for leases at a portfolio level when the criteria described below are met and it reasonably expects that the application of the lease model to the portfolio will not differ materially from the application to the individual leases in that portfolio. If the applicable criteria are met, the start of the lease term is expected to be the first of the month. The criteria are:

1. Leases are similar in nature (e.g. similar underlying asset such as vehicles);

2. Leases have identical or nearly identical contract provisions, including same lessor; and

3. Leases with effective dates that fall within a narrow window of time (month or quarter) and have the same lease term.

For purposes of arriving at the transition adjustment on the effective date, a total of seven vehicle leases were combined into three portfolios.

Combining lease and non-lease components into a single component. The Company elected to adopt this practical expedient for all asset classes. As a result of this election, the consideration included in the lease payments for these asset classes will be greater, resulting in a larger lease liability and ROU asset.

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

10. Goodwill and Intangible Assets

As of and for the period ended June 30, 2019, the fair value of the goodwill within our Hearing Help Express reporting unit was less than its carrying amount and resulted in a non-cash impairment charge on goodwill of $1,257 and intangible assets of $2,508.  There were no further adjustments made to the carrying amount of goodwill and intangible assets as of September 30, 2019.

The following summarizes the consolidated carrying amount of goodwill by period: 

Carrying amount at December 31, 2018	$	10,808
Impairment of goodwill of Hearing Help Express		(1,257)
Carrying amount at September 30, 2019	$	9,551

The following summarizes the consolidated carrying amounts of intangible assets by period:

Carrying amount at December 31, 2018	$	2,585
Amortization of intangible assets of Hearing Help Express		(77)
Impairment of intangible assets of Hearing Help Express		(2,508)
Carrying amount at September 30, 2019	$	-

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Goodwill And Intanigble Assets (Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Goodwill and Intangible Assets [Abstract]
Goodwill impairment	$ 1,257
Intangible assets impairment	$ 2,508

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Investment Securities (Summary Of Maturity Dates Of Investments) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Less than one year	$ 20,315	$ 38,093
1-5 years	13,764
Total	34,079
US Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
1-5 years	1,900
Total	1,900
Commercial Paper Original Maturities of 91 Days or More [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Less than one year	6,824
Total	6,824
Corporate Notes And Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Less than one year	13,491
1-5 years	11,864
Total	$ 25,355

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Shareholders' Equity And Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate number of shares of common stock for which awards can be granted	183		183		249
Number of Shares, Awards granted			79
Shares purchased for award	2	1	7	5
Stock option expense	$ 648	$ 358	$ 1,514	$ 1,025
Unrecognized compensation costs related to non-vested awards	2,321		$ 2,321
Unrecognized compensation costs related to non-vested awards, recognition period			1 year 11 months 27 days
Total intrinsic value of options exercised	$ 196		$ 1,609
Maximum number of shares approved under purchase plan	300		300
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Number of Shares, Awards granted	4		79
Weighted average fair value of units granted	$ 19.19		$ 23.83
2006 Equity Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate number of shares of common stock for which awards can be granted	369		369
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of options			10 years

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Leases (Summary Of Lease Costs By Type) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Amortization of right-of-use assets	$ 27	$ 76
Interest on lease liabilities	3	8
Operating lease cost	462	1,379
Variable lease cost	138	417
Total lease cost	630	1,880
Discontinued Operations [Member] | United Kingdom [Member]
Operating lease cost	0	86
Variable lease cost	$ 0	$ 11

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Related-Party Transactions (Narrative) (Details) € in Thousands, $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Jan. 31, 2019 EUR (€)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)
Related Party Transaction [Line Items]
Legal services and costs | $		$ 63	$ 238	$ 169	$ 413
Soundperience [Member]
Related Party Transaction [Line Items]
Payments for Software | €	€ 1,750
Percent Of Ownership Interest Transferred	49.00%

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Discontinued Operations (Summary Of Results Of Discontinued Operations) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Loss from discontinued operations, net of taxes	$ (299)	$ (597)	$ (870)
Discontinued Operations, Disposed of by Sale [Member]
Revenue, net	568	1,068	2,067
Cost of goods sold	373	667	1,296
Gross profit	195	401	771
Sales and marketing	225	314	706
General and administrative	311	684	1,005
Total operating expenses	536	998	1,711
Other income, net	42		70
Loss from discontinued operations, net of taxes	$ (299)	$ (597)	$ (870)

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Geographic Information (Geographical Distribution Of Long-Lived Assets, Net) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Consolidated	$ 13,658	$ 11,422
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Consolidated	12,264	10,065
Singapore [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Consolidated	1,311	1,240
Other Geographical [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Consolidated	$ 83	$ 117

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Discontinued Operations (Tables)

9 Months Ended

Sep. 30, 2019

Discontinued Operations [Abstract]

Schedule Of Discontinued Operations Balance Sheet

		September 30,		December 31,
		2019		2018
Accounts receivable, net	$	1	$	213
Inventories		21		818
Other current assets		217		174
Current assets of discontinued operations		239		1,205
Machinery and equipment		-		436
Less:  Accumulated depreciation		-		126
Net machinery and equipment		-		310
Other assets, net		-		61
Total assets	$	239	$	1,576
Accounts payable		-		320
Other accrued liabilities		393		16
Current liabilities of discontinued operations		393		336
Net assets (liabilities)	$	(154)	$	1,240

Schedule Of Loss On Sale Of Discontinued Operations

Cash and cash equivalents	$	5
Accounts receivable, net		72
Write-down of inventory to net realizable value		278
Write-down of property, plant and equipment to salvage value		298
Other assets and liabilities, net		71
Realized loss on foreign currency		280
Net assets disposed		1,004
Additional disposal costs, net		112
Loss on disposal of discontinued operations	$	1,116

Summary Of Results Of Discontinued Operations

		Three Months Ended				Nine Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Revenue, net	$	-	$	568	$	1,068	$	2,067
Cost of goods sold		-		373		667		1,296
Gross profit		-		195		401		771
Sales and marketing		-		225		314		706
General and administrative		-		311		684		1,005
Total operating expenses		-		536		998		1,711
Other income, net		-		42		-		70
Loss from discontinued operations, net of taxes	$	-	$	(299)	$	(597)	$	(870)

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Income Per Share

9 Months Ended

Sep. 30, 2019

Income Per Share [Abstract]

Income Per Share

14. Income Per Share

The following table presents a reconciliation between basic and diluted earnings per share:

	Three Months Ended				Nine Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Numerator:
Income (loss) from continuing operations before discontinued operations	$	(290)	$	2,202	$	(2,831)	$	5,549
Loss on disposal of discontinued operations (Note 3)		-		-		(1,116)		-
Loss from discontinued operations, net of income taxes (Note 3)		-		(299)		(597)		(870)
Net income (loss)	$	(290)	$	1,903	$	(4,544)	$	4,679
Denominator:
Basic – weighted shares outstanding		8,764		7,825		8,738		7,249
Weighted shares assumed upon exercise of stock awards		-		997		-		1,111
Diluted – weighted shares outstanding		8,764		8,822		8,738		8,360
Basic income (loss) per share attributable to IntriCon shareholders:
Continuing operations	$	(0.03)	$	0.28	$	(0.32)	$	0.77
Discontinued operations		-		(0.04)		(0.20)		(0.12)
Net income (loss) per share:	$	(0.03)	$	0.24	$	(0.52)	$	0.65
Diluted income (loss) per share attributable to IntriCon shareholders:
Continuing operations	$	(0.03)	$	0.25	$	(0.32)	$	0.66
Discontinued operations		-		(0.03)		(0.20)		(0.10)
Net income (loss) per share:	$	(0.03)	$	0.22	$	(0.52)	$	0.56

The dilutive impact summarized above relates to the periods when the average market price of Company stock exceeded the exercise price of the potentially dilutive options. Earnings per common share was based on the weighted average number of common shares outstanding during the periods when computing the basic earnings per share. When dilutive, stock options are included as equivalents using the treasury stock method when computing the diluted earnings per share. Shares represented by RSUs are also included in the dilution calculation. Individual components of basic and diluted income per share may not sum to the total income per share due to rounding.

For the threeand nine months ended September 30, 2019, weighted average options and RSU’s outstanding of 755 and 125, and 778 and 125were excluded from the dilutive calculation, respectively, as their effect would have been antidilutive based on losses in the period.

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Consolidated Condensed Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Consolidated Condensed Balance Sheets [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 306	$ 807
Common stock, par value	$ 1.00	$ 1.00
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	8,778,000	8,664,000
Common stock, shares outstanding	8,778,000	8,664,000

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Consolidated Condensed Statements Of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net income (loss)	$ (4,544)	$ 4,679
Loss from discontinued operations, net of tax	1,713	870
Income (loss) from continuing operations	(2,831)	5,549
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:
Depreciation and amortization	2,448	2,107
Impariment loss	3,765
Equity in loss of partnerships	206	300
Stock-based compensation	1,514	1,025
Change in allowance for doubtful accounts	(501)	368
Changes in operating assets and liabilities:
Accounts receivable	3,394	(5,110)
Inventories	110	(4,856)
Contract assets	(2,889)	(3,345)
Other assets	(165)	(391)
Accounts payable	(1,773)	2,722
Accrued expenses	(1,372)	49
Other liabilities	(123)	(146)
Net cash provided by (used in) operating activities of continuing operations	1,783	(1,728)
Net cash (used in) operating activities of discontinued operations	(24)	(984)
Net cash provided by (used in) operating activities	1,759	(2,712)
Cash flows from investing activities:
Purchases of machinery and equipment	(3,787)	(3,496)
Payments for acquistion of other assets	(696)
Purchase of investment securities	(40,590)
Proceeds from sale of investment securities	38,015
Proceeds from maturities of investment securities	6,425
Investment in partnerships	(296)	(843)
Net cash (used in) investing activities of continuing operations	(929)	(4,339)
Net cash (used in) investing activities of discontinued operations	(16)
Net cash (used in) investing activities	(945)	(4,339)
Cash flows from financing activities:
Proceeds from long-term debt		14,195
Repayments of long-term debt		(25,539)
Proceeds from issuance of common stock, net of costs		88,967
Payments for repurchase of common stock and related costs		(25,907)
Payment of financing leases	(82)
Exercise of stock options and employee stock purchase plan shares	263	584
Withholding of common stock upon vesting of restricted stock units	(304)
Net cash provided by (used in) financing activities	(123)	52,300
Effect of exchange rate changes on cash of continuing operations	(46)	(24)
Effect of exchange rate changes on cash of discontinued operations	(4)	(2)
Effect of exchange rate changes on cash	(50)	(26)
Net increase in cash	641	45,223
Cash, cash equivalents and restricted cash, beginning of period	8,047	1,017
Cash, cash equivalents and restricted cash, end of period	8,688	46,240
Non-cash investing and financing:
Acquisition of machinery and equipment in accounts payable	305	2,098
Investment in partnership through liability incurred		$ 86
Fitting software other asset through liabilities incurred and exchange of investment in partnership	$ 3,093

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Inventories

9 Months Ended

Sep. 30, 2019

Inventories [Abstract]

Inventories

8.   Inventories

Inventories consisted of the following at:

		Raw materials		Work-in process		Finished products and components		Total
September 30, 2019
Domestic	$	11,579	$	3,103	$	405	$	15,087
Foreign		2,315		368		113		2,796
Total	$	13,894	$	3,471	$	518	$	17,883
December 31, 2018
Domestic	$	10,657	$	2,484	$	1,583	$	14,724
Foreign		2,671		653		115		3,439
Total	$	13,328	$	3,137	$	1,698	$	18,163

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Segment Reporting

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Reporting

4.  Segment Reporting

The Company currently operates in two reportable segments: body-worn devices and hearing health direct-to-end-consumer (DTEC). The nature of distribution and services has been deemed separately identifiable. Therefore, segment reporting has been applied. The following table summarizes certain data from continuing operations by industry segment:

For the Three Months Ended September 30, 2019	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  25,383	$                      1,510	$       26,893
Income (loss) from continuing operations before income taxes and discontinued operations	750	(953)	(203)
Depreciation and amortization	712	108	820
Capital expenditures	1,374	54	1,428
For the Nine Months Ended September 30, 2019	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  80,924	$                      4,876	$       85,800
Impairment loss	-	(3,765)	(3,765)
Income (loss) from continuing operations before income taxes and discontinued operations	5,106	(7,603)	(2,497)
Depreciation and amortization	2,210	238	2,448
Capital expenditures	3,651	136	3,787

For the Three Months Ended September 30, 2018	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  28,076	$                      1,490	$       29,566
Income (loss) from continuing operations before income taxes and discontinued operations	3,146	(1,041)	2,105
Depreciation and amortization	642	55	697
Capital expenditures	1,884	4	1,888
For the Nine Months Ended September 30, 2018	Body Worn Devices	Hearing Health DTEC	Total
Revenue, net	$                  78,263	$                      5,327	$       83,590
Income (loss) from continuing operations before income taxes and discontinued operations	7,899	(1,992)	5,907
Depreciation and amortization	1,952	155	2,107
Capital expenditures	3,426	70	3,496

The following table summarizes the identifiable assets (excluding goodwill) and goodwill by industry segment as of the following dates:

	September 30,	December 31,
	2019	2018
Body Worn Devices:
Identifiable assets (excluding goodwill)	$                103,158	$                     97,725
Goodwill	9,551	9,551
Hearing Health DTEC:
Identifiable assets (excluding goodwill)	2,732	5,139
Goodwill	-	1,257

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Inventories (Tables)

9 Months Ended

Sep. 30, 2019

Inventories [Abstract]

Schedule Of Inventories

		Raw materials		Work-in process		Finished products and components		Total
September 30, 2019
Domestic	$	11,579	$	3,103	$	405	$	15,087
Foreign		2,315		368		113		2,796
Total	$	13,894	$	3,471	$	518	$	17,883
December 31, 2018
Domestic	$	10,657	$	2,484	$	1,583	$	14,724
Foreign		2,671		653		115		3,439
Total	$	13,328	$	3,137	$	1,698	$	18,163

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2019

Income Taxes [Abstract]

Domestic And Foreign Income Taxes (Benefits)

	Three Months Ended				Nine Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
United States	$	(261)	$	1,575	$	(3,015)	$	4,876
Singapore		(90)		378		131		724
Indonesia		18		18		58		60
Germany		130		134		329		247
Income (loss) from continuing operations before income taxes and discontinued operations	$	(203)	$	2,105	$	(2,497)	$	5,907

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Changes In Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
ROU asset	$ 4,749
Lease liability	$ 5,086
Accounting Standards Update 2016-02 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
ROU asset		$ 6,000
Lease liability		$ 6,000

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Goodwill And Intangible Assets (Summary Of Intangible Assets) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Goodwill and Intangible Assets [Abstract]
Beginning balance	$ 2,585
Amortization of intangible assets of Hearing Help Express	(77)
Impairment of intangible assets of Hearing Help Express	(2,508)
Ending balance

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Other Assets, Net (Narrative) (Details) € in Thousands, $ in Thousands	1 Months Ended	9 Months Ended
	Jan. 31, 2019 EUR (€)	Sep. 30, 2019 USD ($)	Jan. 31, 2019 USD ($)
Other Assets, Net [Line Items]
Period of future quartely installments of non-cash amounts, software capitalization		4 years
Software Purchase, Outstanding Liabilities		$ 1,260
Cash Paid At Closing [Member]
Other Assets, Net [Line Items]
Software, capitalized cost			$ 586
Software, Future Quarterly Installments Next Four Years [Member]
Other Assets, Net [Line Items]
Software, capitalized cost			869
Due In January 2023 [Member]
Other Assets, Net [Line Items]
Software, capitalized cost			533
Software, Value Of Partnership And License Agreement Transferred [Member]
Other Assets, Net [Line Items]
Software, capitalized cost			$ 1,691
Soundperience [Member]
Other Assets, Net [Line Items]
Payments for Software | €	€ 1,750
Percent Of Ownership Interest Transferred	49.00%

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Investment In Partnerships (Investments in Partnerships) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]
Total	$ 1,409	$ 2,091
Signison [Member]
Schedule of Equity Method Investments [Line Items]
Total	1,246	865
Soundperience [Member]
Schedule of Equity Method Investments [Line Items]
Total		1,022
Other Investment [Member]
Schedule of Equity Method Investments [Line Items]
Total	$ 163	$ 204

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Discontinued Operations (Schedule Of Discontinued Operations Balance Sheet) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets of discontinued operations	$ 239	$ 1,205
Current liabilities of discontinued operations	393	336
Discontinued Operations, Disposed of by Sale [Member]
Accounts receivable, net	1	213
Inventories	21	818
Other current assets	217	174
Current assets of discontinued operations	239	1,205
Machinery and equipment		436
Less: Accumulated depreciation		126
Net machinery and equipment		310
Other assets, net		61
Total assets	239	1,576
Accounts payable		320
Other accrued liabilities	393	16
Current liabilities of discontinued operations	393	336
Net assets (liabilities)	$ (154)	$ 1,240

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Segment Reporting (Summary Of Data By Industry Segment) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Segment Reporting Information [Line Items]
Revenue, net	$ 26,893	$ 29,566	$ 85,800	$ 83,590
Impairment loss			(3,765)
Income (loss) from continuing operations before income taxes and discontinued operations	(203)	2,105	(2,497)	5,907
Depreciation and amortization	820	697	2,448	2,107
Capital expenditures	1,428	1,888	3,787	3,496
Goodwill	9,551		9,551		$ 10,808
Body Worn Devices [Member]
Segment Reporting Information [Line Items]
Revenue, net	25,383	28,076	80,924	78,263
Income (loss) from continuing operations before income taxes and discontinued operations	750	3,146	5,106	7,899
Depreciation and amortization	712	642	2,210	1,952
Capital expenditures	1,374	1,884	3,651	3,426
Identifiable assets (excluding goodwill)	103,158		103,158		97,725
Goodwill	9,551		9,551		9,551
Hearing Health DTEC [Member]
Segment Reporting Information [Line Items]
Revenue, net	1,510	1,490	4,876	5,327
Impairment loss			(3,765)
Income (loss) from continuing operations before income taxes and discontinued operations	(953)	(1,041)	(7,603)	(1,992)
Depreciation and amortization	108	55	238	155
Capital expenditures	54	$ 4	136	$ 70
Identifiable assets (excluding goodwill)	$ 2,732		$ 2,732		5,139
Goodwill					$ 1,257

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Investment In Partnerships (Narrative) (Details) - EUR (€) € in Thousands	1 Months Ended	12 Months Ended
	Jan. 31, 2019	Dec. 31, 2018	Sep. 30, 2019
Soundperience [Member]
Schedule of Equity Method Investments [Line Items]
Percentage ownership after transaction		49.00%
Percentage Relinquished After Transaction	49.00%
Payments for Software	€ 1,750
Signison [Member]
Schedule of Equity Method Investments [Line Items]
Equity method, ownership interest			50.00%

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Income Per Share (Narrative) (Details) - shares	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities excluded from computation of diluted income per share	755	778
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities excluded from computation of diluted income per share	125	125

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Income Taxes (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Taxes [Abstract]
Income tax expense (benefit)	$ 87	$ (97)	$ 334	$ 358

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General

9 Months Ended

Sep. 30, 2019

General [Abstract]

General

1.General

In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly IntriCon Corporation's (“IntriCon” or the “Company”) consolidated financial position as of September 30, 2019 and December 31, 2018, the consolidated results of its operations for the three and nine months ended September 30, 2019 and 2018 and the consolidated statements of equity and cash flows for the nine months ended September 30, 2019 and 2018. Results of operations for the interim periods are not necessarily indicative of the results of operations expected for the full year or any other interim period. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our 2018 Annual Report on Form 10-K filed with the SEC.

On June 25, 2019, the Company’s officers, pursuant to delegated authority from the board, approved plans to discontinue the operations of its United Kingdom (UK) subsidiary within our body worn device segment. For all periods presented, the Company classified this business as discontinued operations, and accordingly, has reclassified historical financial data presented herein. See Note 3.

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The Company evaluates its voting and variable interests in entities on a qualitative and quantitative basis. The Company consolidates entities in which it concludes it has the power to direct the activities that most significantly impact an entity’s economic success and has the obligation to absorb losses or the right to receive benefits that could be significant to the entity.

The Company has evaluated subsequent events occurring after the date of the consolidated financial statements for events requiring recording or disclosure in the consolidated financial statements. 

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Oct. 31, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Registrant Name	INTRICON CORP
Entity Central Index Key	0000088790
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		8,778,963
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	1-5005
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-1069060
Entity Address, Address Line One	1260 Red Fox Road
Entity Address, City or Town	Arden Hills
Entity Address, Postal Zip Code	55112
Entity Address, State or Province	MN
City Area Code	651
Local Phone Number	636-9770
Title of 12(b) Security	Common stock, par value $1.00 per share
Trading Symbol	IIN
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

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Consolidated Condensed Statements Of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Consolidated Condensed Statements Of Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ (290)	$ 1,903	$ (4,544)	$ 4,679
Realized foreign currency translation loss from discontinued operations previously unrealized, net of taxes of $0			280
Unrealized foreign currency translation adjustment from continuing operations, net of taxes of $0	9	9	(10)	(171)
Interest rate swap, net of taxes of $0		(4)		(1)
Investment in partnerships, net of taxes of $0			118
Pension and postretirement obligations, net of taxes of $0	5	5	15	15
Comprehensive income (loss)	$ (276)	$ 1,913	$ (4,141)	$ 4,522

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Geographic Information (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Geographical Distribution Of Long-Lived Assets, Net

		September 30,		December 31,
		2019		2018
United States	$	12,264	$	10,065
Singapore		1,311		1,240
Other		83		117
Consolidated	$	13,658	$	11,422

Geographical Distribution Of Net Sales

		Three Months Ended				Nine Months Ended
Net Revenue to Geographical Areas		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
United States	$	22,483	$	25,157	$	71,059	$	70,871
Europe		1,248		1,500		4,480		4,163
Asia		2,780		2,472		9,508		7,639
All other countries		382		437		753		917
Consolidated	$	26,893	$	29,566	$	85,800	$	83,590

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Related-Party Transactions

9 Months Ended

Sep. 30, 2019

Related-Party Transactions [Abstract]

Related-Party Transactions

16. Related-Party Transactions

The Company uses the law firm of Blank Rome LLP for legal services. A partner of that firm is the son-in-law of the Chairman of the Company’s Board of Directors, however, on May 1, 2019, the Chairman retired from the Company’s Board of Directors. For the three and nine months endedSeptember 30, 2019, the Company paid that firm approximately $63 and $169 for legal services and costs. For the three and nine months ended September 30, 2018, the Company paid that firm approximately $238 and $413, respectively, for legal services and costs. The prior Chairman of our Board of Directors was considered independent under applicable Nasdaq and Securities and Exchange Commission rules because (i) no payments were made to the Chairman or the partner directly in exchange for the services provided by the law firm and (ii) the amounts paid to the law firm did not exceed the thresholds contained in the Nasdaq standards. Furthermore, the aforementioned partner does not provide any legal services to the Company and is not involved in billing matters.

In January 2019, the Company purchased the source code for the Sentibo Smart Brain self-fitting software from Soundperience, an entity in which we owned 49% of the equity, for 1,750 Euros and the transfer back of our 49% ownership interest in Soundperience. See Note 9.

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Taxes [Abstract]

Income Taxes

12.  Income Taxes

Income tax expense (benefit) for the three and nine months ended September 30, 2019 was $87 and $334 compared to ($97) and $358 for the same period in 2018. The expense was largely due to our foreign operations. The Company has net operating loss carryforwards for U.S. federal income tax purposes. Due to the new tax legislation, there are limitations on the use of certain of the carryforwards. The Company has recorded a full valuation allowance against the deferred tax asset as of September 30, 2019.

The following was the income (loss) from continuing operations before income taxes and discontinued operations for each jurisdiction in which the Company has operations for the three and nine months ended September 30, 2019 and 2018.

	Three Months Ended				Nine Months Ended
		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
United States	$	(261)	$	1,575	$	(3,015)	$	4,876
Singapore		(90)		378		131		724
Indonesia		18		18		58		60
Germany		130		134		329		247
Income (loss) from continuing operations before income taxes and discontinued operations	$	(203)	$	2,105	$	(2,497)	$	5,907

The Company expects impairment losses to be an adjustment to the net loss for the three and nine months ended September 30, 2019 for income tax purposes.

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Geographic Information (Geographical Distribution Of Net Sales) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue, net	$ 26,893	$ 29,566	$ 85,800	$ 83,590
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue, net	22,483	25,157	71,059	70,871
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue, net	1,248	1,500	4,480	4,163
Asia [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue, net	2,780	2,472	9,508	7,639
All Other Countries [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue, net	$ 382	$ 437	$ 753	$ 917

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Discontinued Operations (Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Discontinued Operations, Disposed of by Sale [Member]
Disposal loss after write-down of assets	$ 1,004

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Segment Reporting (Narrative) (Details)	9 Months Ended
	Sep. 30, 2019 segment
Segment Reporting [Abstract]
Number of reportable segments	2

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Income Per Share (Reconciliation Between Basic And Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended					9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Per Share [Abstract]
Income (loss) from continuing operations before discontinued operations	$ (290)			$ 2,202		$ (2,831)	$ 5,549
Loss on disposal of discontinued operations (Note 3)						(1,116)
Loss from discontinued operations, net of income taxes (Note 3)				(299)		(597)	(870)
Net income (loss)	$ (290)	$ (5,030)	$ 775	$ 1,903	$ 757	$ (4,544)	$ 4,679
Basic - weighted shares outstanding	8,764			7,825		8,738	7,249
Weighted shares assumed upon exercise of stock awards				997			1,111
Diluted - weighted shares outstanding	8,764			8,822		8,738	8,360
Continuing operations	$ (0.03)			$ 0.28		$ (0.32)	$ 0.77
Discontinued operations				(0.04)		(0.20)	(0.12)
Net income (loss) per share:	(0.03)			0.24		(0.52)	0.65
Continuing operations	(0.03)			0.25		(0.32)	0.66
Discontinued operations				(0.03)		(0.20)	(0.10)
Net income (loss) per share:	$ (0.03)			$ 0.22		$ (0.52)	$ 0.56

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Income Taxes (Domestic And Foreign Income Taxes (Benefits)) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Operating Loss Carryforwards [Line Items]
Income (loss) from continuing operations before income taxes and discontinued operations	$ (203)	$ 2,105	$ (2,497)	$ 5,907
United States IRS [Member]
Operating Loss Carryforwards [Line Items]
Income before income taxes, United States	(261)	1,575	(3,015)	4,876
Singapore Tax Authority [Member]
Operating Loss Carryforwards [Line Items]
Income before income taxes, Foreign	(90)	378	131	724
Indonesia [Member]
Operating Loss Carryforwards [Line Items]
Income before income taxes, Foreign	18	18	58	60
Federal Ministry Of Finance Germany [Member]
Operating Loss Carryforwards [Line Items]
Income before income taxes, Foreign	$ 130	$ 134	$ 329	$ 247

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Consolidated Condensed Statements Of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Consolidated Condensed Statements Of Operations [Abstract]
Revenue, net	$ 26,893	$ 29,566	$ 85,800	$ 83,590
Cost of goods sold	20,120	20,236	62,253	56,435
Gross profit	6,773	9,330	23,547	27,155
Operating expenses:
Sales and marketing	2,609	2,784	9,071	8,023
General and administrative	3,715	2,921	10,551	8,429
Research and development	840	1,251	2,902	3,693
Impairment loss (Note 10)			3,765
Total operating expenses	7,164	6,956	26,289	20,145
Operating income (loss)	(391)	2,374	(2,742)	7,010
Interest income (expense), net	240	(48)	703	(453)
Other expense, net	(52)	(221)	(458)	(650)
Income (loss) from continuing operations before income taxes and discontinued operations	(203)	2,105	(2,497)	5,907
Income tax expense (benefit)	87	(97)	334	358
Income (loss) from continuing operations before discontinued operations	(290)	2,202	(2,831)	5,549
Loss on disposal of discontinued operations (Note 3)			(1,116)
Loss from discontinued operations, net of income taxes (Note 3)		(299)	(597)	(870)
Net income (loss)	$ (290)	$ 1,903	$ (4,544)	$ 4,679
Basic income (loss) per share:
Continuing operations	$ (0.03)	$ 0.28	$ (0.32)	$ 0.77
Discontinued operations		(0.04)	(0.20)	(0.12)
Net income (loss) per share:	(0.03)	0.24	(0.52)	0.65
Diluted income (loss) per share:
Continuing operations	(0.03)	0.25	(0.32)	0.66
Discontinued operations		(0.03)	(0.20)	(0.10)
Net income (loss) per share:	$ (0.03)	$ 0.22	$ (0.52)	$ 0.56
Average shares outstanding:
Basic	8,764	7,825	8,738	7,249
Diluted	8,764	8,822	8,738	8,360

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Consolidated Condensed Statements Of Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings (Accumulated Deficit) [Member]	Accumulated Other Comprehensive Loss [Member]	Non-Controlling Interest [Member]	Total
Balance at Dec. 31, 2017	$ 6,900	$ 21,581	$ (6,056)	$ (733)	$ (253)	$ 21,439
Balance, shares at Dec. 31, 2017	6,900
Exercise of stock options, net	$ 41	167				208
Exercise of stock options, net, shares	41
Shares issued under the employee stock purchase plan	$ 3	57				60
Shares issued under the employee stock purchase plan, shares	3
Stock-based compensation		333				333
Net income (loss)			757			757
Comprehensive income (loss)				86		86
Balance at Mar. 31, 2018	$ 6,944	22,138	(5,299)	(647)	(253)	22,883
Balance, shares at Mar. 31, 2018	6,944
Balance at Dec. 31, 2017	$ 6,900	21,581	(6,056)	(733)	(253)	21,439
Balance, shares at Dec. 31, 2017	6,900
Net income (loss)						4,679
Balance at Sep. 30, 2018	$ 8,640	84,510	(1,404)	(889)	(253)	90,604
Balance, shares at Sep. 30, 2018	8,640
Balance at Mar. 31, 2018	$ 6,944	22,138	(5,299)	(647)	(253)	22,883
Balance, shares at Mar. 31, 2018	6,944
Exercise of stock options, net	$ 92	(37)				55
Exercise of stock options, net, shares	92
Shares issued under the employee stock purchase plan	$ 1	54				55
Shares issued under the employee stock purchase plan, shares	1
Stock-based compensation		334				334
Net income			1,992			1,992
Comprehensive income (loss)				(252)		(252)
Balance at Jun. 30, 2018	$ 7,037	22,489	(3,307)	(899)	(253)	25,067
Balance, shares at Jun. 30, 2018	7,037
Exercise of stock options, net	$ 377	(227)				150
Exercise of stock options, net, shares	377
Shares issued under the employee stock purchase plan	$ 1	55				56
Shares issued under the employee stock purchase plan, shares	1
Withholding of common stock upon vesting of restricted stock units	$ 1,725	87,242				88,967
Withholding of common stock upon vesting of restricted stock units, shares	1,725
Repurchase of common stock	$ (500)	(25,407)				(25,907)
Repurchase of common stock, shares	(500)
Stock-based compensation		358				358
Net income (loss)			1,903			1,903
Comprehensive income (loss)				10		10
Balance at Sep. 30, 2018	$ 8,640	84,510	(1,404)	(889)	(253)	90,604
Balance, shares at Sep. 30, 2018	8,640
Balance at Dec. 31, 2018	$ 8,664	84,999	(509)	(927)	(253)	91,974
Balance, shares at Dec. 31, 2018	8,664
Exercise of stock options, net	$ 27	(9)				18
Exercise of stock options, net, shares	27
Shares issued under the employee stock purchase plan	$ 3	67				70
Shares issued under the employee stock purchase plan, shares	3
Withholding of common stock upon vesting of restricted stock units	$ 20
Withholding of common stock upon vesting of restricted stock units		(255)				(235)
Withholding of common stock upon vesting of restricted stock units, shares	20
Stock-based compensation		329				329
Net income (loss)			775			775
Comprehensive income (loss)				130		130
Balance at Mar. 31, 2019	$ 8,714	85,131	266	(797)	(253)	93,061
Balance, shares at Mar. 31, 2019	8,714
Balance at Dec. 31, 2018	$ 8,664	84,999	(509)	(927)	(253)	$ 91,974
Balance, shares at Dec. 31, 2018	8,664
Exercise of stock options, net, shares						128
Net income (loss)						$ (4,544)
Balance at Sep. 30, 2019	$ 8,778	86,358	(5,054)	(524)	(253)	89,305
Balance, shares at Sep. 30, 2019	8,778
Balance at Mar. 31, 2019	$ 8,714	85,131	266	(797)	(253)	93,061
Balance, shares at Mar. 31, 2019	8,714
Exercise of stock options, net	$ 29	22				51
Exercise of stock options, net, shares	29
Shares issued under the employee stock purchase plan	$ 2	48				50
Shares issued under the employee stock purchase plan, shares	2
Withholding of common stock upon vesting of restricted stock units	$ 6
Withholding of common stock upon vesting of restricted stock units		(6)
Withholding of common stock upon vesting of restricted stock units, shares	6
Stock-based compensation	$ 3	534				537
Stock-based compensation, shares	3
Net income (loss)			(5,030)			(5,030)
Comprehensive income (loss)				259		259
Balance at Jun. 30, 2019	$ 8,754	85,729	(4,764)	(538)	(253)	88,928
Balance, shares at Jun. 30, 2019	8,754
Exercise of stock options, net	$ 12	16				28
Exercise of stock options, net, shares	12
Shares issued under the employee stock purchase plan	$ 2	44				46
Shares issued under the employee stock purchase plan, shares	2
Withholding of common stock upon vesting of restricted stock units	$ 10
Withholding of common stock upon vesting of restricted stock units		(79)				(69)
Withholding of common stock upon vesting of restricted stock units, shares	10
Stock-based compensation		648				648
Net income (loss)			(290)			(290)
Comprehensive income (loss)				14		14
Balance at Sep. 30, 2019	$ 8,778	$ 86,358	$ (5,054)	$ (524)	$ (253)	$ 89,305
Balance, shares at Sep. 30, 2019	8,778

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Revenue By Market

9 Months Ended

Sep. 30, 2019

Revenue By Market [Abstract]

Revenue By Market

17.Revenue by Market

The following tables set forth, for the periods indicated, timing of revenue recognition by market:

Timing of revenue recognition for the three months ended September 30, 2019:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	15,723	$	15,723
Other Medical		-		3,376		3,376
Hearing Health:
Value Based DTEC		1,510		-		1,510
Value Based ITEC		2,443		-		2,443
Legacy OEM		2,405		-		2,405
Professional Audio Communications:		1,436		-		1,436
Total Net Revenue	$	7,794	$	19,099	$	26,893
Timing of revenue recognition for the nine months ended September 30, 2019:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	50,837	$	50,837
Other Medical		-		9,947		9,947
Hearing Health:
Value Based DTEC		4,876		-		4,876
Value Based ITEC		7,419		-		7,419
Legacy OEM		7,749		-		7,749
Professional Audio Communications:		4,972		-		4,972
Total Net Revenue	$	25,016	$	60,784	$	85,800
Timing of revenue recognition for the three months ended September 30, 2018:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	16,662	$	16,662
Other Medical		-		2,694		2,694
Hearing Health:
Value Based DTEC		1,490		-		1,490
Value Based ITEC		3,660		-		3,660
Legacy OEM		3,056		-		3,056
Professional Audio Communications:		2,004		-		2,004
Total Net Revenue	$	10,210	$	19,356	$	29,566
Timing of revenue recognition for the nine months ended September 30, 2018:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	47,531	$	47,531
Other Medical		-		7,956		7,956
Hearing Health:
Value Based DTEC		5,327		-		5,327
Value Based ITEC		8,923		-		8,923
Legacy OEM		8,500		-		8,500
Professional Audio Communications:		5,353		-		5,353
Total Net Revenue	$	28,103	$	55,487	$	83,590

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Shareholders' Equity And Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Shareholders' Equity And Stock-Based Compensation [Abstract]

Shareholders' Equity And Stock-Based Compensation

13.  Shareholders’ Equity and Stock-based Compensation

The Company has a 2006 Equity Incentive Plan and a 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan replaced the 2006 Equity Incentive Plan and new grants may not be made under the 2006 Plan.

Under the 2015 Equity Incentive Plan, the Company may grant stock options, stock awards, stock appreciation rights, restricted stock units (“RSUs”) and other equity-based awards.  Under all awards, the terms are fixed on the grant date.

The Company granted 4 and 79 RSUs for the three and nine months ended September 30, 2019, respectively. The weighted average closing price of the Company’s common stock on the date of grant was $19.19 and $23.83, respectively, for the RSUs granted in the three and nine months ended September 30, 2019. The RSUs vest in equal, annual installments over a three year period beginning on the first anniversary of the date of grant at which time common stock is issued with respect to vested units.

The Company has also granted stock options under the plans. Options granted under the plans generally vest in equal, annual installments over a three year period beginning on the first anniversary of the date of grant and have a maximum term of 10 years.

Stock award activity as of and during the nine months ended September 30, 2019 was as follows:

	Outstanding Awards				Stock Option Weighted-Average Exercise Price (a)		Aggregate   Intrinsic Value
	Stock Options	RSUs	Total
Outstanding at December 31, 2018	830	98	928	$	6.25
Forfeited, cancelled or expired	(3)	-	(3)		6.42
Granted	-	79	79		-
Exercised or vested	(79)	(49)	(128)		4.87
Outstanding at September 30, 2019	748	128	876	$	6.39	$	12,241
Exercisable at September 30, 2019	670	-	670	$	6.30	$	8,799
Available for future grant at December 31, 2018	249
Available for future grant at September 30, 2019	183
(a) The weighted average exercise price calculation does not include outstanding RSUs

The number of shares available for future grants at September 30, 2019 does not include a total of up to 369 shares subject to options outstanding under the 2006 Equity Incentive Plan, which will become available for grant under the 2015 Equity Incentive Plan as outstanding options under the 2006 Equity Incentive Plan expire, terminate, are cancelled or forfeited or are withheld in a net exercise of such options.

The Company recorded $648 and $1,514 of non-cash stock compensation expense for the three and nine months ended September 30, 2019, respectively. The Company recorded $358 and $1,025 of non-cash stock compensation expense for the three and nine months ended September 30, 2018, respectively. As of September 30, 2019, there was $2,321 of total unrecognized compensation costs related to non-vested stock option and RSU awards that are expected to be recognized over a weighted-average period of 1.99 years. The total intrinsic value of options exercised during the three and nine months ended September 30, 2019 was $196 and $1,609, respectively.

The Company also has an Employee Stock Purchase Plan (the “Purchase Plan”). The Purchase Plan, as amended, through September 30, 2019, provides that a maximum of 300 shares may be sold under the Purchase Plan. There were 2 and 7 shares purchased under the plan for the three and nine months ended September 30, 2019, respectively, and a total of 1 and 5 shares purchased for the three and nine months ended September 30, 2018, respectively.

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Investment In Partnerships (Tables)

9 Months Ended

Sep. 30, 2019

Investment In Partnerships [Abstract]

Investments in Partnerships

		September 30,		December 31,
		2019		2018
Investment in Signison	$	1,246	$	865
Investment in and cash advance for Soundperience		-		1,022
Other		163		204
Total	$	1,409	$	2,091

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Other Assets, Net

9 Months Ended

Sep. 30, 2019

Other Assets, Net [Abstract]

Other Assets, Net

9.  Other Assets, Net

Other assets, net consisted of the following at:

		September 30,		December 31,
		2019		2018
Fitting Software	$	3,679	$	-
NXP Tech		1,964		2,259
Other		553		1,168
Total	$	6,196	$	3,427

In January 2019, the Company purchased the source code for self-fitting software from Soundperience for 1,750 Euros and also transferred our 49% ownership interest in Soundperience to the majority owner, positioning the Company to capitalize on the upcoming over-the-counter (OTC) hearing aid regulations. The Company has capitalized the self-fitting software within other assets, net based on the cost of the consideration transferred and will begin amortizing the asset when it is placed into service. Included in the capitalized cost of the self-fitting software is $586 of cash paid at closing as well as non-cash amounts of $869 due in future quarterly installments over the next four years, $533 due in January 2023 and $1,691 for the value of the partnership and license agreement transferred. The future payments are due in Euros and the related liabilities will be revalued based on exchange rates as of each reporting period. As of September 30, 2019, outstanding liabilities are $1,260.

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Geographic Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Geographic Information

5.    Geographic Information

The geographical distribution of long-lived assets to geographical areas consisted of the following at:

		September 30,		December 31,
		2019		2018
United States	$	12,264	$	10,065
Singapore		1,311		1,240
Other		83		117
Consolidated	$	13,658	$	11,422

Long-lived assets consist of machinery and equipment. Excluded from long-lived assets are investments in partnerships, patents, goodwill, operating lease ROU assets and certain other assets. The Company capitalizes long-lived assets pertaining to the production of specialized parts. These assets are periodically reviewed to ensure the net realizable value from the estimated future production based on forecasted cash flows exceeds the carrying value of the assets.

The geographical distribution of net revenue to geographical areas for the three and nine months ended September 30, 2019 and 2018 were as follows:

		Three Months Ended				Nine Months Ended
Net Revenue to Geographical Areas		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
United States	$	22,483	$	25,157	$	71,059	$	70,871
Europe		1,248		1,500		4,480		4,163
Asia		2,780		2,472		9,508		7,639
All other countries		382		437		753		917
Consolidated	$	26,893	$	29,566	$	85,800	$	83,590

Geographic net revenue is allocated based on the location of the customer.

For the three and nine months ended September 30, 2019,  one customer accounted for59%of the Company’s consolidated net revenue. For the three and nine months ended September 30, 2018, one customer accounted for 56% and 57%, respectively, of the Company’s consolidated net revenue.

Two customers combined accounted for 43% and 52% of the Company’s consolidated accounts receivable at September 30, 2019 and December 31, 2018, respectively.

One customer accounted for 84% and 78% of the Company’s consolidated contract assets at September 30, 2019 and December 31, 2018, respectively.

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Revenue By Market (Tables)

9 Months Ended

Sep. 30, 2019

Revenue By Market [Abstract]

Schedule Of Net Revenue By Market

Timing of revenue recognition for the three months ended September 30, 2019:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	15,723	$	15,723
Other Medical		-		3,376		3,376
Hearing Health:
Value Based DTEC		1,510		-		1,510
Value Based ITEC		2,443		-		2,443
Legacy OEM		2,405		-		2,405
Professional Audio Communications:		1,436		-		1,436
Total Net Revenue	$	7,794	$	19,099	$	26,893
Timing of revenue recognition for the nine months ended September 30, 2019:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	50,837	$	50,837
Other Medical		-		9,947		9,947
Hearing Health:
Value Based DTEC		4,876		-		4,876
Value Based ITEC		7,419		-		7,419
Legacy OEM		7,749		-		7,749
Professional Audio Communications:		4,972		-		4,972
Total Net Revenue	$	25,016	$	60,784	$	85,800
Timing of revenue recognition for the three months ended September 30, 2018:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	16,662	$	16,662
Other Medical		-		2,694		2,694
Hearing Health:
Value Based DTEC		1,490		-		1,490
Value Based ITEC		3,660		-		3,660
Legacy OEM		3,056		-		3,056
Professional Audio Communications:		2,004		-		2,004
Total Net Revenue	$	10,210	$	19,356	$	29,566
Timing of revenue recognition for the nine months ended September 30, 2018:
		Products and services transferred at point in time		Products and services transferred over time		Total
Medical Biotelemetry:
Diabetes	$	-	$	47,531	$	47,531
Other Medical		-		7,956		7,956
Hearing Health:
Value Based DTEC		5,327		-		5,327
Value Based ITEC		8,923		-		8,923
Legacy OEM		8,500		-		8,500
Professional Audio Communications:		5,353		-		5,353
Total Net Revenue	$	28,103	$	55,487	$	83,590

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2019

Investments Securities [Abstract]

Summary Of Maturity Dates Of Investments

The maturity dates of our investments as of September 30, 2019 are as follows:
		Less than one year		1-5 years		Total
Commercial Paper Original Maturities of 91 Days or More	$	6,824	$	-	$	6,824
US Government Agencies		-		1,900		1,900
Corporate Notes and Bonds		13,491		11,864		25,355
Total Investments	$	20,315	$	13,764	$	34,079

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Summary Of Lease Costs By Type

	Three Months Ended September 30, 2019	Nine Months Ended September 30, 2019
Lease cost
Finance lease cost:
Amortization of right-of-use assets	$                       27	$                     76
Interest on lease liabilities	3	8
Operating lease cost*	462	1,379
Variable lease cost**	138	417
Total lease cost	$                     630	$                1,880
*Operating lease cost excludes $0 and $86 related to discontinued operations of the UK for the three and nine months ended September 30, 2019, respectively.
**Variable lease costs consist primarily of taxes, insurance, and common area or other maintenance costs for our domestic and foreign building leases, excluding approximately $0 and $11 related to discontinued operations of the UK for the three and nine months ended September 30, 2019, respectively.

Maturities Of Lease Liabilities

		Operating Leases		Financing Leases		Total
2019	$	503	$	29	$	532
2020		1,919		105		2,024
2021		1,588		31		1,619
2022		1,023		3		1,026
2023		416		-		416
2024 and thereafter		93		-		93
Total lease payments		5,542		168		5,710
Less: Interest		(456)		(5)		(461)
Present value of lease liabilities	$	5,086	$	163	$	5,249

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Other Assets, Net (Schedule Of Other Assets, Net) (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other Assets [Line Items]
Other assets, net	$ 6,196	$ 3,427
Fitting Software [Member]
Other Assets [Line Items]
Other assets, net	3,679
NXP Tech [Member]
Other Assets [Line Items]
Other assets, net	1,964	2,259
Other Assets [Member]
Other Assets [Line Items]
Other assets, net	$ 553	$ 1,168

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Investment Securities (Narrative) (Details)	9 Months Ended
	Sep. 30, 2019
Maximum [Member]
Cash and Cash Equivalents [Line Items]
Maturities benchmark for determining investment in commercial paper, corporate notes and bonds	2 years

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Leases (Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($) item	Dec. 31, 2018 USD ($)
Lessee, Lease, Description [Line Items]
Finance Lease, Weighted Average Discount Rate, Percent	5.56%
Finance Lease, Weighted Average Remaining Lease Term	1 year 7 months 6 days
Operating Lease, Weighted Average Discount Rate, Percent	5.25%
Operating Lease, Weighted Average Remaining Lease Term	3 years 3 months 18 days
Future minimum payments, 2019		$ 2,417
Future minimum payments, 2020		2,255
Future minimum payments, 2021		1,689
Future minimum payments, 2022		950
Future minimum payments, 2023		$ 188
ROU asset	$ 4,749
Lease liability	5,086
Non-cash increase of operating lease ROU assets	772
Non-cash increase of lease incentive other assets	150
Non-cash increase of lease liabilities	922
Continuing Operations [Member]
Lessee, Lease, Description [Line Items]
Operating Lease, Payments	1,406
Discontinued Operations [Member]
Lessee, Lease, Description [Line Items]
Operating Lease, Payments	84
Non-Cash Operating Lease Right Of Use Assets And Liabilities Derecognized	$ 761
Minnesota [Member]
Lessee, Lease, Description [Line Items]
Number of leased facilities | item	3
Illinois [Member]
Lessee, Lease, Description [Line Items]
Number of leased facilities | item	1
Singapore [Member]
Lessee, Lease, Description [Line Items]
Number of leased facilities | item	1
Indonesia [Member]
Lessee, Lease, Description [Line Items]
Number of leased facilities | item	1
ROU asset	$ 103
Lease liability	$ 72
Germany [Member]
Lessee, Lease, Description [Line Items]
Number of leased facilities | item	1
Lease Expiration In 2022 [Member] | Minnesota [Member]
Lessee, Lease, Description [Line Items]
Number of leased facilities | item	2
Lease Expiration In 2023 [Member] | Minnesota [Member]
Lessee, Lease, Description [Line Items]
Number of leased facilities | item	1
Minimum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	1 year
Maximum [Member]
Lessee, Lease, Description [Line Items]
Lessee, Operating Lease, Term of Contract	5 years