What changed in this filing

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Item 1A. Risk Factors

2021-06-08 compared with 2020-12-09 · 404 added, 377 removed, 433 unchanged (64% of the section changed)

9 unchanged sentences

The COVID-19 pandemic could adversely affect our business in a material way.

If our customers do not design our solutions into their product offerings, or if our customers’ product offerings are not commercially successful, our business would suffer.

If we fail to penetrate new markets, our revenue and financial condition could be harmed.

Our ability to sell our products to several China customers has been restricted.

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Our primary inventory warehouse is located in Hong Kong and may be affected by recent political, social and economic conditions in Hong Kong.

Shortages in, or increased costs of, wafers and materials could increase the manufacturing times for our products and adversely impact our ability to meet customer demand, reduce our gross margins and lead to reduced revenues.

We do not have long-term supply contracts with our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our solutions.

We outsource our wafer fabrication, assembly and testing operations to third parties, and if these parties fail to produce and deliver our products according to requested demands in specification, quantity, cost and time, our reputation, customer relationships and operating results could suffer.

If our customers do not design our solutions into their product offerings, or if our customers’ product offerings are not commercially successful, our business would suffer.

If we fail to penetrate new markets, our revenue and financial condition could be harmed.

Our target markets may not grow or develop as we currently expect and are subject to market risks, any of which could harm our business, revenue and operating results.

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We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

We expect competition to increase in the future, which could have an adverse effect on our revenue and market share.

Fluctuations in our operating results on a quarterly and annual basis could cause the market price of our ordinary shares to decline.

A breach of our security systems may have a material adverse effect on our business.

We rely on highly skilled personnel and, if we are unable to hire, retain or motivate key personnel, we may not be able to grow effectively.

Similarly, the loss of any of our key personnel could seriously harm our business.

While we intend to continue to invest in research and development, we may be unable to make the substantial investments that are required to remain competitive in our business.

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We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses.

The complexity of our solutions could result in unforeseen delays or expenses from undetected defects, errors or bugs in hardware or software which could reduce the market adoption of our new solutions, damage our reputation with current or prospective customers and adversely affect our operating costs.

We are subject to warranty and product liability claims and to product recalls which could adversely affect our business.

A substantial portion of our revenue is processed through a single distributor and the loss of this distributor, or our inability to collect from them, may cause disruptions in our shipments, which may adversely affect our operations and financial condition.

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Deterioration of the financial conditions of our customers could adversely affect our operating results.

We rely on highly skilled personnel and, if we are unable to hire, retain or motivate key personnel, we may not be able to grow effectively.

Similarly, the loss of any of our key personnel could seriously harm our business.

Camera manufacturers incorporate components supplied by multiple third parties, and a supply shortage or delay in delivery of these components could delay orders for our solutions by our customers.

We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.

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Any potential dispute involving our patents or other intellectual property could affect our customers, which could trigger our indemnification obligations to them and result in substantial expense to us.

We are subject to warranty and product liability claims and to product recalls which could adversely affect our business.

Some of our operations and a significant portion of our customers and our subcontractors are located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability.

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The COVID-19 pandemic could adversely affect our business in a material way.

The global COVID-19 pandemic has significantly affected the populations of the United States, Italy, China and many other countries.

The outbreak has resulted in significant governmental measures being implemented to control the spread of COVID-19, including, among others, shelter in place orders and restrictions on travel, manufacturing and the movement of employees in many regions of the world, as well as responsive measures from businesses.

We have had to impose remote or work from home conditions in many of our offices, including the United States, Italy, Japan and South Korea.

If remote or work-from-home conditions in any of our offices continue for an extended period of time, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.

The majority of our SoCs are manufactured in South Korea and assembled and tested by third parties in Taiwan.

In addition, certain of our logistics and shipping operations are in Taiwan and Hong Kong.

If any of our third-party manufacturing, assembly and testing partners or our logistics and shipping operations are unable to operate efficiently or at all due to responsive measures to COVID-19, we may experience delays in our supply chain and be unable to meet our customers’ expectations and requirements.

While we have not yet experienced a major disruption in our supply chain as a result of the COVID-19 pandemic, we are experiencing longer manufacturing times due to shortages of materials used to assemble our products caused in part by COVID-19 that, if such conditions persist or worsen, could impact our ability to meet our customers’ demand for our solutions and negatively impact our revenue.

Similarly, our customers and potential customers may also experience delays in the development of their products, reduced sales activity, decreased ability to support their customers, closures of their manufacturing facilities or inability to obtain other components, as a result of measures implemented to control the spread of COVID-19.

Such impacts were experienced in the automotive market, and to a lesser degree in the home security and monitoring camera market, in the first and second quarters of 2020 and could occur again.

COVID-19 has negatively impacted the overall global economy and, as a result, may negatively impact demand for our customers’ products and, in turn, impact demand for our solutions.

If COVID-19 continues to progress in ways that further disrupt the manufacturing, shipment and buying patterns of our products or the products of our customers, or further deteriorates the global economy, it may materially negatively impact our operating results for the fourth quarter of fiscal year 2021 and subsequent periods, including revenue, gross margins, operating margins, cash flows and other operating results and our overall business.

The global COVID-19 pandemic has significantly affected the populations and businesses of many countries.

Our business has been, and is expected to continue to be, adversely impacted by the effects of the COVID-19 pandemic.

In addition to global macroeconomic effects, the COVID-19 pandemic and related adverse public health developments have been causing, and are expected to continue to cause, disruption to our operations.

We have had to impose remote or work from home conditions in many of our offices, including the United States, Italy, Japan, South Korea and Taiwan.

While we have not yet experienced a significant disruption of our operations as a result of the COVID-19 pandemic, if the remote or work from home conditions continue for an extended period of time, we may experience delays in product development, a decreased ability to support our customers, reduced design win activity, and overall lack of productivity.

In addition, we and our suppliers, third-party distributors and customers have been, and are expected to continue to be, disrupted by quarantines and restrictions on certain employees’ ability to perform their jobs, office closures or restrictions, disruptions to shipping infrastructure, or other travel or health-related restrictions.

Depending on the magnitude of such effects on our manufacturing activities or the operations of our suppliers, third-party distributors or sub-contractors, our supply chain, manufacturing and product shipments could be delayed, which could materially adversely affect our business, results of operations and financial condition.

Disruptions may also adversely affect our customers’ ability to manufacture their products, which in turn could reduce their demand for our products.

For example, Taiwan has recently experienced a significant rise in cases of COVID-19 that, if such conditions persist or worsen, could impact our third-party contractors’ ability to assemble, test and ship our products and negatively impair our operations and financial results.

Moreover, the semiconductor industry in general is currently experiencing significant shortages of capacity, due in part to COVID-19, which has resulted in a lengthening of the manufacturing lead time for our products and could be impacting the normal forecasting and ordering patterns of our customers.

In addition, the COVID-19 pandemic or other disease outbreaks will, in the short-term, and could over the longer term, adversely affect the economies and financial markets of many countries, resulting in an economic downturn or recession that could adversely affect demand for our products and impact our results of operations and financial condition.

There can be no assurance that any decrease in sales resulting from the COVID-19 pandemic will be offset by increased sales in subsequent periods.

These effects, alone or taken together, could have a material adverse effect on our business, results of operations, legal exposure, or financial condition.

The extent of the COVID-19 pandemic’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict.

Due to the constantly evolving global conditions, we are not able at this time to estimate the long-term effect of these factors on our business, but the adverse impact on our business, results of operations, financial condition and cash flows could be material.

If our customers do not design our solutions into their product offerings, or if our customers’ product offerings are not commercially successful, our business would suffer.

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We generally refer to ODMs as our customers and OEMs as our end customers, except as otherwise indicated or as the context otherwise requires.

Our video and image processing SoCs are generally incorporated into our customers’ products at the design stage, which is referred to as a design win.

Our computer vision, video and image processing SoCs are generally incorporated into our customers’ products at the design stage, which is referred to as a design win.

As a result, we rely on OEMs to design our solutions into the products that they design and sell.

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Moreover, if we are successful in achieving design wins in these new markets, it will likely take longer to generate revenue from such design wins than in our current markets.

Our ability to sell our products to several China customers has been restricted.

On October 9, 2019, our security camera customers Hangzhou Hikvision Digital Technology Co., Ltd, or Hikvision, and Zhejiang Dahua Technology Co., Ltd., or Dahua, were added to the Entity List of the Bureau of Industry and Security, or BIS, of the U.S.

Department of Commerce, or Commerce, which imposes limitations on the supply of certain U.S.

items to the listed entities.

While the addition of Hikvision and Dahua to the Entity List negatively impacts our ability to ship items subject to BIS regulations, including US-produced SoC solutions, to these entities, we have determined that that we are able to ship some foreign-produced SoC products to the listed entities in compliance with applicable law.

Notwithstanding our ability to continue to supply some SoC products to the listed entities, these customers may seek to obtain similar or substitute products from our competitors that are not subject to these limitations, or to develop similar or substitute products themselves.

We also cannot be certain what additional actions the U.S.

government may take with respect to Hikvision and Dahua, or our other China customers, including changes to the Entity List restrictions, export regulations, tariffs or other trade restrictions, or whether the Chinese government may take any actions in response to U.S.

government action that may adversely affect our ability to do business with our China customers.

Even in the absence of new restrictions, tariffs or trade actions imposed by the U.S.

or Chinese government, our China customers may take actions to reduce dependence on the supply of components subject to U.S.

trade regulations, including our SoC solutions, which could have a material adverse effect on our operating results.

We are unable to predict the duration of the restrictions imposed by the U.S.

government in October 2019 or of any additional governmental actions, any of which could have a long-term adverse effect on our business, operating results and financial condition.

Global economic and political conditions, including possible trade tariffs and trade restrictions, may have an impact on our business and financial condition in ways that we currently cannot predict.

Beyond the BIS actions relating to Hikvision and Dahua, general trade tensions between the United States and China have been escalating, which has, in our view, created and will continue to create an uncertain business environment.

For example, BIS has added over 150 entities related to Huawei Technologies Co., Ltd.

to the Entity List and created new controls on foreign-produced items when one of these entities is a party to the transaction.

If additional tariffs or trade restrictions are imposed on our SoC solutions or the products of our customers, or trade restrictions are imposed on our ability to conduct business with certain customers, there could be a negative impact on our operations and financial performance.

For example, H.R.

5515 - John S.

McCain National Defense Authorization Act for Fiscal Year 2019 negatively impacts Hikvision and Dahua’s ability to sell products into the U.S.

security camera market and could decrease their demand for our solutions.

Similarly, changes in export classification requirements, such as those proposed by U.S.

Congress, could impact our ability to supply our solutions to certain companies or in certain countries.

Even in the absence of new restrictions, tariffs or changes in export classifications, it is possible that foreign customers could take actions to reduce dependence on the supply of components, including our solutions, that could be subject to new export classifications or trade restrictions.

There are also risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business and provide incentives to government-backed local customers to buy from local suppliers.

The materialization of these risks could have a material adverse effect on our business and financial condition.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of certain products, technologies and software.

We must export our products in compliance with U.S.

export controls, including the Commerce’s Export Administration Regulations.

We may not always be successful in obtaining necessary export licenses, and our failure to obtain required import or export approval for our products or limitations on our ability to export or sell our products imposed by these laws may harm both our international and domestic sales and adversely affect our revenue.

Noncompliance with these laws could have negative consequences, including government investigations, penalties and reputational harm.

Compliance with export and import regulations have not had a significant impact on our business to date, but changes in our products or changes in export, import and economic sanctions laws and regulations may delay our introduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the export or import of our products to or from certain countries altogether.

Any change in export or import regulations or legislation, shift or change in enforcement, or change in the countries, persons or technologies targeted by these regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations.

In such event, our business and results of operations could be adversely affected.

The semiconductor industry is subject to intense competitive pricing pressure from customers and competitors.

Accordingly, any increase in the cost of our solutions, whether by adverse purchase price variances or adverse manufacturing cost variances, will reduce our gross margins and operating profit.

We currently do not have long-term supply contracts with most of our primary third-party vendors, and we negotiate pricing with our main vendors on a purchase order-by-purchase order basis.

Therefore, they are not obligated to perform services or supply product to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order.

The ability of our foundry vendors to provide us with a product, which is solely sourced at each foundry, is limited by their available capacity, existing obligations and technological capabilities.

Foundry capacity may not be available when we need it or at reasonable prices.

None of our third-party foundry or assembly and test vendors have provided contractual assurances to us that adequate capacity will be available to us to meet our anticipated future demand for our solutions.

Moreover, availability of foundry capacity at our primary foundry vendor has tightened recently, which could limit the volume of products we can produce and/or delay production of new products, both of which would negatively impact our business and operations.

Similarly, our assembly vendors have recently experienced shortages of certain substrates necessary for the production of our solutions due in part to COVID-19, which has negatively impacted the production time of our devices.

If these conditions continue for a substantial period or worsen, our ability to meet our anticipated demand for our solutions could be impacted which, in turn, could negatively impact our operations and financial results.

Our foundry and assembly and test vendors may allocate capacity to the production of other companies’ products while reducing deliveries to us on short notice.

In particular, other companies that are larger and better financed than we are or that have long-term agreements with our foundry or assembly and test vendors may cause our foundry or assembly and test vendors to reallocate capacity to them, decreasing the capacity available to us.

Converting or transferring manufacturing from a primary location or supplier to a backup provider could be expensive and would likely take at least two or more quarters.

There are only a few foundries, including Samsung and Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, that are currently available for certain advanced process technologies that we utilize or may utilize, such as 10 or 5 nanometer, or nm.

Accordingly, as we continue to develop solutions in advanced process nodes, we will be increasingly dependent upon such foundries.

The unavailability of one or both of these foundries could significantly impact our ability to produce our new products or delay production, which would negatively impact our business.

If, in the future, we enter into arrangements with suppliers that include additional fees to expedite delivery, nonrefundable deposits or loans in exchange for capacity commitments or commitments to purchase specified quantities over extended periods, such arrangements may be costly, reduce our financial flexibility and be on terms unfavorable to us, if we are able to secure such arrangements at all.

To date, we have not entered into any such arrangements with our suppliers.

If we need additional foundry or assembly and test subcontractors because of increased demand or the inability to obtain timely and adequate deliveries from our current vendors, we may not be able to do so cost-effectively, if at all.

Our primary inventory warehouse is located in Hong Kong and may be affected by recent political, social and economic conditions in Hong Kong.

Shortages in, or increased costs of, wafers and materials could adversely impact our gross margins and lead to reduced revenues.

Worldwide manufacturing capacity for silicon wafers is relatively inelastic.

If the demand for silicon wafers or assembly material exceeds market supply, our supply of silicon wafers or assembly material could quickly become limited or prohibitively expensive.

The semiconductor industry is currently experiencing significant shortages of manufacturing capacity, which has resulted in a lengthening of the manufacturing lead time for our products.

If this capacity shortage continues for an extensive period of time, it could negatively impact our ability to meet our customer’s demand for our products and have an adverse impact on our revenue, results of operations and customer relationships.

In addition, silicon wafers constitute a material portion of our product cost.

If we are unable to purchase wafers at favorable prices, our results of operations and financial condition will be adversely affected.

It is also possible during this time of supply chain capacity shortage that customers may place orders for our products that exceed their actual demand, which may lead to us manufacturing a surplus of products and could have a negative impact on our results or operations and cash reserves.

Our primary inventory warehouse is located in Hong Kong and may be affected by continued political, social and economic conditions in Hong Kong.

We operate a warehouse facility in Hong Kong through which the substantial majority of our finished SoCs are shipped to customers or logistic partners.

BIS has imposed additional restrictions on exports and reexports of U.S.-controlled items to Hong Kong by removing preferential treatment that Hong Kong used to receive and imposing more stringent licensing requirements similar to those applicable to China.

Hong Kong has recently experienced, and continues to experience, significant political unrest and social strife, including protests that resulted in the closing of the Hong Kong international airport on August 12, 2019 for two days.

Recently, in response to national security legislation adopted by the Chinese government, the U.S.

Hong Kong has experienced, and continues to experience, significant political unrest and social strife, including protests that resulted in the closing of the Hong Kong international airport on August 12, 2019 for two days.

In response to national security legislation adopted by the Chinese government, the U.S.

Secretary of State certified to the U.S.

Congress on May 27, 2020 that Hong Kong no longer maintains a sufficient degree of autonomy from China to warrant special treatment by the U.S.

While such certification, and subsequent statements made by the U.S.

President relating to Hong Kong’s status, do not have an immediate impact on Hong Kong for trade or other purposes, these recent actions represent an escalation in political and trade tensions involving the U.S, China and Hong Kong.

While such certification does not have an immediate impact on Hong Kong for trade or other purposes, this action represents an escalation in political and trade tensions involving the U.S, China and Hong Kong.

It is possible that the U.S.

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The COVID-19 pandemic has had a negative impact on the global economy and may decrease or delay development of new markets and new programs in emerging markets.

If our key target markets, such as automotive cameras, IP security cameras and cameras for robotic applications, do not grow, grow slower, or do not develop in ways that we currently expect, demand for our video and image processing SoCs may not materialize as expected, and our business and operating results could suffer.

If our key target markets, such as automotive cameras, IP security cameras and cameras for robotic applications, do not grow, grow slower, or do not develop in ways that we currently expect, demand for our computer vision, video and image processing SoCs may not materialize as expected, and our business and operating results could suffer.

Our customers may cancel their orders, change production quantities or delay production.

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Any such cancellation, decrease or delay subjects us to a number of risks, most notably that our projected sales will not materialize on schedule or at all, leading to unanticipated revenue shortfalls and excess or obsolete inventory that we may be unable to sell to other customers.

This risk may be exacerbated during the current period of supply chain constraints by customers placing orders with us that could exceed their actual demand for our solutions.

Alternatively, if we are unable to project customer requirements accurately, we may not build enough SoCs, which could lead to delays in product shipments and lost sales opportunities in the near term, as well as force our customers to identify alternative sources, which could affect our ongoing relationships with these customers.

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We anticipate that this customer concentration will continue for the foreseeable future.

In fiscal year 2020, the customers representing 10% or more of our revenue were Wintech Microelectronics Co., Ltd., or Wintech, the Company’s distributor, and Chicony Electronics Co., Ltd., or Chicony, a direct ODM customer, which accounted for approximately 60% and 18% of total revenue, respectively.

For the nine months ended October 31, 2020, the customers representing 10% or more of revenue were Wintech and Chicony which accounted for approximately 60% and 17% of total revenue, respectively.

In fiscal year 2021, the customers representing 10% or more of our revenue were WT Microelectronics Co., Ltd., formerly Wintech Microelectronics Co., Ltd., or Wintech, our distributor, and Chicony Electronics Co., Ltd., or Chicony, a direct ODM customer, which accounted for approximately 63% and 16% of total revenue, respectively.

For the three months ended April 30, 2021, the customers representing 10% or more of revenue were Wintech and Chicony, which accounted for approximately 63% and 16% of total revenue, respectively.

We believe that our operating results for the foreseeable future will continue to depend on sales to a relatively small number of customers and end customers.

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the emergence of new industry standards for video compression;

or the requirement of additional functionality included in video processors, such as artificial intelligence functionality.

or the requirement of additional functionality included in video processors.

In addition, the markets for our solutions are characterized by frequent introduction of next-generation and new products, short product life cycles, increasing demand for added functionality and significant price competition.

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Even if we begin a product design, a customer may decide to cancel or change its product plans, resulting in no revenue from such expenditures.

We are focused on selling our video and image processing solutions to ODMs and OEMs for incorporation into their products at the design stage.

We are focused on selling our computer vision, video and image processing solutions to ODMs and OEMs for incorporation into their products at the design stage.

These efforts to achieve design wins typically are lengthy, especially in emerging markets such as the OEM automotive market, and in any case can require us to both incur design and development costs and dedicate scarce engineering resources in pursuit of a single customer opportunity.

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We expect competition to increase in the future, which could have an adverse effect on our revenue and market share.

The global semiconductor market in general, and the video and image processing markets in particular, are highly competitive.

The global semiconductor market in general, and the computer vision, video and image processing markets in particular, are highly competitive.

We compete in different target markets to various degrees on the basis of a number of competitive factors, including our solutions’ performance, features, energy efficiency, size, ease with which our solution may be integrated into our customers’ products, customer support, reliability and price, as well as on the basis of our reputation.

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Increased competition could result in price pressure, reduced profitability and loss of market share, any of which could harm our business, revenue and operating results.

Our competitors range from large, international companies offering a wide range of semiconductor products to smaller companies specializing in narrow markets.

In the IP security camera market, our primary competitors include AMLogic Inc., Fullhan Microelectronics Co., Ltd., Geo Semiconductor, Inc., HiSilicon Technologies Co., Ltd., or HiSilicon, which is owned by Huawei Technologies Co., Ingenic Semiconductor Co., Ltd., Intel Corporation, or Intel, Movidius Ltd., a subsidiary of Intel, Novatek Microelectronics Corp., or Novatek, OmniVision Technologies, Inc., or OmniVision, Qualcomm Incorporated, or Qualcomm, Realtek Semiconductor Corp., SigmaStar Technology Corp., or SigmaStar, Socionext Inc., or Socionext, an entity created from the merger of the system LSI businesses of Fujitsu Ltd.

and Panasonic Corporation, or Panasonic, and Texas Instruments Incorporated, or Texas Instruments, as well as vertically integrated divisions of IP Security camera device OEMs, including Axis Communications AB, Hanwha Techwin, and Sony Corporation, or Sony.

In the automotive camera market, we currently compete against Allwinner Technology Co., Ltd., Alpha Imaging Technology Corp., Core Logic, Inc., Mobileye, an Intel company, Novatek, NXP Semiconductors N.V., OmniVision, Qualcomm, Renesas Electronics Corporation, SigmaStar, Sunplus Technology Co.

Ltd., Texas Instruments and Xilinx Inc.

In the wearable sports camera market, our primary competitors are vertically integrated divisions of camera device OEMs, including Sony, Panasonic, HiSilicon and Socionext.

Our primary competitors in the drone camera market include HiSilicon, Intel, NVIDIA Corporation and Qualcomm.

Our competitors range from large, international companies with greater resources offering a wide range of semiconductor products to smaller, nimble companies specializing in narrow markets.

In the security camera market, our primary competitors include AMLogic Inc., HiSilicon Technologies Co., Ltd., or HiSilicon, which is owned by Huawei Technologies Co., Ingenic Semiconductor Co., Ltd., Novatek Microelectronics Corp., or Novatek, OmniVision Technologies, Inc., Qualcomm Incorporated, or Qualcomm, SigmaStar Technology Corp., Socionext Inc., or Socionext, an entity created from the merger of the system LSI businesses of Fujitsu Ltd.

and Panasonic Corporation, and Texas Instruments Incorporated, or Texas Instruments, as well as vertically integrated divisions of security camera device OEMs, including Axis, Hanwha Techwin, and Google LLC, which is owned by Alphabet, Inc.

In the automotive camera market, we primarily compete against Allwinner Technology Co., Ltd., Horizon Robotics Inc., iCatch Technology, Inc., Mobileye, a subsidiary of Intel Corporation, or Intel, Novatek, NVIDIA Corporation, or NVIDIA, NXP Semiconductors N.V., Qualcomm, Renesas Electronics Corporation, Texas Instruments and Xilinx Inc.

In the robotics and emerging applications markets, our primary competitors are Fuzhou Rockchip Electronics Co., Ltd., NVIDIA, Qualcomm, and Texas Instruments.

In the other applications markets, our primary competitors are HiSilicon, Movidius Ltd., a subsidiary of Intel, NVIDIA, Qualcomm, Socionext, and vertically integrated divisions of our OEM customer, Shenzhen Dajiang Baiwang Technology Co., Ltd., or Dajiang Baiwang.

Certain of our customers and suppliers also have divisions that produce products competitive with ours and other customers may seek to vertically integrate competitive solutions in the future.

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our ability to support our customers’ incorporation of our solutions into their products;

our ability to recruit design and application engineers with expertise in image video and image processing technologies and sales and marketing personnel.

our ability to recruit design and application engineers with expertise in computer vision, video and image processing technologies and sales and marketing personnel.

Our competitors may also establish cooperative relationships among themselves or with third parties or acquire companies that provide similar products to ours.

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Any of these factors, alone or in combination with others, could harm our business and result in a loss of market share and an increase in pricing pressure.

A breach of our security systems may have a material adverse effect on our business.

Our security systems are designed to maintain the physical security of our facilities and information systems and protect our customers’, suppliers’ and employees’ confidential information.

Accidental or willful security breaches or other unauthorized access by third parties to our facilities or our information systems or the existence of computer viruses in our data or software could expose us to a risk of information loss and misappropriation of proprietary and confidential information.

Security breaches, computer malware and computer hacking attacks have become more prevalent and sophisticated.

These threats are constantly evolving, making it increasingly difficult to successfully defend against or implement adequate preventive measures.

Moreover, as a result of the COVID-19 pandemic, the need for remote work and remote access to our systems has increased significantly, which also increases our cybersecurity risk profile.

Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise our confidential information or that of third parties or create system disruptions.

Computer programmers and hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our information systems and cause disruptions of our business.

For portions of our IT infrastructure, we rely on products and services provided by third parties.

These third-party providers may also experience breaches and attacks to their products, which could impact our systems.

For example, in 2020, SolarWinds Corp., one of our third-party IT infrastructure software providers, was subject to a data security breach.

Our investigation of the breach, which was supported by a third-party security expert, has not identified any adverse impact to our business or operations, but there can be no guarantee we will not experience such an impact.

Data security breaches may also result from non-technical means, for example, actions by an employee.

Any theft or misuse of this information could result in, among other things, damage to our reputation, allegations by our customers that we have not performed our contractual obligations, litigation by affected parties and possible financial obligations for liabilities and damages related to the theft or misuse of this information, any of which could have a material adverse effect on our business, financial condition, our reputation, and our relationships with our customers and partners.

We also rely on a number of third-party “cloud-based” service providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services and some finance functions, and we are, of necessity, dependent on the security systems of these providers.

Any security breaches or other unauthorized access by third parties to the systems of our cloud-based service providers or the existence of computer viruses in their data or software could expose us to a risk of information loss and misappropriation of confidential information.

While we intend to continue to invest in research and development, we may be unable to make the substantial investments that are required to remain competitive in our business.

The semiconductor industry requires substantial investment in research and development in order to bring to market new and enhanced solutions.

Our research and development expense was $140.8 million, $129.7 million and $128.1 million in fiscal years 2021, 2020 and 2019, respectively.

For the three months ended April 30, 2021, our research and development expense was $37.9 million.

We expect to increase our research and development expenditures as compared to prior periods as part of our strategy of focusing on the development of innovative computer vision, video and image processing solutions with increased functionality, and as we target new markets, such as the automotive OEM and robotics markets.

We are unable to predict whether we will have sufficient resources to achieve the level of investment in research and development required to remain competitive.

For example, development in the latest process nodes, such as 10 and 5 nanometer, or nm, costs significantly more than required to develop in larger process nodes, such as 28nm or 14nm.

This added cost could prevent us from being able to maintain a technology advantage over larger competitors that have significantly more resources to invest in research and development.

In addition, we cannot assure you that the technologies which are the focus of our research and development expenditures will become commercially successful or generate any revenue.

The loss of any of our key personnel could seriously harm our business.

We believe our future success depends in large part upon the continuing services of the members of our senior management team and various engineering and other technical personnel.

If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, our business may be disrupted, and our financial condition and results of operations may be materially and adversely affected.

In addition, if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company, we may experience material disruption of our operations and development plans and lose customers, know-how and key professionals and staff members, and we may incur increased operating expenses as the attention of other senior executives is diverted to recruit replacements for key personnel.

We rely on highly skilled personnel and, if we are unable to hire, retain or motivate key personnel, we may not be able to grow effectively.

Our performance largely depends on the talents and efforts of highly skilled individuals.

Our future success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization.

Our industry is characterized by high demand and intense competition for talent.

The pool of qualified candidates is limited, particularly in Silicon Valley and parts of Asia for very-large-scale integration, or VLSI, and artificial intelligence and computer vision engineers, and certain of our competitors and potential competitors with greater resources have directly targeted our employees.

In addition, we also face competition in hiring artificial intelligence engineers, including from companies with which we do not directly compete.

Our compensation arrangements, such as our equity award programs, may not always be successful in attracting new employees and retaining and motivating our existing employees.

Our continued ability to compete effectively, and to grow our business, depends on our ability to attract new employees and to retain and motivate our existing employees.

The average selling prices of video and image processing solutions in our target markets have typically decreased over time and will likely do so in the future, which could harm our revenue and gross margins.

Average selling prices of semiconductor products in the markets we serve have historically decreased over time, and we expect such declines to occur for our solutions over time.

Our gross margins and financial results will suffer if we are unable to offset reductions in our average selling prices by reducing our costs, developing new or enhanced SoC solutions on a timely basis with higher selling prices or gross margins, or increasing our sales volumes.

Additionally, because we do not operate our own manufacturing, assembly or testing facilities, we may not be able to reduce our costs as rapidly as companies that operate their own facilities, and our costs may even increase, which could also reduce our gross margins.

In the past, we have reduced the prices of our SoC solutions in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors.

We expect that we will have to address pricing pressures again in the future, particularly in markets experiencing consolidation, which could require us to reduce the prices of our SoC solutions and harm our operating results.

If we are unable to manage any future growth, we may not be able to execute our business plan and our operating results could suffer.

Our business has grown rapidly in the past.

Our future operating results depend to a large extent on our ability to successfully manage any expansion and growth, including the challenges of managing a company with an executive management team in the United States and the majority of its employees in Asia.

We are increasing our investment in research and development and other functions to grow our business and address new markets, such as the OEM automotive and robotics markets.

To manage our growth successfully and handle the responsibilities of being a public company, we believe we must effectively, among other things:

recruit, hire, train and manage additional qualified engineers for our research and development activities, particularly in our offices in Asia and especially for the positions of semiconductor design and systems, applications engineering and computer vision development;

add additional sales and business development personnel;

add additional finance and accounting personnel;

maintain and improve our administrative, financial and operational systems, procedures and controls;

enhance our information technology support for enterprise resource planning and design engineering by adapting and expanding our systems and tool capabilities, and properly training new hires as to their use.

be able to secure sufficient manufacturing capacity.

We are likely to incur the costs associated with these increased investments earlier than some of the anticipated benefits, and the return on these investments, if any, may be lower, may develop more slowly than we expect or may not materialize.

In addition, development of products to address emerging markets, such as the OEM automotive and robotics markets, could negatively impact our ability to develop new products for our current markets, which may harm our financial condition, particularly in the near term.

If we are unable to manage growth effectively, we may not be able to take advantage of market opportunities or develop new solutions, and we may fail to satisfy customer product or support requirements, maintain product quality, execute our business plan or respond to competitive pressures.

Deterioration of the financial conditions of our customers could adversely affect our operating results.

Deterioration of the financial condition of our distributors or customers could adversely impact our collection of accounts receivable.

For the three months ended April 30, 2021, the customers representing 10% or more of revenue and accounts receivable were Wintech and Chicony, which accounted for approximately 63% and 16% of total revenue, respectively.

As of April 30, 2021, accounts receivable with Wintech and Chicony were approximately $17.0 million and $11.3 million, respectively.

We regularly review the collectability and creditworthiness of our distributors and customers to determine an appropriate allowance for credit losses.

Based on our review of our distributors and customers, we currently have only immaterial reserves for uncollectible accounts.

If our uncollectible accounts, however, were to exceed our current or future allowance for credit losses, our operating results would be negatively impacted.

We are subject to the cyclical nature of the semiconductor industry.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.

The industry experienced a significant downturn during the 2008-2009 global recession and the economic impact of the COVID-19 pandemic could lead to a similar downturn in future periods.

These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices.

Any future downturns could harm our business and operating results.

Furthermore, any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity.

We are dependent on the availability of this capacity to manufacture and assemble our SoC solutions.

None of our third-party foundry or assembly contractors has provided assurances that adequate capacity will be available to us in the future.

The semiconductor industry is currently experiencing significant shortages of capacity, which has resulted in a lengthening of the manufacturing lead time for our products.

This capacity shortage has negatively impacted our ability to meet our customers’ demand, and if this capacity shortage continues for an extensive period of time, it could further negatively impact our ability to meet our customers’ demand for our products and have an adverse impact on our revenue, results of operations and customer relationships.

In addition, it is possible during this time of supply chain capacity shortage that customers may place orders for our products that exceed their actual demand, which may lead to us manufacturing a surplus of products, which could have a negative impact on our results or operations and cash reserves.

Highly complex SoC solutions such as ours frequently contain defects, errors and bugs when they are first introduced or as new versions are released.

We have in the past and may in the future experience these defects, errors and bugs.

If any of our solutions have reliability, quality or compatibility problems, we may not be able to successfully correct these problems in a timely manner or at all.

In addition, if any of our proprietary features contain defects, errors or bugs when first introduced or as new versions of our solutions are released, we may be unable to timely correct these problems.

Consequently, our reputation may be damaged and customers may be reluctant to buy our solutions, which could harm our ability to retain existing customers and attract new customers, and could adversely affect our financial results.

In addition, these defects, errors or bugs could interrupt or delay sales to our customers.

If any of these problems are not found until after we have commenced commercial production of a new product, we may incur significant additional development costs and product recall, repair or replacement costs.

These problems may also result in claims against us by our customers or others.

We aim to use the most advanced manufacturing process technology appropriate for our products that is available from our third-party foundries.

As a result, we periodically evaluate the benefits of migrating our solutions to smaller geometry process technologies in order to improve performance and reduce costs.

We believe this strategy will help us remain competitive.

We may face difficulties, delays and increased expense as we transition our products to new processes, such as the 5nm process node, and potentially to new foundries.

We currently depend on Samsung, as the principal foundry for our products, to transition to new processes successfully.

We cannot assure you that Samsung will be able to effectively manage such transitions or that we will be able to maintain our relationship with Samsung or develop relationships with new foundries.

Moreover, as we utilize more advanced process nodes beyond 5nm, we are increasingly dependent upon Samsung, who is one of the few foundries currently available for certain advanced process technologies.

If we or our foundry vendors experience significant delays in transitioning to smaller geometries or fail to efficiently implement transitions, we could experience reduced manufacturing yields, delays in product deliveries and increased costs, all of which could harm our relationships with our customers and our operating results.

Rapidly changing industry standards could make our video and image processing solutions obsolete, which would cause our operating results to suffer.

We design our video and image processing solutions to conform to video compression standards, including MPEG-2, H.264 Advanced Video Coding (AVC) and H.265 High Efficiency Video Coding (HEVC), set by industry standards setting bodies such as ITU-T Video Coding Experts Group and the ISO/IEC Moving Picture Experts Group.

Generally, our solutions comprise only a part of a camera device.

All components of these devices must uniformly comply with industry standards in order to operate efficiently together.

We depend on companies that provide other components of the devices to support prevailing industry standards.

Many of these companies are significantly larger and more influential in driving industry standards than we are.

Some industry standards may not be widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or by consumers.

If our customers or the suppliers that provide other device components adopt new or competing industry standards with which our solutions are not compatible, or if the industry groups fail to adopt standards with which our solutions are compatible, our existing solutions would become less desirable to our customers.

If our solutions are not in compliance with prevailing industry standards for a significant period of time, we could miss opportunities to achieve crucial design wins, which could harm our business.

As a result, our sales would suffer, and we could be required to make significant expenditures to develop new SoC solutions to ensure compliance with relevant standards.

We have research and development design centers and business development offices in China, Japan, Italy, South Korea and Taiwan, and we expect to continue to conduct business with companies that are located outside the United States, particularly in Asia.

We purchase wafers from foreign foundries, have our solutions assembled and tested by subcontractors located in Asia, and supply our solutions to customers located outside of the United States.

Even customers of ours that are based in the United States often use contract manufacturers based in Asia to manufacture their products, and these contract manufacturers typically purchase products directly from us.

As a result of our international focus, we face numerous challenges and risks, including:

increased complexity and costs of managing international operations;

longer and more difficult collection of receivables;

difficulties in enforcing contracts generally;

regional economic instability;

geopolitical instability and military conflicts;

limited protection of our intellectual property and other assets;

compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations;

trade and foreign exchange restrictions and higher tariffs;

travel restrictions;

timing and availability of import and export licenses and other governmental approvals, permits and licenses, including export classification requirements;

foreign currency exchange fluctuations relating to our international operating activities;

restrictions imposed by the U.S.

government on our ability to do business with certain companies or in certain countries as a result of international political conflicts;

transportation delays and other consequences of limited local infrastructure, and disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers;

heightened risk of terrorist acts;

local business and cultural factors that differ from standards and practices in the U.S.;

differing employment practices and labor relations;

regional health issues, pandemics, and natural disasters;

work stoppages.

We may make acquisitions in the future that could disrupt our business, cause dilution to our shareholders, reduce our financial resources and harm our business.

In the future, we may acquire other businesses, products or technologies.

Other than our acquisition of VisLab S.r.l., or VisLab, in June 2015, we have not made any acquisitions to date and do not have any agreements or commitments for any specific acquisition at this time.

Our ability to make and successfully integrate acquisitions is unproven.

Future acquisitions may not strengthen our competitive position and may be viewed negatively by our customers, financial markets or investors, and we may not achieve our goals in a timely manner, or at all.

In addition, any acquisitions we make could lead to difficulties in integrating personnel, technologies and operations from the acquired businesses and in retaining and motivating key personnel from these businesses.

Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, subject us to additional liabilities, increase our expenses and adversely impact our business, operating results, financial condition and cash flows.

Acquisitions may also reduce our cash available for operations and other uses, and could also result in an increase in amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities or the incurrence of debt, any of which could harm our business.

The complexity of calculating our tax provision may result in errors that could result in restatements of our financial statements.

We are incorporated in the Cayman Islands and our operations are subject to income and transaction taxes in the United States, China, Hong Kong, Japan, Italy, South Korea, Taiwan and other jurisdictions in which we do business.

Due to the complexity associated with the calculation of our tax provision, we have hired independent tax advisors to assist us.

If we or our independent tax advisors fail to resolve or fully understand certain issues, there may be errors that could result in us having to restate our financial statements.

Restatements are generally costly and could adversely impact our results of operations or have a negative impact on the trading price of our ordinary shares.

Risks Related to Our Financial Performance or Results

Fluctuations in our operating results on a quarterly and annual basis could cause the market price of our ordinary shares to decline.

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Moreover, the semiconductor industry has historically been cyclical in nature, reflecting overall economic conditions as well as budgeting and buying patterns of consumers.

For example, the semiconductor industry is currently experiencing significant shortages of capacity, which has resulted in a lengthening of the manufacturing lead time for our products and could be impacting the normal forecasting and ordering patterns of our customers.

We expect these cyclical conditions to continue.

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If revenue levels are below our expectations, we may experience material adverse impacts on our business, including declines in margins and profitability, or incur losses.

For example, our revenue declined 23% in fiscal year 2019 compared to fiscal year 2018, and we incurred our first annual net losses since our initial public offering, or IPO, in 2012.

For the twelve months ended January 31, 2020, our revenue increased by 0.4% compared to the same period in fiscal year 2019, and we incurred a net loss of $44.8 million.

For the nine months ended October 31, 2020, our revenue declined 6.2% compared to the same period in fiscal year 2020, and we incurred a net loss of $47.3 million.

We may experience similar fluctuations or declines in revenue or net losses in the future, which would harm our operating results.

While we intend to continue to invest in research and development, we may be unable to make the substantial investments that are required to remain competitive in our business.

The semiconductor industry requires substantial investment in research and development in order to bring to market new and enhanced solutions.

Our research and development expense was $129.7 million, $128.1 million and $115.5 million in fiscal years 2020, 2019 and 2018, respectively.

For the nine months ended October 31, 2020, our research and development expense was $103.6 million.

We expect to increase our research and development expenditures as compared to prior periods as part of our strategy of focusing on the development of innovative video and image processing solutions with increased functionality, such as computer vision capabilities, and as we target new markets, such as the automotive OEM and robotics markets.

We are unable to predict whether we will have sufficient resources to achieve the level of investment in research and development required to remain competitive.

For example, development in the latest process nodes, such as 10nm and 5nm, can cost significantly more than required to develop in larger process nodes, such as 28nm or 14nm.

This added cost could prevent us from being able to maintain a technology advantage over larger competitors that have significantly more resources to invest in research and development.

In addition, we cannot assure you that the technologies which are the focus of our research and development expenditures will become commercially successful or generate any revenue.

The average selling prices of video and image processing solutions in our target markets have historically decreased over time and will likely do so in the future, which could harm our revenue and gross margins.

Average selling prices of semiconductor products in the markets we serve have historically decreased over time, and we expect such declines to continue to occur for our solutions over time.

In the past, we have reduced the prices of our SoC solutions in anticipation of future competitive pricing pressures, new product introductions by us or our competitors and other factors.

Recently, we have experienced competitive pricing pressures at the low ends of the automotive aftermarket camera market and China-based IP security camera market.

For example, our revenue declined 2.5% in fiscal year 2021, increased 0.4% in fiscal year 2020 and declined 23% in fiscal year 2019.

We incurred a net loss in fiscal years 2021, 2020, and 2019, respectively.

For the three months ended April 30, 2021, while our revenue increased by 28.3% compared to the same period in fiscal year 2021, we incurred a net loss of $10.8 million.

We may experience similar fluctuations or declines in revenue or net losses in the future, which would harm our financial results.

If we do not generate revenue growth, we may not be able to execute our business plan and our operating results could suffer.

You should not rely on our revenue, gross margins or operating results for any prior quarterly or annual periods as an indication of our future operating performance.

In years past, we experienced significant growth in a short period of time.

Our revenue increased from $21.5 million in fiscal year 2008 to $316.4 million in fiscal year 2016.

Recently, however, we have not sustained this growth rate.

Our revenue decreased to $295.4 million in fiscal year 2018 and to $227.8 million in fiscal year 2019, resulting in the first annual net losses since our IPO in 2012.

In fiscal year 2020, our revenue increased by 0.4% compared to fiscal year 2019.

For the nine months ended October 31, 2020, our revenue declined 6.2% compared to the same period in fiscal year 2020, and we incurred a net loss of $47.3 million.

We continue to invest in the development of new technology and solutions and expect our research and development expenditures to increase compared to prior periods.

We believe that our future revenue growth, if any, will significantly depend on our ability to expand within our existing camera markets, such as the existing professional IP security and home security and monitoring camera markets, and successfully penetrate new markets, such as the OEM automotive, robotics and industrial markets, with our new AI computer vision SoC solutions.

We believe that executing upon our business plan requires us to continue to develop new SoCs and new software to address the particular requirements of these markets.

Accordingly, we continue to invest in the development of new technology and solutions and expect our research and development expenditures to increase compared to prior periods.

Our revenue declined 2.5% in fiscal year 2021, increased 0.4% in fiscal year 2020 and declined 23% in fiscal year 2019.

We incurred net loss in fiscal years 2021, 2020, and 2019, respectively.

For the three months ended April 2021, while our revenue increased by 28.3% compared to the same period in fiscal year 2021, we continued a net loss of $10.8 million.

Accordingly, if we are unable to generate or maintain adequate revenue growth, our financial results could suffer and our stock price could decline.

If we are unable to manage any future growth, we may not be able to execute our business plan and our operating results could suffer.

Our business has grown rapidly in the past.

We are increasing our investment in research and development and other functions to grow our business and address new markets, such as the OEM automotive and robotics markets.

To manage our growth successfully and handle the responsibilities of being a public company, we believe we must effectively, among other things:

add additional sales and business development personnel;

add additional finance and accounting personnel;

maintain and improve our administrative, financial and operational systems, procedures and controls;

be able to secure sufficient manufacturing capacity.

We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses.

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If our revenue does not increase as anticipated, we could incur significant losses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.

Continued or persistent losses may require us to obtain additional capital that may not be available at reasonable terms.

Continued or persistent losses may require us to obtain additional capital that may not be available on reasonable terms or at all.

Changes to financial accounting standards may affect our results of operations and could cause us to change our business practices.

We prepare our consolidated financial statements to conform to generally accepted accounting principles, or GAAP, in the United States.

These accounting principles are subject to interpretation by the American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create accounting rules and regulations.

Changes in those accounting rules could have a significant effect on our financial results, require significant resources, pose challenges in forecasting revenue and may affect our reporting of transactions completed before a change is announced.

Changes to those rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

Fluctuations in exchange rates between and among the currencies of the countries in which we do business may adversely affect our operating results.

Our sales have been historically denominated in U.S.

An increase in the value of the U.S.

dollar relative to the currencies of the countries in which our end customers operate could impair the ability of our end customers to cost-effectively integrate our SoCs into their devices which may materially affect the demand for our solutions and cause these end customers to reduce their orders, which would adversely affect our revenue and business.

We may experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S.

A significant portion of our solutions are sold to camera manufacturers located outside the United States, primarily in Asia.

Sales to customers in Asia accounted for approximately 88%, 90% and 87% of our total revenue in fiscal years 2021, 2020 and 2019, respectively.

For the three months ended April 30, 2021, sales to customers in Asia accounted for approximately 90% of our total revenue.

Because most of our end customers or their ODM manufacturers are located in Asia, we anticipate that a majority of our future revenue will continue to come from sales to that region.

Although a large percentage of our sales are made to customers in Asia, we believe that a significant number of the products designed by these customers and incorporating our SoCs are then sold to consumers globally.

In addition, if in the future we sell products or purchase inventory in currencies other than the U.S.

dollar, our exposure to foreign currency risk could become more significant.

A significant number of our employees are located in Asia, principally Taiwan and China, and Europe.

Therefore, a portion of our payroll as well as certain other operating expenses are paid in currencies other than the U.S.

dollar, such as the New Taiwan Dollar, the Chinese Yuan Renminbi and the Eurozone Euro.

Our operating results are denominated in U.S.

dollars and the difference in exchange rates in one period compared to another may directly impact period-to-period comparisons of our operating results.

Furthermore, currency exchange rates, particularly the exchange rates between the Chinese Yuan Renminbi and the U.S.

dollar, between the New Taiwan Dollar and the U.S.

dollar, and between the Eurozone Euro and the U.S.

dollar, have been volatile in the recent past and these currency fluctuations may make it difficult for us to predict our operating results.

We have not implemented any hedging strategies to mitigate risks related to the impact of fluctuations in currency exchange rates.

Even if we were to implement hedging strategies, not every exposure can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts which may vary or which may later prove to have been inaccurate.

Failure to hedge successfully or anticipate currency risks accurately could adversely affect our operating results.

We cannot predict our future capital needs, and we may not be able to obtain additional financing to fund our operations.

We may need to raise additional funds in the future.

Any required additional financing may not be available on terms acceptable to us, or at all.

If we raise additional funds by issuing equity securities or convertible debt, investors may experience significant dilution of their ownership interest, and the newly-issued securities may have rights senior to those of the holders of our ordinary shares.

If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur interest expense.

If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations or limit our production activities, and we may not be able to expand our business, develop or enhance our products, take advantage of business opportunities or respond to competitive pressures which could result in lower revenue and reduce the competitiveness of our products.

Our marketable securities portfolio could experience a decline in market value, which could materially and adversely affect our financial results.

As of April 30, 2021, we had approximately $214.9 million in debt security investments.

These investments consisted primarily of money market funds, commercial paper, asset-backed securities, U.S.

government securities and debt securities of corporations.

We currently do not use derivative financial instruments to adjust our investment portfolio risk or income profile.

These investments, as well as any cash deposited in bank accounts, are subject to general credit, liquidity, market and interest rate risks, which may be exacerbated by unusual events, such as the COVID-19 pandemic, the Eurozone crisis and the U.S.

debt ceiling crisis, which affected various sectors of the financial markets and led to global credit and liquidity issues.

If the global credit market continues to experience volatility or deteriorates, our investment portfolio may be impacted and some or all of our investments may experience other-than-temporary impairment which could adversely impact our financial results and position.

Risks Related to Our Dependence on Third Parties