What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-01 compared with 2021-08-04 · 75 added, 60 removed, 156 unchanged (46% of the section changed)

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performance enhancement technology that we believe addresses a number of key engineering challenges facing the semiconductor industry.

We believe that by incorporating MST, transistors can be smaller, with increased speed, reliability and energy efficiency.

We believe that by incorporating MST, transistors can be made smaller, with increased speed, reliability and energy efficiency.

since MST is an additive and low-cost technology, we believe it can be deployed on an industrial scale, with equipment commonly used in

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technologies.

We believe that MST can be widely incorporated into the most common types of semiconductor products, including analog, logic,

optical and memory integrated circuits.

We believe that MST can be incorporated into a wide range of the most common types of semiconductor products, including

analog, logic, optical and memory integrated circuits.

We do not intend to design

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or ATM offering, to or through the agent.

We announce the completion of this offering on January 5, 2021 after 2,221,575 shares had been

We announced the completion of this offering on January 5, 2021 after 2,221,575 shares had been

sold at an average price per share of approximately $11.25, resulting in approximately $24.2 million of net proceeds to us after deducting

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MST recipe was distinct from any obligations to provide other goods or services and was a right to use our intellectual property and therefore

recognized revenue at the point in time when the recipe was delivered.

recognized revenue at the point in time when we delivered the recipe.

Our integration services consist

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Revenue for each of the three

months ended June 30, 2021 and 2020 was $0.

Revenue for the six months ended June 30, 2021 and 2020 was approximately $400,000 and $62,000,

respectively.

months ended September 30, 2021 and 2020 was $0.

Revenue for the nine months ended September 30, 2021 and 2020 was approximately $400,000

and $62,000, respectively.

Cost of Revenue.

of revenue consists of costs of materials, as well as direct compensation and expenses incurred to provide integration engineering services.

Cost of revenue was $0 for each of the three months ended June 30, 2021 and 2020.

Cost of revenue was approximately $0 and $13,000 for

the six months ended June 30, 2021 and 2020, respectively.

We anticipate that our cost of revenue will vary substantially depending on

the mix of integration license and integration engineering services and the nature of products and/or services delivered in each customer

Cost of revenue was $0 for each of the three months ended September 30, 2021 and 2020.

Cost of revenue was approximately $0 and $13,000

for the nine months ended September 30, 2021 and 2020, respectively.

We anticipate that our cost of revenue will vary substantially depending

on the mix of integration license and integration engineering services and the nature of products and/or services delivered in each customer

Operating Expenses

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For the three

months ended June 30, 2021 and 2020 our operating expenses totaled approximately $3.7 million and $3.8 million, respectively.

six months ended June 30, 2021 and 2020 our operating expenses totaled approximately $7.7 million and $7.5 million, respectively.

months ended September 30, 2021 and 2020 our operating expenses totaled approximately $4.1 million and $3.6 million, respectively.

the nine months ended September 30, 2021 and 2020, our operating expenses totaled approximately $11.9 million and $11.1 million, respectively.

Research and development

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Research and development

costs were approximately $2.1 million and for each of the three months ended June 30, 2021 and 2020.

For the six months ended

June 30, 2021 and 2020, we incurred approximately $4.3 million and $4.1 million, respectively, of research and development expense, an

increase of approximately $150,000.

The increase in research and development expense is primarily due to additional headcount offset by

a decrease in outsourced research and development costs.

costs were approximately $2.2 and $2.0 million for the three months ended September 30, 2021 and 2020, respectively representing an increase

of approximately $183,000, or 9%.

This increase in primarily due to our new tool lease that began in August 2021.

For the nine months

ended September 30, 2021 and 2020, we incurred approximately $6.5 million and $6.2 million, respectively, of research and development

expense, an increase of approximately $333,000 or 5%.

The increase in research and development expense is primarily due to additional

headcount and the new tool lease, offset by a decrease in outsourced research and development costs.

General and administrative

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costs and professional fees.

General and administrative costs were approximately $1.5 million for each of the three months ended June

30, 2021 and 2020.

General and administrative costs were approximately $1.6 and $1.3 million for the three months ended September

30, 2021 and 2020, respectively.

The increase of approximately $315,000, or 24% is primarily due to increases in patent-related legal

fees and higher insurance costs.

General and administrative

costs for the six months ended June 30, 2021 and 2020 were approximately $3.0 million and $2.9 million, respectively, representing an

increase of approximately $94,000.

The increase in costs was primarily due to an increase of approximately $113,000 in insurance costs

and approximately $209,000 in stock-based compensation, offset by a decrease of approximately $276,000 in professional fees.

costs for the nine months ended September 30, 2021 and 2020 were approximately $4.7 million and $4.2 million, respectively, representing

an increase of approximately $409,000, or 10%.

The increase in costs was primarily due to increases of approximately $214,000 in insurance

costs, approximately $90,000 in rent costs and approximately $182,000 in stock-based compensation, offset in part by a decrease of approximately

$111,000 in professional fees.

Selling and marketing

Selling and marketing expenses consist primarily of salary and benefits for our sales and marketing personnel.

and marketing expenses for the three months ended June 30, 2021 and 2020 were approximately $137,000 and $215,000, respectively, representing

a decrease of approximately $78,000, or 36%.

The decrease in costs is primarily related to lower headcount in the three months ended June

and marketing expenses for the three months ended September 30, 2021 and 2020 were approximately $267,000 and $208,000, respectively,

representing an increase of approximately $59,000, or 28%.

The increase in costs is primarily related to increased spending in new marketing

Selling and marketing

expenses for the six months ended June 30, 2021 and 2020 were approximately $403,000 and $440,000, respectively, representing a decrease

of approximately $37,000, or 8%.

The decrease in costs is primarily related to lower headcount and lower bonus accrual.

expenses for the nine months ended September 30, 2021 and 2020 were approximately $670,000 and $648,000, respectively, representing an

increase of approximately $22,000, or 3%.

The increase in costs is primarily related to increased spending in new marketing initiatives

offset by lower payroll and related expenses.

Interest income.

income for the three months ended June 30, 2021 and 2020 was approximately $3,000 and $2,000, respectively.

Interest income for the six

months ended June 30, 2021 and 2020 was approximately $5,000 and $40,000, respectively.

Interest income for each period related to interest

earned on our cash and cash equivalents and declined as interest rates continued to fall during 2020 and into 2021.

Interest income for the three months ended September 30, 2021 and 2020 was approximately $2,000 and $1,000, respectively.

income for the nine months ended September 30, 2021 and 2020 was approximately $7,000 and $41,000, respectively.

Interest income for each

period related to interest earned on our cash and cash equivalents.

The decrease in interest income was due to the fall in interest rates

during 2020 and into 2021.

Interest expense.

expense for the three and nine months ended September 30, 2021 and 2021 was approximately $52,000 for each period.

There was no interest

expense recorded for the three and nine months ended September 30, 2020.

Interest expense is related to the new tool financing lease

entered into in August 2021.

Provision for income

The provision for income taxes for the three months ended June 30, 2021 and 2020 was approximately $17,000 and $0, respectively.

The provision for income taxes for the six months ended June 30, 2021 and 2020 was approximately $31,000 and $0, respectively.

Our provision

is income taxes due to a foreign country arising from withholding taxes imposed on payments received for revenue.

The provision for income taxes for the three months ended September 30, 2021 and 2020 was approximately $17,000 and $0,

respectively.

The provision for income taxes for the nine months ended September 30, 2021 and 2020 was approximately $48,000 and $0, respectively.

Our provision is for income taxes due to a foreign country arising from withholding taxes imposed on payments received for revenue.

Cash Flows from Operating, Investing and Financing

Net cash used in operating

activities of approximately $6.6 million for the six months ended June 30, 2021 resulted primarily from our net loss of approximately

$7.3 million, an increase of approximately $527,000 in prepaid expenses and other assets and a decrease in accrued payroll expenses of

approximately $383,000, offset by approximately $1.6 million of stock-based compensation.

activities of approximately $9.4 million for the nine months ended September 30, 2021 resulted primarily from our net loss of approximately

$11.5 million and an increase of approximately $297,000 in prepaid expenses and other assets, offset by approximately $2.3 million of

stock-based compensation.

Net cash used in operating

activities of approximately $6.6 million for the six months ended June 30, 2020 resulted primarily from our net loss of approximately

$7.4 million adjusted by approximately $1.4 million in stock-based compensation expense offset by increase of approximately $573,000 in

prepaids and other assets.

activities of approximately $9.1 million for the nine months ended September 30, 2020 resulted primarily from our net loss of approximately

$11.0 million adjusted by approximately $2.2 million in stock-based compensation expense, offset by an increase of approximately $499,000

in prepaids and other assets.

Net cash used in investing

activities of approximately $79,000 for the six months ended June 30, 2021 and approximately $11,000 for the six months ended June 30,

2020 consisted of the purchase of computers, lab tools and leasehold improvements for the remodeled Los Gatos office space and new Tempe

office space.

activities of approximately $102,000 for the nine months ended September 30, 2021 and approximately $56,000 for the nine months ended

September 30, 2020 consisted of the purchase of computers, lab tools and leasehold improvements for the remodeled Los Gatos office space

and new Tempe office space.

Net cash provided by

financing activities of approximately $3.1 million for the six months ended June 30, 2021 related to the exercise of approximately 458,000

financing activities of approximately $3.4 million for the nine months ended September 30, 2021 related to the exercise of approximately

506,000 stock options and net proceeds from our at-the-market offering which began in September 2020 and concluded in January 2021.

Net cash provided by financing

activities of approximately $9.7 million for the six months ended June 30, 2020 was primarily related to the net proceeds from our underwritten

public offering in May 2020 and the exercise of approximately 189,000 warrants and approximately 33,000 stock options during this six-month

activities of approximately $19.6 million for the nine months ended September 30, 2020 was primarily related to the net proceeds from

our underwritten public offering in May 2020, proceeds from our ATM program in September 2020 and the exercise of approximately 386,000

warrants and approximately 136,000 stock options during this nine month period.

Liquidity and Capital Resources

As of June 30, 2021, we had

cash and cash equivalents of approximately $34.3 million and working capital of approximately $33.9 million.

For the six months ended

June 30, 2021, we had a net loss of approximately $7.3 million and used approximately $6.6 million of cash and cash equivalents in operations.

As of September 30, 2021,

we had cash and cash equivalents of approximately $31.8 million and working capital of approximately $29.3 million.

For the nine months

ended September 30, 2021, we had a net loss of approximately $11.5 million and used approximately $9.4 million of cash and cash equivalents

in operations.

Since inception, we have incurred recurring operating losses.

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There have been no changes

to our critical accounting policies from those included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed

with the SEC on February 19, 2021

to our critical accounting policies from those included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with

the SEC on February 19, 2021

Quantitative and Qualitative Disclosure about Market Risk.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis