What changed in this filing

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Item 1. Financial Statements

2021-02-03 compared with 2020-11-05 · 204 added, 131 removed, 473 unchanged (41% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts) October 2,

(In thousands, except share and par value amounts) January 1,

Current Assets:

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Customer service inventories 1,202 1,234

Assets held for sale 2,218 —

Other current assets 11,243 10,355

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Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 5,443,362 shares issued and outstanding at October 2, 2020;

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 5,563,918 shares issued and outstanding at January 1, 2021;

5,400,487 shares issued and outstanding at July 3, 2020

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

(In thousands, except per share amounts) October 2,

2020 September 27,

Three Months Ended Six Months Ended

(In thousands, except per share amounts) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Revenue from product sales $ 46,691 $ 34,152 $ 91,155 $ 70,746

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Total operating expenses 19,031 19,816 36,715 40,853

Operating income 6,565 1,519

Operating income (loss) 7,878 ( 1,497 ) 14,443 22

Interest income 38 120 74 206

Interest expense — ( 1 ) ( 1 ) ( 4 )

Income before income taxes 6,600 1,602

Income (loss) before income taxes 7,916 ( 1,378 ) 14,516 224

Provision for income taxes 1,275 293 1,939 1,841

Net income $ 5,936 $ 54

Net income per share of common stock outstanding:

Net income (loss) $ 6,641 $ ( 1,671 ) $ 12,577 $ ( 1,617 )

Net income (loss) per share of common stock outstanding:

Basic $ 1.21 $ ( 0.31 ) $ 2.30 $ ( 0.30 )

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

(In thousands) October 2,

2020 September 27,

Net income $ 5,936 $ 54

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Net income (loss) $ 6,641 $ ( 1,671 ) $ 12,577 $ ( 1,617 )

Other comprehensive income (loss):

Net change in cumulative translation adjustments

184 410 598 ( 103 )

Other comprehensive income (loss) 184 410 598 ( 103 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(In thousands) October 2,

2020 September 27,

Six Months Ended

(In thousands) January 1,

2021 December 27,

Operating Activities

Net income $ 5,936 $ 54

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ 12,577 $ ( 1,617 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization of property, plant and equipment 2,661 2,115

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Effect of exchange rate changes on cash, cash equivalents, and restricted cash 266 ( 129 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 5,393 ) 2,539

Net increase in cash, cash equivalents, and restricted cash 1,428 6,122

Cash, cash equivalents, and restricted cash, beginning of period 41,872 32,201

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended October 2, 2020

Three Months Ended January 1, 2021

Common Stock Additional

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(In thousands, except share amounts) Shares $

Balance as of October 2, 2020 5,443,362 $ 54 $ 815,203 $ ( 724,805 ) $ ( 14,555 ) $ 75,897

Net income — — — 6,641 — 6,641

Other comprehensive income, net of tax — — — — 184 184

Issuance of common stock under employee stock plans 121,024 2 1,061 — — 1,063

Shares withheld for taxes related to vesting of equity awards ( 468 ) — ( 40 ) — — ( 40 )

Share-based compensation — — 818 — — 818

Balance as of January 1, 2021 5,563,918 $ 56 $ 817,042 $ ( 718,164 ) $ ( 14,371 ) $ 84,563

Three Months Ended December 27, 2019

Common Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of September 27, 2019 5,444,671 $ 54 $ 814,113 $ ( 730,944 ) $ ( 13,249 ) $ 69,974

Net loss — — — ( 1,671 ) — ( 1,671 )

Other comprehensive income, net of tax — — — — 410 410

Issuance of common stock under employee stock plans 15,896 — 6 — — 6

Stock repurchase ( 46,087 ) — ( 653 ) — — ( 653 )

Share-based compensation — — 401 — — 401

Balance as of December 27, 2019 5,414,480 $ 54 $ 813,867 $ ( 732,615 ) $ ( 12,839 ) $ 68,467

Six Months Ended January 1, 2021

Common Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of July 3, 2020 5,400,487 $ 54 $ 814,337 $ ( 730,741 ) $ ( 14,969 ) $ 68,681

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Share-based compensation — — 1,389 — — 1,389

Balance as of October 2, 2020 5,443,362 $ 54 $ 815,203 $ ( 724,805 ) $ ( 14,555 ) $ 75,897

Three Months Ended September 27, 2019

Balance as of January 1, 2021 5,563,918 $ 56 $ 817,042 $ ( 718,164 ) $ ( 14,371 ) $ 84,563

Six Months Ended December 27, 2019

Common Stock Additional

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Balance as of June 28, 2019 5,359,695 $ 54 $ 815,196 $ ( 730,998 ) $ ( 12,736 ) $ 71,516

Net income — — — 54 — 54

Net loss — — — ( 1,617 ) — ( 1,617 )

Other comprehensive loss, net of tax — — — — ( 103 ) ( 103 )

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Share-based compensation — — 808 — — 808

Balance as of September 27, 2019 5,444,671 $ 54 $ 814,113 $ ( 730,944 ) $ ( 13,249 ) $ 69,974

Balance as of December 27, 2019 5,414,480 $ 54 $ 813,867 $ ( 732,615 ) $ ( 12,839 ) $ 68,467

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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In the opinion of our management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows for such periods.

The results for the three months ended October 2, 2020 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The results for the three and six months ended January 1, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year or future operating periods.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.

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We operate on a 52-week or 53-week year ending on the Friday closest to June 30.

The three months ended October 2, 2020 and September 27, 2019 both consisted of 13 weeks.

The three months ended January 1, 2021 and December 27, 2019 both consisted of 13 weeks.

Fiscal year 2021 will be comprised of 52 weeks and will end on July 2, 2021.

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Changes in such estimates, based on more accurate information, or different assumptions or conditions, may affect amounts reported in future periods.

Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, valuation allowances for deferred tax assets, uncertainties in income taxes, lease liabilities, restructuring obligations, product warranty obligations, share-based awards, contingencies, recoverability of long-lived assets and useful lives of property, plant and equipment.

The actual results that we experience may differ materially from our estimates.

Summary of Significant Accounting Policies

There have been no material changes in our significant accounting policies as of and for the three months ended October 2, 2020, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.

There have been no material changes in our significant accounting policies as of January 1, 2021 and for the six months ended January 1, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020.

Accounting Standards Adopted

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for

Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

This guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

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The following table provides a summary of our cash, cash equivalents, and restricted cash reported within our unaudited condensed consolidated balance sheets that reconciles to the corresponding amount in our unaudited condensed consolidated statement of cash flows:

(In thousands) October 2,

(In thousands) January 1,

Cash and cash equivalents $ 43,046 $ 41,618

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Our net accounts receivable are summarized below:

(In thousands) October 2,

(In thousands) January 1,

Accounts receivable $ 51,555 $ 46,502

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Our inventories are summarized below:

(In thousands) October 2,

(In thousands) January 1,

Finished products $ 11,783 $ 9,055

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We record charges to adjust our inventory and customer service inventory due to excess and obsolete inventory resulting from lower sales forecasts, product transitioning, or discontinuance.

The charges during the three months ended October 2, 2020 and September 27, 2019 were classified in cost of product sales as follows:

Three Months Ended

(In thousands) October 2,

2020 September 27,

The charges during the three and six months ended January 1, 2021 and December 27, 2019 were classified in cost of product sales as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Excess and obsolete inventory charges $ 134 $ 23 $ 197 $ 169

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Total inventory charges

$ 400 $ 177 $ 585 $ 514

Assets Held for Sale

We consider properties to be Assets held for sale when management approves and commits to a plan to dispose of a property or group of properties.

The property held for sale prior to the sale date is separately presented on the balance sheet as Assets held for sale.

During the quarter management initiated the sale of our facility located in the United Kingdom.

We expect to complete the sale within the next twelve months.

The carrying value of this asset held for sale as of January 1, 2021 of $ 2.2 million which represents the lower of the carrying value or fair value, net of estimated costs to sell the assets.

We performed an analysis and determined the estimated fair value of the assets, less estimated selling costs, is higher than the carrying value of the assets.

As a result, no impairment charge was recorded in our statement of operations.

Property, Plant and Equipment, net

Our property, plant and equipment, net are summarized below:

(In thousands) October 2,

(In thousands) January 1,

Land $ 210 $ 710

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Total property, plant and equipment, net $ 13,451 $ 16,911

Included in the total plant, property and equipment above were $ 0.7 million and $ 3.5 million of assets in progress which have not been placed in service as of October 2, 2020 and July 3, 2020, respectively.

Included in the total plant, property and equipment above were $ 0.4 million and $ 3.5 million of assets in progress which have not been placed in service as of January 1, 2021 and July 3, 2020, respectively.

Depreciation and amortization expense related to property, plant and equipment, including amortization of software developed for internal use, was as follows:

Three Months Ended

(In thousands) October 2,

2020 September 27,

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Depreciation and amortization $ 1,407 $ 1,077 $ 2,661 $ 2,115

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Our accrued expenses are summarized below:

(In thousands) October 2,

(In thousands) January 1,

Accrued compensation and benefits $ 10,194 $ 11,814

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We accrue for the estimated cost to repair or replace products under warranty.

Changes in our warranty liability, which is included as a component of accrued expenses in our unaudited condensed consolidated balance sheets were as follows:

Three Months Ended

(In thousands) October 2,

2020 September 27,

Changes in our warranty liability, which are included as a component of accrued expenses in our unaudited condensed consolidated balance sheets were as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Balance as of the beginning of the period $ 3,107 $ 3,412 $ 3,196 $ 3,323

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Our advance payments and unearned revenue are summarized below:

(In thousands) October 2,

(In thousands) January 1,

Advance payments $ 3,292 $ 2,529

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Total advance payments and unearned revenue $ 25,707 $ 21,872

Excluded from the balances above are $ 8.2 million and $ 8.1 million in long-term unearned revenue as of October 2, 2020 and July 3, 2020, respectively.

Excluded from the balances above are $ 8.3 million and $ 8.1 million in long-term unearned revenue as of January 1, 2021 and July 3, 2020, respectively.

Fair Value Measurements of Assets and Liabilities

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• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amounts, estimated fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of October 2, 2020 and July 3, 2020 were as follows:

October 2, 2020 July 3, 2020 Valuation Inputs

The carrying amounts, estimated fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of January 1, 2021 and July 3, 2020 were as follows:

January 1, 2021 July 3, 2020 Valuation Inputs

(In thousands) Carrying Amount Fair Value Carrying Amount Fair Value

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Our Level 1 items mainly are money market funds.

As of October 2, 2020 and July 3, 2020, these money market funds were valued at $ 1.00 net asset value per share.

As of January 1, 2021 and July 3, 2020, these money market funds were valued at $ 1.00 net asset value per share.

We classify items in Level 2 if the observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes, or alternative pricing sources are available with reasonable levels of price transparency.

Our bank certificates of deposit and foreign exchange forward contracts are classified within Level 2.

As of October 2, 2020 and July 3, 2020, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

As of January 1, 2021 and July 3, 2020, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

Our policy is to recognize asset or liability transfers among Level 1, Level 2, and Level 3 as of the actual date of the events or change in circumstances that caused the transfer.

During the first three months of fiscal 2021 and 2020, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

During the first six months of fiscal 2021 and 2020, we had no transfers between levels of the fair value hierarchy of our assets or liabilities measured at fair value.

The Company has facilities under non-cancelable operating lease agreements.

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We determine if an arrangement contains a lease at inception.

These operating leases are included in "Right of use assets" (“ROU”) on our unaudited condensed consolidated balance sheets and represent our right to use the underlying asset for the lease term.

These operating leases are included in "Right of use assets" on our unaudited condensed consolidated balance sheets and represent our right to use the underlying asset for the lease term.

Our obligations to make lease payments are included in "Short-term lease liabilities" and "Long-term lease liabilities" on our unaudited condensed consolidated balance sheets.

We did not enter into any finance leases during the three months ended October 2, 2020.

We did not enter into any finance leases during the six months ended January 1, 2021.

The following summarizes our lease costs (in thousands):

Three Months Ended

October 2, 2020 September 27, 2019

(In thousands)

Three Months Ended Six Months Ended

2021 December 27, 2019 January 1,

2021 December 27, 2019

(In thousands) (In thousands)

Operating lease costs $ 301 $ 526 $ 614 $ 846

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Total lease costs

The following summarizes our lease term and discount rate for three months ended October 2, 2020:

$ 754 $ 906 $ 1,593 $ 1,773

The following summarizes our lease term and discount rate for six months ended January 1, 2021:

Weighted average remaining lease term 7.7 years

Weighted average discount rate 6.5 %

As of October 2, 2020, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

As of January 1, 2021, our future minimum lease payments under all non-cancelable operating leases with an initial term in excess of one year were as follows (in thousands):

(In thousands)

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We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty.

As of October 2, 2020, available credit under the SVB Credit Facility was $ 23.5 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 1.5 million.

As of January 1, 2021, available credit under the SVB Credit Facility was $ 23.5 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 1.5 million.

As of July 3, 2020, our outstanding debt balance under the SVB Credit Facility, classified as a current liability, was $ 9.0 million, and the interest rate was 3.75 %.

We repaid the outstanding debt balance during the quarter ended October 2, 2020.

We repaid the outstanding debt balance in July 2020.

The SVB Credit Facility carries an interest rate computed, at our option, based on either (i) at the prime rate reported in the Wall Street Journal plus a spread of 0.50 % to 1.50 %, with such spread determined based on our adjusted quick ratio;

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applicable prime or LIBOR rate.

During the first three months of fiscal 2021, the weighted-average interest rate on our outstanding loan was 3.75 %.

During the first six months of fiscal 2021, the weighted-average interest rate on our outstanding loan was 3.75 %.

The SVB Credit Facility contains quarterly financial covenants including minimum adjusted quick ratio and minimum profitability (EBITDA) requirements.

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Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default at a per annum rate of interest equal to 5.00 % above the applicable interest rate.

As of October 2, 2020, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

We also obtained an uncommitted short-term line of credit $ 0.3 million from a bank in New Zealand to support the operations of our New Zealand subsidiary.

This line of credit provides for up to $ 0.2 million in short-term advances at various interest rates, all of which was available as of October 2, 2020 and July 3, 2020.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $ 0.1 million was outstanding as of October 2, 2020 and July 3, 2020.

As of January 1, 2021, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

We also obtained an uncommitted short-term line of credit of $ 0.4 million from a bank in New Zealand to support the operations of our New Zealand subsidiary.

This line of credit provides for up to $ 0.3 million in short-term advances at various interest rates, all of which was available as of January 1, 2021 and July 3, 2020.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $ 0.1 million was outstanding as of January 1, 2021 and July 3, 2020.

This line of credit may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

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The following table provides information about receivables and liabilities from contracts with customers (in thousands):

October 2, 2020 July 3, 2020

January 1, 2021 July 3, 2020

Contract Assets

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however, this will have no impact on our future obligation to bill and collect.

As of October 2, 2020, we had $ 33.4 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 68 % is expected to be recognized as revenue in the remainder of fiscal 2021 and the balance thereafter.

During the three months ended October 2, 2020 we recognized approximately $ 11.4 million which was included in advance payments and unearned revenue at the beginning of the reporting period.

As of January 1, 2021, we had $ 34.0 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 50 % is expected to be recognized as revenue in the remainder of fiscal 2021 and the balance thereafter.

During the six months ended January 1, 2021 we recognized approximately $ 15.8 million which was included in advance payments and unearned revenue at the beginning of the reporting period.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 75.4 million at October 2, 2020.

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 77.0 million at January 1, 2021.

Of this amount, we expect to recognize approximately 60 % as revenue during the next 12 months, with the remaining amount to be recognized as revenue within two to five years .

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We report revenue by region and country based on the location where our customers accept delivery of our products and services.

Revenue by region for the three months ended October 2, 2020 and September 27, 2019 was as follows:

Three Months Ended

(In thousands) October 2, 2020 September 27, 2019

Revenue by region for the three and six months ended January 1, 2021 and December 27, 2019 was as follows:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27, 2019 January 1,

2021 December 27,

North America

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Customers accounting for 10% or more of our total revenue was as follows:

Three Months Ended

October 2, 2020 September 27, 2019

Mobile Telephone Networks Group (MTN Group) * 13 %

Three Months Ended Six Months Ended

2021 December 27, 2019 January 1,

2021 December 27, 2019

State Government Customer 12.5 % * * *

Motorola Solutions, Inc.

* Less than 10.0%

Customers accounting for 10% or more of our accounts receivable was as follows:

October 2, 2020 July 3, 2020

MTN Group 12 % 21 %

January 1, 2021 July 3, 2020

State Government Customer 18.3 % *

Mobile Telephone Networks Group (MTN Group) * 21.0 %

* Less than 10.0%

Stock Repurchase Program

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All repurchased shares were retired.

As of October 2, 2020, $ 3.4 million remained available under our stock repurchase program.

As of January 1, 2021, $ 3.4 million remained available under our stock repurchase program.

The repurchase program has been suspended temporarily since February 2020.

Therefore, during the first three months of fiscal 2021, we did not repurchase any shares of our common stock in the open market.

Therefore, during the first six months of fiscal 2021, we have not repurchased any shares of our common stock in the open market.

Stock Incentive Programs

At October 2, 2020, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

The 2018 Plan was approved by the stockholders at the fiscal year 2017 Annual Stockholders’ Meeting and it added 500,000 shares to the equity pool of shares available to grant to employees and non-

employee directors.

The 2018 Plan also provides for the issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and performance share awards and units.

At January 1, 2021, we had one stock incentive plan for our employees and non-employee directors, the 2018 Incentive Plan (the “2018 Plan”).

The 2018 Plan provides for the issuance of share-based awards in the form of stock options, stock appreciation rights, restricted stock awards and units, and performance share awards and units.

Under the 2018 Plan, option exercise prices are equal to the fair market value of our common stock on the date the options are granted using our closing stock price.

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Market-based stock units vest upon meeting certain predetermined share price performance criteria and continued employment through the end of the applicable period.

During the three months ended October 2, 2020, we granted 37,506 restricted stock units, 35,565 performance restricted stock units and 111,811 stock options to purchase shares of our common stock.

During the six months ended January 1, 2021, we granted 55,714 restricted stock units, 35,869 performance restricted stock units and 112,732 stock options to purchase shares of our common stock.

Total compensation expense for share-based awards included in our unaudited condensed consolidated statements of operations was as follows:

Three Months Ended

(In thousands) October 2,

2020 September 27,

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

By Expense Category:

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Total share-based compensation expense $ 818 $ 401 $ 1,389 $ 808

As of October 2, 2020, there was approximately $ 1.5 million of total unrecognized compensation expense related to non-vested stock options granted which are expected to be recognized over a weighted-average period of 2.3 years.

As of October 2, 2020, there was $ 3.1 million of total unrecognized compensation expense related to non-vested stock awards which are expected to be recognized over a weighted-average period of 2.1 years.

On September 6, 2016, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock, par value $ 0.01 per share (the “Common Shares”), to our stockholders of record as of the close of business on September 16, 2016 (the “Record Date”).

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $ 0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $ 35.00 (the “Exercise Price”) per one one-thousandth of a Preferred Share, subject to adjustment.

As of January 1, 2021, there was approximately $ 1.2 million of total unrecognized compensation expense related to non-vested stock options granted which are expected to be recognized over a weighted-average period of 2.1 years.

As of January 1, 2021, there was $ 2.9 million of total unrecognized compensation expense related to non-vested stock awards which are expected to be recognized over a weighted-average period of 1.8 years.

On September 6, 2016, our Board of Directors authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of our common stock, par value $ 0.01 per share, to our stockholders of record as of the close of business on September 16, 2016 (the “Record Date”).

Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $ 0.01 per share (the “Preferred Shares”), of the Company at an exercise price of $ 35.00 per one one-thousandth of a Preferred Share, subject to adjustment.

Until the rights become exercisable, they will not be evidenced by separate certificates and will trade automatically with shares of the Company’s common stock.

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as Rights Agent.

The Amended and Restated Plan, reauthorized by our Board of Directors on March 3, 2020, will be subject to our shareholders approval at our upcoming Annual Shareholders’ Meeting to be held on November 11, 2020.

The Amended and Restated Plan, reauthorized by our Board of Directors on March 3, 2020, was approved by our shareholders at our Annual Shareholders’ Meeting held on November 11, 2020.

Restructuring Activities

The following table summarizes our restructuring-related activities during the three months ended October 2, 2020:

The following table summarizes our restructuring-related activities:

Severance and Benefits Facilities and Other Total

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Accrual balance, October 2, 2020 1,212 261 91 — 25 246 1,835

As of October 2, 2020, the accrual balance of $ 1.8 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Cash payments ( 395 ) ( 81 ) — — — — ( 476 )

Foreign exchange impact ( 45 ) — 36 — 13 10 14

Accrual balance, January 1, 2021 $ 772 $ 180 $ 127 $ — $ 38 $ 256 $ 1,373

As of January 1, 2021, the accrual balance of $ 1.4 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

During the fourth quarter of fiscal 2020, our Board of Directors approved a restructuring plan (the “Q4 2020 Plan”) in order to continue to reduce our operating costs and improve profitability to optimize our business model and increase efficiencies.

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Fiscal 2015-2016 Plan

In January 2018, we reached a settlement with certain foreign government for grant liabilities which allowed us to reduce our estimated payments relating to prior years’ restructuring plan by $ 0.3 million.

In January 2018, we reached a settlement with a certain foreign government for grant liabilities which allowed us to reduce our estimated payments relating to prior years’ restructuring plan by $ 0.3 million.

During the third quarter of fiscal 2015, with the intent to bring our operational cost structure in line with the changing dynamics of the microwave radio and telecommunications markets, we initiated a restructuring plan (the “Fiscal 2015-2016 Plan”) to lower fixed overhead costs and operating expenses and to preserve cash flow.

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Our effective tax rate varies from the U.S.

federal statutory rate of 21% primarily due to results of foreign operations that are subject to income taxes at different statutory rates, certain jurisdictions where we cannot recognize tax benefits on current losses, and partial valuation allowance against US federal and state deferred tax assets.

federal statutory rate of 21% primarily due to results of foreign operations that are subject to income taxes at different statutory rates, certain jurisdictions where we cannot recognize tax benefit on current losses, and partial valuation allowance against U.S.

federal and state deferred tax assets.

During interim periods, we accrue tax expenses for jurisdictions that are anticipated to be profitable for fiscal 2021.

The determination of our income taxes for the three months ended October 2, 2020 and September 27, 2019 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Our tax expense for the three months ended October 2, 2020 was primarily due to tax expense related to profitable subsidiaries.

The tax expense for the three months ended September 27, 2019 was primarily due to tax expense related to profitable subsidiaries and $ 0.6 million increase in our reserves for uncertain tax positions.

The determination of our income taxes for the six months ended January 1, 2021 and December 27, 2019 was based on our estimated annual effective tax rate adjusted for losses in certain jurisdictions for which no tax benefit can be recognized.

Our tax expense for the six months ended January 1, 2021 was primarily due to tax expense related to profitable subsidiaries and $ 0.4 million of tax expense related to an audit settlement with the Financial Administration of the Republic of Slovenia.

The tax expense for the six months ended December 27, 2019 was primarily due to tax expense related to profitable subsidiaries and $ 0.6 million increase in our reserves for uncertain tax positions.

We continue to record a partial valuation allowance on our U.S.

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If future events cause us to conclude that it is not more likely than not that we will be able to recover more or less of the current anticipated portion of deferred tax assets, we would be required to either decrease or increase the valuation allowance on our deferred tax assets at that time, which would result in a charge to income tax expense and a material increase or decrease in net income in the period in which we change our judgment.

During the first quarter of fiscal 2021, we did not record any adjustment to valuation allowance on our U.S.

During the second quarter of fiscal 2021, we did not record any adjustment to valuation allowance on our U.S.

deferred tax assets.

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There have been no settlement payments recorded since the acquisition date.

To the extent we become more profitable in the U.S.

in the future, we may be required to make certain payments to Harris which is currently not estimable.

We have a number of open income tax audits covering various tax years, which vary from jurisdiction to jurisdiction.

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During the first quarter of 2021, we received a tax refund of $ 1.2 million from the Federal Revenue of Brazil related to our withholding tax refund claim and recorded minimal tax expense related to interest as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the Financial Administration of the Republic of Slovenia for fiscal years 2016 to 2018 and recorded $ 0.4 million of tax expense related to the denial of research and development tax relief as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the General Authority of Zakat and Tax in Saudi Arabia for fiscal years 2016 to 2018 and recorded minimal tax benefit related to the release of previously recorded ASC 740-10 reserve as a discrete item.

We account for interest and penalties related to unrecognized tax benefits as part of our provision for federal, foreign and state income taxes.

Such interest expense was not material for the three months ended October 2, 2020 and September 27, 2019.

On March 27, 2020, the US enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act which provided certain tax relief measures including, but not limited to, (1) a five-year net operating loss carryback, (2) changes in the deduction of interest, (3) acceleration of alternative minimum tax credit (AMT) refunds, and (4) a technical correction to allow accelerated deductions for qualified improvement property.

The Tax Cuts and Jobs Act repealed the corporate AMT credit and allowed taxpayers to claim any unused AMT credit over four tax years beginning in tax year 2018.

Such interest expense was not material for the three and six months ended January 1, 2021 and December 27, 2019.

On March 27, 2020, the U.S.

enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act which provided certain tax relief measures including, but not limited to, (1) a five-year net operating loss carryback, (2) changes in the deduction of interest, (3) acceleration of alternative minimum tax credit (“AMT”) refunds, and (4) a technical correction to allow accelerated deductions for qualified improvement property.

The Tax Cuts and Jobs Act repealed the corporate AMT

credit and allowed taxpayers to claim any unused AMT credit over four tax years beginning in tax year 2018.

The CARES Act allows for acceleration of the refundable AMT credit up to 100% of the AMT credit to be refunded in tax year 2018.

During the third quarter of fiscal 2020, in connection with our analysis of the impact of the CARES Act, we reclassified the refundable AMT credit of $ 3.4 million from long-term to short-term receivable and recorded no income tax effects on the other tax relief measures of the CARES Act.

We continue to examine the elements of CARES Act and the impact they may have on our future business.

Net Income Per Share of Common Stock

Net income per share is computed using the two-class method, by dividing net income attributable to us by the weighted-average number of shares of our outstanding common stock and participating securities outstanding.

During the third quarter of fiscal 2020, in connection with our analysis of the impact of the CARES Act, we reclassified the refundable AMT credit of $ 3.4 million from a long-term to short-term receivable and recorded no income tax effects on the other tax relief measures of the CARES Act.

On December 27, 2020, the US enacted the Consolidated Appropriations Act of 2021 (CAA) which extended and expanded certain tax relief measures created by the CARES Act, including, but not limited to, (1) second round of Payroll Protection Program loans, and (2) the Employer Retention Credit for 2021.

We continue to examine the elements of CARES Act and CAA and the impact they may have on our future business.

Net Income (Loss) Per Share of Common Stock

Net income (loss) per share is computed using the two-class method, by dividing net income attributable to us by the weighted-average number of shares of our outstanding common stock and participating securities outstanding.

Our restricted shares contain rights to receive non-forfeitable dividends and therefore are considered to be participating securities and included in the calculations of net income per basic and diluted common share.

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The impact on earnings per share of the participating securities under the two-class method was immaterial.

The following table presents the computation of basic and diluted net income per share:

Three Months Ended

(In thousands, except per share amounts) October 2,

2020 September 27,

Net income $ 5,936 $ 54

The following table presents the computation of basic and diluted net income (loss) per share:

Three Months Ended Six Months Ended

(In thousands, except per share amounts) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Net income (loss) $ 6,641 $ ( 1,671 ) $ 12,577 $ ( 1,617 )

Weighted-average shares outstanding, basic

5,504 5,427 5,457 5,387

Effect of potentially dilutive equivalent shares

Weighted-average shares outstanding, diluted

Net income per share of common stock outstanding:

5,710 5,427 5,639 5,387

Net income (loss) per share of common stock outstanding:

$ 1.21 $ ( 0.31 ) $ 2.30 $ ( 0.30 )

The following table summarizes the weighted-average equity awards that were excluded from the diluted net income per share calculations since they were anti-dilutive:

Three Months Ended

(In thousands) October 2,

2020 September 27,

$ 1.16 $ ( 0.31 ) $ 2.23 $ ( 0.30 )

The following table summarizes the weighted-average equity awards that were excluded from the diluted net income (loss) per share calculations since they were anti-dilutive:

Three Months Ended Six Months Ended

(In thousands) January 1,

2021 December 27,

2019 January 1,

2021 December 27,

Stock options 107 406 94 392

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Total shares of common stock excluded

107 577 94 548

Commitments and Contingencies

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Because these agreements do not specify fixed or minimum quantities, do not specify minimum or variable price provisions, and do not specify the approximate timing of the transaction, and we have no present intention to cancel or terminate any of these agreements, we currently do not believe that we have any future liability under these agreements.

As of October 2, 2020, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 23.5 million.

In addition, we had contractual obligations of approximately $ 1.4 million associated with software licenses as of October 2, 2020.

As of January 1, 2021, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 25.8 million.

In addition, we had contractual obligations of approximately $ 1.2 million associated with software licenses as of January 1, 2021.

Financial Guarantees and Commercial Commitments

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The terms of the guarantees are generally equal to the remaining term of the related debt or other obligations and are generally limited to two years or less.

As of October 2, 2020, we had no guarantees applicable to our debt arrangements.

As of January 1, 2021, we had no guarantees applicable to our debt arrangements.

We have entered into commercial commitments in the normal course of business including surety bonds, standby letters of credit agreements, and other arrangements with financial institutions primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers.

As of October 2, 2020, we had commercial commitments of $ 58.7 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets.

As of January 1, 2021, we had commercial commitments of $ 59.7 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets.

We do not believe, based on historical experience and information currently available, that it is probable that any significant amounts will be required to be paid on these performance guarantees in the future.

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Under the terms of substantially all of our license agreements, we have agreed to defend and pay any final judgment against our customers arising from claims against such customers that our products infringe the intellectual property rights of a third party.

As of October 2, 2020, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products;

As of January 1, 2021, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products;

we have not received any request to defend any customers from infringement claims arising from the use of our products;

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Because the outcome of infringement disputes is related to the specific facts of each case and given the lack of previous or current indemnification claims, we cannot estimate the maximum amount of potential future payments, if any, related to our indemnification provisions.

As of October 2, 2020, we had not recorded any liabilities related to these indemnifications.

As of January 1, 2021, we had not recorded any liabilities related to these indemnifications.

Legal Proceedings

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There are many uncertainties associated with any litigation and these actions or other third-party claims against us may cause us to incur costly litigation and/or substantial settlement charges.

As a result, our business, financial condition, results of operations, and cash flows could be adversely affected.

As a result, our business, financial condition, results of

operations, and cash flows could be adversely affected.

The actual liability in any such matters may be materially different from our estimates, if any.

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We expense all legal costs incurred to resolve regulatory, legal, and tax matters as incurred.

In March 2016, an enforcement action by the Indian Department of Revenue, Ministry of Finance was brought against our subsidiary Aviat Networks (India) Private Limited (“Aviat India”) relating to the non-realization of intercompany receivables and non-payment of intercompany payables, which originated from 1999 to 2012, within the time frames dictated by the Indian regulations under the Foreign Exchange Management Act ("FEMA").

In November 2017, the Indian Department of Revenue, Ministry of Finance also initiated a similar action against Telsima Communications Private Limited (“Telsima India”), a subsidiary of the Company, relating to the non-realization of intercompany receivables and non-payment of intercompany payables which originated from the period prior to our acquisition of Telsima India in February 2009.

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The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating activities can resume.

Management is actively monitoring the impact of COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Management is actively monitoring the impact of the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

Additionally we have undertaken measures to protect our employees, suppliers, and customers, including encouraging, and in many cases requiring employees to work remotely as appropriate.

We have also modified some of our controls procedures but those changes have not been significant.

Our first priority remains the health and safety of our employees and their families.

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We are maintaining social distancing for workers on-site and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the three months ended October 2, 2020.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the three and six months ended January 1, 2021.

However, depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our ability to perform field services during shelter in place orders, we could experience constraints and delays in fulfilling customer orders in future periods.

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We expect these challenges to continue until business and economic activities return to more normal levels.

The financial results for the three months ended October 2, 2020 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

The financial results for the three and six months ended January 1, 2021 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

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 1. Financial Statements