What changed in this filing

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Item 1. Financial Statements

2022-02-02 compared with 2021-11-03 · 190 added, 127 removed, 451 unchanged (41% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share and par value amounts) December 31,

Current Assets:

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Other assets 8,782 8,430

TOTAL ASSETS $ 308,919 $ 297,653

$ 317,123 $ 297,653

LIABILITIES AND EQUITY

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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, 11,187,003 shares issued and outstanding at October 1, 2021;

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 11,195,542 shares issued and outstanding at December 31, 2021;

11,153,445 shares issued and outstanding at July 2, 2021 (see Note 1 Stock Split)

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TOTAL LIABILITIES AND EQUITY

$ 317,123 $ 297,653

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

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

2021 October 2,

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Revenue from product sales $ 53,467 $ 46,691 $ 104,314 $ 91,155

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Selling and administrative expenses 13,739 13,612 26,437 26,449

Restructuring charges 659 —

Restructuring (recovery) charges ( 960 ) — ( 301 ) —

Total operating expenses 18,948 19,031 38,215 36,715

Operating income 9,208 7,878 16,022 14,443

Interest income, net 28 35

Other expense (income), net 240 ( 38 ) 212 ( 73 )

Income before income taxes 8,968 7,916 15,810 14,516

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

(In thousands) October 1,

2021 October 2,

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Net income $ 5,916 $ 6,641 $ 10,598 $ 12,577

Other comprehensive (loss) income:

Net change in cumulative translation adjustments, net of tax ( 164 ) 414

Net change in cumulative translation adjustments

( 108 ) 184 ( 272 ) 598

Other comprehensive (loss) income ( 108 ) 184 ( 272 ) 598

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

(In thousands) October 1,

2021 October 2,

Six Months Ended

(In thousands) December 31,

2021 January 1,

Operating Activities

Net income $ 10,598 $ 12,577

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

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

Depreciation and amortization of property, plant and equipment 2,393 2,661

Provision for uncollectible receivables ( 2 ) 2

(Recoveries) Provision for uncollectible receivables ( 3 ) 30

Share-based compensation 1,624 1,389

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Noncash lease expense 445 327

Restructuring recoveries ( 301 ) —

Changes in operating assets and liabilities:

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Change in lease liabilities ( 472 ) ( 342 )

Net cash provided by operating activities 682 4,241

Net cash (used in) provided by operating activities ( 2,163 ) 10,220

Investing Activities

8 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 291 ) 266

Net decrease in cash, cash equivalents, and restricted cash ( 658 ) ( 5,393 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 5,645 ) 1,428

Cash, cash equivalents, and restricted cash, beginning of period 48,198 41,872

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (1)

Three Months Ended October 1, 2021

Three Months Ended December 31, 2021

Common Stock Treasury Stock Additional

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(In thousands, except share amounts) Shares $

Balance as of July 2, 2021 11,153,445 $ 112 $ ( 787 ) $ 818,939 $ ( 620,602 ) $ ( 14,327 ) $ 183,335

Balance as of October 1, 2021 11,187,003 $ 112 $ ( 1,500 ) $ 819,711 $ ( 615,920 ) $ ( 14,491 ) $ 187,912

Net income — — — — 5,916 — 5,916

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Share-based compensation — — — 761 — — 761

Balance as of December 31, 2021 11,195,542 $ 112 $ ( 3,408 ) $ 820,791 $ ( 610,004 ) $ ( 14,599 ) $ 192,892

Three Months Ended January 1, 2021

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of October 2, 2020 10,886,724 $ 109 $ — $ 815,148 $ ( 724,805 ) $ ( 14,555 ) $ 75,897

Three Months Ended October 2, 2020

Common Stock Additional

Net income — — — — 6,641 — 6,641

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

Issuance of common stock under employee stock plans 242,048 4 — 1,059 — — 1,063

Shares withheld for taxes related to vesting of equity awards — — — — — — —

Stock repurchase ( 936 ) — — ( 40 ) — — ( 40 )

Share-based compensation — — — 818 — — 818

Balance as of January 1, 2021 11,127,836 $ 113 $ — $ 816,985 $ ( 718,164 ) $ ( 14,371 ) $ 84,563

Six Months Ended December 31, 2021

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

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Shares withheld for taxes related to vesting of equity awards ( 10,134 ) — — ( 358 ) — — ( 358 )

Stock repurchase ( 83,438 ) ( 1 ) ( 2,621 ) — — — ( 2,622 )

Share-based compensation — — — 1,624 — — 1,624

Balance as of October 2, 2020 10,886,724 $ 109 $ 815,148 $ ( 724,805 ) $ ( 14,555 ) $ 75,897

Balance as of December 31, 2021 11,195,542 $ 112 $ ( 3,408 ) $ 820,791 $ ( 610,004 ) $ ( 14,599 ) $ 192,892

Six Months Ended January 1, 2021

Common Stock Treasury Stock Additional

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity

(In thousands, except share amounts) Shares $

Balance as of July 3, 2020 10,800,974 $ 108 $ — $ 814,283 $ ( 730,741 ) $ ( 14,969 ) $ 68,681

Net income — — — — 12,577 — 12,577

Other comprehensive loss, net of tax — — — — — 598 598

Issuance of common stock under employee stock plans 339,030 5 — 1,481 — — 1,486

Shares withheld for taxes related to vesting of equity awards ( 11,232 ) — — ( 128 ) — — ( 128 )

Stock repurchase ( 936 ) — — ( 40 ) — — ( 40 )

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

Balance as of January 1, 2021 11,127,836 $ 113 $ — $ 816,985 $ ( 718,164 ) $ ( 14,371 ) $ 84,563

(1) See Note 1 Stock Split.

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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 1, 2021 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 December 31, 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 2, 2021.

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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 1, 2021 and the three months ended October 2, 2020 both consisted of 13 weeks.

The three months ended December 31, 2021 consisted of 13 weeks and the three months ended January 1, 2021 consisted of 13 weeks.

Fiscal year 2022 will be comprised of 52 weeks and will end on July 1, 2022.

Fiscal 2021 was comprised of 52 weeks and ended on July 2, 2021.

Fiscal year 2021 was comprised of 52 weeks and ended on July 2, 2021.

On April 7, 2021 we effected a two -for-one split in the form of a stock dividend to shareholders of record as of April 1, 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 doubtful accounts, inventory valuation, valuation allowances for deferred tax assets, uncertainties in income taxes, contingencies and recoverability of long-lived assets.

Such estimates affect significant items, including revenue recognition, provision for uncollectible receivables, inventory valuation, valuation allowances for deferred tax assets, uncertainties in income taxes, contingencies and recoverability of long-lived assets.

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 October 1, 2021 and for the three months ended October 1, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 2, 2021.

There have been no material changes in our significant accounting policies as of December 31, 2021 and for the six months ended December 31, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended July 2, 2021.

Accounting Standards Adopted

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This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued.

This guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and is effective March 12, 2020 through December 31, 2022.

We are evaluating the potential impact ASU 2020-04 will have on our unaudited condensed consolidated financial statements.

This guidance is applicable for our borrowing instruments, which use LIBOR as a reference rate, and was effective March 12, 2020 through December 31, 2022.

We are currently evaluating the potential impact ASU 2020-04 will have on our unaudited condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

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Cash, Cash Equivalents, and Restricted Cash

The following table provides a summary of the 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 1,

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) December 31,

Cash and cash equivalents $ 42,326 $ 47,942

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Our net accounts receivable are summarized below:

(In thousands) October 1,

(In thousands) December 31,

Accounts receivable $ 70,903 $ 50,276

Allowances for doubtful accounts ( 1,746 ) ( 2,141 )

Allowances for collection losses ( 1,829 ) ( 2,141 )

Total accounts receivable, net $ 69,074 $ 48,135

Our inventories are summarized below:

(In thousands) October 1,

(In thousands) December 31,

Finished products $ 15,578 $ 15,409

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$ 8,534 $ 6,570

We increased certain levels of inventory during the three and six months ended December 31, 2021 primarily to mitigate supply chain constraints.

We currently rely on a few vendors for substantially all of our inventory purchases.

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 1, 2021 and October 2, 2020 were classified in cost of product sales as follows:

Three Months Ended

(In thousands) October 1,

2021 October 2,

Excess and obsolete inventory charges $ 133 $ 63

The charges during the three and six months ended December 31, 2021 and January 1, 2021 were classified in cost of product sales as follows:

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Excess and obsolete inventory $ 107 $ 134 $ 240 $ 197

Customer service inventory write-downs 170 266 418 388

Total inventory charges

$ 277 $ 400 $ 658 $ 585

Assets Held for Sale

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During the second quarter of fiscal 2021 management initiated the sale of our facility located in the United Kingdom.

We expect to complete the sale by the end of our second fiscal 2022 quarter.

The carrying value of this asset held for sale as of October 1, 2021 was $ 2.2 million, which represents the lower of 1) the carrying value or 2) the fair value of the asset, less estimated costs to sell the asset.

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

We expect to complete the sale by the end of third quarter of fiscal 2022.

The carrying value of this asset held for sale as of December 31, 2021 of $ 2.2 million which represents the lower of 1) the carrying value or 2) fair value of the assets, less 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.

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

(In thousands) October 1,

(In thousands) December 31,

Land $ 210 $ 210

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Total property, plant and equipment, net $ 10,010 $ 11,701

Included in the total plant, property and equipment above were $ 0.4 million and $ 0.3 million of assets in progress which have not been placed in service as of October 1, 2021 and July 2, 2021, respectively.

Included in the total plant, property and equipment above there were no assets in progress which have not been placed in service as of December 31, 2021 and $ 0.3 million as of July 2, 2021.

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 1,

2021 October 2,

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Depreciation and amortization $ 1,129 $ 1,407 $ 2,393 $ 2,661

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Our accrued expenses are summarized below:

(In thousands) October 1,

(In thousands) December 31,

Accrued compensation and benefits $ 7,945 $ 13,455

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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

(In thousands) October 1,

2021 October 2,

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Balance as of the beginning of the period $ 3,318 $ 3,107 $ 3,228 $ 3,196

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Our advance payments and unearned revenue are summarized below:

(In thousands) October 1,

(In thousands) December 31,

Advance payments $ 1,536 $ 2,445

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Total advance payments and unearned revenue $ 35,753 $ 32,304

Excluded from the balances above are $ 8.5 million and $ 8.6 million in long-term unearned revenue as of October 1, 2021 and July 2, 2021, respectively.

Excluded from the balances above are $ 8.0 million and $ 8.6 million in long-term unearned revenue as of December 31, 2021 and July 2, 2021, respectively.

Fair Value Measurements of Assets and Liabilities

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We maximize the use of observable inputs and minimize the use of unobservable inputs in measuring fair value and establish a three-level fair value hierarchy that prioritizes the inputs used to measure fair value.

We did not have any fair value measurements of liabilities to disclose.

The three levels of inputs used to measure fair value are as follows:

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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 measured at fair value on a recurring basis as of October 1, 2021 and July 2, 2021 were as follows:

October 1, 2021 July 2, 2021 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 December 31, 2021 and July 2, 2021 were as follows:

December 31, 2021 July 2, 2021 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 1, 2021 and July 2, 2021, these money market funds were valued at $ 1.00 net asset value per share.

As of December 31, 2021 and July 2, 2021, 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 are classified within Level 2.

As of October 1, 2021 and July 2, 2021, we did not have any recurring assets that were valued using significant unobservable inputs.

Our policy is to recognize asset 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 2022 and 2021, we had no transfers between levels of the fair value hierarchy of our assets measured at fair value.

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

As of December 31, 2021 and July 2, 2021, 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 six months of fiscal 2022 and 2021, 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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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 1, 2021.

We did not enter into any finance leases during the six months ended December 31, 2021.

The following summarizes our lease costs (in thousands):

Three Months Ended

2021 October 2, 2020

(In thousands)

Three Months Ended Six Months Ended

2021 January 1, 2021 December 31,

2021 January 1, 2021

(In thousands) (In thousands)

Operating lease costs $ 245 $ 301 $ 562 $ 614

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$ 805 $ 754 $ 1,836 $ 1,593

The following summarizes our lease term and discount rate for the three months ended October 1, 2021:

Weighted average remaining lease term 7.93

The following summarizes our lease term and discount rate for the six months ended December 31, 2021:

Weighted average remaining lease term 7.9 years

Weighted average discount rate 5.7 %

As of October 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):

As of December 31, 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 1, 2021, available credit under the SVB Credit Facility was $ 22.5 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 2.5 million.

We did not borrow against the SVB Credit Facility during the first quarter of fiscal 2022 and there was no borrowing outstanding as of October 1, 2021 or July 2, 2021.

As of December 31, 2021, available credit under the SVB Credit Facility was $ 22.5 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 2.5 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 in July 2020.

We have not borrowed against the SVB Credit Facility during the six months ended December 31, 2021 and there were no borrowing outstanding as of December 31, 2021 or July 2, 2021.

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

As of December 31, 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 October 1, 2021 and July 2, 2021.

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 1, 2021 and July 2, 2021.

This line of credit provides for up to $ 0.4 million in short-term advances at various interest rates, all of which was available as of December 31, 2021 and July 2, 2021.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which none was outstanding as of December 31, 2021 and July 2, 2021.

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 1, 2021 July 2, 2021

December 31, 2021 July 2, 2021

Contract Assets

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

As of October 1, 2021, we had $ 44.0 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 45 % is expected to be recognized as revenue in the remainder of fiscal 2022 and the balance thereafter.

During the three months ended October 1, 2021 we recognized $ 6.9 million of revenue which was included in advance payments and unearned revenue at the beginning of the reporting period.

As of December 31, 2021, we had $ 43.7 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 34 % is expected to be recognized as revenue in the remainder of fiscal 2022 and the balance thereafter.

During the three and six months ended December 31, 2021 we recognized $ 6.6 million and $ 13.5 million, respectively, of revenue which was included in advance payments and unearned revenue at July 2, 2021.

Remaining Performance Obligations

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 82.0 million at October 1, 2021.

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 75 million at December 31, 2021.

Of this amount, we expect to recognize approximately 70 % 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 1, 2021 and October 2, 2020 was as follows:

Three Months Ended

(In thousands) October 1,

2021 October 2,

Revenue by region for the three and six months ended December 31, 2021 and January 1, 2021 was as follows:

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

North America

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

Three Months Ended

2021 October 2,

Three Months Ended Six Months Ended

2021 January 1,

2021 December 31,

2021 January 1,

Motorola Solutions, Inc.

11.0 % * 13.0 % *

State Government Customer * 12.5 % * *

* Less than 10.0%

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

October 1, 2021 July 2, 2021

Motorola Solutions, Inc.

Customer accounting for 10% or more of our accounts receivable were as follows:

December 31, 2021 July 2, 2021

Mobile Telephone Networks Group (MTN Group) 16.0 % 14.0 %

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Stock Repurchase Program

In May 2018, our board of directors approved a stock repurchase program, which does not have an expiration date, for the repurchase of up to $ 7.5 million of our common stock.

As of October 1, 2021, $ 1.9 million remained available under our stock repurchase program.

The repurchase program was suspended temporarily from February 2020 to February 2021.

During the second quarter of fiscal 2022 we completed the $ 7.5 million stock repurchase program approved by our board of directors in May 2018 by purchasing 60,895 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $ 1.9 million.

During the first quarter of fiscal 2022, we repurchased 22,543 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $ 0.7 million.

These shares were recorded as treasury stock and we do not anticipate retiring them.

Treasury stock did not participate in the two -for-one stock split in the form of a stock dividend paid on April 7, 2021.

The repurchase program was suspended temporarily from February 2020 to February 2021.

During the third quarter of fiscal 2021, our Board of Directors voted to re-instate our stock repurchase program.

In November 2021 our board of directors approved a stock repurchase program to purchase up to $ 10.0 million of our common stock.

As of December 31, 2021, $ 10.0 million remains available and we may choose to suspend or discontinue the repurchase program at any time.

Stock Incentive Programs

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

As of December 31, 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.

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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 1, 2021, we granted 46,533 restricted stock units, 46,533 market-based stock units and 114,012 stock options to purchase shares of our common stock.

During the six months ended December 31, 2021, we granted 69,196 restricted stock units, 46,533 market-based stock units and 114,012 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 1,

2021 October 2,

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

By Expense Category:

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Total share-based compensation expense $ 761 $ 818 $ 1,624 $ 1,389

As of October 1, 2021, there was approximately $ 1.6 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 1.8 years.

As of October 1, 2021, there was $ 6.0 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.7 years.

As of December 31, 2021, there was approximately $ 1.3 million of total unrecognized compensation expense related to non-vested stock options granted which is expected to be recognized over a weighted-average period of 1.6 years.

As of December 31, 2021, there was $ 5.6 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.6 years.

Restructuring Activities

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Severance and Benefits Facilities and Other Total

(In thousands) Fiscal 2021 Plan Q4 2020 Plan Prior Years' Plan Prior Years’ plan

(In thousands) Fiscal 2021 Plan Q4 2020 Plan Prior Years' Plan Fiscal 2015-2016 Plan

Accrual balance, July 2, 2021 2,209 $ 216 $ 64 $ 248 $ 2,737

Charges 628 31 — — 659

Charges, net 628 31 — — 659

Cash payments ( 326 ) ( 49 ) — — ( 375 )

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Accrual balance, October 1, 2021 2,504 198 64 242 3,008

As of October 1, 2021, the accrual balance of $ 3.0 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Charges (recovery), net ( 526 ) ( 198 ) — ( 236 ) ( 960 )

Cash payments ( 253 ) — — — ( 253 )

Foreign exchange impact ( 2 ) — — ( 6 ) ( 8 )

Accrual balance, December 31, 2021 $ 1,723 $ — $ 64 $ — $ 1,787

As of December 31, 2021, the accrual balance of $ 1.8 million was in short-term restructuring liabilities on our unaudited condensed consolidated balance sheets.

Included in the above plans for which we were carrying a provision were positions identified for termination that have not been executed from a restructuring perspective.

Due to transition of leadership in the finance function it was concluded that we would not make several of the planned headcount reductions, and

the likelihood of future restructuring for these positions is presently deemed remote.

Therefore, we decided it was prudent to reverse the associated provision.

Fiscal 2021 Plan

During the third and fourth quarter of fiscal 2021, our Board of Directors approved a restructuring plan (the “Fiscal 2021 Plan”) to continue to reduce our operating costs and improve profitability.

Payments related to the accrued restructuring balances for this plan are expected to be fully paid in fiscal 2022.

During the third quarter of fiscal 2021, our Board of Directors approved a restructuring plan (the “Fiscal 2021 Plan”) in order to continue to reduce operating costs and improve profitability as part of our transformational initiative to optimize our business model and increase efficiencies.

The Fiscal 2021 Plan was anticipated to entail a reduction in force of approximately 30 employees to be implemented through the second quarter of fiscal year 2022, with a certain number of positions being consolidated and/or relocated.

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.

Payments related to the accrued restructuring liability balance for this plan are expected to be fully paid in fiscal 2022.

The Q4 2020 Plan was implemented starting with our fourth fiscal quarter of 2020 through the second fiscal quarter of 2021.

This plan has been fully paid.

Prior Years’ Plan

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During interim periods, we accrue tax expenses for jurisdictions that are anticipated to be profitable for fiscal 2022.

The determination of our income taxes for the three months ended October 1, 2021 and October 2, 2020 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 benefit for the three months ended October 1, 2021 was primarily due to tax expense related to U.S.

The determination of our income taxes for the six months ended December 31, 2021 and January 1, 2021 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 December 31, 2021 was primarily due to tax expense related to U.S.

and profitable subsidiaries.

The 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 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.

We entered into a tax sharing agreement with Harris Corporation (“Harris”) effective on January 26, 2007, the acquisition date of Stratex Networks, Inc.

The tax sharing agreement addresses, among other things, the settlement process associated with pre-merger tax liabilities and tax attributes that were attributable to the Microwave Communication Division

when it was a division of Harris.

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

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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 ending October 1, 2021 and October 2, 2020.

Such interest expense was not material for the six months ended December 31, 2021 and January 1, 2021.

On December 27, 2020, the U.S.

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

Three Months Ended

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

2021 October 2,

Three Months Ended Six Months Ended

(In thousands, except per share amounts) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Net income $ 5,916 $ 6,641 $ 10,598 $ 12,577

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Effect of potentially dilutive equivalent shares

651 412 723 364

Weighted-average shares outstanding, diluted

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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 1,

2021 October 2,

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Stock options 123 107 48 94

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Total shares of common stock excluded

177 107 89 94

Commitments and Contingencies

Purchase Orders and Other Commitments

From time to time in the normal course of business, we may enter into purchasing agreements with our suppliers that require us to accept delivery of, and remit full payment for, finished products that we have ordered, finished products that we requested be held as safety stock, and work in process started on our behalf, in the event we cancel or terminate the purchasing agreement.

purchasing agreement.

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 1, 2021, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 43.8 million.

In addition, we had contractual obligations of approximately $ 4.0 million associated with software licenses as of October 1, 2021.

As of December 31, 2021, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 36.8 million.

In addition, we had contractual obligations of approximately $ 3.7 million associated with software licenses as of December 31, 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 1, 2021, we had no guarantees applicable to our debt arrangements.

As of December 31, 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 1, 2021, we had commercial commitments of $ 64.0 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets.

As of December 31, 2021, we had commercial commitments of $ 64.2 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 1, 2021, we have not received any notice that any customer is subject to an infringement claim arising from the use of our products;

As of December 31, 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 1, 2021, we had not recorded any liabilities related to these indemnifications.

As of December 31, 2021, we had not recorded any liabilities related to these indemnifications.

Legal Proceedings

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The COVID-19 pandemic may have an impact on our operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring.

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 the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

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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 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