What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2022-02-02 · 157 added, 166 removed, 475 unchanged (40% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

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

Current Assets:

10 unchanged sentences

Right of use assets 3,196 3,816

Marketable securities 2,515 —

Other assets 9,841 8,430

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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, 11,195,542 shares issued and outstanding at December 31, 2021;

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

Common stock, $ 0.01 par value, 300,000,000 shares authorized, 11,166,918 shares issued and outstanding at April 1, 2022;

11,153,445 shares issued and outstanding at July 2, 2021

Treasury stock ( 5,398 ) ( 787 )

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended

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

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

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

2022 April 2,

2021 April 1,

2022 April 2,

Revenue from product sales $ 52,047 $ 45,246 $ 156,361 $ 136,401

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Income before income taxes 7,307 4,163 23,117 18,679

Provision for income taxes 3,052 1,275 5,212 1,939

Provision for (benefit from) income taxes 1,278 ( 90,568 ) 6,490 ( 88,629 )

Net income $ 6,029 $ 94,731 $ 16,627 $ 107,308

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Diluted $ 0.51 $ 8.00 $ 1.40 $ 9.31

Weighted-average shares outstanding (see Note 1 Stock Split):

Weighted-average shares outstanding:

Basic 11,173 11,152 11,172 10,994

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

(In thousands) April 1,

2022 April 2,

2021 April 1,

2022 April 2,

Net income $ 6,029 $ 94,731 $ 16,627 $ 107,308

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

(In thousands) December 31,

2021 January 1,

Nine Months Ended

(In thousands) April 1,

2022 April 2,

Operating Activities

6 unchanged sentences

Charges for inventory and customer service inventory write-downs 1,140 1,148

Loss on disposition of property, plant and equipment, net — 24

(Gain) loss on disposition of property, plant and equipment, net ( 66 ) 6

Noncash lease expense 620 581

Restructuring recoveries ( 301 ) —

Net gain on marketable securities ( 23 ) —

Restructuring (recoveries) charges ( 373 ) 1,162

Changes in operating assets and liabilities:

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Payments for acquisition of property, plant and equipment ( 1,028 ) ( 2,399 )

Purchase of marketable securities ( 2,492 ) —

Proceeds from sale of asset held for sale 2,284 —

Net cash used in investing activities ( 1,236 ) ( 2,399 )

12 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended December 31, 2021

Three Months Ended April 1, 2022

Common Stock Treasury Stock Additional

1 unchanged sentence

(In thousands, except share amounts) Shares $

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

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

Net income — — — — 6,029 — 6,029

1 unchanged sentence

Issuance of common stock under employee stock plans 37,327 1 — 345 — — 346

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

Stock repurchase ( 65,951 ) ( 1 ) ( 1,990 ) — — — ( 1,991 )

Share-based compensation — — — 840 — — 840

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

Balance as of April 1, 2022 11,166,918 $ 112 $ ( 5,398 ) $ 821,976 $ ( 603,975 ) $ ( 15,385 ) $ 197,330

Three Months Ended April 2, 2021

Common Stock Treasury Stock Additional

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(In thousands, except share amounts) Shares $

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

Balance as of January 1, 2021 11,119,536 $ 111 $ — $ 816,988 $ ( 718,164 ) $ ( 14,371 ) $ 84,564

Net income — — — — 94,731 — 94,731

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

Other comprehensive loss, net of tax — — — — — ( 284 ) ( 284 )

Issuance of common stock under employee stock plans 54,324 1 — 401 — — 402

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Share-based compensation — — — 765 — — 765

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

Six Months Ended December 31, 2021

Balance as of April 2, 2021 11,164,194 $ 112 $ ( 458 ) $ 818,155 $ ( 623,433 ) $ ( 14,655 ) $ 179,721

Nine Months Ended April 1, 2022

Common Stock Treasury Stock Additional

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Share-based compensation — — — 2,464 — — 2,464

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

Balance as of April 1, 2022 11,166,918 $ 112 $ ( 5,398 ) $ 821,976 $ ( 603,975 ) $ ( 15,385 ) $ 197,330

Nine Months Ended April 2, 2021

Common Stock Treasury Stock Additional

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Share-based compensation — — — 2,154 — — 2,154

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

(1) See Note 1 Stock Split.

Balance as of April 2, 2021 11,164,194 $ 112 $ ( 458 ) $ 818,155 $ ( 623,433 ) $ ( 14,655 ) $ 179,721

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 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 results for the three and nine months ended April 1, 2022 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 December 31, 2021 consisted of 13 weeks and the three months ended January 1, 2021 consisted of 13 weeks.

The three months ended April 1, 2022 and the three months ended April 2, 2021 both consisted of 13 weeks.

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

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.

Common stock, Additional paid-in-capital, per share and equity award amounts for all periods presented have been retrospectively reclassified to reflect the two -for-one stock split in the form of a stock dividend.

Use of Estimates

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Summary of Significant Accounting Policies

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.

There have been no material changes in our significant accounting policies as of April 1, 2022 and for the nine months ended April 1, 2022, 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

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740).

This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes.

This guidance simplifies the accounting for income taxes by removing certain

exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis of goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes.

ASU 2019-12 became effective for us in our first quarter of fiscal 2022.

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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.

The adoption of ASU 2020-04 will not have a material impact 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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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,

(In thousands) April 1,

Cash and cash equivalents $ 31,296 $ 47,942

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Our net accounts receivable are summarized below:

(In thousands) December 31,

(In thousands) April 1,

Accounts receivable $ 77,484 $ 50,276

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Our inventories are summarized below

(In thousands) December 31,

(In thousands) April 1,

Finished products $ 16,994 $ 15,409

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$ 11,098 $ 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 increased certain levels of inventory during the three and nine months ended April 1, 2022 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 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,

The charges during the three and nine months ended April 1, 2022 and April 2, 2021 were classified in cost of product sales as follows:

Three Months Ended Nine Months Ended

(In thousands) April 1,

2022 April 2,

2021 April 1,

2022 April 2,

Excess and obsolete inventory $ 196 $ 270 $ 436 $ 467

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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 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.

We completed the sale during the third quarter of fiscal 2022 with proceeds of $ 2.3 million, reflecting a gain of $ 0.1 million.

We have no additional assets held for sale.

Property, Plant and Equipment, net

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

(In thousands) December 31,

(In thousands) April 1,

Land $ 210 $ 210

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Total property, plant and equipment, net $ 9,522 $ 11,701

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.

Included in the total plant, property and equipment above there were no assets in progress which have not been placed in service as of April 1, 2022 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 Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

(In thousands) April 1,

2022 April 2,

2021 April 1,

2022 April 2,

Depreciation and amortization $ 1,051 $ 1,355 $ 3,444 $ 4,016

1 unchanged sentence

Our accrued expenses are summarized below:

(In thousands) December 31,

(In thousands) April 1,

Accrued compensation and benefits $ 8,885 $ 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 Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

(In thousands) April 1,

2022 April 2,

2021 April 1,

2022 April 2,

Balance as of the beginning of the period $ 3,198 $ 3,315 $ 3,228 $ 3,196

4 unchanged sentences

Our advance payments and unearned revenue are summarized below:

(In thousands) December 31,

(In thousands) April 1,

Advance payments $ 2,906 $ 2,445

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Total advance payments and unearned revenue $ 38,066 $ 32,304

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.

Excluded from the balances above are $ 7.6 million and $ 8.6 million in long-term unearned revenue as of April 1, 2022 and July 2, 2021, 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 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

The fair values, and valuation input levels of our assets and liabilities that are measured at fair value on a recurring basis as of April 1, 2022 and July 2, 2021 were as follows:

April 1, 2022 July 2, 2021 Valuation Inputs

(In thousands) Fair Value Fair Value

Cash and cash equivalents:

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$ 3,475 $ 3,288 Level 2

Marketable securities $ 2,515 $ — Level 1

We classify items within Level 1 if quoted prices are available in active markets.

Our Level 1 items mainly are money market funds.

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

As of April 1, 2022 and July 2, 2021, these money market funds were valued at $1.00 net asset value per share.

Our marketable securities are included in non-current assets on our balance sheet as we intend to hold for longer than 12 months.

These marketable securities are publicly traded stock measured at fair value and classified within Level 1.

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 December 31, 2021 and July 2, 2021, we did not have any recurring assets or liabilities that were valued using significant unobservable inputs.

As of April 1, 2022 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.

During the first nine 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 six months ended December 31, 2021.

We did not enter into any finance leases during the nine months ended April 1, 2022.

The following summarizes our lease costs (in thousands):

Three Months Ended Six Months Ended

2021 January 1, 2021 December 31,

2021 January 1, 2021

Three Months Ended Nine Months Ended

2022 April 2, 2021 April 1,

2022 April 2, 2021

(In thousands) (In thousands)

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$ 938 $ 894 $ 2,774 $ 2,487

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

The following summarizes our lease term and discount rate for the nine months ended April 1, 2022:

Weighted average remaining lease term 7.8 years

Weighted average discount rate 5.8 %

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):

As of April 1, 2022, 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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The SVB Credit Facility provides for a $ 25.0 million accounts receivable formula-based revolving credit facility that can be borrowed by our U.S.

company, with a $ 25.0 million sublimit that can be borrowed by our U.S.

company, with a $ 25.0 million sub-limit that can be borrowed by our U.S.

and Singapore entities.

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The borrowing base is subject to certain eligibility criteria.

Availability under the accounts receivable formula based revolving credit facility can also be utilized to issue letters of credit with a $ 12.0 million sublimit.

Availability under the accounts receivable formula based revolving credit facility can also be utilized to issue letters of credit with a $ 12.0 million sub-limit.

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

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 April 1, 2022, available credit under the SVB Credit Facility was $ 21.7 million, reflecting the lower available limit of $ 25.0 million less outstanding letters of credit of $ 3.3 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.

We have not borrowed against the SVB Credit Facility during the nine months ended April 1, 2022 and there were no borrowing outstanding as of April 1, 2022 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 December 31, 2021, we were in compliance with the quarterly financial covenants contained in the SVB Credit Facility, as amended.

As of April 1, 2022, 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 $ 0.4 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 provides for up to $ 0.3 million in short-term advances at various interest rates, all of which was available as of April 1, 2022 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 April 1, 2022 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):

December 31, 2021 July 2, 2021

April 1, 2022 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 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.

As of April 1, 2022, we had $ 45.7 million in advance payments and unearned revenue and long-term unearned revenue, of which approximately 18 % is expected to be recognized as revenue in the remainder of fiscal 2022 and the balance thereafter.

During the three and nine months ended April 1, 2022 we recognized $ 5.3 million and $ 18.8 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 $ 75 million at December 31, 2021.

The aggregate amount of transaction price allocated to our unsatisfied (or partially unsatisfied) performance obligations was approximately $ 82.8 million at April 1, 2022.

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 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,

Revenue by region for the three and nine months ended April 1, 2022 and April 2, 2021 was as follows:

Three Months Ended Nine Months Ended

(In thousands) April 1,

2022 April 2,

2021 April 1,

2022 April 2,

North America

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Africa and the Middle East 13,123 9,904 37,360 31,138

Europe and Russia 2,908 1,511 5,611 3,773

Europe 2,898 3,280 8,509 7,053

Latin America and Asia Pacific 9,453 11,199 28,644 28,356

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

Three Months Ended Six Months Ended

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

2022 April 2,

2021 April 1,

2022 April 2,

Motorola Solutions, Inc.

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State Government Customer * 12.5 % * *

Mobile Telephone Networks Group (MTN Group) 13.0 % * 10.0 % *

* Less than 10.0%

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

December 31, 2021 July 2, 2021

April 1, 2022 July 2, 2021

Mobile Telephone Networks Group (MTN Group) 20.0 % 14.0 %

* Less than 10.0%

Stock Repurchase Program

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.

During the third quarter of fiscal 2022, we repurchased 65,951 shares of our common stock in the open market for an aggregate purchase price, including commissions, of $ 2.0 million.

During the nine months ended of fiscal 2022, we repurchased 149,389 shares of our common stock in the open market for an aggregate purchase price, including commission of $ 4.6 million.

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

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.

As of April 1, 2022, $ 8.0 million remains available and we may choose to suspend or discontinue the repurchase program at any time.

Stock Incentive Programs

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”).

As of April 1, 2022, 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 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.

During the nine months ended April 1, 2022, we granted 70,531 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 Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

(In thousands) April 1,

2022 April 2,

2021 April 1,

2022 April 2,

By Expense Category:

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Total share-based compensation expense $ 840 $ 765 $ 2,464 $ 2,154

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.

As of April 1, 2022, there was approximately $ 1.1 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 1.3 years.

As of April 1, 2022, there was $ 4.8 million of total unrecognized compensation expense related to non-vested stock awards which is expected to be recognized over a weighted-average period of 1.3 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 Fiscal 2015-2016 Plan

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

Accrual balance, July 2, 2021 $ 2,209 $ 280 $ 248 $ 2,737

3 unchanged sentences

Accrual balance, October 1, 2021 2,504 262 242 3,008

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

Recovery, net ( 526 ) ( 198 ) ( 236 ) ( 960 )

Cash payments ( 253 ) — — ( 253 )

1 unchanged sentence

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.

Recovery, net ( 72 ) — — ( 72 )

Cash payments ( 702 ) — — ( 702 )

Foreign exchange impact ( 14 ) — — ( 14 )

Accrual balance, April 1, 2022 $ 935 $ 64 $ — $ 999

As of April 1, 2022, the accrual balance of $ 1.0 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 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.

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.

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

Prior Years’ Plan

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.

Activities under the Fiscal 2015-2016 Plan primarily included reductions in workforce across the Company, but primarily in operations outside the United States.

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

Payments related to the accrued restructuring liability balance for this plan are complete.

The Q4 2020 Plan was completed in the second quarter of fiscal 2022.

Our effective tax rate varies from the U.S.

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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 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.

The determination of our income taxes for the nine months ended April 1, 2022 and April 2, 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 nine months ended April 1, 2022 was primarily due to tax expense related to U.S.

and 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.

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

in the future and utilize these tax attributes, we may be required to make certain payments to Harris which are currently not estimable.

The tax benefit for the nine months ended April 2, 2021 was primarily due to the release of valuation allowance on our U.S.

federal and state deferred tax assets

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

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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 six months ended December 31, 2021 and January 1, 2021.

Such interest expense was not material for the nine months ended April 1, 2022 and April 2, 2021.

On December 27, 2020, the U.S.

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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.

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.

Undistributed losses are not allocated to unvested restricted shares as the unvested restricted shares are not contractually obligated to share our losses.

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

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.

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

Three Months Ended Six Months Ended

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

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

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

2022 April 2,

2021 April 1,

2022 April 2,

Net income $ 6,029 $ 94,731 $ 16,627 $ 107,308

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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 Six Months Ended

(In thousands) December 31,

2021 January 1,

2021 December 31,

2021 January 1,

Three Months Ended Nine Months Ended

(In thousands) April 1,

2022 April 2,

2021 April 1,

2022 April 2,

Stock options 121 8 112 4

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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.

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 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.

As of April 1, 2022, we had outstanding purchase obligations with our suppliers or contract manufacturers of $ 40.1 million.

In addition, we had contractual obligations of approximately $ 3.7 million associated with software licenses as of April 1, 2022.

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 December 31, 2021, we had no guarantees applicable to our debt arrangements.

As of April 1, 2022, 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 December 31, 2021, we had commercial commitments of $ 64.2 million outstanding that were not recorded on our unaudited condensed consolidated balance sheets.

As of April 1, 2022, we had commercial commitments of $ 65.1 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 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;

As of April 1, 2022, 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 December 31, 2021, we had not recorded any liabilities related to these indemnifications.

As of April 1, 2022, we had not recorded any liabilities related to these indemnifications.

Legal Proceedings

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

Subsequent Events

We announced on April 13, 2022 that we have entered into an arrangement agreement under which we will acquire all outstanding shares of Redline Communications Group, Inc.

(“Redline”) (TSX:

RDL), for CAD$ 0.90 per common share (approximately USD$ 0.71 per share), in an all-cash transaction valued at approximately CAD $ 16.2 million (approximately USD $ 12.9 million).

We expect to fully fund the acquisition from cash on hand.

Subject to customary closing conditions and necessary regulatory approvals, the transaction is expected to close within four months .

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