What changed in this filing

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Item 1A. Risk Factors

2021-08-12 compared with 2021-05-14 · 23 added, 19 removed, 668 unchanged (6% of the section changed)

47 unchanged sentences

have disrupted our normal movement to and from China and this has impacted our efficiency.

If COVID-19 vaccines are not widely available, our business operations may be affected negatively.

If COVID-19 vaccines are not widely available or people choose not to be vaccinated, our business operations may be affected negatively.

The outbreak has affected transportation and reduced the availability of air transport, caused port closures, and increased border controls and closures.

8 unchanged sentences

government, the introduction of new products, decreases in average selling prices for products, utilization of our manufacturing capacity, fluctuations in manufacturing yields and our ability to reduce product costs.

These factors and other variables change from period to period and these fluctuations are expected to continue in the future.

These factors and other variables change from period to period and these fluctuations are expected to

continue in the future.

A recent example is that in the second quarter of 2019 our gross margin was 34.3% but it dropped to 21.0% in the fourth quarter of 2019 as a result of several of these factors.

60 unchanged sentences

If the Chinese government does not assist us in this matter it could materially and adversely impact our results of operations and our financial condition.

Further, a loss of key employees or our inability to hire qualified employees could disrupt our production, which could materially and adversely impact our results of operations and our financial condition.

Further, a loss

of key employees or our inability to hire qualified employees could disrupt our production, which could materially and adversely impact our results of operations and our financial condition.

The Chinese government has in the past imposed temporary restrictions on manufacturing facilities, such as the restrictions imposed on polluting factories for the 2008 Olympics and the 2014 Asian Pacific Economic Cooperation event.

34 unchanged sentences

Because the end users of our products are primarily large companies whose businesses fluctuate with general economic and business conditions, a softening of demand for products that use our substrates, caused by a weakening economy, may result in decreased revenue.

Customers may find themselves facing excess inventory from earlier purchases, and may defer or reconsider purchasing products due to the downturn in their business and in the general economy.

Customers may find themselves facing excess inventory from

earlier purchases, and may defer or reconsider purchasing products due to the downturn in their business and in the general economy.

If market conditions deteriorate, we may experience increased collection times and greater write-offs, either of which could have a material adverse effect on our profitability and our cash flow.

24 unchanged sentences

For example, during 2019 widespread political and economic instability and trade war concerns resulted in a general slowdown and our revenue decreased significantly.

Additionally, in the second half of 2016, manufacturers producing and selling passive optical network devices known as EPONs and GPONs experienced a slowdown in demand

resulting in surplus inventory on hand.

Additionally, in the second half of 2016, manufacturers producing and selling passive optical network devices known as EPONs and GPONs experienced a slowdown in demand resulting in surplus inventory on hand.

The slowdown persisted until late in 2017.

24 unchanged sentences

Further, the central government encourages employees to report to the appropriate regulatory agencies possible safety or environmental violations, but there may not be actual violations.

Regular use in the normal course of business of hazardous chemicals or hazardous elements or a company’s failure to meet the ever-tightening standards for control of hazardous chemicals or hazardous elements could result in orders to shut down permanently, fines or other severe measures.

Any such orders directed at one of our raw material companies could result in impairment charges if the company is forced to close its business, cease operations or incurs fines or operating losses, which would have a material adverse effect on our financial results.

43 unchanged sentences

It is possible that the pace of the decline of average selling prices could accelerate beyond these levels for certain products in a commoditizing market.

We anticipate that average selling prices will decrease in the future in response to the unstable demand environment, price reductions by competitors, or by other factors, including pricing pressures from significant customers.

We anticipate that average selling prices may decrease in the future in response to the unstable demand environment, price reductions by competitors, or by other factors, including pricing pressures from significant customers.

When our average selling prices decline, our revenue and gross profit decline, unless we are able to sell more products or reduce the cost to manufacture our products.

212 unchanged sentences

We are subject to foreign exchange gains and losses that materially impact our income statement.

We are subject to foreign exchange gains and losses that materially impact our statement of operations.

We are subject to foreign exchange gains and losses that may materially impact our statement of operations.

For example, in 2020 we incurred a loss of $411,000.

75 unchanged sentences

This right is suspended when Tongmei submits its formal application to the CSRC.

Tongmei currently plans to submit its formal application to the CSRC in the third quarter of 2021.

However, if on December 31, 2022 the IPO

application has been submitted and accepted by the CSRC or the stock exchange and such submission remains under review, then the date when such investor is entitled to exercise such redemption right shall be deferred to a date when such submission is rejected by the CSRC or stock exchange, or the date when Tongmei withdraws its IPO application.

Tongmei currently plans to submit its formal application to the CSRC in the third quarter of 2021 or in the fourth quarter of 2021.

However, if on

December 31, 2022 the IPO application has been submitted and accepted by the CSRC or the stock exchange and such submission remains under review, then the date when such investor is entitled to exercise such redemption right shall be deferred to a date when such submission is rejected by the CSRC or stock exchange, or the date when Tongmei withdraws its IPO application.

The process of going public on the STAR Market includes several periods of review and is therefore a lengthy process.

55 unchanged sentences

federal net operating loss carryforwards of approximately $57.0 million.

We have utilized all state net operating losses, primarily in the state of California, as of December 31, 2020.

We have utilized net operating losses for certain states.

In June 2020, California's Governor signed AB 85 suspending California net operating loss utilization, effective for tax years 2020, 2021 and 2022.

As of June 30, 2021, we have approximately $160,000 in net operating loss carryforwards.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited.

20 unchanged sentences

Our competitors may also develop and patent improvements to the VGF technology upon which we rely, and thus may limit any exclusivity we enjoy by virtue of our patents or trade secrets.

It is possible that pending or future United States or foreign patent applications made by us will not be approved, that our issued patents will not protect our intellectual property, or that third parties will challenge our ownership rights or the validity of our patents.

In addition, the laws of some foreign countries may not protect our

proprietary rights to as great an extent as do the laws of the United States and it may be more difficult to monitor the use of our intellectual property.

ownership rights or the validity of our patents.

In addition, the laws of some foreign countries may not protect our proprietary rights to as great an extent as do the laws of the United States and it may be more difficult to monitor the use of our intellectual property.

Our competitors may be able to legitimately ascertain non-patented proprietary technology embedded in our systems.

26 unchanged sentences

Although we have in place engineering, administrative and personnel protective equipment programs to address these issues, our ability to expand or continue to operate our present locations could be restricted or we could be required to acquire costly remediation equipment or incur other significant expenses if we were found liable for failure to comply with environmental and safety regulations.

Existing or future changes in laws or regulations in the United States and China may require us to incur significant expenditures or liabilities, or may restrict our operations.

In addition, our

employees could be exposed to chemicals or other hazardous materials at our facilities and we may be subject to lawsuits seeking damages for wrongful death or personal injuries allegedly caused by exposure to chemicals or hazardous materials at our facilities.

Existing or future changes in laws or regulations in the United States and

China may require us to incur significant expenditures or liabilities, or may restrict our operations.

In addition, our employees could be exposed to chemicals or other hazardous materials at our facilities and we may be subject to lawsuits seeking damages for wrongful death or personal injuries allegedly caused by exposure to chemicals or hazardous materials at our facilities.

Litigation is inherently uncertain and while we would expect to defend ourselves vigorously, it is possible that our business, financial condition, results of operations or cash flows could be affected in any particular period by litigation pending and any additional litigation brought against us.

16 unchanged sentences

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 1A. Risk Factors