What changed in this filing

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Item 1A. Risk Factors

2020-11-05 compared with 2020-08-07 · 22 added, 22 removed, 371 unchanged (11% of the section changed)

6 unchanged sentences

Our quarterly and annual revenues, expenses and operating results have varied significantly and are likely to vary in the future.

For example, in the nine fiscal quarters ended June 30, 2020, we recorded net revenues of as much as $14.7 million and as little as $6.6 million and quarterly operating income of as much as $2.2 million and, in eight quarters, operating losses, including an operating loss of $5.7 million in the quarter ended June 30, 2020.

For example, in the ten fiscal quarters ended September 30, 2020, we recorded net revenues of as much as $14.7 million and as little as $6.6 million and quarterly operating income of as much as $2.2 million and, in nine quarters, operating losses, including an operating loss of $5.7 million in the quarter ended June 30, 2020.

We therefore believe that period-to-period comparisons of our operating results are not a good indication of our future performance, and you should not rely on them to predict our future performance or the future performance of our stock price.

20 unchanged sentences

Nokia, our largest customer, purchases our products directly from us and through contract manufacturers and distributors.

Purchases by Nokia represented approximately 27%, 38%, 45% and 36% of our net revenues in the three months ended June 30, 2020 and in fiscal 2020, 2019 and 2018, respectively.

Purchases by Nokia represented approximately 39%, 38%, 45% and 36% of our net revenues in the six months ended September 30, 2020 and in fiscal 2020, 2019 and 2018, respectively.

We expect that our operating results in any given period will continue to depend significantly on orders from our key OEM customers, particularly Nokia, and our future success is dependent to a large degree on the business success of this customer over which we have no control.

We do not have long-term contracts with Nokia or any of our other major OEM customers, distributors or contract manufacturers that obligate them to purchase our products.

We expect that future direct and indirect sales to Nokia and our other key OEM customers will continue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our operating results in future periods.

We expect that

future direct and indirect sales to Nokia and our other key OEM customers will continue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our operating results in future periods.

The decline in economic activity resulting from the COVID-19 global pandemic is expected to cause a continued reduction in orders from Nokia and our other key OEM customers.

15 unchanged sentences

We may experience a number of adverse impacts as a result of the COVID-19 global pandemic, including reductions in demand for our products, delays and cancellations of orders, difficulties in obtaining raw materials and components, shortages of labor to manufacture products, inefficiencies caused by remote worker’s difficulties in performing their normal work outputs, closures of the facilities of some of our suppliers and customers, delays in shipments and delays in collecting accounts receivable.

Although we cannot estimate the length or gravity of the

impact of the COVID-19 outbreak at this time, if the pandemic continues, it is expected to have an adverse effect on our results of operations, financial position, and liquidity during fiscal year 2021.

Although we cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it is expected to have an adverse effect on our results of operations, financial position, and liquidity during fiscal year 2021.

This includes results from new information that may emerge concerning COVID-19 and any actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

53 unchanged sentences

Additionally, the trend toward incorporating SRAM into other chips in the networking and telecommunications markets has the potential to reduce future demand for Very Fast SRAM products.

There can be no assurance that we will be able to compete successfully in the future.

There can be no assurance that we will be able to

compete successfully in the future.

Our failure to compete successfully in these or other areas could harm our business.

8 unchanged sentences

If any of these suppliers cannot provide components on a timely basis, at the same price or at all, our ability to manufacture our products will be constrained and our business will suffer.

For example, due to the COVID-19 global pandemic, we could see disruptions in our supply chain, although there have been none to date.

For example, due to the COVID-19 global pandemic, we could see additonal disruptions in our supply chain beyond the longer leadtimes for the purchase of wafers and assembly services that we are currently experiencing.

Most significantly, we obtain wafers for our Very Fast SRAM and APU products from a single foundry, TSMC, and most of them are packaged at ASE.

8 unchanged sentences

A significant percentage of our sales are made to distributors and to contract manufacturers who incorporate our products into end products for OEMs.

For example, in the three months ended June 30, 2020 and in fiscal 2020, 2019 and 2018, our largest distributor Avnet Logistics accounted for 35.5%, 34.3%, 31.3% and 35.3%, respectively, of our net revenues.

For example, in the six months ended September 30, 2020 and in fiscal 2020, 2019 and 2018, our largest distributor Avnet Logistics accounted for 31.5%, 34.3%, 31.3% and 35.3%, respectively, of our net revenues.

Avnet Logistics and our other existing distributors may choose to devote greater resources to marketing and supporting the products of other companies.

20 unchanged sentences

A small number of customers generally account for a significant portion of our accounts receivable in any period, and if any one of them fails to pay us, our financial position and operating results will suffer.

At June 30, 2020, four customers accounted for 44%, 20%, 13% and 11% of our accounts receivable, respectively.

At September 30, 2020, three customers accounted for 36%, 36% and 14% of our accounts receivable, respectively.

If any of these customers do not pay us, our financial position and operating results will be harmed.

21 unchanged sentences

Any such litigation regarding intellectual property could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations.

Similarly, changing our products or processes to avoid infringing the

rights of others may be costly or impractical.

Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical.

If any claims received in the future were to be upheld, the consequences to us could require us to:

4 unchanged sentences

Although patent disputes in the semiconductor industry have often been settled through cross-licensing arrangements, we may not be able in any or every instance to settle an alleged patent infringement claim through a cross-licensing arrangement in part because we have a more limited patent portfolio than many of our competitors.

If a successful claim is made against us or any of our customers and a license is not made available to us on commercially reasonable terms or we are required to pay substantial damages or awards, our business, financial condition and results of operations would be materially adversely affected.

If a successful claim is made against us or any of our customers and a license is not made available to us on

commercially reasonable terms or we are required to pay substantial damages or awards, our business, financial condition and results of operations would be materially adversely affected.

Our acquisition of companies or technologies could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results.

13 unchanged sentences

● delays in customer purchases due to uncertainty.

If we proceed with additional acquisitions or investments, we may be required to use a considerable amount of our cash, or to finance the transaction through debt or equity securities offerings, which may decrease our

financial liquidity or dilute our stockholders and affect the market price of our stock.

As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be harmed.

35 unchanged sentences

We continuously evaluate the benefits of migrating to smaller geometry process technologies in order to improve performance and reduce costs.

Historically, these migrations to new manufacturing processes have resulted in significant initial design and development costs associated with pre-production mask sets for the manufacture of new products with smaller geometry process technologies.

Historically, these migrations to new manufacturing processes have resulted in significant initial design and development costs associated with pre-production mask sets for the manufacture of

new products with smaller geometry process technologies.

For example, in the second quarter of fiscal 2019, we incurred approximately $1.0 million in research and development expense associated with a pre-production mask set that will not be used in production as part of the transition to our new 28 nanometer SRAM process technology for our APU product.

24 unchanged sentences

If an OEM customer decides at the design stage not to incorporate our products into their products, we will not have another opportunity for a design win with respect to that customer’s product for many months or years, if at all.

Our sales cycle can take up to 24 months to complete, and because of this lengthy sales cycle, we may experience a delay between increasing expenses for research and development and our sales and marketing efforts and the generation of volume production revenues, if any, from these expenditures.

these expenditures.

Moreover, the value of any design win will largely depend on the commercial success of our OEM customers’ products.

15 unchanged sentences

Our international business exposes us to additional risks.

Products shipped to destinations outside of the United States accounted for 62.7%, 59.6%, 62.5% and 51.5% of our net revenues in the three months ended June 30, 2020 and in fiscal 2020, 2019 and 2018, respectively.

Products shipped to destinations outside of the United States accounted for 56.2%, 59.6%, 62.5% and 51.5% of our net revenues in the six months ended September 30, 2020 and in fiscal 2020, 2019 and 2018, respectively.

Moreover, a substantial portion of our products is manufactured and tested in Taiwan, and the software development for our associative computing products occurs in Israel.

We intend to continue expanding our international business

in the future.

We intend to continue expanding our international business in the future.

Conducting business outside of the United States subjects us to additional risks and challenges, including:

78 unchanged sentences

From November 2008 through December 2019 we repurchased and retired an aggregate of 12,004,779 shares of our common stock at a total cost of $60.7 million, including 3,846,153 shares repurchased at a total cost of $25 million pursuant to a modified “Dutch auction” self-tender offer that we completed in August 2014 and additional shares repurchased in the open market pursuant to our stock repurchase program.

At June 30, 2020, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our

common stock from time to time under our repurchase program.

At September 30, 2020, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our common stock from time to time under our repurchase program.

Although our Board has determined that these repurchases are in the best interests of our stockholders, they expose us to certain risks including:

3 unchanged sentences

Our executive officers, directors and entities affiliated with them hold a substantial percentage of our common stock.

As of July 31, 2020 , our executive officers, directors and entities affiliated with them beneficially owned approximately 35% of our outstanding common stock.

As of October 31, 2020 , our executive officers, directors and entities affiliated with them beneficially owned approximately 35% of our outstanding common stock.

As a result, these stockholders will be able to exercise substantial influence over, and may be able to effectively control, matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could have the effect of delaying or preventing a third party from acquiring control over or merging with us.

15 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