What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-06 compared with 2021-02-05 · 92 added, 96 removed, 100 unchanged (65% of the section changed)

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The networking and telecommunications market has accounted for a significant portion of our net revenues in the past and has declined during the past several years and is expected to continue to decline.

However, with no debt, substantial liquidity and a history of positive cash flows from operations, we believe we are in a better financial position than many other companies of our size.

On March 11, 2020, the World Health Organization announced that COVID-19, a respiratory illness caused by a novel coronavirus, is a pandemic.

COVID-19 has spread to many of the countries in which we, our customers, our suppliers and our other business partners conduct business.

In recent years we have devoted significant resources to the development of our new APU product.

However, with no debt and substantial liquidity, we believe we are in a better financial position than many other companies of our size.

The COVID-19 pandemic has affected many of the countries in which we, our customers, our suppliers and our other business partners conduct business.

Governments in affected regions have implemented, and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary.

Many organizations and individuals, including the Company and our employees, are taking additional steps to avoid or reduce infection, including limiting travel and working from home.

These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

While expected to be temporary, these disruptions have negatively impacted our revenue, results of operations, financial condition, and liquidity during fiscal year 2021.

We continue to monitor our operations and government recommendations and have made modifications to our normal operations because of the COVID-19 global pandemic.

These measures have disrupted normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

While expected to

be temporary, these disruptions negatively impacted our revenue, results of operations, financial condition, and liquidity in fiscal year 2021, and are expected to continue to negatively impact us in fiscal 2022 and into fiscal 2023.

We continue to monitor our operations and government recommendations and has made modifications to our normal operations because of the COVID-19 global pandemic.

We have instituted many preventative measures and are regularly evaluating those measures and others as we continue to better understand our current and future operating environment.

Except for our employees located in Taiwan, the majority of our employees are working from home around the world, and productivity remains high.

Since March 2020, except for our employees located in Taiwan, the majority of our employees have worked from home around the world.

In May 2021, with the surge in COVID-19 infections in Taiwan, our employees in Taiwan have begun working from home under alternating schedules.

We have maintained a substantial portion of our manufacturing operational capacity at our primary manufacturing support facility located in Hsin Chu, Taiwan where our suppliers are located and all of our products are manufactured.

Since the outbreak of COVID-19, aside from the lengthening of lead times for wafers and assembly services, we have experienced minimal impact on our manufacturing operations in Taiwan.

Supply chain shortages and the impact of rising COVID infections in Taiwan that have recently impacted the operations of our manufacturing partners are expected to impact our fulfillment of sales in the near term, and possibly for the remainder of the calendar year.

Final testing of our product is conducted in house.

Shipping and receiving operations at our United States headquarters are being maintained by a skeleton crew with minimal impact.

Our revenues have been and are expected to continue to be impacted by changes in customer buying patterns and communication limitations related to shelter in place restrictions that require a significant number of our customer contacts to work from home.

Our results for the quarter and nine month periods ended December 31, 2020 demonstrate the challenges that we are facing during the COVID-19 global pandemic, which has restricted the activities of our sales force and distributors, reduced customer demand and caused the postponement of investment in certain customer sectors.

These challenges are also impacting us as we enter new markets and engage with target customers.

Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, are unavailable due to COVID-19 related restrictions.

Our revenues have been and are expected to continue to be impacted by changes in customer buying patterns and communication limitations related to COVID-19 restrictions that require a significant number of our customer contacts to work from home.

Our results for the fiscal year ended March 31, 2021 demonstrated the challenges that we are facing during the COVID-19 global pandemic, which has restricted the activities of our sales force and distributors, reduced customer demand and caused the postponement of investment in certain customer sectors.

These challenges are also impacting us as we enter new markets and engage with target customers to sell our new APU product.

Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, have been unavailable due to COVID-19 related restrictions.

We have adapted our sales strategies for the COVID-19 environment, where we cannot do face-to-face meetings and conduct secure meetings with government and defense customers, but we are still not operating at an optimal level.

The disruption to the marketplace resulting from the COVID-19 global pandemic that we continue to experience is unlike anything we have ever had to deal with.

The disruption to the marketplace resulting from the COVID-19 global pandemic that we are currently experiencing is unlike anything we have ever had to deal with.

While we continue to monitor the business metrics that we have historically used to predict our financial performance, we are uncertain as to whether these metrics will operate consistently with our historical experience

As of December 31, 2020, we had cash, cash equivalents, and short-term and long-term investments of $62.4 million, with no debt.

As of June 30, 2021, we had cash, cash equivalents, and short-term and long-term investments of $55.8 million, with no debt.

We have a team in-place with tremendous depth and breadth of experience and knowledge, with a legacy business that is providing an ongoing source of funding for the development of new product lines.

We have a strong balance sheet and liquidity position that we anticipate will provide financial flexibility and security in the current environment of economic uncertainty with no current expectations of additional cash infusions required.

Generally, our primary source of liquidity is cash generated from operating activities.

Our level of cash and cash flows from operations have historically been sufficient to meet our operating and capital needs.

We believe that during the next 12 months the COVID-19 global pandemic could impact general economic activity and demand in our end markets.

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 in fiscal year 2021 and into fiscal year 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted to provide emergency economic stimulus in response to the COVID-19 global pandemic.

The CARES Act includes direct financial assistance to Americans in the form of one-time payments to individuals, aid to small businesses in the form of loans and grants, and other efforts to stabilize the U.S.

economy and keep Americans employed.

We have not filed, and currently do not intend to file, for funding related to the CARES Act due to our strong balance sheet and liquidity position with $62.4 million in cash and cash equivalents, short-term investments and long-term investments and no debt outstanding as of December 31, 2020.

Also included in the CARES Act are numerous income tax provisions including changes to the net operating loss rules that we believe will not have a significant impact on us.

Generally, our primary source of liquidity is cash equivalents and short-term investments.

Our level of cash equivalents and short-term investments has historically been sufficient to meet our operating and capital needs.

We believe that during the next 12 months, the COVID-19 global pandemic could continue to impact general economic activity and demand in our end markets.

Although it is difficult to estimate the length or gravity of the impact of the COVID-19 outbreak, if the pandemic continues, it may have an adverse effect on our results of operations, financial position, including potential impairments, and liquidity for the remainder of fiscal year 2022

On March 27, 2020, the CARES Act was enacted to provide emergency economic stimulus in response to the COVID-19 global pandemic.

The CARES Act includes aid to small businesses in the form of loans and grants, and other efforts to stabilize the U.S.

The CAA Act which was signed into law in 2020 extended some of the CARES Act programs along with adding new stimulus provisions.

In March 2021, the ARPA Act of 2021 was also passed which further extended several CARES Act relief programs and other assistance.

We have not filed, and do not intend to file, for funding related to the CARES Act, CAA or ARPA due to our strong balance sheet and liquidity position with $55.8 million in cash and cash equivalents, short-term investments and long-term investments and no debt outstanding.

We currently have no plans to defer payroll taxes, to layoff or furlough employees or to modify leases and stock compensation plans.

Also included in the CARES Act are numerous income tax provisions including changes to the net operating loss.

During fiscal year 2021, we recorded a $378,000 tax benefit resulting from the carryback of our fiscal year 2020 federal net operating loss to fiscal year 2018 due to the five-year net operating loss carryback provision from the CARES Act.

We believe that the CAA and ARPA will not have a significant impact on us.

Our revenues are derived primarily from sales of our Very Fast SRAM products.

Sales to networking and telecommunications OEMs accounted for 50% to 55% of our net revenues during our last three fiscal years.

We also sell our products to OEMs that manufacture products for military and aerospace applications such as radar and guidance systems, missiles and satellites, for professional audio applications such as sound mixing systems, for test and measurement applications such as high-speed testers, for automotive applications such as smart

cruise control and voice recognition systems, and for medical applications such as ultrasound and CAT scan equipment.

As is typical in the semiconductor industry, the selling prices of our products generally decline over the life of the product.

Our ability to increase net revenues, therefore, is dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products with higher average selling prices in quantities sufficient to compensate for the anticipated declines in selling prices of our more mature products.

Although we expect the average selling prices of individual products to decline over time, we believe that, over the next several quarters, our overall average selling prices will increase due to a continuing shift in product mix to a higher percentage of higher price, higher density products.

Our ability to increase unit sales volumes is dependent primarily upon increases in customer demand but, particularly in periods of increasing demand, can also be affected by our ability to increase production through the availability of increased wafer fabrication capacity from Taiwan Semiconductor Manufacturing Company, or TSMC, our wafer supplier, and our ability to increase the number of good integrated circuit die produced from each wafer through die size reductions and yield enhancement activities.

Our ability to increase unit sales volumes is dependent primarily upon increases in customer demand but, particularly in periods of increasing demand, can also be affected by our ability to increase production through the availability of increased wafer fabrication capacity from TSMC, our wafer supplier, and our ability to increase the number of good integrated circuit die produced from each wafer through die size reductions and yield enhancement activities.

We may experience fluctuations in quarterly net revenues for a number of reasons.

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We sell our products through our direct sales force, international and domestic sales representatives and distributors.

Our revenues have been and are expected to continue to be impacted by changes in customer buying patterns and communication limitations related to COVID-19 shelter in place restrictions that require a significant number of our customer contacts to work from home.

The majority of our customer contracts, which may be in the form of purchase orders, contracts or purchase agreements, contain performance obligations for delivery of agreed upon products.

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Nokia purchases products directly from us and through contract manufacturers and distributors.

Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 40%, 38%, 45% and 36% of our net revenues in the nine months ended December 31, 2020 and in fiscal 2020, 2019 and 2018, respectively.

Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 43%, 39%, 38% and 45% of our net revenues in the three months ended June 30, 2021 and in fiscal 2021, 2020 and 2019, respectively.

Our revenues have been substantially impacted by significant fluctuations in sales to Nokia, and we expect that future direct and indirect sales to Nokia will continue to fluctuate substantially on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods.

To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in the nine months ended December 31, 2020 and in fiscal 2020, 2019 or 2018.

To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in the three months ended June 30, 2021 and in fiscal 2021, 2020 or 2019.

Cost of Revenues.

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Accordingly, most of our cost of revenues consists of payments to TSMC and independent assembly and test houses.

Because we do not have long-term, fixed-price supply contracts, our wafer fabrication and other outsourced manufacturing costs are subject to the cyclical fluctuations in demand for semiconductors.

Because we do not have long-term, fixed-

price supply contracts, our wafer fabrication and other outsourced manufacturing costs are subject to the cyclical fluctuations in demand for semiconductors.

Cost of revenues also includes expenses related to supply chain management, quality assurance, and final product testing and documentation control activities conducted at our headquarters in Sunnyvale, California and our branch operations in Taiwan.

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The following table sets forth statement of operations data as a percentage of net revenues for the periods indicated:

Three Months Ended December 31,

Nine Months Ended December 31,

Three Months Ended June 30,

Cost of revenues

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Loss from operations

Interest and other income, net

Interest and other income (expense), net

Loss before income taxes

Provision for income taxes

Provision (benefit) for income taxes

Net Revenues .

Net revenues decreased by 32.7% from $10.0 million in the three months ended December 31, 2019 to $6.8 million in the three months ended December 31, 2020 and by 42.4% from $34.8 million in the nine months ended December 31, 2019 to $20.0 million in the nine months ended December 31, 2020.

Net revenues in the three and nine month periods ended December 31, 2020 were impacted by the COVID-19 global pandemic.

Our net revenues in the current fiscal year demonstrate the challenges that we are facing during

the COVID-19 global pandemic, which has restricted the activities of our sales force and distributors, reduced customer demand and caused the postponement of investment in certain customer sectors.

These challenges are also impacting us as we enter new markets and engage with target customers.

Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, are unavailable due to COVID-19 related restrictions.

Net revenues increased by 32.8% from $6.6 million in the three months ended June 30, 2020 to $8.8 million in the three months ended June 30, 2021.

Net revenues in both periods were impacted by the COVID-19 global pandemic.

Our net revenues continue to demonstrate the challenges that we are facing during the COVID-19 global pandemic, which has restricted the activities of our sales force and distributors, reduced customer demand and caused the postponement of investment in certain customer sectors.

These challenges continue to impact us as we enter new markets and engage with target customers.

Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, have been unavailable due to COVID-19 related restrictions.

We have adapted our sales strategies for the COVID-19 environment as there are limitations with both in-person and virtual meetings, particularly, government and defense customers with regards to secure teleconferencing.

However, we are still not operating at an optimal level.

The overall average selling price of all units shipped in the quarter ended December 31, 2020 decreased by 1.0% compared to the quarter ended December 31, 2019 and decreased by 7.3% in the nine months ended December 31, 2020 compared to the nine months ended December 31, 2019.

The changes in the average selling price in each fiscal 2021 period were due to changes in product mix, as we sold less higher density, higher average selling price products in the fiscal 2021 periods compared to the prior fiscal year periods.

Direct and indirect sales to Nokia, currently our largest customer, increased from $2.6 million in the three months ended December 31, 2019 to $2.8 million in the three months ended December 31, 2020 and decreased from $13.9 million in the nine months ended December 31, 2019 to $8.1 million in the nine months ended December 31, 2020.

Shipments of our SigmaQuad product line accounted for 62.0% of total shipments in the three months ended December 31, 2019 and in the three months ended December 31, 2020 and 64.7% of total shipments in the nine months ended December 31, 2019 compared to 58.1% of total shipments in the nine months ended December 31, 2020.

The overall average selling price of all units shipped in the quarter ended June 30, 2021 increased by 23.0% compared to the quarter ended June 30, 2020 and the number of units shipped increased 5.8% in the quarter ended June 30, 2021 compared to the quarter ended June 30, 2020.

The changes in the average selling price were due to changes in product mix, as we sold more higher density, higher average selling price products in the fiscal 2022 period compared to the prior fiscal year period.

Direct and indirect sales to Nokia, currently our largest customer, increased from $1.8 million in the three months ended June 30, 2020 to $3.8 million in the three months June 30, 2021.

Shipments to Nokia in the quarter ended June 30, 2021 included approximately $1.1 million of buffer stock in anticipation of perceived market tightness.

Shipments of our SigmaQuad product line accounted for 46.3% of total shipments in the three months ended June 30, 2020 and compared to 63.6% of total shipments in the three months ended June 30, 2021.

The changes in SigmaQuad shipments were primarily due to the changes in sales to Nokia discussed above.

Cost of Revenues.

Cost of revenues decreased by 10.9% from $4.0 million in the three months ended December 31, 2019 to $3.6 million in the three months ended December 31, 2020 and decreased by 23.4% from $13.9 million in the nine months ended December 31, 2019 to $10.7 million in the nine months ended December 31, 2020.

Cost of revenues included a provision for excess and obsolete inventories of $260,000 in the nine months ended December 31, 2019 compared to $327,000 in the nine months ended December 31, 2020.

Cost of revenues included stock-based compensation expense of $77,000 and $88,000 for the three months ended December 31, 2019 and 2020, respectively, and $184,000 and $260,000 for the nine months ended December 31, 2019 and 2020, respectively.

Cost of revenues increased by 12.3% from $3.6 million in the three months ended June 30, 2020 to $4.0 million in the three months ended June 30, 2021.

Cost of revenues included a provision for excess and obsolete inventories of $159,000 in the three months ended June 30, 2020 compared to $160,000 in the three months ended June 30, 2021.

Cost of revenues included stock-based compensation expense of $88,000 and $70,000 for the three months June 30, 2020 and 2021, respectively.

Gross Profit.

Gross profit decreased by 47.1% from $6.0 million in the three months ended December 31, 2019 to $3.2 million in the three months ended December 31, 2020 and decreased by 55.1% from $20.9 million in the nine months ended December 31, 2019 to $9.4 million in the nine months ended December 31, 2020.

Gross margin decreased from 60.2% in the three months ended December 31, 2019 to 47.3% in the three months ended December 31, 2020 and decreased from 59.9% in the nine months ended December 31, 2019 to 46.7% in the nine months ended December 31, 2020.

The change in gross profit in each period is primarily related to the changes in net revenues discussed above.

The changes in gross margin are primarily related to changes in the mix of products and customers and changes in the level of charges for inventory reserves booked in each period.

Gross profit increased by 56.8% from $3.1 million in the three months ended June 30, 2020 to $4.8 million in the three months ended June 30, 2021.

Gross margin increased from 46.1% in the three months ended June 30, 2020 to 54.4% in the three months ended June 30, 2021.

The change in gross profit is primarily related to the change in net revenues discussed above.

The change in gross margin is primarily related to changes in the mix of products and customers.

Research and Development Expenses.

Research and development expenses decreased by 30.1% from $8.2 million in the three months ended December 31, 2019 to $5.7 million in the three months ended December 31, 2020.

The decrease in research and development spending was primarily related to a decrease of $2.7 million for purchased intellectual property partially offset by a lesser increase in payroll related expenses.

Research and development expenses included stock-based compensation expense of $347,000 and $343,000 for the three months ended December 31, 2019 and 2020, respectively.

Research and development expenses decreased 12.3% from $19.6 million in the nine months ended December 31, 2019 to $17.2 million in the nine months ended December 31, 2020.

The decrease in research and development spending was primarily related to a decrease of $2.7 million for purchased intellectual property and a lesser decrease in consultants expenses partially offset by lesser increases in payroll related expenses, patent related legal fees and software maintenance expenses.

Research and development expenses included stock-based compensation expense of $1.1 million for the nine months ended December 31, 2019 and 2020.

Research and development expenses increased by 4.8% from $5.8 million in the three months ended June 30, 2020 to $6.1 million in the three months ended June 30, 2021.

The increase in research and development spending was primarily related to an increase of $352,000 in payroll related expenses partially offset by lesser decreases in patent related legal fees and outside consulting expenses.

Research and development expenses included stock-based compensation expense of $413,000 and $470,000 for the three months ended June 30, 2020 and 2021, respectively.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses were unchanged at $2.6 million in the three months ended December 31, 2019 and in the three months ended December 31, 2020.

A decrease of $179,000 for independent sales representatives commissions and a lesser decrease in travel

expenses was primarily offset by an increase in professional fees.

Selling, general and administrative expenses included stock-based compensation expense of $205,000 and $262,000 for the three months ended December 31, 2019 and 2020, respectively.

Selling, general and administrative expenses were unchanged at $8.1 million in the nine months ended December 31, 2019 and in the nine months ended December 31, 2020.

Decreases in independent sales representative commissions of $466,000 and $131,000 in travel expenses were primarily offset by increases in professional fees, payroll related expenses and stock-based compensation expense.

Selling, general and administrative expenses included stock-based compensation expense of $595,000 and $732,000 for the nine months ended December 31, 2019 and 2020, respectively.

Selling, general and administrative expenses increased by 4.1% from $2.9 million in the three months ended June 30, 2020 to $3.0 million in the three months ended June 30, 2021.

An increase of $121,000 for independent sales representatives commissions was partially offset by decreases in payroll related expenses and professional fees.

Selling, general and administrative expenses included stock-based compensation expense of $254,000 and $283,000 for the three months ended June 30, 2020 and 2021, respectively.

Interest Income and Other Income, Net.

Interest and other income, net decreased 87.9% from income of $207,000 in the three months ended December 31, 2019 to $25,000 in the three months ended December 31, 2020.

Interest income decreased by $139,000 primarily due to lower interest rates received on our cash and short-term and long-term investments.

Foreign exchange gains were $18,000 for the three months ended December 31, 2019 compared to losses of $25,000 for the three months ended December 31, 2020.

The exchange gains and losses in each period were related to our Taiwan branch operations and our operations in Israel.

Interest and other income, net decreased 79.6% from income of $564,000 in the nine months ended December 31, 2019 to $115,000 in the nine months ended December 31, 2020.

Interest income decreased by $366,000 primarily due to lower interest rates received on our cash and short-term and long-term investments.

We had a foreign exchange loss of $46,000 for the nine months ended December 31, 2019 compared to $129,000 for the nine months ended December 31, 2020.

Interest and other income, net decreased by $126,000 from income of $106,000 in the three months ended June 30, 2020 to an expense of $20,000 in the three months ended June 30, 2021.

Interest income decreased by $91,000 primarily due to lower interest rates received on our cash and short-term and long-term investments and a lesser amount of investments.

Foreign exchange losses were $8,000 for the three months ended June 30, 2020 compared to $43,000 for the three months ended June 30, 2021.

The exchange losses in each period were related to our Taiwan branch operations and our operations in Israel.

Provision for Income Taxes.

The provision for income taxes increased 7.1% from $84,000 in the three months ended December 31, 2019 to $90,000 in the three months ended December 31, 2020 and increased 251.1% from $182,000 in the nine months ended December 31, 2019 to $639,000 in the nine months ended December 31, 2020.

This change for the nine month period was primarily due to the settlement of an income tax audit in Israel during the quarter ended June 30, 2020 for fiscal years 2016 through fiscal 2019 which resulted in a discrete tax provision of $479,000, and to a lesser extent due to fluctuations in the relative mix of income among our operating jurisdictions.

Net loss was $4.6 million in the three months ended December 31, 2019 compared $5.2 million in the three months ended December 31, 2020 and was $6.5 million in the nine months ended December 31, 2019 compared to $16.5 million in the nine months ended December 31, 2020.

These fluctuations were primarily due to the changes in net revenues, gross profit and operating expenses discussed above.

Provision (benefit) for Income Taxes.

The provision (benefit) for income taxes decreased from a provision of $487,000 in the three months ended June 30, 2020 to a benefit of ($172,000) in the three months June 30, 2021.

The provision for (benefit from) income taxes for the three months ended June 30, 2020 included a settlement of an income tax audit in Israel during for fiscal years 2016 through fiscal 2019 which resulted in a discrete tax provision of $479,000.

The provision (benefit) for income taxes for the three months ended June 30, 2021 included a benefit of ($220,000) related to the approval by the Israel tax authorities of a “Preferred Company” tax rate that was retroactively applied to fiscal 2018 and subsequent fiscal years.

Net loss was $6.1 million in the three months ended June 30, 2020 compared $4.2 million in the three months ended June 30, 2021.

This fluctuation was primarily due to the changes in net revenues, gross profit and operating expenses discussed above.

Liquidity and Capital Resources

As of December 31, 2020, our principal sources of liquidity were cash, cash equivalents and short-term investments of $52.3 million compared to $66.6 million as of March 31, 2020.

Net cash used in operating activities was $11.4 million for the nine months ended December 31, 2020 compared to $1.2 million for the nine months ended December 31, 2019.

The primary uses of cash in the nine months ended December 31, 2020 was the net loss of $16.5 million and a reduction in accrued expenses and other liabilities of $1.7 million.

The reduction in accrued expenses and other liabilities was primarily related to the payment of fiscal 2020 year-end accruals for purchased intellectual property.

Primary sources of cash in the nine months ended December 31, 2020 were a reduction in accounts receivable of $2.3 million, non-cash items including stock-based compensation of $2.1 million and depreciation and amortization expenses of $962,000 and an increase in accounts payable of $1.2 million.

The decrease in accounts receivable was primarily due to the decrease in shipments in the quarter ended December 31, 2020 compared to the quarter ended March 31, 2020.

The primary uses of cash in the nine months ended December 31, 2019 was the net loss of $6.5 million, an increase of $1.1 million in prepaid expenses and other assets and a reduction in accounts payable of $728,000.

Primary sources of cash in the nine months ended December 31, 2019 were non-cash items including stock-based compensation of $1.9 million and depreciation and amortization expenses of $1.1 million and a reduction in accounts receivable of $2.0 million.

The decrease in accounts receivable was primarily due to the decrease in net revenues in the quarter ended December 31, 2019 compared to the quarter ended March 31, 2019.

Net cash used in investing activities was $381,000 in the nine months ended December 31, 2020 compared to net cash provided by investing activities of $3.5 million in the nine months ended December 31, 2019.

Investment activities in the nine months ended December 31, 2020 primarily consisted of the purchase of certificates of deposit, agency bonds and supranational obligations of $17.5 million, partially offset by the maturity of certificates of deposit and agency bonds of $17.3 million.

Investment activities in the nine months ended December 31, 2019 primarily consisted of the maturity of certificates of deposit of $18.6 million, partially offset by the purchase of certificates of deposit and agency bonds of $15.9 million.

Net cash provided by financing activities in the nine months ended December 31, 2020 consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans of $3.3 million.

Net cash provided by financing activities in the nine months ended December 31, 2019 primarily consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans of $3.6 million partially offset by the release of an escrow deposit related to our acquisition of MikaMonu in the amount of $428,000.

Our estimated annual effective income tax rate was approximately (3.4%) as of December 31, 2020.

As of June 30, 2021, our principal sources of liquidity were cash, cash equivalents and short-term investments of $51.5 million compared to $54.0 million as of March 31, 2021.

Net cash used in operating activities was $4.6 million for the three months ended June 30, 2021 compared to $3.6 million for the three months ended June 30, 2020.

The primary uses of cash in the three months ended June 30, 2021 was the net loss of $4.2 million, an increase in accounts receivable of $885,000, and a reduction in accrued expenses and other liabilities of $813,000.

The increase in accounts receivable was related to the increased net revenues in the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The reduction in accrued expenses and other liabilities was primarily related to the payment of fiscal 2021 year-end accruals for incentive compensation.

The primary sources of cash in the three months ended June 30, 2021 were non-cash items including stock-based compensation of $823,000 and depreciation and amortization expenses of $246,000 and a decrease in inventory of $252,000.

The primary uses of cash in the three months ended June 30, 2020 were the net loss of $6.1 million, a reduction in accrued expenses and other liabilities of $931,000 and an increase of $580,000 in inventories.

The reduction in accrued expenses and other liabilities was primarily related to the payment of fiscal 2020 year-end compensation related accruals.

Primary sources of cash in the three months ended June 30, 2020 were a reduction in accounts receivable of $2.5 million, non-cash items including stock-based compensation of $755,000 and depreciation and amortization expenses of $354,000.

The decrease in accounts receivable was primarily due to the decrease in shipments in the quarter ended June 30, 2020 compared to the quarter ended March 31, 2020.

Net cash provided by investing activities was $4.1 million in the three months ended June 30, 2021 compared to $700,000 in the three months ended June 30, 2020.

Investment activities in the three months ended June 30, 2021 primarily consisted of the maturity of certificates of deposit and agency bonds of $4.1 million.

Investment activities in the three months ended June 30, 2020 primarily consisted of the maturity of agency bonds and certificates of deposit of $6.0 million, partially offset by the purchase of certificates of deposit of $5.3 million.

Net cash provided by financing activities in the three months ended June 30, 2021 consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans of $783,000.

Net cash provided by financing activities in the three months ended June 30, 2020 consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans of $2.3 million.

Our estimated annual effective income tax rate was approximately 0.05% as of June 30, 2021.

We believe that our existing balances of cash, cash equivalents and short-term investments, and cash flow expected to be generated from our future operations will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months.

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Contractual Obligations

The following table describes our contractual obligations as of December 31, 2020:

The following table describes our contractual obligations as of June 30, 2021:

Payments due by period (in thousands)

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Wafer, software and test purchase obligations

As of December 31, 2020, the current portion of our unrecognized tax benefits was $0, and the long-term portion was $326,000.

As June 30, 2021, the current portion of our unrecognized tax benefits was $0, and the long-term portion was $0.

In connection with the acquisition of MikaMonu on November 23, 2015, we are required to make contingent consideration payments to the former MikaMonu shareholders conditioned upon revenue targets for products based on the MikaMonu technology.

As of December 31, 2020, the accrual for potential contingent consideration was $4.0 million and is payable at various dates through December 31, 2025.

As of June 30, 2021, the accrual for potential contingent consideration was $4.2 million and is payable at various dates through December 31, 2025.

Critical Accounting Policies and Estimates

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Off-Balance Sheet Arrangements

At December 31, 2020, we did not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

At June 30, 2021, we did not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Accordingly, we are not exposed to the type of financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

2 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 2. Management’s Discussion and Analysis