What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-05 compared with 2021-08-06 · 117 added, 83 removed, 419 unchanged (32% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEET S

September 30,

(In thousands, except share

37 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATION S

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In thousands, except per share amounts)

Cost of revenues

13 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In thousands)

Net unrealized gain (loss) on available-for-sale investments

(In thousands)

Net unrealized loss on available-for-sale investments

Total comprehensive loss

5 unchanged sentences

Income (Loss)

Three months ended June 30, 2021

Three months ended September 30, 2021

(In thousands, except share amounts)

Balance, March 31, 2021

Balance, June 30, 2021

Issuance of common stock under employee stock option plans

1 unchanged sentence

Net unrealized loss on available-for-sale investments

Balance, September 30, 2021

Three months ended September 30, 2020

Balance, June 30, 2020

Three months ended June 30, 2020

Issuance of common stock under employee stock option plans

Stock-based compensation expense

Net unrealized loss on available-for-sale investments

Balance, September 30, 2020

Comprehensive

Stockholders'

Income (Loss)

Six months ended September 30, 2021

(In thousands, except share amounts)

Balance, March 31, 2021

1 unchanged sentence

Stock-based compensation expense

Net unrealized gain on available-for-sale investments

Balance, June 30, 2020

Net unrealized loss on available-for-sale investments

Balance, September 30, 2021

Six months ended September 30, 2020

Balance, March 31, 2020

Issuance of common stock under employee stock option plans

Stock-based compensation expense

Net unrealized loss on available-for-sale investments

Balance, September 30, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW S

Three Months Ended June 30,

Six Months Ended September 30,

(In thousands)

17 unchanged sentences

Purchases of property and equipment

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

1 unchanged sentence

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the period

2 unchanged sentences

Purchases of property and equipment through accounts payable and

Operating lease right-of-use assets exchanged for lease obligations

Supplemental cash flow information:

Net cash paid for income taxes

Net cash (paid) received for income taxes

The accompanying notes are an integral part of these condensed consolidated financial statements.

9 unchanged sentences

However, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

The consolidated results of operations for the three months ended June 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year.

The consolidated results of operations for the six months ended September 30, 2021 are not necessarily indicative of the results to be expected for the entire fiscal year.

Significant accounting policies

8 unchanged sentences

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

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

In May 2021, with the surge in COVID-19 infections in Taiwan, the Company’s Taiwan employees began working from home under alternating schedules, fully returning to work in July 2021.

The Company has maintained a substantial portion of its manufacturing operational capacity at its primary manufacturing support facility located in Hsin Chu, Taiwan where the Company’s suppliers are located and where all of the Company’s products are manufactured.

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.

Supply chain shortages, the impact of ongoing and expected price increases from suppliers and the impact of 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 into calendar 2022.

Final testing of the Company’s products is conducted in house.

3 unchanged sentences

These challenges are also impacting the Company as it enters new markets and engages with target customers to sell its 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.

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

The Company has adapted its sales strategies for the COVID-19 environment, where it cannot do face-to-face meetings and conduct secure meetings with government and defense customers, but the Company is still not operating at an optimal level.

4 unchanged sentences

This includes results from new information that may emerge concerning COVID-19, the rollout and effectiveness of vaccines 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.

The Company has made estimates of the impact of COVID-19 within its condensed consolidated financial statements and there may be changes to those estimates in future periods.

The Company has made estimates of the impact of COVID-19 within its condensed consolidated financial statements and there may be changes to those estimates in future periods that could be material.

Accounting pronouncements recently adopted

10 unchanged sentences

2016-13, “Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of

a broader range of reasonable and supportable information to inform credit loss estimates.

For trade and other receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable.

For trade and other

receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable.

Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

27 unchanged sentences

The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues.

Warranty costs and the accrued warranty liability were not material as of June 30, 2021.

The majority of the Company’s revenue is derived from sales of SRAM products which represent approximately 99 % of total revenues in the three months ended June 30, 2021.

Warranty costs and the accrued warranty liability were not material as of September 30, 2021.

The majority of the Company’s revenue is derived from sales of SRAM products which represent approximately 98 % of total revenues in the six months ended September 30, 2021.

Nokia, the Company’s largest customer, purchases products directly from the Company and through contract manufacturers and distributors.

Based on information provided to the Company by its contract manufacturers and distributors, purchases by Nokia represented approximately 42.7 % and 26.9 % of the Company’s net revenues in the three months ended June 30, 2021 and 2020, respectively.

Based on information provided to the Company by its contract

manufacturers and distributors, purchases by Nokia represented approximately 34 % and 39 % of the Company’s net revenues in the six months ended September 30, 2021 and 2020, respectively.

See “Note 12 — Segment and Geographic Information” for revenue by shipment destination.

The following table presents the Company’s revenue disaggregated by customer type.

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In thousands)

Contract manufacturers

2 unchanged sentences

The following table sets forth the computation of basic and diluted net loss per share:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In thousands, except per share amounts)

Denominators:

6 unchanged sentences

The following shares of common stock underlying outstanding stock options, determined on a weighted average basis, were excluded from the computation of diluted net loss per share as they had an anti-dilutive effect:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In thousands)

Shares underlying options and ESPP shares

NOTE 4—BALANCE SHEET DETAIL

June 30, 2021

September 30, 2021

March 31, 2021

3 unchanged sentences

Inventory at distributors

June 30, 2021

September 30, 2021

March 31, 2021

3 unchanged sentences

Allowances for doubtful accounts and other

June 30, 2021

September 30, 2021

March 31, 2021

2 unchanged sentences

Prepaid tooling and masks

Prepaid income taxes

Other receivables

Other prepaid expenses and other current assets

June 30, 2021

September 30, 2021

March 31, 2021

6 unchanged sentences

Accumulated depreciation

Depreciation expense was $ 187,000 and $ 296,000 for the three months ended June 30, 2021 and 2020, respectively.

The following tables summarize the components of intangible assets and related accumulated amortization balances at June 30, 2021 and March 31, 2021 (in thousands):

As of June 30, 2021

Depreciation expense was $ 197,000 and $ 287,000 for the three months ended September 30, 2021 and 2020, respectively, and $ 384,000 and $ 590,000 for the six months ended September 30, 2021 and 2020.

The following tables summarize the components of intangible assets and related accumulated amortization balances at September 30, 2021 and March 31, 2021 (in thousands):

As of September 30, 2021

Intangible assets:

3 unchanged sentences

Product designs

Amortization of intangible assets included in cost of revenues was $ 59,000 and $ 58,000 for the three months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, the estimated future amortization expense of intangible assets in the table above is as follows (in thousands):

Amortization of intangible assets included in cost of revenues was $ 58,000 and $ 59,000 for the three months ended September 30, 2021 and 2020, respectively, and $ 117,000 and $ 117,000 for the six months ended September 30, 2021 and 2020.

As of September 30, 2021, the estimated future amortization expense of intangible assets in the table above is as follows (in thousands):

Fiscal year ending March 31,

2022 (Remaining nine months)

June 30, 2021

2022 (Remaining six months)

September 30, 2021

March 31, 2021

10 unchanged sentences

The Company assesses goodwill for impairment on an annual basis on the last day of February in the fourth quarter of its fiscal year.

The Company had a goodwill balance of $ 8.0 million as of both March 31, 2021 and June 30, 2021.

The Company had a goodwill balance of $ 8.0 million as of both March 31, 2021 and September 30, 2021.

The goodwill resulted from the acquisition of MikaMonu Group Ltd.

3 unchanged sentences

NOTE 6—INCOME TAXES

The current portion and long portion of the Company’s unrecognized tax benefits was $ 0 at both June 30, 2021 and March 31, 2021.

As of June 30, 2021, $ 3.3 million of unrecognized tax benefits had been recorded as a reduction to net deferred tax assets.

As of June 30, 2021, the Company’s net deferred tax assets of $ 13.7 million were subject to a valuation allowance of $ 13.7 million.

The current portion and long-term portion of the Company’s unrecognized tax benefits was $ 0 at both September 30, 2021 and March 31, 2021.

As of September 30, 2021, $ 3.4 million of unrecognized tax benefits had been recorded as a reduction to net deferred tax assets.

As of September 30, 2021, the Company’s net deferred tax assets of $ 14.5 million were subject to a valuation allowance of $ 14.5 million.

As of March 31, 2021, the Company’s net deferred tax assets of $ 13.0 million were subject to a valuation allowance of $ 13.0 million.

4 unchanged sentences

In March 2021, the American Rescue Plan Act of 2021 (“ARPA”) was also passed which further extended several CARES Act relief programs and other assistance.

The Company has not filed, and does not intend to file, for funding related to the CARES Act, the CAA or ARPA due to its 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 as of June 30, 2021.

The Company has not filed, and does not intend to file, for funding related to the CARES Act, the CAA or ARPA due to its strong balance sheet and liquidity position with $ 53.5 million in cash and cash equivalents, short-term investments and long-term investments and no debt outstanding as of September 30, 2021.

The Company currently has no plans to defer payroll taxes, to layoff or furlough employees or to modify leases and stock compensation plans.

7 unchanged sentences

During the quarter ended June 30, 2020, the Company settled an income tax audit in Israel for fiscal years 2016 through 2019 that resulted in a discrete tax provision of $ 479,000 and a tax liability of $ 713,000 as of June 30, 2020 that was paid in the quarter ended September 30, 2020.

For the three months ended June 30, 2021 and June 30,2020, the Company incurred income tax expense (benefit) of ($ 172,000 ) and $ 487,000 on net losses before income taxes of ($ 4.4 million) and ($ 5.6 million), respectively.

For the six months ended September 30, 2021 and September 30, 2020, the Company incurred income tax expense (benefit) of ($ 130,000 ) and $ 549,000 on net losses before income taxes of ($ 8.9 million) and ($ 10.8 million), respectively.

The provision (benefit) was calculated using the annualized effective tax rate method.

The Company’s estimated annual effective income tax rate, including discrete items, was approximately 0.05 % and ( 4.0 %) as of June 30, 2021 and 2020, respectively.

The annual effective tax rates as of June 30, 2021 and 2020 vary from the United States statutory income tax rate primarily due to valuation allowances in the United States, whereby pre-tax losses do not result in the recognition of corresponding income tax benefits and expenses and the foreign tax differential.

The Company’s estimated annual effective income tax rate, including discrete items, was approximately 0.49 % and ( 3.3 %) as of September 30, 2021 and 2020, respectively.

The annual effective tax rates as of September 30, 2021 and 2020 vary from the United States statutory income tax rate primarily due to valuation allowances in the United States, whereby pre-tax losses do not result in the recognition of corresponding income tax benefits and expenses and the foreign tax differential.

NOTE 7—FINANCIAL INSTRUMENTS

5 unchanged sentences

The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market.

As of June 30, 2021, the Level 1 category included money market funds of $ 20.2 million, which were included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

As of September 30, 2021, the Level 1 category included money market funds of $ 17.0 million, which were included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date;

2 unchanged sentences

The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers.

As of June 30, 2021, the Level 2 category included short-term investments of $ 7.0 million and long-term investments of $ 4.3 million, which were comprised of certificates of deposit, government and agency securities.

As of September 30, 2021, the Level 2 category included short-term investments of $ 9.8 million and long-term investments of $ 2.8 million, which were comprised of certificates of deposit, government and agency securities.

Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing.

As of June 30, 2021, the Company’s Level 3 financial instruments measured at fair value on the Condensed Consolidated Balance Sheets consisted of the contingent consideration liability related to the acquisition of MikaMonu.

As of September 30, 2021, the Company’s Level 3 financial instruments measured at fair value on the Condensed Consolidated Balance Sheets consisted of the contingent consideration liability related to the acquisition of MikaMonu.

The fair value of the contingent consideration liability was initially determined as of the acquisition date using unobservable inputs.

3 unchanged sentences

Conversely, changes in the risk-adjusted discount rate would be accompanied by a directionally opposite change in the related fair value measurement and expense.

Subsequent to the acquisition date, at each reporting period, the contingent consideration liability is re-measured to fair value with changes recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

During the most recent re-measurement of the contingent consideration liability as of March 31, 2021, the Company used a

risk-adjusted discount rate of approximately 14.5 % to adjust the probability-weighted cash flows to their present value using probabilities ranging from 0 % to 15 % for the remaining contingent events.

The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at June 30, 2021 and March 31, 2021 in the amount of $ 4.2 million and $ 4.2 million, respectively.

During the most recent re-measurement of the contingent consideration liability as of March 31, 2021, the Company used a risk-adjusted discount rate of approximately 14.5 % to adjust the probability-weighted cash flows to their present value using probabilities ranging from 0 % to 15 % for the remaining contingent events.

The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at September 30, 2021 and March 31, 2021 in the amount of $ 4.3 million and $ 4.2 million, respectively.

The fair value of financial assets measured on a recurring basis is as follows (in thousands):

3 unchanged sentences

and Liabilities

June 30, 2021

September 30, 2021

Money market funds

9 unchanged sentences

Contingent consideration

The following table sets forth the changes in fair value of contingent consideration for the three months ended June 30, 2021 and 2020, respectively:

Three Months Ended June 30,

The following table sets forth the changes in fair value of contingent consideration for the six months ended September 30, 2021 and 2020, respectively:

Six Months Ended September 30,

(In thousands)

6 unchanged sentences

Investments in available-for-sale securities are reported at fair value with unrecognized gains (losses), net of tax, as a component of accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.

The Company had money market funds of $ 20.2 million and $ 23.0 million at June 30, 2021 and March 31, 2021, respectively, included in cash and cash equivalents on the Condensed

Consolidated Balance Sheets.

The Company had money market funds of $ 17.0 million and $ 23.0 million at September 30, 2021 and March 31, 2021, respectively, included in cash and cash equivalents on the

Condensed Consolidated Balance Sheets.

The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when declines are determined to be other-than-temporary.

The following table summarizes the Company’s available-for-sale investments:

June 30, 2021

September 30, 2021

(In thousands)

5 unchanged sentences

Certificates of deposit

Supranational obligations

Total long-term investments

9 unchanged sentences

Total long-term investments

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position as of June 30, 2021 and March 31, 2021, respectively.

June 30, 2021

September 30, 2021

Less Than 12 Months

12 unchanged sentences

Subject to normal credit risks, the Company has the ability to realize the full value of all these investments upon maturity.

The deferred tax liability related to unrecognized gains and losses on short-term and long-term investments was $( 11,000 ) and $( 15,000 ) at June 30, 2021 and March 31, 2021, respectively.

As of June 30, 2021, contractual maturities of the Company’s available-for-sale investments were as follows:

The deferred tax liability related to unrecognized gains and losses on short-term and long-term investments was $( 7,000 ) and $( 15,000 ) at September 30, 2021 and March 31, 2021, respectively.

As of September 30, 2021, contractual maturities of the Company’s available-for-sale investments were as follows:

(In thousands)

6 unchanged sentences

Supplemental balance sheet information related to leases was as follows:

June 30, 2021

September 30, 2021

March 31, 2021

6 unchanged sentences

The following table provides the details of lease costs:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In thousands)

Operating lease cost

1 unchanged sentence

The following table provides other information related to leases:

Three Months Ended June 30,

Six Months Ended September 30,

(In thousands)

7 unchanged sentences

Operating leases

The following table provides the maturities of the Company’s operating lease liabilities as of June 30, 2021:

The following table provides the maturities of the Company’s operating lease liabilities as of September 30, 2021:

Operating Lease

(In thousands)

2022 (Remaining nine months)

2022 (Remaining six months)

Total undiscounted future cash flows

13 unchanged sentences

The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues.

Warranty costs and the accrued warranty liability were not material as of June 30, 2021 and March 31, 2021 and for the three months ended June 30, 2021 or 2020.

Warranty costs and the accrued warranty liability were not material as of September 30, 2021 and March 31, 2021 and for the three months ended September 30, 2021 or 2020.

NOTE 10—STOCK-BASED COMPENSATION

As of June 30, 2021, 1,179,327 shares of common stock were available for grant under the Company’s 2016 Equity Incentive Plan.

The following table summarizes the Company’s stock option activities for the three months ended June 30, 2021:

As of September 30, 2021, 4,584,209 shares of common stock were available for grant under the Company’s Amended and Restated 2016 Equity Incentive Plan.

The following table summarizes the Company’s stock option activities for the six months ended September 30, 2021:

Number of Shares

1 unchanged sentence

Balance at March 31, 2021

Balance at June 30, 2021

Options reserved

Balance at September 30, 2021

Options vested and exercisable

Options vested and expected to vest

The weighted average fair value per underlying share of options granted during the three months ended June 30, 2021 and 2020 was $ 2.41 and $ 2.80 , respectively.

Options outstanding by exercise price at June 30, 2021 were as follows:

The weighted average fair value per underlying share of options granted during the three months ended September 30, 2021 and 2020 was $ 2.34 and $ 2.24 , respectively, and $ 2.35 and $ 2.34 for the six months ended September 30, 2021 and 2020, respectively.

Options outstanding by exercise price at September 30, 2021 were as follows:

Options Outstanding

3 unchanged sentences

The following table summarizes stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations, all relating to employee stock plans:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In Thousands)

Cost of revenues

3 unchanged sentences

The Company estimates forfeitures at the time of grant and revises the original estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

No tax benefit related to stock-based compensation was recognized in the three months ended June 30, 2021 due to a full valuation allowance.

No tax benefit related to stock-based compensation was recognized in the six months ended September 30, 2021 due to a full valuation allowance.

There were no windfall tax benefits realized from exercised stock options in either of these periods.

Compensation cost capitalized within inventory at June 30, 2021 was immaterial.

As of June 30, 2021, the Company’s total unrecognized compensation cost was $ 5.1 million, which will be recognized over a weighted average period of 2.19 years.

Compensation cost capitalized within inventory at September 30, 2021 was immaterial.

As of September 30, 2021, the Company’s total unrecognized compensation cost was $ 5.9 million, which will be recognized over a weighted average period of 2.35 years.

The Company calculated the fair value of stock-based awards in the periods presented using the Black-Scholes option pricing model and the following weighted average assumptions:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Stock Option Plans:

7 unchanged sentences

NOTE 11—RELATED PARTY TRANSACTION

The Company incurred non-recurring engineering service expense and production charges of approximately $ 13,000 and $ 54,000 during the three months ended June 30, 2021 and 2020, respectively, from Wistron Neweb Corp (“WNC”) in connection with the manufacturing of single-APU PCIe boards, to be used in the Company’s in-place associative computing product.

The Company incurred non-recurring engineering service expense and production charges of approximately $ 80,000 and $ 84,000 during the six months ended September 30, 2021 and 2020, respectively, from Wistron Neweb Corp (“WNC”) in connection with the manufacturing of single-APU PCIe boards, to be used in the Company’s in-place associative computing product.

Haydn Hsieh, a member of the Company’s board of directors, is the Chairman and Chief Strategy Officer of WNC.

The amount owed to WNC, of $ 13,000 and $ 11,000 at June 30, 2021 and 2020, respectively, is included in accounts payable in the Condensed Consolidated Balance Sheets.

The amount owed to WNC, of $ 69,000 and $ 30,000 at September 30, 2021 and 2020, respectively, is included in accounts payable in the Condensed Consolidated Balance Sheets.

NOTE 12—SEGMENT AND GEOGRAPHIC INFORMATION

2 unchanged sentences

The following is a summary of net revenues by geographic area based on the location to which product is shipped:

Three Months Ended June 30,

Three Months Ended September 30,

Six Months Ended September 30,

(In thousands)

United States

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 1. Financial Statements