What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-06 · 78 added, 62 removed, 130 unchanged (52% of the section changed)

18 unchanged sentences

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.

While originally

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 have 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.

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.

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

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.

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 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 into calendar 2022.

Final testing of our product is conducted in house.

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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.

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.

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.

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

As of September 30, 2021, we had cash, cash equivalents, and short-term and long-term investments of $53.5 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.

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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.

We believe that during the next 12 months, the COVID-19 global pandemic will 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.

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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.

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.

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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 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.

Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 34%, 39%, 38% and 45% of our net revenues in the six months ended September 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 three months ended June 30, 2021 and in fiscal 2021, 2020 or 2019.

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

Cost of Revenues.

Our cost of revenues consists primarily of wafer fabrication costs, wafer sort, assembly, test and burn-in expenses, the amortized cost of production mask sets, stock-based compensation and the cost of materials and overhead from operations.

Our cost of revenues consists primarily of wafer fabrication costs, wafer sort, assembly, test and burn-in expenses, the amortized cost of production mask sets, stock-based compensation and the

cost of materials and overhead from operations.

All of our wafer manufacturing and assembly operations, and a significant portion of our wafer sort testing operations, are outsourced.

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.

We have experienced increased costs as a result of supply chain constraints for wafers and outsourced assembly, burn-in and test operations.

We expect these increased manufacturing costs will continue into calendar 2022.

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 June 30,

Three Months Ended September 30,

Six Months Ended September 30,

Cost of revenues

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Net Revenues .

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.

Net revenues increased by 17.1% from $6.7 million in the three months ended September 30, 2020 to $7.8 million in the three months ended September 30, 2021 and by 24.9% from $13.3 million in the six months ended September 30, 2020 to $16.6 million in the six months ended September 30, 2021.

Net revenues in all 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.

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.

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 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.

The overall average selling price of all units shipped in the quarter ended September 30, 2021 increased by 5.6% compared to the quarter ended September 30, 2020 and the number of units shipped increased 3.4% in the quarter ended September 30, 2021 compared to the quarter ended September 30, 2020.

The overall average selling price of all units shipped in the six months ended September 30, 2021 increased by 14.1% compared to the six months ended September 30, 2020 and the number of units shipped increased 4.7% in the six months ended September 30, 2021 compared to the six months ended September 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 periods compared to the prior fiscal year periods.

Direct and indirect sales to Nokia, currently our largest customer, decreased from $3.4 million in the three months ended September 30, 2020 to $1.9 million in the three months September 30, 2021 and increased from $5.2 million in the six months ended September 30, 2020 to $5.6 million in the six months September 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.

Shipments of our SigmaQuad product line accounted for 65.4% of total shipments in the three months ended September 30, 2020 compared to 52.4% of total shipments in the three months ended September 30, 2021 and 56.1% of total shipments in the six months ended September 30, 2020 and compared to 58.4% of total shipments in the six months ended September 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 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.

Cost of revenues increased by 2.1% from $3.5 million in the three months ended September 30, 2020 to $3.6 million in the three months ended September 30, 2021 and increased by 7.2% from $7.1 million in the six months ended September 30, 2020 to $7.6 million in the six months ended September 30, 2021.

Cost of revenues included a provision for excess and obsolete inventories of $230,000 in the six months ended

September 30, 2020 compared to $265,000 in the six months ended September 30, 2021.

Cost of revenues included stock-based compensation expense of $84,000 and $64,000 for the three months September 30, 2020 and 2021, respectively, and $172,000 and $134,000 for the six months ended September 30, 2020 and 2021, respectively.

Gross Profit.

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.

Gross profit increased by 34.2% from $3.1 million in the three months ended September 30, 2020 to $4.2 million in the three months ended September 30, 2021 and by 45.4% from $6.2 million in the six months ended September 30, 2020 to $9.0 million in the six months ended September 30, 2021.

Gross margin increased from 46.7% in the three months ended September 30, 2020 to 53.6% in the three months ended September 30, 2021 and increased from 46.4% in the six months ended September 30, 2020 to 54.0% in the six months ended September 30, 2021.

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

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

Research and Development Expenses.

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.

Research and development expenses increased by 4.4% from $5.7 million in the three months ended September 30, 2020 to $5.9 million in the three months ended September 30, 2021 .

The increase in research and development spending was primarily related to an increase of $366,000 in payroll related expenses and lesser increases in stock-based compensaton expense and facilities related expenses partially offset by lesser decreases outside consulting expenses and other fees and patent related legal fees.

Research and development expenses included stock-based compensation expense of $353,000 and $418,000 for the three months ended September 30, 2020 and 2021, respectively.

Research and development expenses increased by 4.6% from $11.5 million in the six months ended September 30, 2020 to $12.0 million in the six months ended September 30, 2021.

The increase in research and development spending was primarily related to an increase of $718,000 in payroll related expenses and lesser increases in stock-based compensaton expense and facilities related expenses partially offset by lesser decreases outside consulting expenses and other fees and patent related legal fees.

Research and development expenses included stock-based compensation expense of $766,000 and $888,000 for the six months ended September 30, 2020 and 2021, respectively.

Selling, General and Administrative Expenses.

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.

Selling, general and administrative expenses increased by 6.9% from $2.6 million in the three months ended September 30, 2020 to $2.8 million in the three months ended September 30, 2021.

An increase of $62,000 for professional fees and lesser increases in payroll related expenses, general insurance expense, stock-based compensation expense and independent sales representatives commissions was partially offset by a decrease in travel related expenses.

Selling, general and administrative expenses included stock-based compensation expense of $216,000 and $234,000 for the three months ended September 30, 2020 and 2021, respectively.

Selling, general and administrative expenses increased by 5.4% from $5.5 million in the six months ended September 30, 2020 to $5.8 million in the six months ended September 30, 2021.

An increase of $137,000 in independent sales representatives commissions and lesser increases in professional fees, general insurance expense and stock-based compensation expense was partially offset by a decrease in travel related expenses.

Selling, general and administrative expenses included stock-based compensation expense of $470,000 and $517,000 for the six months ended September 30, 2020 and 2021, respectively.

Interest Income and Other Income, Net.

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 and other income, net decreased by $8,000 from a net expense of $16,000 in the three months ended September 30, 2020 to an expense of $8,000 in the three months ended September 30, 2021.

Interest income decreased by $62,000 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.

Foreign exchange losses were $96,000 for the three months ended September 30, 2020 compared to $26,000 for the three months ended September 30, 2021.

Interest and other income, net decreased by $118,000 from income of $90,000 in the six months ended September 30, 2020 to an expense of $28,000 in the six months ended September 30, 2021.

Interest income decreased by $153,000 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 $104,000 for the six months ended September 30, 2020 compared to $69,000 for the six months ended September 30, 2021.

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

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.

The provision (benefit) for income taxes decreased from a provision of $62,000 in the three months ended September 30, 2020 to $42,000 in the three months September 30, 2021 and decreased from a provision of $549,000 in the six months ended September 30, 2020 to a benefit of ($130,000) in the six months September 30, 2021.

The provision for (benefit from) income taxes for the three months ended

September 30, 2020 included a settlement of an income tax audit in Israel 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 September 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 $5.2 million in the three months ended September 30, 2020 compared $4.6 million in the three months ended September 30, 2021 and was $11.3 million in the six months ended September 30, 2020 compared to $8.8 million in the six months ended September 30, 2021.

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

Liquidity and Capital Resources

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.

As of September 30, 2021, our principal sources of liquidity were cash, cash equivalents and short-term investments of $50.7 million compared to $54.0 million as of March 31, 2021.

Net cash used in operating activities was $7.4 million for the six months ended September 30, 2021 compared to $8.3 million for the six months ended September 30, 2020.

The primary uses of cash in the six months ended September 30, 2021 was the net loss of $8.8 million, a reduction in accrued expenses and other liabilities of $548,000 and lesser increases in prepaids expenses and other assets and inventory.

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.

The primary sources of cash in the six months ended September 30, 2021 were non-cash items including stock-based compensation of $1.5 million and depreciation and amortization expenses of $501,000.

Net cash used in operating activities was $8.3 million for the six months ended September 30, 2020.

The primary uses of cash in the six months ended September 30, 2020 was the net loss of $11.3 million and a reduction in accrued expenses and other liabilities of $1.9 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 six months ended September 30, 2020 were a reduction in accounts receivable of $2.1 million and non-cash items including stock-based compensation of $1.4 million and depreciation and amortization expenses of $707,000.

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

Net cash provided by investing activities was $2.5 million in the six months ended September 30, 2021 compared to net cash used in investing activities of $1.7 million in the six months ended September 30, 2020.

Investment activities in the six months ended September 30, 2021 primarily consisted of the maturity of certificates of deposit and agency bonds of $6.1 million partially offset by the purchase of certificates of deposit of $3.3 million.

Investment activities in the six months ended September 30, 2020 primarily consisted of the purchase of certificates of deposit, agency bonds and supranational obligations of $11.3 million, partially offset by the maturity of certificates of deposit and agency bonds of $9.8 million

Net cash provided by financing activities in the six months ended September 30, 2021 consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans of $1.6 million.

Net cash provided by financing activities in the six months ended September 30, 2020 consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans of $2.5 million.

Our estimated annual effective income tax rate was approximately 0.49% as of September 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.

Our future capital requirements will depend on many factors, including revenue growth, if any, that we experience, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that we maintain, the timing and extent of spending to support our product development efforts and the expansion of our sales and marketing.

Our future capital requirements will depend on many factors, including revenue growth, if any, that we experience, the continuation of the impact of the COVID-19 pandemic on our business, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that we maintain, the timing and extent of spending to support our product development efforts and the expansion of our sales and marketing.

Additional capital may also be required for the consummation of any acquisition of businesses, products or technologies that we may undertake.

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Contractual Obligations

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

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

Payments due by period (in thousands)

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Wafer, software and test purchase obligations

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

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

As of September 30, 2021, the accrual for potential contingent consideration was $4.3 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 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.

At September 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.

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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