What changed in this filing

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Item 1A. Risk Factors

2021-11-05 compared with 2021-08-06 · 40 added, 31 removed, 355 unchanged (17% of the section changed)

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

For example, in the nine fiscal quarters ended June 30, 2021, we recorded net revenues of as much as $13.0 million and as little as $6.6 million, including net revenues varying from $6.6 million to $8.8 million in the last five quarters, and operating losses from $229,000 to $5.7 million, and varying from $4.4 million and $5.7 million in the last five quarters ended June 30, 2021.

For example, in the ten fiscal quarters ended September 30, 2021, we recorded net revenues of as much as $13.0 million and as little as $6.6 million, including net revenues varying from $6.6 million to $8.8 million in the last six quarters, and operating losses from $229,000 to $5.7 million, and varying from $4.4 million and $5.7 million in the last six quarters ended September 30, 2021.

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

For the last six consecutive quarters, our net revenues were adversely impacted by the COVID-19 global pandemic.

For the last seven consecutive quarters, our net revenues were adversely impacted by the COVID-19 global pandemic.

In future periods, we may not have any revenue growth, or our revenues could decline or continue to be further adversely impacted by the COVID-19 global pandemic.

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manufacturing defects, which could cause us to incur significant warranty, support and repair costs, lose potential sales, harm our relationships with customers and result in write-downs;

changes in our product pricing policies, including those made in response to new product announcements and pricing changes of our competitors;

changes in our product pricing policies, including those made in response to new product announcements, pricing changes of our competitors and price increases by our foundry and suppliers;

our ability to address technology issues as they arise, improve our products' functionality and expand our product offerings.

Our expenses are, to a large extent, fixed, and we expect that these expenses will increase in the future.

In fiscal 2021 we experienced price increases for raw materials and manufacturing services due to the tightness in the semiconductor market.

In fiscal 2021, and continuing into fiscal 2022, we have experienced, and will continue to experience, price increases for raw materials and manufacturing services due to the tightness in the semiconductor market.

We will not be able to adjust our spending quickly if our revenues fall short of our expectations.

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

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.

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

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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.

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 Taiwan employees have begun working from home under alternating schedules.

In May 2021, with the surge in COVID-19 infections in Taiwan, our Taiwan employees began working from home under alternating schedules, 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 where all of our products are manufactured.

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

Since the outbreak of COVID-19, aside from the lengthening of lead times for wafers and assembly services and some price increases, including a 20% increase in the cost of wafers to be received beginning in early calendar 2022, we have experienced minimal impact, and continue to experience minimal impact, on our manufacturing operations in Taiwan.

Final testing of our product is conducted in house.

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We have incurred significant losses.

We incurred net losses of $21.5 million, $10.3 million and $4.5 million during fiscal 2021, 2020 and 2018, respectively, and a net loss of $4.2 million in the three months ended June 30, 2021.

We incurred net losses of $21.5 million, $10.3 million and $4.5 million during fiscal 2021, 2020 and 2018, respectively, and a net loss of $8.8 million in the six months ended September 30, 2021.

There can be no assurance that our Very Fast SRAMs will continue to receive broad market acceptance, that our new product development initiatives will be successful or that we will be able to achieve sustained revenue growth or profitability.

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We derive most of our revenues from the sale of Very Fast SRAMs, and we expect that sales of these products will represent the substantial majority of our revenues for the foreseeable future.

Our business depends in large part upon continued demand for our products in the markets we currently serve, which could continue to be adversely impacted by the COVID-19 global pandemic, and adoption of our products in new markets.

Our business depends in large part upon continued demand for our products in the markets we currently serve, which will continue to be adversely impacted by the COVID-19 global pandemic, and adoption of our products in new markets.

Market adoption will be dependent upon our ability to increase customer awareness of the benefits of our products and to prove their high-performance and cost-effectiveness.

We may not be able to sustain or increase our revenues from sales of our products, particularly if the networking and telecommunications markets were to experience another significant downturn in the future.

We may not be able to sustain or increase our revenues from

sales of our products, particularly if the networking and telecommunications markets were to experience another significant downturn in the future.

Any decrease in revenues from sales of our products could harm our business more than it would if we offered a more diversified line of products.

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This ongoing project involves the commercialization of new, cutting-edge technology, will require a continuing substantial effort during fiscal 2022 and beyond and will be subject to significant risks.

In addition to the typical risks associated with the development of technologically advanced products (as further detailed in the next paragraph), this project will be subject to enhanced risks of technological problems related to the development of this entirely new category of products, substantial risks of delays or unanticipated costs that may be encountered, and risks associated with the establishment of entirely new markets and customer relationships.

The establishment of new customer relationships and selling our in-place associative computing products to such new customers is a significant undertaking that requires us to invest heavily in our sales team, enter into new channel partner relationships, expand our marketing activities and change the focus of our business and operations.

The establishment of new customer and partner relationships and selling our in-place associative computing products to such new customers is a significant undertaking that requires us to invest heavily in our sales team, enter into new channel partner relationships, expand our marketing activities and change the focus of our business and operations.

Our inability to successfully establish a market for the product that we have developed will have a material adverse effect on our future financial and business success, including our prospects for increased revenues.

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If we fail to offer technologically advanced products and respond to technological advances and emerging standards, we may not generate sufficient revenues to offset our development costs and other expenses, which will hurt our business.

The development of new or enhanced products is a complex and uncertain process that requires

the accurate anticipation of technological and market trends.

The development of new or enhanced products is a complex and uncertain process that requires the accurate anticipation of technological and market trends.

In particular, the networking and telecommunications markets are rapidly evolving and new standards are emerging.

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Several of our competitors offer a broad array of memory products and have greater financial, technical, marketing, distribution and other resources than we have.

Some of our competitors maintain their own semiconductor fabrication facilities, which may provide them with capacity, cost and technical

advantages over us.

Some of our competitors maintain their own semiconductor fabrication facilities, which may provide them with capacity, cost and technical advantages over us.

We cannot assure you that we will be able to compete successfully against any of these competitors.

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the success of our customers’ products;

the price of our competitors’ products relative to the price of our products;

our ability to develop and market new products;

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

For example, in the three months ended June 30, 2021 and in fiscal 2021, 2020 and 2019, our largest distributor Avnet Logistics accounted for 26.2%, 29.8%, 34.3% and 31.3%, respectively, of our net revenues.

For example, in the six months ended September 30, 2021 and in fiscal 2021, 2020 and 2019, our largest distributor Avnet Logistics accounted for 34.4%, 29.8%, 34.3% and 31.3%, respectively, of our net revenues.

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

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The loss of services, whether as a result of illness, retirement or death, of Lee-Lean Shu, our President and Chief Executive Officer, Robert Yau, our Vice President of Engineering, Dr.

Avidan Akerib, our Vice President of Associative Computing, any other executive officer or other key employee could significantly delay or prevent the achievement of our development and strategic

Avidan Akerib, our Vice President of Associative Computing, any other executive officer or other key employee could significantly delay or prevent the achievement of our development and strategic objectives.

We do not have employment contracts with, nor maintain key person insurance on, any of our executive officers or other key employees.

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

At June 30, 2021, three customers accounted for 36%, 27% and 12% of our accounts receivable, respectively.

At September 30, 2021, three customers accounted for 41%, 21% and 17% of our accounts receivable, respectively.

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

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

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

Similarly, changing our products or processes to avoid infringing the

rights of others may be costly or impractical.

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

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delays in customer purchases due to uncertainty.

If we proceed with additional acquisitions or investments, we may be required to use a considerable amount of our cash, or to finance the transaction through debt or equity securities offerings, which may decrease our financial liquidity or dilute our stockholders and affect the market price of our stock.

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

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

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If a customer refuses to accept shipped products or does not pay for these products, we could miss future revenue projections or incur significant charges against our income, which could materially and adversely affect our operating results.

Our business could be negatively affected as a result of actions of activist stockholders or others.

We may be subject to actions or proposals from stockholders or others that may not align with our business strategies or the interests of our other stockholders.

Responding to such actions can be costly and time-consuming, disrupt our business and operations, and divert the attention of our board of directors, management, and employees from the pursuit of our business strategies.

Such activities could interfere with our ability to execute our strategic plan.

Activist stockholders or others may create perceived uncertainties as to the future direction of our business or

strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential customers, and may affect our relationships with current customers, vendors, investors, and other third parties.

In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our board of directors.

The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.

If our business grows, such growth may place a significant strain on our management and operations and, as a result, our business may suffer.

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In addition, we may not have sufficient administrative staff to support our operations.

For example, we currently have only five employees in our finance department in the United States, including our Chief Financial

For example, we currently have only five employees in our finance department in the United States, including our Chief Financial Officer.

Furthermore, our officers have limited experience in managing large or rapidly growing businesses.

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We are dependent on our relationships with TSMC to transition successfully to smaller geometry process technologies and to more advanced manufacturing processes.

If we or TSMC experience significant delays in this transition or fail to implement these transitions, our business, financial condition and results of operations could be materially and adversely affected.

If we or TSMC experience significant delays in this

transition or fail to implement these transitions, our business, financial condition and results of operations could be materially and adversely affected.

Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development.

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Because much of the manufacturing and testing of our products is conducted in Taiwan, our business performance may be affected by changes in Taiwan’s political, social and economic environment.

For example, any political instability resulting from the relationship among the United States, Taiwan and the People’s Republic of China could damage our business.

For example, any political instability or armed conflict resulting from changes in the relationship among the United States, Taiwan and the People’s Republic of China could damage our business.

Moreover, the role of the Taiwanese government in the Taiwanese economy is significant.

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Our international business exposes us to additional risks.

Products shipped to destinations outside of the United States accounted for 48.4%, 55.4%, 59.6% and 62.5% of our net revenues in the three months ended June 30, 2021 and in fiscal 2021, 2020 and 2019, respectively.

Products shipped to destinations outside of the United States accounted for 49.1%, 55.4%, 59.6% and 62.5% of our net revenues in the six months ended September 30, 2021 and in fiscal 2021, 2020 and 2019, respectively.

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

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Use of a portion of our cash reserves to repurchase shares of our common stock presents potential risks and disadvantages to us and our continuing stockholders.

From November 2008 through March 2021 we repurchased and retired an aggregate of 12,004,779 shares of our common stock at a total cost of $60.7 million, including 3,846,153 shares repurchased at a total cost of $25 million pursuant to a modified “Dutch auction” self-tender offer that we completed in August 2014 and

additional shares repurchased in the open market pursuant to our stock repurchase program.

At June 30, 2021, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our common stock from time to time under our repurchase program.

From November 2008 through September 2021 we repurchased and retired an aggregate of 12,004,779 shares of our common stock at a total cost of $60.7 million, including 3,846,153 shares repurchased at a total cost of $25 million pursuant to a modified “Dutch auction” self-tender offer that we completed in August 2014 and additional shares repurchased in the open market pursuant to our stock repurchase program.

At September 30, 2021, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our common stock from time to time under our repurchase program.

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

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

As of July 31, 2021 , our executive officers, directors and entities affiliated with them beneficially owned approximately 35% of our outstanding common stock.

As of October 31, 2021 , our executive officers, directors and entities affiliated with them beneficially owned approximately 34% of our outstanding common stock.

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

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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 1A. Risk Factors