What changed in this filing

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Item 1A. Risk Factors

2022-02-04 compared with 2021-11-05 · 37 added, 37 removed, 358 unchanged (17% of the section changed)

7 unchanged sentences

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

For example, in the 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.

For example, in the eleven fiscal quarters ended December 31, 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 seven quarters, and operating losses from $229,000 to $5.7 million, and varying from $4.4 million and $5.7 million in the last seven quarters ended December 31, 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 seven consecutive quarters, our net revenues were adversely impacted by the COVID-19 global pandemic.

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

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.

In fiscal years 2021 and 2022, we experienced, and we expect to 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.

1 unchanged sentence

If our operating results in future quarters fall below the expectations of market analysts and investors, the price of our common stock could fall.

The COVID-19 global pandemic has caused increased stock market volatility and uncertainty in customer demand and the worldwide economy in general, and we may continue to experience decreased sales and revenues in the future.

We expect such impact will in particular affect our SRAM sales and may also impact the launch of our APU product to some degree.

3 unchanged sentences

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

Purchases by Nokia represented approximately 31%, 39%, 38% and 45% of our net revenues in the nine months ended December 31, 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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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.

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 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 Taiwan employees began working from home under alternating schedules, returning to work in July 2021.

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

5 unchanged sentences

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

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

during the remainder of fiscal year 2022 and into fiscal 2023.

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

5 unchanged sentences

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 $8.8 million in the six months ended September 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 $13.4 million in the nine months ended December 31, 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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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.

3 unchanged sentences

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 and partner relationships.

In addition to the typical risks associated with the development of technologically advanced products, 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 and partner relationships.

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.

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If we are unable to offset increased wafer fabrication and assembly costs by increasing the average selling prices of our products, our gross margins will suffer.

If there is a significant upturn in the demand for the manufacturing and assembly of semiconductor products as has occured in recent months as a result of the COVID-19 global pandemic, the available supply of wafers and packaging services may be limited.

If there is a significant upturn in the demand for the manufacturing and assembly of semiconductor products as has occurred in recent months as a result of the COVID-19 global pandemic, the available supply of wafers and packaging services may be limited.

As a result, we could be required to obtain additional manufacturing and assembly capacity in order to meet increased demand.

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the supply and cost of wafers.

We recently experienced a 20% increase in wafer fabrication costs due to supply chain constraints, which resulted in us increasing the cost of our products.

Our customers may decide to purchase products from our competitors rather than accept these price increases and our business may suffer.

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

2 unchanged sentences

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

For example, in the 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.

For example, in the nine months ended December 31, 2021 and in fiscal 2021, 2020 and 2019, our largest distributor Avnet Logistics accounted for 35.6%, 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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We manage and store various proprietary information and sensitive or confidential data relating to our business on the cloud.

Breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or confidential data about us, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could expose us to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation or otherwise harm our business.

Breaches of our security measures or the accidental loss, inadvertent disclosure or

unapproved dissemination of proprietary information or confidential data about us, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could expose us to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation or otherwise harm our business.

In addition, the cost and operational consequences of implementing further data protection measures could be significant.

10 unchanged sentences

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

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

At December 31, 2021, three customers accounted for 51%, 23% and 12% of our accounts receivable, respectively.

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

16 unchanged sentences

There can be no assurance that we will continue to achieve design wins or that any design win will result in future revenues.

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

Claims that we infringe third party intellectual property rights could seriously harm our business and require us to incur significant costs.

In recent years, there has been significant litigation in the semiconductor industry involving patents and other intellectual property rights.

We have been involved in protracted patent infringement litigation, and we could become subject to additional claims or litigation in the future as a result of allegations that we infringe others’ intellectual property rights or that our use of intellectual property otherwise violates the law.

We were previously involved in protracted patent infringement litigation, and we could become subject to additional claims or litigation in the future as a result of allegations that we infringe others’ intellectual property rights or that our use of intellectual property otherwise violates the law.

Claims that our products infringe the proprietary rights of others would force us to defend ourselves and possibly our customers, distributors or manufacturers against the alleged infringement.

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.

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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Monitoring unauthorized use of our intellectual property is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.

Our attempts to enforce our intellectual property rights could be time consuming and costly.

to enforce our intellectual property rights could be time consuming and costly.

In the past, we have been involved in litigation to enforce our intellectual property rights and to protect our trade secrets.

14 unchanged sentences

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.

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.

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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Other countries, including at the federal and state levels in the United States, are also considering similar laws and regulations.

Certain electronic products that we maintain in inventory may be rendered obsolete if they are not in compliance with such laws and regulations, which could negatively impact our ability to generate revenue from those products.

those products.

Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result in additional costs, or in the worst case decreased revenue, and could even require that we redesign or change how we manufacture our products.

7 unchanged sentences

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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Our international business exposes us to additional risks.

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.

Products shipped to destinations outside of the United States accounted for 52.7%, 55.4%, 59.6% and 62.5% of our net revenues in the nine months ended December 31, 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 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.

From November 2008 through December 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 December 31, 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:

3 unchanged sentences

Our executive officers, directors and entities affiliated with them hold a substantial percentage of our 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 of January 31, 2022 , our executive officers, directors and entities affiliated with them beneficially owned approximately 31% of our outstanding common stock.

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

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors