What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-04-28 · 102 added, 95 removed, 384 unchanged (34% of the section changed)

3 unchanged sentences

(In thousands)

March 31, 2022

June 30, 2022

December 31, 2021

29 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

4 unchanged sentences

General and administrative

Other operating expenses, net

Total operating expenses

8 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments, net of $ 0 tax in each of the three months ended March 31, 2022 and 2021

Unrealized loss on marketable securities, net of $ 0 tax in each of the three months ended March 31, 2022 and 2021

Amortization of defined benefit pension items, net of tax of $ 3 and $ 135 in the three months ended March 31, 2022 and 2021, respectively

Foreign currency translation adjustments, net of $ 0 tax in each of the three and six months ended June 30, 2022 and 2021

Unrealized loss on marketable securities, net of $ 0 tax in each of the three and six months ended June 30, 2022 and 2021

Amortization of defined benefit pension items, net of tax of $ 0 and $ 3 in the three and six months ended June 30, 2022, respectively, and $ 6 and $ 141 in the three and six months ended June 30, 2021, respectively

Total other comprehensive loss

4 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

15 unchanged sentences

Beginning balance

Repurchase of common stock

Payment of dividends to stockholders

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

Deferred income taxes

Increase (decrease) in accounts receivable allowance for credit losses

Increase in accounts receivable allowance for credit losses

Change in operating assets and liabilities:

9 unchanged sentences

Proceeds from sales and maturities of marketable securities

Net cash provided by investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

3 unchanged sentences

Net cash used in financing activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

29 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

11 unchanged sentences

Intangible Assets

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

Total intangible assets

The estimated future amortization expense related to finite-lived intangible assets at March 31, 2022, is as follows:

The estimated future amortization expense related to finite-lived intangible assets at June 30, 2022, is as follows:

(In thousands)

2022 (remaining nine months)

2022 (remaining six months)

Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for the three months ended March 31, 2022 and 2021, were as follows:

Changes in accumulated other comprehensive loss for the three and six months ended June 30, 2022 and 2021, were as follows:

Unrealized Gains

14 unchanged sentences

Ending balance

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended March 31, 2022 and 2021.

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the three months ended June 30, 2022 and 2021.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unrealized Gains

and Losses on

Defined Benefit

Foreign Currency

Marketable Securities

Pension Items

Six Months Ended

(In thousands)

Beginning balance

Other comprehensive income (loss) before reclassifications

Amounts reclassified from accumulated other comprehensive loss

Net-current period other comprehensive income (loss)

Ending balance

(1) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost for the six months ended June 30, 2022 and 2021 .

FAIR VALUE MEASUREMENTS:

5 unchanged sentences

The Company’s cash equivalents and short-term marketable securities are classified within Level 1 or Level 2 of the fair-value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at March 31, 2022, and December 31, 2021, was as follows:

The fair-value hierarchy of the Company’s cash equivalents and marketable securities at June 30, 2022 and December 31, 2021, was as follows:

Fair Value Measurement at

March 31, 2022

June 30, 2022

Quoted Prices in

20 unchanged sentences

Money market funds

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the three months ended March 31, 2022, and the twelve months ended December 31, 2021.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company did not transfer any investments between Level 1 and Level 2 of the fair-value hierarchy in the six months ended June 30, 2022 and the twelve months ended December 31, 2021.

MARKETABLE SECURITIES:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at March 31, 2022, were as follows:

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at June 30, 2022, were as follows:

Gross Unrealized

2 unchanged sentences

Investments due in 3 months or less:

Commercial paper

Corporate securities

4 unchanged sentences

Total marketable securities

Accrued interest receivable was $ 1.5 million at March 31, 2022 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Accrued interest receivable was $ 1.4 million at June 30, 2022 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

Amortized cost and estimated fair market value of marketable securities classified as available-for-sale (excluding cash equivalents) at December 31, 2021, were as follows:

11 unchanged sentences

Accrued interest receivable was $ 1.5 million at December 31, 2021 and was recorded within prepaid expenses and other current assets on the condensed consolidated balance sheet.

The following table summarizes marketable securities classified as available-for-sale (excluding cash equivalents) in a continuous unrealized loss position for which an allowance for credit losses was not recorded at March 31, 2022:

Less Than 12 Months

3 unchanged sentences

Total marketable securities

In the three months ended March 31, 2022 and 2021, no unrealized losses on marketable securities were recognized in income.

The Company does not intend to sell and it is unlikely that it will be required to sell the securities prior to their anticipated recovery.

The issuers are high quality (investment grade) and the decline in fair value is largely due to changes

In the three and six months ended June 30, 2022 and 2021, no unrealized losses on marketable securities were recognized in income.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

in interest rates.

The Company does not intend to sell and it is unlikely that it will be required to sell the securities prior to their anticipated recovery.

The issuers are high quality (investment grade) and the decline in fair value is largely due to changes in interest rates.

Additionally, the issuers continue to make timely interest payments on the marketable securities with the fair value expected to recover as they reach maturity.

STOCK-BASED COMPENSATION:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three months ended March 31, 2022 and 2021:

The following table summarizes the stock-based compensation expense recognized in accordance with ASC 718-10 for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

Total stock-based compensation expense

Stock-based compensation expense in the three months ended March 31, 2022, was approximately $ 9.0 million, comprising approximately $ 5.6 million related to restricted stock unit (RSU) awards, $ 3.0 million related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $ 0.4 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended March 31, 2021, was approximately $ 8.5 million, comprising approximately $ 5.3 million related to RSUs, $ 2.7 million related to PSUs and PRSUs and $ 0.5 million related to the Company’s employee stock purchase plan.

Stock Options

A summary of stock options outstanding as of March 31, 2022, and activity during the three months ended, is presented below:

Contractual Term

Intrinsic Value

(In thousands)

Outstanding at January 1, 2022

Forfeited or expired

Outstanding at March 31, 2022

Vested and exercisable at March 31, 2022

Stock-based compensation expense in the three months ended June 30, 2022, was approximately $ 3.7 million, comprising approximately $ 5.3 million related to restricted stock unit (RSU) awards, a $ 2.1 million credit to expense related to performance-based (PSU) awards and long-term performance-based (PRSU) awards and $ 0.5 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the six months ended June 30, 2022, was approximately $ 12.7 million, comprising approximately $ 10.9 million related to RSUs, $ 0.9 million related to PSUs and PRSUs and $ 0.9 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the three months ended June 30, 2021, was approximately $ 9.2 million, comprising approximately $ 4.7 million related to RSUs, $ 4.0 million related to PSUs and PRSUs and $ 0.5 million related to the Company’s employee stock purchase plan.

Stock-based compensation expense in the six months ended June 30, 2021, was approximately $ 17.7 million, comprising approximately $ 10.0 million related to RSUs, $ 6.7 million related to PSUs and PRSUs and $ 1.0 million related to the Company’s employee stock purchase plan.

Under the performance-based awards program, the Company grants awards in the performance year in an amount equal to twice the target number of shares to be issued if the maximum performance metrics are met.

4 unchanged sentences

If the performance conditions are not achieved, no compensation cost is recognized and any previously recognized compensation is reversed.

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In February 2022, it was determined that approximately 104,000 shares subject to the PSUs granted in 2021 vested in aggregate;

the shares were released to the Company’s employees and executives in the first quarter of 2022.

A summary of PSUs outstanding as of March 31, 2022, and activity during the three months ended, is presented below:

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of PSUs outstanding as of June 30, 2022 and activity during the six months ended, is presented below:

Weighted-Average

Grant Date Fair

5 unchanged sentences

Outstanding at January 1, 2022

Outstanding at March 31, 2022

Outstanding and expected to vest at March 31, 2022

Outstanding at June 30, 2022

Outstanding and expected to vest at June 30, 2022

The Company’s PRSU program provides for the issuance of PRSUs which will vest based on the Company’s performance measured against the PRSU program’s established performance targets.

6 unchanged sentences

the shares were released to the Company’s executives in the first quarter of 2022.

A summary of PRSUs outstanding as of March 31, 2022, and activity during the three months ended, is presented below:

A summary of PRSUs outstanding as of June 30, 2022 and activity during the six months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2022

Outstanding at March 31, 2022

Outstanding and expected to vest at March 31, 2022

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of RSUs outstanding as of March 31, 2022, and activity during the three months ended, is presented below:

Outstanding at June 30, 2022

Outstanding and expected to vest at June 30, 2022

A summary of RSUs outstanding as of June 30, 2022 and activity during the six months ended, is presented below:

Weighted-Average

6 unchanged sentences

Outstanding at January 1, 2022

Outstanding at March 31, 2022

Outstanding and expected to vest at March 31, 2022

Outstanding at June 30, 2022

Outstanding and expected to vest at June 30, 2022

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SIGNIFICANT CUSTOMERS AND GEOGRAPHIC NET REVENUES:

3 unchanged sentences

Customer Concentration

The Company’s top ten customers accounted for approximately 77 % and 79 % of net revenues for the three months ended March 31, 2022 and 2021, respectively.

The Company’s top ten customers accounted for approximately 77 % of net revenues for both the three and six months ended June 30, 2022, and 80 % in both the corresponding periods of 2021.

A significant portion of these revenues are attributable to sales of the Company’s products to distributors of electronic components.

These distributors sell the Company’s products to a broad, diverse range of end users, including original equipment manufacturers, or OEMs, and merchant power supply manufacturers.

Sales to distributors were $ 135.7 million and $ 134.2 million in the three months ended March 31, 2022, and 2021, respectively.

Sales to distributors were $ 133.9 million and $ 269.7 million in the three and six months ended June 30, 2022, respectively, and $ 136.4 million and $ 270.7 million, respectively, in the corresponding periods of 2021.

Direct sales to OEMs and power-supply manufacturers accounted for the remainder.

The following customers represented 10% or more of the Company’s net revenues for the respective periods:

The following customers (both of which are distributors of the Company’s products) represented 10% or more of the Company’s net revenues for the respective periods:

Three Months Ended

Six Months Ended

Honestar Technologies Co., Ltd.

3 unchanged sentences

The Company does not have any off-balance-sheet credit exposure related to its customers.

As of March 31, 2022, and December 31, 2021, 87 % and 86 %, respectively, of accounts receivable were concentrated with the Company’s top ten customers.

The following customers represented 10% or more of accounts receivable:

Powertech Distribution Ltd.

* Total customer accounts receivable was less than 10% of accounts receivable.

As of June 30, 2022 and December 31, 2021, 84 % and 86 %, respectively, of accounts receivable were concentrated with the Company’s top ten customers.

The following customer represented 10% or more of accounts receivable at June 30, 2022 and December 31, 2021:

No other customers accounted for 10% or more of the Company’s accounts receivable in the periods presented.

3 unchanged sentences

The Company markets its products globally through its sales personnel and a worldwide network of independent sales representatives and distributors.

Geographic net revenues, based on “bill to” customer locations, for the three months ended March 31, 2022 and 2021, were as follows:

Geographic net revenues, based on “bill to” customer locations, for the three and six months ended June 30, 2022 and 2021, were as follows:

Three Months Ended

Six Months Ended

(In thousands)

6 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

As of December 31, 2021, the Company had $ 67.3 million remaining under its stock-repurchase program.

In January and February 2022, the Company’s board of directors authorized the use of an additional $ 100 million and $ 50 million, respectively, for the repurchase of the Company’s common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In the three months ended March 31, 2022 the Company purchased 1,584,340 shares for $ 134.7 million, leaving $ 82.7 million remaining on the repurchase authorization as of March 31, 2022.

The program has no expiration date.

In April 2022, the Company’s board of directors authorized the use of an additional $ 75 million for the repurchase of the Company’s common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In January, February and April 2022, the Company’s board of directors authorized the use of an additional $ 100 million, $ 50 million and $ 75 million, respectively, for the repurchase of the Company’s common stock, with repurchases to be executed according to pre-defined price/volume guidelines.

In the six months ended June 30, 2022, the Company purchased 3.5 million shares for $ 292.3 million, leaving no funds authorized as of June 30, 2022.

Authorization of future repurchase programs is at the discretion of the board of directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors.

5 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the three months ended March 31, 2022 and 2021, cash dividends declared and paid were as follows:

For the three and six months ended June 30, 2022 and 2021, cash dividends declared and paid were as follows:

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

7 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands, except per share amounts)

10 unchanged sentences

The Company has excluded the shares underlying the outstanding performance-based awards in the 2022 and 2021 calculations as the shares were not contingently issuable as of the end of the reporting periods.

In the three months ended March 31, 2022 and 2021, no stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share.

In the three months ended June 30, 2022, no outstanding stock awards were determined to be anti-dilutive and therefore excluded from the computation of diluted earnings per share;

in the comparable period of 2021, stock awards with approximately 0.1 million underlying shares were determined to be anti-dilutive.

In the six months ended June 30, 2022 and 2021, no outstanding stock awards were determined to be anti-dilutive.

PROVISION FOR INCOME TAXES:

1 unchanged sentence

Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate.

The Company’s effective tax rates for the three months ended March 31, 2022 and 2021, were 10.4 % and 2.4 %, respectively.

In the three months ended March 31, 2022 and 2021, the effective tax rate was lower than the statutory federal income-tax rate of 21 % due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions and federal research tax credits.

Additionally, in the three months ended March 31, 2021, the Company’s effective tax rate was favorably impacted by a discrete item associated with the release of an unrecognized tax benefit and the recognition of excess tax benefits related to share-based payments.

These benefits were partially offset by foreign income subject to U.S.

tax, known as global intangible low-taxed income.

The Company’s primary jurisdiction where foreign earnings are

The Company’s effective tax rates for the three and six months ended June 30, 2022, were 8.1 % and 9.2 %, respectively, and 7.2 % and 4.9 %, respectively, in the corresponding periods of 2021.

The effective tax rate in these periods was lower than the statutory federal income-tax rate of 21 % due to the geographic distribution of the Company’s world-wide earnings in lower-tax jurisdictions and federal research tax credits.

Additionally, in the three months ended

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

derived is the Cayman Islands, which is a non-taxing jurisdiction.

June 30, 2022 and 2021, the Company’s effective tax rate was favorably impacted by the recognition of excess tax benefits related to share-based payments.

In the six months ended June 30, 2022 and 2021, the Company’s effective tax rate was favorably impacted by discrete items associated with the release of unrecognized tax benefits and recognition of excess tax benefits related to share-based payments.

These benefits were partially offset by foreign income subject to U.S.

tax, known as global intangible low-taxed income.

The Company’s primary jurisdiction where foreign earnings are derived is the Cayman Islands, which is a non-taxing jurisdiction.

Income earned in other foreign jurisdictions was not material.

The Company has not been granted any incentivized tax rates and does not operate under any tax holidays in any jurisdiction.

As of March 31, 2022, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets, and capital losses for federal purposes, and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

As of June 30, 2022, the Company maintained a valuation allowance on its California deferred tax assets, New Jersey deferred tax assets, and capital losses for federal purposes, and a valuation allowance with respect to its deferred tax assets relating to tax credits in Canada.

Determining the consolidated provision for income-tax expense, income-tax liabilities and deferred tax assets and liabilities involves judgment.

13 unchanged sentences

In accordance with ASC 450-10, Contingencies , the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

On April 1, 2016, Opticurrent, LLC filed a complaint against the Company in the United States District Court for the Eastern District of Texas alleging that the Company infringed one patent pertaining to transistor switch devices and seeking damages for the alleged infringement.

The Company filed a motion to transfer the case to the Northern District of California, which the Court granted, and the case was assigned to a new judge in San Francisco following the transfer.

On December 21, 2018, the Court granted the Company’s challenge to Opticurrent’s damages expert but denied the Company’s motion for summary judgment.

Following a trial in February 2019, a jury issued a finding of direct infringement by the Company but found that the Company did not induce infringement, and awarded Opticurrent damages of $ 6.7 million.

The Company challenged those findings in post-trial proceedings, and the Court granted one of the Company’s post-trial motions, reducing the damages award to $ 1.2 million.

The Court of Appeals affirmed the original findings and the reduced damages award, but the Company believes Opticurrent made key disclaimers during reexamination proceedings after the original trial, giving rise to a motion to set aside the original judgment in view of a disclaimer, an issue that is currently on appeal to the Federal Circuit.

In the meanwhile, the District Court issued an order staying execution on the original judgment pending the Company’s appeal, and the Federal Circuit rejected Opticurrent’s challenge to the order staying execution pending appeal.

On February 23, 2022, a split panel at the Federal Circuit issued a ruling denying the Company’s appeal challenging the judgment.

The Company has until July 25, 2022 to appeal that decision.

The Company continues to believe it has strong defenses, and intends to continue to vigorously defend itself against Opticurrent’s claims.

On June 19, 2019, Opticurrent, LLC filed a follow-on lawsuit in the United States District Court for the Northern District of California accusing more of the Company’s products of infringement and seeking damages for the alleged infringement of the same claim of the same patent asserted in the parties’ prior litigation, as described above.

Limited discovery has taken place, and the parties and the Court are working on a schedule for expert discovery, dispositive

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

motions, and trial.

The Company believes it has strong defenses, independent of the issue on appeal in the first case, and intends to vigorously defend itself against Opticurrent’s claims, with appeals to follow if necessary.

On May 10, 2021, Opticurrent, LLC filed another follow-on lawsuit in the United States District Court for the Eastern District of Texas accusing one of the Company’s customers of infringement based on the use of the Company’s products and seeking damages for the alleged infringement of the same claim of the same patent asserted in the parties’ prior litigation, as described above.

The case is at the claim construction stage, but the Company believes it has strong defenses, independent of the issue on appeal in the parties’ first case, and intends to vigorously defend against Opticurrent’s claims against the Company’s technology, with appeals to follow if necessary.

On May 16, 2022, the Company entered into a binding settlement agreement (the “Settlement Agreement”) with Opticurrent, LLC, pursuant to which the parties agreed to end all outstanding legal disputes.

Neither party granted any licenses to the other.

Pursuant to the Settlement Agreement, the Company and Opticurrent have dismissed, withdrawn, and/or terminated all legal proceedings between the parties and the Company has agreed to pay Opticurrent $ 2.9 million.

On January 6, 2020, the Company filed a complaint against CogniPower LLC in the United States District Court for the District of Delaware for infringement of two of the Company’s patents and seeking a declaration of non-infringement with respect to patents that CogniPower had charged the Company’s customers with infringing , based on customer use of the Company’s products.

1 unchanged sentence

That motion was granted, so CogniPower’s claims for infringement initially went forward separately in their lawsuit against the Company’s customers in the District of Delaware, but the Company filed a motion to intervene in that lawsuit and received a ruling allowing the Company to intervene in CogniPower’s customer lawsuit on February 1, 2021, and the parties thereafter agreed to dismiss the Company’s separate lawsuit against CogniPower.

The Company believes it has strong claims and defenses, and intends to vigorously defend itself against CogniPower’s claims against the Company’s technology, with appeals to follow if necessary.

Moreover, given the United States Patent and Trademark Office’s institution of inter partes review proceedings against every independent claim CogniPower asserted in the litigation, the parties have agreed to stay the associated District Court litigation pending resolution of the IPRs.

The Company is unable to predict the outcome of legal proceedings with certainty, and there can be no assurance that the Company will prevail in the above-mentioned unsettled litigations.

These litigations, whether or not determined in the Company’s favor or settled, will be costly and will divert the efforts and attention of the Company’s management and technical personnel from normal business operations, potentially causing a material adverse effect on the business, financial condition and operating results.

The remaining case is currently stayed, but the Company believes it has strong claims and defenses, and intends to vigorously defend itself against CogniPower’s claims against the Company’s technology, with appeals to follow if necessary.

The Company is unable to predict the outcome of legal proceedings with certainty, and there can be no assurance that the Company will prevail in the above-mentioned unsettled litigation.

This litigation, whether or not determined in

POWER INTEGRATIONS, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the Company’s favor or settled, will be costly and will divert the efforts and attention of the Company’s management and technical personnel from normal business operations, potentially causing a material adverse effect on the business, financial condition and operating results.

Currently, the Company is not able to estimate a loss or a range of loss for the ongoing litigation disclosed above, however adverse determinations in litigation could result in monetary losses, the loss of proprietary rights, subject the Company to significant liabilities, require the Company to seek licenses from third parties or prevent the Company from licensing the technology, any of which could have a material adverse effect on the Company’s business, financial condition and operating results.

6 unchanged sentences

In addition, the Company requires its employees to sign a proprietary information and inventions agreement, which assigns the rights to its employees’ development work to the Company.

To date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of March 31, 2022.

To date, the Company has not had to reimburse any of its distributors or customers for any losses related to these indemnifications and no material claims were outstanding as of June 30, 2022.

For several reasons, including the lack of prior indemnification claims and the lack of a monetary liability limit for certain infringement cases, the Company cannot determine the maximum amount of potential future payments, if any, related to such indemnifications.

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