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Item 9A. Controls and Procedures

2020-08-31 compared with 2019-12-19 · 594 added, 770 removed, 723 unchanged (65% of the section changed)

Controls and Procedures

Prior to the issuance of the Company’s consolidated financial statements for the fiscal year ended June 30, 2017, the audit committee (the “Audit Committee”) of the Company’s Board of Directors (the “Board”) investigated and assessed certain accounting and internal control matters at the Company, principally focused on certain revenue recognition matters.

Concurrently, new members of the Company’s management, under the direction of the Audit Committee, performed a thorough analysis of the Company’s historical financial statements, accounting policies and financial reporting, as well as the Company’s disclosure controls and procedures and its internal control over financial reporting.

Management concluded that our disclosure controls and procedures were not effective as of June 30, 2017 because of certain material weaknesses in our internal control over financial reporting, as described in our 2017 10-K.

The Company is committed to remediating these material weaknesses and strengthening its internal control over financial reporting, and our management has developed a comprehensive plan for this remediation and strengthening.

In consultation with the Audit Committee, our management began developing this plan during the comprehensive analysis described above and continued developing it after we filed the 2017 10-K.

We began to implement certain elements of the plan during fiscal years 2018 and 2019, and have continued to implement the plan during the current fiscal year.

Among other actions, our actions to date have included both strengthening existing individual controls and designing and implementing new individual controls.

However, before our management can conclude that these new and strengthened controls are sufficient to remediate the material weaknesses, the controls must operate effectively for a sufficient period of time.

As of June 30, 2019,

sufficient time had not elapsed since we implemented the new and strengthened controls for our management to determine that they operated effectively as of that date.

For this reason, although we have taken many actions to strengthen our internal control over financial reporting and the Company’s disclosure controls and procedures, our management did not conclude that any of the material weaknesses identified in the 2017 10-K had been remediated as of June 30, 2019.

The actions we have taken to address these material weaknesses are described below under “Remediation Plan and Status.”

In connection with the preparation and filing of this Annual Report on Form 10-K, we have conducted the requisite evaluations of the effectiveness of our disclosure controls and procedures and of our internal control over financial reporting, both as of June 30, 2019.

Evaluation of Disclosure Controls and Procedures

Under the supervision, and with the participation, of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2020.

Based on this evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of June 30, 2019 because of certain material weaknesses in our internal control over financial reporting, as further described below.

Notwithstanding the conclusion by our CEO and CFO that our disclosure controls and procedures as of June 30, 2019 were not effective, and notwithstanding the material weaknesses in our internal control over financial reporting described below, management believes that the consolidated financial statements and related financial information included in this Annual Report fairly present in all material respects our financial condition, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (“U.S.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of June 30, 2020 because of a material weakness in our internal control over financial reporting, as further described below.

Notwithstanding the material weakness, management believes that the consolidated financial statements and related financial information included in this Annual Report on Form 10-K present fairly, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with U.S.

generally accepted accounting principles (“U.S.

Management’s Report on Internal Control Over Financial Reporting

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In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its Internal Control - Integrated Framework (2013) (the “COSO Framework”).

Based on this assessment, management has determined that we did not maintain effective internal control over financial reporting as of June 30, 2019 because of the material weaknesses described below.

Based on this assessment, management has determined that we did not maintain effective internal control over financial reporting as of June 30, 2020 because of the material weakness described below.

A material weakness in internal controls is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Because of its inherent limitations, even appropriate internal control over financial reporting may not prevent or detect misstatements.

In connection with management’s assessment of the Company’s internal control over financial reporting described above, management has identified the deficiencies described below that constitute material weaknesses in our internal control over financial reporting as of June 30, 2019.

Control Environment

In our Annual Report on Form 10-K for the year ended June 30, 2017 we disclosed the identification of deficiencies in the control environment component of the COSO Framework that constituted material weaknesses, either individually or in the aggregate.

These deficiencies related to all the principles associated with the control environment component of the COSO Framework.

We are committed to remediating the underlying cause of these material weaknesses and are taking actions to enhance our internal control over financial reporting relating to the material weaknesses.

However, we are still in the process of implementing our comprehensive remediation plan and we have not had sufficient time to test the effectiveness of the new and strengthened controls as of June 30, 2019.

Consequently, deficiencies that constitute material weaknesses, either individually or in the aggregate, in the control environment and other components remain.

The material weaknesses noted above cannot be considered remediated until each control has been appropriately designed, has operated for a sufficient period of time, and management has concluded, through testing, that the control is operating effectively.

Due to the interdependencies between the COSO Framework components, the material weakness in our control environment contributed to other material weaknesses within our system of internal control over financial reporting.

Information Technology (“IT”) General Controls

We identified deficiencies related to IT general controls that aggregated to a material weakness.

The following were contributing factors to the material weakness in IT general controls:

We have authorized certain IT users with broad access to all parts of our primary accounting system without adequate monitoring or recording of how they used that access.

In addition, access control deficiencies and change management deficiencies were noted on other systems relevant to financial reporting.

Some of our internally-developed systems relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes.

In some cases, IT general controls were not designed effectively, and in others, were designed effectively but did not operate effectively or for a sufficient period of time.

Business process controls that depend on the affected information systems, or that depend on data or financial reports generated from the affected information

systems to be accurate and complete, could be adversely affected, although we have identified no instances of any adverse effect due to these deficiencies.

The effectiveness of our internal control over financial reporting as of June 30, 2020 has been audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in its report that is included herein.

Remediation Plan

We have remediated the material weaknesses related to each of the five COSO components of internal control (Control Environment;

Risk Assessment;

We identified deficiencies in the risk assessment component of the COSO Framework that aggregated to a material weakness.

These deficiencies related to the principles associated with the risk assessment component of the COSO Framework, specifically principles within the component related to:

(i) identifying, assessing, and communicating appropriate control objectives, (ii) identifying and analyzing risks to achieve these objectives, (iii) contemplating fraud risks, and (iv) identifying and assessing changes in the business that could impact the system of internal controls.

As of June 30, 2019, our risk assessment component framework had not yet operated for a sufficient period of time for us to determine its effectiveness.

Control Activities;

We identified deficiencies in the control activities component of the COSO Framework that aggregated to a material weakness.

These deficiencies related to principles associated with the control activities component of the COSO Framework, specifically principles within the component related to (i) selecting and developing control activities that mitigate risks, (ii) selecting and developing general controls over technology and (iii) deploying control activities through policies that establish what is expected and procedures that put policies into action.

We did not design or operate certain control activities to sufficiently respond to potential risks of material misstatement in the area of revenue recognition.

We did not effectively select and develop certain information technology (“IT”) general controls and we also had control deficiencies at both the IT administrator and end-user levels across multiple applications relevant to financial reporting.

We also had deficiencies related to segregation of duties.

Deficiencies in control activities contributed to the potential for there to have been material accounting errors in substantially all financial statements account balances and disclosures.

Information and Communication

We identified deficiencies in the information and communication component of the COSO Framework that aggregated to a material weakness.

These deficiencies related to principles associated with the information and communications component of the COSO Framework, specifically principles within the component related to (i) generating and using relevant quality information and (ii) internally communicating information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control.

We rely on manual business processes to compensate for a lack of extensive integration in our information systems.

We also rely heavily on each of our various functions, such as sales, operations, accounting, legal and management, to communicate to the other functions information that the entire organization needs to operate an effective internal control environment.

In certain areas, our control activity deficiencies resulted from insufficient communication of information among our internal functions.

Monitoring of Controls

We identified deficiencies in the monitoring of controls component of the COSO Framework that aggregated to a material weakness.

There were deficiencies related to a principle associated with the monitoring of controls component of the COSO Framework, specifically selecting, developing and performing ongoing and/or separate evaluations.

We lacked controls (i) to determine whether components of internal control were present and functioning and (ii) to detect incorrect accounting practices.

The material weaknesses noted above contributed to the following additional material weaknesses:

Revenue Recognition Accounting

We identified deficiencies in revenue recognition accounting controls that resulted in material weaknesses, either individually or in the aggregate, as we did not appropriately design, or effectively operate, internal controls over certain aspects of accurate recording, presentation, and disclosure of revenue and related costs.

The following were contributing factors to the material weaknesses in revenue recognition accounting:

Our internal controls did not consistently identify and properly account for certain key non-standard contract or arrangement terms for sales transactions.

Our internal controls failed to consistently identify transactions where the terms of the sales arrangements with our customers were not properly documented in a form that fully reflected the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction.

Our internal controls failed to consistently identify, resolve, document, and allow for proper accounting where there were inconsistencies among the various documents underlying our sales transactions, and we did not always communicate the existence or resolution of those inconsistencies to our accounting organization to enable the proper recognition of revenue.

Internal controls intended to establish a consistent approach for reviewing pricing and establishing supportable estimates of standalone selling price in allocating revenue between multiple performance obligations have not been implemented for a sufficient period of time to demonstrate the controls were operating effectively.

Information Technology General Controls

We identified deficiencies related to IT general controls that represented a material weakness, either individually or in the aggregate.

The following were contributing factors to the material weakness in information technology and general controls:

We have a decentralized approach to developing IT policies and practices and to monitoring our IT controls.

As a result, our internal procedures for granting and monitoring employee access, and managing changes to various applications and infrastructure layers relevant to our financial reporting are not consistent across those applications and infrastructure layers.

In addition, some of our internally-developed applications relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes.

We have also authorized certain users with broad access, both as a user and as an administrator, to all parts of our primary accounting system without adequate monitoring or recording of how they used that access.

As a result of these factors, we have material weaknesses related to access controls and change management.

The fact that we have material weaknesses related to access controls and change management means that it is possible that our business process controls that depend on the affected information systems, or that depend on data or financial reports generated from the affected information systems, could be adversely affected due to the access control and change management issues, although we have identified no instances of any adverse effect due to these deficiencies.

The effectiveness of our internal control over financial reporting as of June 30, 2019 has been audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in its report that is included herein.

Remediation Plan and Status

As previously disclosed, starting in the second half of fiscal year 2018 and throughout fiscal year 2019, we began to design and implement processes and procedures to remediate material weaknesses identified as of June 30, 2017.

Information & Communication;

Monitoring of Controls) and revenue recognition accounting controls by completing our remediation plan, as previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2019.

Our management is committed to remediating identified control deficiencies (including both those that rise to the level of a material weakness and those that do not), fostering continuous improvement in our internal controls and enhancing our overall internal controls environment.

Our management believes that these remediation actions, along with additional actions, when fully implemented, will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting.

We are committed to improving our internal control processes and intend to continue to review and improve our financial reporting controls and procedures.

design and operate internal controls that mitigate identified risks and enable an effective system of internal control over external financial reporting.

We have taken the following actions, among others, to address previously disclosed material weaknesses:

Restructured our sales organization, which resulted in the resignations of the Senior Vice President of International Sales, the Senior Vice President of Worldwide Sales, the Vice President, Strategic Accounts, the Vice President, Strategic Sales, the Vice President, Business Development and certain other sales personnel.

Appointed experienced professionals to key accounting and finance and compliance leadership positions, including the appointments of a new Chief Financial Officer and a new Corporate Controller in January 2018, and the creation of, and appointments to, two newly established roles of Chief Compliance Officer and Vice President of Internal Audit in May 2018 and August 2018, respectively.

Reviewed and amended our Code of Conduct to align with the organizational changes described above and to strengthen certain provisions regarding compliance and reporting violations of the Code of Conduct.

Adopted an Internal Audit Charter setting forth the responsibilities of the internal audit function and establishing that the Vice President of Internal Audit reports directly to the Audit Committee and that the Audit Committee has authority to provide adequate funding for this function.

Changed our organizational structure to narrow the scope of responsibilities of certain of our senior executives and to revise various reporting relationships, which included the appointment of a new Senior Vice President of Worldwide Sales, and a new Senior Vice President of Operations.

Conducted training in the following areas:

Revenue recognition training for our global sales force, various operations personnel, and certain senior executives, including our CEO, which included detailed examples of acceptable and unacceptable sales practices,

Reviewed with our senior management team our amended Code of Conduct,

Reviewed with our CEO enhanced processes for periodic evaluations by the CEO and the CFO of the effectiveness of our disclosure controls and procedures, and the periodic assessments by the CEO and the CFO of the effectiveness of our internal control over financial reporting, and other compliance matters, and

Shipping and cut-off training for accounting and operations personnel that included new requirements for quarter-end procedures.

Enhanced the sales sub-certification document that supports our CEO’s and CFO’s financial statement certifications and expanded the sub-certification participation population to the global sales force.

To date, we have taken the following actions related to material weaknesses that, as of June 30, 2019, had not yet been fully implemented or had not been in place for a sufficient period of time to demonstrate that they were having their desired effect:

Upgraded our accounting department to include the new roles of Senior Director of Tax, Financial Audit Director and Information Technology Audit Director, as well as replaced certain of our accounting personnel with more experienced individuals, including rebuilding and expanding our revenue recognition team.

Enhanced the financial statement risk assessment and fraud risk assessment which are a foundational element of our Sarbanes-Oxley compliance program.

Implemented a sequence of meetings around our processes to prepare and report on the consolidated financial statements that promotes cross-functional communication and broadens the accountability for internal controls.

Implemented new revenue recognition processes and controls to:

Effect an appropriate cutoff of shipping activity

Increase the alignment of invoicing with physical shipment

Identify and account for transactions that may not have met revenue recognition criteria

Appropriately account for the allocation of revenue among performance obligations

Assigned accountability for certain internal controls to our Compliance Department, such as our organizational-wide quarterly sales certification process.

Conducted a process by which employees re-certified their understanding of, and compliance with, the Company’s Code of Conduct.

Adopted a charter for our compliance program to promote an organizational culture that encourages the highest standards of ethical business conduct and compliance with the law, exercises appropriate due diligence to prevent and detect unlawful conduct, and protects the Company’s reputation.

Our management believes that the actions below will remediate the material weakness we have identified and strengthen our internal control over financial reporting.

As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional or different measures to address control deficiencies with the overall objective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements through an effective system of internal control over financial reporting.

To date, we have taken the following actions related to the material weakness that, as of June 30, 2020, had not yet been fully implemented or had not been in place for a sufficient period of time to demonstrate that they were having their desired effect:

Re-designed the logical access roles associated with our primary ERP application and re-provisioned those roles to enforce segregation of duties and align user access commensurate with their business process role and job responsibilities;

Implemented a third-party application to facilitate improved processes and controls related to provisioning privileged access roles and the monitoring of those roles;

For one of our boundary applications (fulfillment and warehouse management), implemented a new program change management control.

Our management believes that meaningful progress has been made on the remaining remediation efforts.

Management regards successful completion of our remaining remediation actions as an important priority.

Some of the more significant remaining remediation activities include:

Developing and implementing an ongoing compliance training program regarding significant accounting and financial reporting matters, as well as broad compliance matters, for accounting, financial reporting, sales and operations personnel, as well as for our CEO, our other corporate executives and the Board.

Integrating the responsibility for internal controls across business functions to assign accountability for internal controls beyond the accounting and finance team.

Increasing standardization and automation within accounting processes to improve the reliability of information used by existing accounting personnel.

Implementing a governance committee for our Sarbanes-Oxley compliance program and assigning individual accountability for internal controls.

Redesigning and implementing necessary changes to the existing system of internal controls in the context of the revised and more comprehensive risk assessment.

Updating selected policies and assigning accountable policy owners related to revenue recognition.

Reevaluating the boundary applications that interface with our primary accounting and reporting application and redesigning logical access and program change controls to enhance the reliability of information used to conduct other internal controls.

Implementing and/or enhancing IT general controls and segregation of duties controls:

Monitoring instances in which individuals are granted broad access

The remaining remediation activities include:

Strengthening access controls related to boundary systems;

Strengthening provisioning of privileged access roles;

Developing change management capabilities in certain boundary applications and implementing new change management controls

Identifying and properly accounting for non-standard terms, including increased information sharing between Sales and other departments on sales transactions

Identifying and resolving instances in which customer contracts and purchase orders have conflicting terms, including the new processes to ensure customer master data is complete, accurate and updated as needed on a timely basis

Enhancing procedures to ensure contracts create enforceable rights and obligations, including standardizing the method by which we accept customer purchase orders.

Developing a system of daily reports related to revenue recognition that enable ongoing monitoring for non-standard transactions and the appropriate allocation of revenue among performance obligations.

Testing of sufficient instances of the performance of controls to determine operational effectiveness.

Monitoring instances in which individuals are granted broad access;

Implementing new change management controls related to boundary systems.

Changes in Internal Control over Financial Reporting

Other than the ongoing remediation efforts described above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than the remediation efforts described above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Super Micro Computer, Inc.

To the Stockholders and the Board of Directors of Super Micro Computer, Inc.

Opinion on Internal Control over Financial Reporting

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and subsidiaries (the “Company”) as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of June 30, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year June 30, 2019, of the Company and our report dated December 19, 2019, expressed an unqualified opinion on those financial statements and included an explanatory paragraph regarding the Company’s change in method of accounting for revenue in fiscal year 2019 due to the adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers .

In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinion

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weaknesses have been identified and included in management's assessment:

Control Environment

The Company has identified deficiencies in the control environment component of the COSO Framework that constituted material weaknesses, either individually or in the aggregate.

These deficiencies related to all the principles associated with the control environment component of the COSO Framework.

The Company is still in the process of implementing its comprehensive remediation plan and has not had sufficient time to test the effectiveness of certain remediation actions as of June 30, 2019.

Consequently, deficiencies that constitute material weaknesses, either individually or in the aggregate, in the control environment and other components remain.

Due to the interdependencies between the COSO Framework components, the material weakness in the control environment contributed to other material weaknesses within the Company’s system of internal control over financial reporting.

Risk Assessment

The Company identified deficiencies in the risk assessment component of the COSO Framework that aggregated to a material weakness.

These deficiencies related to the principles associated with the risk assessment component of the COSO Framework, specifically principles within the component related to:

As of June 30, 2019, the Company’s risk assessment component framework had not yet operated for a sufficient period of time to determine its effectiveness.

Control Activities

The Company identified deficiencies in the control activities component of the COSO Framework that aggregated to a material weakness.

The Company did not design or operate certain control activities to sufficiently respond to potential risks of material misstatement in the area of revenue recognition.

The Company did not effectively select and develop certain information technology (“IT”) general controls and also had control deficiencies at both the IT administrator and end-user levels across multiple applications relevant to financial reporting.

The Company also had deficiencies related to segregation of duties.

Deficiencies in control activities contributed to the potential for there to have been material accounting errors in substantially all financial statements account balances and disclosures.

Information and Communication

The Company identified deficiencies in the information and communication component of the COSO Framework that aggregated to a material weakness.

The Company relies on manual business processes to compensate for a lack of extensive integration in their information systems.

The Company also relies heavily on each of the various functions, such as sales, operations, accounting, legal and management, to communicate to the other functions information that the entire organization needs to operate an effective internal control environment.

In certain areas, control activity deficiencies resulted from insufficient communication of information among internal functions.

Monitoring of Controls

The Company identified deficiencies in the monitoring of controls component of the COSO Framework that aggregated to a material weakness.

The Company lacked controls (i) to determine whether components of internal control were present and functioning and (ii) to detect incorrect accounting practices.

The material weaknesses noted above contributed to the following additional material weaknesses:

Revenue Recognition Accounting

The Company identified deficiencies in revenue recognition accounting controls that resulted in material weaknesses, either individually or in the aggregate, as the Company did not appropriately design, or effectively operate, internal controls

over certain aspects of accurate recording, presentation, and disclosure of revenue and related costs.

The following were contributing factors to the material weaknesses in revenue recognition accounting:

Internal controls did not consistently identify and properly account for certain key non-standard contract or arrangement terms for sales transactions.

Internal controls failed to consistently identify transactions where the terms of the sales arrangements with customers were not properly documented in a form that fully reflected the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction.

Internal controls failed to consistently identify, resolve, document, and allow for proper accounting where there were inconsistencies among the various documents underlying sales transactions, and the Company did not always communicate the existence or resolution of those inconsistencies to the accounting organization to enable the proper recognition of revenue.

Information Technology General Controls

The Company identified deficiencies related to IT general controls that represented a material weakness, either individually or in the aggregate.

The following were contributing factors to the material weakness in information technology and general controls:

The Company has a decentralized approach to developing IT policies and practices and to monitoring our IT controls.

As a result, the Company’s internal procedures for granting and monitoring employee access and managing changes to various applications and infrastructure layers relevant to financial reporting are not consistent across those applications and infrastructure layers.

In addition, some of the Company’s internally-developed applications relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes.

The Company has also authorized certain users with broad access, both as a user and as an administrator, to all parts of the primary accounting system without adequate monitoring or recording of how they used that access.

As a result of these factors, the Company has material weaknesses related to access controls and monitoring for changes to applications.

The fact that the Company had material weaknesses related to access controls and change management means that it is possible that business process controls that depend on the affected information systems, or that depend on data or financial reports generated from affected information systems, could be adversely affected due to the access control and change management issues, although the Company has identified no instances of any adverse effect due to these deficiencies.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended June 30, 2019, of the Company, and this report does not affect our report on such financial statements.

The following material weakness has been identified and included in management's assessment:

Information Technology (“IT”) General Controls

The Company identified deficiencies related to IT general controls that aggregated to a material weakness.

The following were contributing factors to the material weakness in IT general controls:

The Company authorized certain IT users with broad access to all parts of the primary accounting system without adequate monitoring or recording of how they used that access.

In addition, access control deficiencies and change management deficiencies were noted on other systems relevant to financial reporting.

Some of the Company’s

internally-developed systems relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes.

In some cases IT general controls were not designed effectively, and in others, were designed effectively but did not operate effectively or for a sufficient period of time.

Business process controls that depend on the affected information systems, or that depend on data or financial reports generated from the affected information systems to be accurate and complete, could be adversely affected, although the Company has identified no instances of any adverse effect due to these deficiencies.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended June 30, 2020, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

San Jose, California

December 19, 2019

August 28, 2020

Other Information

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Executive Officers and Directors

The following table sets forth information regarding our current directors and executive officers and their ages as of November 30, 2019:

The following table sets forth information regarding our current directors and executive officers and their ages as of July 31, 2020:

Charles Liang

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Charles Liang founded Super Micro and has served as our President, Chief Executive Officer and Chairman of the Board since our inception in September 1993.

Liang has been developing server and storage system architectures and technologies for the past two decades.

Liang has been developing server and storage system architectures and technologies for the past three decades.

From July 1991 to August 1993, Mr.

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Alex Hsu serves as our Chief Operating Officer.

Hsu has served in various positions with the Company since October 2003, including as the Chairman of Supermicro Taiwan since February 2018, Sr.

Chief Executive of Strategic Business since August 2009, Executive Director of Supermicro Technology (Beijing) Co.

since August 2009, Chief Sales and Marketing Officer from July 2006 to August 2009, Senior Vice President of Sales from October 2004 to July 2006 and President of European Offices and Vice President of Operations (USA) from October 2003 to October 2004.

Hsu has served in various positions with the Company since October 2003, including as the Chairman of Supermicro Taiwan since February 2018, Executive Director of Supermicro Technology (Beijing) Co.

since August 2009, Sr.

Chief Executive of Strategic Business from August 2009 to February 2018, Chief Sales and Marketing Officer from July 2006 to August 2009, Senior Vice President of Sales from October 2004 to July 2006 and President of European Offices and Vice President of Operations (USA) from October 2003 to October 2004.

From January 2002 to September 2003, Mr.

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Earlier in his career Mr.

Fairfax served in executive financial management and/or general management positions as GoRemote Internet Communications, Ironside Technologies, Acta Technology, NeoVista Software, Siemens and Spectra-Physics.

Fairfax served in executive financial management and/or general management positions at GoRemote Internet Communications, Ironside Technologies, Acta Technology, NeoVista Software, Siemens and Spectra-Physics.

He began his career as a consultant with the National Telecommunications Practice Group of Ernst & Young.

Fairfax currently serves on the board of directors of Energous Corporation, where he is the chair of the audit committee.

Fairfax holds an MBA degree from The University of Chicago Booth School of Business and a Bachelor of Arts degree, with a major in Economics, from

Whitman College.

Fairfax is a certified public accountant with an inactive license in California and holds an MBA degree from The University of Chicago Booth School of

Business and a Bachelor of Arts degree, with a major in Economics, from Whitman College.

Our Governance Committee concluded that Mr.

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Liu is a member of the American Institute of Certified Public Accountants (AICPA) with retired status, and was previously a member of the Florida Institute of Certified Public Accountants (FICPA).

Liu is also a Certified Information System Auditor (CISA) and Certified Information Security Manager (CISM), with non-practice status, with the Information Systems Audit and Control Association (ISACA) and has also been certified in Control Self-assessment (CCSA) by the Institute of Internal Auditors (IIA).

After earning his BA of Commerce

from National Chengchi University, Taipei, Taiwan, and MBA from Florida Atlantic University, Mr.

Liu is also a Certified Information System Auditor (CISA) and Certified Information Security

Manager (CISM), with non-practice status, with the Information Systems Audit and Control Association (ISACA) and has also been certified in Control Self-assessment (CCSA) by the Institute of Internal Auditors (IIA).

After earning his BA of Commerce from National Chengchi University, Taipei, Taiwan, and MBA from Florida Atlantic University, Mr.

Liu received executive leadership training at the Stanford Advanced Finance Program in 1986 and at Harvard Business School in the Advanced Management Program (AMP) in 1998.

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Our amended and restated certificate of incorporation provides for a classified Board of Directors divided into three classes.

The members of each class are elected to serve a term expiring at the third succeeding annual meeting of stockholders after such election.

The members of each class are elected to serve a three-year term with the term of office for each class ending in consecutive years.

Vacancies may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

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Class II Directors (2)

Class III Directors (1)

Hwei-Ming (Fred) Tsai

Class III Directors (3)

__________________________

Because we did not, prior to the filing of this Annual Report, file our Annual Reports on Form 10-K for fiscal years 2017 and 2018 in a timely manner, we were unable to hold our annual meetings following the fiscal years 2017 and 2018..

We are not able to hold an annual meeting until such time as we have filed all delinquent Annual Reports on Form 10-K and our Annual Report on Form 10-K for the most recently completed fiscal year.

The Class II Directors’ terms were originally to expire at the annual meeting following fiscal 2017, the Class III Directors’ terms were originally to expire at the annual meeting following 2018 and the Class I Directors' terms will expire at the annual meeting following fiscal year 2019, which we expect to hold in the first half of calendar 2020.

We expect that the Class I Directors, Class II Directors and Class III Directors will all come up for election at that annual meeting.

The term of Class I directors expires at the annual meeting of stockholders following fiscal year 2022.

The term of Class II directors expires at the annual meeting of stockholders following fiscal year 2020.

The term of Class III directors expires at the annual meeting of stockholders following fiscal year 2021.

CORPORATE GOVERNANCE

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We have adopted “Corporate Governance Guidelines” to help ensure that the Board of Directors is independent from management, appropriately performs its function as the overseer of management, and that the interests of the Board of Directors and management align with the interests of our stockholders.

The “Corporate Governance Guidelines” are available at www.Supermicro.com by first clicking on “About Us” and then “Investor Relations” and then “Corporate Governance.”

The “Corporate Governance Guidelines” are available at https://ir.supermicro.com/corp-governance#governance .

Code of Ethics

We have adopted a “Code of Business Conduct and Ethics” that is applicable to all directors, executive officers and employees and embodies our principles and practices relating to the ethical conduct of our business and our long-standing commitment to honesty, fair dealing and full compliance with all laws affecting our business.

Our “Code of Business Conduct and Ethics” is available at www.Supermicro.com by first clicking on “About Us” and then “Investor Relations” and then “Corporate Governance.” Any substantive amendment or waiver of the Code relating to executive officers or directors will be made only after approval by our Board of Directors and will be promptly disclosed on our website within four business days.

Our “Code of Business Conduct and Ethics” is available at https://ir.supermicro.com/corp-governance#governance .

Any substantive amendment or waiver of the Code relating to executive officers or directors will be made only after approval by our Board of Directors and will be promptly disclosed on our website within four business days.

Director Independence

Although our common stock is not currently listed on Nasdaq, we have operated in accordance with Nasdaq listing standards with respect to director independence requirements.

The rules of Nasdaq generally require that a majority of the members of a listed company's board of directors be independent.

The listing requirements of The Nasdaq Stock Market generally require that a majority of the members of a listed company's board of directors be independent.

In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company's audit committee, compensation committee, and nominating and corporate governance committees be independent.

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In addition, compensation committee members must satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act and the listing requirements of The Nasdaq Stock Market.

The Board affirmatively determines the independence of each director and nominee for election as a director in accordance with Nasdaq listing standards.

The Board affirmatively determines the independence of each director and nominee for election as a director in accordance with the listing requirements of The Nasdaq Stock Market.

Based on these standards, our Board of Directors has determined that six of its current eight members, Daniel W.

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We encourage, but do not require, each Board member to attend our annual meeting of stockholders.

We have not held an annual meeting of stockholders since March 1, 2017 (following the completion of our fiscal year on June 30, 2016).

The Board held five meetings during fiscal year 2018, four of which were regularly scheduled meetings and one of which was a special meeting.

We held an annual meeting of stockholders on June 5, 2020 for our fiscal year 2019.

The Board held 15 meetings during fiscal year 2020, four of which were regularly scheduled meetings and 11 of which were special meetings.

All directors attended at least 75% of the meetings of the Board and the committees on which they served during the time they were members of the Board or such committees during fiscal year 2018 and during fiscal year 2019, except that Sherman Tuan attended only 21% of such meetings during fiscal year 2019 due to an illness beginning in April 2018.

He resumed attending Board and committee meetings on a consistent basis starting in April 2019.

For fiscal years 2015, 2016 and 2017, Mr.

Tuan’s attendance rate for Board and committee meetings was 100%, 75% and 100%, respectively.

All directors attended at least 75% of the meetings of the Board and the committees on which they served during the time they were members of the Board or such committees during fiscal year 2020.

Board Leadership Structure

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The Board and our Nominating and Corporate Governance Committee (the "Governance Committee") believe that it is appropriate for Mr.

Liang to serve as both the Chief

Executive Officer and Chairman due to the relatively small size of our Board, and the fact that Mr.

Liang to serve as both the Chief Executive Officer and Chairman due to the relatively small size of our Board, and the fact that Mr.

Liang is the founder of our company with extensive experience in our industry.

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Board Role in the Oversight of Risk

The Board exercises oversight over our risk management activities, requesting and receiving reports from management.

The Board oversees our risk management activities, requesting and receiving reports from management.

The Board exercises this oversight responsibility directly and through its committees.

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The Audit Committee also assists the Board in oversight of certain risks, particularly in the areas of internal controls over financial reporting, financial reporting and review of related party transactions.

Our management with oversight from our Compensation Committee has reviewed its compensation policies and practices with respect to risk-taking incentives and risk management and does not believe that potential risks arising from its compensation polices or practices are reasonably likely to have a material adverse effect on our company.

Our management, with oversight from our Compensation Committee, has reviewed its compensation policies and practices with respect to risk-taking incentives and risk management and does not believe that potential risks arising from our compensation polices or practices are reasonably likely to have a material adverse effect on our company

Committees of the Board of Directors

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the Audit Committee, the Compensation Committee and the Governance Committee.

In accordance with applicable Nasdaq listing standards, each of these committees is comprised solely of non-employee, independent directors.

The charter for each committee is available at www.Supermicro.com by first clicking on “About Us” and then “Investor Relations” and then “Corporate Governance.” In January 2019, the Board of Directors approved amendments to the charters for each of the Audit Committee, the Compensation Committee and the Governance Committee, which amendments are reflected in the descriptions contained herein.

In accordance with applicable listing requirements of The Nasdaq Stock Market, each of these committees is comprised solely of non-employee, independent directors.

The charter for each committee is available at https://ir.supermicro.com/corp-governance#governance .

In January 2019, the Board of Directors approved amendments to the charters for each of the Audit Committee, the Compensation Committee and the Governance Committee, which amendments are reflected in the descriptions contained herein.

The charter of each committee also is available in print to any stockholder who requests it.

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Compensation Committee

Nominating and

Corporate Governance Committee

Governance Committee

Tally Liu (1)

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The Audit Committee has four members.

The Audit Committee met nine times in fiscal year 2019, four of which were regularly scheduled meetings and five of which were special meetings.

During fiscal year 2018, the Audit Committee met 42 times, four of which were regularly scheduled meetings and 38 of which were special meetings.

The Board has determined that each member of our Audit Committee meets the requirements for independence under the applicable listing standards of Nasdaq and the rules of the SEC.

The Audit Committee met 15 times in fiscal year 2020, four of which were regularly scheduled meetings and 11 of which were special meetings.

The Board has determined that each member of our Audit Committee meets the requirements for independence under the applicable listing requirements of The Nasdaq Stock Market and the rules of the SEC.

The Board has also determined that each member of our Audit Committee is an “audit committee financial expert” as defined under applicable SEC rules.

As outlined more specifically in the Audit Committee charter, the Audit Committee has, among other duties, the following responsibilities:

Appoints, retains and approves the compensation of our independent auditors, and the review and evaluation of the auditors’ qualifications, independence and performance;

Appoints, retains and approves the compensation of our independent auditors, and reviews and evaluates the auditors’ qualifications, independence and performance;

Oversees the independent auditors’ audit work and reviews and pre-approves all audit and non-audit services that may be performed by them;

Discusses with the independent auditors any audit problems, difficulties and management’s response, and matters that the Public Company Accounting Oversight Board and the SEC require to be discussed with the committee;

Discusses with the independent auditors any audit problems, difficulties and management’s response to them, and all matters that the Public Company Accounting Oversight Board and the SEC require to be discussed with the committee;

Reviews and discusses with management press releases regarding our financial results, as well as financial information and earnings guidance provided to securities analysts and rating agencies;

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Oversees the adequacy of our financial controls;

Periodically reviews with management and the independent auditors our disclosure controls and procedures and internal control over financial reporting;

Reviews and approves the internal audit function’s (i) audit plan, (ii) all major changes to the audit plan, (iii) the scope, progress and results of executing the internal audit plan, and (iv) the annual performance of the internal audit function

Periodically reviews with management and the independent auditors our disclosure controls and procedures and our internal control over financial reporting;

Reviews and approves the internal audit function’s (i) audit plan, (ii) all major changes to the internal audit plan, (iii) the scope, progress and results of executing the internal audit plan, and (iv) the annual performance of the internal audit function

Reviews and approves all related party transactions;

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The Compensation Committee has three members.

The Compensation Committee met seven times in fiscal year 2019, four of which were regularly scheduled meetings and three of which were special meetings.

During fiscal year 2018, the Compensation Committee met four times, all of which were regularly scheduled meetings.

The Compensation Committee met nine times in fiscal year 2020, four of which were regularly scheduled meetings and five of which were special meetings.

The Compensation Committee is comprised solely of non-employee directors.

The Board has determined that each member of our Compensation Committee meets the requirements for independence under the applicable Nasdaq listing standards.

The Board has determined that each member of our Compensation Committee meets the requirements for independence under the listing requirements of The Nasdaq Stock Market.

As outlined more specifically in the Compensation Committee charter, the Compensation Committee has, among other duties, the following responsibilities:

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Administers the issuance of restricted stock grants, stock options and other equity awards to executive officers, directors and other eligible individuals under our equity compensation plans;

Reviews and evaluates, at least annually, the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter and the adequacy of the Compensation Committee charter.

Reviews and evaluates, at least annually, the performance of the Compensation Committee, including compliance of the Compensation Committee with its charter and the adequacy of the Compensation Committee charter.

In general, the Compensation Committee discharges the Board's responsibilities regarding the determination of executive compensation, and reviews and makes recommendations to the full Board in the determination of non-employee director compensation.

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The Compensation Committee may delegate its responsibilities to subcommittees comprised of one or more Compensation Committee members, subject to requirements of our bylaws and applicable laws, regulations and the terms of our executive compensation plans.

Additional information about the Compensation Committee's processes for determining executive and non-employee director compensation, including the role of the Compensation Committee's

compensation consultant and our executive officers, can be found in the "Executive Compensation" and "2019 Director Compensation" sections of this Annual Report.

Additional information about the Compensation Committee's processes for determining executive and non-employee director compensation, including the role of the Compensation Committee's compensation consultant and our executive officers, can be found in the "Executive Compensation" and "2020 Director Compensation" sections of this Annual Report.

Nominating and Corporate Governance Committee

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The Governance Committee met six times in fiscal year 2020, four of which were regularly scheduled meetings and two of which were special meetings.

During fiscal year 2018, the Governance Committee met five times, four of which were regularly scheduled meetings and one of which was a special meeting.

The Governance Committee is comprised solely of non-employee directors.

The Board has determined that each member of our Governance Committee meets the requirements for independence under the applicable Nasdaq listing standards.

The Board has determined that each member of our Governance Committee meets the requirements for independence under the listing requirements of The Nasdaq Stock Market.

As outlined more specifically in the Governance Committee charter, the Governance Committee has, among other duties, the following responsibilities:

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Periodically reviews the scope of responsibilities of the Governance Committee and the committee's performance of its duties.

Delinquent Section 16(a) Reports

The members of the Board, our executive officers and persons who hold more than 10% of our outstanding common stock are subject to the reporting requirements of Section 16(a) of the Exchange Act, which require them to file reports with respect to their ownership of our common stock and their transactions in our common stock.

Based upon (i) the copies of Section 16(a) reports that we received from such persons for their fiscal year 2019 and 2018 transactions in our common stock and their common stock holdings and (ii) the written representations, if any, received from one or more of such persons that no annual Form 5 reports were required to be filed by them for fiscal year 2019 or 2018, we believe that all reporting requirements under Section 16(a) were met in a timely manner by the persons who were executive officers, members of the Board or greater than 10% stockholders during such fiscal year, other than one late report made by each of Sherman Tuan, Charles Liang, Sara Liu, and Kevin Bauer in fiscal year 2018, in each case with respect to one transaction.

Executive Compensation

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Compensation Discussion and Analysis

In this section we provide an explanation and analysis of the material elements of the compensation provided to our Chief Executive Officer, Chief Financial Officer and other three most highly compensated executive officers who were serving as executive officers at the end of our fiscal years 2019 and 2018 (collectively referred to as our “named executive officers”).

In this section we provide an explanation and analysis of the material elements of the compensation provided to our Chief Executive Officer, Chief Financial Officer and other three most highly compensated executive officers who were serving as executive officers at the end of our fiscal year 2020 (collectively referred to as our “named executive officers”).

Our named executive officers and their positions during fiscal year 2020 were:

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Senior Vice President, Worldwide Sales

Senior Vice President, Operations

David Weigand

Senior Vice President, Chief Compliance Officer

Our named executive officers and their positions during fiscal year 2018 were:

Charles Liang

President, Chief Executive Officer and Chairman of the Board

Senior Vice President, Chief Financial Officer

Howard Hideshima (1)

Former Senior Vice President, Chief Financial Officer

Senior Vice President

Phidias Chou (1)

Former Senior Vice President, Worldwide Sales

Wally Liaw (1)

Former Senior Vice President, International Sales

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Hideshima, Chou and Liaw resigned effective January 30, 2018.

None of them received any severance or other enhanced benefits in connection with their termination of employment.

Senior Vice President, Chief Operating Officer

Process Overview

The Compensation Committee of the Board discharges the Board’s responsibilities relating to compensation of all of our executive officers.

During both fiscal year 2019 and 2018, the Compensation Committee was comprised of three non-employee directors, all of whom are independent pursuant to the applicable listing rules of NASDAQ and Rule 16b-3 under the Exchange Act.

During fiscal year 2020 , the Compensation Committee was comprised of three non-employee directors, all of whom are independent pursuant to the applicable listing rules of NASDAQ and Rule 16b-3 under the Exchange Act.

The agenda for meetings is determined by the Chair of the Compensation Committee with the assistance of our Chief Financial Officer.

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However, neither our Chief Financial Officer nor our General Counsel attends the portion of meetings during which his own performance or compensation is being discussed.

Our Chief Financial Officer and General Counsel support the Compensation Committee in its work by providing information relating to our financial plans, performance assessments of our executive officers and other personnel-related data.

In addition, the Compensation Committee has the authority under its charter to hire, terminate and approve fees for advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities.

As part of making an overall assessment of each named executive officer’s role and performance, and structuring our compensation programs for fiscal year 2019 and 2018, respectively, the Compensation Committee reviewed recommendations of our Chief Executive Officer, as well as publicly available peer group compensation data.

Our Chief Financial Officer and General Counsel support the Compensation Committee in its work by providing information relating to our financial plans and certain personnel-related data.

the Compensation Committee has the authority under its charter to hire, terminate and approve fees for advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities.

As part of making an overall assessment of each named executive officer’s role and performance, and structuring our compensation programs for fiscal year 2020 , the Compensation Committee reviewed recommendations of our Chief Executive Officer, as well as publicly available peer group compensation data and data compiled by our independent compensation consultant.

Compensation Philosophy and Objectives

Our executive compensation philosophy is to link the named executive officers’ compensation to, and reward, corporate performance.

The base salaries, quarterly bonuses and equity award grants for the named executive officers are determined in part by the Compensation Committee reviewing data on prevailing compensation practices of comparable technology companies with whom we compete for executive talent, and generally evaluating such information in connection with our corporate goals and compensation practices, all as further described below.

In general, our compensation philosophy has been unchanged over the last several years.

During fiscal year 2018, however, in order to take another step in linking executive pay to performance, our Compensation Committee decided that a significant portion of our Chief Executive Officer’s periodic long-term equity award should be in the form of performance-based restricted stock units (“PRSUs”).

Commencing in fiscal year 2018, in order to better link executive pay to performance, our Compensation Committee decided that a significant portion of our Chief Executive Officer’s periodic long-term equity awards should be in the form of performance-based restricted stock units (“PRSUs”).

In general, PRSUs represent an opportunity to earn a defined number of shares of our common stock if we and/or the recipient achieve pre-set performance goals over time.

PRSUs generally encourage long-term commitment to the Company and commitment to performance that is designed to boost long-term Company results.

Liang received two PRSU grants in fiscal year 2018 that are further described below:

one grant with a performance period of one year, running from July 1, 2017 to June 30, 2018;

and a second grant with a performance period of two years, running from July 1, 2017 to June 30, 2019.

The Compensation Committee currently plans to expand its use of performance-based equity awards like PRSUs in future long-term equity awards to named executive officers in order to more tightly link the investment interests of our stockholders to the compensation interests of our senior executive leaders.

The Compensation Committee considers various sources of comparative data when determining executive compensation levels, including compensation data from a sample of public companies assembled for the Compensation Committee by Radford, an Aon Hewitt company ("Radford").

For fiscal years 2019 and 2018 compensation decisions, the sample public companies consisted of the following:

In June 2020, our stockholders approved our 2020 Equity and Incentive Compensation Plan (the “2020 Plan”), and the Compensation Committee currently plans to expand its use of performance-based equity awards like PRSUs in future long-term equity programs for named executive officers in order to more tightly link the investment interests of our stockholders to the compensation interests of our senior executive leaders.

The Compensation Committee considers various sources of comparative data when determining executive compensation levels, including compensation data assembled for the Compensation Committee by Radford, an Aon Hewitt company ("Radford"), from a sample of public companies selected by us.

For fiscal year 2020 compensation decisions, the sample consisted of the following companies:

Ciena Corporation

Infinera Corporation

Juniper Networks, Inc.

Diebold Nixdorf, Inc.

Diebold Nixdorf, Incorporated

Extreme Networks, Inc.

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F5 Networks, Inc.

In selecting the companies for inclusion in the sample, the following factors were considered:

industry comparability, net revenues, operating income, market capitalization and whether the company may compete against us for executive talent.

These companies ranged in annual revenue from approximately $455.9 million to $6.1 billion for fiscal year 2019 and from approximately $392.5 million to $5.9 billion for fiscal year 2018.

These companies also ranged in operating income (loss) from approximately $1.2 billion to $(362.9) million for fiscal year 2019 and from approximately $1.2 billion to approximately $(183.1) million for fiscal year 2018.

For fiscal years 2019 and 2018, our net sales were $3.5 billion and $3.4 billion , respectively, and our operating income was $97.2 million and $94.7 million , respectively.

The Compensation Committee does not benchmark compensation based upon the sample companies reviewed nor does the Compensation Committee employ any other formulaic process in making compensation decisions.

Rather, the Compensation Committee uses its subjective judgment based upon a review of all information, including an annual review for each officer of his or her level of responsibility, contributions to our financial results and our overall performance.

The Compensation Committee's generalized assessment of these factors influences named executive officer compensation, and this information is not weighted in any specific manner.

The Compensation Committee then uses comparative compensation data as a market check on its compensation decisions.

Recognizing that over-reliance on external comparisons can be of concern, the Compensation Committee uses external comparisons as only one point of reference and is mindful of the value and limitations of comparative data.

For both fiscal years 2019 and 2018, the compensation paid to several of our named executive officers, including our Chief Executive Officer, was significantly below median compensation levels for similar positions at comparable companies.

The Compensation Committee was comfortable with this outcome in light of the level of stock ownership held by such persons, particularly our CEO.

Recently, to induce new executives to join our company, we have utilized fixed bonuses until such time as we establish a more formal short-term bonus program.

In the future, we may need to increase our recruiting of new executives from outside of our company.

This in turn may require us to pay higher or different forms of compensation.

Finally, we believe that creating stockholder value requires not only managerial talent but active and unified participation by all employees.

In recognition of this belief, we try to minimize the number of compensation arrangements that are distinct or exclusive to one or more of our named executive officers.

We currently provide base salary, quarterly bonus opportunities and long-term equity incentive compensation to a considerable number of our domestic and international employees, in addition to our named executive officers.

__________________________

The same sample companies were used for fiscal year 2019 and 2020 compensation decisions.

Although Cray Inc.

was acquired by Hewlett Packard Enterprise Company in 2019, it remained included in the information regarding the sample public companies that was used for fiscal year 2020 compensation decisions.

In selecting the companies for inclusion in the sample, we considered whether the company may compete against us for executive talent.

For fiscal year 2020, the Compensation Committee utilized the independent consultant report developed for fiscal year 2019 as it believed the report continued to be relevant.

Recognizing that over-reliance on external comparisons can be of concern, the Compensation Committee used external comparisons as only one point of reference and is mindful of the value and limitations of comparative data.

Key Fiscal Year 2020 Executive Compensation Decisions and Actions

At the beginning of fiscal year 2020, the Compensation Committee decided that it would generally not implement any increases in base salary or annual cash incentive opportunities for, or grant any equity awards to, any of our named executive officers for so long as the Company was not current in filing its periodic reports with the SEC (please refer to our Annual Report on Form 10-K for fiscal year 2019 for background on why we were not current in those filings).

After we became current in our filings with the SEC and our stock was re-listed on the Nasdaq Global Select Market in December 2019, the Compensation Committee reviewed the compensation arrangements for our named executive officers.

As a result of that review, in the fourth quarter of fiscal year 2020 the Compensation Committee increased the base salaries of our named executive officers (to the extent not already increased during the fiscal year) and implemented a short-term cash incentive program that incorporated certain financial metrics and individual goals as performance conditions.

In addition, in March 2020 the Board, upon the recommendation of the Compensation Committee, approved special performance-based cash incentive award opportunities to certain long-term employees.

For many employees, these awards were granted to reward them for their valuable contributions and loyal service to the Company, particularly through the period of time when we were not current in our SEC filings.

In the case of Mr.

Liang and Mr.

Clegg, who were the named executive officers who received such award opportunities, their incentives were specifically linked to Company stock price performance.

The Board selected this design specifically to take into consideration the views expressed by multiple stockholders in connection with the Company’s stockholder outreach program, particularly a desire for the Company to use cash rather than shares for such awards and the character of the performance metrics that must be achieved to earn these awards, thus further aligning Mr.

Liang and Mr.

Clegg’s interests with those of our stockholders.

Clegg’s award, for a target payment of $114,000, was conditioned on the price of our common stock equaling or exceeding $25.80 (a 12% premium over the closing price on the date the Board granted the award opportunity) for any period of 20 consecutive trading days prior to September 30, 2022.

The award condition was satisfied during the fourth quarter of fiscal 2020, and Mr.

Clegg received his target payout of $114,000 in satisfaction of this award.

Liang’s award, for a cash incentive opportunity of up to $8,076,701 (the “Maximum Value”), is subject to the following conditions:

50% of the Maximum Value will be paid to Mr.

Liang only if the average closing price for the Company’s common stock equals or exceeds $31.61 (representing a 15% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding the Board’s decision) for any period of 20 consecutive trading days prior to September 30, 2021, provided that Mr.

Liang remains employed with the Company through the date that such common stock price goal is achieved;

provided further that this payment shall be subject to reduction (including possibly a reduction to zero) at the sole discretion of the Board to the extent the Company has not made, in the Board’s determination, adequate progress in remediating its internal weaknesses in its internal control over financial reporting;

50% of the Maximum Value will be paid to Mr.

Liang only if the average closing price for the Company’s common stock equals or exceeds $32.99 (representing a 20% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding the Board’s decision) for any period of 20 consecutive trading days prior to June 30, 2022, provided that Mr.

Liang remains employed with the Company through the date that such common stock price goal is achieved.

Regarding Mr.

Liang's award, the relevant stock price goals were not met during fiscal year 2020, and no portion of these amounts were paid to Mr.

Liang during fiscal year 2020, although the award opportunity remains available going forward.

While PRSUs were issued to our Chief Executive Officer, Mr.

Liang, during fiscal year 2018, the Compensation Committee did not grant PRSUs to Mr.

Liang in either fiscal year 2019 or fiscal year 2020, in part because we had only a limited number of shares available under our 2016 Equity Incentive Plan and in part because we were not current in our periodic filings with the SEC until December 2019.

Following the re-listing of our stock on the Nasdaq Global Select Market in January 2020, the Compensation Committee began considering special bonuses to certain of our employees who were most deeply involved in the effort over the prior two years to restate our prior financial statements, bring us current in our SEC filings and re-list our common stock.

After several months of review and consideration, the Compensation Committee determined in May 2020 to make special cash bonus payments to certain of our employees, including $342,784 for Mr.

Bauer and $147,107 for Mr.

For fiscal 2020, the Compensation Committee established a short-term incentive cash program in which each of our named executive officers participated, as described in further detail below under “Fiscal Year 2020 Named Executive Officer Compensation Components - Short-Term Incentive Cash Compensation.”

Additional Information on the Compensation Committee's Compensation Consultant

For both fiscal years 2019 and 2018, the Compensation Committee directly engaged Radford to assist it in obtaining and reviewing information relevant to named executive officer compensation decisions.

The independence and performance of Radford are of the utmost importance to the Compensation Committee.

In fiscal year 2019, after Radford had advised the Compensation Committee regarding executive officer compensation decisions, our management commissioned Radford to provide additional services to management for similar compensation studies to evaluate certain components of total compensation for our employees generally.

The Compensation Committee has assessed the independence of Radford in the light of all relevant factors, including the additional services and other factors required by the Securities and Exchange Commission, that could give rise to a potential conflict of interest with respect to Radford during fiscal years 2019 and 2018.

For fiscal year 2020, the Compensation Committee utilized information from Radford in making certain named executive officer compensation decisions.

Previously, in fiscal year 2019, Radford had advised the Compensation Committee regarding executive officer compensation decisions and our management had commissioned Radford to provide additional services to management for similar compensation studies to evaluate certain components of total compensation for our employees generally.

In making the adjustments to base salaries for our named executive officers in the fourth quarter of fiscal year 2020, the Compensation Committee relied on information that Radford had provided in both fiscal year 2020 and in fiscal year 2019.

In fiscal year 2019, before receiving Radford’s information and assistance, the Compensation Committee assessed the independence of Radford in the light of all relevant factors, including the additional services and other factors required by the SEC, that could give rise to a potential conflict of interest with respect to Radford.

Based on these reviews and assessments, the Compensation Committee did not identify any conflicts of interest raised by the work performed by Radford.

In fiscal year 2020, the Compensation Committee updated its assessment of Radford’s independence and did not identify any conflicts of interest raised by additional work performed by Radford in fiscal year 2020.

The Role of the Most Recent Stockholder Say-on-Pay Vote

The Compensation Committee, with the entire Board, and our management value the opinions of our stockholders.

At our last annual meeting of stockholders, which was held on March 1, 2017 (the "Fiscal Year 2016 Annual Meeting"), we provided our stockholders the opportunity to vote to approve, on an annual advisory basis, the compensation of our named executive officers as disclosed in the proxy statement for our Fiscal Year 2016 Annual Meeting.

At the meeting, over 99% of the stockholders who were present and entitled to vote on this “say-on-pay” proposal approved the compensation of our named executive officers.

At our last annual meeting of stockholders, which was held on June 5, 2020 (the "Fiscal Year 2019 Annual Meeting"), we provided our stockholders the opportunity to vote to approve, on an annual advisory basis, the compensation of our named executive officers as disclosed in the proxy statement for such meeting.

At the meeting, stockholders representing over 91% of the stock present and entitled to vote on this “say-on-pay” proposal approved the compensation of our named executive officers.

Although the say-on-pay vote was non-binding, the Compensation Committee has considered, and expects to continue to consider, the outcome of the vote when making future compensation decisions for our named executive officers.

In determining named executive officer compensation for both fiscal years 2019 and 2018, our Compensation Committee specifically considered the strong support expressed by our stockholders at the Fiscal Year 2016 Annual Meeting in the say-on-pay vote as one factor in deciding that our compensation policies and procedures for fiscal years 2019 and 2018 should largely remain consistent with our policies and procedures in prior years.

In addition, while the Fiscal Year 2019 Annual Meeting and therefore the say-on-pay vote were held late in fiscal year 2020, outreach had been made to several significant stockholders prior to the meeting to discuss (among other things) matters related to executive compensation.

Feedback received from such stockholders included a desire that a more significant portion of executive compensation (including future equity awards made following the adoption of the 2020 Plan) be tied to performance based upon the achievement of pre-established goals.

The Compensation Committee currently intends to take this feedback into account when instituting future compensation plans for our executive officers.

Role of Executive Officers in the Compensation Process

Each year, management provides recommendations to the Compensation Committee regarding compensation program design and evaluations of executive and Company performance.

In particular, in fiscal years 2019 and 2018, our Chief Executive Officer and Chief Financial Officer provided the Compensation Committee with their views on the appropriate company performance considerations for use in our short-term and long-term incentive programs.

Management's input was provided based on its view of investor expectations and our operating plans and financial goals.

At the end of fiscal years 2019 and 2018, our Chief Executive Officer provided the Compensation Committee with his views of the nature and extent of our performance against expectations.

Finally, our Chief Executive Officer also provided the Compensation Committee with regular performance evaluations of the other named executive officers, including his views as to their impact on strategic initiatives and organizational goals, as well as their leadership behaviors.

In fiscal years 2019 and 2018, the Compensation Committee also had access to the comparative compensation data discussed above, which had been furnished by Radford.

In particular, in fiscal year 2020 our Chief Executive Officer and Chief Financial Officer provided the Compensation Committee with their views on the appropriate Company performance considerations for use in our short-term incentive programs.

Management's input was provided based on its view of investor expectations, our operating plans and financial goals, and consideration of the limited availability of shares remaining available for grant under our 2016 Equity Incentive Plan.

At the end of fiscal year 2020, our Chief Executive Officer provided the Compensation Committee with his views of the nature and extent of our performance against expectations.

While the Compensation Committee carefully considers all recommendations made by members of management, ultimate authority for all compensation decisions regarding our named executive officers rests with the Compensation Committee and the Board.

Fiscal Year 2019 and 2018 Named Executive Officer Compensation Components

For fiscal years 2019 and 2018, the principal components of compensation for our named executive officers were:

Equity-based incentive compensation consisting of grants of:

(1) for fiscal year 2019, stock options and/or time-based restricted stock units (“RSUs”) to certain named executive officers;

and (2) for fiscal year 2018, stock options, time-based RSUs and/or PRSUs to certain named executive officers.

Fiscal Year 2020 Named Executive Officer Compensation Components

For fiscal year 2020 , the principal components of compensation for our named executive officers were:

Short-term incentive cash compensation.

In addition, certain of our named executive officers also received some or all of the following additional compensation components, as further described below:

Other short-term discretionary bonuses or one-time cash incentive awards;

Equity-based incentive compensation consisting of grants of stock options and/or PRSUs.

We pay base salaries to our named executive officers to provide them with a base level of fixed income for services rendered to us.

Base salaries for our named executive officers other than the Chief Executive Officer are determined annually by the Compensation Committee based upon recommendations by our Chief Executive Officer, taking into account factors such as salary norms in comparable companies and publicly available data regarding compensation increases in our industry, subjective assessments of the nature of the officers' positions and an annual review of the contribution and experience of each executive officer.

For the Chief Executive Officer, the Compensation Committee considers substantially the same type of information, as well as our overall size in terms of annual revenue and number of employees and the Chief Executive Officer’s overall stock ownership.

In determining base salaries for fiscal year 2019, the Compensation Committee decided to maintain all named executive officer base salaries at fiscal year 2018 levels because the Compensation Committee believed it was not appropriate to increase base salaries at a time when we were still in the process of completing our review and analysis of the matters that led to the delay filing the 2017 10-K.

Base salary rates for our named executive officers other than the Chief Executive Officer are determined annually by the Compensation Committee based upon recommendations by our Chief Executive Officer, typically taking into account factors such as salary norms in comparable companies and publicly available data regarding compensation increases in our industry, subjective assessments of the nature of the officers' positions and an annual review of the contribution and experience of each named executive officer.

For the Chief Executive Officer, the Compensation Committee considers substantially the same type of information, as well as our overall size in terms of annual revenue, scale and number of employees and the Chief Executive Officer’s overall stock ownership.

The Compensation Committee held base salaries at the same annual rates as were in effect at the end of fiscal 2019 until after we had again become current in filing our periodic reports with the SEC (which occurred in December 2019) and our common stock was relisted on the Nasdaq Global Select Market (which occurred in January 2020).

In the fourth quarter of fiscal year 2020, the Compensation Committee approved increases in base salary rates for the named executive officers, which ranged from approximately 8% to 43%, as disclosed below.

In determining increased base salary rates for fiscal year 2020, the Compensation Committee considered the salary factors discussed in the paragraph above, the contributions the named executive officers made during fiscal year 2020 to regain compliance with our public Company disclosure requirements and achieve a relisting of our shares on the Nasdaq Global Select Market, and the fact that base salary rates during fiscal year 2019 had been maintained at the same levels as in fiscal year 2018 for all named executive officers.

Principal Position During Fiscal Year 2020

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Senior Vice President, Worldwide Sales

Senior Vice President, Operations

David Weigand

Senior Vice President, Chief Compliance Officer

In determining base salaries for fiscal year 2018, the Compensation Committee decided to maintain most named executive officer base salaries at fiscal year 2017 levels, except we increased the annual base salary rate for Mr.

Bauer by 3.0% in the first quarter of fiscal year 2018 as an annual merit increase, prior to the time that Mr.

Bauer was a named executive officer.

The Compensation Committee determined to maintain the other named executive officers’ base salary rates at fiscal year 2017 levels in light of the matters that led to the delay in the company filing the 2017 10-K.

Principal Position During Fiscal Year 2018

Fiscal Year 2017

Base Salary Rate

Fiscal Year 2018

Base Salary Rate

Charles Liang

President, Chief Executive Officer and Chairman of the Board

Senior Vice President, Chief Financial Officer

Howard Hideshima (1)

Former Senior Vice President, Chief Financial Officer

Senior Vice President.

Phidias Chou (1)

Former Senior Vice President, Worldwide Sales

Wally Liaw (1)

Former Senior Vice President, International Sales

Chief Operating Officer

____________________

Hideshima, Mr.

Liaw resigned effective January 30, 2018.

Short-term bonuses.

We did not pay short-term bonuses to our Chief Executive Officer or to our Senior Vice President and Co-Founder in either fiscal year 2018 or fiscal year 2019.

With respect to our other named executive officers, we have individualized short-term cash bonus arrangements.

In some cases, these arrangements pre-date the time that these individuals became named executive officers, and in other cases, the arrangements were negotiated at the time the individual was hired or was designated as named executive officer.

The base salary amounts actually paid to each named executive officer for fiscal year 2019 and 2020 are disclosed in the Summary Compensation Table.

The fiscal year 2020 salary amounts disclosed in the Summary Compensation Table for each named executive officer are less than the amounts disclosed in the table above because each named executive officer was receiving his fiscal year 2019 base salary rate for a portion of fiscal year 2020.

Effective April 1, 2019.

Short-Term Incentive Cash Compensation .

As part of its review of executive compensation following the re-listing of our common stock on the Nasdaq Global Select Market, the Compensation Committee implemented a short-term incentive, or “STI,” cash compensation program for fiscal year 2020.

This program was instituted in the fourth quarter of fiscal 2020, at the same time that the Compensation Committee adjusted base salary rates for most of our named executive officers.

The general goal of our STI program for our named executive officers is to support our overall business objectives by aligning short-term Company performance with the interests of investors and focusing attention on key measures of success.

Our STI program accomplishes this goal by providing the opportunity for additional cash rewards when pre-established Company and individual performance goals are achieved.

The Compensation Committee established two financial performance metrics that would determine the STI amount each named executive officer would receive under the STI program.

These two metrics were annual revenue for fiscal year 2020 (determined as reflected in the Company’s audited financial statements) and non-GAAP operating margin for the fourth quarter of fiscal year 2020 (as reported by the Company in its press release announcing fiscal year-end results).

These two metrics were evenly weighted, so that each was to contribute 50% of the STI award payout to be received by each named executive officer.

The Compensation Committee established for each metric a “base” performance goal, a “target” performance goal and a “high” performance goal.

If the Company did not achieve at least the base goal for a performance metric, none of the STI award opportunity associated with that metric could be earned.

For each named executive officer, the Compensation Committee established a target STI award payout opportunity that would be earned if the Company performed exactly at the target goals on both of the two metrics.

As disclosed in the table below, the target STI award opportunity ranged from 20% to 40% of the fiscal year 2020 base salary rate for each named executive officer, except that for Mr.

Liang, his target STI award payout opportunity was set at 100% of his fiscal year 2020 base salary rate.

At the base level of performance for a performance metric, each named executive officer could earn 80% of his target STI award payout opportunity for that performance metric.

At the high level of performance for a performance metric, each named executive officer other than Mr.

Liang could earn either 125% or 135% of his target STI award payout opportunity for that performance metric, and Mr.

Liang could earn 200% of his target STI award payout opportunity for that performance metric.

For actual performance between base, target and high levels, straight-line mathematical interpolation between the applicable payout opportunities would determine the achieved payout level for a performance metric.

The named executive officers’ STI award payout opportunities were determined by the Compensation Committee generally based on factors substantially similar to those described above for base salary determinations.

Two named executive officers, Messrs.

Clegg and Hsu, were provided the opportunity to further increase their STI award payout up to 150% for the annual revenue performance metric if actual performance for that performance metric met or exceeded an additional “stretch” goal above the “high” goal.

This additional opportunity was provided to Messrs.

Clegg and Hsu as they are the named executive officers, other than Mr.

Liang, whose work has the greatest impact on the Company’s annual revenue growth.

The Compensation Committee also assigned each of the named executive officers an individual performance goal to be completed during the fourth quarter of fiscal year 2020 (other than Mr.

Liang, whose STI award payout was determined solely based on the Company financial performance metrics).

Any named executive officer who did not achieve his assigned goal would not be eligible for a STI award payout above his target STI award opportunity, even if the Company’s actual financial performance exceeded the target goal on one or both of the financial performance metrics.

The fiscal 2020 target STI award opportunities for the named executive officers are shown in the following chart:

Named Executive Officer

Fiscal 2020 Target STI Award Amount

Target STI Award as a % of Base Salary Rate

Charles Liang

David Weigand

The Company performance metrics consisted of the following metrics for fiscal 2020:

Fiscal year 2020 revenue - weighted 50%;

Fourth quarter fiscal year 2020 non-GAAP operating margin, generally defined as non-GAAP income from operations as a percentage of net sales (for these purposes, non-GAAP income from operations excludes stock-based compensation expense, legal settlement costs, one-time employee performance bonuses, controls remediation and other expenses from GAAP income from operations) - weighted 50%.

The goals for each Company financial performance metric established for the fiscal 2020 STI awards, and actual results, were as follows (dollars in millions):

Company Performance Metrics, Goals and Actual Achievement

Company Performance Metric

Base Goal (80% of Target Payout)

Target Goal (100% of Target Payout)

High Goal (200%, 125% or 135% of Target Payout)

Stretch Goal (150% of Target Payout)

Actual Result

Percent of Target Goal Earned

FY 2020 Revenue

Q4 2020 Non-GAAP Operating Margin

In terms of the individual goals for the named executive officers (other than Mr.

Liang, whose STI award payout opportunity was based solely on the Company’s performance against the financial performance metrics described above):

Bauer’s goals primarily related to developing both a new corporate-wide budgeting system and the 2021 annual operating plan.

Clegg and Hsu’s goal primarily related to developing customers to support future years’ revenue achievement;

Weigand’s goal primarily related to the Company response to the coronavirus pandemic.

The Compensation Committee, after considering the recommendations of Mr.

Liang (as well as input from the Chairman of the Audit Committee regarding Mr.

Bauer’s performance), and taking into account the degree of achievement of the individual goals, determined each named executive officer's STI award payout.

Each named executive officer’s fiscal year 2020 target STI award opportunity, and actual payout result, were as follows:

Named Executive Officer

Fiscal 2020 Target STI Award Amount

Fiscal 2020 STI Award Payout ($)

Fiscal 2020 STI Award Payout (%)

Charles Liang

David Weigand

Other Short-Term Bonuses .

We have had individualized short-term cash bonus arrangements with various officers of the Company, including three of our named executives officers.

In some cases, these arrangements pre-date the time that these individuals became executive officers, and in other cases, the arrangements were negotiated at the time the individual was hired or was designated as an executive officer.

In some cases, these arrangements provide for fixed bonus payments and in other cases these arrangements provide for variable bonus payments or a hybrid thereof.

We award these short-term bonuses to certain named executive officers for their continued achievements and contributions to the Company.

The table below summarizes the fiscal year 2020 arrangements for Messrs.

Clegg, Bauer and Weigand.

The arrangements with Mr.

Clegg and Mr.

Bauer terminated as of July 31, 2020, and the arrangement with Mr.

Weigand terminated as of June 30, 2020.”

Fixed bonus, paid monthly, initially at a rate of $80,000 per year, then increased to a rate of $120,000 per year in September 2019.

Bauer is also eligible for less than $2,000 per year in a variable bonus tied to Company performance.

Fixed bonus, paid monthly, at a rate of $84,000 per year, plus $8,242 per year in a variable bonus tied to Company performance and $16,728 per year in a sales bonus based upon achieving certain quarterly sales goals.

David Weigand

Fixed bonus, paid quarterly, at a rate of $75,000 per year.

This bonus was a continuation in fiscal year 2020 of an arrangement agreed at the time of Mr.

Weigand’s initial employment in May 2018.

The Company awarded certain special one-time cash incentive opportunities or made certain special one-time cash payments to Messrs.

Liang, Bauer, Clegg and/or Weigand, as described above under “Key Fiscal Year 2020 Executive Compensation Decisions and Actions.”

Equity-Based Incentive Compensation .

Stock options and other equity-based awards are an important component of the total compensation of our named executive officers.

We believe that equity-based awards align the interests of each named executive officer with those of our stockholders.

Stock options and other equity-based awards are also an important component of the total compensation of our named executive officers.

We believe that equity-based awards also align the interests of each named executive officer with those of our stockholders.

They also provide named executive officers a significant, long-term interest in our success and help retain key named executive officers in a competitive market for executive talent.

Our 2016 Equity Incentive Plan authorizes the Compensation Committee to grant stock options and other equity-based awards to eligible named executive officers.

The number of shares owned by, or subject to equity-based awards held by, each named executive officer is periodically reviewed and additional awards are considered based upon a generalized assessment of past performance of the executive and the relative holdings of other executive officers.

The 2016 Equity Incentive Plan authorized the Compensation Committee to grant stock options and other equity-based awards to eligible named executive officers.

The number of shares owned by, or subject to equity-based awards held by, each named executive officer is periodically reviewed and additional awards are considered based upon a generalized assessment of past performance, expected future performance and the relative holdings of other executive officers.

The Compensation Committee has historically granted equity awards to employees on a two-year cycle.

Stockholders approved the 2020 Plan at the Fiscal Year 2019 Annual Meeting.

As a result, while outstanding awards issued under the 2016 Equity Incentive Plan will continue to be governed by that plan, no new grants are permitted to be made under the 2016 Equity Incentive Plan and we expect to make all future equity awards out of the 2020 Plan.

Due to the fact that we failed to file our 2017 10-K by its due date, the effectiveness of our registration statement on Form S-8 covering equity awards under our 2016 Equity Incentive Plan was suspended.

It has remained suspended since that time, and the effectiveness of this registration statement on Form S-8 will not be revived until we are able to file all our delinquent quarterly and annual reports with the SEC.

On advice of counsel, the Compensation Committee has refrained from making equity awards to our named executive officers during the period of time when our registration statement on Form S-8 was not effective.

The equity grants to named executive officers described below were all made either (i) at a time when our registration statement on Form S-8 was still effective or (ii) to individuals who had not been designated by the Board as executive officers at the time of grant, but who were, later in the same fiscal year, designated as executive officers by the Board.

Once we are again current in our SEC filings and the effectiveness of our registration statement on Form S-8 is revived, our Compensation Committee expects that

it will grant additional equity awards to our named executive officers that will reflect the lack of equity awards since the effectiveness of our registration statement on Form S-8 was suspended.

Fiscal Year 2019 Grants.

For fiscal year 2019, the Compensation Committee determined to provide certain named executive officers with grants of stock options and/or time-based RSUs.

In particular, the Compensation Committee determined to provide the following awards:

It remained suspended until December 20, 2019, the date on which we had completed filing all of our delinquent quarterly and annual reports with the SEC.

The effectiveness of our registration statement on Form S-8 for the 2016 Equity Incentive Plan was then revived.

The Compensation Committee did not make equity awards to our named executive officers during the period of time when our registration statement on Form S-8 for the 2016 Equity Incentive Plan was not effective.

With the adoption of the 2020 Plan, and the effectiveness of a Form S-8 registration statement for that plan and awards granted under it, our Compensation Committee expects that it will grant additional equity awards to our named executive officers that will reflect the lack of equity

awards for a period of time after the effectiveness of our registration statement on Form S-8 for our prior 2016 Equity Incentive Plan was suspended.

For fiscal year 2020, the Compensation Committee determined to provide the awards of stock options and PRSUs as outlined in the table below.

The equity grants to Mr.

Hsu were made during the last quarter of fiscal year 2020 in connection with his promotion to Chief Operating Officer (or COO).

Type of Award

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· Registration statement on Form S-8 not effective

· Stock options

· Normal refresh grant when not an executive officer

· Stock options

· Normal refresh grant when not an executive officer

· Registration statement on Form S-8 not effective

David Weigand

· Registration statement on Form S-8 not effective

· Stock options

· Initial hire grant;

not yet an executive officer

· Initial hire grant;

not yet an executive officer

· Granted in connection with promotion to COO

Stock Options .

In general, for fiscal year 2019, the Compensation Committee used stock options to directly align the compensation interests of participating named executive officers with the investment interests of our stockholders.

The stock options described above for Messrs.

Clegg and Weigand were granted on July 31, 2018 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($22.10 per share).

In general, the Compensation Committee uses stock options to directly align the compensation interests of participating named executive officers with the investment interests of our stockholders.

The stock options described above for Mr.

Kao were granted on October 30, 2018 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($13.00 per share).

These stock options vested as to 25% of the award on May 1, 2019, October 30, 2019 and April 30, 2019 for Messrs.

Clegg, Kao and Weigand, respectively, and generally vested (or vest) as to 1/16th of the award per quarter after the first vesting date (fully vested by May 1, 2022, April 30, 2022 and October 30, 2022, respectively).

The Compensation Committee provided for these vesting schedules in accordance with our company’s standard practice, which the Compensation Committee believes is common among the companies with whom we compete for talent.

The Compensation Committee determined the particular size of the stock option grants for these named executive officers based on our company’s normal refresh grant practices (for Messrs.

Clegg and Kao) or the amounts agreed upon at the time of hire (for Mr.

In general, for fiscal year 2019, RSUs represented the right to receive a defined number of shares of our common stock after completing a period of service established at the grant date, and encourage long-term commitment to the company.

Clegg and Weigand’s RSUs vested as to 25% of the award on May 16, 2019 and generally vested (or vest) as to 1/16th of the award per quarter after the first vesting date (fully vested by May 16, 2022).

The Compensation Committee determined the particular size of the RSU awards for these individuals based on our company’s normal refresh grant practices (for Messrs.

Clegg and Kao) or the amounts agreed upon at the time of hire (for Mr.

Fiscal Year 2018 Grants.

For fiscal year 2018, the Compensation Committee determined to provide certain named executive officers with grants of stock options, time-based RSUs and/or PRSUs.

In particular, the Compensation Committee determined to provide the following awards:

Type of Award

Quantity (at Target) of Award

Rationale for Providing

(or Not Providing) the Award

Charles Liang

· Stock options

· PRSUs (one-year performance period)

· PRSUs (two-year performance period)

· 60,000 at target

· Refresh grant, registration statement on Form S-8 effective at time of grant

· Refresh grant, adding performance element, registration statement on Form S-8 effective at time of grant

· Refresh grant, adding different performance element, registration statement on Form S-8 effective at time of grant

· Registration statement on Form S-8 not effective when became named executive officer

Howard Hideshima

· Not on schedule for refresh grant

· Registration statement on Form S-8 not effective when scheduled for refresh grant

· Not on schedule for refresh grant

Stock Options.

In general, the Compensation Committee used stock options to directly align the compensation interests of the participating named executive officer with the investment interests of our stockholders.

The stock options described above were granted on August 2, 2017 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($26.95 per share).

Liang’s stock options vested immediately as to 12.5% of the award and generally vested (or vest) as to 1/36th of the award per month after the first vesting date (fully vested by August 2, 2020).

The Compensation Committee determined the particular size of the stock option grant for Mr.

Liang based on its subjective judgment of the appropriate size of this option grant, when coupled with the PRSU grants discussed below, to provide appropriate incentive for Mr.

Liang to continue to lead the company into the future.

In general, PRSUs represent an opportunity to earn a defined number of shares of our common stock if we and/or the recipient achieve pre-set performance goals over time.

PRSUs generally encourage long-term commitment to the company and commitment to performance that is designed to boost long-term company results.

Liang received two PRSU grants in fiscal year 2018:

one grant with a performance period of one year, running from July 1, 2017 to June 30, 2018;

and a second grant with a performance period of two years, running from July 1, 2017 to June 30, 2019.

The rationale for the two separate grants was to have two different performance metrics on which Mr.

Liang should focus:

revenue growth in fiscal year 2018 (for the first PRSU) and non-GAAP operating margin for fiscal years 2018 and 2019 (for the second PRSU).

The first PRSU provided for 60,000 RSUs at target, with the opportunity to earn from zero to as many as 120,000 RSUs based on revenue growth in fiscal year 2018 over fiscal year 2017, as reflected in our audited financial statements;

provided that if non-GAAP operating margin was not at least 3.5%, no RSUs would be earned, regardless of growth.

Our company exceeded the revenue growth target for earning the maximum number of units for fiscal year 2018, so that Mr.

Liang earned 120,000 RSUs.

The second PRSU also provided for 60,000 RSUs at target (specified average non-GAAP operating margin over the two-year period comprised of fiscal years 2018 and 2019), as reflected in our audited financial statements and a defined calculation of adjustments from the GAAP financial statement to reach the non-GAAP operating margin.

60,000 units was the maximum number that could be earned under the second PRSU.

Our company did not achieve the minimum average non-GAAP operating margin specified for fiscal years 2018 and 2019, so none of the units under the second PRSU were earned, and the PRSU expired.

The Compensation Committee did not apply any discretion in determining whether the performance metrics had been met, nor did it adjust the metrics after they had been established.

In addition to their performance-based conditions, the PRSUs were subject to service-based vesting as follows:

one-half of each earned award was to vest on the final day of its performance period;

the remaining portion of the one-year PRSUs then vested on the last day of each of the company’s next 10 fiscal quarters;

and the remaining portion of the two-year PRSUs would have then vested (or vest) on the last day of each of the company’s next six fiscal quarters (but no PRSUs were earned based on our company’s performance).

The Compensation Committee determined the particular size of PRSU grants for Mr.

Liang based on its subjective judgment of the appropriate size for these PRSU grants when coupled with the option grant discussed above needed to provide appropriate incentive for Mr.

Liang to continue to lead the company into the future and to focus on the specific performance metrics associated with each PRSU grant.

Hsu were granted on March 27, 2020 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($20.37 per share).

These stock options vest at a rate of 88% on March 27, 2021 and 12% one quarter thereafter, such that the granted options will be fully vested on June 27, 2021.

Liang first discussed Mr.

Hsu assuming the role of COO in March 2019 and discussed an equity grant with a two-year vesting period.

The particular size of the stock option grant was determined based upon negotiation with Mr.

Hsu and the recommendation of Mr.

Hsu’s formal appointment as COO did not occur until September 6, 2019 and the grant of the equity award that had been discussed was delayed until after our common stock had been re-listed on the Nasdaq Global Select Market.

This equity award was granted under the 2016 Equity Incentive Plan, which required a minimum vesting period of one year.

When the first vesting date of March 27, 2021 occurs, seven quarters will have elapsed since Mr.

Liang first discussed the change in Mr.

Hsu’s role, and the vesting of 7/8ths of the stock option award reflects that history.

In general, PRSUs represent the right to receive a defined number of shares of our common stock subject to the achievement of pre-established goals.

The PRSUs described above for Mr.

Hsu were granted on March 27, 2020.

The Compensation Committee determined the particular size of the PRSU grant to Mr.

Hsu based on similar sized grants in prior years to other executives and upon the recommendation of Mr.

In general, a total of 30,000 units will vest based on service conditions only, with the first tranche of 15,000 vesting in May 2021 and 15,000 vesting in November 2021.

Additional units can be earned for each tranche if the Company’s revenue increases year-over-year (fiscal year 2020 compared to fiscal year 2019 for the first tranche and fiscal year 2021 compared to fiscal year 2020 for the second tranche).

With respect to the first tranche, if the Company’s revenue for fiscal year 2020 exceeded its revenue for fiscal year 2019, then a number of additional units would have been earned for the first tranche.

The number of additional units was to be determined by multiplying the percentage growth in revenue by three, which amount would have then been a multiplier of the base number of 15,000 units.

For example, if the Company’s growth rate from fiscal 2019 to fiscal 2020 had been 10%, the number of additional units would have been 4,500 (30% of 15,000 units).

The Company’s revenue for fiscal year 2020 ($3,339 million) did not exceed revenue for fiscal 2019 ($3,500 million), however, so no additional units were earned for the first tranche.

Similarly, with respect to the second tranche, if the Company’s revenue for fiscal year 2021 exceeds its revenue for fiscal year 2020, then a number of additional units will be earned for the second tranche.

The number of additional units will again be determined by multiplying the percentage growth in revenue by three, which amount will be a multiplier of the base number of 15,000 units.

Stock Ownership Guidelines

Other than as discussed below under “Stock Retention Policy,” we currently do not require our directors or executive officers to own a particular amount of our common stock.

The Compensation Committee is satisfied that stock and option holdings among our directors and named executive officers has historically been sufficient to provide motivation and to align this group’s interests with those of our stockholders.

We have not been able to make equity awards to our Board members since the effectiveness of our registration statement on Form S-8 was suspended in October 2017.

The Compensation Committee believes that, once we are again able to make such equity awards to our Board members, their stock and stock option holdings will again align their interests with the interests of our stockholders.

Our insider trading policy prohibits any of our directors, executive officers, employees or contractors from engaging in any transactions in publicly-traded options, such as puts and calls, and other derivative securities, including any hedging or similar transaction, with respect to our common stock.

The Compensation Committee is satisfied that stock and option holdings among our directors and named executive officers have historically been sufficient to provide motivation and to align this group’s interests with those of our stockholders.

Our insider trading policy prohibits any of our directors, executive

officers, employees or contractors from engaging in any transactions in publicly-traded options, such as puts and calls, and other derivative securities, including any hedging or similar transaction, with respect to our common stock.

Stock Retention Policy

We have adopted a stock retention policy which requires that our Chief Executive Officer hold a significant portion of the shares of our common stock acquired under our equity incentive plan for at least 36 months.

Under the policy, the Chief Executive Officer must retain at least 50% of all “net” shares received (“net” shares means those shares remaining after the sale or withholding of shares in payment of the exercise price, if applicable, and withholding taxes) for at least 36 months following the date on which an equity award is vested, settled or exercised, as applicable.

Recoupment Policy

We established a Recoupment Policy that is applicable to our named executive officers.

We established a recoupment policy that is applicable to our named executive officers (the “Recoupment Policy”).

Under the Recoupment Policy, if we are required to prepare an accounting restatement due to material noncompliance with the financial reporting requirements under United States securities laws, the Compensation Committee shall be entitled to recover from any current or former executive officer any excess incentive-based compensation received by such person during the three-year period prior to the date on which we are required to prepare the restatement.

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The “excess incentive-based compensation” is the difference between the actual amount that was paid, and the amount that would have been paid under the restated financial results.

As indicated in the Explanatory Note, certain consolidated financial statements included in our 2017 10-K were restated.

Our Compensation Committee has reviewed whether any of our executive officers or former executive officers received excess incentive-based compensation.

The committee concluded that no executive officer or former executive officer received excess incentive-based compensation and, accordingly, determined not to pursue any potential recoupment from any executive officer or former executive officer.

Other Benefits

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We have not entered into employment agreements with any of our named executive officers.

Hideshima had, and each of Messrs.

Bauer, Clegg, Kao and Weigand currently has, a signed offer letter which provides for at-will employment.

Each of Messrs.

Bauer, Clegg, Weigand, and Hsu currently has a signed offer letter which provides for at-will employment.

Each such offer letter provides for an initial base salary rate, an initial stock option grant and rights to participate in our employee benefit plans as described above.

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Internal Revenue Code of 1986, as amended (the “Code”), generally limits a Company’s ability to deduct for tax purposes compensation in excess of $1.0 million paid in any single tax year to certain executive officers (and, beginning in 2018, certain former executive officers).

Prior to 2017 tax reform legislation, compensation deemed to be performance-based in accordance with Section 162(m) could be exempt from this $1.0 million limitation, and compensation paid

to the Chief Financial Officer was not subject to the deductibility limitation of Section 162(m).

After the 2017 tax reform legislation, performance-based exception no longer applies, except for the performance-based compensation that is grandfathered;

Prior to 2017 tax reform legislation, compensation deemed to be performance-based in accordance with Section 162(m) could be exempt from this $1.0 million limitation, and compensation paid to the Chief Financial Officer was not subject to the deductibility limitation of Section 162(m).

After the 2017 tax reform legislation, this performance-based exception no longer applies, except for the performance-based compensation that is grandfathered;

and compensation paid to the Chief Financial Officer is subject to the deductibility limitation of Section 162(m).

This legislation change does not have material impact to the Company for fiscal year 2019.

The future impact is dependent on the future stock value of the Company.

This legislation change did not have material impact to the Company for fiscal year 2020.

We continue to evaluate the impact of the 2017 tax reform legislation and related guidance and regulations for their potential impact on our Company.

Regardless of that impact, however, we will continue to design and maintain executive compensation arrangements that we believe will attract and retain the executive talent that we need to compete successfully, even if in certain cases such compensation is not deductible for federal income tax purposes.

of that impact, however, we will continue to design and maintain executive compensation arrangements that we believe will attract and retain the executive talent that we need to compete successfully, even if in certain cases such compensation is not deductible for federal income tax purposes.

In addition, because of the uncertainties associated with the application and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m), as in effect prior to 2018, will in fact be deductible.

3 unchanged sentences

If our plans, arrangements and agreements as administered fail to meet certain requirements under or exemptions from Section 409A, compensation earned thereunder may be subject to immediate taxation and tax penalties.

The Committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns our named executive officers’ interests with those of our stockholders.

The Committee also believes that the compensation of our named executive officers is both appropriate and responsive to the goal of building stockholder value.

The Compensation Committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns our named executive officers’ interests with those of our stockholders.

The Compensation Committee also believes that the compensation of our named executive officers is both appropriate and responsive to the goal of building stockholder value.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with our management.

Based on this review and these discussions, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Annual Report.

Based on this review and these discussions, the Compensation Committee recommended to the Board that the CD&A be included in this Annual Report.

This report has been furnished by the Compensation Committee.

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and Chairman of the Board

Senior Vice President and Chief Financial Officer

Senior Vice President

Senior Vice President, Operations

Senior Vice President, Chief Financial Officer

Senior Vice President, Worldwide Sales

David Weigand

Senior Vice President, Chief Compliance Officer

Senior Vice President, Chief Operating Officer

__________________________

Amounts disclosed under "Salary" for fiscal year 2019 includes leave pay earned by the named executive officers for fiscal year 2019.

Amounts disclosed under “Bonus” for fiscal year 2019 reflect primarily fixed amounts per the terms of employment offer letters or upon promotion, quarterly profit sharing and/or our sales bonus program.

Amounts disclosed for fiscal year 2019 represent the grant date fair value of RSU awards granted during fiscal year 2019 calculated in accordance with ASC Topic 718 and are based on the closing market price of our common stock on the date of grant.

Amounts disclosed for fiscal year 2019 represent the grant date fair value of each stock option award granted during fiscal year 2019 calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model.

Assumptions used in the calculation of these amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 13 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2019 included in this Annual Report.

Amounts disclosed under "Salary" for fiscal year 2020 include leave pay earned by the named executive officers.

Amounts disclosed under “Bonus” for fiscal year 2020 reflect both (a) short-term bonuses for Messrs.

Bauer, Clegg and Weigand as described above in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Other Short-Term Bonuses” and (b) for Mr.

Bauer and Mr.

Weigand, additional bonuses paid in fiscal year 2020 in the amounts of $342,784 and $147,107, respectively (as described above in “Compensation Discussion and Analysis”).

The amount disclosed for fiscal year 2020 represents the grant date fair value of the PRSU award granted during the fiscal year calculated in accordance with ASC Topic 718 and is based on the probable outcome of the performance conditions on the date of grant.

Assumptions used in the calculation of this amount are included in Part II, Item 8, “Financial Statement and Supplementary Data”, and Part II, Item 8, Note 14 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2020 included in this Annual Report on Form 10-K.

There is no maximum grant date fair value for Mr.

Hsu’s fiscal year 2020 PRSU award because the award does not specify a maximum amount of PRSUs that may be earned (there is no cap on the maximum performance achievement for the revenue growth performance metric).

The amount disclosed for fiscal year 2020 represents the grant date fair value of the stock option award calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model.

Assumptions used in the calculation of this amount are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 14 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2020 included in this Annual Report on Form 10-K.

Amounts disclosed in this column for fiscal year 2020 represent:

(a) for each named executive officer, the fiscal 2020 STI payout as described above in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Short-Term Incentive Cash Compensation”;

and (b) for Mr.

Clegg, the special one-time cash payment of $114,000 that was earned in fiscal year 2020 based on the achievement of the specified stock price condition (as described above in the “Compensation Discussion and Analysis”).

Fiscal Year 2020 Grants of Plan-Based Awards

The following table provides information concerning all plan-based awards granted during fiscal year 2019 to each of our named executive officers.

The following table provides information concerning all plan-based awards granted during fiscal year 2020 to each of our named executive officers, which grants were made under the 2016 Equity Incentive Plan.

FISCAL YEAR 2020 GRANTS OF PLAN-BASED AWARDS TABLE

Stock Awards:

Shares of Stock or Units (#)

Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)

Estimated Future Payouts Under Equity Incentive Plan Awards

Exercise or Base Price of

Option Awards

Exercise or Base Price of Option Awards ($/Sh)

Grant Date Fair

Value of Stock and Option

Awards ($)(1)

Threshold ($)

Threshold (#)

Charles Liang

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_________________________

Represents the fair value of the stock options and RSU awards as of the date of grant, computed in accordance with ASC Topic 718.

This RSU award vested at the rate of 25% on May 16, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

This stock option grant vested at the rate of 25% on May 1, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

This stock option grant vested at the rate of 25% on October 30, 2019 and generally will vest at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 30, 2022.

This stock option grant vested at the rate of 25% on April 30, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

This RSU award vested at the rate of 25% on May 16, 2019 and generally vested (or will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

Amounts in the first row reflect the STI award opportunities established for the named executive officers.

The amounts actually earned by the named executive officers for these awards are included in the “Non-Equity Incentive Plan Compensation” column of the 2020 Summary Compensation Table above.

These STI awards are described in further detail in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Short-Term Incentive Cash Compensation.” The second row of amounts for Mr.

Liang and Mr.

Clegg reflect special cash incentive award opportunities.

These awards are described in further detail in the “Compensation Discussion and Analysis” under “Key Fiscal Year 2020 Executive Compensation Decisions and Actions.”

Amounts disclosed in this column represent the fair value of the PRSU and stock option award as of the date of grant (for the PRSU award, based upon the probable outcome of performance conditions), computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures.

The performance-based portion of Mr.

Hsu’s PRSU grant (reported in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns of this table) is in addition to the service-based portion of his PRSU grant (reported in the “All Other Stock Awards:

Number of Shares of Stock or Units” column of this table).

Under the performance-based portion, units can be earned for each of two tranches if the Company’s revenue increases year-over-year (fiscal year 2020 compared to fiscal year 2019 for the first tranche and fiscal year 2021 compared to fiscal year 2020 for the second tranche).

For each tranche, the number of additional units is (or was to be) determined by multiplying the percentage growth in revenue by three, which amount would then be a multiplier of the base number of 15,000 units.

For example, if the Company’s growth rate from fiscal 2019 to fiscal 2020 had been 10%, the number of additional units would have been 4,500 (30% of 15,000 units).

The threshold, target, and maximum columns do not include specific values because Mr.

Hsu’s award does not provide for a threshold, target or maximum number of units that may be earned.

Of the PRSUs to be earned based on performance in fiscal 2020, 100% were to vest in May 2021, and of the PRSUs to be earned based on performance in fiscal 2021, 100% will vest in November 2021.

The Company’s performance for fiscal 2020 resulted in no PRSUs being earned under the first tranche of this award.

Under the service-based portion of Mr.

Hsu’s PRSU grant, in general a total of 30,000 units will vest based on service conditions only, with the first tranche of 15,000 vesting in May 2021 and 15,000 vesting in November 2021.

This PRSU award is described in further detail in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Equity-Based Incentive Compensation.”

This stock option grant vests at a rate of 88% on March 27, 2021 and 12% one quarter thereafter, such that the granted options will be fully vested on June 27, 2021.

Grants made in fiscal year 2020 are described more fully in the "Compensation Discussion and Analysis" section of this Annual Report.

More information concerning the terms of the employment arrangements, if applicable, and the amounts payable pursuant to the employment arrangements, in effect with our named executive officers during fiscal year 2019 is provided under the "Employment Arrangements, Severance and Change of Control Benefits" section of this Annual Report.

More information concerning the terms of the employment arrangements, if applicable, in effect with our named executive officers during fiscal year 2020 is provided under the "Employment Arrangements, Severance and Change of Control Benefits" under the “Compensation Discussion and Analysis”.

Outstanding Equity Awards at 2020 Fiscal Year-End

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Option Awards

Unexercised Options (#)

Unexercisable

Shares or Units of Stock That Have

Number of Shares or Units of Stock That Have

Units of Stock

That Have Not Vested

Equity Incentive Plan Awards:

Number of Unearned Shares, Units or Other Rights That Have Not Vested

Equity Incentive Plan Awards:

Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

Charles Liang

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__________________________

Represents the closing stock price per share of our common stock as of June 30, 2019 ($19.35) multiplied by the number of shares underlying RSUs that had not vested or that were unearned as of June 30, 2019.

These nonqualified stock options vested at the rate of 12.5% on August 2, 2017 and generally vested (or will vest) at a rate of 1/36th per month thereafter, such that the granted options will be fully vested on August 2, 2020.

Represents the closing stock price per share of our common stock as of June 30, 2020 ($28.39) multiplied by the number of shares underlying RSUs that had not vested as of June 30, 2020.

These RSUs were originally granted as PRSUs and were earned based on performance during fiscal year 2018 at a rate of 200% of the target number of PRSUs (a total of 120,000 PRSUs for this award).

50% of the earned PRSUs (60,000) vested on June 30, 2018 and the remainder of the earned PRSUs (60,000) will vest ratably over the following ten fiscal quarters based on Mr.

50% of the earned PRSUs (60,000)

vested on June 30, 2018 and the remainder of the earned PRSUs (60,000) were to vest ratably over the following ten fiscal quarters based on Mr.

Liang’s continued employment with the Company.

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These nonqualified stock options vested at the rate of 20% on January 11, 2018 and vested (or generally will vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

These RSUs vested at the rate of 25% on February 16, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on February 16, 2021.

These incentive stock options vested at the rate of 25% on April 17, 2017 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 17, 2020.

These incentive stock options vested at the rate of 25% on May 1, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

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These RSUs vested at the rate of 25% on May 16, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

These incentive stock options vested at the rate of 25% on April 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

These nonqualified stock options vested at the rate of 25% on April 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

These RSUs vested at the rate of 25% on May 16, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

These incentive stock options vested at the rate of 25% on October 22, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 22, 2021.

These nonqualified stock options vested at the rate of 25% on October 12, 2017 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 12, 2020.

These incentive stock options vested at the rate of 25% on October 30, 2019 and generally will vest at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 30, 2022.

These nonqualified stock options vested at the rate of 25% on October 30, 2019 and generally will vest at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 30, 2022.

These nonqualified stock options vested at the rate of 25% on May 1, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

These nonqualified stock options will vest at the rate of 88% on March 27, 2021 and 12% one quarter thereafter, such that the granted options will be fully vested on June 27, 2021.

These RSUs vested at the rate of 25% on November 16, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on November 16, 2021.

These RSUs vested at the rate of 25% on May 10, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 10, 2022.

This amount reflects the service-based portion of the March 2020 PRSU grant to Mr.

Hsu, as described in further detail in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Equity-Based Incentive Compensation.” Mr.

Hsu may earn 30,000 PRSUs in two separate tranches if he remains employed through the applicable vesting dates (May 2021 for 15,000 units, and November 2021 for an additional 15,000 units).

This note indicates that there is also a variable performance-based portion of the March 2020 PRSU grant to Mr.

Hsu was eligible to earn additional PRSUs for each of two tranches if the Company’s revenue increases year-over-year (fiscal year 2020 compared to fiscal year 2019 for the first tranche and fiscal year 2021 compared to fiscal year 2020 for the second tranche).

As of the end of fiscal year 2020, no PRSUs were earned under the first tranche of this award and Mr.

Hsu remained eligible at the end of fiscal year 2020 to earn additional units for only the second tranche of this award.

No quantitative amounts are reportable in these columns because Mr.

Hsu’s award does not provide for a threshold, target or maximum number of units that may be earned under the award.

In addition, the Company cannot estimate amounts to report in these columns based on last fiscal year’s performance because no PRSUs were earned for the revenue growth results between fiscal year 2019 and fiscal year 2020.

As a result, as of the end of fiscal year 2020, the Company is unable to determine the number of units (if any) that Mr.

Hsu was on track to earn under the second tranche of this award.

If, however, any units are earned under the second tranche of this award, their value as of June 30, 2020 would have been $28.39 per unit.

Fiscal Year 2020 Option Exercises and Stock Vested

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Value Realized on

Exercise ($)(1)

Number of Shares

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__________________________

The value is the closing price of our common stock on the date of vesting, multiplied by the number of shares vested, , except that in Mr.

Liang’s case, the value is the closing price of our common stock on the June 30, 2019 ($23.65), which is the date the shares vested.

Since our registration statement on Form S-8 was not effective, those vested shares for Mr.

Liang have not been released.

Fiscal Year 2019 Pension Benefits and Nonqualified Deferred Compensation

We do not provide any nonqualified deferred compensation arrangements or pension plans.

As such, the Pension Benefits disclosure and Nonqualified Deferred Compensation disclosure for fiscal year 2019 are omitted from this Annual Report.

Fiscal Year 2019 Potential Payments Upon Termination or Change of Control

We do not currently, and did not during fiscal year 2019 have, any arrangements with any of our named executive officers that provide for any additional or enhanced severance or other compensation or benefits in the event of termination or change of control of our company.

Fiscal Year 2018 Summary Compensation Table

The following table sets forth information concerning the reportable compensation for our 2018 named executive officers for the fiscal years ended 2018, 2017 and 2016, as applicable.

FISCAL YEAR 2018 SUMMARY COMPENSATION TABLE

Name and Principal

Incentive Plan

Pension Value

Non-qualified

Charles Liang

President, Chief Executive Officer

and Chairman of the Board

Senior Vice President and Chief Financial Officer

Howard Hideshima

Former Senior Vice President and Chief Financial Officer

Senior Vice President

Former Senior Vice President, Worldwide Sales

Former Senior Vice President, International Sales

__________________________

Amounts disclosed under "Salary" for fiscal year 2018 include leave pay earned by the named executive officers for fiscal year 2018.

Amounts disclosed under “Bonus” for fiscal year 2018 reflect fixed bonuses per the terms of an employment offer letter and our profit sharing program.

Amounts disclosed for fiscal year 2018 represent the grant date fair value of RSU or PRSU awards granted during fiscal year 2018 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 ("ASC Topic 718"), and are based on the closing market price of our common stock on the date of grant.

Assuming the highest level of performance is achieved for the PRSUs granted in fiscal year 2018, the grant date fair value of the PRSU awards would have been $3,252,000 for Mr.

Liang’s one-year PRSUs and $1,626,000 for Mr.

Liang’s two-year PRSUs.

Amounts disclosed for fiscal year 2018 represent the grant date fair value of each stock option award calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model.

Assumptions used in the calculation of these amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 13 “Stock-based Compensation and Stockholders’ Equity,” to our consolidated financial statements for fiscal year 2018 included in this Annual Report.

Fiscal Year 2018 Grants of Plan-Based Awards

The following table provides information concerning all plan-based awards granted during fiscal year 2018 to each of our 2018 named executive officers.

FISCAL YEAR 2018 GRANTS OF PLAN-BASED AWARDS TABLE

Estimated Future Payouts Under Equity Incentive Plan Awards

Exercise or Base Price of

Option Awards

Threshold (#)

Charles Liang

Howard Hideshima

__________________________

Represents the fair value of the stock options and RSU and PRSU awards as of the date of grant, computed in accordance with ASC Topic 718.

This stock option grant vested at the rate of 12.5% on August 2, 2017 and then generally vested (or vests) at a rate of 1/36th per month thereafter, such that the granted options will be fully vested on August 2, 2020.

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 200% of the target depending on revenue growth and minimum operating profit for fiscal year 2018.

Of the PRSUs earned based on performance, 50% vested as of June 30, 2018 and the remainder of the earned PRSUs vested (or will vest) ratably over the following 10 fiscal quarters based on Mr.

Liang’s continued employment with the Company.

The Company’s performance for fiscal 2018 resulted in 120,000 PRSUs being earned under this award.

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 100% of the target depending on average non-GAAP operating margin over a two-year period consisting of fiscal year 2018 and fiscal year 2019.

Non-GAAP operating margin is defined as net income from operations, less stock-based compensation expense, divided by net sales (all as shown on the Company’s audited financial statements for such fiscal years).

PRSUs earned based on performance, if any, would be 50% vested as of June 30, 2019, with the remainder vesting ratably over the following six fiscal quarters based on Mr.

Liang’s continued employment with the Company.

As of June 30, 2018, the performance period for this PRSU had not been completed, and it was not then determinable whether any of such PRSUs would be earned and/or vested.

Grants made in fiscal year 2018 are described more fully in the "Compensation Discussion and Analysis" section of this Annual Report.

More information concerning the terms of the employment arrangements, if applicable, and the amounts payable pursuant to the employment arrangements, in effect during fiscal year 2018 with our named executive officers is provided under the "Employment Arrangements, Severance and Change of Control Benefits" section of this Annual Report.

Outstanding Equity Awards at 2018 Fiscal Year-End

The following table provides information concerning the outstanding equity-based awards as of June 30, 2018, held by our 2018 named executive officers.

OUTSTANDING EQUITY AWARDS AT 2018 FISCAL YEAR-END TABLE

Option Awards

Unexercisable

Shares or Units of Stock That Have

Units of Stock

That Have Not Vested

Charles Liang

Howard Hideshima

__________________________

Represents the closing stock price per share of our common stock as of June 30, 2018 ($23.65) multiplied by the number of shares underlying RSUs that had not vested or that were unearned as of June 30, 2018.

These nonqualified stock options vested at the rate of 25% on November 1, 2015 and at a rate of 1/16th per quarter thereafter, such that the granted options were fully vested on November 1, 2018.

These nonqualified stock options vested at the rate of 12.5% on August 2, 2017 and generally vested (or vest) at a rate of 1/36 th per month thereafter, such that the granted options will be fully vested on August 2, 2020.

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 200% of the target depending on revenue growth and minimum operating profit for fiscal year 2018, as shown in the Company’s audited financial statements.

Of the PRSUs earned based on performance, 50% vested as of June 30, 2018 and the remainder of the earned PRSUs vested (or will vest) ratably over the following 10 fiscal quarters based on Mr.

Liang’s continued

employment with the Company.

The Company’s performance for fiscal 2018 resulted in 120,000 PRSUs being earned under this award.

This PRSU grant has a target opportunity of 60,000 PRSUs and a maximum opportunity of 100% of the target generally depending on performance during the performance period of July 1, 2017 to June 30, 2019.

In addition, 50% of the award vested on June 30, 2019 and the remainder of the award generally vested (or will vest), depending on final performance, at a rate of quarterly over the following six Company fiscal quarters.

The performance achievement determination and number of PRSUs actually earned are based on the audited financial statements of the Company for the fiscal years ended June 30, 2019 and 2018, but was not determinable as of June 30, 2018.

These PRSUs were not earned as of June 30, 2019.

These incentive stock options vested at the rate of 25% on January 11, 2018 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

These nonqualified stock options vested at the rate of 25% on January 11, 2018 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

These nonqualified stock options vested at the rate of 20% on January 11, 2018 and generally vested (or vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

These RSUs vested at the rate of 25% on February 16, 2018 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on February 16, 2021.

These nonqualified stock options vested at the rate of 25% on December 12, 2016 and at a rate of 1/16th per quarter thereafter, such that the granted options were fully vested on December 12, 2019.

These RSUs vested at the rate of 25% on February 10, 2017 and generally vested (or vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on February 10, 2020.

Fiscal Year 2018 Option Exercises and Stock Vested

The following table sets forth the dollar amounts realized by each of our 2018 named executive officers pursuant to the exercise or vesting of equity-based awards during fiscal year 2018.

2018 FISCAL YEAR OPTION EXERCISES AND STOCK VESTED TABLE

Option Awards

Number of Shares

Acquired on Exercise (#)

Value Realized on

Number of Shares

Acquired on Vesting (#)

Value Realized on

Vesting ($)(1)

Charles Liang

Howard Hideshima

__________________________

The value is the closing price of our common stock on the date the vested shares are released, except in Mr.

Liang’s case, the value is the closing price of our common stock on the June 30, 2018 ($23.65), which is the date the shares vested.

Since our registration statement on Form S-8 was not effective, those vested shares for Mr.

Liang have not been released.

The value disclosed in this column is based on the difference between the price of our common stock at the time of exercise and the exercise price.

The values disclosed in this column are based on the closing price of our common stock on the date of vesting, multiplied by the gross number of shares vested.

Fiscal Year 2020 Pension Benefits and Nonqualified Deferred Compensation

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2020 Median Annual Compensation for the identified median employee was determined to be $92,135, also including the Company’s contribution to group health and welfare benefits provided to the median employee.

To identify the median employee, we examined our total employee population as of June 30, 2018 (the “2018 Determination Date”).

We included all 2,090 U.S.

Due to our permitted use of reasonable estimates and assumptions in preparing this pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus this pay ratio disclosure is a reasonable estimate.

In calculating our Chief Executive Officer pay ratio for fiscal year 2020, we used the same median employee as was used to calculate the Chief Executive Officer pay ratio for each of fiscal year 2018 and fiscal year 2019.

This is because we believe that there has been no change in our employee population or employee compensation arrangements during fiscal year 2020 that would result in a significant change to our Chief Executive Officer pay ratio disclosure for fiscal year 2020.

To identify the median employee, we had examined our total employee population as of June 30, 2018 (the “Determination Date”).

We had included all 2,090 U.S.

full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries.

We also included all 1,115 full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries in The Netherlands and Taiwan.

We excluded independent contractors and “leased” workers.

We excluded all our employees in China (47 individuals) and Japan (14 individuals), which together represented approximately 1.9% of our total employees worldwide (3,266 individuals).

We had also included all 1,115 full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries in The Netherlands and Taiwan.

We had excluded independent contractors and “leased” workers.

We had also excluded all our employees in China (47 individuals) and Japan (14 individuals), which together

had then represented approximately 1.9% of our total employees worldwide (3,266 individuals).

Our analysis identified 3,205 individuals who were not excluded.

To determine 2018 Median Annual Compensation, we generally reviewed compensation for the period beginning on July 1, 2017 and ending on the Determination Date.

We totaled, for each included employee other than Mr.

To determine the median of the annual total compensation of all of such employees, other than Mr.

Liang, we had generally reviewed compensation for the period beginning on July 1, 2017 and ending on the Determination Date.

We had totaled, for each included employee other than Mr.

Liang, base earnings (salary, hourly wages and overtime, as applicable) and cash bonuses paid during the measurement period, plus the Company’s contribution to group health and welfare benefits.

We did not use any statistical sampling or cost-of-living adjustments for purposes of this pay ratio disclosure.

A portion of our employee workforce (full-time and part-time) worked for less than the full fiscal year (due to mid-measurement period start dates, disability status or similar factors, etc.).

In determining the median employee, we generally annualized the total compensation for such individuals other than temporary or seasonal employees (but avoided creating full-time equivalencies) based on reasonable assumptions and estimates relating to our employee compensation program.

Fiscal Year 2019 Chief Executive Officer Pay Ratio

For fiscal year 2019, the ratio of the annual total compensation of Mr.

Liang, our Chief Executive Officer (“2019 CEO Compensation”), to the median of the annual total compensation of all of our employees and those of our consolidated subsidiaries other than Mr.

Liang (“2019 Median Annual Compensation”), was 4.74 to 1.

For purposes of this pay ratio disclosure, 2019 CEO Compensation was determined to be $395,302, which represents the total compensation reported for Mr.

Liang under the “Fiscal Year 2019 Summary Compensation Table,” plus the Company’s contribution to group health and welfare benefits provided to Mr.

2019 Median Annual Compensation for the identified median employee was determined to be $83,467, also including the Company’s contribution to group health and welfare benefits provided to the median employee.

In calculating our Chief Executive Officer pay ratio for fiscal year 2019, we used the same median employee as was used to calculate the Chief Executive Officer pay ratio for fiscal year 2018.

This is because we believe that there has been no change in our employee population or employee compensation arrangements during fiscal year 2019 that would result in a significant change to our Chief Executive Officer pay ratio disclosure for fiscal year 2019.

We did not use any statistical sampling or cost-of-living adjustments for those purposes.

A portion of our employee workforce (full-time and part-time) had worked for less than the full fiscal year (due to mid-measurement period start dates, disability status or similar factors, etc.).

In determining the median employee, we had generally annualized the total compensation for such individuals other than temporary or seasonal employees (but avoided creating full-time equivalencies) based on reasonable assumptions and estimates relating to our employee compensation program.

DIRECTOR COMPENSATION

Under our director compensation policy in effect for fiscal year 2019, we reimbursed non-employee directors for reasonable expenses in connection with attendance at Board and committee meetings.

Our non-employee directors received an annual retainer of $60,000, payable quarterly in cash.

2020 Director Compensation

Under our director compensation policy, we reimburse non-employee directors for reasonable expenses in connection with attendance at Board and committee meetings.

Sara Liu, one of our directors, is an executive officer of the Company, but is not serving as a named executive officer, and she does not receive any additional compensation from us specifically for her service as a director.

For their service during fiscal year 2020, our non-employee directors received an annual retainer of $60,000, payable quarterly in cash.

In addition, the Chairperson of our Audit Committee received an additional annual retainer of $30,000 and the Chairperson of each of our Compensation Committee and our Nominating and Corporate Governance Committee received an additional annual retainer of $20,000 and $15,000, respectively, payable quarterly in cash.

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Finally, non-employee directors were entitled to $2,000 per meeting for each meeting attended in excess of (1) the regular meetings of the Board and (2) up to 10 additional meetings beyond such regular meetings, provided that notice of the meeting was properly given, a quorum was present and the meeting was recorded.

Non-employee directors also were eligible to receive equity grants under our 2016 Equity Incentive Plan.

Under our Board policy, non-employee directors were entitled to an annual grant of RSUs equal to $220,000.

Initial grants upon election as a director were to be prorated based on the grant date relative to our annual stockholders' meeting.

Generally, RSUs granted to non-employee directors were to vest on the earlier of the day prior to our next annual stockholders' meeting and the one-year anniversary of the grant date.

Since the effectiveness of our registration statement on Form S-8 was suspended when we became delinquent in filing our 2017 10-K, none of the equity grants to our non-employee directors contemplated by our policy were granted.

We anticipate that, at such time as we are current in our SEC filings, and the effectiveness of our registration statement on Form S-8 is revived, we will grant additional equity awards to our non-employee directors in amounts that reflect the grants that would have been made to them had the effectiveness of our registration statement on Form S-8 not been suspended.

In addition, following the recommendation of the Compensation Committee, in June 2020, the Board approved an additional cash fee of $120,000 for Mr.

Tally Liu for fiscal year 2020 for, among other matters, the extraordinary efforts he contributed in his capacity as a non-employee director in providing guidance and other assistance to management in connection with the restatement of our financial statements and remediation work on internal controls.

Additionally, in March 2020, the Board provided special performance-based cash incentive award opportunities to two non-employee directors, Mr.

Sherman Tuan and Mr.

These awards provide a cash incentive opportunity of up to $194,150 and $103,095, respectively, subject to the following conditions:

(1) 50% of the opportunity will be earned if the average closing price for the Company’s common stock equals or exceeds $31.61 (representing a 15% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding March 4, 2020) for any period of 20 consecutive trading days prior to September 30, 2021;

and (2) an additional 50% of the opportunity will be earned if the average closing price for the Company’s common stock equals or exceeds $32.99 (representing a 20% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding March 4, 2020) for any period of 20 consecutive trading days prior to June 30, 2022.

The relevant stock price goals were not met during fiscal year 2020, and no portion of these amounts were paid to Mr.

Tsai during fiscal year 2020, although the award opportunities remain available going forward.

Non-employee directors also were eligible to receive equity grants under our 2016 Equity Incentive Plan for fiscal year 2020 service (following adoption of our 2020 Plan by stockholders, our non-employee directors will receive future equity grants under our 2020 Plan).

Under our director compensation policy for fiscal year 2020, non-employee directors were entitled to receive an annual grant of RSUs equal in value to $220,000 for their service during fiscal year 2020.

Initial RSU grants upon election as a director are intended to be prorated based on the grant date relative to our annual stockholders' meeting.

Generally, RSUs granted to non-employee directors will vest on the earlier of the day prior to our next annual stockholders' meeting and the one-year anniversary of the grant date.

The vesting date for the RSUs granted to the non-employee directors in fiscal year 2020 is expected to be May 10, 2021.

Going forward, we expect that our director compensation policy will provide for annual RSU grants to the non-employee directors with a value equal to $220,000, with the ultimate number of RSUs granted based on our closing stock price on the date of grant.

Because the effectiveness of our registration statement on Form S-8 for the 2016 Equity Incentive Plan was suspended when we became delinquent in filing our 2017 10-K, none of the equity grants designed to be made to our non-employee directors for their respective service for fiscal years 2018 or 2019 were actually granted during the suspension.

After we became current in our SEC filings and the effectiveness of the registration statement on Form S-8 for the 2016 Equity Incentive Plan was revived, the Board acted in March 2020 to make certain additional grants to the non-employee directors under the 2016 Equity Incentive Plan, which grants were intended to provide the value that was not delivered for their service during fiscal years 2018 or 2019.

These grants, as reflected in the table below, consisted of:

no additional grants, due to his joining the Board in fiscal year 2020;

(1) $220,000 in RSUs, for his fiscal year 2019 service (10,800 RSUs);

and (2) stock options to purchase 5,000 shares at an exercise price of $20.37 per share, for his fiscal year 2018 service (4,500 shares) and Board committee chair service (500 shares);

McAndrews and Ms.

(1) $220,000 in RSUs, for his and her fiscal year 2019 service (10,800 RSUs);

and (2) stock options to purchase 4,500 shares at an exercise price of $20.37 per share, for his and her fiscal year 2018 service;

4,500 RSUs, pro-rated for his fiscal year 2019 service.

Each of these stock option grants will generally vest in full on March 27, 2021.

The following table shows for fiscal year 2020 certain information with respect to the compensation of all of our non-employee directors who served in such capacities during fiscal year 2020:

FISCAL YEAR 2020 DIRECTOR COMPENSATION

Laura Black (3)

Michael McAndrews

Hwei-Ming (Fred) Tsai

__________________________

This column consists of annual director fees, non-employee committee chairman fees and other committee member fees earned for fiscal year 2019.

The dollar amounts in this column represent the aggregate grant date fair values of the awards granted during fiscal year 2019 calculated in accordance with ASC Topic 718.

Assumptions used in the calculation of the grant date fair value amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Item II, Part 8, Note 13, “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for fiscal year 2019 included in this Annual Report.

Laura Black resigned from the Board on June 26, 2019

The table below sets forth the aggregate number of shares underlying option awards held by our non-employee directors as of June 30, 2019.

Option Awards

Michael McAndrews

Daniel Fairfax

Hwei-Ming (Fred) Tsai

2018 Director Compensation

Under our director compensation policy in effect for fiscal year 2018, we reimbursed non-employee directors for reasonable expenses in connection with attendance at Board and committee meetings.

Our non-employee directors received an annual retainer of $40,000, payable quarterly in cash.

In addition, the Chairperson of our Audit Committee received an additional annual retainer of $25,000, the Chairperson of each of our Compensation Committee and Nominating and Corporate Governance Committee received an additional annual retainer of $5,000 and each director serving in a non-chairperson capacity on our standing Board committees received an additional annual retainer of $2,500 per committee, payable quarterly in cash.

Our policy also provided that non-employee directors were eligible to receive stock options under our 2016 Equity Incentive Plan.

Under our policy, non-employee directors were granted an initial stock option award to purchase 18,000 shares upon first becoming a member of our Board.

A non-employee director serving as Chairperson of the Audit Committee was to receive an additional initial grant of stock options to purchase 12,000 shares.

Non-employee directors serving as Chairperson of the Compensation or Nominating and Corporate Governance Committees were to receive an additional initial grant of stock options to purchase 2,000 shares.

Each of these initial stock option grants generally would have vested and become exercisable over four years, with the first 25% of the award generally vesting on the first anniversary of the date of grant and the remainder generally vesting quarterly after the first vesting date.

Immediately after each of our annual meetings of stockholders, each non-employee director was to be granted stock options to purchase 4,500 shares of our common stock, the Audit Committee Chairperson was to be granted additional stock options to purchase 3,000 shares of our common stock and the Chairperson of each of the Compensation and Nominating and Corporate Governance Committees was to be granted additional stock options to purchase 500 shares of our common stock.

These stock options were to vest and become exercisable generally on the first anniversary of the date of grant or immediately prior to our next annual meeting of stockholders, if earlier.

The policy provided that stock options granted to non-employee directors during fiscal year 2018 would have a per share exercise price equal to 100% of the fair market value of the underlying shares on the date of grant, and will become fully vested if we undergo a change of control.

Annual grants were reduced proportionally if the person did not serve for the full year after the annual grant.

As with the equity grants that would have been made in fiscal 2019 under our policy, no grants to non-employee directors were made during fiscal 2018, in light of the suspension of the effectiveness of our registration statement on Form S-8.

The following table shows for fiscal year 2018 certain information with respect to the compensation of all of our non-employee directors who served in such capacities during fiscal year 2018:

FISCAL YEAR 2018 DIRECTOR COMPENSATION

Michael McAndrews

Hwei-Ming (Fred) Tsai

__________________________

This column consists of annual director fees, non-employee committee chairman fees and other committee member fees earned for fiscal year 2018.

The dollar amounts in this column represent the aggregate grant date fair values of the awards granted during fiscal year 2018 calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model.

The table below sets forth the aggregate number of shares underlying stock option awards held by our non-employee directors as of June 30, 2018.

None of the non-employee directors held any unvested stock awards as of June 30, 2018.

This column consists of annual director fees, non-employee committee chairman fees, other committee member fees, and, for Mr.

Liu, an additional cash fee for the substantial amount of work he had completed in assisting in his capacity as a non-employee director with the restatement of our financial statements and remediation work on internal controls, in each case earned for fiscal year 2020.

The dollar amounts in this column represent the aggregate grant date fair values of the RSU awards granted during fiscal year 2020 calculated in accordance with ASC Topic 718.

Assumptions used in the calculation of the grant date fair value amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Item II, Part 8, Note 14, “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for fiscal year 2020 included in this Annual Report on Form 10-K.

Each grant of 10,800 RSUs had a grant date fair value of $219,996, and Mr.

Liu’s grant of 4,500 RSUs had a grant date fair value of $91,665.

Only $219,996 of the amount reflected in this column for each director represent director compensation for fiscal year 2020 service.

The dollar amounts in this column represent the aggregate grant date fair value of option awards granted during fiscal year 2020 calculated in accordance with ASC Topic 718.

Assumptions used in the calculation of the grant date fair value amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Item II, Part 8, Note 14, “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for fiscal

year 2020 included in this Annual Report on Form 10-K.

Each grant of 4,500 stock options had a grant date fair value of $44,100, and each grant of 500 stock options had a grant date fair value of $4,900.

None of the amounts reflected in this column represent director compensation for fiscal year 2020 service.

As discussed above, for the non-employee directors other than Mr.

Fairfax, the total compensation amounts include awards granted for service for fiscal years 2018 and/or 2019.

Calculating just the amounts paid to the non-employee directors for their fiscal year 2020 service, total amounts would be:

Fairfax, $316,996;

Tsai, $349,996;

McAndrews, $314,996;

Tseng, $307,496;

Tuan, $317,496;

Liu, $451,996.

The table below sets forth the aggregate number of shares underlying stock and option awards held by our non-employee directors as of June 30, 2020.

Option Awards

Michael McAndrews

Daniel Fairfax

Hwei-Ming (Fred) Tsai

Michael McAndrews

Compensation Committee Interlocks and Insider Participation

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See “Part III.

Certain Relationships and Related Transactions and Director Independence-Transactions with Monolithic Power Systems.” In addition, during each of fiscal years 2019 and 2018, none of our executive officers served as a member of the Board of Directors of Compensation Committee of any other entity that has one or more executive officers who served on our Board of Directors of Compensation Committee.

Saria Tseng, Hweng (Fred) Tsai and Sherman Tuan served on the Compensation Committee during each of fiscal years 2019 and 2018.

Certain Relationships and Related Transactions and Director Independence-Transactions with Monolithic Power Systems.” In addition, during fiscal year 2020, none of our executive officers served as a member of the compensation committee of the board of directors of any other entity that has one or more executive officers who served on our Compensation Committee of the Board.

Hwei-Ming (Fred) Tsai, Saria Tseng and Sherman Tuan served on the Compensation Committee during fiscal year 2020.

Compensation Program Risk Assessment

We have assessed our compensation programs for both fiscal years 2019 and 2018 and have concluded that risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on us.

We have assessed our compensation programs for fiscal year 2020 and have concluded that risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on us.

We concluded that our compensation policies and practices do not encourage excessive or inappropriate risk-taking.

We believe our programs are appropriately designed to encourage our employees to make decisions that result in positive short-term and long-term results for our business and our shareholders.

We believe our programs are appropriately designed to encourage our employees to make decisions that result in positive short-term and long-term results for our business and our stockholders.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information known to us regarding beneficial ownership of our common stock as of November 30, 2019 by:

The following table sets forth certain information known to us regarding beneficial ownership of our common stock as of July 31, 2020 by:

Each of the named executive officers during fiscal year 2020 ;

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5% Holders Not Listed Above:

Dimensional Fund Advisors (15)

Oaktree Capital Management LP (16)

Empyrean Capital Overseas Master Fund, Ltd.

Disciplined Growth Investors Inc.

Total executives, directors & 5% or more stockholders

__________________________

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Except as otherwise indicated, to our knowledge the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws applicable and to the information contained in the footnotes to this table.

Except as otherwise provided, the address of each stockholder listed in the table is 980 Rock Avenue, San Jose, CA 95131.

Under the SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options or RSUs subject to vesting.

Calculated on the basis of 50,085,282 shares of common stock outstanding as of November 30, 2019, provided that any additional shares of Common Stock that a stockholder has the right to acquire within 60 days after November 30, 2019 are deemed to be outstanding for the purposes of calculating that stockholder’s percentage of beneficial ownership.

Includes 637,891 options exercisable within 60 days after November 30, 2019.

Also includes 96,000 PRSUs that have been earned and will be vested within 60 days after November 30, 2019, none of which have been yet released.

Calculated on the basis of 52,436,548 shares of common stock outstanding as of July 31, 2020, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after July 31, 2020 are deemed to be outstanding for the purposes of calculating that stockholder’s percentage of beneficial ownership.

Includes 721,010 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Also includes 2,668,752 shares jointly held by Mr.

Liang and Sara Liu, his spouse, 389,341 shares held directly by Ms.

Liu and 61,000 options exercisable within 60 days after November 30, 2019.

Liu and 61,000 options exercisable within 60 days after July 31, 2020.

See footnote 14.

Includes 52,499 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

Includes 39,020 options exercisable or 2,250 RSUs exercisable within 60 days after November 30, 2019.

Includes 17,735 options exercisable or RSUs subject to vesting, both within 60 days after November, 2019.

Includes 7,500 options exercisable or 3,750 RSUs exercisable within 60 days after November 30, 2019.

Includes 27,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

Includes 40,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

Includes 18,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

Includes 40,000 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

Includes 61,000 options exercisable within 60 days after November 30, 2019.

Includes 61,249 shares issuable upon exercise of stock options and 938 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 28,050 options exercisable and 375 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 16,636 shares issuable upon the exercise of options and 237 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 21,348 shares issuable upon the exercise of options and 375 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 11,250 shares issuable upon the exercise of options and 625 RSUs subject to vesting within 60 days after July 31, 2020.

Includes 27,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Includes 35,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Includes 21,375 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Includes 35,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Includes 61,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Also includes 2,668,752 shares jointly held by Ms.

Liang, her spouse, 3,969,793 shares held by Charles Liang, Ms.

Liu’s spouse and 637,891 shares issuable upon the exercise of options within 60 days after November 30, 2019.

Also includes 96,000 PRSUs held by Mr.

Liang that have been earned and will be vested within 60 days after November 30, 2019, none of which have been yet released.

Liang, her spouse, 4,029,127 shares held by Charles Liang, and 660,010 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

See footnote 4.

Includes 1,042,645 shares issuable upon the exercise of options exercisable within 60 days after November 30, 2019.

The information with respect to the holdings of Dimensional Fund Advisors LP ("Dimensional Fund Advisors") is based solely on Schedule 13G filed on February 8, 2019 by Dimensional Fund Advisors.

Dimensional Fund Advisors has the sole power to dispose or to direct the disposition of all of such shares.

Dimensional Fund Advisors has the sole power to direct the vote of 3,355,723 of such shares.

The address for Dimensional Fund Advisors is Building One 6300 Bee Cave Road, Austin, Texas 78746.

Includes 980,468 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

The information is based solely on the Schedule 13D filed on March 19, 2020 by (i) Oaktree Value Equity Fund, L.P., a Cayman Islands exempted limited partnership (“VEF”), in its capacity as the direct owner of 2,667,482 shares of common stock;

(ii) Oaktree Value Equity Fund GP, L.P., a Cayman Islands exempted limited partnership (“VEF GP”), in its capacity as the general partner of VEF;

(iii) Oaktree Value Equity Fund GP Ltd., a Cayman Islands exempted company (“VEF Ltd.”), in its capacity as the general partner of VEF GP;

(iv) Oaktree Capital Management, L.P., a Delaware limited partnership (“Management”), in its capacity as the sole director of VEF Ltd.;

(v) Oaktree Capital Management GP, LLC, a Delaware limited liability company (“Management GP”), in its capacity as the general partner of Management;

(vi) Atlas OCM Holdings, LLC, a Delaware limited liability company (“Atlas”), in its capacity as the sole managing member of Management GP;

(vii) Oaktree Fund GP I, L.P., a Delaware limited partnership (“GP I”), in its capacity as sole shareholder of VEF Ltd.;

(viii) Oaktree Capital I, L.P., a Delaware limited partnership (“Capital I”), in its capacity as the general partner of GP I;

(ix) OCM Holdings I, LLC, a Delaware limited liability company (“Holdings I”), in its capacity as the general partner of Capital I;

(x) Oaktree Holdings, LLC, a Delaware limited liability company (“Holdings”) in its capacity as the managing member of Holdings I;

(xi) Oaktree Capital Group, LLC, a Delaware limited liability company (“OCG”), in its capacity as the managing member of Holdings;

(xii) Oaktree Capital Group Holdings GP, LLC, a Delaware limited liability company (“OCGH”), in its capacity as the indirect owner of the class B units of each of OCG and Atlas;

(xiii) Brookfield Asset Management Inc., a Canadian corporation (“BAM”), in its capacity as the indirect owner of the class A units of each of OCG and Atlas;

and (xiv) Partners Limited, a Canadian corporation (“Partners”), in its capacity as the sole owner of Class B Limited Voting Shares of BAM.

Except as set forth in Schedule A to the Scheudle 13D, the address of the business office of each of the reporting persons and covered persons is c/o Oaktree Capital Management, L.P., 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071.

The information is based solely on the Schedule 13G filed on January 3, 2020 by (i) Empyrean Capital Overseas Master Fund, Ltd.

("ECOMF"), a Cayman Islands exempted company, with respect to the common stock directly held by it, and has shared voting and dispositive power over 2,679,893 shares of common stock;

(ii) P EMP Ltd.

("P EMP" and collectively with ECOMF, the "Empyrean Clients"), a British Virgin Islands business company, with respect to the common stock directly held by it, and has shared voting and dispositive power over 79,928 shares of common stock;

(iii) Empyrean Capital Partners, LP ("ECP"), a Delaware limited partnership, which serves as investment manager to the Empyrean Clients with respect to the common stock directly held by the Empyrean Clients, and has shared voting and dispositive power over 2,759,821 shares of common stock;

Amos Meron, who serves as the managing member of Empyrean Capital, LLC, the general partner of ECP, with respect to the common stock directly held by the Empyrean Clients, and has shared voting and dispositive power over 2,759,821 shares of common stock.

The address of the business office of each of the reporting persons is c/o Empyrean Capital Partners, LP, 10250 Constellation Boulevard, Suite 2950, Los Angeles, CA 90067.

The information is based solely on the Schedule 13-F filed on August 14, 2020.

The address for the reporting person is 150 S.

Suite 2550, Minneapolis, MN 55402.

Equity Compensation Plan Information

We currently maintain three compensation plans that provide for the issuance of our Common Stock to officers and other employees, directors and consultants.

These consist of the 2006 Equity Incentive Plan and the 2016 Equity Incentive Plan.

The 2006 Equity Incentive Plan and the 2016 Equity Incentive Plan have been approved by our stockholders.

We no longer grant any equity-based awards under the 2006 Equity Incentive Plan.

The following table sets forth information regarding outstanding options, RSUs, and PRSUs and shares reserved and remaining available for future issuance under the foregoing plans as of June 30, 2019:

These consist of the 2006 Equity Incentive Plan, the 2016 Equity Incentive Plan and the 2020 Plan.

All three of these plans have been approved by our stockholders.

We no longer grant any equity-based awards under the 2006 Equity Incentive Plan or the 2016 Equity Incentive Plan.

The following table sets forth information regarding

outstanding options, RSUs, and PRSUs and shares reserved and remaining available for future issuance under the foregoing plans as of June 30, 2020 :

Plan Category

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Equity-Based Awards

Please see the “Grants of Plan-Based Awards” table and the “Director Compensation” table above for information on stock option and restricted stock unit grants to our directors and named executive officers in fiscal years 2018 and 2019.

Employment Relationships

Hung-Fan (Albert) Liu, who is a brother of Sara Liu, our Co-Founder and Senior Vice President and a director, is employed in our operations organization in San Jose, California.

Liu received a total compensation of approximately $272,000 and $341,000 in fiscal years 2019 and 2018, respectively.

Liu received a total compensation of approximately $851,000 in fiscal year 2020.

The total compensation includes salary, bonus and equity awards.

Albert Liu reports to Mr.

Kao, our Senior Vice President of Operations.

Liu also received options and RSU awards in fiscal year 2020 totaling $19,766.

Shao Fen (Carly) Kao, who is a sister-in-law of Sara Liu, our Co-Founder and Senior Vice President and a director, is employed in our finance and accounting organization in San Jose, California.

Kao received total compensation of approximately $132,000 and $140,000 in fiscal years 2019 and 2018, respectively.

Kao received total compensation of approximately $251,000 in fiscal year 2020.

The total compensation includes salary, bonus and equity awards.

Kao reports through the finance and accounting organization, which reports to Mr.

Bauer, our Chief Financial Officer.

Sara Liu, who is Charles Liang's spouse and is related to Mr.

Kao as outlined above, is a Co-Founder, Senior Vice President, and director of the Company, and received total compensation of approximately $754,000 in fiscal year 2020.

Transactions with Ablecom and Compuware

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Ablecom’s ownership of Compuware is below 50% but Compuware remains a related party as Ablecom still has significant influence over the operations.

Ablecom’s Chief Executive

Officer, Steve Liang, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of our Board, and owned approximately 0.4% of our common stock as of June 30, 2017, but owned no shares as June 30, 2018 and thereafter.

Charles Liang served as a Director of Ablecom during our fiscal year 2006, but is no longer serving in such capacity.

In addition, Charles Liang and Sara Liu, his spouse, who is also an officer and director of ours, collectively owned approximately 10.5% of Ablecom’s capital stock throughout fiscal years 2018 and 2019.

Steve Liang and his family members owned approximately 28.8% throughout fiscal years 2018 and 2019.

Certain family members of Yih-Shyan (Wally) Liaw, who until January 2018 was the Senior Vice President of International Sales and a director of the Company, owned approximately 11.7% Ablecom’s capital stock throughout fiscal years 2018 and 2019.

Bill Liang, a brother of both Charles Liang and Steve Liang, also is a member of the Board of Directors of Ablecom.

Ablecom’s Chief Executive Officer, Steve Liang, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of the Board of Directors.

Steve Liang and his family members owned approximately 28.8% of Ablecom’s stock and Charles Liang and his spouse, Sara Liu, who is also an officer and director of our company, collectively owned approximately 10.5% of Ablecom’s capital stock as of June 30, 2020 .

Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors of Ablecom.

Bill Liang is also the Chief Executive Officer of Compuware, a member of Compuware’s Board of Directors and a holder of a significant equity interest in Compuware.

Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware.

None of the Company, Charles Liang or Sara Liu own any capital stock of Compuware.

We have a series of agreements with Ablecom, including multiple product development, production and service agreements, product manufacturing agreements, manufacturing services agreements and lease agreements for warehouse space.

Under these agreements, we outsource a portion of our design activities and a significant part of our manufacturing of components such as server chassis to Ablecom.

Charles Liang or Sara Liu do not own any capital stock of Compuware and we do not own any of Ablecom or Compuware's capital stock.

We have entered into a series of agreements with Ablecom, including multiple product development, production and service agreements, product manufacturing agreements, manufacturing services agreements and lease agreements for warehouse space.

Under these agreements, we outsource a portion of our design activities and a significant part of our server chassis manufacturing of components such as server chassis to Ablecom.

Ablecom agrees to design products according to our specifications.

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With respect to the manufacturing aspects of the relationship, Compuware purchases most of materials needed to manufacture the power supplies from outside markets and uses these materials to manufacture the products and then sell to us.

We review and frequently negotiate with Compuware the prices of the power supplies the we purchase from Compuware.

We review and frequently negotiate with Compuware the prices of the power supplies that we purchase from Compuware.

Compuware also manufactures motherboards, backplanes and other components used on our printed circuit boards.

We sell to Compuware most of the components needed to manufacture the above products.

We sell to Compuware most

of the components needed to manufacture the above products.

Compuware uses these components to manufacture and then sells back the products to us at a purchase price equal to the price at which we sold the components to Compuware, plus a “manufacturing value added” fee and other miscellaneous material charges and costs.

We frequently review and negotiate with

Compuware the amount of the “manufacturing value added” fee that will be included in the price of the products we purchase from Compuware.

We frequently review and negotiate with Compuware the amount of the “manufacturing value added” fee that will be included in the price of the products we purchase from Compuware.

Ablecom’s sales to us comprise a substantial majority of Ablecom’s net sales.

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We do not directly or indirectly guarantee any obligations of Compuware, or any losses that the equity holders of Compuware may suffer.

In October 2018, our CEO, Charles Liang, personally borrowed approximately $12.9 million from Chang Chien-Tsun, the spouse of Steve Liang.

The loan is unsecured, bore interest at 0.80% per month for the first six months and the loan has no maturity date.

After the first six months, the loan bears interest at 0.85% per month.

The loan was made at Charles Liang’s request, to provide funds to repay personal margin loans to two financial institutions, which loans had been secured by shares of our common stock held by Charles Liang.

The lenders called the loans in October 2018, following the suspension of our common stock from trading on Nasdaq in August 2018 and the decline in the market price of our common stock in October 2018.

As of November 30, 2019, the amount due on the unsecured loan (including principal and accrued interest) was approximately $14.5 million.

In October 2018, our Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang.

The loan is unsecured, has no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to to 0.25% effective March 1, 2020.

The loan was originally made at Mr.

Liang's request to provide funds to repay margin loans to two financial institutions, which loans had been secured by shares of the company's common stock that he held.

The lenders called the loans in October 2018, following the suspension of the company's common stock from trading on NASDAQ in August 2018 and the decline in the market price of the company's common stock in October 2018.

As of June 30, 2020, the amount due on the unsecured loan (including principal and accrued interest) was approximately $14.9 million.

Transactions with Monolithic Power Systems

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We purchased approximately $0.5 million and $0.3 million of products from MPS for the years ended June 30, 2020 and 2019 , respectively, for use in the manufacturing of our products.

We did not owe any amounts to MPS as of June 30, 2019 and 2018.

Amount owed to MPS by us as of June 30, 2020 was $0.1 million.

We did not owe any amounts to MPS as of June 30, 2019 .

Principal Accounting Fees and Services

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Description of Securities(11)

Amended 1998 Stock Option Plan(1)

Form of Incentive Stock Option Agreement under 1998 Stock Option Plan(1)

Form of Nonstatutory Stock Option Agreement under 1998 Stock Option Plan(1)

Form of Nonstatutory Stock Option Agreement outside the 1998 Stock Option Plan(1)

2006 Equity Incentive Plan(1)

Form of Option Agreement under Super Micro Computer, Inc.

2006 Equity Incentive Plan(1)

Form of Restricted Stock Agreement under Super Micro Computer, Inc.

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Offer Letter for Alex Hsu(23)

Offer Letter for Howard Hideshima(1)

Director Compensation Policy through March 1, 2019(24)

4 unchanged sentences

Form of Notice of Grant of Restricted Stock Unit under 2006 Equity Incentive Plan(2)

Agreement of Purchase and Sale(3)

Stock Option Exercise Notice and Restricted Stock Purchase Agreement—Charles Liang(4)

Stock Option Exercise Notice and Restricted Stock Purchase Agreement—Sara Liu (5)

Stock Option Exercise Notice and Restricted Stock Purchase Agreement—Shiow-Meei Liaw(5)

Agreement of Purchase and Sale of Properties on Fox Lane and Fox Drive, San Jose, California(6)

Business Loan Agreement dated as of June 17, 2010, by and between Super Micro Computer, Inc.

and Bank of America(7)

Amendment No.1 to Loan Agreement, dated August 15, 2011 between Super Micro Computer, Inc.

and Bank of America (9)

Amendment No.

2 to Loan Agreement, dated October 4, 2011 between Super Micro Computer, Inc.

and Bank of America (9)

2006 Equity Incentive Plan, as amended(3)

Purchase and Sale Agreement on Ridder Park Drive, San Jose, California(10)

Addendum 1 to Purchase and Sale Agreement on Ridder Park Drive, San Jose, California(10)

Amendment No.

3 to Loan Agreement, dated September 30, 2013 between Super Micro Computer, Inc.

and Bank of America(11)

Summary of Credit Facility, dated November 5, 2013 between Super Micro Computer, Inc.

and CTBC Bank (11)

Extension of Loan Agreement with Bank of America, N.A., dated November 13, 2014(12)

Summary of Credit Facility, dated December 1, 2014 between Super Micro Computer, Inc.

and CTBC Bank (12)

Amendment No.

4 to Loan Agreement, dated June 19, 2015 between Super Micro Computer, Inc.

and Bank of America(13)

Extension of Loan Agreement with Bank of America, N.A., dated November 13, 2015(14)

Extension of Credit Agreement with CTBC Bank dated January 29, 2016(15)

2016 Equity Incentive Plan(4)

3 unchanged sentences

Form of Restricted Stock Units Agreement under 2016 Equity Incentive Plan(5)

Extension of Loan Agreement with Bank of America, N.A., dated March 14, 2016(18)

Extension of Loan Agreement with Bank of America, N.A., dated April 26, 2016(18)

Summary of Credit Facility, dated April 1, 2016 between Super Micro Computer, Inc.

and CTBC Bank(18)

Extension of Loan Agreement with Bank of America, N.A., dated May 27, 2016(19)

Credit Agreement dated as of June 30, 2016 between Super Micro Computer, Inc.

and Bank of America(19)

Second Amendment to Credit Agreement with Bank of America, N.A.

dated May 5, 2017(20)

Summary of Credit Facilities with CTBC Bank dated May 8, 2017 (27)

Extension of Credit Agreement with Bank of America, N.A., dated October 28, 2017(21)

Extension of Credit Agreement with Bank of America, N.A., dated January 12, 2018(22)

Third Amendment to Credit Agreement with Bank of America, N.A., dated March 12, 2018(23)

Loan and Security Agreement with Bank of America, N.A., dated April 19, 2018(6)

Extension of Loan and Security Agreement with Bank of America, N.A., dated September 7, 2018(7)

Summary of Credit Facilities with CTBC Bank dated January 17, 2018 and Extension letters dated on April 29, 2018 (27)

Second Amendment to Loan and Security Agreement, dated as of June 27, 2019(10)

4 unchanged sentences

Letter Agreement with Bank of America, N.A., dated October 28, 2019(16)

Super Micro Computer, Inc.

2020 Equity and Incentive Compensation Plan(17)

Third Amendment to Loan and Security Agreement with Bank of America, N.A.

dated May 12, 2020, by and among Super Micro Computer, Inc., the lenders party thereto and Bank of America, N.A., as administrative agent for the lenders(18)

Summary of Credit Facilities, dated June 26, 2019 between Super Micro Computer Inc.

Taiwan and CTBC Bank

Summary of Terms & Conditions 10-Year Term Loan Facility, dated May 6, 2020, between Super Micro Computer Inc.

Taiwan and CTBC Bank

Extension of Credit Facilities with CTBC Bank dated June 30, 2020

Extension of Credit Facilities with CTBC Bank dated August 24, 2020

Form of Notice of Grant of Stock Option under 2020 Equity and Incentive Compensation Plan

Form of Notice of Incentive Stock Option Agreement under 2020 Equity and Incentive Compensation Plan

Form of Nonqualified Stock Option Agreement under 2020 Equity and Incentive Compensation Plan

Form of Notice of Grant of Restricted Stock Units under 2020 Equity and Incentive Compensation Plan

Form of Restricted Stock Units Agreement under 2020 Equity and Incentive Compensation Plan

Code of Business Conduct and Ethics (8)

Subsidiaries of Super Micro Computer, Inc.

Consent of Independent Registered Public Accounting Firm

Power of Attorney (included in signature pages)

15 unchanged sentences

333-142404) filed with the Securities and Exchange Commission on April 27, 2007.

Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on Form 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on June 29, 2007.

Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on September 2, 2008.

Incorporated by reference to the Company’s Current Report on Form 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 2, 2008.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No.

001-33383) filed with the Securities and Exchange Commission on May 7, 2010.

Incorporated by reference to Exhibit 10.34 from the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on September 7, 2010.

Incorporated by reference to Appendix A from the Company’s Definitive Proxy Statement on Schedule 14A (Commission File No.

001-33383) filed with the Securities and Exchange Commission on January 18, 2011.

Incorporated by reference to the Company's Quarterly Report on Form 10-Q (Commission File No.

001-33383) filed with the Securities and Exchange Commission on November 7, 2011.

Incorporated by reference to the Company's Current Report on Form 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on September 24, 2013.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No.

001-33383) filed with the Securities and Exchange Commission on November 7, 2013.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No.

001-33383) filed with the Securities and Exchange Commission on February 9, 2015.

Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on September 10, 2015.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No.

001-33383) filed with the Securities and Exchange Commission on November 16, 2015.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No.

001-33383) filed with the Securities and Exchange Commission on February 4, 2016.

Incorporated by reference to the Company's Current Report on Form 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on March 14, 2016.

Incorporated by reference to the Company's registration statement on Form S-8 (Commission File No.333-210881) filed with the Securities and Exchange Commission on April 22, 2016.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No.

001-33383) filed with the Securities and Exchange Commission on May 6, 2016.

Incorporated by reference to the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on August 26, 2016.

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q (Commission File No.

Incorporated by reference to Exhibit 10.51 from the Company's Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on May 17, 2019.

Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on October 31, 2017.

Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on January 17, 2018.

Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on March 13, 2018.

Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on September 12, 2018.

3 unchanged sentences

for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Incorporated by reference to the Company's Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on May 17, 2019.

Incorporated by reference to Exhibit 10.1 from the Company's Current report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on July 2, 2019.

Incorporated by reference to Exhibit 4.5 from the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 19, 2019.

Incorporated by reference to Exhibit 10.55 from the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 19, 2019.

Incorporated by reference to Exhibit 10.56 from the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 19, 2019.

Incorporated by reference to Exhibit 10.57 from the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 19, 2019.

Incorporated by reference to Exhibit 10.58 from the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 19, 2019.

Incorporated by reference to Exhibit 10.59 from the Company’s Annual Report on Form 10-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 19, 2019.

Incorporated by reference to Appendix A in the Company’s Definitive Proxy Statement on Schedule 14A (Commission File No.

001-33383) filed with the Securities and Exchange Commission on April 21, 2020.

Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on Form 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on May 13, 2020.

Incorporated by reference to Exhibit 10.7 from the Company’s Registration Statement on Form S-1 (Registration No.