Financial Performance - Total revenue for the three months ended December 31, 2023, was $4,670,000, a 4% increase from $4,493,000 in the same period of 2022[24] - Gross profit for the three months ended December 31, 2023, was $75,000, compared to a gross loss of $2,669,000 in the same period of 2022[24] - Net loss for the three months ended December 31, 2023, was $10,001,000, slightly improved from a net loss of $10,460,000 in the same period of 2022[24] - The company reported a comprehensive loss of $9,790,000 for the three months ended December 31, 2023, compared to a comprehensive loss of $9,939,000 in the same period of 2022[26] - For the nine months ended December 31, 2023, the company incurred a net loss of $24.6 million, compared to a net loss of $21.8 million for the same period in 2022, representing an increase in losses of approximately 12.7%[45] - The company reported a basic loss per share of $0.54 for the nine months ended December 31, 2023, compared to $0.38 for the same period in 2022, reflecting a worsening of 42.1%[57] - The company reported cash, cash equivalents, and restricted cash of $7.95 million at the end of the period, down from $23.65 million at the end of the previous year, reflecting a decrease of approximately 66.4%[39] - The company has an accumulated deficit of $242.1 million as of December 31, 2023, highlighting ongoing financial challenges[45] Expenses - Research and development expenses increased to $2,839,000 for the three months ended December 31, 2023, up from $2,325,000 in the same period of 2022, representing a 22% increase[24] - Total operating expenses for the three months ended December 31, 2023, increased by $1.8 million, or 24.4%, to $9.0 million compared to $7.2 million for the same period in 2022[164] - General and administrative expenses increased by $1.0 million, or 27.6%, to $4.4 million for the three months ended December 31, 2023, primarily due to increased legal expenses and stock-based compensation[171] - The company incurred stock-based compensation expenses of $4.43 million for the nine months ended December 31, 2023, up from $2.34 million in the prior year, representing an increase of 89.5%[45] - Sales and marketing expense increased by $1.3 million, or 37.2%, to $4.9 million for the nine months ended December 31, 2023, from $3.6 million for the same period in 2022[178] Assets and Liabilities - Total current assets decreased to $20,952,000 as of December 31, 2023, down from $30,688,000 as of March 31, 2023, reflecting a 32% decline[19] - Total liabilities decreased to $14,412,000 as of December 31, 2023, down from $24,837,000 as of March 31, 2023, indicating a 42% reduction[19] - Cash and cash equivalents decreased to $7,951,000 as of December 31, 2023, from $15,527,000 as of March 31, 2023, a decline of 49%[19] - Total stockholders' equity as of December 31, 2023, was $18,250,000, down from $19,615,000 as of March 31, 2023, a decrease of 7%[21] Revenue Sources - Government revenue for the three months ended December 31, 2023, was $1,495 million, significantly up from $533 million in the same period of 2022, primarily due to a contract with NSTXL[60] - Revenue from related parties included in commercial product and service revenue was $1,981 million for the three months ended December 31, 2023, down from $2,917 million in the same period of 2022[60] - Revenue for the nine months ended December 31, 2023, was $15.6 million, an increase from $13.3 million in the same period of 2022[132] - Revenue for the three months ended December 31, 2023, increased by $0.2 million, or 3.9%, to $4.7 million compared to $4.5 million for the same period in 2022, primarily due to a $1.0 million increase in government contract revenue from the NSTXL contract awarded in May 2023[164] Merger and Future Outlook - On January 10, 2024, the company entered into a merger agreement with Renesas Electronics America Inc., which is expected to close in the second half of 2024, subject to customary closing conditions[46] - The company expects to continue incurring net losses until it achieves the necessary scale to generate positive cash flow from operations[45] - The completion of the Merger is uncertain, and if not finalized, it could adversely affect the company's business, financial condition, and stock price[212] - The current market price of the company's stock may decline if the Merger is not completed, reflecting investor assumptions about the Merger's success[215] - The company may face litigation related to the Merger, which could be costly and distract management from daily operations[217] - If the Merger is completed, stockholders will miss the opportunity to realize the long-term value of the company's independent strategy[215] Stock and Financing Activities - The company raised $9.94 million from the issuance of common stock during the nine months ended December 31, 2023, compared to $16 million in the same period of 2022, indicating a decrease of 37.6%[45] - The rights offering completed in August 2023 generated approximately $7.9 million in gross proceeds, with net proceeds used for working capital[140] - The Company completed a rights offering in August 2023, issuing 2,404,758 shares of common stock, generating approximately $7.9 million in gross proceeds[101] - The Company entered into warrant exercise inducement offers in April 2023, resulting in gross proceeds of approximately $7.3 million from the exercise of warrants[141]

Financial Performance - Total revenue for Q3 Fiscal 2024 was $4.7 million, representing a 4.0% increase year-over-year and a 6.8% decrease from the prior quarter[4]. - Total revenue for the three months ended December 31, 2023, was $4,670,000, a 3.9% increase from $4,493,000 in the same period last year[28]. - Net loss for Q3 Fiscal 2024 was ($10.0) million, or ($0.20) per share, compared to a net loss of ($7.1) million, or ($0.12) per share, in the prior quarter[10]. - The net loss for the three months ended December 31, 2023, was $10,001,000, compared to a net loss of $10,460,000 in the same period last year[28]. - Non-GAAP adjusted EBITDA for the three months ended December 31, 2023, was $(6,905,000), compared to $(8,521,000) in the same period last year[30]. Revenue Breakdown - Product revenue decreased to $3.2 million, down 20% year-over-year and 11% sequentially, while government revenue increased by 180% to $1.5 million compared to the same quarter last year[4]. Expenses - Operating expenses rose to $9.0 million, up from $7.7 million in the prior quarter and $7.2 million in Q3 Fiscal 2023, primarily due to legal expenses related to the acquisition agreement[9]. - Operating expenses increased to $8,996,000 for the three months ended December 31, 2023, from $7,229,000 in the same period last year, representing a 24.4% increase[28]. - Research and development expenses for the three months ended December 31, 2023, were $2,839,000, up from $2,325,000 in the same period last year[28]. Cash and Assets - Cash, cash equivalents, and restricted cash as of December 31, 2023, were $8.0 million[11]. - Cash and cash equivalents decreased to $7,951,000 as of December 31, 2023, down from $15,527,000 as of March 31, 2023[26]. - Total assets decreased to $32,662,000 as of December 31, 2023, from $44,452,000 as of March 31, 2023[26]. - Total liabilities decreased to $14,412,000 as of December 31, 2023, from $24,837,000 as of March 31, 2023[26]. Gross Margin - Gross margin improved to 1.6%, compared to (59.4)% in Q3 Fiscal 2023 and 23.4% in the prior quarter, impacted by a $250K consumption tax adjustment and $170K in non-recurring scrap[4]. - Gross profit for the same period was $75,000, compared to a gross loss of $2,669,000 in the prior year[28]. Strategic Initiatives - Total design-ins for higher power applications increased by 20% to over 120, with over 35 in production[4]. - Launched two new SuperGaN devices with improved efficiency, offering 25% lower energy losses in internal tests[4]. - Announced a collaboration with Allegro MicroSystems to enhance GaN power system performance for high power applications[4]. - Transphorm entered into a definitive agreement to be acquired by a subsidiary of Renesas Electronics Corporation, valuing the company at approximately $339 million[1].

Financial Performance - Revenue for the three months ended September 30, 2023, was $5,010,000, representing a 36.5% increase from $3,670,000 in the same period of 2022[24] - Gross profit for the three months ended September 30, 2023, was $1,174,000, compared to $438,000 for the same period in 2022, indicating a significant improvement[24] - Net loss for the three months ended September 30, 2023, was $7,129,000, compared to a net loss of $5,995,000 for the same period in 2022, representing a 18.9% increase in losses[24] - Total revenue for the six months ended September 30, 2023, was $10.9 million, a 23.4% increase from $8.8 million in the same period of 2022[56] - The company reported a net loss of $14.6 million for the six months ended September 30, 2023, compared to a net loss of $11.3 million for the same period in 2022, representing a 29.8% increase in losses[43] Assets and Liabilities - Total current assets decreased to $21,925,000 as of September 30, 2023, down from $30,688,000 as of March 31, 2023, reflecting a 28.6% decline[19] - Total liabilities decreased to $10,598,000 as of September 30, 2023, down from $24,837,000 as of March 31, 2023, a reduction of 57.4%[19] - Total stockholders' equity increased to $23,691,000 as of September 30, 2023, up from $19,615,000 as of March 31, 2023, a growth of 20.6%[21] - The company’s cash and cash equivalents decreased to $6,152,000 as of September 30, 2023, down from $15,527,000 as of March 31, 2023, a decline of 60.4%[19] Research and Development - Research and development expenses for the three months ended September 30, 2023, were $3,022,000, up 65.1% from $1,830,000 in the same period of 2022[24] - The company anticipates that research and development expenses will remain flat or moderately increase in absolute dollars while decreasing as a percentage of revenue[141] Financing and Capital - The company plans to raise additional working capital through stock issuance and debt financing to support operations[44] - The company completed a private placement on April 3, 2023, raising $2.0 million by selling 500,000 shares at $4.00 per share and issuing warrants for 250,001 shares with an exercise price of $5.00[91] - The rights offering completed in August 2023 resulted in the issuance of 2,404,758 shares, generating approximately $7.9 million in gross proceeds[97] - The company is pursuing debt and equity financing to provide working capital into the fiscal year ending March 31, 2025, but acknowledges the uncertainty in securing such funding[127] Customer Concentration and Revenue Sources - The company reported that three customers accounted for 71.5% of its revenue for the six months ended September 30, 2023, indicating a high customer concentration risk[124] - Revenue from government contracts for the six months ended September 30, 2023, was $4.3 million, significantly higher than $1.2 million in the same period of 2022, reflecting a 250% increase[56] Operational Challenges and Risks - The company has substantial doubt about its ability to continue as a going concern for the next twelve months due to historical losses and the need for additional capital[43] - The company faces substantial risks related to its ability to continue as a going concern, requiring significant additional capital to fund operations[199] - The sales cycles for the company's products are long and unpredictable, making revenue difficult to forecast[210] - Unfavorable global economic conditions, including inflation, may negatively affect the company's business and financial results[213] - The company operates in highly competitive markets, facing pressures from both existing and new competitors[215] Stockholder Value and Strategic Review - The company is engaged in a strategic review of opportunities to enhance stockholder value, which may include partnerships, asset sales, or other financing alternatives[128] - The company is engaged in a strategic review process to enhance stockholder value, which may include partnerships, asset sales, or other financing alternatives[197] Foreign Currency and Joint Ventures - The company recognized net losses of $39,000 and $0.2 million during the three and six months ended September 30, 2023, respectively, due to foreign currency forward and option contracts[105] - The joint venture with GaNovation, which increased the company's ownership interest to 32.5% effective April 10, 2023, resulted in a share of operating losses of $1.6 million for the six months ended September 30, 2023[202]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $5 million, a year-over-year increase of 36% and a quarter-over-quarter decrease of 15% [54] - Product revenue was $3.55 million, up 18% from the prior quarter and 12% from the same quarter last year [55] - Gross margin for the quarter was 23%, down from 35% in the prior quarter but up 11% year-over-year [58] - Operating expenses on a non-GAAP basis were $6.4 million, down 6% from the prior quarter [60] - Cash and cash equivalents were $6.2 million at quarter end, largely due to an $8 million rights issue [68] Business Line Data and Key Metrics Changes - Approximately 70% of Q2 revenue came from product sales, with government revenue just under $1.5 million [12][13] - The majority of product revenue was derived from high-power applications, particularly those exceeding 300 watts [12][13] - The company achieved a record 33% sequential increase in design-ins for high-power products, totaling over 100, with more than 35 in production [9][12] Market Data and Key Metrics Changes - The company is expanding its leadership in high-power verticals, including computing power for data centers, energy and industrials, and electric vehicles [14] - The company has secured 15 new design-ins in the low-power space, bringing the total to over 115, with over 30 now in production [16] Company Strategy and Development Direction - The company is undergoing a strategic review with Bank of America to enhance shareholder value, which may include a merger or sale [15][48] - The focus is on continuing product revenue growth, improving margins, and accessing new markets, particularly in the EV sector [49][50] - The company aims to secure non-dilutive debt financing and explore licensing opportunities to extend its cash runway into fiscal 2025 [15][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued sequential product revenue growth in the current quarter, driven by strong customer engagement and production [55][61] - The company anticipates a stable gross margin in the coming quarter and aims for long-term gross margins exceeding 40% [59] - Management highlighted the superior performance and reliability of Transphorm's GaN technology compared to competitors, particularly in high-power applications [34][78] Other Important Information - The company has established a product pipeline valued at over $475 million, with a significant portion focused on high-power applications [12][14] - Recent testing has shown Transphorm's GaN products to have superior reliability compared to e-mode GaN offerings [34] Q&A Session Summary Question: Can you provide updates on the strategic review process? - Management confirmed that they are working with Bank of America to systematically channel interest and will provide updates as they become available [75] Question: How does GaN compare to silicon carbide in terms of efficiency and cost? - Management believes GaN has 70% lower losses than silicon carbide and is seeing increasing interest in GaN for automotive applications [78] Question: Where is the company seeing more engagement activity, high-power or low-power? - Management indicated that high-power remains a focus, contributing 70% of revenue, but low-power is also a growing segment with strong performance [85] Question: What is the expected cash burn over the next few quarters? - Management expects cash burn to hover around $5.1 million, with ongoing efforts to secure debt facilities and explore licensing opportunities [88][90] Question: What is the timeline for design-ins to convert into revenue? - Management noted that high-power design cycles can take 12-24 months, while low-power designs tend to convert faster, typically within 6-12 months [98]

Financial Performance - Revenue for Fiscal Quarter 2 2024 was $5 million, with product revenue contributing $3.6 million, an 18% increase compared to the previous quarter[11] - High power revenue accounted for over 70% of the total product revenue[11] - Gross margin was 23%, an improvement from 12% year-over-year[19] - Non-GAAP operating expenses (OPEX) were $6.4 million[19] - Non-GAAP loss per share (EPS) was ($0.08)[19] - Stockholders' equity increased to $23.7 million[19] Business Highlights - The product pipeline exceeds $475 million[10, 15] - High power products (over 300 Watts) constitute 70% of the power products pipeline[15] - Over 200 billion hours of field reliability have been recorded across 18 million devices shipped[8, 23] - Design-ins for low power adapters/chargers (25W – 300W) total over 115, with over 30 in production[11] - Design-ins for high power applications (300W – 75kW) total over 100, with over 35 in production[11]

Financial Data and Key Metrics Changes - The company reported total GAAP and non-GAAP revenue of $5.9 million for Q1 2024, representing an increase of 84% from the prior quarter and 14% year-over-year [20][31][46] - Product sales accounted for $3 million, driven by various core applications, with expectations for sequential revenue growth in the current quarter [21][31] - Gross margin for the quarter was 35.5%, significantly up from 5% in the prior quarter and 14% higher than the same quarter last year [46] Business Line Data and Key Metrics Changes - Revenue was roughly evenly split between product revenue ($3 million) and government revenue ($2.9 million), with over 70% of product revenue coming from high-power applications [4][20] - The company secured over 10 new design-ins for fast chargers, bringing the total to more than 100, with over 30 now in production [11][33] - The power products pipeline has grown to over $450 million, with a total pipeline nearing $600 million, primarily driven by high-power products [31][43] Market Data and Key Metrics Changes - The company is focusing on three key high-power verticals: computing (including data centers and AI), energy and industrials, and electric vehicles [5][31] - There is significant interest in the company's 1,200-volt GaN technology, which is expected to compete with silicon carbide [13][16] Company Strategy and Development Direction - The company is undergoing a strategic review process aimed at maximizing shareholder value, including exploring financing, licensing, and potential M&A opportunities [6][18] - The focus will be on resuming sequential product revenue growth, improving margins, and accessing new markets such as 800-volt battery electric vehicle systems [18][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong design-in momentum and the ability to convert design-ins into production, anticipating a return to sequential product revenue growth [60][64] - The company is actively working on securing non-dilutive debt financing and has received $2.9 million from a government contract, contributing to a stronger balance sheet [10][48] Other Important Information - The company completed a rights offering, raising approximately $8 million from key shareholders [10] - Cash and cash equivalents were reported at $3.3 million at the end of the quarter, with operational cash burn decreasing to $6.7 million [48][65] Q&A Session Summary Question: What is the appropriate inventory level given the demand? - Management indicated that the current inventory level of $8 million is appropriate to support business growth and sequential revenue growth [67][68] Question: Can you describe the milestones for the strategic review process? - Management stated that discussions are ongoing with bankers familiar with the company, but specific milestones cannot be disclosed at this time [55][72] Question: How is the company addressing the demand in AI and data centers? - The company is seeing positive design-ins in the AI space and is focused on high-power computing applications [54][69] Question: What is the expected mix of product and government revenue in the upcoming quarters? - Management anticipates a shift towards more product revenue, with government revenue reverting to normalized levels [83][85] Question: When can customers expect sampling of the 1,200-volt products? - Limited sampling is expected in early 2024 for customers interested in system-based design and evaluation [94]

August 14th, 2023 NASDAQ: TGAN • This presentation contains forward-looking statements. All statements other than statements of historical fact contained in this presentation, including statements regarding Transphorm's business strategy, plans and objectives for future operations, expectations regarding its total addressable market, products, and competitive position, are forwardlooking statements. The words "may," "will," "estimate," "expect," "plan," "believe," "potential," "predict," "target," "should," ...

Financial Performance - Total revenue for the three months ended June 30, 2023, was $5,883,000, an increase of 14.1% compared to $5,156,000 for the same period in 2022[19]. - Gross profit for the same period was $2,088,000, up from $1,106,000, reflecting a gross margin improvement[19]. - The net loss attributable to common stockholders for the three months ended June 30, 2023, was $13,059,000, compared to a net loss of $5,353,000 for the same period in 2022[19]. - The company experienced a comprehensive loss of $7,934,000 for the three months ended June 30, 2023, compared to a comprehensive loss of $5,746,000 for the same period in 2022[22]. - The company reported a net loss applicable to common shareholders of $13.1 million for the three months ended June 30, 2023, compared to a net loss of $5.4 million for the same period in 2022, resulting in a basic loss per share of $0.22[44]. - The company reported a net loss of $7.4 million for the three months ended June 30, 2023, compared to a net loss of $5.4 million for the same period in 2022[174]. - The company had an accumulated deficit of $222.3 million as of June 30, 2023[174]. Cash and Liquidity - Cash and cash equivalents decreased to $3,311,000 as of June 30, 2023, down from $15,527,000 as of March 31, 2023[16]. - The company raised approximately $9.3 million in total gross proceeds from the exercise of existing warrants and a private placement of common stock in April 2023[82]. - The company raised gross proceeds of $7.3 million from the exercise of warrants and $2.0 million from a private placement during the three months ended June 30, 2023[182]. - The company anticipates needing additional equity or debt financing to secure funds, which may lead to significant dilution of existing stockholders' ownership[183]. - If the company fails to secure additional funding, it may need to cease operations or seek bankruptcy protection[178][181]. - The company plans to raise additional working capital through stock issuance, debt financing, or licensing of intellectual property, but there is no assurance of success in these efforts[36]. Operating Expenses - Operating expenses increased to $8,867,000 from $6,140,000, primarily due to higher research and development costs, which rose to $2,869,000 from $1,740,000[19]. - Research and development expenses rose by $1.1 million, or 64.9%, to $2.9 million, driven by increased payroll costs and stock-based compensation[138]. - Sales and marketing expenses increased by $0.4 million, or 36.8%, to $1.5 million, primarily due to higher payroll and stock-based compensation costs[139]. - General and administrative expenses increased by $1.2 million, or 36.1%, to $4.5 million, mainly due to increased payroll and stock-based compensation[141]. Assets and Liabilities - Total assets decreased to $33,715,000 from $44,452,000, indicating a significant reduction in the company's asset base[16]. - Total liabilities decreased to $10,891,000 from $24,837,000, primarily due to the repayment of the revolving credit facility[16]. - As of June 30, 2023, the company had total inventory of $8.9 million, slightly up from $8.4 million as of March 31, 2023[54]. - Accounts payable and accrued expenses totaled $6.5 million as of June 30, 2023, down from $7.9 million as of March 31, 2023[61]. Joint Ventures and Investments - The company has provided $6.1 million of its $12 million commitment to GaNovation as part of its investment in a joint venture[62]. - The company's interest in the joint venture GaNovation increased from 25% to 32.5% effective April 10, 2023, leading to a maximum funding obligation of $12.0 million over three years, of which $6.1 million has been provided as of June 30, 2023[187]. - The company's share of operating losses from the joint venture for the three months ended June 30, 2023, was $0.9 million, with losses of $2.7 million and $4.0 million for the years ended March 31, 2023, and 2022, respectively[187]. Market and Operational Risks - The company faces significant competition in the semiconductor market, with existing competitors having advantages such as greater name recognition and larger customer bases[200]. - The company is exposed to foreign currency exchange rate fluctuations, with a loss of $0.5 million from such fluctuations for both the three months ended June 30, 2023, and 2022[192]. - The company relies on third-party suppliers for raw materials and components, which poses risks related to availability, capacity, and delivery schedules[210]. - Manufacturing processes depend on specific raw materials, and delays in access could adversely affect operational results[212]. - The company is susceptible to manufacturing delays and pricing fluctuations due to reliance on third-party manufacturers, which may lead to loss of sales and customers[214]. Strategic Initiatives - The company plans to initiate a strategic review in the second fiscal quarter ending September 30, 2023, to explore opportunities to enhance stockholder value, including potential partnerships or asset sales[114]. - The company plans to pursue additional working capital through stock issuance, debt financing, and licensing of intellectual property to sustain operations[149].

Market Potential and Financial Overview - The total addressable market for GaN is estimated to be approximately $3.1 billion in 2023 and $8.0 billion in 2028[46]. - The existing market for GaN RF transistors for wireless infrastructure and 5G is estimated to exceed $800 million, with the company targeting approximately 40% of this market attributed to epiwafers[47]. - Total revenue decreased to $16.5 million for the year ended March 31, 2023, down from $24.1 million for the year ended March 31, 2022, primarily due to an $8.0 million decrease in licensing revenue[118]. - Product and service revenue increased to approximately $14.9 million for the year ended March 31, 2023, compared to $12.2 million for the year ended March 31, 2022[118]. - The company expects revenue from product sales to increase in fiscal 2024 compared to the year ended March 31, 2023[118]. - The company has an accumulated deficit of $209.2 million, with net losses of $30.6 million and $10.2 million for the years ended March 31, 2023 and 2022, respectively[142]. - The company raised gross proceeds of $16.0 million from selling shares in private placements during the year ended March 31, 2023, and had $15.5 million in cash and cash equivalents as of the same date[149]. - The company intends to raise up to $15 million through a rights offering to be used for working capital and general corporate purposes[31]. Product Development and Innovation - The company has a strong innovation track record with multiple generations of products, including Gen-5 released in 2021, aimed at improving performance and reducing costs[37]. - The company has commercialized Gen-4 GaN products for power adapters and fast chargers, with capabilities for 30 watt to 1500 watt applications[65]. - The company’s GaN products are designed for power levels from 30 watts to over 30 kilowatts, targeting the 600 Volt to 650 Volt and 900 Volt markets[88]. - The company is focusing on power conversion opportunities in automobiles, targeting onboard battery chargers and DC-DC converters, with a near-term focus on two and three-wheeled vehicles with lower power ratings (e.g., 800 kilowatts)[100]. - The company is developing reference designs for fast chargers, targeting power levels from sub-100 watts to over 3 kilowatts for datacenter servers and blockchain applications[98]. - The company has developed significant partnerships in industrial markets, such as with Yaskawa for servo motor drives, and aims to deliver 300 watts to 5 kilowatts of power in a single package[99]. - The company has established a five-year cooperation agreement with Nexperia to enhance its position in the automotive market for GaN products[56]. - The company has secured $70 million from KKR Phorm Investors L.P. to enable mass marketing of GaN products[53]. Intellectual Property and Competitive Position - The company holds over 850 issued patents and 200 pending patent applications as of March 31, 2023, with a strong intellectual property portfolio in GaN technology[76]. - The company’s intellectual property protection is critical for competitive advantage, and any failure to protect proprietary technologies could negatively affect its market position[198]. - The company faces potential challenges in maintaining the validity and enforceability of its patents, which could lead to costly legal disputes and limit its competitive edge[200]. - The company’s patent portfolio may not be sufficient to settle infringement claims through cross-licensing arrangements, exposing it to greater risks from non-practicing entities[204]. Operational Challenges and Risks - The company expects cash flows to be negatively impacted if AFSW continues to operate at a loss, which is anticipated to persist for the next couple of years[52]. - The company faces risks related to the development of new technologies and products, which are critical for maintaining market competitiveness[161][162]. - Sales cycles are long and unpredictable, making revenue difficult to forecast and potentially leading to significant fluctuations in operating results[163]. - The company relies on third-party suppliers for wafer fabrication and assembly, which could limit product shipments if disruptions occur[172][174]. - Geopolitical changes in China-Taiwan relations could disrupt operations of suppliers, adversely affecting the company's ability to scale products[178]. - Inflation and rising costs may not be matched by revenue increases, potentially impacting financial performance[167]. - The company competes in highly competitive markets, facing pressures from both existing and new entrants that could affect market share and profit margins[168][169]. - The company is exposed to risks associated with international sales and operations, requiring effective recruitment and training of personnel for foreign markets[189]. Corporate Governance and Financial Reporting - The company has identified a material weakness in its internal control over financial reporting, which could result in inaccuracies in its financial statements if not remediated[216]. - The company is an emerging growth company and may benefit from reduced reporting requirements, but this status could make its stock less attractive to investors[222]. - The company is subject to increased regulatory, legal, and accounting expenses due to its public company status, which could impact its financial condition[211]. - The company has initiated corrective actions to address its internal control weaknesses, including hiring additional personnel with technical accounting knowledge[217]. - The company qualifies as a "smaller reporting company" with a public float of less than $250 million and annual revenues of less than $100 million[227]. - The substantial control by principal stockholders could delay or prevent changes in corporate control[228]. - The company may experience increased volatility or a decline in stock price if investors find its common stock less attractive due to reduced disclosures[224].

Financial Performance - For the three months ended December 31, 2022, Transphorm reported net revenue of $4,493,000, a decrease of 2.4% compared to $4,604,000 for the same period in 2021[26]. - The net loss for the three months ended December 31, 2022, was $10,460,000, compared to a net loss of $4,164,000 for the same period in 2021, representing a 151% increase in losses[26]. - For the nine months ended December 31, 2022, the company reported a net loss of $21.8 million, compared to a net loss of $5.2 million for the same period in 2021[37]. - Revenue decreased by $5.8 million, or 30.4%, to $13.3 million for the nine months ended December 31, 2022, compared to $19.1 million for the same period in 2021[208]. - Net loss increased by $16.6 million, or 316.5%, to $(21.8) million for the nine months ended December 31, 2022, compared to $(5.2) million for the same period in 2021[208]. Expenses and Losses - The cost of goods sold for the three months ended December 31, 2022, was $7,162,000, resulting in a gross loss of $2,669,000 compared to a gross profit of $669,000 in the same period of 2021[26]. - Total operating expenses for the three months ended December 31, 2022, increased to $7,229,000, up 33% from $5,437,000 in the same period of 2021[26]. - The company has incurred significant operating losses primarily due to research and development expenses and general administrative costs[174]. - The company anticipates an increase in general and administrative expenses due to costs associated with being a public company and business growth[193]. Cash and Assets - Cash and cash equivalents decreased to $23,149,000 as of December 31, 2022, from $33,435,000 as of March 31, 2022[23]. - The company’s total assets as of December 31, 2022, were $49,245,000, a slight increase from $48,646,000 as of March 31, 2022[23]. - The company’s accumulated deficit as of December 31, 2022, was $200,446,000, up from $178,638,000 as of March 31, 2022[23]. Revenue Breakdown - The Company reported $3.960 million in commercial product and service revenue for the three months ended December 31, 2022, an increase of 9.3% from $3.623 million in 2021[82]. - Government contract revenue decreased to $0.533 million for the three months ended December 31, 2022, from $0.981 million in 2021, a decline of 45.5%[82]. - The company reported that four customers accounted for 73.3% of its revenue for the nine months ended December 31, 2022, down from 81.6% in the same period of 2021[175]. Inventory and Write-offs - The company experienced a significant inventory write-off of $2.8 million during the nine months ended December 31, 2022, compared to $202,000 in the prior year[37]. - The Company recognized a $2.8 million inventory write-off for the three months ended December 31, 2022, compared to $8,000 for the same period in 2021[91]. - The Company recorded an inventory total of $7.476 million as of December 31, 2022, up from $6.330 million as of March 31, 2022, representing an increase of 18.1%[90]. Research and Development - Research and development expenses for the nine months ended December 31, 2022, were $5,895,000, an increase of 15% from $5,023,000 in the same period of 2021[26]. - Research and development expenses increased by $0.7 million, or 44.5%, to $2.3 million for the three months ended December 31, 2022[203]. - The company has invested in research and development to support new product development and improve product performance, which is essential to remain competitive[184]. Stock and Equity - The Company has 750 million shares of common stock authorized, with 56,861,743 shares issued and outstanding as of December 31, 2022[126]. - The Company has 5,144,788 shares available for grant under the 2020 Equity Incentive Plan as of December 31, 2022[142]. - The total stock-based compensation expense for the three months ended December 31, 2022, was $1.123 million, an increase from $848,000 in the same period of 2021[153]. Going Concern - The company has substantial doubt about its ability to continue as a going concern due to historical losses and future expected losses[45]. - The company expects to incur significant expenses and operating losses in the foreseeable future, driven by the addition of sales personnel and increased promotional activities[176].