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Investment in Aizu Fujitsu Semiconductor Wafer Solution Limited ("AFSW")
 9 Months Ended
Dec. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Investment in Aizu Fujitsu Semiconductor Water Solution Limited ("AFSW") Investment in Aizu Fujitsu Semiconductor Wafer Solution Limited (“AFSW”)
Through July 31, 2021, the Company was party to a joint venture agreement (the “JVA”), by and among Aizu Fujitsu Semiconductor Limited, Fujistu Semiconductor Limited (“FSL”), the Company and Transphorm Aizu, Inc. (“Transphorm Aizu”) for the ownership and operations of AFSW. Through July 31, 2021, the Company held a 49% interest in AFSW through Transphorm Aizu, the Company’s wholly-owned subsidiary established in Japan to manage the financial transactions around AFSW. Transphorm Aizu and FSL funded AFSW based on a mutually agreed funding schedule, which was adjusted as agreed upon by both parties during the three months ended September 30, 2021. Any outstanding balances were reviewed upon the conclusion of the JVA effective July 31, 2021 to assess unfunded commitment to joint venture liability. During the nine months ended December 31, 2021, the Company recognized a $1.5 million gain, in other income, upon termination of the JVA and settlement of its obligation.

On April 1, 2020, FSL exercised its put option under the JVA and notified us that FSL intended to exit the joint venture by selling its 51% interest in AFSW to us. In December 2020, the Company entered into a joint venture agreement with JCP Capital Management, LLC (controlling party with 75% ownership) to create GaNovation, a joint venture company in Singapore, to engage in the business of distribution, development and supply of GaN products and, upon approval of the regulatory authorities in Japan, to purchase FSL’s and Transphorm’s interests in AFSW. In July 2021, regulatory authorities in Japan approved GaNovation’s purchase of 100% of the interests in AFSW from Transphorm and FSL. On July 20, 2021, Transphorm Aizu entered into a Share Purchase Agreement (the “Purchase Agreement”) with GaNovation, pursuant to which GaNovation agreed to acquire Transphorm’s 49% interest in AFSW from Transphorm Aizu for 1 Japanese Yen. The closing of the Purchase Agreement occurred on August 1, 2021. Following the closing of the Purchase Agreement and other concurrent transactions between GaNovation and FSL, Transphorm, through GaNovation, holds a 25% interest in AFSW (down from the previous 49%). The Company has agreed to use its best efforts to maintain the operations of AFSW until at least August 1, 2022.

AFSW manufactures semiconductor products exclusively for its owners under manufacturing agreements at prices estimated to cover the cost of production. AFSW was determined to be a variable interest entity as the equity at risk was not believed to be sufficient. AFSW depends on its owners for any additional cash. The Company extended $3.8 million and $5.8 million to AFSW to fund AFSW’s operations for the nine months ended December 31, 2021 and 2020, respectively. The Company’s known maximum exposure to loss approximated the carrying value of its investment balance, which included the financing. Potential future losses could be higher than the carrying amount of the Company’s investment, as the Company is liable, along with the controlling owner, for other future operating costs or obligations of AFSW. In addition, because Transphorm is currently committed to
purchasing GaN wafers and production-related services from AFSW at pre-agreed pricing based upon the Company’s second generation products, the Company may be required to purchase products at a higher cost for its newer generation products. Investment in AFSW was $61 thousand as of December 31, 2021 and unfunded commitment to AFSW was $1.9 million as of March 31, 2021.
The Company’s investment activities in AFSW for the periods presented are summarized below (in thousands):

For the Nine Months Ended December 31, 2021For the Year Ended March 31, 2021
Beginning balance$(1,866)$(1,546)
Investment3,765 6,768 
Loss(3,294)(6,885)
Gain1,455 — 
Effect of exchange rate change1 (203)
Ending balance$61 $(1,866)

    Summarized financial information of AFSW for the periods indicated, as provided by the controlling owner, are as follows (in thousands):
As of
December 31, 2021March 31, 2021
Current assets$1,844 $932 
Long-term assets$5,152 $5,330 
Other current liabilities$3,494 $2,200 
Due to controlling owner$3,707 $22,354 
Due to Transphorm$594 $13,179 
Net deficit$(799)$(31,471)
For the Three Months Ended December 31,For the Nine Months Ended December 31,
2021202020212020
Sales$2,262 $698 $5,957 $1,728 
Gross loss$(2,338)$(2,896)$(7,094)$(9,214)
Net loss$(2,848)$(3,303)$(9,085)$(11,057)