Business and Basis of Presentation

6 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Transphorm Technology, Inc. (“Transphorm Technology”), a wholly owned subsidiary of Transphorm, Inc., was founded in 2007 to develop GaN semiconductor components used in power conversion.

Throughout these notes, “the Company,” “Transphorm,” “we,” “us” and “our” refer to Transphorm, Inc. and its direct and indirect wholly-owned subsidiaries. Transphorm Technology and its subsidiaries hold all material assets and conduct all business activities and operations of the Company. Transphorm Technology’s activities to date have been primarily performing research and development, establishing manufacturing infrastructure, market sampling, product launch, hiring personnel, and raising capital to support and expand these activities. Transphorm Japan, Inc. (“TPJ”) was established in Japan in February 2014 to secure the Company’s production capacity and establish a direct presence in Asian markets. Transphorm Aizu, Inc. (“Transphorm Aizu”) was established in Japan to manage the financial transactions around Aizu Fujitsu Semiconductor Wafer Solution Limited (“AFSW”), the wafer fabrication facility located in Aizu Wakamatsu, Japan that is owned by GaNovation, the joint venture company in which the Company has a non-controlling interest. Transphorm Japan Epi, Inc. (“TJE”) was established in Japan in 2019 to enable the operational capacity of the MOCVD reactors held in Aizu.

Going Concern

The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. However, considering the Company’s working capital of $13.6 million as of September 30, 2023, historical losses (during the year ended March 31, 2023 and six months ended September 30, 2023, the Company’s net loss was $30.6 million and $14.6 million, respectively), and future expected losses, there is substantial doubt about the Company’s ability to continue as a going concern for the next twelve months from the issuance of these financial statements.

In response to the factors noted above, management intends to raise additional working capital to fund operations through the issuance of stock to investors, debt financing, and/or license of intellectual property. However, there is no assurance that the Company will be successful in raising additional capital. If the Company is unable to secure additional funding, the Company believes that its existing cash and cash equivalents and forecasted revenue will be sufficient to fund its operations into the first half of January 2024. If the Company does not obtain any other financing, the Company would need to cease operations, liquidate its assets, and may seek the protection of applicable bankruptcy laws.

The Company’s ability to sustain operations is dependent on its ability to successfully market and sell its products and its ability to raise capital through additional financings until it is able to achieve profitability with positive cash flows. To the extent sufficient financing is not available, the Company may not be able to, or may be delayed in, developing its offerings and meeting its obligations. The Company will continue to evaluate its projected expenditures relative to its available cash and evaluate financing alternatives in order to satisfy its working capital and other cash requirements. The accompanying unaudited condensed consolidated financial statements do not reflect any adjustments that might result from the outcome of these uncertainties.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements reflect all adjustments of a normal and recurring nature that are necessary for a fair presentation of the results for the interim period ended September 30, 2023, but are not necessarily indicative of the results that will be reported for the entire fiscal year or any other interim period. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) have been condensed or omitted. The aforementioned unaudited condensed consolidated financial statements are prepared in conformity with GAAP and in accordance with the instructions to Form 10-Q pursuant to the rules and regulations

of the Securities and Exchange Commission. The interim information should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023. The consolidated balance sheet as of March 31, 2023 is derived from those audited financial statements.

Significant Accounting Policies

Descriptions of the Company’s significant accounting policies are included in Note 2 - Summary of Significant Accounting Policies in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

Accounting Standard Adopted

Financial Instruments - In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard changed the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for the Company’s fiscal year ending March 31, 2024. The Company adopted this standard effective April 1, 2023 and the adoption did not have a material effect on the condensed consolidated financial statements.

Recently Issued Accounting Standards under Evaluation

Debt - In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. Among other provisions, the amendments in this ASU significantly change the guidance on the issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, excluding entities eligible to be smaller reporting companies as defined by the SEC. As the Company is a smaller reporting company, the ASU is effective for fiscal years beginning after December 15, 2023. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and the adoption is not expected to have a significant impact on the consolidated financial statements.

Loss Per Share

Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Net loss applicable to common shareholders is calculated as follows for each interim period as follows (in thousands except for number of shares):


	Three Months Ended September 30,				Six Months Ended September 30,
	2023		2022		2023		2022
Net loss available to common shareholders	$	(7,129)	$	(5,995)	$	(14,576)	$	(11,348)
Deemed dividend related to warrant modification (Note 8)	—		—		(753)		—
Deemed dividend related to Inducement Warrants (Note 8)	—		—		(4,859)		—
Net loss attributable to common stockholders	(7,129)		(5,995)		(20,188)		(11,348)
Weighted average common shares outstanding - basic and diluted	61,138,691		56,619,662		61,071,729		55,518,297
Net loss per share	$	(0.12)	$	(0.10)	$	(0.33)	$	(0.20)

Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Potentially dilutive shares are excluded from the computation of diluted loss per share during periods in which losses are reported since the result would be antidilutive.Excluded from diluted loss per share for the three months ended September 30, 2023 and 2022 were 1,426,944 shares and 3,643,320 shares, respectively, because their inclusion would have been antidilutive. Excluded from diluted loss per share for the six months ended September 30, 2023 and 2022 were 1,003,724 shares and 3,615,397 shares, respectively, because their inclusion would have been antidilutive.