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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________

Commission file number: 001-41295
image2.jpg
Transphorm, Inc.
(Exact name of registrant as specified in its charter)
Delaware82-1858829
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
75 Castilian Drive
Goleta,California93117
(Address of principal executive offices)(Zip Code)

(805) 456-1300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $0.0001 per shareTGANThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
1


“accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of February 6, 2024, 63,266,180 shares of the registrant’s common stock were outstanding.


2


Transphorm, Inc.
FORM 10-Q
Table of Contents
PART I - FINANCIAL INFORMATION
PART II - OTHER INFORMATION
3


Glossary of Terms and Abbreviations
The following is a glossary of technical terms used in this Quarterly Report on Form 10-Q (this “Report”):

AC – alternating current
AEC-Q101 – Automotive Electronic Council’s electronic components stress qualification standard

AFSW – Aizu Fujitsu Semiconductor Wafer Solution Limited, the wafer fabrication facility located in Aizu Wakamatsu, Japan that is owned by GaNovation, our joint venture company

DC – direct current

Epi/Epiwafer/Epimaterials – GaN device layers grown on a substrate, from which active GaN-based devices are subsequently manufactured in a wafer fabrication facility

FET – field effect transistor, a type of switching transistor

GaN – gallium nitride

JEDEC – Joint Electron Device Engineering Council, an independent semiconductor engineering trade organization and standardization body that represents all areas of the electronics industry

MOCVD – metal organic chemical vapor deposition, a technique for layering GaN layers onto substrates such as a silicon substrate and making the starting GaN semiconductor material (i.e., an epiwafer)

Power converters / Inverters – electronic systems used to convert electricity from AC to DC (such as a charger), DC-AC (such as an inverter) or in some cases AC-AC or DC-DC within the systems converting from one voltage level to another

4


Risk Factor Summary
Our business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors,” together with the other information in this Report. If any of the following risks actually occurs (or if any of those listed elsewhere in this Report occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.
We face risks related to our proposed acquisition by Renesas Electronics America Inc., including the possibility that the merger agreement is terminated prior to the completion of the merger, diversion of management’s attention, disruption of our relationships with third parties and employees, restrictions on our business activities and potential litigation related to the merger.
We have a history of losses, anticipate increasing our operating expenses and capital expenditures in the future, and may not be able to achieve or maintain profitability.
Our ability to continue as a going concern will depend on us being able to raise significant additional capital to fund our operations, and this capital may be unavailable on attractive terms, if at all, and could dilute your investment.
Our joint venture arrangement involves numerous risks, including risks relating to the lack of full control of the joint venture, potential disagreements with our joint venture partner about how to manage the joint venture, conflicting interests of the joint venture, completion of audit requirements under SEC rules, requirements to fund the joint venture and its business not being profitable.
Our quarterly results of operations are likely to vary from period to period, which could cause the market price of our common stock to fluctuate or decline.
We are exposed to foreign currency exchange rate fluctuations. Although we hedge certain currency risks, our hedging strategies may not be successful in mitigating our risks and changes in foreign currency exchange rates may adversely affect our financial condition, cash flows and results of operations.
We may not be able to develop new technologies and products to satisfy changes in customer demand or industry standards, and our competitors could develop products that decrease the demand for our products.
Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.
We must commit resources to development, design and production prior to receipt of purchase commitments and could lose some or all of the associated investment.
Unfavorable worldwide economic conditions (including inflation), may negatively affect our business, financial condition and results of operations.
We compete in highly competitive markets, and competitive pressures from existing and new companies may adversely impact our business and operating results.
We rely on third-party channel partners to sell our products. If our partners fail to perform, our ability to sell our products and services could be limited, and if we fail to optimize our channel partner model going forward, our operating results could be harmed.
We rely on limited sources of wafer fabrication, packaged products fabrication and product testing, the loss of which could delay and limit our product shipments.
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We rely on third parties for supply of raw materials and parts, assembly and test services, and transportation, among other things, and we generally cannot control their availability or conditions of supply or services.
Because we depend on third-party manufacturers to build portions of our products, we are susceptible to manufacturing delays and pricing fluctuations that could prevent us from shipping customer orders on time, if at all, or on a cost-effective basis, which may result in the loss of sales, income and customers.
Our business could be adversely affected by health epidemics or pandemics.
An earthquake, terrorist attack or other man-made natural disaster could negatively impact our business and operating results.
The loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business.
If we fail to effectively manage our growth, our business, financial condition and results of operations would be harmed.
We are subject to a number of risks associated with international sales and operations.
Investments in us may be subject to U.S. foreign investment regulations which may impose conditions on or limit certain investors’ ability to purchase or hold our common stock, potentially limiting our ability to enter into or maintain strategic relationships and making our common stock less attractive to investors.
We are subject to government regulation, including import, export and economic sanctions laws and regulations that may expose us to liability and increase our costs.
Our sales to government customers subject us to uncertainties regarding fiscal funding approvals, renegotiations or terminations at the discretion of the government, as well as audits and investigations, which could result in litigation, penalties and sanctions including early termination, suspension and debarment.
Any failure by us to protect our proprietary technologies or maintain the right to use certain technologies may negatively affect our ability to compete.
If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose certain intellectual property rights.
Any failure to maintain effective internal controls over our financial reporting could materially and adversely affect us.
We have identified a material weakness in our internal control over financial reporting that, if not properly remediated, could result in material misstatements in our consolidated financial statements in future periods.
Sales of substantial amounts of our common stock in the public markets, or the perception that such sales might occur, could cause the market price of our common stock to decline significantly, even if our business is doing well.
We could be subject to certain liquidated damages pursuant to the registration rights agreements we entered into with certain holders of our securities.
Our principal stockholders and management have substantial control over us and could delay or prevent a change in corporate control.
Anti-takeover provisions in our charter documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management.
6


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Transphorm, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except share and per share data)

December 31, 2023March 31, 2023
Assets
Current assets:
Cash and cash equivalents$7,951 $15,527 
Restricted cash 500 
Accounts receivable, net of allowance for doubtful accounts of $263 and $0 at December 31, 2023 and March 31, 2023, respectively, including related parties (Note 11)
1,721 4,396 
Inventory10,005 8,406 
Prepaid expenses and other current assets1,275 1,859 
Total current assets20,952 30,688 
Property and equipment, net7,679 7,890 
Operating lease right-of-use assets2,311 3,033 
Goodwill1,020 1,079 
Intangible assets, net99 321 
Investment in joint venture 715 
Other assets601 726 
Total assets$32,662 $44,452 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses, including related parties (Note 11)$9,306 $7,895 
Deferred revenue10  
Accrued interest 180 
Unfunded commitment in joint venture1,296  
Accrued payroll and benefits1,430 1,458 
Operating lease liabilities368 404 
Revolving credit facility 12,000 
Total current liabilities12,410 21,937 
Operating lease liabilities, net of current portion2,002 2,670 
Other liabilities 230 
Total liabilities14,412 24,837 
Commitments and contingencies (Note 7)
Stockholders’ equity:
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Preferred stock, $0.0001 par value; 5,000,000 shares authorized and none issued and outstanding as of December 31, 2023 and March 31, 2023
  
Common stock, $0.0001 par value; 750,000,000 shares authorized as of December 31, 2023 and March 31, 2023, and 63,195,948 and 57,047,013 shares issued and outstanding as of December 31, 2023 and March 31, 2023, respectively
6 6 
Additional paid-in capital262,319 230,272 
Accumulated deficit(242,146)(209,236)
Accumulated other comprehensive loss(1,929)(1,427)
Total stockholders’ equity18,250 19,615 
Total liabilities and stockholders’ equity$32,662 $44,452 
See accompanying notes to unaudited condensed consolidated financial statements.
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Transphorm, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(in thousands, except share and per share data)

Three Months Ended
December 31,
Nine Months Ended
December 31,
2023202220232022
Revenue, net, including related parties (Note 11)$4,670 $4,493 $15,563 $13,319 
Cost of goods sold4,595 7,162 12,226 14,444 
Gross profit (loss)75 (2,669)3,337 (1,125)
Operating expenses:
Research and development2,839 2,325 8,730 5,895 
Sales and marketing1,745 1,447 4,935 3,596 
General and administrative4,412 3,457 11,870 9,818 
Total operating expenses8,996 7,229 25,535 19,309 
Loss from operations(8,921)(9,898)(22,198)(20,434)
Interest expense 184 8 550 
Loss in joint venture978 799 2,559 2,065 
Other expense (income), net102 (421)(188)(1,241)
Loss before tax expense(10,001)(10,460)(24,577)(21,808)
Tax expense    
Net loss$(10,001)$(10,460)$(24,577)$(21,808)
Deemed dividend related to warrant modification and issuance of Inducement Warrants (Note 8)2,721  8,333  
Net loss attributable to common stockholders$(12,722)$(10,460)$(32,910)$(21,808)
Net loss per share - basic and diluted$(0.20)$(0.18)$(0.54)$(0.38)
Weighted average common shares outstanding - basic and diluted62,183,843 56,739,450 61,458,945 55,926,828 
See accompanying notes to unaudited condensed consolidated financial statements.

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Transphorm, Inc.
Condensed Consolidated Statements of Comprehensive Loss (unaudited)
(in thousands)

Three Months Ended
December 31,
Nine Months Ended
December 31,
2023202220232022
Net loss$(10,001)$(10,460)$(24,577)$(21,808)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments211 521 (502)(136)
Other comprehensive loss (income), net of tax211 521 (502)(136)
Comprehensive loss$(9,790)$(9,939)$(25,079)$(21,944)
See accompanying notes to unaudited condensed consolidated financial statements.

10


Transphorm, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
For the Three Months Ended December 31, 2023 and 2022
(in thousands, except share data)

Preferred StockCommon StockAccumulated Other Comprehensive LossTotal Stockholders’ Equity
Number of SharesAmountNumber of SharesAmountAdditional Paid-in CapitalAccumulated Deficit
Balance at September 30, 2023 $ 61,981,134 $6 $255,249 $(229,424)$(2,140)$23,691 
Restricted stock units vested— — 176,380 — — — — — 
Restricted stock units surrendered due to net share settlement to satisfy employee tax liability— — (30,838)— (86)— — (86)
Stock warrant exercise and deemed dividend related to warrant modification, net of issuance costs (Note 8)— — 1,069,272 — 3,763 (837)— 2,926 
Deemed dividend related to issuance of Inducement Warrants (Note 8)— — — — 1,884 (1,884)—  
Issuance of common stock, net of issuance costs (Note 8)— — — — — — — — 
Stock-based compensation— — — — 1,509 — — 1,509 
Other comprehensive loss— — — — — — 211 211 
Net loss— — — — — (10,001)— (10,001)
Balance at December 31, 2023 $ 63,195,948 $6 $262,319 $(242,146)$(1,929)$18,250 
Balance at September 30, 2022 $ 56,626,340 $6 $228,178 $(189,986)$(1,853)$36,345 
Stock options exercised— — 154,904 — 653 — — 653 
Restricted stock units vested— — 80,551 — — — — — 
Restricted stock units surrendered due to net share settlement to satisfy employee tax liability— — (52)— — — — — 
Stock-based compensation— — — — 1,123 — — 1,123 
Other comprehensive income— — — — — — 521 521 
Net loss— — — — — (10,460)— (10,460)
Balance at December 31, 2022 $ 56,861,743 $6 $229,954 $(200,446)$(1,332)$28,182 

See accompanying notes to unaudited condensed consolidated financial statements.


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Transphorm, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
For the Nine Months Ended December 31, 2023 and 2022
(in thousands, except share data)

Preferred StockCommon StockAccumulated Other Comprehensive LossTotal Stockholders’ Equity
Number of SharesAmountNumber of SharesAmountAdditional Paid-in CapitalAccumulated Deficit
Balance at March 31, 2023 $ 57,047,013 $6 $230,272 $(209,236)$(1,427)$19,615 
Restricted stock units vested— — 475,940 — — — — — 
Restricted stock units surrendered due to net share settlement to satisfy employee tax liability— — (116,883)— (374)— — (374)
Stock warrant exercise and deemed dividend related to warrant modification, net of issuance costs (Note 8)— — 2,885,120 — 11,684 (1,590)— 10,094 
Deemed dividend related to issuance of Inducement Warrants (Note 8)— — — — 6,743 (6,743)—  
Issuance of common stock, net of issuance costs (Note 8)— — 2,904,758 — 9,569 — — 9,569 
Stock-based compensation— — — — 4,425 — — 4,425 
Other comprehensive loss— — — — — — (502)(502)
Net loss— — — — — (24,577)— (24,577)
Balance at December 31, 2023 $ 63,195,948 $6 $262,319 $(242,146)$(1,929)$18,250 
Balance at March 31, 2022 $ 53,379,307 $5 $211,190 $(178,638)$(1,196)$31,361 
Stock options exercised— — 168,326 — 709 — — 709 
Restricted stock units vested— — 115,731 — — — — — 
Restricted stock units surrendered due to net share settlement to satisfy employee tax liability— — (1,620)— (6)— — (6)
Issuance of common stock, net of issuance costs— — 3,199,999 1 15,719 — — 15,720 
Stock-based compensation— — — — 2,342 — — 2,342 
Other comprehensive loss— — — — — — (136)(136)
Net loss— — — — — (21,808)— (21,808)
Balance at December 31, 2022 $ 56,861,743 $6 $229,954 $(200,446)$(1,332)$28,182 
See accompanying notes to unaudited condensed consolidated financial statements.
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Transphorm, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Nine Months Ended December 31,
20232022
Cash flows from operating activities:
Net loss$(24,577)$(21,808)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for inventory332 2,810 
Depreciation and amortization913 719 
Reduction in the carrying amount of right-of-use assets396 425 
Provision for doubtful accounts263  
Impairment of long-lived assets208  
Stock-based compensation4,425 2,342 
Interest cost 4 
Gain on sale of equipment(48)(110)
Loss in joint venture2,559 2,065 
Changes in fair value of derivative instruments169 75 
Changes in operating assets and liabilities:
Accounts receivable2,404 (1,221)
Inventory(2,047)(3,956)
Prepaid expenses and other current assets613 401 
Other assets146 (504)
Accounts payable, accrued expenses, and other liabilities300 428 
Deferred revenue10 (346)
Accrued payroll and benefits(20)486 
Operating lease liabilities(406)(392)
Net cash used in operating activities(14,360)(18,582)
Cash flows from investing activities:
Purchases of property and equipment(623)(5,633)
Proceeds from sale of equipment48 110 
Investment in joint venture(807)(2,569)
Net cash used in investing activities(1,382)(8,092)
Cash flows from financing activities:
Proceeds from stock option exercise 709 
Proceeds from issuance of common stock9,936 16,000 
Cost associated with issuance of common stock and warrants(123)(280)
Payment for taxes related to net share settlement of restricted stock units(374)(6)
Proceeds from exercise of stock warrants10,257  
Loan repayment(12,000) 
Net cash provided by financing activities7,696 16,423 
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash(30)(35)
Net decrease in cash, cash equivalents and restricted cash(8,076)(10,286)
Cash, cash equivalents and restricted cash at beginning of period16,027 33,935 
Cash, cash equivalents and restricted cash at end of period$7,951 $23,649 
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Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets
Cash and cash equivalents$7,951 $23,149 
Restricted cash 500 
Cash, cash equivalents and restricted cash at end of period$7,951 $23,649 
Supplemental disclosures of cash flow information:
Interest expense paid$188 $546 
Supplemental non-cash investing activity:
Property and equipment in accounts payable and accrued expenses$185 $ 
Supplemental non-cash financing activity:
Stock warrant exercise and deemed dividend related to warrant modification$1,590 $ 
Deemed dividend related to issuance of Inducement Warrants6,743  
Rights offering and warrant repricing costs in accounts payable and accrued liabilities409  
Operating lease right-of-use asset obtained in exchange for operating lease liabilities 3,598 
Remeasurement of operating lease right-of-use assets and liabilities for lease modification(300) 
See accompanying notes to unaudited condensed consolidated financial statements.

14


Transphorm, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 - Business and Basis of Presentation
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 in accordance with U.S. generally accepted accounting principles (GAAP) assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt about the Company’s ability to continue as a going concern exists.
The Company has incurred significant operating losses since its formation. During the nine months ended December 31, 2023 and 2022, the Company incurred a net loss of $24.6 million and $21.8 million, respectively, and used $14.4 million and $18.6 million of cash in operating activities, respectively. As of December 31, 2023, the Company had cash of $8.0 million, an accumulated deficit of $242.1 million, and working capital of $8.5 million. Net losses are expected to continue until the Company reaches the necessary scale to generate net cash inflow from operations. Accordingly, the Company has historically relied on the issuance of stock to investors, debt financing, and the license of intellectual property to fund its operations.
On January 10, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Renesas Electronics America Inc., a California corporation (“Parent”), Travis Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Renesas Electronics Corporation, a Japanese corporation (solely for the purposes set forth in Section 9.17 of the Merger Agreement) (“Guarantor”), pursuant to which Merger Sub will merge with and into Transphorm, with Transphorm surviving the merger as a wholly owned subsidiary of Parent (the “Merger”). Completion of the Merger is subject to customary closing conditions set forth in the Merger Agreement, including, among other things: (1) the adoption of the Merger Agreement by the holders of a majority of the voting power of the outstanding shares of our common stock; (2) the absence of any law or order preventing or making illegal the consummation of the Merger; and (3) certain specified regulatory clearances.
While the Company expects the Merger Agreement to close in the second half of 2024, there is no assurance that all of the various conditions will be satisfied, or that the Merger will be completed on the proposed terms, within the expected timeframe, or at all. 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.
Given the Company’s current liquidity, cash burn rate and capital readily available, management has concluded there is substantial doubt regarding the Company's ability to continue as a going concern within one year from the issuance date of the Company’s condensed consolidated financial statements. The accompanying unaudited
15


condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.
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 December 31, 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
Income Taxes - In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). The amendments in this ASU enhance transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregation by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 for public business entities. 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.
Segment Reporting - In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendments introduce a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker (CODM), extend certain annual disclosures to interim periods, and require that a public entity that has a single reportable segment provide all the disclosures required by the amendment and all existing segment disclosures in Topic 280. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and early adoption is permitted. 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.
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
16


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 stockholders by the weighted average number of common shares during the period. Net loss applicable to common stockholders is calculated for each interim period as follows (in thousands except for number of shares):
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Net loss available to common stockholders$(10,001)$(10,460)$(24,577)$(21,808)
Deemed dividend related to warrant modification (Note 8)(837) (1,590) 
Deemed dividend related to Inducement Warrants (Note 8)(1,884) (6,743) 
Net loss attributable to common stockholders(12,722)(10,460)(32,910)(21,808)
Weighted average common shares outstanding - basic and diluted62,183,843 56,739,450 61,458,945 55,926,828 
Net loss per share$(0.20)$(0.18)$(0.54)$(0.38)

Diluted earnings per share is calculated by dividing the Company’s net loss available to common stockholders 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 December 31, 2023 and 2022 were 4,776,610 shares and 3,366,373 shares, respectively, because their inclusion would have been antidilutive. Excluded from diluted loss per share for the nine months ended December 31, 2023 and 2022 were 2,481,914 shares and 3,146,131 shares, respectively, because their inclusion would have been antidilutive.

Note 2 - Revenue Recognition
Revenue, net including related parties, disaggregated by contract type is as follows (in thousands):

17


Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Commercial product and service3,175 $3,960 9,727 $11,556 
Government1,495 533 5,836 1,763 
Revenue, net$4,670 $4,493 $15,563 $13,319 

Revenue from related parties is as follows and included in Commercial product and service revenue (in thousands):
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Commercial product and service$1,981 $2,917 $4,711 $6,081 
Government revenue for the three and nine months ended December 31, 2023 was primarily derived from a contract with the National Security Technology Accelerator (“NSTXL”) which was awarded in May 2023, in which the Company may receive up to $15.2 million over the period from the first quarter of fiscal 2024 through the third quarter of fiscal 2026 for developing and manufacturing advanced GaN epiwafer materials in accordance with statements of work, and in support of an agreement between NSTXL and the U.S. Government. As of December 31, 2023, $7.5 million of the total $15.2 million has been funded by the U.S. Government. Government revenue for the three and nine months ended December 31, 2022 was primarily derived from contracts with the U.S. Navy, which ended in December 2022.

Note 3 - Concentration of Credit Risk and Significant Customers
The Company manages its credit risk associated with exposure to distributors and direct customers on outstanding accounts receivable through the application of credit approvals and other monitoring procedures. Credit sales, which are mainly on credit terms of 30 to 60 days, are only made to customers who meet the Company's credit standards, while sales to new customers or customers with low credit ratings are usually made on an advance payment basis. The Company closely monitors the aging of accounts receivable from its distributors and direct customers, and regularly reviews their financial positions, where available.
Significant customers are those that represent 10% or more of revenue or accounts receivable.
Total revenues, by percentage, from individual customers representing 10% or more of total revenues in the respective periods were as follows:

Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Customer A30.8%20.5%22.2%13.9%
Customer B*10.6%*11.8%
Customer C22.6%*16.0%23.2%
Customer D*39.5%*24.4%
Customer E****
Customer F32.0%*37.5%*
* Less than 10% of total
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Accounts receivable, by percentage, from individual customers representing 10% or more of accounts receivable are set forth in the following table:

December 31, 2023March 31, 2023
Customer A31.0%26.2%
Customer B**
Customer C31.6%12.8%
Customer D*38.2%
Customer E21.3%10.6%
Customer F**
* Less than 10% of total
Customers A and D are related parties and Customer B is a government agency. JCP Capital Management, LLC Limited (“JCP Capital”) is a majority stockholder of Customer C. See Note 5 - Investment in Joint Venture and Note 11 - Related Party Transactions. Customer E is Array Microelectronics Limited and Customer F is NSTXL.

Note 4 - Balance Sheet Components
Inventory
Inventory consists of the following as of the dates presented (in thousands):
December 31, 2023March 31, 2023
Raw materials$4,669 $5,167 
Work in process2,181 1,719 
Sub-assembly2,083 809 
Finished goods1,072 711 
Total$10,005 $8,406 
Property and equipment
Property and equipment, net consist of the following as of the dates presented (in thousands):
December 31, 2023March 31, 2023
Machinery and equipment$14,193 $11,124 
Computer equipment and software890 887 
Furniture and fixtures73 75 
Leasehold improvements5,101 5,069 
Construction in progress3,462 6,446 
Property and equipment, gross23,719 23,601 
Less: accumulated depreciation(16,040)(15,711)
Property and equipment, net$7,679 $7,890 
The Company recorded depreciation and amortization expense related to property and equipment, net of $0.2 million for each of the three months ended December 31, 2023 and 2022. The Company recorded depreciation and amortization expense related to property and equipment, net of $0.7 million and $0.5 million for the nine months ended December 31, 2023 and 2022, respectively.
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For the three months ended December 31, 2023, the Company recorded a $0.2 million impairment in General and administrative expense of certain property and equipment classified as construction in progress. This was a result of a pending sale for the equipment that evidenced the fair value of the equipment was less than its carrying value.
Intangible assets
The carrying values of intangible assets as of the dates presented, respectively, consist of the following (in thousands, except years):
December 31, 2023
GrossAccumulated AmortizationForeign Exchange Rate ChangesNetEstimated Useful Life (in years)
Patents$2,963 $(2,864)$ $99 10
Developed Technology - 150 V560 (517)(43) 6
Developed Technology - 600 V1,701 (1,570)(131) 6
Total$5,224 $(4,951)$(174)$99 
March 31, 2023
GrossAccumulated AmortizationForeign Exchange Rate ChangesNetEstimated Useful Life (in years)
Patents$2,963 $(2,642)$ $321 10
Developed Technology - 150 V560 (517)(43) 6
Developed Technology - 600 V1,701 (1,570)(131) 6
Total$5,224 $(4,729)$(174)$321 
The Company recorded amortization expenses related to intangible assets of $0.1 million for each of the three months ended December 31, 2023 and 2022. The Company recorded amortization expenses related to intangible assets of $0.2 million for each of the nine months ended December 31, 2023 and 2022.
Estimated future amortization expenses related to intangible assets as of December 31, 2023 were as follows (in thousands):
Year Ending March 31,
2024$74 
202525 
Total$99 
Goodwill
Changes in the carrying amount of goodwill were as follows (in thousands):
Balance as of March 31, 2022$1,180 
Foreign currency translation adjustments(101)
Balance as of March 31, 2023$1,079 
Foreign currency translation adjustments(59)
Balance as of December 31, 2023$1,020 
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There have been no impairment losses recorded to date.
Accounts payable and accrued expenses
Accounts payable and accrued expenses consist of the following as of the dates presented (in thousands):
December 31, 2023March 31, 2023
Accounts payable$4,232 $2,781 
Manufacturing production costs1,017 506 
Legal fees842 596 
Audit fees50 318 
Consulting fees209 256 
Royalty fees221 76 
Deposit liability 2,950 
Equipment sale buyback liability2,100  
Other635 412
Accrued expenses$5,074 $5,114 
Total Accounts payable and accrued expenses$9,306 $7,895 

Note 5 - Investment in Joint Venture
From April 1, 2022 through April 10, 2023, JCP Capital and the Company were responsible for 75% and 25%, respectively, of the funding obligations and losses of AFSW (through GaNovation). Beginning April 10, 2023, JCP Capital and the Company are responsible for 67.5% and 32.5%, respectively, of the funding obligations and losses of AFSW (through GaNovation). Notwithstanding this allocation of funding responsibilities, JCP Capital’s total funding obligations or investment in GaNovation shall not exceed $35 million and the Company’s total funding obligations or investment in GaNovation shall not exceed $12 million for the three-year period beginning August 1, 2021. As of December 31, 2023, the Company had provided $6.1 million of the Company’s $12.0 million commitment to GaNovation.
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The Company’s investment activities in GaNovation for the periods presented are summarized below (in thousands):
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Beginning Balance$(59)$414 $715 $143 
Investment 1,032 807 2,569 
Loss(978)(799)(2,559)(2,065)
Effect of exchange rate change(259) (259) 
Ending Balance$(1,296)$647 $(1,296)$647 
Summarized financial information of GaNovation for the periods indicated are as follows (in thousands):
Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Sales$2,593 $3,926 $8,419 $9,958 
Gross loss(1,879)(2,716)(6,166)(6,964)
Net loss(2,587)(3,197)(7,483)(8,351)

Note 6 - Debts
Revolving Credit Facility
The Company entered into a Loan and Security Agreement (“LSA”) with Nexperia on April 4, 2018 which provided a $10.0 million revolving loan (Tranche C Loan) that was scheduled to mature at the earlier of (i) April 3, 2021, and (ii) the date a Change of Control (as defined in the LSA) of the Company occurs. Interest payable by the Company accrues on the outstanding principal amount of the loans during such period at a rate of 6% per annum. The credit facility was secured against certain of the Company’s U.S. patents not relating to MOCVD or epiwafer technology. On March 31, 2019, the Company executed Amendment No.1 to the LSA which provided for a $2.0 million development loan intended to pre-fund a 1200V technology development (“Tranche B-1 Loan”). On March 1, 2021, the maturity of the Tranche C Loan of $10.0 million was extended to May 18, 2021. On May 18, 2021, the maturity of the Tranche C Loan was extended to the earlier of April 4, 2023 or the occurrence of specified change of control events, and the $2.0 million Tranche B-1 Loan was converted into a Tranche C-1 Loan (the “Tranche C Loans” together with the Tranche C Loan) with the same terms and conditions as the existing Tranche C Loan.
As of December 31, 2023, there were no revolving loans outstanding, as the LSA with Nexperia terminated upon repayment of the principal and interest amount in full on April 4, 2023. There was no interest expense for the three months ended December 31, 2023. For the nine months ended December 31, 2023, the Company recorded interest expense of $8,000. For the three and nine months ended December 31, 2022, the Company recorded interest expense of $0.2 million and $0.6 million, respectively.
Equipment Financing
On December 21, 2023 (the “Effective Date”), the Company entered into an Equipment Purchase and Sale Agreement (the “Equipment Agreement”) with GlobalWafers Co., Ltd. (the “Buyer”), wherein the Company sold certain equipment associated with wafer manufacturing (the “Equipment”) to the Buyer for $2.1 million (the “Purchase Price”). The Equipment Agreement contains an option for the Company to repurchase the Equipment at any time within one year of the Effective Date at the Purchase Price, plus an amount equal to: (i) the Purchase Price, multiplied by (ii) 7.5%, divided by 12, multiplied by (iii) the number of full months that have elapsed after the Effective Date. If the Company does not exercise the option to repurchase the Equipment within one year of the Effective Date, (i) certain limitations on the Buyer’s use of the Equipment specifically applied to this Transphorm
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consigned Equipment shall lapse and (ii) the Company shall pay $157,500 to the Buyer (i.e., 7.5% for 12 months, on the Purchase Price).
The Company determined that the transaction did not qualify as a sale under ASC 606 - Revenue from Contracts with Customers nor ASC 842 - Leases as a sale leaseback transaction. As such, the Company has accounted for the agreement under ASC 470 - Debt. As of December 31, 2023, the $2.1 million is included within Accounts payable and accrued expenses on the condensed consolidated balance sheets.

Note 7 - Commitments and Contingencies
Cooperation Agreement
On December 30, 2022, and effective as of December 18, 2022, the Company entered into a cooperation agreement (the “Cooperation Agreement”) with GaNext (Zhuhai) Technology Co., Ltd (“GaNext”). Among other things, the Cooperation Agreement calls for certain royalties including a royalty due to the Company in the event that GaNext utilizes epiwafers not provided by the Company (such royalties are based on time and volume with a minimum floor), and a royalty payable by the Company in the event the Company utilizes certain future platform that may be developed independently by GaNext (such royalties are based on time and volume, and half the amount per wafer of the royalties GaNext would pay the Company when utilizing epiwafers not provided by the Company). As of December 31, 2023, no amounts have been earned by or due to either party and, thus, no amounts have been recorded in the condensed consolidated financial statements.
Contingencies
During the ordinary course of business, the Company may become a party to legal proceedings incidental to its business. The Company accrues contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. Legal cost is expensed as incurred. There are currently no material claims or actions pending or threatened against us.
Indemnification
The Company from time to time enters into types of contracts that contingently require the Company to indemnify parties against third-party claims. These contracts primarily relate to: (1) real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities and for other claims arising from the Company’s use of the applicable premises; (2) agreements with the Company’s officers, directors, and employees, under which the Company may be required to indemnify such persons from liabilities arising out of their relationship; (3) indemnifying customers in the event of product failure; and (4) agreements with outside parties that use the Company’s intellectual property, under which the Company may indemnify for copyright or patent infringement related specifically to the use of such intellectual property.
Historically, the Company has not been required to make payments under these obligations, and no liabilities have been recorded for these obligations in the Company’s condensed consolidated financial statements.

Note 8 - Stockholders’ Equity

As of December 31, 2023, 750,000,000 shares of common stock are authorized, of which 63,195,948 shares of common stock were issued and outstanding, and 5,000,000 shares of preferred stock are authorized, none of which were issued and outstanding. The Company’s Board of Directors has the ability to designate the rights, preferences and privileges for the preferred stock.
Common Stock
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Common stockholders are entitled to dividends, as and when declared by the Company’s Board of Directors, subject to the priority dividend rights of the holders of any then-outstanding preferred stock. There have been no dividends declared to date. The holder of each share of common stock is entitled to one vote.
The Company has reserved shares of common stock for future issuance as of the date presented as follows:

December 31, 2023
Equity incentive plans11,099,382 
Common stock warrants4,027,929 
Total15,127,311 

April 2023 Private Placement of Common Stock, Warrant Repricing, and Warrant Issuance
On April 3, 2023, the Company entered into warrant exercise inducement offer letters with certain holders of outstanding warrants to purchase shares of the Company’s common stock, pursuant to which such warrant holders agreed to exercise, for cash, then-existing warrants to purchase, in the aggregate, 1,815,848 shares of the Company’s common stock, in exchange for the Company’s agreement to (i) lower the exercise price of the then-existing warrants to $4.00 per share and (ii) issue new warrants (the “April 2023 Inducement Warrants”) to the warrant holders to purchase, in the aggregate, up to 2,269,810 shares of the Company’s common stock. The April 2023 Inducement Warrants have an exercise price of $5.00 per share, provide for a cashless exercise feature, and are exercisable until April 3, 2026.
The Company determined that the modification was not executed in contemplation of an imminent equity offering, financing transaction nor represented compensation for goods and services and is not within the scope of another ASC Topic. As such, the Company concluded that the $0.8 million incremental fair value of the modified warrants and the $4.9 million fair value of the April 2023 Inducement Warrants should be treated as deemed dividends to the warrant holders in accordance with ASC Subtopic 815-40 – Derivatives and Hedging – Contracts in Entity’s Own Equity.
Also on April 3, 2023, the Company entered into securities purchase agreements with two accredited investors that are affiliated with each other (the “Purchasers”) pursuant to which the Company agreed to sell to the Purchasers in a private placement (the “Private Placement”) for an aggregate purchase price of $2.0 million (i) an aggregate of 500,000 shares of the Company’s common stock at a purchase price of $4.00 per share and (ii) warrants to purchase an aggregate of 250,001 shares of the Company’s common stock (the “Warrants”). The Warrants have an exercise price of $5.00 per share, provide for a cashless exercise feature, and are exercisable until April 3, 2026.
In connection with the April 2023 warrant repricing and Private Placement, the Company received $7.3 million from the exercise of then-existing warrants and $2.0 million from the sale of common stock in the Private Placement, for total aggregate gross proceeds of approximately $9.3 million (before deducting legal costs of $0.1 million).
December 2023 Warrant Repricing and Warrant Issuance
On December 21, 2023, the Company entered into warrant exercise inducement offer letters with certain holders of outstanding warrants to purchase shares of the Company’s common stock, pursuant to which such warrant holders agreed to exercise, for cash, then-existing warrants to purchase, in the aggregate, 1,069,272 shares of the Company’s common stock, in exchange for the Company’s agreement to (i) lower the exercise price of the then-existing warrants to $2.80 per share and (ii) issue new warrants (the “December 2023 Inducement Warrants”) to the warrant holders to purchase, in the aggregate, up to 1,069,272 shares of the Company’s common stock. The December 2023 Inducement Warrants have an exercise price of $3.80 per share, provide for a cashless exercise feature, and are exercisable until December 21, 2026.
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The Company determined that the modification was not executed in contemplation of an imminent equity offering, financing transaction nor represented compensation for goods and services and is not within the scope of another ASC Topic. As such, the Company concluded that the $0.8 million incremental fair value of the modified warrants and the $1.9 million fair value of the December 2023 Inducement Warrants should be treated as deemed dividends to the warrant holders in accordance with ASC Subtopic 815-40 – Derivatives and Hedging – Contracts in Entity’s Own Equity.
In connection with the December 2023 warrant repricing, the Company received aggregate gross proceeds of $3.0 million from the exercise of then-existing warrants (before deducting legal costs of $0.1 million).
The following warrants to purchase common stock were outstanding as of December 31, 2023:
Number of Warrant SharesExercise PriceExpiration Date
360,938 6.00 November 5, 2024
67,568 9.25 December 7, 2024
281,081 9.25 December 10, 2024
10,116 8.48 December 10, 2025
45,000 3.30 December 23, 2025
84,000 4.00 April 3, 2026
2,100,539 5.00 April 3, 2026
1,069,272 3.80 December 21, 2026
6,046 34.74 
5 years after an initial public offering of the Company
3,369 54.41 
5 years after an initial public offering of the Company
4,027,929 

The following table summarizes stock warrant activity for the periods presented:
Number of Warrant Shares
Outstanding at March 31, 20233,323,966 
Stock warrants issued3,589,083 
Stock warrants exercised(2,885,120)
Outstanding and exercisable at December 31, 20234,027,929 
Rights Offering
On July 5, 2023, the Company distributed to all holders of record of its common stock as of 5:00 p.m., Eastern Daylight Time, on June 26, 2023, for each share of common stock held as of June 26, 2023, one non-transferable subscription right. Each subscription right carried with it (i) a basic subscription right, which entitled the holder to purchase 0.07655623 of a share of common stock and (ii) an over-subscription privilege, which entitled a holder that had exercised its basic subscription right in full to subscribe for additional shares of common stock that were offered in the rights offering, to the extent other holders did not exercise their basic subscription rights in full. The subscription price was $3.30 per whole share of common stock.
The Company completed the rights offering in August 2023 and issued 2,404,758 shares of common stock, which generated approximately $7.9 million in gross proceeds (before deducting legal costs of $0.3 million).

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Note 9 - Stock-Based Compensation
Out-of-Period Adjustment
For the three months ended June 30, 2023, the Company recorded a $0.4 million out-of-period adjustment to stock-based compensation expense and additional paid-in-capital related to prior periods. The adjustment was a correction of an error to properly reflect (i) the grant date fair value of awards and (ii) the straight-lining of stock-based compensation expense for graded-vested awards under ASC 718, Compensation – Stock Compensation and in accordance with the Company’s stock-based compensation expense recognition policy election. The Company assessed that this error was not material to the historical financial statements in any individual period or in the aggregate, the current interim period and its forecasted results for the full 2024 fiscal year and did not result in the previously issued financial statements being materially misstated.
Option Modification
During the nine months ended December 31, 2023, the Company recognized $0.5 million in incremental compensation cost as a result of an amendment to a former employee’s option agreements to allow for an extended post termination exercise period.

Note 10 - Fair Value Measurements
FASB ASC 820, Fair Value Measurements and Disclosures, establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2 - Inputs (other than quoted prices included within Level 1) that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data of substantially the full term of the related assets or liabilities.
Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Inputs are unobservable for the asset or liability. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
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Foreign Currency Forward and Option Contracts
In December 2022, the Company entered into four quarterly tiered collar contracts consisting of foreign currency forward and option contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities, specifically those associated with its Japanese operations. The contracts had quarterly maturities ending October 2023.
As a result of foreign currency fluctuations, the U.S. dollar equivalent values of the Company’s foreign currency-denominated assets and liabilities change. The Company has not elected to account for these contracts as hedge instruments and as such, gains and losses on these contracts are included in other income (expense), net in the Company's condensed consolidated statements of operations, along with foreign currency gains and losses of the related foreign currency-denominated assets and liabilities associated with these foreign currency forward and option contracts. During the three and nine months ended December 31, 2023, the Company recognized a net gain of $1,700 and a net loss of $0.2 million, respectively, associated with these contracts.
As the forward contract and option model employed market observable inputs such as spot currency rates and forward points, the Company determined that the inputs used to value its derivatives fell within Level 2 of the fair value hierarchy.
As of December 31, 2023, there were no derivative assets or liabilities on the Company’s condensed consolidated balance sheets as the last collar expired in October 2023. As of March 31, 2023, the fair value of the derivative asset in the Company’s condensed consolidated balance sheets was $7,000.

Note 11 - Related Party Transactions                                                                                                                                                                                                                                                                                
The Company entered into the following related party transactions for the periods indicated (in thousands):
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Three Months Ended December 31,Nine Months Ended December 31,
2023202220232022
Joint Venture-GaNovation:
Product sale$313 $1,774 $579 $3,246 
Service fees69  200  
Inventory purchase88 96 201 345 
Fixed asset purchase124  192  
Cost of goods sold1,511 1,030 3,963 2,738 
Research and development expense116 141 200 330 
Consumption tax92 91 234 311 
Employee and related benefits33 35 94 124 
Yaskawa:
Revenue per a cooperation and development agreement223 221 666 991 
Nexperia:
Product sale1,445 923 3,465 1,778 
License and service fee income   66 
Reimbursements in license maintenance fee25 13 75 88 
Interest expense 184 8 550 
As of December 31, 2023, total due to and from related parties were as follows (in thousands):
December 31, 2023March 31, 2023
Due from (included in Accounts receivable, net):
Joint venture$99 $1,713 
Stockholder and noteholder548 1,152 
Total due from related parties$647 $2,865 
Due to (included in Accounts payable and accrued expenses):
Joint venture$1,111 $968 
Stockholder and noteholder 93 
Total due to related parties$1,111 $1,061 

Note 12 - Subsequent Events
Merger Agreement
On January 10, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Renesas Electronics America Inc., a California corporation (“Parent”), Travis Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Renesas Electronics Corporation, a Japanese corporation (solely for the purposes set forth in Section 9.17 of the Merger Agreement) (“Guarantor”). The Merger Agreement provides that, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent (the “Merger”).
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Pursuant to the Merger Agreement, at the effective time of the Merger, each share of the Company’s common stock outstanding immediately prior to such effective time (except for certain shares specified in the Merger Agreement) will automatically be converted into the right to receive cash in an amount equal to $5.10, without interest.
Completion of the Merger is subject to customary closing conditions set forth in the Merger Agreement, including, among other things: (1) the adoption of the Merger Agreement by the holders of a majority of the voting power of the outstanding shares of the Company’s common stock; (2) the absence of any law or order preventing or making illegal the consummation of the Merger; and (3) certain specified regulatory clearances, including the expiration or termination of the applicable waiting period under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the receipt of approval of the Committee on Foreign Investment in the United States (“CFIUS”). The obligation of Parent and Merger Sub to consummate the Merger is also conditioned upon the absence of a material adverse effect on the Company since the date of the Merger Agreement.
The Company is subject to customary restrictions on its ability to solicit alternative acquisition proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with, third parties regarding alternative acquisition proposals, subject to customary exceptions.
If the Merger Agreement is terminated in certain circumstances, including by the Company in order to enter into a superior proposal or by Parent because the Company’s board of directors withdraws its recommendation in favor of the Merger, the Company would be required to pay Parent a termination fee of $12.9 million. If the Merger Agreement is terminated based on a failure by the Parent, the Parent would be required to pay the Company a termination fee of $20.0 million.
Upon consummation of the Merger, the Company will cease to be a publicly traded company and its common stock will be delisted from the Nasdaq Capital Market.
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Note Regarding Forward-Looking Statements
This Report, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. All statements other than statements of historical fact contained in this Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
our pending acquisition by Renesas Electronics America Inc.;
our needs for additional financing, ability to obtain additional funds for our operations and our intended use of any such funds;
the implementation of our business model and strategic plans for our business, technologies and products;
our costs in meeting our contractual obligations, including the cash flow impact of operating AFSW, and our ability to maintain our contracts for their expected durations;
the rate and degree of market acceptance of any of our products or GaN technology in general, including changes due to the impact of (i) new GaN fabrication sources, (ii) the performance of GaN technology, whether perceived or actual, relative to competing semiconductor materials, and (iii) the performance of our products, whether perceived or actual, compared to competing GaN-based, silicon-based and other products;
the timing and success of product releases by us and our customers;
our ability to develop new products and technologies;
our future financial performance, including our expectations regarding our revenue, expenses, ongoing losses, and capital requirements;
our receipt and timing of any royalties or other payments under any current or future collaboration, license or other agreements or arrangements, including the credit risks of our customers;
our ability to obtain, maintain, enforce, defend and enhance our intellectual property rights;
the strength and marketability of our intellectual property portfolio;
our dependence on current and future collaborators for developing, manufacturing or otherwise bringing our products to market;
the ability of our third party supply and manufacturing partners to meet our current and future business needs;
the throughput of our fabrication facilities and third party foundries, as well as the ability of such facilities and foundries to ramp up production;
our expectations regarding our classification in future periods as a “smaller reporting company,” as defined under the Securities Exchange Act of 1934 (the “Exchange Act”), and an “emerging growth company,” as defined under the JOBS Act;
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the total addressable market and growth rates of the markets in which we compete;
the competitive landscape of our industry;
our expectations regarding the performance of our products; and
the impact of government regulation and developments relating to us, our competitors or our industry.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Report.    

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to significant risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Report. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Report to reflect events or circumstances after the date of this Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical financial statements and the related notes thereto contained in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a pioneer, and a market and technology leader, in the wide-bandgap GaN power electronics field for high voltage power conversion applications. We deliver high quality and reliable GaN devices with high performance, while providing application design support to a growing customer base. Our GaN devices allow customers to design
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smaller, lighter and cooler power systems that create increased functional value in end products including smartphone power adapters, smartphone chargers, power supplies for datacenter servers and automotive electric vehicles, among other applications. We deploy our unique vertically integrated innovation model that leverages one of the industry’s most experienced GaN engineering teams (with over 300 years of combined experience) at every development stage: device design, materials growth, device fabrication, packaging, circuits and application support. This approach, backed by one of the GaN power industry’s largest intellectual property portfolios with access to over 1,000 world-wide patents, has yielded the industry’s first automotive-grade AEC-Q101 and JEDEC qualified high voltage GaN FETs. Our innovations are designed to move power electronics beyond the limitations of silicon and provide our customers with the potential to achieve higher efficiency (e.g., titanium-class performance in power supplies), higher power density and, in some designs, an overall lower system cost.
Since our inception, we have devoted substantial resources to the research and development of GaN power devices and the protection and enhancement of our intellectual property and have incurred significant operating losses. Our net loss was $24.6 million and $21.8 million for the nine months ended December 31, 2023 and 2022, respectively. As of December 31, 2023, our accumulated deficit was $242.1 million. Substantially all of our operating losses have resulted from expenses incurred in connection with research and development activities and from general and administrative costs associated with our operations.
Our revenue for the nine months ended December 31, 2023 was $15.6 million, of which $4.7 million was from related parties. Our revenue for the nine months ended December 31, 2022 was $13.3 million, of which $6.1 million was from related parties. For the nine months ended December 31, 2023 and 2022, we had three and four customers, respectively, that each accounted for more than ten percent of our revenue. Together, these customers accounted for 75.7% and 73.3% of our revenues during the nine months ended December 31, 2023 and 2022, respectively.
We expect to continue to incur significant expenses and operating losses for the foreseeable future. We expect our expenses will increase in connection with our ongoing activities as we:

add sales and field applications personnel and incur related expenses to support operational growth;
increase activity directly related to promoting our products to increase revenue;
acquire additional MOCVD reactor capacity; and
add financial accounting and management systems and select personnel and incur additional legal and accounting expense as we operate as a public company.
Recent Developments
Pending Merger
On January 10, 2024, we entered into the Merger Agreement with Parent, Merger Sub and Guarantor, pursuant to which Merger Sub will merge with and into Transphorm, with Transphorm surviving the merger as a wholly owned subsidiary of Parent.
Pursuant to the Merger Agreement, at the effective time of the Merger, each share of our common stock outstanding immediately prior to such effective time (except for certain shares specified in the Merger Agreement) will automatically be converted into the right to receive cash in an amount equal to $5.10, without interest.
Completion of the Merger is subject to customary closing conditions set forth in the Merger Agreement, including, among other things: (1) the adoption of the Merger Agreement by the holders of a majority of the voting power of the outstanding shares of our common stock; (2) the absence of any law or order preventing or making illegal the consummation of the Merger; and (3) certain specified regulatory clearances, including the expiration or termination of the applicable waiting period under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and the receipt of approval of CFIUS. The obligation of Parent and Merger Sub to consummate the Merger
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is also conditioned upon the absence of a material adverse effect on Transphorm since the date of the Merger Agreement.
We are subject to customary restrictions on our ability to solicit alternative acquisition proposals from third parties and to provide non-public information to, and participate in discussions and engage in negotiations with, third parties regarding alternative acquisition proposals, subject to customary exceptions.
If the Merger Agreement is terminated in certain circumstances, including by us in order to enter into a superior proposal or by Parent because tour board of directors withdraws its recommendation in favor of the Merger, we would be required to pay Parent a termination fee of $12.9 million. If the Merger Agreement is terminated based on a failure by the Parent, the Parent would be required to pay us a termination fee of $20 million.
We expect the Merger to close in the second half of calendar year 2024. Upon consummation of the Merger, we will cease to be a publicly traded company and our common stock will be delisted from the Nasdaq Capital Market.
Rights Offering
On July 5, 2023, we distributed to all holders of record of our common stock as of 5:00 p.m., Eastern Daylight Time, on June 26, 2023, for each share of common stock held as of June 26, 2023, one non-transferable subscription right. Each subscription right carried with it (i) a basic subscription right, which entitled the holder to purchase 0.07655623 of a share of common stock and (ii) an over-subscription privilege, which entitled a holder that had exercised its basic subscription right in full to subscribe for additional shares of common stock that were offered in the rights offering, to the extent other holders did not exercise their basic subscription rights in full. The subscription price was $3.30 per whole share of common stock. We completed the rights offering in August 2023 and issued 2,404,758 shares of common stock, which generated approximately $7.9 million in gross proceeds (before deducting legal costs of $0.3 million). We are using the net proceeds for working capital and other general corporate purposes.
April 2023 Private Placement of Common Stock, Warrant Repricing, and Warrant Issuance
On April 3, 2023, we entered into warrant exercise inducement offer letters with certain holders of then-outstanding warrants (the “Exercising Holders”), pursuant to which the Exercising Holders agreed to exercise, for cash, warrants to purchase, in the aggregate, 1,815,848 shares of common stock, in exchange for our agreement to (i) lower the exercise price of such warrants to $4.00 per share and (ii) issue new warrants (the “Inducement Warrants”) to the Exercising Holders to purchase, in the aggregate, up to 2,269,810 shares of common stock at an exercise price of $5.00 per share. We received aggregate gross proceeds of approximately $7.3 million from the exercise of warrants by the Exercising Holders.
The Inducement Warrants have an exercise price of $5.00 per share and are exercisable until April 3, 2026. Certain Exercising Holders have contractually agreed to restrict their ability to exercise the Inducement Warrants issued to them if the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares in excess of 9.99% of the shares of the Company’s common stock then outstanding. At the holder’s option, upon notice to the Company, the holder may increase or decrease this beneficial ownership limitation not to exceed 19.99% of the shares of common stock then outstanding, with any such increase becoming effective upon 61 days’ prior notice to the Company.
Also on April 3, 2023, we entered into securities purchase agreements with two accredited investors that are affiliated with each other (the “Purchasers”) pursuant to which we agreed to sell to the Purchasers in a private placement for an aggregate purchase price of $2.0 million (i) an aggregate of 500,000 shares of our common stock at a purchase price of $4.00 per share and (ii) warrants to purchase an aggregate of 250,001 shares of the our common stock (the “Private Placement Warrants”). The Private Placement Warrants have an exercise price of $5.00 per share and are exercisable until April 3, 2026.

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December 2023 Warrant Repricing and Warrant Issuance
On December 21, 2023, we entered into warrant exercise inducement offer letters with certain holders of outstanding warrants to purchase shares of our common stock, pursuant to which such warrant holders agreed to exercise, for cash, then-existing warrants to purchase, in the aggregate, 1,069,272 shares of our common stock, in exchange for our agreement to (i) lower the exercise price of the then-existing warrants to $2.80 per share and (ii) issue new warrants (the “ Inducement Warrants”) to the warrant holders to purchase, in the aggregate, up to 1,069,272 shares of our common stock. The Inducement Warrants have an exercise price of $3.80 per share, provide for a cashless exercise feature, and are exercisable until December 21, 2026. We received aggregate gross proceeds of approximately $3.0 million from the exercise of warrants by the warrant holders.
Equipment Financing
On December 21, 2023 (the “Effective Date”), we entered into an Equipment Purchase and Sale Agreement (the “Equipment Agreement”) with GlobalWafers Co., Ltd. (the “Buyer”), wherein we sold certain equipment associated with wafer manufacturing (the “Equipment”) to the Buyer for $2.1 million (the “Purchase Price”). The Equipment Agreement contains an option for us to repurchase the Equipment at any time within one year of the Effective Date at the Purchase Price, plus an amount equal to: (i) the Purchase Price, multiplied by (ii) 7.5%, divided by 12, multiplied by (iii) the number of full months that have elapsed after the Effective Date. If we do not exercise our option to repurchase the Equipment within one year of the Effective Date, (i) certain limitations on the Buyer’s use of the Equipment specifically applied to this Transphorm consigned Equipment shall lapse and (ii) we shall pay $157,500 to the Buyer (i.e., 7.5% for 12 months, on the Purchase Price).
Key Factors Affecting Our Performance
A number of industry factors affect our business, including:
Overall Demand for Products and Applications Using GaN Devices. Our potential for growth depends significantly on the adoption of GaN materials and devices in the power markets and GaN epiwafer material products in the radio frequency markets, the expansion of the use of GaN devices in infrastructure, IT, datacenter, industrial, automotive and consumer applications such as fast charger/adapter and gaming power supplies, and our ability to win new designs for these applications. Demand also fluctuates based on various market cycles, fluctuations in supply chains, trade and tariff terms, and the competitive dynamics in each of the respective markets. These uncertainties make demand difficult to forecast for us and our customers.
Intense and Constantly Evolving Competitive Environment. Competition in the industries we serve is intense. Many companies have made significant investments in product development and production equipment. To remain competitive, market participants must continuously increase product performance, reduce costs and develop improved ways to serve their customers. To address these competitive pressures, we have invested in research and development activities to support new product development, lower product costs and deliver higher levels of performance to differentiate our products in the market.
Governmental Trade and Regulatory Conditions. Our potential for growth, as with most multinational companies, depends on a balanced and stable trade, political, economic and regulatory environment among the countries where we do business. Changes in trade policy such as the imposition of tariffs or export bans to specific customers or countries could reduce or limit demand for our products in certain markets.
Technological Innovation and Advancement. Innovations and advancements in materials and power technologies continue to expand the potential commercial application for our products. However, new technologies or standards could emerge or improvements could be made to existing technologies that could reduce or limit the demand for our products.
Intellectual Property Issues. We rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities and other core competencies of our business. Protection of intellectual
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property is critical. Therefore, filing additional patent applications, entering into confidentiality and non-disclosure agreements, and other security measures are important. While we have a strong patent portfolio comprising access to over 1,000 worldwide patents (directly owned or licensed) and there is no actual or, to our knowledge, threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to effectively enforce or protect intellectual property rights. Such action may be initiated by or against us and could require significant management time and be costly.    
Components of Results of Operations
Revenue
Our revenue currently consists of (1) commercial product sales and service contracts, (2) government contracts, and (3) licensing contracts. Products are sold to distributors and end-users in various sectors such as, the gaming, industrial, IT, and consumer products industries.
Cost of Goods Sold
Cost of goods sold consists of (1) direct product costs incurred for the raw materials and manufacturing services for our products, (2) fixed product costs primarily relating to production, manufacturing and personnel and (3) depreciation expenses consisting primarily of expenses related to our fixed assets. In future periods, we expect our cost of goods sold attributable to direct product costs to increase proportionately with increases in revenue, and our cost of goods sold attributable to fixed product costs to remain substantially flat or moderately increase in connection with increases in revenue.
Operating Expenses
Research and Development. Research and development expenses consist primarily of compensation and related costs for personnel, including stock-based compensation and employee benefits as well as costs associated with design, fabrication, packaging and testing of GaN devices. In addition, research and development expenses include depreciation expenses related to our fixed assets and an allocation of our information technology (IT) and facilities costs. We expense research and development expenses as incurred. As we continue to invest in developing our technology for new products, we expect research and development expenses in future periods to remain flat or moderately increase in absolute dollars and decrease as a percentage of revenue.
Sales and Marketing. Sales and marketing expenses consist primarily of compensation and related costs for personnel, including stock-based compensation and employee benefits, and associated travel costs. Sales and marketing expenses also include costs associated with our support of business development efforts with distributors in Europe and Asia, and costs related to trade shows and marketing programs, and an allocation of our information technology (IT) and facilities costs. We expense sales and marketing expenses as incurred. As we increase our sales and expand our sales force and our marketing organization, we expect sales and marketing expenses in future periods to increase in absolute dollars.
General and Administrative. General and administrative expenses consist primarily of compensation and related costs for personnel, including stock-based compensation, employee benefits and travel. In addition, general and administrative expenses include third-party consulting, legal, audit, and accounting services, rent, facilities and information technology, and amortization of our intangible assets. We expect general and administrative expenses in future periods to increase in absolute dollars due to additional legal, accounting, insurance, investor relations and other costs associated with being a public company, as well as other costs associated with growing our business.
Interest Expense
Interest expense consists of interest associated with our revolving credit facility with Nexperia.
Equity Loss in Joint Venture
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Equity loss in joint venture consists of expenditures to cover the losses associated with our 32.5% share ownership of GaNovation beginning April 10, 2023 and our 25% share ownership of GaNovation from August 1, 2021 to April 9, 2023. The potential magnitude of equity loss in joint venture may increase in the future based upon the level of operating expenses incurred by GaNovation, which wholly owns AFSW.
Other Expense (Income), Net
Other expense (income), net consists primarily of interest income and income generated from subleasing a portion of our research and development facility located in California.
Tax Expense
Tax expense consists primarily of income taxes in certain foreign and state jurisdictions in which we conduct business.
Results of Operations
Comparison of the Three Months Ended December 31, 2023 and 2022
The following table sets forth our unaudited condensed consolidated statements of operations data for the periods indicated (in thousands, except percentages):
Three Months Ended December 31,Change
20232022AmountPercentage
Revenue, net$4,670 $4,493 $177 3.9 %
Cost of goods sold4,595 7,162 (2,567)(35.8)%
Gross profit (loss)75 (2,669)2,744 102.8 %
Operating expenses:
Research and development2,839 2,325 514 22.1 %
Sales and marketing1,745 1,447 298 20.6 %
General and administrative4,412 3,457 955 27.6 %
Total operating expenses8,996 7,229 1,767 24.4 %
Loss from operations(8,921)(9,898)977 (9.9)%
Interest expense— 184 (184)(100.0)%
Loss in joint venture978 799 179 22.4 %
Other expense (income), net102 (421)523 (124.2)%
Loss before tax expense(10,001)(10,460)459 (4.4)%
Tax expense— — — 
Net loss$(10,001)$(10,460)$459 (4.4)%
Revenue increased $0.2 million, or 3.9%, to $4.7 million for the three months ended December 31, 2023 from $4.5 million for the same period in 2022. The increase is due primarily to a $1.0 million increase in government contract revenue resulting from the NSTXL contract awarded in May 2023, offset by a $0.6 million decrease in commercial product and services revenue as compared to the same period in 2022.

Cost of goods sold decreased $2.6 million, or 35.8%, to $4.6 million for the three months ended December 31, 2023 from $7.2 million for the same period in 2022, due primarily to a $2.8 million inventory write-off in the prior year that did not reoccur in the current period. The inventory write-offs resulted primarily from a decision to discontinue the evaluation of certain epiwafer inventory produced while bringing our reactors online following an internal risk
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assessment of using these epiwafer units in our manufacturing process, and in favor of allocating resources to current and future epiwafer production and expansion efforts.
Gross profit increased $2.7 million, or 102.8%, to $0.1 million for the three months ended December 31, 2023 from a gross loss of $2.7 million for the same period in 2022. Gross profit margin increased 61.0% to 1.6% for the three months ended December 31, 2023 from a gross loss margin of 59.4% for the same period in 2022. The increase is due primarily to the large inventory write-off in the prior year that did not reoccur in the current period.
Research and development expense increased $0.5 million, or 22.1%, to $2.8 million for the three months ended December 31, 2023 from $2.3 million for the same period in 2022, due primarily to a $0.7 million increase in employee payroll and related development costs resulting from increased research and development activities, offset by a $0.1 million decrease in stock-based compensation.
Sales and marketing expense increased $0.3 million, or 20.6%, to $1.7 million for the three months ended December 31, 2023 from $1.4 million for the same period in 2022, due primarily to an increase in costs related to payroll expense.

General and administrative expense increased $1.0 million, or 27.6%, to $4.4 million for the three months ended December 31, 2023 from $3.5 million for the same period in 2022, due primarily to an increase in legal expenses and stock-based compensation, offset by a decrease in payroll expense.

There was no interest expense recorded for the three months ended December 31, 2023, as we repaid the outstanding amount of the revolving credit facility with Nexperia in full on April 4, 2023. Interest expense was $0.2 million for the revolving credit facility for the same period in 2022.

Loss in joint venture was $1.0 million for each of the three months ended December 31, 2023 and 2022.

Other expense, net was $0.1 million for the three months ended December 31, 2023 compared to other income, net of $0.4 million for the same period in 2022, due primarily to a decrease in sublease income as a result of the amendment of our subleasing contract and a decrease in interest income.
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Comparison of the Nine Months Ended December 31, 2023 and 2022
The following table sets forth our unaudited condensed consolidated statements of operations data for the periods indicated (in thousands, except percentages):
Nine Months Ended December 31,Change
20232022AmountPercentage
Revenue, net$15,563 $13,319 $2,244 16.8 %
Cost of goods sold12,226 14,444 (2,218)(15.4)%
Gross profit (loss)3,337 (1,125)4,462 396.6 %
Operating expenses:
Research and development8,730 5,895 2,835 48.1 %
Sales and marketing4,935 3,596 1,339 37.2 %
General and administrative11,870 9,818 2,052 20.9 %
Total operating expenses25,535 19,309 6,226 32.2 %
Loss from operations(22,198)(20,434)(1,764)8.6 %
Interest expense550 (542)(98.5)%
Loss in joint venture2,559 2,065 494 23.9 %
Other income, net(188)(1,241)1,053