UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM
10-Q

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

April 2, 2022

OR

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
0-26946

INTEVAC, INC.

(Exact name of registrant as specified in its charter)

Delaware
 
94-3125814

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

3560 Bassett Street

Santa Clara, California 95054

(Address of principal executive office, including Zip Code)

Registrant’s telephone number, including area code: (408)
986-9888

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock ($0.001 par value)
IVAC
The Nasdaq Stock Market LLC (Nasdaq) Global Select
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging“emerging growth companycompany” in
Rule 12b-2
of the Exchange Act. (Check one):

Act:
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated filer ☐  (Do not check if a smaller reporting company)
Non-accelerated
filer
 
Smaller 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 Act).    ☐  Yes    ☒  No

On October 31, 2017, 21,789,007May 10, 2022, 25,059,237 shares of the Registrant’sregistrant’s Common Stock, $0.001 par value, were
outstanding.



PART I. FINANCIAL INFORMATION

Item 1.
Financial Statements

INTEVAC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

   September 30,
2017
  December 31,
2016
 
   (Unaudited) 
   

(In thousands, except

par value)

 
ASSETS 

Current assets:

   

Cash and cash equivalents

  $19,197  $27,043 

Short-term investments

   18,037   17,602 

Trade and other accounts receivable, net of allowances of $0 at both September 30, 2017 and at December 31, 2016

   22,311   17,447 

Inventories

   32,581   24,876 

Prepaid expenses and other current assets

   2,825   1,768 
  

 

 

  

 

 

 

Total current assets

   94,951   88,736 

Property, plant and equipment, net

   12,509   11,237 

Long-term investments

   6,165   3,593 

Restricted cash

   1,400   1,602 

Intangible assets, net of amortization of $6,725 at September 30, 2017 and $6,129 at December 31, 2016

   1,662   2,258 

Deferred income taxes and other long-term assets

   745   898 
  

 

 

  

 

 

 

Total assets

  $117,432  $108,324 
  

 

 

  

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY 

Current liabilities:

   

Accounts payable

  $7,036  $5,323 

Accrued payroll and related liabilities

   5,781   4,220 

Other accrued liabilities

   7,856   17,011 

Customer advances

   12,347   5,422 
  

 

 

  

 

 

 

Total current liabilities

   33,020   31,976 

Other long-term liabilities

   2,994   3,082 

Stockholders’ equity:

   

Common stock, $0.001 par value

   22   21 

Additionalpaid-in capital

   176,282   171,314 

Treasury stock, 4,845 shares at both September 30, 2017 and December 31, 2016

   (28,489  (28,489

Accumulated other comprehensive income

   443   321 

Accumulated deficit

   (66,840  (69,901
  

 

 

  

 

 

 

Total stockholders’ equity

   81,418   73,266 
  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $117,432  $108,324 
  

 

 

  

 

 

 

   
April 2,

2022
  
January 1,

2022
 
        
   
(Unaudited)
 
   
(In thousands, except par value)
 
ASSETS
 
   
Current assets:
         
Cash and cash equivalents
  $98,034  $102,728 
Short-term investments
   8,941   10,221 
Trade and other accounts receivable, net of allowances of $0 at both April 2, 2022 and January 1, 2022
   17,054   14,261 
Inventories
   8,908   5,791 
Prepaid expenses and other current assets
   1,778   1,827 
   
 
 
  
 
 
 
Total current assets
   134,715   134,828 
Long-term investments
   9,407   7,427 
Restricted cash
   786   786 
Property, plant and equipment, net
   3,372   4,759 
Operating lease
right-of-use-assets
   3,966   4,520 
Deferred income taxes and other long-term assets
   5,406   5,449 
   
 
 
  
 
 
 
Total assets
  $157,652  $157,769 
   
 
 
  
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
   
Current liabilities:
         
Current operating lease liabilities
  $3,188  $3,119 
Accounts payable
   3,915   5,320 
Accrued payroll and related liabilities
   3,319   5,505 
Other accrued liabilities
   2,971   3,665 
Customer advances
   15,320   2,107 
   
 
 
  
 
 
 
Total current liabilities
   28,713   19,716 
Noncurrent liabilities:
 
Noncurrent operating lease liabilities
   2,854   3,675 
Other long-term liabilities
   270   363 
   
 
 
  
 
 
 
Total noncurrent liabilities
   3,124   4,038 
Stockholders’ equity:
 
Common stock, $0.001 par value
   25   25 
Additional
paid-in
capital
   198,935   199,073 
Treasury stock, 5,087 shares at both April 2, 2022 and at January 1, 2022
   (29,551  (29,551
Accumulated other comprehensive income
   371   578 
Accumulated deficit
   (43,965  (36,110
   
 
 
  
 
 
 
Total stockholders’ equity
   125,815   134,015 
   
 
 
  
 
 
 
Total liabilities and stockholders’ equity
  $157,652  $157,769 
   
 
 
  
 
 
 
Note: Amounts as of December 31, 2016January 1, 2022 are derived from the December 31, 2016January 1, 2022 audited consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

notes.

3

Table of Contents

INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

   Three Months Ended  Nine Months Ended 
   September 30,
2017
   October 1,
2016
  September 30,
2017
   October 1,
2016
 
   (Unaudited) 
   (In thousands, except per share amounts) 

Net revenues:

       

Systems and components

  $24,537   $20,961  $82,822   $47,326 

Technology development

   2,189    1,598   5,255    3,816 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total net revenues

   26,726    22,559   88,077    51,142 

Cost of net revenues:

       

Systems and components

   13,402    13,025   47,419    29,490 

Technology development

   2,026    1,019   4,842    3,155 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total cost of net revenues

   15,428    14,044   52,261    32,645 
  

 

 

   

 

 

  

 

 

   

 

 

 

Gross profit

   11,298    8,515   35,816    18,497 

Operating expenses:

       

Research and development

   4,535    4,067   13,635    14,220 

Selling, general and administrative

   5,495    4,772   17,482    14,724 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total operating expenses

   10,030    8,839   31,117    28,944 
  

 

 

   

 

 

  

 

 

   

 

 

 

Income (loss) from operations

   1,268    (324  4,699    (10,447

Interest income and other income (expense), net

   28    60   265    184 
  

 

 

   

 

 

  

 

 

   

 

 

 

Income (loss) before income taxes

   1,296    (264  4,964    (10,263

Provision for income taxes

   66    217   805    13 
  

 

 

   

 

 

  

 

 

   

 

 

 

Net income (loss)

  $1,230   $(481 $4,159   $(10,276
  

 

 

   

 

 

  

 

 

   

 

 

 

Net income (loss) per share:

       

Basic

  $0.06   $(0.02 $0.19   $(0.50

Diluted

  $0.05   $(0.02 $0.18   $(0.50

Weighted average common shares outstanding:

       

Basic

   21,714    20,869   21,475    20,704 

Diluted

   22,970    20,869   22,989    20,704 

   
Three Months Ended
 
   
April 2,

2022
  
April 3,

2021
 
        
   
(Unaudited)
   
(In thousands, except per
share amounts)
Net revenues
  $4,445  $9,238 
Cost of net revenues
   3,722   7,104 
   
 
 
  
 
 
 
Gross profit
   723   2,134 
Operating expenses:
         
Research and development
   4,160   3,365 
Selling, general and administrative
   4,249   4,334 
   
 
 
  
 
 
 
Total operating expenses
   8,409   7,699 
   
 
 
  
 
 
 
Loss from operations
   (7,686  (5,565
Interest income and other income (expense), net
   (8  29 
   
 
 
  
 
 
 
Loss from continuing operations before provision for income taxes
   (7,694  (5,536
Provision for income taxes
   26   32 
   
 
 
  
 
 
 
Net loss from continuing operations
   (7,720  (5,568
   
 
 
  
 
 
 
Net loss from discontinued operations, net of taxes
   (135  (936
   
 
 
  
 
 
 
Net loss
   (7,855  (6,504
   
 
 
  
 
 
 
Net loss per share:
         
Basic and diluted – continuing operations
  $(0.31 $(0.23
Basic and diluted – discontinued operations
  $(0.01 $(0.04
Basic and diluted – net loss
  $(0.32 $(0.27
Weighted average common shares outstanding:
         
Basic and diluted
   24,800   24,033 
See accompanying notes to the condensed consolidated financial statements.

notes.

4

Table of Contents

INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

   Three Months Ended  Nine Months Ended 
   September 30,
2017
   October 1,
2016
  September 30,
2017
   October 1,
2016
 
   (Unaudited) 
   (In thousands) 

Net income (loss)

  $1,230   $(481 $4,159   $(10,276
  

 

 

   

 

 

  

 

 

   

 

 

 

Other comprehensive income (loss), before tax

       

Change in unrealized net gain onavailable-for-sale investments

   5    (16  8    41 

Foreign currency translation gains (losses)

   39    (17  114    5 
  

 

 

   

 

 

  

 

 

   

 

 

 

Other comprehensive income (loss), before tax

   44    (33  122    46 

Income tax (expense) benefit related to items in other comprehensive income (loss)

   —      —     —      —   
  

 

 

   

 

 

  

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

   44    (33  122    46 
  

 

 

   

 

 

  

 

 

   

 

 

 

Comprehensive income (loss)

  $1,274   $(514 $4,281   $(10,230
  

 

 

   

 

 

  

 

 

   

 

 

 

LOSS

   
Three Months Ended
 
   
April 2,
2022
  
April 3,
2021
 
   
(Unaudited)
 
   
(In thousands)
 
Net loss
  $(7,855 $(6,504
   
 
 
  
 
 
 
Other comprehensive loss, before tax:
         
Change in unrealized net gain (loss) on
available-for-sale
investments
   (174  (20
Foreign currency translation losses
   (33  (68
   
 
 
  
 
 
 
Other comprehensive loss, before tax
   (207  (88
   
 
 
  
 
 
 
Income tax provision related to items in other comprehensive loss
   0—     0—   
   
 
 
  
 
 
 
Other comprehensive loss, net of tax
   (207  (88
   
 
 
  
 
 
 
Comprehensive loss
  $(8,062 $(6,592
   
 
 
  
 
 
 
See accompanying notes to the condensed consolidated financial statements.

notes.

5

Table of Contents

INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   Nine months ended 
   September 30,
2017
  October 1,
2016
 
   (Unaudited) 
   (In thousands) 

Operating activities

   

Net income (loss)

  $4,159  $(10,276

Adjustments to reconcile net income (loss) to net cash and cash equivalents used in operating activities:

   

Depreciation and amortization

   2,877   3,744 

Net amortization of investment premiums and discounts

   53   96 

Equity-based compensation

   3,012   2,896 

Change in the fair value of acquisition-related contingent consideration

   (181  (90

Deferred income taxes

   (1  9 

Gain on disposal of equipment

   —     (8

Changes in operating assets and liabilities

   (11,658  577 
  

 

 

  

 

 

 

Total adjustments

   (5,898  7,224 
  

 

 

  

 

 

 

Net cash and cash equivalents used in operating activities

   (1,739  (3,052

Investing activities

   

Purchases of investments

   (21,968  (10,433

Proceeds from sales and maturities of investments

   18,916   22,180 

Proceeds from sale of equipment

   —     8 

Purchases of leasehold improvements and equipment

   (3,553  (2,535

Decrease (increase) in restricted cash

   202   (178
  

 

 

  

 

 

 

Net cash and cash equivalents (used in) provided by investing activities

   (6,403  9,042 

Financing activities

   

Net proceeds from issuance of common stock

   2,344   1,482 

Taxes paid related to net share settlement

   (1,988  (403

Payment of acquisition-related contingent consideration

   (174  —   
  

 

 

  

 

 

 

Net cash and cash equivalents provided by financing activities

   182   1,079 

Effect of exchange rate changes on cash

   114   8 
  

 

 

  

 

 

 

Net increase (decrease) in cash and cash equivalents

   (7,846  7,077 

Cash and cash equivalents at beginning of period

   27,043   13,746 
  

 

 

  

 

 

 

Cash and cash equivalents at end of period

  $19,197  $20,823 
  

 

 

  

 

 

 

   
Three Months Ended
 
   
April 2,
2022
  
April 3,
2021
 
   
(Unaudited)
 
   
(In thousands)
 
Operating activities
         
Net loss
  $(7,855 $(6,504
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
         
Depreciation and amortization
   445   791 
Net amortization (accretion) of investment premiums and discounts
   17   33 
Equity-based compensation
   (1,036  968 
Straight-line rent adjustment and amortization of lease incentives
   (198  (115
Loss on disposal of fixed assets
   1,453   
0—
 
Deferred income taxes
   (6  (40
Changes in operating assets and liabilities
   3,130   7,399 
   
 
 
  
 
 
 
Total adjustments
   3,805   9,036 
   
 
 
  
 
 
 
Net cash provided by (used in) operating activities
   (4,050  2,532 
Investing activities
         
Purchases of investments
   (6,525  (5,962
Proceeds from sales and maturities of investments
   5,634   6,140 
Purchases of leasehold improvements and equipment
   (618  (243
   
 
 
  
 
 
 
Net cash used in investing activities
   (1,509  (65
Financing activities
         
Proceeds from issuance of common stock
   1,033   1,096 
Taxes paid related to net share settlement
   (135  (20
   
 
 
  
 
 
 
Net cash provided by financing activities
   898   1,076 
   
 
 
  
 
 
 
Effect of exchange rate changes on cash and cash equivalents
   (33  (68
   
 
 
  
 
 
 
Net increase (decrease) in cash, cash equivalents and restricted cash
   (4,694  3,475 
Cash, cash equivalents and restricted cash at beginning of period
   103,514   30,128 
   
 
 
  
 
 
 
Cash, cash equivalents and restricted cash at end of period
  $98,820  $33,603 
   
 
 
  
 
 
 
See accompanying notes to the condensed consolidated financial statements.

notes.

6

Table of Contents

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.
Description of Business and Basis of Presentation

Description of Business
Intevac, Inc. (together with its subsidiaries, “Intevac”, the “Company” or “we”) is a leader in the design and development of high-productivity, thin-film processing systems. Intevac’s production-proven platforms are designed for high-volume manufacturing of substrates with precise thin-film properties, such as for the hard disk drive (“HDD”) and display cover panel (“DCP”) markets.
Principles of Consolidation and Basis of Presentation
The condensed consolidated financial statements include the accounts of Intevac, Inc. and its subsidiaries after elimination of inter-company balances and transactions.
In the opinion of management, the unaudited interim condensed consolidated financial statements of Intevac Inc. and its subsidiaries (“Intevac” or the “Company”) included herein have been prepared on a basis consistent with the December 31, 2016January 1, 2022 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Intevac’s Annual Report on Form10-K for the fiscal year ended December 31, 2016 (“2016 Form10-K”). Intevac’s results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of future operating results.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

2.Recent Accounting Pronouncements

Reportable Segment
During fiscal 2021, we sold the business of one of our reporting segments, Photonics. Therefore, we have one reportable segment remaining. See Note 2 for additional disclosure related to discontinued operations.
The remaining segment, Thin Film Equipment (“TFE”), designs, develops and markets vacuum process equipment solutions for high-volume manufacturing of small substrates with precise thin-film properties, such as for the HDD, and DCP markets, as well as other adjacent thin-film markets. The TFE segment also previously designed, developed and marketed manufacturing equipment for the photovoltaic (“PV”) solar cell and advanced semiconductor packaging industries.
In May 2017,March 2022, the Financial Accounting Standards BoardCompany’s management approved a restructuring plan to realign the Company’s operational focus, scale the business and improve costs. The restructuring program includes (i) reducing the Company’s headcount and (ii) eliminating several research and development (“FASB”R&D”) issued Accounting Standards Updateprograms and product offerings. As part of this realignment effort, the Company will no longer be pursuing several DCP projects, including the coating of the backside covers of smartphones, PV solar ion implantation (also known as ENERGi
®
), and advanced semiconductor packaging.
Reclassification of Prior Periods
On December 30, 2021, the Company completed the sale of its Photonics business to EOTECH, LLC, a Michigan limited liability company (“ASU”EOTECH” or the “Buyer”)2017-09,Compensation—Stock Compensation: Scope of Modification Accounting, which provides guidance about which changes. Due to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair valuesale of the modified award isPhotonics business during the same asfourth quarter of 2021, we have classified the original award, the vesting conditionsresults of the modified award arePhotonics business as discontinued operations in our condensed consolidated statements of operations for all periods presented. See Note 2 for additional disclosure related to discontinued operations. All amounts included in the same asNotes to Condensed Consolidated Financial Statements relate to continuing operations unless otherwise noted.
2.
Divestiture and Discontinued Operations
Sale of Photonics
On December 30, 2021, the original award andCompany entered into an asset purchase agreement (the “Purchase Agreement”) with EOTECH, governing the classificationsale of the modified awardCompany’s Photonics business to EOTECH in exchange for (i) $70.0 million in cash consideration (as may be increased or decreased by certain closing net working capital adjustments), (ii) up to $30.0 million in earnout payments and (iii) the assumption by EOTECH of certain liabilities of the Photonics business as an equity instrument or liability instrument is the same as the original award. This update becomes effective and will be adopted by Intevacspecified in the first quarterPurchase Agreement. The transaction closed
7

Table of fiscal 2019. The update is to be adopted prospectively to an award modified on or after the adoption date. Early adoption is permitted. Intevac does not expect the adoption of this update to have a material impact on its consolidated financial statements.

In March 2017, the FASB issued ASU2017-08,Receivables – Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchased Callable Debt Securities. ASU2017-08 amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. This update becomes effective and will be adopted by Intevac in the first quarter of fiscal 2019. Intevac does not expect the adoption of this update to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU2017-04,Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU2017-04 eliminates Step 2 from the goodwill impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in ASU2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This update becomes effective and will be adopted by Intevac in the first quarter of fiscal 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Intevac does not expect the adoption of this update to have a material impact on its consolidated financial statements.

Contents


INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In March 2016,

on December 30, 2021. Under the FASB issued ASU2016-09Compensation—Stock Compensation (Topic 718): ImprovementsPurchase Agreement, EOTECH has also agreed to Employee Share-Based Payment Accounting. We have adopted these amendments beginningpay to the Company, if earned, earnout payments of up to an aggregate of $30.0 million based on achievement of fiscal year 2023, 2024 and 2025 Photonics segment revenue targets for the Integrated Visual Augmentation System (“IVAS”) program as specified in the first quarterPurchase Agreement. At any time prior to December 31, 2024, EOTECH may elect to pay to the Company $14.0 million, which would terminate EOTECH’s obligations with respect to any remaining earnout payments. The cash proceeds do not include any estimated future payments from the revenue earnout as the Company has elected to record the proceeds when the consideration is deemed realizable. The Company believes this disposition will allow it to benefit from a streamlined business model, simplified operating structure, and enhanced management focus.
In connection with the Photonics sale, the Company and EOTECH have entered into a Transition Service Agreement (“TSA”) and a Lease Assignment Agreement. The TSA outlines the information technology, people, and facility support the parties will provide to each other for a period anticipated to be up to six months after the closing of 2017. Startingthe sale. The Lease Assignment Agreement assigns the lease obligation for two buildings in the first quarterCompany’s California campus to EOTECH. As part of fiscal 2017, stock-based compensation excess tax benefits or deficienciesthe assignment, the Company has agreed to subsidize a portion of EOTECH’s lease payments through the remainder of the lease term which expires in March 2024.
TSA fees earned since the divestiture were $787,000
for the three months ended April 2, 2022. The agreed-upon charges for such services are reflectedgenerally intended to allow the service provider to recover all costs and expenses of providing such services. The TSA fees were included in selling, general and administrative expenses and cost of sales, respectively, in the Condensed Consolidated StatementsCompany’s condensed consolidated statement of Operations as a componentoperations. Additionally, during the three months ended April 2, 2022, the Company sold inventory in the amount of $117,000
to EOTECH. As of April 2, 2022, accounts receivable from EOTECH of $370,000
were included in trade and other accounts receivable in the Company’s condensed consolidated balance sheets.
Based on its magnitude and because the Company exited certain markets, the sale of the provisionPhotonics segment represents a significant strategic shift that has a material effect on the Company’s operations and financial results, and the Company has separately reported the results of its Photonics segment as discontinued operations in the condensed consolidated statements of operations for income taxes, whereas they previously were recognized in equity. Additionally, our Condensed Consolidated Statementsthe three months ended April 2, 2022 and April 3, 2021.
The operating results of Cash Flows now presents excess tax benefits as an operating activity. Finally, we have elected to account for forfeitures as they occur, rather than estimate expected forfeitures. The net cumulative effect of this change was recognized as a $1.1 million chargethe discontinued operations only reflect revenues and expenses that are directly attributable to the accumulated deficit as of January 1, 2017.

In May 2014,Photonics segment that have been eliminated from continuing operations. Previously reported expenses for the FASB issued ASU2014-09(Topic 606) Revenue from Contracts with Customers. Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, “Revenue Recognition”, and requires entitiesPhotonics segment have been recast to recognize revenue when they transfer control of promised goods or services to customers in an amountexclude certain allocated expenses that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. We expect revenue recognition for our equipment sales arrangements, which includes systems, technology upgrades, service and spare parts, to remain materially consistent with our historical practice.

We expect to recognize revenue for equipment sales at a point in time following the transfer of control of such productsare not directly attributable to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. Our contracts with customers may include multiple performance obligations. For such arrangements, we expect to allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost plus margin.Photonics segment. The expected costs associated with our base warranties will continue to be recognized as expense when the equipment is sold.

We expect to recognize revenue for cost plus fixed fee and firm fixed priced government contracts over time under thecost-to-cost method for the majority of our government contracts, which is consistent with our current revenue recognition model. Revenue on the majority of our government contracts will continue to be recognized over time because of the continuous transfer of controlkey components from discontinued operations related to the customer. For U.S. government contracts, this continuous transferPhotonics segment are as follows:

   
Three Months
Ended
 
   
April 2,
2022
  
April 3,
2021
 
   
(in thousands)
 
Net revenues:
         
Systems and components
  $—    $3,822 
Technology development
   —     3,181 
   
 
 
  
 
 
 
Total net revenues
   —     7,003 
Cost of net revenues:
         
Systems and components
   —     2,860 
Technology development
   —     3,223 
   
 
 
  
 
 
 
Total cost of net revenues
   —     6,083 
Gross profit
   —     920 
Operating expenses:
         
Research and development
   —     260 
Selling, general and administrative
   135   1,596 
   
 
 
  
 
 
 
Total operating expenses
   135   1,856 
   
 
 
  
 
 
 
Operating loss – discontinued operations
   (135  (936
Other income (expense) – discontinued operations
   0—     0—   
   
 
 
  
 
 
 
Loss from discontinued operations before provision for (benefit from) income taxes
   (135  (936
Provision for (benefit from) income taxes
   0     0   
   
 
 
  
 
 
 
Net loss from discontinued operations net of taxes
  $(135 $(936
   
 
 
  
 
 
 
8

Table of control to the customer is supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. Similarly, fornon-U.S. government contracts, the customer typically controls the work in process as evidenced either by contractual termination clauses or by our rights to payment for work performed to date to deliver products or services that do not have an alternative use to the company. Under the new standard, thecost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as we incur costs.

The new standard must be adopted by Intevac in our fiscal year beginning December 31, 2017. We intend to adopt the new standard as of December 31, 2017, using the modified retrospective transition method applied to those contracts which were not completed as of that date. Upon adoption, we will recognize the cumulative effect of adopting this guidance as an adjustment to our opening balance of the accumulated deficit. Prior periods will not be retrospectively adjusted. Based on our preliminary assessment, we expect the adoption of Topic 606 will not have a material impact to our consolidated financial statements, including the presentation of revenues in our Consolidated Statements of Operations. We also do not expect the standard to have a material impact on our Consolidated Balance Sheet. The immaterial impact primarily relates to reclassifications among financial statement accounts to align with the new standard. Most notably, contracts in process, net will be reclassified as receivables or contract assets based on amounts billed or unbilled, respectively. Advance payments and billings in excess of costs incurred and deferred revenue will be combined and reclassified as contract liabilities. Our contract balances will be reported in a net contract asset or liability position on acontract-by-contract basis at the end of each reporting period.

Contents

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. The following table presents cash flow and
non-cash
information related to discontinued operations for the three months ended April 2, 2022 and April 3, 2021:
   
Three Months Ended
 
        
   
April 2,
  
April 3,
 
   
2022
  
2021
 
        
   
(in thousands)
 
Depreciation and amortization
  $—    $285 
Equity-based compensation
  $(330 $272 
Purchase of leasehold improvements and equipment
  $—    $73 
3.
Inventories
Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the three months ended April 2, 2022 and April 3, 2021.
Major Products and Service Lines
   
Three Months Ended April 2, 2022
   
Three Months Ended April 3, 2021
 
                                     
   
(in thousands)
 
   
HDD
   
DCP
   
PV
   
Total
   
HDD
   
DCP
   
PV
   
ASP
   
Total
 
                                     
Systems, upgrades and spare parts
  $3,123   $0     $53   $3,176   $3,585   $0     $111   $3,850   $7,546 
Field service
   1,263    0      6    1,269    1,636    14    42    0      1,692 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total TFE net revenues
  $4,386   $0     $59   $4,445   $5,221   $14   $153   $3,850   $9,238 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Revenue by Geographic Region
   
Three Months Ended
 
         
   
April 2, 2022
   
April 3, 2021
 
         
   
(in thousands)
 
United States
  $294   $367 
Asia
   4,151    5,021 
Europe
   0      3,850 
   
 
 
   
 
 
 
Total net revenues
  $4,445   $9,238 
   
 
 
   
 
 
 
Timing of Revenue Recognition
   
Three Months Ended
 
         
   
April 2, 2022
   
April 3, 2021
 
         
   
(in thousands)
 
Products transferred at a point in time
  $4,445   $9,238 
Products and services transferred over time
   0      0   
   
 
 
   
 
 
 
Total net revenues
  $4,445   $9,238 
   
 
 
   
 
 
 
9


INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table reflects the changes in our contract assets, which we classify as accounts receivable, unbilled, and our contract liabilities, which we classify as deferred revenue and customer advances, for the three months ended April 2 2022.
   
April 2,
2022
   
January 1,
2022
   
Three Months

Change
 
             
   
(in thousands)
 
Contract assets:
               
Accounts receivable, unbilled
  $0     $99   $(99
   
 
 
   
 
 
   
 
 
 
Contract liabilities:
               
Deferred revenue
  $55   $65   $(10
Customer advances
   15,320    2,107    13,213 
   
 
 
   
 
 
   
 
 
 
   $15,375   $2,172   $13,203 
   
 
 
   
 
 
   
 
 
 
Accounts receivable, unbilled represents a contract asset for revenue that has been recognized in advance of billing the customer. For our system and certain upgrade sales, our customers generally pay in three installments, with a portion of the system price billed upon receipt of an order, a portion of the price billed upon shipment, and the balance of the price due upon completion of installation and acceptance of the system at the customer’s factory. Accounts receivable, unbilled generally represents the balance of the system price that is due upon completion of installation and acceptance, less, the amount that has been deferred as revenue for the performance of the installation tasks. During the three months ended April 2, 2022, contract assets decreased by $99,000 primarily due to the billing of accrued revenue related to spare parts sold to a customer as of January 1, 2022.
Customer advances generally represent a contract liability for amounts billed to the customer prior to transferring goods. The Company has elected to use the practical expedient to disregard the effect of the time value of money in a significant financing component when its payment terms are less than one year. These contract advances are liquidated when revenue is recognized. Deferred revenue generally represents a contract liability for amounts billed to a customer for completed systems at the customer site that are undergoing installation and acceptance testing where transfer of control has not yet occurred as Intevac does not yet have a demonstrated history of meeting the acceptance criteria upon the customer’s receipt of product. During the three months ended April 2, 2022, we recognized revenue of $59,000 and $10,000 that was included in customer advances and deferred revenue, respectively, at the beginning of the period.
On April 2, 2022, we had $87.2 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 36% of our remaining performance obligations as revenue in 2022 and 64% in 2023.
4.
Inventories
Inventories are stated at the lower of average cost or marketnet realizable value and consist of the following:

   September 30,   December 31, 
   2017   2016 
   (In thousands) 

Raw materials

  $16,385   $10,290 

Work-in-progress

   12,452    6,470 

Finished goods

   3,744    8,116 
  

 

 

   

 

 

 
  $32,581   $24,876 
  

 

 

   

 

 

 

Finished goods inventory consists primarily of completed systems that are undergoing installation and acceptance testing.

   
April 2,
   
January 1,
 
   
2022
   
2022
 
         
   
(in thousands)
 
Raw materials
  $6,346   $5,323 
Work-in-progress
   2,562    468 
   
 
 
   
 
 
 
   $8,908   $5,791 
   
 
 
   
 
 
 
4.
5.
Equity-Based Compensation

At September 30, 2017,April 2, 2022, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan, and the 20042022 Inducement Equity Incentive Plan (the “Inducement Plan”) (together, the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved all of these plans.the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan and the ESPP. The Plans permit the grant of incentive or
non-statutory
stock options, performance-based stock options (“PSOs”), restricted stock, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and performance shares.

10

Table of Contents

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
On January 19, 2022, Intevac’s Board of Directors adopted the Inducement Plan and, subject to the adjustment provisions of the Inducement Plan, reserved 1,200,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2020 Equity Incentive Plan. The Inducement Plan was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with that rule, awards under the Inducement Plan may only be made to individuals not previously employees or
non-employee
directors of the Company (or following such individuals’ bona fide period of
non-employment
with the Company), as an inducement material to the individuals’ entry into employment with the Company.
The ESPP provides that eligible employees may purchase Intevac’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the entry date of the applicable offering period or at the end of each applicable purchase interval. Offering periods are generally two years in length and consist of a series of
six-month
purchase intervals. Eligible employees may join the ESPP at the beginning of any
six-month
purchase interval. Under the terms of the ESPP, employees can choose to have up to 15%50% of their base earnings withheld to purchase Intevac common stock.

stock (not to exceed $25,000 per year).

Compensation Expense

The effect of recording equity-based compensation for the threethree-month periods ended April 2, 2022 and nine months ended September 30, 2017 and October 1, 2016April 3, 2021 was as follows:

   Three Months Ended   Nine Months Ended 
   September 30,
2017
   October 1,
2016
   September 30,
2017
   October 1,
2016
 
   (In thousands) 

Equity-based compensation by type of award:

        

Stock options

  $350   $211   $808   $696 

RSUs

   731    543    1,943    1,657 

ESPP awards

   67    151    261    543 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total equity-based compensation

  $1,148   $905   $3,012   $2,896 
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity-based compensation expense is based on awards ultimately expected to vest and such amount has been historically reduced for estimated forfeitures. Beginning January 1, 2017, Intevac accounts for forfeitures as they occur, rather than estimating expected forfeitures. The net cumulative effect of this change was recognized as a $1.1 million increase to

   
Three Months Ended
 
        
   
April 2, 2022
  
April 3, 2021
 
        
   
(In thousands)
 
Equity-based compensation by type of award:
         
Stock options
  $(171 $75 
RSUs
   (728  543 
ESPP purchase rights
   (137  350 
   
 
 
  
 
 
 
Total equity-based compensation
  $(1,036 $968 
Included in the accumulated deficit as of January 1, 2017.

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

table above are:

(a)
A reversal of $1.3 million in equity-based compensation expense related to forfeitures of awards due to our reduction in workforce and a $37,000 benefit related to the modification of certain stock-based awards for the three months ended April 2, 2022. (See Note
13. Restructuring and Other Costs, Net.); and
(b)
Equity-based compensation reported in discontinued operations of ($330,000) and $272,000 for the three months ended April
2, 2022 and April 3, 2021, respectively. Equity-based compensation expense allocated to discontinued operations for the three months ended April 2, 2022 includes $75,000 related to the modification of certain stock-based awards and is net of a divestiture-related forfeiture benefit of $446,000 that was recognized when employees were conveyed to the Buyer upon closing. (See Note 2. Divestiture and Discontinued Operations.)
Stock Options and ESPP

The fair value of stock options and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The determination of the fair value of stock options and ESPP awards on the date of grant using an option-pricing model is affected by Intevac’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual employee stock option exercise behavior.

11


INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Option activity as of September 30, 2017April 2, 2022 and changes during the ninethree months ended September 30, 2017April 2, 2022 were as follows:

   Shares   Weighted Average
Exercise Price
 

Options outstanding at December 31, 2016

   2,740,364   $7.00 

Options granted

   413,075   $12.33 

Options cancelled and forfeited

   (61,753  $12.07 

Options exercised

   (115,273  $6.88 
  

 

 

   

Options outstanding at September 30, 2017

   2,976,413   $7.64 
  

 

 

   

Options exercisable at September 30, 2017

   2,127,940   $7.16 

   
Shares
  
Weighted-Average

Exercise Price
 
Options outstanding at January 1, 2022
   1,457,587  $6.55 
Options granted
   0    $0   
Options cancelled and forfeited
   (102,152 $5.43 
Options exercised
   (65,563 $5.06 
   
 
 
  
 
 
 
Options outstanding at April 2, 2022
   1,289,872  $6.72 
   
 
 
     
Options exercisable at April 2, 2022
   1,223,472  $6.79 
Intevac issued 405,659146,344 shares of common stock under the ESPP during the ninethree months ended September 30, 2017.

April 2, 2022.

Intevac estimated the weighted-average fair value of stock options and employee stockESPP purchase rights using the following weighted-average assumptions:

  Three Months Ended  Nine Months Ended 
  September 30,
2017
  October 1,
2016
  September 30,
2017
  October 1,
2016
 

Stock Options:

    

Weighted-average fair value of grants per share

 $3.89  $1.90  $4.54  $1.75 

Expected volatility

  42.10  40.53  40.54  44.00

Risk free interest rate

  1.84  0.97  1.77  0.94

Expected term of options (in years)

  4.08   3.96   4.10   4.29 

Dividend yield

  None   None   None   None 
  Three Months Ended  Nine Months Ended 
  September 30,
2017
  October 1,
2016
  September 30,
2017
  October 1,
2016
 

Stock Purchase Rights:

    

Weighted-average fair value of grants per share

 $2.76  $1.69  $2.75  $1.55 

Expected volatility

  48.59  37.51  43.51  39.22

Risk free interest rate

  1.36  0.63  1.22  0.75

Expected term of purchase rights (in years)

  0.50   1.00   0.65   1.87 

Dividend yield

  None   None   None   None 

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

   
Three Months Ended
 
   
April 2,
2022
  
April 3,
2021
 
ESPP Purchase Rights:
         
Weighted-average fair value of grants per share
  $1.85  $2.69 
Expected volatility
   60.36  58.56
Risk-free interest rate
   0.98  0.08
Expected term of purchase rights (in years)
   1.2   1.0 
Dividend yield
   NaN   NaN 
The computation of the expected volatility assumptions used in the Black-Scholes calculations for new stock option grants and employee stockESPP purchase rights is based on the historical volatility of Intevac’s stock price, measured over a period equal to the expected term of the stock option grant or purchase right. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the equity-based awards and vesting schedules. The expected term of purchase rights represents the period of time remaining in the current offering period. The dividend yield assumption is based on Intevac’s history of not paying dividends and the assumption of not paying dividends in the future.

Intevac accounts for forfeitures as they occur, rather than by estimating expected forfeitures.

RSUs

A summary of the RSU activity is as follows:

   Shares   Weighted Average
Grant Date
Fair Value
 

Non-vested RSUs at December 31, 2016

   949,455   $4.64 

Granted

   363,846   $11.44 

Vested

   (500,621  $4.46 

Cancelled and forfeited

   (14,292  $7.97 
  

 

 

   

Non-vested RSUs at September 30, 2017

   798,388   $7.79 
  

 

 

   

   
Shares
  
Weighted-Average

Grant Date

Fair Value
 
Non-vested
RSUs at January 1, 2022
   1,033,436  $5.59 
Granted
   300,928  $5.11 
Vested
   (66,704 $5.45 
Cancelled and forfeited
   (533,199 $5.65 
   
 
 
     
Non-vested
RSUs at April 2, 2022
   734,461  $5.37 
   
 
 
     
Time-based RSUs are converted into shares of Intevac common stock upon vesting on a
one-for-one
basis. Time-based RSUs typically are scheduled to vest over three or four years. Vesting of time-based RSUs is subject to the grantee’s continued service with Intevac. The compensation expense related to these awards is determined using the fair market value of Intevac common stock on the date of the grant, and the compensation expense is recognized over the vesting period.

Market condition-based RSUs vest upon the achievement of certain market conditions (our stock performance) during a set performance period (typically five years) subject to the grantee’s continued service with Intevac through the date the applicable market condition is achieved. The fair value is based on the values calculated under the Monte Carlo simulation model on the grant date. Compensation cost is not adjusted in future periods for subsequent changes in the expected outcome of market related conditions. The compensation expense is recognized over the derived service period. We granted 125,000 of such awards to certain executive officers in the nine months ended October 1, 2016. These awards have a derived service period of 2.8 years.

Intevac estimated the weighted-average fair value of market condition-based RSUs using the following weighted-average assumptions:

   Nine Months Ended
October 1, 2016
 

Weighted-average fair value of grants per share

  $2.46 

Expected volatility

   47.65

Risk free interest rate

   1.35

Expected term (in years)

   4.79 

Dividend yield

   None 

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

In fiscal 2016, the annual bonus for certain participants in the Company’s annual incentive plan was settled with RSUs with one year vesting. The Company accrued for the payment of bonuses at the expected company-wide payout percentage amount at October 1, 2016, which amounts were less than the target bonus amounts for each participant. The bonus accrual was classified as a liability until the number of shares was determined on the date the awards were granted, at which time the Company classified the awards into equity. In February 2017, the annual 2016 bonus for certain participants was settled with RSUs withone-year vesting. 33 participants were granted stock awards to receive an aggregate of 134,000 shares of common stock with a weighted average grant date fair value of $9.63 per share. In February 2016, the annual 2015 bonus for certain participants was settled with RSUs with one year vesting. 34 participants were granted stock awards to receive an aggregate of 266,000 shares of common stock with a weighted average grant date fair value of $4.40 per share. The Company recorded equity-based compensation expense related to the annual incentive plans of $102,000 for the nine months ended September 30, 2017. The Company recorded equity-based compensation expense related to the annual incentive plan of $120,000 and $364,000, respectively, for the three and nine months ended October 1, 2016.

5.
6.
Purchased Intangible Assets
Warranty

Details of finite-lived intangible assets by segment as of September 30, 2017 are as follows.

   September 30, 2017 
   Gross
Carrying
Amount
   Accumulated
Amortization
   Net
Carrying
Amount
 
   (In thousands) 

Equipment

  $7,172   $(5,648  $1,524 

Photonics

   1,215    (1,077   138 
  

 

 

   

 

 

   

 

 

 
  $8,387   $(6,725  $1,662 
  

 

 

   

 

 

   

 

 

 

Total amortization expense of finite-lived intangibles for the three and nine months ended September 30, 2017 was $169,000 and $596,000, respectively.

As of September 30, 2017, future amortization expense is expected to be as follows.

(In thousands)    

2017

  $159 

2018

   615 

2019

   615 

2020

   273 
  

 

 

 
  $1,662 
  

 

 

 

6.Acquisition-Related Contingent Consideration

In connection with the acquisition of Solar Implant Technologies, Inc. (“SIT”), Intevac agreed to pay to the selling shareholders in cash a revenue earnout on Intevac’s net revenue from commercial sales of certain products over a specified period up to an aggregate of $9.0 million. Intevac estimated the fair value of this contingent consideration on September 30, 2017 based on probability-based forecasted revenues reflecting Intevac’s own assumptions concerning future revenue from such products.

The fair value measurement of contingent consideration is based on significant inputs not observed in the market and thus represents a Level 3 measurement. Any change in fair value of the contingent consideration subsequent to the acquisition date is recognized in income (loss) from operations within the condensed consolidated statement of operations. The following table represents a reconciliation of the change in the fair value measurement of the contingent consideration liability for the three and nine month periods ended September 30, 2017 and October 1, 2016:

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

   Three Months Ended   Nine Months Ended 
   September 30,
2017
   October 1,
2016
   September 30,
2017
   October 1,
2016
 
   (In thousands) 

Opening balance

  $859   $748   $759   $890 

Changes in fair value

   (283   52    (181   (90

Cash payments made

   (172   —      (174   —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

  $404   $800   $404   $800 
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table displays the balance sheet classification of the contingent consideration liability account at September 30, 2017 and at December 31, 2016:

   September 30,   December 31, 
   2017   2016 
   (In thousands) 

Other accrued liabilities

  $36   $329 

Other long-term liabilities

   368    430 
  

 

 

   

 

 

 

Total acquisition-related contingent consideration

  $404   $759 
  

 

 

   

 

 

 

The following table represents the quantitative range of the significant unobservable inputs used in the calculation of fair value of the continent consideration liability as of September 30, 2017. Significant increases or decreases in any of these inputs in isolation would result in a significantly lower or higher fair value measurement.

   Quantitative Information about Level 3 Fair Value Measurements at September 30, 2017
   Fair Value   Valuation Technique  

Unobservable Input

  Range (Weighted Average)
   (In thousands, except for percentages)

Revenue Earnout

  $404   Discounted
cash flow
  

Weighted average cost of capital

Probability weighting of achieving revenue forecasts

  11.9%

10.0% - 80.0% (30.0%)

7.Warranty

Intevac provides for the estimated cost of warranty when revenue is recognized. Intevac’s warranty is persubject to contract terms and, for its diskHDD manufacturing DCP manufacturing, solar photovoltaic (“PV”)cell manufacturing and display cover panel (“DCP”) manufacturingadvanced semiconductor packaging systems, the warranty typically ranges between 12 and 24 months from customer acceptance. During this warranty period any defective
non-consumable
parts are replaced and installed at no charge to the customer. Intevac uses estimated repair or replacement costs along with its historical warranty experience to determine its warranty obligation. Intevac generally provides a twelve month warranty on its Photonics products. The provision for the estimated future costs of warranty is based upon historical cost and product performance experience. Intevac exercises judgment in determining the underlying estimates.

12

Table of Contents
INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
On the condensed consolidated balance sheets, the short-term portion of the warranty provision is included in other accrued liabilities, while the long-term portion is included in other long-term liabilities. The expense associated with product warranties issued or adjusted is included in cost of net revenues on the condensed consolidated statements of operations.

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The following table displays the activity in the warranty provision account for the threethree-month periods ended April 2, 2022 and nine months ended September 30, 2017 and October 1, 2016:

   Three Months Ended   Nine Months Ended 
   September 30,
2017
   October 1,
2016
   September 30,
2017
   October 1,
2016
 
   (In thousands) 

Opening balance

  $1,220   $592   $1,007   $982 

Expenditures incurred under warranties

   (360   (80   (640   (384

Accruals for product warranties issued during the reporting period

   169    320    675    494 

Adjustments to previously existing warranty accruals

   106    (110   93    (370
  

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

  $1,135   $722   $1,135   $722 
  

 

 

   

 

 

   

 

 

   

 

 

 

April 3, 2021.

   
Three Months Ended
 
   
        April 2,        
2022
  
        April 3,    
2021
 
   
(in thousands)
 
Opening balance
  $346  $480 
Expenditures incurred under warranties
   (171  (153
Expenditures incurred under warranties included in discontinued operations
   0     (46
Accruals for product warranties issued during the reporting period
   36   255 
Accruals for product warranties issued during the reporting period included in discontinued operations
   0     20 
Adjustments to previously existing warranty accruals
   38   (10
Adjustments to previously existing warranty accruals included in discontinued operations
   0     44 
   
 
 
  
 
 
 
Closing balance
  $249  $590 
   
 
 
  
 
 
 
The following table displays the balance sheet classification of the warranty provision account at September 30, 2017April 2, 2022 and at December 31, 2016:

   September 30,
2017
   December 31,
2016
 
   (In thousands) 

Other accrued liabilities

  $915   $829 

Other long-term liabilities

   220    178 
  

 

 

   

 

 

 

Total warranty provision

  $1,135   $1,007 
  

 

 

   

 

 

 

January 1, 2022.
   
        April 2    
2022
   
        January 1    
2022
 
   
(in thousands)
 
Other accrued liabilities
  $219   $301 
Other long-term liabilities
   30    45 
   
 
 
   
 
 
 
Total warranty provision
  $249   $346 
   
 
 
   
 
 
 
8.
7.
Guarantees

Officer and Director Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, Intevac has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at Intevac’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments Intevac could be required to make under these indemnification obligations is unlimited; however, Intevac has a director and officer insurance policy that mitigates Intevac’s exposure and enables Intevac to recover a portion of any future amounts paid. As a result of Intevac’s insurance policy coverage, Intevac believes the estimated fair value of these indemnification obligations is not material.

Other Indemnifications

As is customary in Intevac’s industry, many of Intevac’s contracts provide remedies to certain third parties such as defense, settlement, or payment of judgments for intellectual property claims related to the use of its products. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

Letters of Credit

As of September 30, 2017,April 2, 2022, we had letters of credit and bank guarantees outstanding totaling $1.4 million,$786,000, including athe standby letter of credit outstanding under the Santa Clara, California facility lease and various other guarantees with our bank. These letters of credit and bank guarantees are collateralized by $1.4 million$786,000 of restricted cash.

13


INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9.
8.
Cash, Cash Equivalents and Investments

Cash and cash equivalents, short-term investments and long-term investments consist of:

   September 30, 2017 
   Amortized
Cost
   Unrealized
Holding
Gains
   Unrealized
Holding
Losses
   Fair Value 
   (In thousands) 

Cash and cash equivalents:

        

Cash

  $14,159   $—     $—     $14,159 

Money market funds

   5,038    —      —      5,038 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

  $19,197   $—     $—     $19,197 

Short-term investments:

        

Certificates of deposit

  $4,498   $1   $1   $4,498 

Commercial paper

   1,990    —      —      1,990 

Corporate bonds and medium-term notes

   6,252    1    5    6,248 

Municipal bonds

   1,004    —      3    1,001 

U.S. treasury and agency securities

   4,300    —      —      4,300 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total short-term investments

  $18,044   $2   $9   $18,037 

Long-term investments:

        

Corporate bonds and medium-term notes

  $3,576   $—     $3   $3,573 

U.S. treasury and agency securities

   2,596    —      4    2,592 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total long-term investments

  $6,172   $—     $7   $6,165 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents, and investments

  $43,413   $2   $16   $43,399 
  

 

 

   

 

 

   

 

 

   

 

 

 
   December 31, 2016 
   Amortized
Cost
   Unrealized
Holding
Gains
   Unrealized
Holding
Losses
   Fair Value 
   (in thousands) 

Cash and cash equivalents:

        

Cash

  $18,726   $—     $—     $18,726 

Money market funds

   8,317    —      —      8,317 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

  $27,043   $—     $—     $27,043 

Short-term investments:

        

Commercial paper

  $1,992   $—     $1   $1,991 

Corporate bonds and medium-term notes

   8,586    —      6    8,580 

Municipal bonds

   600    —      —      600 

U.S. treasury and agency securities

   6,432    —      1    6,431 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total short-term investments

  $17,610   $—     $8   $17,602 

Long-term investments:

        

Corporate bonds and medium-term notes

  $2,510   $—     $11   $2,499 

Municipal bonds

   500    —      4    496 

U.S. treasury and agency securities

   597    1    —      598 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total long-term investments

  $3,607   $1   $15   $3,593 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents, and investments

  $48,260   $1   $23   $48,238 
  

 

 

   

 

 

   

 

 

   

 

 

 

  
April 2, 2022
 
  
Amortized Cost
   
Unrealized
Holding Gains
   
Unrealized
Holding Losses
   
Fair Value
 
  
(in thousands)
 
Cash and cash equivalents:
                   
Cash
 $93,662   $0     $0     $93,662 
Money market funds
  3,042    0      0      3,042 
Certificates of deposit
  500    0      0      500 
Commercial paper
  300    0      0      300 
U.S. treasury securities
  530    0      0      530 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cash and cash equivalents
 $98,034   $0     $0     $98,034 
Short-term investments:
                   
Certificates of deposit
 $2,750   $0     $11   $2,739 
Commercial paper
  898    0      0      898 
Corporate bonds and medium-term notes
  3,293    0      27    3,266 
Municipal bonds
  145    0      2    143 
U.S. treasury securities
  1,909    0      14    1,895 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total short-term investments
 $8,995   $0     $54   $8,941 
Long-term investments:
                   
Asset backed securities
 $3,745   $0     $30   $3,715 
Corporate bonds and medium-term notes
  1,718    0      22    1,696 
Municipal bonds
  347    0      2    345 
U.S. treasury securities
  3,747    0      96    3,651 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total long-term investments
 $9,557   $0     $150   $9,407 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cash, cash equivalents, and investments
 $116,586   $0     $204   $116,382 
  
 
 
   
 
 
   
 
 
   
 
 
 
  
January 1, 2022
 
  
Amortized Cost
   
Unrealized
Holding Gains
   
Unrealized
Holding Losses
   
Fair Value
 
  
(in thousands)
 
Cash and cash equivalents:
                   
Cash
 $102,494   $0     $0     $102,494 
Money market funds
  234    0      0      234 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cash and cash equivalents
 $102,728   $0     $0     $102,728 
Short-term investments:
                   
Certificates of deposit
 $4,300   $0     $0     $4,300 
Commercial paper
  400    0      0      400 
Corporate bonds and medium-term notes
  2,916    0      3    2,913 
Municipal bonds
  700    0      0      700 
U.S. treasury securities
  1,910    0      2    1,908 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total short-term investments
 $10,226   $0     $5   $10,221 
Long-term investments:
                   
Asset backed securities
 $2,040   $0     $3   $2,037 
Certificates of deposit
  500    0      3    497 
Corporate bonds and medium-term notes
  1,521    0      6    1,515 
Municipal bonds
  145    0      1    144 
U.S. treasury securities
  3,246    0      12    3,234 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total long-term investments
 $7,452   $0     $25   $7,427 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total cash, cash equivalents, and investments
 $120,406   $0     $30   $120,376 
  
 
 
   
 
 
   
 
 
   
 
 
 
14

Table of Contents

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The contractual maturities ofavailable-for-sale investment securities at September 30, 2017April 2, 2022 are presented in the following table.

   Amortized
Cost
   Fair Value 
   (In thousands) 

Due in one year or less

  $23,082   $23,075 

Due after one through two years

   6,172    6,165 
  

 

 

   

 

 

 
  $29,254   $29,240 
  

 

 

   

 

 

 

   
Amortized Cost
   
Fair Value
 
   
(in thousands)
 
Due in one year or less
  $13,367   $13,313 
Due after one through five years
   9,557    9,407 
   
 
 
   
 
 
 
   $22,924   $22,720 
   
 
 
   
 
 
 
The following table provides the fair market value of Intevac’s investments with unrealized losses that are not deemed to be other-than temporarily impaired as of September 30, 2017.

   September 30, 2017 
   In Loss Position for
Less than 12 Months
   In Loss Position for
Greater than 12 Months
 
   Fair Value   Gross
Unrealized
Losses
   Fair Value   Gross
Unrealized
Losses
 
   (In thousands) 

Certificates of deposit

  $1,249   $1   $—     $—   

Corporate bonds and medium-term notes

   5,882    7    1,200    1 

Municipal bonds

   504    1    497    2 

U.S. treasury and agency securities

   4,118    4    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 
  $11,753   $13   $1,697   $3 
  

 

 

   

 

 

   

 

 

   

 

 

 

April 2, 2022.

   
April 2, 2022
 
   
In Loss Position for

Less than 12 Months
   
In Loss Position for

Greater than 12 Months
 
   
Fair Value
   
Gross

Unrealized
Losses
   
Fair Value
   
Gross

Unrealized
Losses
 
   
(in thousands)
 
Asset backed securities
  $3,715   $30   $0     $0   
Certificates of deposit
   2,739    11    0      0   
Corporate bonds and medium-term notes
   4,460    44    502    5 
Municipal bonds
   488    4    0      0   
U.S. treasury securities
   5,546    110    0      0   
   
 
 
   
 
 
   
 
 
   
 
 
 
   $16,948   $199   $502   $5 
   
 
 
   
 
 
   
 
 
   
 
 
 
All prices for the fixed maturity securities including U.S. Treasurytreasury and agency securities, certificates of deposit, commercial paper, corporate bonds, asset backed securities and municipal bonds are received from independent pricing services utilized by Intevac’s outside investment manager. This investment manager performs a review of the pricing methodologies and inputs utilized by the independent pricing services for each asset type priced by the vendor. In addition, on at least an annual basis, the investment manager conducts due diligence visits and interviews with each pricing vendor to verify the inputs utilized for each asset class. The due diligence visits include a review of the procedures performed by each vendor to ensure that pricing evaluations are representative of the price that would be received forif a security were sold in an orderly sale.transaction. Any pricing where the input is based solely on a broker price is deemed to be a Level 3 price. Intevac uses the pricing data obtained from its outside investment manager as the primary input to make its assessments and determinations as to the ultimate valuation of the above-mentioned securities and has not made, during the periods presented, any material adjustments to such inputs.

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The following table represents the fair value hierarchy of Intevac’savailable-for-sale investment securities measured at fair value on a recurring basis as of September 30, 2017.

   Fair Value Measurements
at September 30, 2017
 
   Total   Level 1   Level 2 
   (In thousands) 

Recurring fair value measurements:

      

Available-for-sale securities

      

Money market funds

  $5,038   $5,038   $—   

U.S. treasury and agency securities

   6,892    4,865    2,027 

Certificates of deposit

   4,498    —      4,498 

Commercial paper

   1,990    —      1,990 

Corporate bonds and medium-term notes

   9,821    —      9,821 

Municipal bonds

   1,001    —      1,001 
  

 

 

   

 

 

   

 

 

 

Total recurring fair value measurements

  $29,240   $9,903   $19,337 
  

 

 

   

 

 

   

 

 

 

April 2, 2022.
   
Fair Value Measurements
at April 2, 2022
 
   
Total
   
Level 1
   
Level 2
 
   
(in thousands)
 
Recurring fair value measurements:
               
Investment securities
               
Money market funds
  $3,042   $3,042   $0   
U.S. treasury securities
   6,076    6,076    0   
Asset backed securities
   3,715    0      3,715 
Certificates of deposit
   3,239    0      3,239 
Commercial paper
   1,198    0      1,198 
Corporate bonds and medium-term notes
   4,962    0      4,962 
Municipal bonds
   488    0      488 
   
 
 
   
 
 
   
 
 
 
Total recurring fair value measurements
  $22,720   $9,118   $13,602 
   
 
 
   
 
 
   
 
 
 
15


INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
10.
9.
Derivative Instruments

The Company uses foreign currency forward contracts to mitigate variability in gains and losses generated from the
re-measurement
of certain monetary assets and liabilities denominated in foreign currencies and to offset certain operational exposures from the impact of changes in foreign currency exchange rates. These derivatives are carried at fair value with changes recorded in interest income and other income (expense), net in the condensed consolidated statements of operations. Changes in the fair value of these derivatives are largely offset by
re-measurement
of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. The derivatives have original maturities of approximately 30 days.

The following table summarizes the Company’s outstanding derivative instruments on a gross basis as recorded in its condensed consolidated balance sheets as of September 30, 2017April 2, 2022 and December 31, 2016:

   Notional Amounts   Derivative Liabilities 

Derivative Instrument

  September 30
2017
   December 31,
2016
   September 30,
2017
   December 31,
2016
 
           Balance
Sheet
Line
  Fair
Value
   Balance
Sheet
Line
  Fair
Value
 
   (in thousands) 

Undesignated Hedges:

          

Forward Foreign Currency Contracts

  $1,418   $1,146    (a $2    (a $8 
  

 

 

   

 

 

    

 

 

    

 

 

 

Total Hedges

  $1,418   $1,146    $2    $8 
  

 

 

   

 

 

    

 

 

    

 

 

 

(a)Other accrued liabilities

11.Equity

January 1, 2022.

   
Notional Amounts
   
Derivative Liabilities
   
Derivative Assets
 
Derivative Instrument
  
April 2,
2022
   
January 1,
2022
   
April 2,
2022
   
January 1,
2022
 
           
Balance

Sheet

Line
   
Fair

Value
   
Balance

Sheet

Line
   
Fair

Value
 
   
(in thousands)
                 
Undesignated Hedges:
            
Forward Foreign Currency Contracts
  $1,179    815    
(b
)
 
   $0      
(a
 
    $1 
   
 
 
   
 
 
        
 
 
        
 
 
 
Total Hedges
  $1,179    815        $0          $1 
   
 
 
   
 
 
        
 
 
        
 
 
 
(a) Other current assets
(b) Other accrued liabilities
10. Equity
Condensed Consolidated Statements of Changes in Equity
The changes in stockholders’ equity by component for the three months ended April 2, 2022 and April 3, 2021, are as follows (in thousands):
   
Three Months Ended April 2, 2022
 
   
Common
Stock and
Additional
Paid-in

Capital
  
Treasury
Stock
  
Accumulated
Other
Comprehensive
Income
  
Accumulated
Deficit
  
Total
Stockholders’
Equity
 
Balance at January 1, 2022
  $199,098  $(29,551 $578  $(36,110 $134,015 
Common stock issued under employee plans
   1,033   —     —     —     1,033 
Shares withheld for net share settlement of RSUs
   (135  —     —     —     (135
Equity-based compensation expense
   (1,036  —     —     —     (1,036
Net loss
   —     —     —     (7,855  (7,855
Other comprehensive loss
   —     —     (207  —     (207
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at April 2, 2022
  $198,960  $(29,551 $371  $(43,965 $125,815 
  
   
Three Months Ended April 3, 2021
 
   
Common
Stock and
Additional
Paid-in

Capital
  
Treasury
Stock
  
Accumulated
Other
Comprehensive
Income
  
Accumulated
Deficit
  
Total
Stockholders’
Equity
 
Balance at January 2, 2021
  $193,197  $(29,551 $640  $(62,730 $101,556 
Common stock issued under employee plans
   1,243   —     —     —     1,243 
Shares withheld for net share settlement of RSUs
   (20  —     —     —     (20
Equity-based compensation expense
   968   —     —     —     968 
Net loss
   —     —     —     (6,504  (6,504
Other comprehensive loss
   —     —     (88  —     (88
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Balance at April 3, 2021
  $195,388  $(29,551 $552  $(69,234 $97,155 
16

Table of Contents

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income by component for the three months ended April 2, 2022 and April 3, 2021, are as follows:
   
Three Months Ended
 
   
April 2, 2022
  
April 3, 2021
 
   
Foreign
currency
  
Unrealized
holding gains
(losses) on
available-for-sale

investments
  
Total
  
Foreign
currency
  
Unrealized
holding gains
(losses) on
available-for-sale

investments
  
Total
 
   
(in thousands)
 
Beginning balance
  $608  $(30 $578  $602  $38  $640 
Other comprehensive income (loss) before reclassification
   (33  (174  (207  (68  (20  (88
Amounts reclassified from other comprehensive income (loss)
   0     0     0     0     0     0   
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net current-period other comprehensive income (loss)
   (33  (174  (207  (68  (20  (88
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Ending balance
  $575  $(204 $371  $534  $18  $552 
   
 
 
  
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
Stock Repurchase Program

On November 21, 2013, Intevac’sIntevac announced that its Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. On August 20, 2018, Intevac’s Board of Directors approved a $10.0 million increase to the original stock repurchase program for an aggregate authorized amount of up to $40.0 million. At September 30, 2017, $1.5April 2, 2022, $10.4 million remains available for future stock repurchases under the repurchase program. Intevac did not make any common stock repurchases during the three and nine months ended September 30, 2017April 2, 2022 and October 1, 2016, respectively.

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

April 3, 2021.

Intevac records treasury stock purchases under the cost method using the
first-in,
first-out
(FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional
paid-in
capital. If Intevac reissues treasury stock at an amount below its acquisition cost and additional
paid-in
capital associated with prior treasury stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is recorded against retained earnings.

Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income by component for the three and nine months ended September 30, 2017 and October 1, 2016, are as follows.

   Three Months Ended  Nine Months Ended 
   September 30, 2017 
   Foreign
currency
  Unrealized
holding losses on
available-for-sale
investments
  Total  Foreign
currency
   Unrealized
holding losses on
available-for-sale
investments
  Total 
   (In thousands) 

Beginning balance

  $418  $(19 $399  $343   $(22 $321 

Other comprehensive income before reclassification

   39   5   44   114    8   122 

Amounts reclassified from other comprehensive income

   —     —     —     —      —     —   
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net current-period other comprehensive income

   39   5   44   114    8   122 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Ending balance

  $457  $(14 $443  $457   $(14 $443 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 
   Three Months Ended  Nine Months Ended 
   October 1, 2016 
   Foreign
currency
  Unrealized
holding gains on
available-for-sale
investments
  Total  Foreign
currency
   Unrealized
holding gains on
available-for-sale
investments
  Total 
   (In thousands) 

Beginning balance

  $474  $17  $491  $452   $(40 $412 

Other comprehensive income (loss) before reclassification

   (17  (16  (33  5    41   46 

Amounts reclassified from other comprehensive income

   —     —     —     —      —     —   
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Net current-period other comprehensive income (loss)

   (17  (16  (33  5    41   46 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Ending balance

  $457  $1  $458  $457   $1  $458 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

deficit.
12.
11.
Net Income (Loss)Loss Per Share

The following table sets forth the computation of basic and diluted net income (loss)loss per share:

   Three Months Ended   Nine Months Ended 
   September 30,
2017
   October 1,
2016
   September 30,
2017
   October 1,
2016
 
   (In thousands, except per share amounts) 

Net income (loss)

  $1,230   $(481  $4,159   $(10,276
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares – basic

   21,714    20,869    21,475    20,704 

Effect of dilutive potential common shares

   1,256    —      1,514    —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares – diluted

   22,970    20,869    22,989    20,704 
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share – basic

  $0.06   $(0.02  $0.19   $(0.50
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share –diluted

  $0.05   $(0.02  $0.18   $(0.50
  

 

 

   

 

 

   

 

 

   

 

 

 

The following potentially dilutive securities were excluded (as common stock equivalents) fromshare.

   
Three Months Ended
 
   
April 2,

2022
   
April 3,

2021
 
   
(in thousands)
 
Net loss from continuing operations
  $(7,720  $(5,568
Net loss from discontinued operations, net of tax
   (135   (936
   
 
 
   
 
 
 
Net loss
  $(7,855  $(6,504
   
 
 
   
 
 
 
Weighted-average shares – basic
   24,800    24,033 
Effect of dilutive potential common shares
   0      0   
   
 
 
   
 
 
 
Weighted-average shares – diluted
   24,800    24,033 
   
 
 
   
 
 
 
Basic and diluted net loss per share:
          
Continuing operations
  $(0.31  $(0.23
   
 
 
   
 
 
 
Discontinued operations
  $(0.01  $(0.04
   
 
 
   
 
 
 
Net loss per share
  $(0.32  $(0.27
   
 
 
   
 
 
 
As the computation of dilutedCompany is in a net income (loss) per share for the periods presented as their effect would have been antidilutive:

   Three Months Ended   Nine Months Ended 
   September 30,
2017
   October 1,
2016
   September 30,
2017
   October 1,
2016
 
   (In thousands) 

Stock options to purchase common stock

   826    2,743    834    2,743 

RSUs

   —      955    —      955 

Employee stock purchase plan

   —      82    —      82 

13.Segment Reporting

Intevac’s two reportable segments are: Thin-film Equipment and Photonics. Intevac’s chief operating decision-maker has been identified as the President and CEO, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Segment information is presented based upon Intevac’s management organization structure as of September 30, 2017 and the distinctive nature of each segment. Future changes to this internal financial structure may result in changes to the reportable segments disclosed.

Each reportable segment is separately managed and has separate financial results that are reviewed by Intevac’s chief operating decision-maker. Each reportable segment contains closely related products that are unique to the particular segment. Segment operating profit is determined based upon internal performance measures used by the chief operating decision-maker.

Intevac derives the segment results from its internal management reporting system. The accounting policies Intevac uses to derive reportable segment results are substantially the same as those used for external reporting purposes. Management measures the performance of each reportable segment based upon several metrics, including orders, net revenues and operating income. Management uses these results to evaluate the performance of, and to assign resources to, eachloss position, all of the reportable segments. Intevac manages certain operating expenses separately at the corporate level. Intevac allocates certainCompany’s equity instruments are considered antidilutive.

17


INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Thin-film Equipment segment designs, develops and markets vacuum process equipment solutions for high-volume manufacturing of small substrates with precise thin-film properties, such as for the hard drive, solar cell and DCP industries, as well as other adjacent thin-film markets.

The Photonics segment develops compact, cost-effective, high-sensitivity digital-optical products for the capture and display oflow-light images. Intevac provides sensors, cameras and systems for government applications such as night vision.

Information for each reportable segment for the three and nine months ended September 30, 2017 and October 1, 2016 is as follows:

Net Revenues

   Three Months Ended   Nine Months Ended 
   September 30,
2017
   October 1,
2016
   September 30,
2017
   October 1,
2016
 
   (In thousands) 

Thin-film Equipment

  $17,177   $14,272   $61,087   $25,941 

Photonics

   9,549    8,287    26,990    25,201 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment net revenues

  $26,726   $22,559   $88,077   $51,142 
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

   Three Months Ended   Nine Months Ended 
   September 30,
2017
   October 1,
2016
   September 30,
2017
   October 1,
2016
 
   (In thousands) 

Thin-film Equipment

  $1,213   $(998  $4,821   $(10,117

Photonics

   1,417    1,737    3,646    3,656 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment operating income (loss)

   2,630    739    8,467    (6,461
  

 

 

   

 

 

   

 

 

   

 

 

 

Unallocated costs

   (1,362   (1,063   (3,768   (3,986
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

   1,268    (324   4,699    (10,447

Interest income and other income (expense), net

   28    60    265    184 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  $1,296   $(264  $4,964   $(10,263
  

 

 

   

 

 

   

 

 

   

 

 

 

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Total assets for each reportable segment as of September 30, 2017 and December 31, 2016 are as follows:

Assets

   September 30,
2017
   December 31,
2016
 
   (In thousands) 

Thin-film Equipment

  $52,620   $39,503 

Photonics

   16,563    16,071 
  

 

 

   

 

 

 

Total segment assets

   69,183    55,574 
  

 

 

   

 

 

 

Cash, cash equivalents and investments

   43,399    48,238 

Restricted cash

   1,400    1,602 

Deferred income taxes

   4    3 

Other current assets

   1,024    997 

Common property, plant and equipment

   1,698    1,039 

Other assets

   724    871 
  

 

 

   

 

 

 

Consolidated total assets

  $117,432   $108,324 
  

 

 

   

 

 

 

14.
12.
Income Taxes

Intevac recorded income tax provisions of $66,000 and $805,000$26,000 for the three and nine months ended September 30, 2017, respectively,April 2, 2022 and $217,000 and $13,000$32,000 for the three and nine months ended October 1, 2016, respectively. The income tax provision for the nine months ended September 30, 2017 includes $506,000 for withholding taxes on royalties payable to the United States from Intevac’s Singapore subsidiary and $200,000 for audit considerations in foreign jurisdictions, both recorded as discrete items.April 3, 2021. The income tax provisions for the three and nine monththree-month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which Intevac operates. Intevac did not recognize benefits onFor the U.S. net operating loss for the three and nine monththree-month period ended September 30, 2017 dueApril 2, 2022 Intevac recorded a $26,000 income tax benefit on losses of its international subsidiaries and recorded $51,000 for withholding taxes on royalties paid to having full valuation allowances on the U.S. deferred tax assets. Intevac did not recognize benefits onUnited States from Intevac’s Singapore subsidiary as a discrete item. For the U.S. net operating loss or on the Singapore net operating loss for the three and nine monththree-month period ended October 1, 2016 dueApril 3, 2021 Intevac recorded a $19,000 income tax benefit on losses of its international subsidiaries and recorded $48,000 for withholding taxes on royalties paid to having full valuation allowances on the U.S. deferred tax assets and on theUnited States from Intevac’s Singapore deferred tax assets.subsidiary as a discrete item. Intevac’s tax rate differs from the applicable statutory rates due primarily to establishment of a valuation allowance, the utilization of deferred and current credits and the effect of permanent differences and adjustments of prior permanent differences. Intevac’s future effective income tax rate depends on various factors, including the level of Intevac’s projected earnings, the geographic composition of worldwide earnings, tax regulations governing each region, net operating loss carry-forwards, availability of tax credits and the effectiveness of Intevac’s tax planning strategies. Management carefully monitors these factors and timely adjusts the effective income tax rate.

The Inland Revenue AuthorityCoronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. The CARES Act includes several significant provisions for corporations, including the usage of Singapore (“IRAS”net operating losses and payroll benefits. Several foreign
(non-U.S.) is currently conducting a review
jurisdictions in which we operate have taken similar economic stimulus measures. The Company evaluated the provisions of the fiscal 2009 through 2012 tax returnsCARES Act and other
non-U.S.
economic measures and determined the impact on our financial position at April 2, 2022 and on the results of operations and cash flows for the three months then ended to be as follows.
Under the CARES Act, we elected to defer payment, on an interest-free basis, of the Company’s wholly-owned subsidiary, Intevac Asia Pte. Ltd. IRAS has challenged the Company’s tax position with respectemployer portion of social security payroll taxes incurred from March 27, 2020 to certain aspectsDecember 31, 2020.
One-half
of such deferral amount became due on December 31, 2021.
One-half
of such deferral amount will become due on December 31, 2022. We elected to utilize this deferral program to delay payment of $764,000 of the Company’s transfer pricing. Underemployer portion of payroll taxes which were incurred between March 27, 2020 and December 31, 2020. On the condensed consolidated balance sheets, the deferred payroll tax liability in the amount of $407,000 as of April 2, 2022 is included in accrued payroll and related liabilities. The Company also utilized the employee retention tax credit under the CARES Act for certain qualifying employee salary and wage expenditures. Tax benefits under the employee retention tax credit are not significant.
In Singapore, tax law,Intevac received government assistance under the Job Support Scheme (“JSS”). The purpose of the JSS is to provide wage support to employers to help them retain their local employees. During the first quarter of fiscal 2021, the Company must pay all contested taxesreceived $66,000 in JSS grants, of which $39,000 is reported as a reduction of cost of net revenues, $10,000 is reported as a reduction of research and the related interest to have the right to defend its position. The contested tax depositsdevelopment expenses and $17,000 is reported as a reduction of $724,000 at September 30, 2017selling, general and $871,000 at December 31, 2016 are included in other long-term assetsadministrative expenses on the condensed consolidated balance sheets.statement of operations. The Company’sCompany did not receive any JSS grants in the first quarter of fiscal 2022.
13.
Restructuring and Other Costs, Net
During the first quarter of fiscal 2022, Intevac substantially completed implementation of the 2022 cost reduction plan (the “2022 Cost Reduction Plan”), which was intended to reduce our overall cost structure and optimize our operational design, inclusive of the stranded overhead associated with the divestiture of the Photonics business. The restructuring program includes management reorganization and its advisors continuethe right sizing of certain technology development, marketing and administrative functions. We incurred restructuring costs of $1.2 million in estimated severance and the related modification of certain stock-based awards. Other costs incurred as part of the 2022 Cost Reduction Plan include: (i) a benefit of $1.3 million related to believe thatthe stock-based compensation forfeitures related to the employees affected by the reduction in workforce, (ii) $1.5 million for fixed asset disposals and (iii) $755,000 for write-offs of excess inventory. The 2022 Cost Reduction Plan reduced the workforce by 6 percent. The cost of implementing the 2022 Cost Reduction Plan was reported under cost of net revenues and operating expenses in the condensed consolidated statements of operations. Implementation of the 2022 Cost Reduction Plan is expected to reduce salary, wages and other employee-related expenses by approximately $2.1 million on an annual basis.
18

Table of Contents

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The changes in restructuring reserves, which resulted from cash-based severance payments and other employee-related costs, associated with the 2022 Cost Reduction Plan for the three months ended April 2, 2022 were as follows.
   
Employee
Termination
Costs
 
   
(in thousands)
 
Balance at January 1, 2022
  $0   
Provision for restructuring charges under the 2022 Cost Reduction Plan
   1,232 
Cash payments made
   (757
Non-cash
utilization (a)
   37 
   
 
 
 
Balance at April 2, 2022 (b)
  $512 
   
 
 
 
(a) Acceleration of equity awards.
(b) Liability for employee termination costs is included in accrued payroll and related liabilities.
During the fourth quarter of fiscal 2021, the Company recorded asset impairment and restructuring charges associated with the sale of the Photonics division including (i) $693,000 in severance and other employee-related costs related to the termination of the Photonics general manager; (ii) $1.2 million in asset impairment charges on the Company’s ROU asset and (iii) $665,000 in accruals for common area charges associated with an unused space commitment to EOTECH. In consideration of EOTECH’s assumption of certain lease obligations related to the Company’s Santa Clara, California campus, which assumed lease obligations pertain in part to excess space beyond that required by EOTECH’s currently anticipated operation of the Photonics division, the Company agreed to pay EOTECH the amount of $2.1 million, which is “more likely than not” to successfully defend that the tax treatment was properpayable in (i) one initial installment of $308,000 on January 10, 2022 and in accordance with Singapore tax regulations. Presently, there are no other active income tax examinations(ii) 7 equal quarterly installments of $259,000. The Company recorded an asset impairment charge against its ROU asset in the jurisdictions whereamount of $1.2 million associated with the excess space noted above. The Company recorded a liability to EOTECH in the amount of $665,000, the amount related to common area charges which are not included in the base rental payments or the lease liability on the Company’s condensed consolidated balance sheet. During the first quarter of fiscal 2022, the Company recorded restructuring charges associated with the sale of the Photonics division including $37,000 in severance and other employee-related costs related to the termination of four Photonics employees and $75,000 in stock-based compensation associated with the modification of certain stock-based awards for eighty Photonics employees.
The changes in restructuring reserves, which resulted from cash-based severance payments and other employee-related costs and other exit costs associated with the Photonics divestiture for the three months ended April 2, 2022 were as follows.
   
Employee
Termination
Costs
  
Other Exit
Costs
  
Total
 
   
(in thousands)
 
Balance at January 1, 2022
  $358  $665  $1,023 
Provision for restructuring charges associated with Photonics divestiture (a)
   112   2   114 
Cash payments made
   (137  (128  (265
Non-cash
utilization (b)
   (75  0     (75
   
 
 
  
 
 
  
 
 
 
Balance at April 2, 2022
  $258 (c)  $539  $797 
   
 
 
  
 
 
  
 
 
 
(a) Included in loss from discontinued operations (See Note 2).
(b) Acceleration of equity awards.
(c) Liability for employee termination costs is included in accrued payroll and related liabilities.
During the third quarter of fiscal 2021, Intevac operates.

substantially completed implementation of the 2021 cost reduction plan (the “2021 Cost Reduction Plan”), which was intended to reduce expenses and reduce its workforce by 5.2 percent. The cost of implementing the 2021 Cost Reduction Plan was reported under cost of net revenues and operating expenses in the condensed consolidated statements of operations. Substantially all cash outlays in connection with the 2021 Cost Reduction Plan occurred in the first nine months of fiscal 2021. Implementation of the 2021 Cost Reduction Plan is expected to reduce salary, wages and other employee-related expenses by approximately $2.0 million on an annual basis.
19


INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The changes in restructuring reserves, which resulted from cash-based severance payments and other employee-related costs, associated with the 2021 Cost Reduction Plan for the three months ended April 3, 2021 were as follows.
15.Contingencies
Three Months
Ended
April 3, 2021
(in thousands)
Beginning balance
$0  
Provision for restructuring reserves
43
Cash payments made
(43
Ending balance
$0  

14.
Commitments and Contingencies
From time to time, Intevac may have certain contingent liabilities that arise in the ordinary course of its business activities. Intevac accounts for contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Legal Matters
From time to time, Intevac receives notification from third parties, including customers and suppliers, seeking indemnification, litigation support, payment of money or other actions in connection with claims made against them. In addition, from time to time, Intevac receives notification from third parties claiming that Intevac may be or is infringing their intellectual property or other rights. Intevac also is subject to various other legal proceedings and claims, both asserted and unasserted, that arise in the ordinary course of business. Although the outcome of these claims and proceedings cannot be predicted with certainty, Intevac does not believe that any existing proceedings or claims will have a material adverse effect on its consolidated financial condition or results of operations.
In July 2020, Robin Quiusky, a former contract employee who worked for us via a staffing agency, filed an action against us under the Private Attorneys General Act (“PAGA”) in California state court (Quiusky v. Intevac, Inc., et al) alleging that the Company failed to provide rest and meal breaks, pay overtime and reimburse business expenses for
non-exempt
California employees. The former employee subsequently added class action claims to his original complaint. The parties participated in a confidential mediation on February 1, 2022, and reached a settlement resolving the case. We are awaiting approval of the settlement by the court. Payment on the claims is expected to be made in the second half of 2022. The settlement effectively extinguishes the Quiusky v. Intevac, Inc., et al lawsuit. The settlement includes the dismissal of all claims against the Company and related parties in the Quiusky lawsuit and claim under the PAGA, without any admission of liability or wrongdoing attributed to the Company. Because of the uncertainty surrounding this litigation, no litigation reserve had been previously established by the Company resulting in the full $1.0 million settlement expense being recognized in the fourth quarter of fiscal 2021.
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form
10-Q
contains forward-looking statements, which involve risks and uncertainties. Words such as “believes,” “expects,” “anticipates” and the like indicate forward-looking statements. These forward-looking statements include comments related to Intevac’s shipments, projected revenue recognition, product costs, gross margin, operating expenses, interest income, income taxes, cash balances and financial results in 20172022 and beyond; projected customer requirements for Intevac’s new and existing products, and when, and if, Intevac’s customers will place orders for these products; Intevac’s ability to proliferate its Photonics technology into major military programs and to develop and introduce commercial imaging products; the timing of delivery and/or acceptance of the systems and products that comprise Intevac’s backlog for revenue and the Company’s ability to achieve cost savings. Intevac’s actual results may differ materially from the results discussed in the forward-looking statements for a variety of reasons, including those set forth under “Risk Factors” and in other documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form
10-K
filed on February 15, 2017, 17, 2022, our Quarterly Reports on Form
10-Q
and our periodicCurrent Reports on Form10-Q’s
8-K.
Intevac’s trademarks include the following: “200 Lean
®
,” “INTEVAC LSMA
®
,” “INTEVAC MATRIX
®
,” “oDLC
®
,” and “TRIO
.”
20

Table of Contents

Discontinued Operations
On December 30, 2021, the Company completed the sale of its Photonics business to EOTECH, LLC, a Michigan limited liability company (“EOTECH”). As a result of the disposition, the results of operations from the Photonics reporting segment are reported as “Net loss from discontinued operations, net of taxes” in the condensed consolidated financial statements. The Company has recast prior period amounts presented to provide visibility and comparability. All discussion herein, unless otherwise noted, refers to Intevac’s remaining operating segment after the disposition, the Thin Film Equipment (“TFE”) business. See Note 2 “Divestiture and Discontinued Operations” to the condensed consolidated financial statements in Item 1 of this Quarterly Report on Form8-K’s.

10-Q.
Overview

Intevac is a provider of vacuum deposition equipment for a wide variety of thin-film applications, and a leading provider of digital night-vision technologies and products to the defense industry.applications. The Company leverages its core capabilities in high-volume manufacturing of small substrates to provide process manufacturing equipment solutions to the hard disk drive (“HDD”), and display cover panel (“DCP”), and solar cell industries. Intevac also provides sensors, cameras and systems for government applications such as night vision. Intevac’s customers include manufacturers of hard disk media DCPs and solar cells as well as the U.S. government and its agencies, allies and contractors.DCPs. Intevac reports two segments: Thin-film Equipment and Photonics.

operates in a single segment: TFE. Product development and manufacturing activities occur in North America and Asia. Intevac also has field offices in Asia to support its Thin-film Equipment customers. Intevac’s products are highly technical and are sold primarily through Intevac’s direct sales force. Intevac also sells its products through distributors in Japan and China.

Intevac’s results of operations are driven by a number of factors including success in its equipment growth initiatives in the DCP and solar marketsmarket and by worldwide demand for HDDs. Demand for HDDs depends on the growth in digital data creation and storage, the rate of areal density improvements, and the
end-user
demand for PCs, enterprise data storage, nearline “cloud” applications, video players and video game consoles that include such drives. Intevac continues to execute its strategy of equipment diversification into new marketsbeyond the HDD industry by introducing new products, such asfocusing on the Company’s ability to provide proprietary tools to enhance scratch protection and durability for a thin-film physical vapor deposition (“PVD”) application for protective coating forthe DCP market and by working to develop the next generation of high volume DCP manufacturing and a thin-film PVD application for PV solar cell manufacturing.equipment. Intevac believes that expansion into these marketsits renewed focus on the DCP market will result in incremental equipment revenues for Intevac and decrease Intevac’s dependence on the HDD industry. Intevac’s equipment business is subject to cyclical industry conditions, as demand for manufacturing equipment and services can change depending on supply and demand for HDDs and cell phones and PV cells as well as other factors such as global economic conditions and technological advances in fabrication processes.

In March 2022, the Company’s management approved a restructuring plan to realign the Company’s operational focus, scale the business and improve costs. The restructuring program includes (i) reducing the Company’s headcount and (ii) eliminating several research and development (“R&D”) programs and product offerings. As part of this realignment effort, the Company will no longer be pursuing several DCP projects including the coating of the backside covers of smartphones, solar ion implantation (also known as ENERGi
®
), and advanced packaging for semiconductor manufacturing.
The following table presents certain significant measurements for the three and nine months ended September 30, 2017April 2, 2022 and October 1, 2016:

   Three months ended   Nine months ended 
   September 30,
2017
  October 1,
2016
  Change over
prior period
   September 30,
2017
  October 1,
2016
  Change over
prior period
 
   (In thousands, except percentages and per share amounts) 

Net revenues

  $26,726  $22,559  $4,167   $88,077  $51,142  $36,935 

Gross profit

  $11,298  $8,515  $2,783   $35,816  $18,497  $17,319 

Gross margin percent

   42.3  37.7  4.6 points    40.7  36.2  4.5 points 

Income (loss) from operations

  $1,268  $(324 $1,592   $4,699  $(10,447 $15,146 

Net income (loss)

  $1,230  $(481 $1,711   $4,159  $(10,276 $14,435 

Net income (loss) per diluted share

  $0.05  $(0.02 $0.07   $0.18  $(0.50 $0.68 

April 3, 2021.

   
Three Months Ended
 
   
April 3,

2021
  
April 3,

2021
  
Change over

prior period
 
   
(In thousands, except percentages and
per share amounts)
 
Net revenues
  $4,445  $9,238  $(4,793
Gross profit
  $723  $2,134  $(1,411
Gross margin percent
   16.3  23.1  (6.8) points 
Loss from operations
  $(7,686 $(5,565 $(2,121
Net loss from continuing operations
  $(7,720 $(5,568 $(2,152
Net loss from discontinued operations, net of taxes
  $(135 $(936 $801 
Net loss
  $(7,855 $(6,504 $(1,351
Net loss per diluted share
  $(0.32 $(0.27 $(0.05
21

Table of Contents
Net revenues fordecreased during the thirdfirst quarter of fiscal 2017 increased2022 compared to the same period in the prior year primarily due to higher technology upgrade and spare parts sales to HDD manufacturers and to higher Photonics product sales and higher Photonics contract research and development (“R&D”). Thin-film Equipment recognizedlower system sales. We did not recognize revenue on two 200 Lean®HDD systemsany system sales in both the thirdfirst quarter of fiscal 2017 and third2022 compared to one MATRIX PVD system for advanced semiconductor packaging recognized in the first quarter of fiscal 2016. Thin-film Equipment also recognized revenue on one pilot ENERGi™ solar ion implant system2021. Lower gross margin in the thirdfirst quarter of fiscal 2016. Net income2022 reflects $755,000 in charges for excess and obsolete inventory as part of the thirdCompany’s realignment effort. Lower gross margin in the first quarter of fiscal 2017 increased compared2021 reflected the lower-margin contribution from the first MATRIX PVD system for advanced semiconductor packaging. In March 2022, the Company’s management approved a restructuring plan to realign the Company’s operational focus, scale the business and improve costs. R&D expenses for the first quarter of fiscal 2022 include $1.5 million in expenditures related to the same perioddisposal of certain lab equipment as part of the realignment effort. The cost of employee severance associated with the realignment effort of $1.2 million was offset in full by stock-based compensation forfeitures related to the prior year dueemployees affected by the reduction in workforce. Fees earned pursuant to higherthe TSA with EOTECH since the divestiture of Photonics (“TSA fees”) were $787,000 for the three months ended April 2, 2022 of which $11,000 was reported as a reduction of cost of net revenues and higher gross profit offset in part by higher spending on research and development and higher$767,000 was reported as a reduction of selling, general and administrative expenses. The agreed-upon charges for such services are generally intended to allow the service provider to recover all costs and expenses asof providing such services. During the first quarter of fiscal 2021, the Company recordedreceived $66,000 in government assistance related to
COVID-19
from the government of Singapore of which $39,000 was reported as a reduction of cost of net revenues, $10,000 was reported as a reduction of R&D expenses and $17,000 was reported as a reduction of selling, general and administrative expenses. The Company did not receive any JSS grants in the first quarter of fiscal 2022. The Company reported a larger net loss for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 due to lower revenues, lower gross margins and higher variable compensation expensesoperating costs as a result of the realignment effort.
We believe fiscal 2022 will be a challenging year and Intevac does not expect be profitable in fiscal 2022. Intevac expects that 2022 HDD equipment sales will be similar to 2021 levels as we expect a customer to take delivery of one system in backlog. We believe there will be improvements to our HDD equipment sales in fiscal 2023 as we expect a customer to take delivery of up to eight systems in backlog.
COVID-19
Update
The impact of
COVID-19,
including changes in consumer behavior, pandemic fears, and market downturns, as well as restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity. Although
COVID-19
vaccines are now broadly distributed and administered, there remains significant uncertainty concerning the magnitude of the impact and the duration of the
COVID-19
pandemic. As new strains of
COVID-19
develop, the continued impacts to our business could be material to our fiscal 2022 results. Further, the impacts of inflation on our business and the broader economy, which may be exacerbated by the economic recovery from the
COVID-19
pandemic, may also impact our financial condition and results of operations. Our customers may delay or cancel orders due to reduced demand, supply chain disruptions, and/or travel restrictions and border closures. We have experienced pandemic-related delays in our evaluation and development work. In response to
COVID-19,
we implemented initiatives to safeguard our employees, including work-from-home protocols. In June 2021, we began reopening our offices on a regional basis in accordance with local authority guidelines while ensuring that our return to profitability.

Net revenues for the first nine months of fiscal 2017 increased compared to the same periodwork is thoughtful, prudent, and handled with a safety-first approach. All employees in the prior year primarily dueUnited States who could work from home did so through the middle of June 2021, when we fully reopened our offices as restrictions were lifted by the applicable authorities. Effective March 29, 2022, 75% of the employees are allowed to higher equipment saleswork onsite in Singapore. Our employees’ health and safety is our top priority, and we will continue to HDD, PVmonitor local restrictions across the world, the administration and cell phone manufacturers, higher Photonics contract R&Defficacy of vaccines and by higher Photonics product sales. Thin-film Equipment recognized revenuethe number of new cases.

In Singapore, Intevac received government assistance under the Job Support Scheme (“JSS”). The purpose of the JSS is to provide wage support to employers to help them retain their local employees. Under the JSS, Intevac received $66,000 in JSS grants in the first nine monthsquarter of fiscal 2017 on four 200 LeanHDD systems, one pilot INTEVAC MATRIX™ solar ion implant system, two ENERGi solar ion implant systems and four INTEVAC VERTEX™ coating systems for DCP. Thin-film Equipment recognized revenue2021. The Company did not receive any JSS grants in the first nine monthsquarter of fiscal 2016 on two 200 LeanHDD systems, one pilot ENERGi solar ion implant system and one VERTEX system. The net income for2022.
During the first nine monthsquarter of fiscal 2017 increased compared to2022 and the same period infirst quarter of fiscal 2021, the prior yearCompany’s expenses included approximately $18,000 and $43,000, respectively, due to higher revenues, higher gross profit, and lower spending on research and development offset in part by higher selling, general and administrative expenses as the Company recorded higher variable compensation expenses as a result of the return to profitability and higher legal feescosts related to patents and contracts.

Given the momentum we have builtactions taken in our business, we believe that we are currently on the path response

to profitability in fiscal 2017. Intevac expects higher sales of new Thin-film Equipment products for DCP and PV and higher sales of HDD equipment. For fiscal 2017, Intevac expects that Photonics business levels will be at about the same levels as 2016 as Photonics continues to deliver production shipments of the pilot night-vision systems for the Apache helicopter and night-vision camera modules for the F35 Joint Strike Fighter program. Deliveries under the current multi-year Apache arrangement are expected to be completed in the fourth quarter of 2017.

Intevac’s trademarks, include the following: “200 Lean®,” “AccuLuber™,” “EBAPS®,” “ENERGi™,”“I-Port™,” “LIVAR®,” “INTEVAC LSMA™,” “INTEVAC MATRIX™,” “MicroVista®,” “NightVista®,” “Night Port™,” “oDLC™” and “INTEVAC VERTEX™”.

COVID-19.

Results of Operations

Net revenues

   Three months ended   Nine months ended 
   September 30,
2017
   October 1,
2016
   Change over
prior period
   September 30,
2017
   October 1,
2016
   Change over
prior period
 
   (In thousands) 

Thin-film Equipment

  $17,177   $14,272   $2,905   $61,087   $25,941   $35,146 

Photonics:

            

Products

  $7,360   $6,689   $671   $21,735   $21,385   $350 

Contract R&D

   2,189    1,598    591    5,255    3,816    1,439 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   9,549    8,287    1,262    26,990    25,201    1,789 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

  $26,726   $22,559   $4,167   $88,077   $51,142   $36,935 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Thin-film Equipment

   
Three Months Ended
 
   
April 2,
2022
   
April 3,
2021
   
Change over

prior period
 
   
(In thousands)
 
Total net revenues
  $4,445   $9,238   $(4,793
  
 
 
   
 
 
   
 
 
 
22

Table of Contents
The decrease in revenue forin the three months ended September 30, 2017 increased overApril 2, 2022 versus the same periodthree months ended April 3, 2021, was primarily driven by lower system sales. We did not recognize revenue on any systems sales in the prior year as a resultfirst quarter of higher salesfiscal 2022. We recognized revenue on one MATRIX PVD system for advanced semiconductor packaging in the first quarter of fiscal 2021. Revenue during the three-month periods ended April 2, 2022 and April 3, 2021 also included revenue recognized for disk equipment technology upgrades and spare parts. Thin-film Equipment revenue for the three months ended September 30, 2017
Backlog
   
April 2,
2022
   
January 1,
2022
   
April 3,
2021
 
   
(In thousands)
 
Total backlog
  $87,162   $24,725   $4,221 
  
 
 
   
 
 
   
 
 
 
Backlog at April 2, 2022 included revenue recognized for two 200 LeanHDD systems. Thin-film Equipment revenue for the three months ended October 1, 2016 included two 200 Lean systems and a pilot ENERGi solar ion implant tool. Thin-film Equipment revenue for the nine months ended September 30, 2017 increased over the same period in the prior year as a result of higher sales of systems, technology upgrades, service and spare parts. Thin-film Equipment recognized revenue in the first nine months of fiscal 2017 on four 200 LeanHDD systems, one pilot MATRIX solar ion implant system, two ENERGi solar ion implant systems and four VERTEX coating systems for DCP. Thin-film Equipment recognized revenue in the first nine months of fiscal 2016 on two 200 LeanHDD systems, one pilot ENERGi solar ion implant system and one VERTEX system.

Photonics revenue for the three and nine month periods ended September 30, 2017 increased from the same periods in the prior year as a result of higher product sales revenues and by increased contract R&D work.

Backlog

   September 30,
2017
   December 31,
2016
   October 1,
2016
 
   (In thousands) 

Thin-film Equipment

  $59,375   $46,283   $49,234 

Photonics

   13,457    22,244    23,703 
  

 

 

   

 

 

   

 

 

 

Total backlog

  $72,832   $68,527   $72,937 
  

 

 

   

 

 

   

 

 

 

Thin-film Equipment backlog at September 30, 2017 included five 200 Lean HDD systems and twelve ENERGi solar ion implant systems. Thin-film Equipment backlogBacklog at December 31, 2016January 1, 2022 included fourone 200 Lean HDD systems, four VERTEX systems for DCP, one pilot MATRIX solar ion implant system, and two ENERGi solar ion implant systems. Thin-film Equipment backlogsystem. Backlog at October 1, 2016 included fourApril 3, 2021 did not include any 200 Lean HDD systems, one MATRIX solar PVD system, three VERTEX systems for DCP, one pilot MATRIX solar ion implant system, and two ENERGi solar ion implant systems.

Revenue by geographic region

   Three months ended  Nine months ended 
   September 30,
2017
   October 1,
2016
   Change over
prior period
  September 30,
2017
   October 1,
2016
   Change over
prior period
 
   (In thousands) 

United States

  $10,294   $9,066   $1,228  $29,879   $27,603   $2,276 

Asia

   15,807    13,311    2,496   57,062    22,801    34,261 

Europe

   94    182    (88  605    738    (133

Rest of World

   531    —      531   531    —      531 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total net revenues

  $26,726   $22,559   $4,167  $88,077   $51,142   $36,935 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

   
Three Months Ended
 
   
April 2, 2022
   
April 3, 2021
 
   
(in thousands)
 
United States
  $294   $367 
Asia
   4,151    5,021 
Europe
   —      3,850 
  
 
 
   
 
 
 
Total net revenues
  $4,445   $9,238 
  
 
 
   
 
 
 
International sales include products shipped to overseas operations of U.S. companies. The increase in salesSales to the U.S. region in 2017 versus 2016 reflected higher Photonics contract R&D work and higher Photonics product sales.for all periods presented were not significant. The increasedecrease in sales to the Asia region in 2017the three months ended April 2, 2022 versus 2016the three months ended April 3, 2021, reflected lower spare parts and service sales, offset in part by higher systemHDD upgrade sales. Sales to the Asia region in 2017 included four 200 Lean HDD systems, four VERTEX coating systems for DCP, one pilot MATRIX solar ion implant system and two ENERGi solar ion implant systems versus two 200 Lean HDD systems, one pilot ENERGi solar ion implant tool one and VERTEX coating system in 2016.both three month periods did not include any systems. Sales to the Europe region in 2017 and 2016 were not significant. Rest of World includes contract R&Dthe three months ended April 3, 2021 included one MATRIX PVD system for the Australian government as part of a program under the Department of Defense’s Coalition Warfare Program, which is funded by the U.S. government and several foreign nation coalition partners.

advanced semiconductor packaging.

Gross profit

   Three months ended  Nine months ended 
   September 30,
2017
  October 1,
2016
  Change over
prior period
  September 30,
2017
  October 1,
2016
  Change over
prior period
 
   (In thousands, except percentages) 

Thin-film Equipment gross profit

  $7,812  $4,628  $3,184  $25,686  $7,337  $18,349 

% of Thin-film Equipment net revenues

   45.5  32.4   42.0  28.3 

Photonics gross profit

  $3,486  $3,887  $(401 $10,130  $11,160  $(1,030

% of Photonics net revenues

   36.5  46.9   37.5  44.3 

Total gross profit

  $11,298  $8,515  $2,783  $35,816  $18,497  $17,319 

% of net revenues

   42.3  37.7   40.7  36.2 

   
Three Months Ended
 
   
April 2,

2022
  
April 3,

2021
  
Change over

prior period
 
   
(In thousands, except
percentages)
 
TFE gross profit
  $723  $2,134  $(1,411
% of TFE net revenues
   16.3  23.1 
Cost of net revenues consists primarily of purchased materials, and costs attributable to contract research and development, and also includes fabrication, assembly, test and installation labor and overhead, customer-specific engineering costs, warranty costs, royalties, provisions for inventory reserves and scrap.

Thin-film Equipment gross

23

Table of Contents
Gross margin was 45.5%16.3% in the three months ended September 30, 2017April 2, 2022 compared to 32.4%23.1% in the three months ended October 1, 2016 and was 42.0% inApril 3, 2021. Lower gross margin during the ninethree months ended September 30, 2017 compared to 28.3%April 2, 2022 reflects $755,000 in charges for excess and obsolete inventory as part of the nine months ended October 1, 2016. The improvement in grossCompany’s realignment effort. Gross margin for the three and nine months ended September 30, 2017 was due primarily to higher revenue, increased shipments of higher-margin upgrades and higher factory utilization. Thin-film Equipment gross margin for the nine months ended September 30, 2017April 3, 2021 reflects the release of $2.2 million on previously-recognized inventory provisions upon the sale of two ENERGi solar ion implant systems, offset in part by the lower margin on the pilotfirst MATRIX solar ion implant system.PVD system for advanced semiconductor packaging. Gross margin for the three and nine months ended October 1, 2016 reflected the lower margin on a pilot ENERGi solar implant tool sold to an R&D facility. Gross margins in the Thin-film Equipment business will vary depending on a number of factors, including revenue levels, product mix, product cost, system configuration and pricing, factory utilization, and provisions for excess and obsolete inventory.

Photonics gross margin was 36.5% in

Research and development expense
   
Three Months Ended
 
   
April 2,

2022
   
April 3,

2021
   
Change over

prior period
 
   
(In thousands)
 
Research and development expense
  $4,160   $3,365   $795 
R&D spending during the three months ended September 30, 2017April 2, 2022 increased compared to 46.9% in the three months ended October 1, 2016 and was 37.5% in the nine months ended September 30, 2017 compared to 44.3% in the nine months ended October 1, 2016. The decline in gross margin for the three months ended September 30, 2017 wasApril 3, 2021 primarily due to $1.5 million in expenditures related to the disposal of certain lab equipment as part of the realignment effort, offset by lower marginsspending on contract R&D higher inventory provisions and higher manufacturing engineering spending. The lower gross margin for the nine months ended September 30, 2017 was due to loss provisions recorded on firm fixed price contracts, higher inventory provisions and higher manufacturing engineering spending. Gross margins in the Photonics business will vary depending on a number of factors, including sensor yield, product mix, product cost, pricing, factory utilization, provisions for warranty and inventory reserves.

Research and development

   Three months ended   Nine months ended 
   September 30,
2017
   October 1,
2016
   Change over
prior period
   September 30,
2017
   October 1,
2016
   Change over
prior period
 
   (In thousands) 

Research and development expense

  $4,535   $4,067   $468   $13,635   $14,220   $(585

Research and development spending in Thin-film Equipment during the three and nine months ended September 30, 2017 increased compared to the same periods in the prior year. Thin-film Equipment spending consisted primarily of PV and DCP development. Research and development spending decreased in Photonics during the three and nine months ended September 30, 2017 as compared to the same periods in the prior year. Photonics spending during the three and nine months ended October 1, 2016 reflected incremental spending on demonstrators developed for evaluation by the U.S. Army and U.S. Navy which were self-funded by Intevac. Research and development expenses do not include costs of $2.0 million and $4.8 million for the three and nine months ended September 30, 2017 respectively, or $1.0 million and $3.2 million for the three and nine months ended October 1, 2016 respectively, which are related to customer-funded contract R&D programs at Photonics and therefore included in cost of net revenues.

programs.

Selling, general and administrative

   Three months ended   Nine months ended 
   September 30,
2017
   October 1,
2016
   Change over
prior period
   September 30,
2017
   October 1,
2016
   Change over
prior period
 
   (In thousands) 

Selling, general and administrative expense

  $5,495   $4,772   $723   $17,482   $14,724   $2,758 

expense

   
Three Months Ended
 
   
April 2,

2022
   
April 3,

2021
   
Change over

prior period
 
   
(In thousands)
 
Selling, general and administrative expense
  $4,249   $4,334   $(85
Selling, general and administrative expense consists primarily of selling, marketing, customer support, financial and management costs. Selling, general and administrative expensesexpense for the three and nine months ended September 30, 2017 increasedApril 2, 2022 decreased compared to the same periods in the prior year primarily due to higherthree months ended April 3, 2021 as lower variable compensation costs as a result ofexpenses and lower stock compensation expenses were offset
in-part
by
one-time
severance charges associated with the Company’s return to profitability, increasedrealignment effort and higher legal expenses for patent applications and increased spending for strategic consulting.consulting fees. Selling, general and administrative expense for the three months ended September 30, 2017April 2, 2022, is net of $776,000 in TSA fees earned since the Photonics divestiture. The agreed-upon charges for such services are generally intended to allow the service provider to recover all costs and expenses of providing such services.
Cost reduction plans
In March 2022, the Company’s management approved a restructuring plan to realign the Company’s operational focus, scale the business and improve costs. The restructuring program includes (i) reducing the Company’s headcount and (ii) eliminating several R&D programs and product offerings. As part of this
re-alignment
effort, the Company will no longer be pursuing several DCP projects including the coating of the backside covers of smartphones, solar ion implantation (also known as ENERGi
®
), and advanced packaging for semiconductor manufacturing. We incurred restructuring costs of $1.2 million for estimated severance and the related modification of certain stock-based awards. Other costs incurred as part of the 2022 cost reduction plan include: (i) a benefit of $283,000 compared to a charge of $52,000 for the three months ended October 1, 2016 associated with changes in the fair value of the contingent consideration related to a revenue earnout obligation. Selling, general and administrative expense for the nine months ended September 30, 2017 is net of a benefit of $181,000 compared to a benefit of $90,000 for the nine months ended October 1, 2016 associated with changes in the fair value of the contingent consideration$1.3 million related to the revenue earnout obligation.

stock-based compensation forfeitures related to the employees affected by the reduction in workforce, (ii) $1.5 million for fixed asset disposals and (iii) $755,000 for write-offs of excess inventory. The 2022 Cost Reduction Plan reduced the workforce by 6 percent. The cost of implementing the 2022 Cost Reduction Plan was reported under cost of net revenues and operating expenses in the condensed consolidated statements of operations. Implementation of the 2022 Cost Reduction Plan is expected to reduce salary, wages and other employee-related expenses by approximately $2.1 million on an annual basis and reduce depreciation expense by $720,000 on an annual basis.

During the third quarter of fiscal 2021, Intevac substantially completed implementation of the 2021 cost reduction plan (the “2021 Cost Reduction Plan”), which was intended to reduce expenses and reduce its workforce by 5.2 percent. During the first quarter of 2021, the Company reported costs of $43,000 under the 2021 Cost Reduction Plan of which $9,000 was reported under cost of net revenues and $34,000 was reported under operating expenses. The total cost of implementing the 2021 Cost Reduction Plan was $319,000, of which $224,000 was reported under cost of net revenues and $95,000 was reported under operating expenses during fiscal 2021. Substantially all cash outlays in connection with the 2021 Cost Reduction Plan were completed in the third quarter of fiscal 2021. Implementation of the 2021 Cost Reduction Plan is expected to reduce salary, wages and other employee-related expenses by approximately $2.0 million on an annual basis.
24

Table of Contents
Interest income and other income (expense), net

   Three months ended  Nine months ended 
   September 30,
2017
   October 1,
2016
   Change over
prior period
  September 30,
2017
   October 1,
2016
   Change over
prior period
 
   (In thousands) 

Interest income and other income (expense), net

  $28   $60   $(32 $265   $184   $81 

   
Three Months Ended
 
   
April 3,

2021
  
April 3,

2021
   
Change over

prior period
 
   
(In thousands)
 
Interest income and other income (expense), net
  $(8 $29   $(37
Interest income and other income (expense), net is comprisedin the three months ended April 2, 2022 included $9,000 of interest income foreign currency gains and losses,on investments and other income of $16,000, offset in part by $33,000 of foreign currency losses. Interest income and expense such as gainsother income (expense), net in the three months ended April 3, 2021 included $17,000 of interest income on investments and losses on salesother income of fixed assets and earnout$19,000, offset in part by $7,000 of foreign currency losses. The decrease in interest income in the three months ended April 2, 2022 compared to the same period in the prior year resulted from divestitures.

Provision for income taxes

   Three months ended  Nine months ended 
   September 30,
2017
   October 1,
2016
   Change over
prior period
  September 30,
2017
   October 1,
2016
   Change over
prior period
 
   (In thousands) 

Provision for income taxes

  $66   $217   $(151 $805   $13   $792 

lower interest rates, offset in part by higher invested balances.

Income tax provision
   
Three Months Ended
 
   
April 2,

2022
   
April 3,

2021
   
Change over

prior period
 
   
(In thousands)
 
Income tax provision
  $26   $32   $(6
Intevac recorded income tax provisions of $66,000 and $805,000$26,000 for the three and nine months ended September 30, 2017, respectively,April 2, 2022 and $217,000 and $13,000$32,000 for the three and nine months ended October 1, 2016, respectively. The income tax provision for the nine months ended September 30, 2017 includes $506,000 for withholding taxes on royalties payable to the United States from Intevac’s Singapore subsidiary and $200,000 for audit considerations in foreign jurisdictions, both recorded as discrete items.April 3, 2021. The income tax provisions for the three and nine monththree-month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which Intevac operates. The income tax expense for the three months ended April 2, 2022 and for the three months ended April 3, 2021 was largely the result of foreign withholding taxes and income taxes in foreign jurisdictions. For the three-month period ended April 2, 2022, Intevac did not recognize benefitsrecorded a $26,000 income tax benefit on losses of our international subsidiaries and recorded $51,000 for withholding taxes on royalties paid to the U.S.United States from Intevac’s Singapore subsidiary as a discrete item. For the three-month period ended April 3, 2021, Intevac recorded a $19,000 income tax benefit on losses of our international subsidiaries and recorded $48,000 for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as a discrete item. For all periods presented, Intevac utilized net operating loss forcarry-forwards to offset the three and nine month period ended September 30, 2017 due to having full valuation allowances on the U.S. deferred tax assets. Intevac did not recognize benefits on the U.S. net operating loss or on the Singapore net operating loss for the three and nine month period ended October 1, 2016 due to having full valuation allowances on the U.S. deferred tax assets and on the Singapore deferred tax assets.impact of global intangible
low-taxed
income. Intevac’s tax rate differs from the applicable statutory rates due primarily to establishment of a valuation allowance, the utilization of deferred and current credits and the effect of permanent differences and adjustments of prior permanent differences. Intevac’s future effective income tax rate depends on various factors, including the level of Intevac’s projected earnings, the geographic composition of worldwide earnings, tax regulations governing each region, net operating loss carry-forwards, availability of tax credits and the effectiveness of Intevac’s tax planning strategies. Management carefully monitors these factors and timely adjusts the effective income tax rate.

The income tax expense consists primarily of income taxes in foreign jurisdictions in which we conduct business and foreign withholding taxes. We maintain a full valuation allowance for domestic deferred tax assets, including net operating loss carryforwards and certain domestic tax credits. Intevac’s effective tax rate differs from the U.S. statutory rate in both 2022 and 2021 primarily due to the Company not recognizing an income tax benefit on the domestic loss.
Discontinued operations
   
Three Months Ended
 
   
April 2,

2022
   
April 3,

2021
   
Change over

prior period
 
   
(In thousands)
 
Loss from discontinued operations, net of taxes
  $135   $936   $(801
The loss from discontinued operations consists primarily of the results of operations of the Photonics business which was sold to EOTECH on December 30, 2021. Loss from discontinued operations for the three months ended April 2, 2022 includes salaries and wages and employee benefits up to and including January, 4, 2022, the date when employees were conveyed to the Buyer, severance for several employees that were not hired by the Buyer, stock-based compensation expense associated with the acceleration of stock awards and incremental legal expenses associated with the divestiture, offset in part by a stock based compensation divestiture-related forfeiture benefit. Loss from discontinued operations for the three months ended April 3, 2021 represents the loss from the Photonics division, net of tax.
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Table of Contents
Liquidity and Capital Resources

At September 30, 2017,April 2, 2022, Intevac had $43.4$117.2 million in cash, cash equivalents, restricted cash and investments compared to $48.2$121.2 million at December 31, 2016.January 1, 2022. During the first ninethree months of 2017,fiscal 2022, cash, cash equivalents, restricted cash and investments decreased by $4.8$4.0 million due primarily to cash used by operating activities, purchases of fixed assets, and tax payments related to theon net share settlement of restricted stock units, partiallysettlements offset in part by cash received from the sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit plans.

Cash, cash equivalents, restricted cash and investments consist of the following:

   September 30,
2017
   December 31,
2016
 
   (In thousands) 

Cash and cash equivalents

  $19,197   $27,043 

Short-term investments

   18,037    17,602 

Long-term investments

   6,165    3,593 
  

 

 

   

 

 

 

Total cash, cash equivalents and investments

  $43,399   $48,238 
  

 

 

   

 

 

 

   
April 2,

2022
   
January 2,

2021
 
   
(In thousands)
 
Cash and cash equivalents
  $98,034   $102,728 
Restricted cash
   786    786 
Short-term investments
   8,941    10,221 
Long-term investments
   9,407    7,427 
  
 
 
   
 
 
 
Total cash, cash equivalents, restricted cash and investments
  $117,168   $121,162 
  
 
 
   
 
 
 
Operating activities used cash of $1.7$4.1 million during the first ninethree months of 2017 and usedfiscal 2022 compared to cash generated of $3.1$2.5 million during the first ninethree months of 2016. The improvement in operating cash flows was due primarily to higher net income as a result of the return to profitability, offset in part by additional investments in working capital during the first nine months of 2017.

fiscal 2021.

Accounts receivable totaled $22.3$17.1 million at September 30, 2017April 2, 2022 compared to $17.4$14.3 million at December 31, 2016 primarily as a result of billings for third quarter revenue and customer advances. At September 30, 2017, customerJanuary 1, 2022. Customer advances for products that had not been shipped to customers and included in accounts receivable were $4.0 million.$10.6 million at April 2, 2022. Net inventories totaled $32.6$8.9 million at September 30, 2017April 2, 2022 compared to $24.9$5.8 million at December 31, 2016. The increase wasJanuary 1, 2022 due primarily to three Energi systems that were undergoing installation and acceptance testing and included in finished goods at September 30, 2017 and higher levels of production inventories for planned 2017 and 2018 shipments, offset in part by recognition of previously deferred revenue on four VERTEX systems and two Energi systems that were undergoing installation and acceptance testing and included in finished goods at December 31, 2016.increased manufacturing activities. Accounts payable totaled $7.0decreased to $3.9 million at September 30, 2017 compared toApril 2, 2022 from $5.3 million at December 31, 2016. The increase was due primarilyJanuary 1, 2022. Accounts payable at January 1, 2022 included a payable of $2.0 million as a commission to increased materials purchases to support planned shipments.the investment banker for the Photonics sale. Accrued payroll and related liabilities increaseddecreased to $5.8$3.3 million at September 30, 2017April 2, 2022 compared to $4.2$5.5 million at December 31, 2016January 1, 2022 due primarily to higher accruals for 2017 bonuses and profit sharing due to the return to profitability, offset in part by the settlement of 20162021 bonuses. Other accrued liabilities decreased to $7.9$3.0 million at September 30, 2017April 2, 2022 compared to $17.0$3.7 million at December 31, 2016January 1, 2022 primarily due primarily to the recognition of previously deferred revenue.lower other tax liability balances. Customer advances increased from $5.4$2.1 million at December 31, 2016January 1, 2022 to $12.3$15.3 million at September 30, 2017,April 2, 2022 primarily due to the receiptas a result of new customer orders.

Investing activities used cash of $6.4$1.5 million during the first ninethree months of 2017.fiscal 2022. Purchases of investments net of proceeds from sales totaled $3.1 million.$891,000. Capital expenditures for the ninethree months ended September 30, 2017April 2, 2022 were $3.6 million.

$618,000.

Financing activities generated cash of $182,000$1.0 million in the first ninethree months of 2017. Thefiscal 2022 from the sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit plans generated cash of $2.3 million.plans. Tax payments related to the net share settlement of restricted stock units were $2.0 million.

$135,000.

Intevac’s investment portfolio consists principally of investment grade money market mutual funds, U.S. Treasury and agency securities, certificates of deposit, asset-backed securities, commercial paper, municipal bonds and corporate bonds. Intevac regularly monitors the credit risk in its investment portfolio and takes measures, which may include the sale of certain securities, to manage such risks in accordance with its investment policies.

As of September 30, 2017,April 2, 2022, approximately $10.9$30.9 million of cash and cash equivalents and $3.3$2.9 million of short-term investments were domiciled in foreign tax jurisdictions. Intevac expects a significant portion of these funds to remain offshore in the short term. If the Company chose to repatriate these funds to the United States, it would be required to accrue and pay additional taxes on any portion of the repatriation where no United States income tax had been previously provided.

Intevac believessubject to foreign withholding taxes.

We believe that itsour existing cash, cash equivalents and investments and cash flows from operating activities will be sufficientadequate to meet its cash requirementsour liquidity needs for the next twelve months and for the foreseeable future. Intevac intends to undertake approximately $2.0 million to $3.0 million infuture beyond the next twelve months. Our significant funding requirements include procurement of manufacturing inventories, operating expenses,
non-cancelable
operating lease obligations, capital expenditures, duringsettlement of the PAGA litigation and variable compensation. We have flexibility over some of these uses of cash, including capital expenditures and discretionary operating expenses, to preserve our liquidity position. Capital expenditures for the remainder of 2017.

fiscal 2022 are projected to be approximately $4.0 million related to network infrastructure and security, and laboratory and test equipment to support our R&D programs.

26

Off-Balance
Sheet Arrangements

Off-balance
sheet firm commitments relating to outstanding letters of credit amounted to approximately $1.4 million$786,000 as of September 30, 2017.April 2, 2022. These letters of credit and bank guarantees are collateralized by $1.4 million$786,000 of restricted cash. We do not maintain any other
off-balance
sheet arrangements, transactions, obligations, or other relationships that would be expected to have a material current or future effect on the consolidated financial statements.

Climate Change
We believe that neither climate change, nor governmental regulations related to climate change, have had any material effect on our business, financial condition or results of operations.
Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported. Intevac’s significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of Intevac’s Annual Report on Form
10-K
for the year ended January 1, 2022, filed with the SEC on February 15, 2017.17, 2022. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below.

A critical accounting policy is defined as one that is both material to the presentation of Intevac’s financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on Intevac’s financial conditions and results of operations. Specifically, critical accounting estimates have the following attributes: 1) Intevac is required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates Intevac could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on Intevac’s financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. Intevac bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as Intevac’s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they become known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. Many of these uncertainties are discussed in the section below entitled “Risk Factors.” Based on a critical assessment of Intevac’s accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that Intevac’s consolidated financial statements are fairly stated in accordance with US GAAP, and provide a meaningful presentation of Intevac’s financial condition and results of operation.

For further information about Intevac’s otheroperations.

There have been no material changes to our critical accounting policies see the discussion of critical accounting policies in Intevac’s 2016 Form10-K. Beginning January 1, 2017, Intevac accounts for forfeitures on stock-based compensation as they occur, rather than estimate expected forfeitures. Except for the change in accounting policy for the timing of recognition of forfeitures, management believes that there have been no significant changes during the ninethree months ended September 30, 2017 to the items identified as critical accounting policies in Intevac’s 2016 Form10-K.

April 2, 2022.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk

Interest rate risk.Intevac’s exposure

Not applicable to market risk for changes in interest rates relates primarily to its investment portfolio. Intevac does not use derivative financial instruments in Intevac’s investment portfolio. The Company has adopted an investment policy and established guidelines relating to credit quality, diversification and maturities of its investments in order to preserve principal and maintain liquidity. All investment securities in Intevac’s portfolio have an investment grade credit rating. Investments typically consist of certificates of deposit, commercial paper, obligations of the U.S. government and its agencies, corporate debt securities and municipal bonds.

The table below presents principal amounts and related weighted-average interest rates by year of expected maturity for Intevac’s investment portfolio at September 30, 2017.

   2017  2018  2019  Total   Fair
Value
 
   (In thousands, except percentages) 

Cash equivalents Variable rate amounts

  $5,038  $—    $—    $5,038   $5,038 

Weighted-average rate

   0.93  —     —      

Short-term investments Fixed rate amounts

  $6,247  $11,797  $—    $18,044   $18,037 

Weighted-average rate

   1.49  1.37  —      

Long-term investments Fixed rate amounts

  $—    $598  $5,574  $6,172   $6,165 

Weighted-average rate

   —     1.00  1.87   

Total investment portfolio

  $11,285  $12,395  $5,574  $29,254   $29,240 

Foreign exchange risk.From time to time, Intevac enters into foreign currency forward exchange contracts to hedge certain of its anticipated foreign currencyre-measurement exposures and to offset certain operational exposures from the impact of changes in foreign currency exchange rates. The objective of these contracts is to minimize the impact of foreign currency exchange rate movements on Intevac’s operating results. The derivatives have original maturities of approximately 30 days. The notional amount of Company’s foreign currency derivatives was $1.4 million at September 30, 2017 and $1.1 million at December 31, 2016.

smaller reporting companies.
Item 4.
Controls and Procedures

Evaluation of disclosure controls and procedures

Intevac maintains a set of disclosure controls and procedures that are designed to ensure that information relating to Intevac required to be disclosed in periodic filings under the Securities Exchange Act of 1934, or Exchange Act, is recorded, processed, summarized and reported in a timely manner under the Exchange Act. In connection with the filing of this Quarterly Report on Form
10-Q
for the quarter ended September 30, 2017,April 2, 2022, as required under Rule13a-15(b)
13a-15(e)
of the Exchange Act, an evaluation was carried out under the supervision and with the participation of management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CEO” and “CFO”), of the effectiveness of Intevac’s disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, Intevac’s Chief Executive OfficerCEO and Chief Financial OfficerCFO concluded that our disclosure controls and procedures were effective as of September 30, 2017.

April 2, 2022.

Attached as exhibits to this Quarterly Report on Form
10-Q
are certifications of the CEO and the CFO, which are required in accordance with Rule
13a-14
of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

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Table of Contents
Definition of disclosure controls

Disclosure Controlscontrols are controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form
10-Q,
is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controlscontrols are also designed to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our Disclosure Controlsdisclosure controls include components of our internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the U.S. To the extent that components of our internal control over financial reporting are included within our Disclosure Controls,disclosure controls, they are included in the scope of our quarterly controls evaluation.

Limitations on the effectiveness of controls

Intevac’s management, including the CEO and CFO, does not expect that Intevac’s Disclosure Controlsdisclosure controls or Intevac’s internal control over financial reporting will prevent all errorerrors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Intevac have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in internal controlscontrol over financial reporting

There were no changes in our internal controlscontrol over financial reporting that occurred during the period covered by this Quarterly Report on Form
10-Q
that have materially affected, or are reasonably likely to materially affect, Intevac’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.
Legal Proceedings

From time to time, Intevac is involved in claims and legal proceedings that arise in the ordinary course of business. Intevac expects that the number and significance of these matters will increase as Intevac’s business expands. Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require us to enter into royalty or licensing agreements which, if required, may not be available on terms favorable to us or at all. Intevac is not presently a party to any lawsuit or proceeding that, in Intevac’s opinion, is likely to seriously harm Intevac’s business.

For a description of our material pending legal proceedings, see Note 14 “Commitments and Contingencies” to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form
10-Q.
See also “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form
10-Q.
Item 1A.
Risk Factors

The following factors could materially affect Intevac’s business, financial condition or results of operations and should be carefully considered in evaluating the Company and its business, in addition to other information presented elsewhere in this report.

28

Risks Related to Our Business
The industries we serve are cyclical, volatile and unpredictable.

A significant portion of our revenue is derived from the sale of equipment used to manufacture commodity technology products such as disk drives PV solar cells and cell phones. This subjects us to business cycles, the timing, length and volatility of which can be difficult to predict. When demand for commodity technology products exceeds production capacity, then demand for new capital equipment such as ours tends to be amplified. Conversely, when supply of commodity technology products exceeds demand, then demand for new capital equipment such as ours tends to be depressed. For example, sales of systems for magnetic disk production were depressed from late 2007 through 2009. The number of new systems delivered increased in 2010 as customers increased their production capacity in response to increased demand for data storage, but decreased in 2011 through 2015 as the hard disk drive industry did not add the same level of capacity that it did in 2010. We cannot predict with any certainty when these cycles will begin or end. OurFor example, our sales of systems for magnetic disk production increased modestly in 2016 as a customer upgradedbegan upgrading the technology level of its manufacturing capacity. 2017 salesSales of systems and upgrades for magnetic disk production to date have beenin 2017 and 2018 were higher than in 2016 as this customer’s technology upgrade continued. However, sales of systems and upgrades for magnetic disk production in 2019, 2020 and 2021 were down from the levels in 2018 as this customer took delivery of fewer or no (in the case of 2021) systems. Intevac expects sales of systems and we anticipateupgrades for magnetic disk production in 2022 will be at levels similar to the trend will continue for the remainder of 2017.

levels in 2021.

Our equipment represents only a portion of the capital expenditure that our customers incur when they upgrade or add production capacity. Accordingly, our customers generally commit to making large capital expenditures far in excess of the cost of our systems alone when they decide to purchase our systems. The magnitude of these capital expenditures requires our customers to have access to large amounts of capital. Our customers generally reduce their level of capital investment during downturns in the overall economy or during a downturn in their industries.

In recent years Reductions in capital investment could be particularly pronounced as the photovoltaic (solar) market has undergone a downturn, which is likely to impact our salescost of PV equipment. The solar industry from time to time experiencesobtaining capital increases during periods of structural imbalance between supply and demand. And such periods put intense pressure on our customers’ pricing. The solar industry is currently in such a period. Competition in solar markets globally and across the solar value chain is intense, and could remain that way for an extended period of time. During any such period, solar module manufacturers may reduce their sales prices in response to competition, even below their manufacturing costs, in order to generate sales and may do so for a sustained period of time. As a result, our customers may be unable to sell their solar modules or systems at attractive prices or for a profit during a period of excess supply of solar modules, which would adversely affect their results of operations and their ability to make capital investments such as purchasing our products.

rapidly rising interest rates.

We must effectively manage our resources and production capacity to meet rapidly changing demand. Our business experiences rapid growth and contraction, which stresses our infrastructure, internal systems and managerial resources. During periods of increasing demand for our products, we must have sufficient manufacturing capacity and inventory to meet customer demand; attract, retain and motivate a sufficient number of qualified individuals; and effectively manage our supply chain. During periods of decreasing demand for our products, we must be able to align our cost structure with prevailing market conditions; motivate and retain key employees and effectively manage our supply chain.

Supply chain and shipping disruptions could result in shipping delays, and increased product costs which may have a material adverse effect on our business, financial condition and results of operations.
Supply chain disruptions, resulting from factors such as the
COVID-19
pandemic, such as labor supply and shipping container shortages, have impacted, and may continue to impact, us and our suppliers. These disruptions have resulted in longer lead times and increased product costs and shipping expenses. While we have taken steps to minimize the impact of these increased costs by working closely with our suppliers and customers, there can be no assurances that unforeseen events impacting the supply chain will not have a material adverse effect on our business, financial condition and results of operations in the future. Additionally, the impacts supply chain disruptions have on our suppliers are not within our control. It is not currently possible to predict how long it will take for these supply chain disruptions to cease. Prolonged supply chain disruptions impacting us and our suppliers could interrupt product manufacturing, increase lead times, increase product costs and continue to increase shipping costs, all of which may have a material adverse effect on our business, financial condition and results of operations.
We are dependent on certain suppliers for parts used in our products.
We are a manufacturing business. Purchased parts constitute the largest component of our product cost. Our ability to manufacture depends on the timely delivery of parts, components and subassemblies from suppliers. We obtain some of the key components and subassemblies used in our products from a single supplier or a limited group of suppliers. If any of our suppliers fail to deliver quality parts on a timely basis, we may experience delays in manufacturing, which could result in delayed product deliveries, increased costs to expedite deliveries or develop alternative suppliers, or require redesign of our products to accommodate alternative suppliers. Some of our suppliers are thinly capitalized and may be vulnerable to failure, particularly during economic downturns and periods of rapidly rising interest rates and inflation.
The impact of the
COVID-19
pandemic, or similar global health concerns, has negatively impacted and could continue to negatively impact our operations, supply chain and customer base.
The
COVID-19
pandemic has severely restricted the level of economic activity around the world, which may impact demand for our products. Our operations and supply chains for certain of our products or services have been and could continue to be negatively impacted by the regional or global outbreak of illnesses, including
COVID-19.
The impact of
COVID-19,
including changes in consumer behavior, pandemic fears, and market downturns as well as restrictions on business and individual activities has created significant volatility in the global economy and led to reduced economic activity. There have been extraordinary actions taken by federal, state, and local public health and governmental authorities to contain the spread of
COVID-19
and although many restrictions that were in place have eased in many localities, some areas that had previously eased restrictions have reverted to more stringent limitations in light of the emergence of new strains of
COVID-19.
There remains significant uncertainty concerning the magnitude of the impact and the duration of the
COVID-19
pandemic. The extent that our operations will continue to be impacted by the
COVID-19
pandemic will depend on future developments, including any new potential waves of the virus, new strains of the virus, and the success of vaccination programs, all of which are highly uncertain and cannot be accurately predicted.
29

Sales of our equipment are primarily dependent on our customers’ upgrade and capacity expansion plans and whether our customers select our equipment.

We have no control over our customers’ upgrade and capacity expansion plans, and we cannot be sure they will select, or continue to select, our equipment when they upgrade or expand their capacity. The sales cycle for our equipment systems can be a year or longer, involving individuals from many different areas of Intevac and numerous product presentations and demonstrations for our prospective customers. Our sales process also commonly includes production of samples and customization of our products. We do not typically enter into long-term contracts with our customers, and until an order is actually submitted by a customer there is no binding commitment to purchase our systems.

In some cases, orders are also subject to customer acceptance or other criteria even in the case of a binding agreement.

Sales of new manufacturing systems are also dependent on obsolescence and replacement of the installed base of our customers’ existing equipment with newer, more capable equipment. If upgrades are developed that extend the useful life of the installed base of systems, then we tend to sell more upgrade products and fewer new systems, which can significantly reduce total revenue. For example, some of our
Our 200 Lean customers continue to use legacy systems for the production of perpendicular media, which delayed the replacement of such systems with new 200 Lean systems.

Our 200 LeanHDD customers also experience competition from companies that produce alternative storage technologies like flash memory, which offer smaller size, lower power consumption and more rugged designs. These storage technologies are being used increasingly in enterprise applications and smaller form factors such as tablets, smart-phones, ultra-books, and notebook PCs instead of hard disk drives. Tablet computing devices and smart-phones have never contained, nor are they likely in the future to contain, a disk drive. Products using alternative technologies, such as flash memory, optical storage and other storage technologies are becoming increasingly common and could become a significant source of competition to particular applications of the products of our 200 Lean HDD customers, which could adversely affect our results of operations. If alternative technologies, such as flash memory, replace hard disk drives as a significant method of digital storage, then demand for our hard disk manufacturing products would decrease.

The Photonics business is also subject to long sales cycles because many of its products, such as our military imaging products, often must be designed into the customers’ end products, which are often complexstate-of-the-art products. These development cycles are typically multi-year, and our sales are contingent on our customers successfully integrating our product into their product, completing development of their product and then obtaining production orders for their product from the U.S. government or its allies.

We operate in an intensely competitive marketplace, and our competitors have greater resources than we do.

In the market for our disk sputtering systems, we experience competition primarily from Canon Anelva, which has sold a substantial number of systems worldwide. In the PV equipment market, Intevac faces competition from large established competitors including Applied Materials, Centrotherm Photovoltaics, Amtech, Jusung and Von Ardenne. In the market for our military imaging products we experience competition from companies such as Harris Corporation andL-3 Communications. Some of our competitors have substantially greater financial, technical, marketing, manufacturing and other resources than we do, especially in the DCP and PV equipment markets.market. Our competitors may develop enhancements to, or future generations of, competitive products that offer superior price or performance features, and new competitors may enter our markets and develop such enhanced products. Moreover, competition for our customers is intense, and our competitors have historically offered substantial pricing concessions and incentives to attract our customers or retain their existing customers.

Our growth depends on development of technically advanced new products and processes.

We have invested heavily, and continue to invest, in the development of new products, such as our 200 Lean and other PVD systems, our coating systems for DCP, our solar systems for PV applications, our digital night-vision products and ournear-eye display products. Our success in developing and selling new products depends upon a variety of factors, including our ability to: predict future customer requirements; make technological advances; achieve a low total cost of ownership for our products; introduce new products on schedule; manufacture products cost-effectively including transitioning production to volume manufacturing; commercialize and attain customer acceptance of our products; and achieve acceptable and reliable performance of our new products in the field. Our new product decisions and development commitments must anticipate continuously evolving industry requirements significantly in advance of sales. In addition, we are attempting to expand into new or related markets, including the PV and cell phone cover glass markets. Our expansion into the PV market is dependent upon the success of our customers’ development plans. To date we have not recognized material revenue from such products. Failure to correctly assess the size of the markets, to successfully develop cost effective products to address the markets or to establish effective sales and support of the new products would have a material adverse effect on future revenues and profits. In addition, if we invest in products for which the market does not develop as anticipated, we may incur significant charges related to such investments.

Rapid technological change in our served markets requires us to rapidly develop new technically advanced products. Our future success depends in part on our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products have reliability or quality problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance and payment for new products and additional service and warranty expenses.

We are exposed to risks associated with a highly concentrated customer base.

Historically, a significant portion of our revenue in any particular period has been attributable to sales of our disk sputtering systems to a limited number of customers. Our reliance on sales to relatively few customers has increased with the disposition of our Photonics business, and we expect that sales of our products to relatively few customers will continue to account for a high percentage of our revenues in the foreseeable future. This concentration of customers, when combined with changes in the customers’ specific capacity plans and market share shifts can lead to extreme variability in our revenue and financial results from period to period.

The concentration of our customer base may enable our customers to demand pricing and other terms unfavorable to Intevac and makes us more vulnerable to changes in demand by or issues with a given customer. Orders from a relatively limited number of manufacturers have accounted for, and will likely continue to account for, a substantial portion of our revenues. The loss of one of these large customers, or delays in purchasing by them, couldwould have a material and adverse effect on our revenues.

Our operating results fluctuate significantly from quarter to quarter, which can lead to volatility in the price of our common stock.

Our quarterly revenues and common stock price have fluctuated significantly. We anticipate that our revenues, operating margins and common stock price will continue to fluctuate for a variety of reasons, including: (1) changes in the demand, due to seasonality, cyclicality and other factors in the markets for computer systems, storage subsystems and consumer electronics containing disks as well as cell phones and PV solar cells our customers produce with our systems; (2) delays or problems in the introduction and acceptance of our new products, or delivery of existing products; (3) timing of orders, acceptance of new systems by our customers or cancellation or delay of those orders; (4) new products, services or technological innovations by our competitors or us; (5) changes in our manufacturing costs and operating expense; (6) changes in general economic, political, stock market and industry conditions; and (7) any failure of our operating results to meet the expectations of investment research analysts or investors.

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Any of these, or other factors, could lead to volatility and/or a rapid change in the trading price of our common shares. In the past, securities class action litigation has been instituted against companies following periods of volatility in the market price of their securities. Any such litigation, if instituted against Intevac, could result in substantial costs and diversion of management time and attention.

We may not be able to obtain export licenses from the U.S. government permitting delivery of our products to international customers.

Many of our products, especially Photonics products, require export licenses from U.S. government agencies under the Export Administration Act, the Trading with the Enemy Act of 1917, the Arms Export Act of 1976 or the International Traffic in Arms Regulations. These regulations limit the potential market for some of our products. We can give no assurance that we will be successful in obtaining all the licenses necessary to export our products. Heightened government scrutiny of export licenses for defense related products has resulted in lengthened review periods for our license applications. Exports to countries that are not considered by the U.S. government to be allies are likely to be prohibited, and even sales to U.S. allies may be limited. Failure to comply with export control laws, including identification and reporting of all exports andre-exports of controlled technology or exports made without correct license approval or improper license use could result in severe penalties and revocation of licenses. Failure to obtain export licenses, delays in obtaining licenses, or revocation of previously issued licenses would prevent us from selling the affected products outside the United States and could negatively impact our results of operations.

The Photonics business is dependent on U.S. government contracts, which are subject to fixed pricing, immediate termination and a number of procurement rules and regulations.

We sell our Photonics products and services directly to the U.S. government, as well as to prime contractors for various U.S. government programs. The U.S government is considering significant changes in the level of existing,follow-on or replacement programs. We cannot predict the impact of potential changes in priorities due to military transformations and/or the nature of futurewar-related activities. A shift of government priorities to programs in which we do not participate and/or reductions in funding for or the termination of programs in which we do participate, unless offset by other programs and opportunities, could have a material adverse effect on our financial position, results of operations, or cash flows.

Funding of multi-year government programs is subject to congressional appropriations, and there is no guarantee that the U.S. government will make further appropriations, particularly given the U.S. government’s recent focus on spending in other areas and spending reductions. Sales to the U.S. government and its prime contractors may also be affected by changes in procurement policies, budget considerations and political developments in the United States or abroad. For example, if the U.S. government is less focused on defense spending or there is a decrease in hostilities, demand for our products could decrease. The loss of funding for a government program would result in a loss of future revenues attributable to that program. The influence of any of these factors, which are beyond our control, could negatively impact our results of operations.

A significant portion of our U.S. government revenue is derived from fixed-price development and production contracts. Under fixed-price contracts, unexpected increases in the cost to develop or manufacture a product, whether due to inaccurate estimates in the bidding process, unanticipated increases in material costs, reduced production volumes, inefficiencies or other factors, are borne by us. We have experienced cost overruns in the past that have resulted in losses on certain contracts, and may experience additional cost overruns in the future. We are required to recognize the total estimated impact of cost overruns in the period in which they are first identified. Such cost overruns could have a material adverse effect on our results of operations.

Generally, government contracts contain provisions permitting termination, in whole or in part, without prior notice at the government’s convenience upon the payment of compensation only for work done and commitments made at the time of termination. We cannot ensure that one or more of the government contracts under which we, or our customers, operate will not be terminated under these circumstances. Also, we cannot ensure that we, or our customers, would be able to procure new government contracts to offset the revenues lost as a result of any termination of existing contracts, nor can we ensure that we, or our customers, will continue to remain in good standing as federal contractors.

As a U.S. government contractor we must comply with specific government rules and regulations and are subject to routine audits and investigations by U.S. government agencies. If we fail to comply with these rules and regulations, the results could include: (1) reductions in the value of our contracts; (2) reductions in amounts previously billed and recognized as revenue; (3) contract modifications or termination; (4) the assessment of penalties and fines; and (5) suspension or debarment from government contracting or subcontracting for a period of time or permanently.

Changes to our effective tax rate affect our results of operations.

As a global company, we are subject to taxation in the United States, Singapore and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future effective tax rate could be affected by: (1) changes in tax laws; (2) the allocation of earnings to countries with differing tax rates; (3) changes in worldwide projected annual earnings in current and future years: (4) accounting pronouncements; or (5) changes in the valuation of our deferred tax assets and liabilities. Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be different from the treatment reflected in our historical income tax provisions and accruals, which could result in additional payments by Intevac.

Our success depends on international sales and the management of global operations.

In previous years, the majority of our revenues have come from regions outside the United States. Most of our international sales are to customers in Asia, which includes products shipped to overseas operations of U.S. companies. We currently have manufacturing facilities in California and Singapore and international customer support offices in Singapore, China, and Malaysia. We expect that international sales will continue to account for a significant portion of our total revenue in future years. Certain of our suppliers are also located outside the United States.

Managing our global operations presents challenges including, but not limited to, those arising from: (1) global trade issues; (2) variations in protection of intellectual property and other legal rights in different countries; (3) concerns of U.S. governmental agencies regarding possible national commercial and/or security issues posed by growing manufacturing business in Asia; (4) fluctuation of interest rates, raw material costs, labor and operating costs, and exchange rates; (5) variations in the ability to develop relationships with suppliers and other local businesses; (6) changes in the laws and regulations of the United States, including export restrictions, and other countries, as well as their interpretation and application; (7) the need to provide technical and spares support in different locations; (8) political and economic instability; (9) cultural differences; (10) varying government incentives to promote development; (11) shipping costs and delays; (12) adverse conditions in credit markets; (13) variations in tariffs, quotas, tax codes and other market barriers; and (14) barriers to movement of cash.

We must regularly assess the size, capability and location of our global infrastructure and make appropriate changes to address these issues.

Difficulties in integrating past or future acquisitions could adversely affect our business.

We have completed a number of acquisitions and dispositions during our operating history. For example, in 2007, we acquired certain assets of DeltaNu, LLC and certain assets of Creative Display Systems, LLC, in 2008 we acquired certain assets of OC Oerlikon Balzers Ltd., in 2010 we acquired the outstanding shares of SIT, in 2012 we completed the sale of certain semiconductor mainframe technology assets and in 2013 we completed the sale of the assets of DeltaNu. We have spent and may continue to spend significant resources identifying and pursuing future acquisition opportunities. Acquisitions involve numerous risks including: (1) difficulties in integrating the operations, technologies and products of the acquired companies or achieving the desires outcomes; (2) the diversion of our management’s attention from other business concerns; and (3) the potential loss of key employees of the acquired companies. Failure to achieve the anticipated benefits of the prior and any future acquisitions or to successfully integrate the operations of the companies we acquire could have a material and adverse effect on our business, financial condition and results of operations. Any future acquisitions could also result in potentially dilutive issuance of equity securities, acquisition or divestiture-related write-offs or the assumption of debt and contingent liabilities. In addition, we have made and will continue to consider making strategic divestitures. With any divestiture, there are risks that future operating results could be unfavorably impacted if targeted objectives, such as cost savings, are not achieved or if other business disruptions occur as a result of the divestiture or activities related to the divestiture.

We may be subject to additional impairment charges due to potential declines in the fair value of our assets.

As a result of our acquisitions, we have significant intangible assets and had significant goodwill on our balance sheet. We test these assets for impairment on a periodic basis as required, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The events or changes that could require us to test our intangible assets for impairment include: a significant reduction in our stock price, and as a result market capitalization, changes in our estimated future cash flows, as well as changes in rates of growth in our industry or in any of our reporting units. In the fourth quarter of 2012, as a result of a decline in our market capitalization and a reduction in our revenue expectations we recorded a goodwill impairment charge in the amount of $18.4 million. We will continue to evaluate the carrying value of our intangible assets and if we determine in the future that there is a potential further impairment, we may be required to record additional charges to earnings which could materially adversely affect our financial results and could also materially adversely affect our business.

Our success is dependent on recruiting and retaining a highly talented work force.

Our employees are vital to our success, and our key management, engineering and other employees are difficult to replace. We do not maintain key person life insurance on any of our employees. The expansion of high technology companies worldwide has increased demand and competition for qualified personnel and has made companies increasingly protective of prior employees. It may be difficult for us to locate employees who are not subject to
non-competition
agreements and other restrictions.

The majority of our U.S. operations are located in California where the cost of living and of recruiting employees is high. Our operating results depend, in large part, upon our ability to retain and attract qualified management, engineering, marketing, manufacturing, customer support, sales and administrative personnel. Furthermore, we compete with industries such as the hard disk drive, semiconductor, and solar industries for skilled employees. Failure to retain existing key personnel, or to attract, assimilate or retain additional highly qualified employees to meet our needs in the future, could have a material and adverse effect on our business, financial condition and results of operations.

Risks Related to Our Intellectual Property
Our growth depends on development of technically advanced new products and processes.
We have invested heavily, and continue to invest, in the development of new products, such as our 200 Lean HDD and our coating systems for DCP. Our success in developing and selling new products depends upon a variety of factors, including our ability to: predict future customer requirements; make technological advances; achieve a low total cost of ownership for our products; introduce new products on schedule; manufacture products cost-effectively including transitioning production to volume manufacturing; commercialize and attain customer acceptance of our products; and achieve acceptable and reliable performance of our new products in the field. Our new product decisions and development commitments must anticipate continuously evolving industry requirements significantly in advance of sales. In addition, we are attempting to expand into new or related markets, including the display cover glass market. Our expansion into the cover glass market is dependent upon the success of our customers’ development plans. To date we have not recognized material revenue from such products. Failure to correctly assess the size of the market, to successfully develop cost effective products to address the market or to establish effective sales and support of the new products would have a material adverse effect on certain suppliersfuture revenues and profits. In addition, if we invest in products for parts usedwhich the market does not develop as anticipated, we may incur significant charges related to such investments.
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Rapid technological change in our served markets requires us to rapidly develop new technically advanced products.

We are a manufacturing business. Purchased parts constitute the largest component of Our future success depends in part on our product cost. Our ability to manufacture depends on the timely delivery of parts, componentsdevelop and subassemblies from suppliers. We obtain some of the key componentsoffer new products with improved capabilities and subassemblies used into continue to enhance our existing products. If new products from a single supplierhave reliability or a limited group of suppliers. If any ofquality problems, our suppliers fail to deliver quality parts on a timely basis, weperformance may experiencebe impacted by reduced orders, higher manufacturing costs, delays in manufacturing, which could result in delayed product deliveries, increased costs to expedite deliveries or develop alternative suppliers, or require redesign of ouracceptance and payment for new products to accommodate alternative suppliers. Some of our suppliers are thinly capitalized and may be vulnerable to failure.

additional service and warranty expenses.

Our business depends on the integrity of our intellectual property rights.

The success of our business depends upon the integrity of our intellectual property rights, and we cannot ensure that: (1) any of our pending or future patent applications will be allowed or that any of the allowed applications will be issued as patents or will issue with claims of the scope we sought; (2) any of our patents will not be invalidated, deemed unenforceable, circumvented or challenged; (3) the rights granted under our patents will provide competitive advantages to us; (4) other parties will not develop similar products, duplicate our products or design around our patents; or (5) our patent rights, intellectual property laws or our agreements will adequately protect our intellectual property or competitive position.

From time to time, we have received claims that we are infringing third parties’ intellectual property rights or seeking to invalidate our rights. We cannot ensure that third parties will not in the future claim that we have infringed current or future patents, trademarks or other proprietary rights relating to our products. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us.

Risks Related to Government Regulation
We may not be able to obtain export licenses from the U.S. government permitting delivery of our products to international customers.
Many of our products, require export licenses from U.S. government agencies under the Export Administration Act. These regulations limit the potential market for some of our products. We can give no assurance that we will be successful in obtaining all the licenses necessary to export our products. Heightened government scrutiny of export licenses for defense related products has resulted in lengthened review periods for our license applications. Failure to comply with export control laws, including identification and reporting of all exports and
re-exports
of controlled technology or exports made without correct license approval or improper license use could be involvedresult in litigation.

From timesevere penalties and revocation of licenses. Failure to time we may be involvedobtain export licenses, delays in litigationobtaining licenses, or revocation of various types, including litigation alleging infringement of intellectual property rights and other claims. Litigation is expensive, subjectspreviously issued licenses would prevent us tofrom selling the risk of significant damages and requires significant management time and attentionaffected products outside the United States and could have a material and adverse effect onnegatively impact our business, financial condition and results of operations.

We are subject to risks of
non-compliance
with environmental and other governmental regulations.

We are subject to a variety of governmental regulations relating to the use, storage, discharge, handling, emission, generation, manufacture, treatment and disposal of toxic or otherwise hazardous substances, chemicals, materials or waste. If we fail to comply with current or future regulations, such failure could result in suspension of our operations, alteration of our manufacturing process, remediation costs or substantial civil penalties or criminal fines against us or our officers, directors or employees. Additionally, these regulations could require us to acquire expensive remediation or abatement equipment and to incur substantial expenses to comply with them.

We are also subject to

In addition, climate change legislation is a varietysignificant topic of other governmental regulationsrecent discussion and has generated and may continue to generate federal, international or other regulatory responses in the near future. If we or our suppliers, customers or partners fail to timely comply with applicable legislation, certain customers may refuse to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, or incur significantlegal liability and reputational damage, which could harm our business, financial condition and results of operations.
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General Risk Factors
Our business could be negatively impacted by cyber and other security threats or disruptions.
We face various cyber and other security threats, including attempts to gain unauthorized access to sensitive information and networks. Although we utilize various procedures and controls to monitor and mitigate the risk of these threats, there can be no assurance that these procedures and controls will be sufficient. These threats could lead to losses of sensitive information or capabilities; financial liabilities and damage to our reputation. If we are unable to maintain compliance with security standards applicable to defense contractors, we could lose business or suffer reputational harm. Cyber threats to businesses in general are evolving and include, but are not limited to, malicious software, destructive malware, attempts to gain unauthorized access to data, disruption or denial of service attacks, and other electronic security breaches that could lead to disruptions in our systems, unauthorized release of confidential, personal or otherwise protected information (ours or that of our employees, customers or partners), and corruption of data, networks or systems. We have experienced cybersecurity threats and incidents involving our systems and expect these incidents to continue. While none of the cybersecurity events have been material to date, a successful breach or attack could have a material adverse effect on our results of operations, financial condition or business, harm our reputation and relationships with our customers, business partners, employees or other third parties, and subject us to consequences such as litigation and direct costs associated with incident response. In addition, we could be impacted by cyber threats or other disruptions or vulnerabilities found in products we use or in our partners’ or customers’ systems that are used in connection with our business. These events, if not prevented or effectively mitigated, could damage our reputation, require remedial actions and lead to loss of business, regulatory actions, potential liability and other financial losses.
Changes to our effective tax rate affect our results of operations.
As a global company, we are subject to taxation in the complianceUnited States, Singapore and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future effective tax rate could be affected by: (1) changes in tax laws; (2) the allocation of earnings to countries with these regulations. For example rules adopted bydiffering tax rates; (3) changes in worldwide projected annual earnings in current and future years: (4) accounting pronouncements; or (5) changes in the SEC to implement the Dodd-Frank Wall Street Reformvaluation of our deferred tax assets and Consumer Protection Act impose diligence and disclosure requirements regarding the use of “conflict” minerals minedliabilities. Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be different from the Democratic Republic of Congotreatment reflected in our historical income tax provisions and adjoining countries in the products we manufacture. Compliance with these regulations is likely toaccruals, which could result in additional costspayments by Intevac.
Difficulties in integrating past or future acquisitions or implementing strategic divestitures could adversely affect our business.
We have completed a number of acquisitions and expenses ordispositions during our operating history. We have spent and may affectcontinue to spend significant resources identifying and pursuing future acquisition opportunities. Acquisitions involve numerous risks including: (1) difficulties in integrating the sourcingoperations, technologies and availabilityproducts of the components usedacquired companies; (2) the diversion of our management’s attention from other business concerns; and (3) the potential loss of key employees of the acquired companies. Failure to achieve the anticipated benefits of the prior and any future acquisitions or to successfully integrate the operations of the companies we acquire could have a material and adverse effect on our business, financial condition and results of operations. Any future acquisitions could also result in potentially dilutive issuance of equity securities, acquisition or divestiture-related write-offs or the productsassumption of debt and contingent liabilities. In addition, we manufacture.

have made and will continue to consider making strategic divestitures, such as the disposition of our Photonics business. With any divestiture, there are risks that future operating results could be unfavorably impacted if targeted objectives, such as cost savings or earnout payments associated with the financial performance of the divested business, are not achieved or if other business disruptions occur as a result of the divestiture or activities related to the divestiture.

We could be involved in litigation.
From time to time, we may be involved in litigation of various types, including litigation alleging infringement of intellectual property rights and other claims and customer disputes. For example, we recently settled an action against us under the Private Attorneys General Act for $1.0 million, pending approval by the court. Litigation is expensive, subjects us to the risk of significant damages and requires significant management time and attention and could have a material and adverse effect on our business, financial condition and results of operations.
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Business interruptions could adversely affect our operations.

Our operations are vulnerable to interruption by fire, earthquake, floods or other natural disaster, quarantines or other disruptions associated with infectious diseases, national catastrophe, terrorist activities, war, disruptions in our computing and communications infrastructure due to power loss, telecommunications failure, human error, physical

or electronic security breaches and computer viruses, and other events beyond our control. We do not have a detailed disaster recovery plan. Despite our implementation of network security measures, our tools and servers may be vulnerable to computer viruses,

break-ins
and similar disruptions from unauthorized tampering with our computer systems and tools located at customer sites. Political instability could cause us to incur increased costs in transportation, make such transportation unreliable, increase our insurance costs or cause international currency markets to fluctuate. All these unforeseen disruptions and instabilities could have the same effects on our suppliers and their ability to timely deliver their products. In addition, we do not carry sufficient business interruption insurance to compensate us for all losses that may occur, and any losses or damages incurred by us could have a material adverse effect on our business and results of operations. For example, we self-insure earthquake risks because we believe this is the prudent financial decision based on the high cost of the limited coverage available in the earthquake insurance market. An earthquake could significantly disrupt our operations, most of which are conducted in California. It could also significantly delay our research and engineering effort on new products, most of which is also conducted in California. We take steps to minimize the damage that would be caused by business interruptions, but there is no certainty that our efforts will prove successful.

We could be negatively affected as a result of a proxy contest and the actions of activist stockholders.

A proxy contest with respect to election of our directors, or other activist stockholder activities, could adversely affect our business because: (i)(1) responding to a proxy contest and other actions by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees; (ii)(2) perceived uncertainties as to our future direction caused by activist activities may result in the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and business partners; and (iii)(3) if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans.

We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our management must perform evaluations of our internal control over financial reporting. Beginning in 2004, our Form10-K has included a report by management of their assessment of the adequacy of such internal control. Additionally, our independent registered public accounting firm must publicly attest to the effectiveness of our internal control over financial reporting.

We have completed the evaluation of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. Although our assessment, testing, and evaluation resulted in our conclusion that as of December 31, 2016,January 1, 2022, our internal controlscontrol over financial reporting werewas effective, we cannot predict the outcome of our testing in future periods. Ongoing compliance with this requirement is complex, costly and time-consuming. If Intevac fails to maintain effective internal control over financial reporting; our management does not timely assess the adequacy of such internal control; or our independent registered public accounting firm does not deliver an unqualified opinion as to the effectiveness of our internal control over financial reporting, then we could be subject to restatement of previously reported financial results, regulatory sanctions and a decline in the public’s perception of Intevac, which could have a material and adverse effect on our business, financial condition and results of operations.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Intevac Common Stock
On November 21, 2013, Intevac’sIntevac announced that its Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. On August 20, 2018, Intevac announced that its Board of Directors approved a $10.0 million increase to the original stock repurchase program for an aggregate authorized amount of $40.0 million. At September 30, 2017, $1.5April 2, 2022, $10.4 million remains available for future stock repurchases under the repurchase program. Intevac did not make any common stock repurchases during the three months ended September 30, 2017.

April 2, 2022.
Item 3.
Defaults upon Senior Securities

None.

Item 4.
Mine Safety Disclosures

Not applicable.

Item 5.
Other Information

None.

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Table of Contents
Item 6.
Exhibits

The following exhibits are filed herewith:

Exhibit

Number
 
Description
    2.1First Amendment to Asset Purchase Agreement, dated March 7, 2022, by and among Intevac, Inc., Intevac Photonics, Inc. and EOTECH, LLC.
  10.1 (1)Employment Agreement, dated January 19, 2022, by and between Nigel Hunton and Intevac, Inc.
  10.2 (1)Intevac, Inc. 2022 Inducement Equity Incentive Plan
  10.3 (1)Form of RSU Agreement under the Intevac, Inc. 2022 Inducement Equity Incentive Plan
  10.4 (2)Separation Agreement and Release, dated January 27, 2022, by and between Wendell Blonigan and Intevac, Inc.
  10.5 (3)Severance Agreement and Release of Claims, dated February 28, 2022, by and between Jay Cho and Intevac, Inc.
31.1 Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Executive Vice President, Finance and Administration, Chief Financial Officer, Treasurer and SecretaryTreasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certifications Pursuant to U.S.C. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS XBRL Instance DocumentDocument—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
(1)Previously filed as an exhibit to the Company’s Report on Form
8-K
filed January 20, 2022.
(2)Previously filed as an exhibit to the Company’s Report on Form
8-K
filed February 1, 2022.
(3)Previously filed as an exhibit to the Company’s Report on Form
8-K
filed March 3, 2022.

*
The certification attached as Exhibit 32.1 is deemed “furnished” and not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of Intevac, Inc. under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof, irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  
INTEVAC, INC.
Date: October 31, 2017May 10, 2022
  By: 
By:
/s/ WENDELL BLONIGANNIGEL D. HUNTON
   Wendell Blonigan
Nigel D. Hunton
   

President, Chief Executive Officer and Director

(Principal Executive Officer)

Date: October 31, 2017By:/s/ JAMES MONIZ
   James Moniz
(Principal Executive Officer)
Date: May 10, 2022
By:
/s/ JAMES MONIZ
   

James Moniz
Executive Vice President, Finance and Administration,

Chief Financial Officer, Secretary and Treasurer

(Principal Financial and Accounting Officer)

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