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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 April 3, 2021
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2
of the Exchange Act:
 
Large accelerated filer
 
  
Accelerated filer
 
       
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 April 30, 2021
,
24,122,215
shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.
 
 
 

INTEVAC, INC.
INDEX
 
No.
      
Page
 
 
     
Item 1.
        
    Condensed Consolidated Balance Sheets    3  
    Condensed Consolidated Statements of Operations    4  
    Condensed Consolidated Statements of Comprehensive Loss    5  
    Condensed Consolidated Statements of Cash Flows    6  
    Notes to Condensed Consolidated Financial Statements    7  
Item 2.
       21  
Item 3.
       28  
Item 4.
       28  
 
 
     
Item 1.
       29  
Item 1A.
       29  
Item 2.
       35  
Item 3.
       35  
Item 4.
       35  
Item 5.
       35  
Item 6.
       36  
   
     37  
 
2

PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
INTEVAC, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    
April 3,

2021
   
January 2,

2021
 
    
(Unaudited)
 
    
(In thousands, except par value)
 
ASSETS
 
Current assets:
                
Cash and cash equivalents
   $ 32,816     $ 29,341  
Short-term investments
     16,077       14,839  
Trade and other accounts receivable, net of allowances of $0 at both April 3, 2021 and January 2, 2021
     18,229       28,646  
Inventories
     20,501       21,689  
Prepaid expenses and other current assets
     1,789       1,893  
    
 
 
   
 
 
 
Total current assets
     89,412       96,408  
Long-term investments
     3,919       5,388  
Restricted cash
     787       787  
Property, plant and equipment, net
     10,456       11,004  
Operating lease
right-of-use-assets
     7,582       8,165  
Deferred income taxes and other long-term assets
     5,485       5,486  
    
 
 
   
 
 
 
Total assets
   $ 117,641     $ 127,238  
    
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
                
Current operating lease liabilities
   $ 2,913     $ 2,853  
Accounts payable
     2,765       4,259  
Accrued payroll and related liabilities
     5,150       7,679  
Other accrued liabilities
     3,136       3,598  
Customer advances
     42       33  
    
 
 
   
 
 
 
Total current liabilities
     14,006       18,422  
Noncurrent liabilities:
                
Noncurrent operating lease liabilities
     6,045       6,803  
Other long-term liabilities
     435       457  
    
 
 
   
 
 
 
Total noncurrent liabilities
     6,480       7,260  
Stockholders’ equity:
                
Common stock, $0.001 par value
     24       24  
Additional
paid-in
capital
     195,364       193,173  
Treasury stock, 5,087 shares at both April 3, 2021 and at January 2, 2021
     (29,551     (29,551
Accumulated other comprehensive income
     552       640  
Accumulated deficit
     (69,234     (62,730
    
 
 
   
 
 
 
Total stockholders’ equity
     97,155       101,556  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 117,641     $ 127,238  
    
 
 
   
 
 
 
Note: Amounts as of January 2, 2021 are derived from the January 2, 2021 audited consolidated financial statements.
See accompanying notes.
 
3

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
    
Three Months Ended
 
    
April 3,

2021
   
March 28,

2020
 
    
(Unaudited)
 
    
(In thousands, except per
share amounts)
 
Net revenues:
                
Systems and components
   $ 13,060     $ 13,836  
Technology development
     3,181       5,004  
    
 
 
   
 
 
 
Total net revenues
     16,241       18,840  
Cost of net revenues:
                
Systems and components
     9,964       7,767  
Technology development
     3,223       2,917  
    
 
 
   
 
 
 
Total cost of net revenues
     13,187       10,684  
    
 
 
   
 
 
 
Gross profit
     3,054       8,156  
Operating expenses:
                
Research and development
     3,625       3,284  
Selling, general and administrative
     5,930       5,972  
    
 
 
   
 
 
 
Total operating expenses
     9,555       9,256  
    
 
 
   
 
 
 
Loss from operations
     (6,501     (1,100
Interest income and other income (expense), net
     29       142  
    
 
 
   
 
 
 
Loss before provision for income taxes
     (6,472     (958
Provision for income taxes
     32       266  
    
 
 
   
 
 
 
Net loss
   $ (6,504   $ (1,224
    
 
 
   
 
 
 
Net loss per share:
                
Basic and Diluted
   $ (0.27   $ (0.05
     
Weighted average common shares outstanding:
                
Basic and Diluted
     24,033       23,483  
See accompanying notes.
 
4

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 
    
Three Months Ended
 
    
April 3,

2021
   
March 28,

2020
 
    
(Unaudited)
 
    
(In thousands)
 
Net loss
   $ (6,504   $ (1,224
    
 
 
   
 
 
 
Other comprehensive loss, before tax:
                
Change in unrealized net gain (loss) on
available-for-sale
investments
     (20     2  
Foreign currency translation losses
     (68     (95
    
 
 
   
 
 
 
Other comprehensive loss, before tax
     (88     (93
    
 
 
   
 
 
 
Income tax provision related to items in other comprehensive loss
                  
    
 
 
   
 
 
 
Other comprehensive loss, net of tax
     (88     (93
    
 
 
   
 
 
 
Comprehensive loss
   $ (6,592   $ (1,317
    
 
 
   
 
 
 
See accompanying notes.
 
5

INTEVAC, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    
Three Months Ended
 
    
April 3,

2021
   
March 28,

2020
 
    
(Unaudited)
 
    
(In thousands)
 
Operating activities
                
Net loss
   $ (6,504   $ (1,224
Adjustments to reconcile net loss to net cash provided by operating activities:
                
Depreciation and amortization
     791       858  
Net amortization (accretion) of investment premiums and discounts
     33       (19
Equity-based compensation
     968       672  
Straight-line rent adjustment and amortization of lease incentives
     (115     (74
Deferred income taxes
     (40     114  
Changes in operating assets and liabilities
     7,399       786  
    
 
 
   
 
 
 
Total adjustments
     9,036       2,337  
    
 
 
   
 
 
 
Net cash provided by operating activities
     2,532       1,113  
Investing activities
                
Purchases of investments
     (5,962     (4,242
Proceeds from sales and maturities of investments
     6,140       5,530  
Purchases of leasehold improvements and equipment
     (243     (1,145
    
 
 
   
 
 
 
Net cash provided by (used in) investing activities
     (65     143  
Financing activities
                
Proceeds from issuance of common stock
     1,096       950  
Common stock repurchases
              (393
Taxes paid related to net share settlement
     (20     (36
    
 
 
   
 
 
 
Net cash provided by financing activities
     1,076       521  
    
 
 
   
 
 
 
Effect of exchange rate changes on cash and cash equivalents
     (68     (94
    
 
 
   
 
 
 
Net increase in cash, cash equivalents and restricted cash
     3,475       1,683  
Cash, cash equivalents and restricted cash at beginning of period
     30,128       20,554  
    
 
 
   
 
 
 
Cash, cash equivalents and restricted cash at end of period
   $ 33,603     $ 22,237  
    
 
 
   
 
 
 
See accompanying notes.
 
6

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1.
Description of Business and Basis of Presentation
Intevac, Inc. (together with its subsidiaries “Intevac,” the “Company” or “we”) 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. 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”), display cover panel (“DCP”), photovoltaic (“PV”) solar cell and advanced semiconductor packaging (“ASP”) 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. Intevac reports two segments: Thin-film Equipment (“TFE”) and Photonics.
In the opinion of management, the unaudited interim condensed consolidated financial statements of Intevac included herein have been prepared on a basis consistent with the January 2, 2021 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein.
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.
The COVID-19
outbreak, which was declared a global pandemic by the World Health Organization in March 2020, has impacted all countries in which we operate. 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. There remains significant uncertainty concerning the magnitude of the impact and the duration of the
COVID-19
pandemic. Given that, we are unable to predict the ultimate impact it may have on our business, future operations, financial position or cash flows. 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. However, we are monitoring the progression of the pandemic and its potential effect on our financial position, results of operations, and cash flows.
 
2.
Revenue
The following tables represent a disaggregation of revenue from contracts with customers for the three months ended April 3, 2021 and March 28, 2020 along with the reportable segment for each category.
Major Products and Service Lines
 
TFE
  
Three Months Ended April 3, 2021
    
Three Months Ended March 28, 2020
 
    
(In thousands)
 
    
HDD
    
DCP
    
PV
    
ASP
    
Total
    
HDD
    
PV
    
Total
 
Systems, upgrades and spare parts
   $ 3,585      $ —        $ 111      $ 3,850      $ 7,546      $ 6,361      $ 208      $ 6,569  
Field service
     1,636        14        42               1,692        1,393        —          1,393  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total TFE net revenues
   $ 5,221      $ 14      $ 153      $ 3,850      $ 9,238      $ 7,754      $ 208      $ 7,962  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
Three Months Ended
 
Photonics
  
April 3,

2021
    
March 28,

2020
 
    
(In thousands)
 
Products:
                 
Military products
   $ 3,252      $ 5,365  
Commercial products
     128        79  
Repair and other services
     442        430  
    
 
 
    
 
 
 
Total Photonics product net revenues
     3,822        5,874  
 
7

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —  (Continued)
(Unaudited)
 
    
Three Months Ended
 
Photonics
  
April 3,

2021
    
March 28,

2020
 
    
(In thousands)
 
Technology development:
                 
Firm Fixed Price (“FFP”)
     1,804        4,430  
Cost Plus Fixed Fee (“CPFF”)
     1,377        574  
Time and materials
     —          —    
    
 
 
    
 
 
 
Total technology development net revenues
     3,181        5,004  
    
 
 
    
 
 
 
Total Photonics net revenues
   $ 7,003      $ 10,878  
    
 
 
    
 
 
 
Primary Geographical Markets
 
    
Three Months Ended
 
    
April 3, 2021
    
March 28, 2020
 
    
(In thousands)
 
    
TFE
    
Photonics
    
Total
    
TFE
    
Photonics
    
Total
 
United States
   $ 367      $ 6,960      $ 7,327      $ 519      $ 10,856      $ 11,375  
Asia
     5,021        —          5,021        7,443        —          7,443  
Europe
     3,850        43        3,893        —          22        22  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total net revenues
   $ 9,238      $ 7,003      $ 16,241      $ 7,962      $ 10,878      $ 18,840  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Timing of Revenue Recognition
 
    
Three Months Ended
 
    
April 3, 2021
    
March 28, 2020
 
    
(In thousands)
 
    
TFE
    
Photonics
    
Total
    
TFE
    
Photonics
    
Total
 
Products transferred at a point in time
   $ 9,238      $ 442      $ 9,680      $ 7,962      $ 430      $ 8,392  
Products and services transferred over time
     —          6,561        6,561        —          10,448        10,448  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 9,238      $ 7,003      $ 16,241      $ 7,962      $ 10,878      $ 18,840  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
The following table reflects the changes in our contract assets, which we classify as accounts receivable, unbilled or retainage, and our contract liabilities, which we classify as deferred revenue and customer advances, for the three months ended April 3 2021.
 
    
April 3,

2021
    
January 2,

2021
    
Three Months

Change
 
    
(In thousands)
 
TFE:
                          
Contract assets:
                          
Accounts receivable, unbilled
   $ —        $ 369      $ (369
    
 
 
    
 
 
    
 
 
 
Contract liabilities:
                          
Deferred revenue
   $ 276      $ 482      $ (206
Customer advances
     42        33        9  
    
 
 
    
 
 
    
 
 
 
     $ 318      $ 515      $ (197
    
 
 
    
 
 
    
 
 
 
Photonics:
                          
Contract assets:
                          
Accounts receivable, unbilled
   $ 4,689      $ 5,439      $ (750
Retainage
     130        126        4  
    
 
 
    
 
 
    
 
 
 
     $ 4,819      $ 5,565      $ (746
    
 
 
    
 
 
    
 
 
 
Contract liabilities:
                          
Deferred revenue
   $ 1,126      $ 779      $ 347  
    
 
 
    
 
 
    
 
 
 
 
8

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Accounts receivable, unbilled in our TFE segment represents a contract asset for revenue that has been recognized in advance of billing the customer. For our system and certain upgrade sales, our TFE 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 in our TFE segment 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 3, 2021, contract assets in our TFE segment decreased by $369,000 primarily due to the recognition of revenue for the installation portion of revenue for one system that completed installation and acceptance during the quarter.
Customer advances in our TFE segment 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 in our TFE segment 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 3, 2021, we recognized revenue in our TFE segment of $33,000 and $206,000 that was included in customer advances and deferred revenue, respectively, at the beginning of the period.
Accounts receivable, unbilled in our Photonics segment represents a contract asset for revenue that has been recognized in advance of billing the customer, which is common for contracts in the defense industry. In our Photonics segment, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. Our contracts with the U.S. government may also contain retainage provisions. Retainage represents a contract asset for the portion of the contract price earned by us for work performed, but held for payment by the U.S. government as a form of security until satisfactory completion of the contract. The retainage is billable upon completion of the contract performance and approval of final indirect expense rates by the government. During the three months ended April 3, 2021, contract assets in our Photonics segment decreased by $746,000 primarily due to the billing for achievement of contractual milestones, offset in part by the accrual of revenue for incurred costs under FFP and CPFF contracts.
Deferred revenue in our Photonics segment generally represents a contract liability for amounts billed to the customer upon achievement of contractual milestones. These amounts are liquidated when revenue is recognized. During the three months ended April 3, 2021, we recognized revenue in our Photonics segment of $779,000 that was included in deferred revenue at the beginning of the period.
On April 3, 2021, we had $43.1 million of remaining performance obligations, which we also refer to as total backlog. Backlog at April 3, 2021 consisted of $4.2 million of TFE backlog and $38.9 million of Photonics backlog. We expect to recognize approximately 56% of our remaining performance obligations as revenue in 2021, 42% in 2022 and 2% in 2023.
 
3.
Inventories
Inventories are stated at the lower of average cost or net realizable value and consist of the following:
 
    
April 3,
2021
    
January 2,
2021
 
    
(In thousands)
 
Raw materials
   $ 10,422      $ 9,999  
Work-in-progress
     5,885        4,832  
Finished goods
     4,194        6,858  
    
 
 
    
 
 
 
     $ 20,501      $ 21,689  
    
 
 
    
 
 
 
Finished goods inventory at April 3, 2021 included one VERTEX SPECTRA system for DCP under evaluation at a customer’s factory. Finished goods inventory at January 2, 2021 included one VERTEX SPECTRA system for DCP under evaluation at a customer’s factory and one MATRIX PVD system for advanced semiconductor packaging under evaluation at a customer’s factory.
 
9

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
4.
Equity-Based Compensation
At April 3, 2021, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan and the 2012 Equity Incentive Plan (together, the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved all of these plans. 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.
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 50% of their base earnings withheld to purchase Intevac common stock (not to exceed $25,000 per year).
Compensation Expense
The effect of recording equity-based compensation for the three-month periods ended April 3, 2021 and March 28, 2020 was as follows:
 
    
Three Months Ended
 
    
April 3, 2021
    
March 28, 2020
 
    
(In thousands)
 
Equity-based compensation by type of award:
                 
Stock options
   $ 75      $ 215  
RSUs
     543        366  
Employee stock purchase plan
     350        91  
    
 
 
    
 
 
 
Total equity-based compensation
   $ 968      $ 672  
    
 
 
    
 
 
 
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.
Option activity as of April 3, 2021 and changes during the three months ended April 3, 2021 were as follows:
 
    
Shares
    
Weighted-Average

Exercise Price
 
Options outstanding at January 2, 2021
     1,814,467      $ 6.66  
Options granted
     —        $ —    
Options cancelled and forfeited
     (50,250    $ 8.32  
Options exercised
     (28,399    $ 6.78  
    
 
 
          
Options outstanding at April 3, 2021
     1,735,818      $ 6.60  
    
 
 
          
Options exercisable at April 3, 2021
     1,317,348      $ 6.71  
Intevac issued 208,516 shares of common stock under the ESPP during the three months ended April 3, 2021.
Intevac estimated the weighted-average fair value of stock options and ESPP purchase rights using the following weighted-average assumptions:
 
10

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
 
 
Three Months Ended
 
  
April 3, 2021
 
 
March 28, 2020
 
Stock Options:
  
     
 
     
Weighted-average fair value of grants per share
  
 
  
 
 
$
1.82
 
Expected volatility
  
 
  
 
 
 
46.06
Risk-free interest rate
  
 
  
 
 
 
0.44
Expected term of options (in years)
  
 
—  
 
 
 
4.39
 
Dividend yield
  
 
  
 
 
 
None
 
ESPP Purchase Rights:
  
     
 
     
Weighted-average fair value of grants per share
  
$
2.69
 
 
$
1.66
 
Expected volatility
  
 
58.56
 
 
36.69
Risk-free interest rate
  
 
0.08
 
 
1.56
Expected term of purchase rights (in years)
  
 
1.0
 
 
 
0.5
 
Dividend yield
  
 
None
 
 
 
None
 
The computation of the expected volatility assumptions used in the Black-Scholes calculations for new stock option grants and ESPP 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 January 2, 2021
  
 
901,634
 
 
$
5.30
 
Granted
  
 
9,603
 
 
$
6.45
 
Vested
  
 
(9,320
 
$
6.72
 
Cancelled and forfeited
  
 
(11,051
 
$
5.36
 
 
  
 
 
 
 
     
Non-vested
 
RSUs at April 3, 2021
  
 
890,866
 
 
$
5.29
 
 
  
 
 
 
 
     
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 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.
 
5.
Warranty
Intevac provides for the estimated cost of warranty when revenue is recognized. Intevac’s warranty is subject to contract terms and, for its HDD manufacturing, DCP manufacturing and solar cell manufacturing 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. 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.
 
11

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.
The following table displays the activity in the warranty provision account for the three-month periods ended April 3, 2021 and March 28, 2020.
 
    
Three Months
Ended
 
    
April 3,

2021
   
March 28,

2020
 
    
(In thousands)
 
Opening balance
   $ 480     $ 1,022  
Expenditures incurred under warranties
     (199     (120
Accruals for product warranties issued during the reporting period
     275       25  
Adjustments to previously existing warranty accruals
     34       (202
    
 
 
   
 
 
 
Closing balance
   $ 590     $ 725  
    
 
 
   
 
 
 
The following table displays the balance sheet classification of the warranty provision account at April 3, 2021 and at January 2, 2021.
 
    
April 3
    
January 2,
 
    
2021
    
2021
 
    
(In thousands)
 
Other accrued liabilities
   $ 537      $ 405  
Other long-term liabilities
     53        75  
    
 
 
    
 
 
 
Total warranty provision
   $ 590      $ 480  
    
 
 
    
 
 
 
 
6.
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 April 3, 2021, we had letters of credit and bank guarantees outstanding totaling $787,000, including the 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 $787,000 of restricted cash.
 
12

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
7.
Cash, Cash Equivalents and Investments
Cash and cash equivalents, short-term investments and long-term investments consist of:
 
    
April 3, 2021
 
    
Amortized Cost
    
Unrealized

Holding Gains
    
Unrealized
Holding Losses
    
Fair Value
 
    
(In thousands)
 
Cash and cash equivalents:
                                   
Cash
   $ 27,929      $ —        $ —        $ 27,929  
Money market funds
     4,387        —          —          4,387  
Certificates of deposit
     500        —          —          500  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash and cash equivalents
   $ 32,816      $ —        $ —        $ 32,816  
Short-term investments:
                                   
Certificates of deposit
   $ 6,750      $ 1      $ —        $ 6,751  
Corporate bonds and medium-term notes
     4,714        3        —          4,717  
Municipal bonds
     595        —          —          595  
U.S. treasury and agency securities
     3,998        16        —          4,014  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total short-term investments
   $ 16,057      $ 20      $ —        $ 16,077  
Long-term investments:
                                   
Certificates of deposit
   $ 500      $ —        $ 2      $ 498  
Corporate bonds and medium-term notes
     2,012        —          1        2,011  
U.S. treasury and agency securities
     1,409        1        —          1,410  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total long-term investments
   $ 3,921      $ 1      $ 3      $ 3,919  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash, cash equivalents, and investments
   $ 52,794      $ 21      $ 3      $ 52,812  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
    
January 2, 2021
 
    
Amortized Cost
    
Unrealized

Holding Gains
    
Unrealized

Holding Losses
    
Fair Value
 
    
(In thousands)
 
Cash and cash equivalents:
                                   
Cash
   $ 24,729      $ —        $ —        $ 24,729  
Money market funds
     3,612        —          —          3,612  
Certificates of deposit
     1,000        —          —          1,000  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash and cash equivalents
   $ 29,341      $ —        $ —        $ 29,341  
Short-term investments:
                                   
Certificates of deposit
   $ 6,450      $ 2      $         $ 6,452  
Commercial paper
     500                            500  
Corporate bonds and medium-term notes
     2,929        6                  2,935  
Municipal bonds
     400        —          —          400  
U.S. treasury and agency securities
     4,527        25        —          4,552  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total short-term investments
   $ 14,806      $ 33      $         $ 14,839  
Long-term investments:
                                   
Certificates of deposit
   $ 500      $         $ —        $ 500  
Corporate bonds and medium-term notes
     3,474        4                  3,478  
U.S. treasury and agency securities
     1,409        1                  1,410  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total long-term investments
   $ 5,383      $ 5      $         $ 5,388  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total cash, cash equivalents, and investments
   $ 49,530      $ 38      $         $ 49,568  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
13

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The contractual maturities of
available-for-sale
securities at April 3, 2021 are presented in the following table.
 
    
Amortized Cost
    
Fair Value
 
    
(In thousands)
 
Due in one year or less
   $ 20,944      $ 20,964  
Due after one through five years
     3,921        3,919  
    
 
 
    
 
 
 
     $ 24,865      $ 24,883  
    
 
 
    
 
 
 
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 April 3, 2021.
 
    
April 3, 2021
 
    
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
   $ 1,498      $ 2      $         $     
Corporate bonds and medium-term notes
     2,686        1                      
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 4,184      $ 3      $         $     
    
 
 
    
 
 
    
 
 
    
 
 
 
All prices for the fixed maturity securities including U.S. treasury 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 if a security were sold in an orderly 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.
 
14

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
The following table represents the fair value hierarchy of Intevac’s
available-for-sale
securities measured at fair value on a recurring basis as of April 3, 2021.
 
    
Fair Value Measurements
at April 3, 2021
 
    
Total
    
Level 1
    
Level 2
 
    
(In thousands)
 
Recurring fair value measurements:
                          
Available-for-sale
securities
                          
Money market funds
   $ 4,387      $ 4,387      $ —    
U.S. treasury and agency securities
     5,424        5,424        —    
Certificates of deposit
     7,749        —          7,749  
Corporate bonds and medium-term notes
     6,728        —          6,728  
Municipal bonds
     595        —          595  
    
 
 
    
 
 
    
 
 
 
Total recurring fair value measurements
   $ 24,883      $ 9,811      $ 15,072  
    
 
 
    
 
 
    
 
 
 
 
8.
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 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 April 3, 2021 and January 2, 2021.
 
    
Notional Amounts
    
Derivative Liabilities
 
Derivative Instrument
  
April 3,

2021
    
January 2,

2021
    
April 3,

2021
    
January 2,

2021
 
                  
Balance

Sheet

Line
    
Fair

Value
    
Balance

Sheet

Line
    
Fair

Value
 
                  
(In thousands)
                      
Undesignated Hedges:
                                                     
             
Forward Foreign Currency Contracts
   $ 594        983       
*
 
     $ 1       
*
 
     $ 3  
    
 
 
    
 
 
             
 
 
             
 
 
 
Total Hedges
   $ 594        983               $ 1               $ 3  
    
 
 
    
 
 
             
 
 
             
 
 
 
 
*
Other accrued liabilities
 
15

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
9. Equity
Condensed Consolidated Statements of Changes in Equity
The changes in stockholders’ equity by component for the three months ended April 3, 2021 and March 28, 2020, are as follows (in thousands):
 
    
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
     1,223        —         —         —         1,223  
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  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
   
    
Three Months Ended March 28, 2020
 
    
Common

Stock and

Additional

Paid-in

Capital
    
Treasury

Stock
   
Accumulated

Other

Comprehensive

Income
   
Accumulated

Deficit
   
Total

Stockholders’

Equity
 
Balance at December 29, 2018
   $ 188,313      $ (29,158   $ 424     $ (63,786   $ 95,793  
Common stock issued under employee plans
     914        —         —         —         914  
Equity-based compensation expense
     672        —         —         —         672  
Net loss
     —          —         —         (1,224     (1,224
Other comprehensive loss
     —          —         (93     —         (93
Common stock repurchases
     —          (393     —         —         (393
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 28, 2020
   $ 189,899      $ (29,551   $ 331     $ (65,010   $ 95,669  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income by component for the three months ended April 3, 2021 and March 28, 2020, are as follows:
 
    
Three Months Ended
 
    
April 3, 2021
   
March 28, 2020
 
    
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
   $ 602     $ 38     $ 640     $ 381     $ 43      $ 424  
Other comprehensive income (loss) before reclassification
     (68     (20     (88     (95     2        (93
Amounts reclassified from other comprehensive income (loss)
     —         —         —         —         —          —    
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
Net current-period other comprehensive income (loss)
     (68     (20     (88     (95     2        (93
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
Ending balance
   $ 534     $ 18     $ 552     $ 286     $ 45      $ 331  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
    
 
 
 
 
16

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Stock Repurchase Program
On November 21, 2013, Intevac’s Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. On August 15, 2019, 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 April 3, 2021, $10.4 million remains available for future stock repurchases under the repurchase program.
The following table summarizes Intevac’s stock repurchases:
 
    
Three Months Ended
 
    
April 3, 2021
    
March 28, 2020
 
    
(In thousands, except per share amounts)
 
Shares of common stock repurchased
               98  
Cost of stock repurchased
   $ —        $ 393  
Average price paid per share share
   $         $ 3.97  
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 accumulated deficit.
 
10.
Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share.
 
    
Three Months Ended
 
    
April 3,

2021
   
March 28,

2020
 
    
(In thousands)
 
Net loss
   $ (6,504   $ (1,224
    
 
 
   
 
 
 
Weighted-average shares – basic
     24,033       23,483  
Effect of dilutive potential common shares
                  
    
 
 
   
 
 
 
Weighted-average shares – diluted
     24,033       23,483  
    
 
 
   
 
 
 
Net loss per share – basic and diluted
   $ (0.27   $ (0.05
    
 
 
   
 
 
 
As the Company is in a net loss position, all of the Company’s equity instruments are considered antidilutive.
 
11.
Segment Reporting
Intevac’s two reportable segments are: TFE 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 April 3, 2021 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.
 
17

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
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, each of the reportable segments. Intevac manages certain operating expenses separately at the corporate level. Intevac allocates certain of these corporate expenses to the segments in an amount equal to 3% of net revenues. Segment operating income excludes interest income/expense and other financial charges and income taxes according to how a particular reportable segment’s management is measured. Management does not consider impairment charges, gains and losses on divestitures and sales of intellectual property, and unallocated costs in measuring the performance of the reportable segments.
The TFE 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, DCP and advanced semiconductor packaging 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 of
low-light
images. Intevac provides sensors, cameras and systems for government applications such as night vision.
Information for each reportable segment for the three months ended April 3, 2021 and March 28, 2020 is as follows:
Net Revenues
 
    
Three Months Ended
 
    
April 3,

2021
    
March 28,

2020
 
    
(In thousands)
 
TFE
   $ 9,238      $ 7,962  
Photonics
     7,003        10,878  
    
 
 
    
 
 
 
Total segment net revenues
   $ 16,241      $ 18,840  
    
 
 
    
 
 
 
Operating Income (Loss)
 
    
Three Months Ended
 
    
April 3,

2021
   
March 28,

2020
 
    
(In thousands)
 
TFE
   $ (4,002   $ (2,531
Photonics
     (1,146     2,912  
    
 
 
   
 
 
 
Total segment operating income (loss)
     (5,148     381  
Unallocated costs
     (1,353     (1,481
    
 
 
   
 
 
 
Loss from operations
     (6,501     (1,100
Interest income and other income (expense), net
     29       142  
    
 
 
   
 
 
 
Loss before provision for income taxes
   $ (6,472   $ (958
    
 
 
   
 
 
 
 
18

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
Total assets for each reportable segment as of April 3, 2021 and January 2, 2021 are as follows:
Assets
 
    
April 3,

2021
    
January 2,

2021
 
    
(In thousands)
 
TFE
   $ 33,042      $ 44,335  
Photonics
     21,474        22,923  
    
 
 
    
 
 
 
Total segment assets
     54,516        67,258  
    
 
 
    
 
 
 
Cash, cash equivalents and investments
     52,812        49,568  
Restricted cash
     787        787  
Deferred income taxes
     5,375        5,335  
Other current assets
     1,194        1,093  
Common property, plant and equipment
     1,355        1,443  
Common operating lease
right-of-use
assets
     1,493        1,603  
Other assets
     109        151  
    
 
 
    
 
 
 
Consolidated total assets
   $ 117,641      $ 127,238  
    
 
 
    
 
 
 
 
12.
Income Taxes
Intevac recorded income tax provisions of $32,000 for the three months ended April 3, 2021 and $266,000 for the three months ended March 28, 2020. The income tax provisions for the three 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. For the three-month period ended April 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 the United States from Intevac’s Singapore subsidiary as a discrete item. For the three-month period ended March 28, 2020 Intevac recorded a $165,000 income tax provision on earnings of its international subsidiaries and recorded $101,000 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 carry-forwards to offset the 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 Coronavirus 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 net operating losses and payroll benefits. Several foreign
 
(non-U.S.)
 
jurisdictions in which we operate have taken similar economic stimulus measures. The Company evaluated the provisions of the CARES Act and other
 
non-U.S.
 
economic measures and determined the impact on our financial position at April 3, 2021 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 employer portion of social security payroll taxes incurred from March 27, 2020 to December 31, 2020.
 
One-half
 
of such deferral amount will become due on each of December 31, 2021 and December 31, 2022. We elected to utilize this deferral program to delay payment of $764,000 of the employer portion of payroll taxes which were incurred between March 27, 2020 and December 31, 2020. On the consolidated balance sheets, the short-term portion of the deferred payroll tax liability is included in accrued payroll and related liabilities, while the long-term portion is included in other long-term 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.
 
 
19

INTEVAC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 
In Singapore, Intevac receives 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 received $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 development expenses and $17,000 is reported as a reduction of selling, general and administrative expenses on the condensed consolidated statement of operations.