Business Wire | Nov 10, 2020 04:06PM EST

Transphorm Reports Third Quarter 2020 Results and Continued Progress Across Business

Nov. 10, 2020

GOLETA, Calif.--(BUSINESS WIRE)--Nov. 10, 2020--Transphorm, Inc. ("Transphorm" or the "Company") (OTCQB: TGAN) -a pioneer in and global supplier of high reliability, high performance gallium nitride (GaN) power conversion products-today announced financial results for the third quarter ended September 30, 2020.

Recent Business Highlights

* Secured new volume order with strategic adapter customer * Announced latest high voltage GaN quality and reliability (Q+R) data, including FIT rate of <1 failure per billion hours on more than 10 billion field hours of operation * Released second 900 V GaN Power FET device to production, for broad industrial and renewable energy applications * Released 4 kW analog-controlled bridgeless totem-pole GaN evaluation board for phase AC-to-DC power conversion solutions

"We continued to execute on our plans and make notable progress on our product development and design win traction during the third quarter, despite the challenging environment," said Mario Rivas, Transphorm's CEO. "We have expanded our pipeline of customer engagements in the fast charging power adapter market and also broadened our portfolio of high-voltage GaN power conversion devices, all of which continue to demonstrate excellent reliability in the field. We believe Transphorm's strong patent and product portfolio, partnerships and government programs uniquely position the Company for meaningful growth in the coming year."

Third Quarter of 2020 Results

Revenue was $1.9 million in the third quarter, compared to $1.0 million in the third quarter of 2019 and $6.3 million in the second quarter of 2020, which included $5.0 million in licensing revenue. For the first nine months of 2020, revenue was $9.4 million as compared to $2.0 million in the prior year period.

Operating expenses were $4.3 million in the third quarter, compared to $4.2 million in the prior quarter and $3.9 million in the third quarter of 2019. Third quarter 2020 operating expenses consisted of R&D expenses of $1.1 million and SG&A expenses of $3.2 million.

Net loss for the third quarter of 2020 was ($6.7) million, or ($0.19) per share, compared to a net loss of ($2.3) million, or ($0.06) per share, in the prior quarter and a net loss of ($5.4) million, or ($0.19) per share, in the third quarter of 2019. For the first nine months of 2020, net loss improved to ($13.2) million, or ($0.39) per share, from ($17.7) million, or ($0.63) per share, in the same period of 2019.

Cash and equivalents as of September 30, 2020 were $4.4 million, compared to $9.4 million as of June 30, 2020.

Conference Call

Transphorm will host a conference call today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to review the Company's third quarter results and provide a business update. The conference call will be webcast live over the Internet with an associated slide presentation, which can be accessed by all interested parties in the Investor Relations section of Transphorm's website at www.transphormusa.com. Investors and analysts may also join the conference call by dialing 1-833-529-0218 and providing the conference ID 4159235. For those unable to attend the live webcast, a replay and the supporting presentation materials will be available on the day of the conference call and for approximately 90 days in the Investor Relations section of the Company's website. Additionally, a telephone replay of the conference call will be available approximately two hours after the conclusion of the call and through November 17, 2020. The telephone replay can be accessed by dialing +1-416-621-4642 and entering the conference ID 4159235.

About Transphorm

Transphorm, Inc., a global leader in the GaN revolution, designs and manufactures high performance and high reliability GaN semiconductors for high voltage power conversion applications. Having one of the largest Power GaN IP portfolios of more than 1,000 owned or licensed patents, Transphorm produces the industry's first JEDEC and AEC-Q101 qualified high voltage GaN semiconductor devices. The Company's vertically integrated device business model allows for innovation at every development stage: design, fabrication, device, and application support. Transphorm's innovations are moving power electronics beyond the limitations of silicon to achieve over 99% efficiency, 40% more power density and 20% lower system cost. Transphorm is headquartered in Goleta, California and has manufacturing operations in Goleta and Aizu, Japan. For more information, please visit www.transphormusa.com. Follow us on Twitter @transphormusa.

Forward-Looking Statements

This press release contains forward-looking statements (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended) concerning the Company's technology and product offerings, industry acceptance of GaN technology, and the Company's pipeline and future anticipated growth. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as "may," "will," "should," "would," "expect," "plan," "believe," "intend," "look forward," and other similar expressions among others. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: risks related to Transphorm's operations, such as additional financing requirements and access to capital; competition; the ability of Transphorm to protect its intellectual property rights; and other risks set forth in the Company's filings with the Securities and Exchange Commission. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

Transphorm, Inc.

Condensed Consolidated Balance Sheets

(in thousands except share and per share data)

September 30, 2020 December 31, 2019 (Unaudited)

Assets

Current Assets

Cash and cash equivalents $ 4,369 $ 2,875

Accounts receivable, net, including related parties 1,125 709

Inventory 1,372 990

Prepaid expenses and other current assets 1,743 783

Total current assets 8,609 5,357

Property and equipment, net 1,432 1,770

Goodwill 1,362 1,325

Intangible assets, net 1,062 1,313

Other assets 401 497

Total assets $ 12,866 $ 10,262



Liabilities, convertible preferred stock and stockholders' deficit

Current liabilities:

Accounts payable and accrued expenses $ 2,687 $ 2,383

Deferred revenue 178 -

Development loan 10,000 5,000

Revolving credit facility, including accrued 10,153 10,458 interest

Unfunded commitment to joint venture 1,684 1,688

Accrued payroll and benefits 1,325 1,159

Total current liabilities 26,027 20,688

Development loans, net of current portion - 10,000

Promissory note 16,327 16,169

Total liabilities 42,354 46,857

Commitments and contingencies

Convertible preferred stock:

Series 1, $0.0001 par value; no shares authorized,issued and outstanding as of September 30, 2020; - 39,658 12,438,704 shares authorized and 12,433,953 sharesissued and outstanding as of December 31, 2019

Series 2, $0.0001 par value; no shares authorized,issued and outstanding as of September 30, 2020; - 30,0007,507,699 shares authorized and 7,499,996 sharesissued and outstanding as of December 31, 2019

Series 3, $0.0001 par value; no shares authorized,issued and outstanding as of September 30, 2020; - 16,000 4,000,000 shares authorized, issued and outstandingas of December 31, 2019

Total convertible preferred stock - 85,658

Stockholders' deficit:Common stock, $0.0001 par value; 750,000,000 sharesauthorized and 35,266,496 shares issued andoutstanding as of September 30, 2020; 29,012,034 4 - shares authorized and 4,220,998 shares issued andoutstanding as of December 31, 2019

Additional paid-in capital 128,385 22,404

Accumulated deficit (157,112 ) (143,915 )

Accumulated other comprehensive loss (765 ) (742 )

Total stockholders' deficit (29,488 ) (122,253 )

Total liabilities, convertible preferred stock and $ 12,866 $ 10,262 stockholders' deficit

Transphorm, Inc.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands except share and per share data)

Three Months Ended September Nine Months Ended September 30, 30,

2020 2019 2020 2019

Revenue, net,including $ 1,929 $ 994 $ 9,358 $ 2,011 relatedparties

Operating expenses:

Cost of goods 2,043 1,625 4,746 4,211 sold

Research and 1,071 2,041 4,131 6,245 development

Sales and 547 572 1,593 2,098 marketing

General and 2,688 1,270 7,838 4,015 administrative

Totaloperating 6,349 5,508 18,308 16,569 expenses

Income (loss)from (4,420 ) (4,514 ) (8,950 ) (14,558 )operations

Interest 191 191 569 567 expense

Loss in joint 1,943 777 5,218 3,004 venture

Changes infair value of 709 17 46 101 promissorynote

Other income, (523 ) (53 ) (1,586 ) (513 )net

Loss before (6,740 ) (5,446 ) (13,197 ) (17,717 )tax expense

Tax expense - - - -

Net loss $ (6,740 ) $ (5,446 ) $ (13,197 ) $ (17,717 )



Net loss pershare - basic $ (0.19 ) $ (0.19 ) $ (0.39 ) $ (0.63 )and diluted

Weightedaverage commonshares 35,156,918 28,153,555 34,072,176 28,153,555outstanding -basic anddiluted

Transphorm, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

Nine Months Ended September 30,

2020 2019

Cash flows from operating activities:

Net loss $ (13,197 ) $ (17,717 )

Adjustments to reconcile net loss to net cash used in operating activities:

Inventory write-off 274 -

Depreciation and amortization 632 920

Licensing revenue from a related party (5,000 )

Stock-based compensation 820 435

Interest cost (193 ) 455

Loss in joint venture 5,218 3,004

Changes in fair value of promissory note 46 101

Changes in operating assets and liabilities:

Accounts receivable (562 ) (45 )

Inventory (656 ) (288 )

Prepaid expenses and other current assets (965 ) (236 )

Other assets 96 (51 )

Accounts payable and accrued expenses 304 (766 )

Deferred revenue 178 3,000

Accrued payroll and benefits 166 (136 )

Net cash used in operating activities (12,693 ) (11,324 )

Cash flows from investing activities:

Purchases of property and equipment (46 ) (155 )

Investment in joint venture (5,327 ) (1,696 )

Net cash used in investing activities (5,373 ) (1,851 )

Cash flows from financing activities:

Proceeds from development loans - 13,000

Proceeds from stock option exercise 32 -

Payment for repurchase of common stock (211 ) -

Loan repayment (50 ) -

Proceeds from issuance of common stock, net of 19,741 - offering cost

Net cash provided by financing activities 19,512 13,000

Effect of foreign exchange rate changes on cash and 48 17 cash equivalents

Net increase (decrease) in cash and cash equivalents 1,494 (158 )

Cash and cash equivalents at beginning of period 2,875 3,069

Cash and cash equivalents at end of period $ 4,369 $ 2,911



Supplemental disclosures of cash flow information:

Interest expense paid $ 762 $ 496

Supplemental non-cash financing activity:

Development loan reduction related to licensing $ 5,000 $ - revenue

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CONTACT: Investor Contacts: Shelton Group Brett Perry | Leanne Sievers 1-214-272-0070 | 1-949-224-3874 sheltonir@sheltongroup.com

CONTACT: Company Contact: Cameron McAulay Chief Financial Officer 1-805-456-1300 ext. 140 cmcaulay@transphormusa.com