10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

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 March 30, 2024

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

For the transition period from

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:

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, 2024, 26,584,057 shares of the registrant’s Common Stock, $0.001 par value, were outstanding.

INTEVAC, INC.

INDEX


No.		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	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.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		26
Item 4.	Controls and Procedures		26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		27
Item 1A.	Risk Factors		28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3.	Defaults Upon Senior Securities		34
Item 4.	Mine Safety Disclosures		34
Item 5.	Other Information		34
Item 6.	Exhibits		34

SIGNATURES			35

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

INTEVAC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 30, 2024			December 30, 2023

	(Unaudited)
	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	45,750		$	51,441
Short-term investments		18,094			17,405
Trade and other accounts receivable, net of allowances of $0 at both March 30, 2024 and December 30, 2023		25,136			18,613
Inventories		45,808			43,795
Prepaid expenses and other current assets		2,387			2,123

Total current assets		137,175			133,377
Long-term investments		922			2,687
Restricted cash		700			700
Property, plant and equipment, net		7,149			7,664
Operating lease right-of-use-assets		7,182			7,658
Intangible assets, net of amortization of $212 at March 30, 2024 and $178 at December 30, 2023		920			954
Deferred income taxes and other long-term assets		3,194			3,466

Total assets	$	157,242		$	156,506

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current operating lease liabilities	$	902		$	1,008
Accounts payable		5,494			5,800
Accrued payroll and related liabilities		2,837			3,475
Other accrued liabilities		1,955			1,820
Customer advances		23,044			20,407

Total current liabilities		34,232			32,510
Noncurrent liabilities:
Noncurrent operating lease liabilities		6,591			6,976
Customer advances		1,482			1,482
Other long-term liabilities		14			21

Total noncurrent liabilities		8,087			8,479
Stockholders’ equity:
Common stock, $0.001 par value		27			26
Additional paid-in capital		211,398			210,320
Treasury stock, 5,087 shares at both March 30, 2024 and December 30, 2023		(29,551	)		(29,551	)
Accumulated other comprehensive income		30			97
Accumulated deficit		(66,981	)		(65,375	)

Total stockholders’ equity		114,923			115,517

Total liabilities and stockholders’ equity	$	157,242		$	156,506

Note:

Amounts as of December 30, 2023 are derived from the December 30, 2023 audited consolidated financial statements.

See accompanying notes.

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INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three Months Ended
	March 30, 2024			April 1, 2023

	(Unaudited)
	(In thousands, except per share amounts)
Net revenues	$	9,631		$	11,542
Cost of net revenues		5,427			6,823

Gross profit		4,204			4,719
Operating expenses:
Research and development		4,369			3,973
Selling, general and administrative		4,281			5,200

Total operating expenses		8,650			9,173

Loss from operations		(4,446	)		(4,454	)
Interest income and other income (expense), net		2,221			672

Loss from continuing operations before provision for income taxes		(2,225	)		(3,782	)
Provision for income taxes		476			386

Net loss from continuing operations		(2,701	)		(4,168	)
Net income from discontinued operations, net of taxes		1,095			277

Net loss		(1,606	)		(3,891	)

Net income (loss) per share:
Basic and diluted – continuing operations	$	(0.10	)	$	(0.16	)
Basic and diluted – discontinued operations	$	0.04		$	0.01
Basic and diluted – net loss	$	(0.06	)	$	(0.15	)
Weighted-average common shares outstanding:
Basic and diluted		26,522			25,781

See accompanying notes.

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INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


	Three Months Ended
	March 30, 2024			April 1, 2023
	(Unaudited)
	(In thousands)
Net loss	$	(1,606	)	$	(3,891	)

Other comprehensive income (loss), before tax:
Change in unrealized net gain (loss) on available-for-sale investments		29			169
Foreign currency translation gains (losses)		(96	)		10

Other comprehensive income (loss), before tax		(67	)		179
Income tax provision related to items in other comprehensive income (loss)		—			—

Other comprehensive income (loss), net of tax		(67	)		179

Comprehensive loss	$	(1,673	)	$	(3,712	)

See accompanying notes.

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INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Three Months Ended
	March 30, 2024			April 1, 2023
	(Unaudited)
	(In thousands)
Operating activities
Net loss	$	(1,606	)	$	(3,891	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		558			344
Net amortization (accretion) of investment premiums and discounts		(83	)		(61	)
Amortization of intangible assets		34			34
Equity-based compensation		761			1,581
Straight-line rent adjustment and amortization of lease incentives		(15	)		(249	)
(Gain) loss on disposal of fixed assets		523			(65	)
Deferred income taxes		299			197
Changes in operating assets and liabilities		(7,006	)		(21,491	)

Total adjustments		(4,929	)		(19,710	)

Net cash used in operating activities		(6,535	)		(23,601	)
Investing activities
Purchases of investments		(7,099	)		(1,989	)
Proceeds from sales and maturities of investments		8,287			14,095
Proceeds from sales of fixed assets		—			65
Purchases of leasehold improvements and equipment		(566	)		(4,005	)

Net cash provided by investing activities		622			8,166
Financing activities
Proceeds from issuance of common stock		462			835
Payment of acquisition-related contingent consideration		—			(250	)
Taxes paid related to net share settlement		(144	)		(1,274	)

Net cash provided by (used in) financing activities		318			(689	)
Effect of exchange rate changes on cash and cash equivalents		(96	)		10

Net decrease in cash, cash equivalents and restricted cash		(5,691	)		(16,114	)
Cash, cash equivalents and restricted cash at beginning of period		52,141			69,690

Cash, cash equivalents and restricted cash at end of period	$	46,450		$	53,576

See accompanying notes.

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Description of Business, Basis of Presentation and Significant Accounting Policy

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 advanced coatings (“ADVC”) (formerly known as 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 included herein have been prepared on a basis consistent with the December 30, 2023 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 estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

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 ADVC 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 (“ASP”) industries.

In March 2022, the Company’s management realigned its operational focus and eliminated several research and development (“R&D”) programs and product offerings. As part of this realignment effort, the Company ceased its efforts to develop and market several of its manufacturing platforms for the ADVC, PV and ASP industries.

Government Grants and Credits

Government assistance is recognized when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received. Reimbursements of eligible expenditures pursuant to government assistance programs are recorded when the related costs have been incurred and there is reasonable assurance regarding collection of the claim. Grant claims not settled by the balance sheet date are recorded as receivables, provided their receipt is reasonably assured. The determination of the amount of the claim, and accordingly the receivable amount, requires management to make calculations based on its interpretation of eligible expenditures in accordance with the terms of the programs. The reimbursement claims submitted by the Company are subject to review by the relevant government agencies.

During the three months ended March 30, 2024, we amended certain fiscal year 2021 payroll tax filings and applied for a refund equal to $2.4 million of Employee Retention Credit (“ERC”) benefits from the U.S. government. The refund is recorded within trade and other accounts receivable in our condensed consolidated balance sheet as of March 30, 2024, and as $1.5 million in other income (expense), net and $933,000 in discontinued operations in our condensed consolidated statements of operations for the three months ended March 30, 2024. (See Note 12. Income Taxes.)

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

2.	Divestiture and Discontinued Operations

Sale of Photonics

On December 30, 2021, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with EOTECH, LLC (“EOTECH”) governing the sale of the Company’s Photonics business to EOTECH in exchange for (i) $70.0 million in cash consideration, (ii) up to $30.0 million in earnout payments and (iii) the assumption by EOTECH of certain liabilities of the Photonics business as specified in the Purchase Agreement. The transaction closed on December 30, 2021. Under the Purchase Agreement, EOTECH has also agreed to pay 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 Purchase Agreement. As of March 30, 2024, there have been no earnout payments under the Purchase 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 the disposition of the Photonics business 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 also entered into a Transition Service Agreement (the “TSA”) and a Lease Assignment Agreement. The TSA, which expired on June 30, 2022, outlined the information technology, people, and facility support the parties provided to each other for a period after the closing of the sale. The Lease Assignment Agreement assigns the lease obligation for two buildings in the Company’s California campus to EOTECH. As part of the assignment, the Company agreed to subsidize a portion of EOTECH’s lease payments through the remainder of the lease term which expired in March 2024. In August 2022, Intevac and EOTECH entered into a Shared Services Agreement (the “Shared Services Agreement”) to share certain building maintenance costs.

Fees earned under the Shared Services Agreement for the three months ended March 30, 2024 and April 1, 2023 were $37,000 and $25,000, respectively. As of March 30, 2024 and December 30, 2023, accounts receivable from EOTECH of $10,000 and $62,000, respectively, 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 Photonics 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 the three months ended March 30, 2024 and April 1, 2023.

The key components from discontinued operations related to the Photonics segment are as follows:


	Three Months Ended
	March 30, 2024			April 1, 2023
	(In thousands)
Operating expenses:
Selling, general and administrative	$	(162	)	$	(277	)

Total operating expenses		(162	)		(277	)

Operating income – discontinued operations		162			277
Other income (expense) – discontinued operations		933			—

Income from discontinued operations before provision for income taxes		1,095			277
Provision for income taxes		—			—

Net income from discontinued operations, net of taxes	$	1,095		$	277

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 March 30, 2024 and April 1, 2023:

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


	Three Months Ended
	March 30, 2024		April 1, 2023
	(In thousands)
Equity-based compensation	$	—	$	(260	)

Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the three months ended March 30, 2024 and April 1, 2023.

Major Products and Service Lines


	Three Months Ended March 30, 2024		Three Months Ended April 1, 2023

	(In thousands)
	HDD		HDD		PV		Total
Systems, upgrades and spare parts	$	8,119	$	10,517	$	18	$	10,535
Field service		1,512		1,007		—		1,007

Total net revenues	$	9,631	$	11,524	$	18	$	11,542

Revenue by Geographic Region


	Three Months Ended

	March 30, 2024		April 1, 2023
	(In thousands)
United States	$	482	$	1,614
Asia		9,149		9,928

Total net revenues	$	9,631	$	11,542

Timing of Revenue Recognition


	Three Months Ended
	March 30, 2024		April 1, 2023
	(In thousands)
Products transferred at a point in time	$	9,631	$	11,542
Products and services transferred over time		—		—

Total net revenues	$	9,631	$	11,542

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 March 30 2024.


	March 30, 2024		December 30, 2023		Three Months Change

	(In thousands)
Contract assets:
Accounts receivable, unbilled	$	884	$	393	$	491

Contract liabilities:
Deferred revenue	$	476	$	376	$	100
Customer advances		24,526		21,889		2,637

	$	25,002	$	22,265	$	2,737

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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 March 30, 2024, contract assets increased by $491,000 primarily due to the accrual of revenue related to the sale of spare parts sold to a customer as of March 30, 2024.

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 customer 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 March 30, 2024, we recognized revenue of $66,000 that was included in deferred revenue at the beginning of the period.

In May 2023, the Company received notice of the cancellation of a $54.6 million order for eight 200 Lean HDD systems due to the customer postponing previously planned media capacity additions, and, accordingly, the Company removed the order from backlog. The customer contract associated with the cancelled order requires the customer to pay the Company a prorated price based upon the percentage of work completed on the order. The Company has received customer advances in the amount of $19.1 million associated with the cancelled order, all of which will be utilized to settle this customer obligation. In September 2023, the Company applied $444,000 of billings against these advances in connection with inventory scrapped at the customer’s direction. In December 2023, the Company received notice of the cancellation of a $11.4 million order for two 200 Lean HDD systems due to the customer postponing previously planned media capacity additions, and, accordingly, the Company removed the order from backlog. The Company has not received any customer advances associated with the cancelled order. The Company expects to invoice the customer in the second quarter of fiscal 2024 for the cancellation fee associated with this order.

On March 30, 2024, we had $53.1 million of remaining performance obligations, which we also refer to as total backlog. We expect to recognize approximately 55.4% of our remaining performance obligations as revenue in 2024 and 44.6% in 2025.

4.	Inventories

Inventories are stated at the lower of average cost or net realizable value and consist of the following:


	March 30, 2024		December 30, 2023
	(In thousands)
Raw materials	$	35,755	$	37,346
Work-in-progress		10,053		6,449

	$	45,808	$	43,795

In May 2023, the Company received notice of the cancellation of a $54.6 million order for eight 200 Lean HDD systems. In December 2023, the Company received notice of the cancellation of a $11.4 million order for two 200 Lean HDD systems. The customer contract associated with the cancelled orders requires the customer to pay the Company a prorated price based upon the percentage of work completed on the order. The Company has received customer advances in the amount of $19.1 million associated with the cancelled order for eight 200 Lean HDD systems, all of which will be utilized to settle this customer obligation. The Company has not received any customer advances associated with the cancelled order for two 200 Lean HDD systems. The Company expects to invoice the customer in the second quarter of 2024 for the cancellation fee associated with this order. In fiscal 2024, as part of the cancellation of the orders for the ten 200 Lean HDD systems, the customer is expected to take delivery of $11.8 million of inventory on hand at March 30, 2024 and $4.0 million of inventory on order, plus reimburse us for any supplier cancellation charges and the costs associated with managing the inventory. A portion of the inventory will be utilized to satisfy other outstanding purchase orders from this customer in backlog.

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

5.	Equity-Based Compensation

At March 30, 2024, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan, the 2022 Inducement Equity Incentive Plan (the “Inducement Plan”) (together, the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved 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.

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 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 months ended March 30, 2024 and April 1, 2023 was as follows:

	Three Months Ended
	March 30, 2024		April 1, 2023

	(In thousands)
Equity-based compensation by type of award:
Stock options	$	—	$	(13	)
RSUs		533		599
PRSUs		91		798
ESPP purchase rights		137		197

Total equity-based compensation	$	761	$	1,581

Included in the table above are:

(a)

Equity-based compensation reported in discontinued operations of ($

260,000

) for the three months ended April

1, 2023. (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. Intevac accounts for forfeitures as they occur, rather than by estimating expected forfeitures.

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Option activity as of March 30, 2024 and changes during the three months ended March 30, 2024 were as follows:


	Shares			Weighted-Average Exercise Price

Options outstanding at December 30, 2023		142,000		$	6.57
Options cancelled and forfeited		(9,000	)	$	7.71

Options outstanding at March 30, 2024		133,000		$	6.50

Options exercisable at March 30, 2024		133,000		$	6.50

Intevac issued 153,595 shares of common stock under the ESPP during the three months ended March 30, 2024.

Intevac estimated the weighted-average fair value of ESPP purchase rights using the following weighted-average assumptions:


	Three Months Ended
	March 30, 2024			April 1, 2023
ESPP Purchase Rights:
Weighted-average fair value of grants per share	$	1.41		$	2.23
Expected volatility		47.81	%		34.20	%
Risk-free interest rate		4.52	%		4.47	%
Expected term of purchase rights (in years)		1.0			1.0
Dividend yield		None			None

The computation of the expected volatility assumptions used in the Black-Scholes calculations for 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 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 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.

RSUs

A summary of the RSU activity is as follows:


	Shares			Weighted-Average Grant Date Fair Value
Non-vested RSUs at December 30, 2023		915,087		$	4.89
Granted		51,925		$	3.97
Vested		(67,263	)	$	5.39
Cancelled and forfeited		(8,654	)	$	5.62

Non-vested RSUs at March 30, 2024		891,095		$	4.79

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.

A summary of the PRSU activity is as follows:


	Shares		Weighted-Average Grant Date Fair Value
Non-vested PRSUs at December 30, 2023		1,160,293	$	4.04
Vested		—	$	—
Cancelled and forfeited		—	$	—

Non-vested PRSUs at March 30, 2024		1,160,293	$	4.04

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

We granted PRSUs in fiscal 2022 and fiscal 2023. These awards may vest based on our performance against one or more specified metrics, including achievement of certain stock prices during a three-year performance period in the case of the PRSUs granted in fiscal 2022 and achievement of strategic goals during a three-year performance period in the case of the PRSUs granted in fiscal 2023.

Warranty

Intevac provides for the estimated cost of warranty when revenue is recognized. Intevac’s warranty is subject to contract terms and, for its 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.

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, if any, 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 months ended March 30, 2024 and April 1, 2023.


	Three Months Ended
	March 30, 2024			April 1, 2023

	(In thousands)
Opening balance	$	205		$	163
Expenditures incurred under warranties		(36	)		(97	)
Accruals for product warranties issued during the reporting period		38			100
Adjustments to previously existing warranty accruals		(48	)		11

Closing balance	$	159		$	177

The following table displays the balance sheet classification of the warranty provision account at March 30, 2024 and at December 30, 2023.


	March 30, 2024		December 30, 2023

	(In thousands)
Other accrued liabilities	$	145	$	184
Other long-term liabilities		14		21

Total warranty provision	$	159	$	205

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.

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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 March 30, 2024, we had letters of credit and bank guarantees outstanding totaling $700,000, 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 $700,000 of restricted cash.

8.	Cash, Cash Equivalents and Investments

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


	March 30, 2024
	Amortized Cost		Unrealized Holding Gains		Unrealized Holding Losses		Fair Value

	(In thousands)
Cash and cash equivalents:
Cash	$	15,100	$	—	$	—	$	15,100
Money market funds		15,183		—		—		15,183
Commercial paper		14,474		—		6		14,468
U.S. treasury securities		999		—		—		999

Total cash and cash equivalents	$	45,756	$	—	$	6	$	45,750
Short-term investments:
Certificates of deposit	$	300	$	—	$	—	$	300
Commercial paper		6,610		—		3		6,607
Corporate bonds and medium-term notes		5,491		—		18		5,473
Municipal bonds		221		—		2		219
U.S. treasury and agency securities		5,500		—		5		5,495

Total short-term investments	$	18,122	$	—	$	28	$	18,094
Long-term investments:
Asset backed securities	$	206	$	—	$	2	$	204
Corporate bonds and medium-term notes		715		3		—		718

SEC Form 10-Q filed by Intevac Inc.