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    IVAC   US4611481080

INTEVAC, INC.

(IVAC)
  Report
Delayed Nasdaq  -  04:00 2022-07-06 pm EDT
4.730 USD   -1.46%
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INTEVAC INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/10/2022 | 04:08pm EDT
This Quarterly Report on Form
10-Q
contains forward-looking statements, which involve risks and uncertainties.
Words such as "believes," "expects," "anticipates" and the like indicate
forward-looking statements. These forward-looking statements include comments
related to Intevac's shipments, projected revenue recognition, product costs,
gross margin, operating expenses, interest income, income taxes, cash balances
and financial results in 2022 and beyond; projected customer requirements for
Intevac's new and existing products, and when, and if, Intevac's customers will
place orders for these products; the timing of delivery and/or acceptance of the
systems and products that comprise Intevac's backlog for revenue and the
Company's ability to achieve cost savings. Intevac's actual results may differ
materially from the results discussed in the forward-looking statements for a
variety of reasons, including those set forth under "Risk Factors" and in other
documents we file from time to time with the Securities and Exchange Commission,
including our Annual Report on Form
10-K
filed on February 17, 2022, our Quarterly Reports on Form
10-Q
and our Current Reports on Form
8-K.

Intevac's trademarks include the following: "200 Lean
®
," "INTEVAC LSMA
®
," "INTEVAC MATRIX
®
," "oDLC
®
," and "TRIO
™
."


                                       20

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Discontinued Operations


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

Overview


Intevac is a provider of vacuum deposition equipment for a wide variety of
thin-film applications. The Company leverages its core capabilities in
high-volume manufacturing of small substrates to provide process manufacturing
equipment solutions to the hard disk drive ("HDD") and display cover panel
("DCP") industries. Intevac's customers include manufacturers of hard disk media
and DCPs. Intevac operates in a single segment: TFE. Product development and
manufacturing activities occur in North America and Asia. Intevac also has field
offices in Asia to support its customers. Intevac's products are highly
technical and are sold primarily through Intevac's direct sales force.

Intevac's results of operations are driven by a number of factors including
success in its equipment growth initiatives in the DCP market and by worldwide
demand for HDDs. Demand for HDDs depends on the growth in digital data creation
and storage, the rate of areal density improvements, and the
end-user
demand for PCs, enterprise data storage, nearline "cloud" applications, video
players and video game consoles that include such drives. Intevac continues to
execute its strategy of diversification beyond the HDD industry by focusing on
the Company's ability to provide proprietary tools to enhance scratch protection
and durability for the DCP market and by working to develop the next generation
of high volume DCP manufacturing equipment. Intevac believes that its renewed
focus on the DCP market will result in incremental equipment revenues for
Intevac and decrease Intevac's dependence on the HDD industry. Intevac's
equipment business is subject to cyclical industry conditions, as demand for
manufacturing equipment and services can change depending on supply and demand
for HDDs and cell phones as well as other factors such as global economic
conditions and technological advances in fabrication processes.

In March 2022, the Company's management approved a restructuring plan to realign
the Company's operational focus, scale the business and improve costs. The
restructuring program includes (i) reducing the Company's headcount and
(ii) eliminating several research and development ("R&D") programs and product
offerings. As part of this realignment effort, the Company will no longer be
pursuing several DCP projects including the coating of the backside covers of
smartphones, solar ion implantation (also known as ENERGi
®
), and advanced packaging for semiconductor manufacturing.

The following table presents certain significant measurements for the three months ended April 2, 2022 and April 3, 2021.

                                                                      Three Months Ended
                                                        April 3,         April 3,         Change over

                                                          2021             2021           prior period
                                                            (In thousands, except percentages and
                                                                      per share amounts)
Net revenues                                           $     4,445       $   9,238       $       (4,793 )
Gross profit                                           $       723       $   2,134       $       (1,411 )
Gross margin percent                                          16.3 %          23.1 %       (6.8) points
Loss from operations                                   $    (7,686 )     $  (5,565 )     $       (2,121 )
Net loss from continuing operations                    $    (7,720 )     $  (5,568 )     $       (2,152 )
Net loss from discontinued operations, net of taxes    $      (135 )     $    (936 )     $          801
Net loss                                               $    (7,855 )     $  (6,504 )     $       (1,351 )
Net loss per diluted share                             $     (0.32 )     $   (0.27 )     $        (0.05 )



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Net revenues decreased during the first quarter of fiscal 2022 compared to the
same period in the prior year primarily due to lower system sales. We did not
recognize revenue on any system sales in the first quarter of fiscal 2022
compared to one MATRIX PVD system for advanced semiconductor packaging
recognized in the first quarter of fiscal 2021. Lower gross margin in the first
quarter of fiscal 2022 reflects $755,000 in charges for excess and obsolete
inventory as part of the Company's realignment effort. Lower gross margin in the
first quarter of fiscal 2021 reflected the lower-margin contribution from the
first MATRIX PVD system for advanced semiconductor packaging. In March 2022, the
Company's management approved a restructuring plan to realign the Company's
operational focus, scale the business and improve costs. R&D expenses for the
first quarter of fiscal 2022 include $1.5 million in expenditures related to the
disposal of certain lab equipment as part of the realignment effort. The cost of
employee severance associated with the realignment effort of $1.2 million was
offset in full by stock-based compensation forfeitures related to the employees
affected by the reduction in workforce. Fees earned pursuant to the TSA with
EOTECH since the divestiture of Photonics ("TSA fees") were $787,000 for the
three months ended April 2, 2022 of which $11,000 was reported as a reduction of
cost of net revenues and $767,000 was reported as a reduction of selling,
general and administrative expenses. The agreed-upon charges for such services
are generally intended to allow the service provider to recover all costs and
expenses of providing such services. During the first quarter of fiscal 2021,
the Company received $66,000 in government assistance related to
COVID-19
from the government of Singapore of which $39,000 was reported as a reduction of
cost of net revenues, $10,000 was reported as a reduction of R&D expenses and
$17,000 was reported as a reduction of selling, general and administrative
expenses. The Company did not receive any JSS grants in the first quarter of
fiscal 2022. The Company reported a larger net loss for the first quarter of
fiscal 2022 compared to the first quarter of fiscal 2021 due to lower revenues,
lower gross margins and higher operating costs as a result of the realignment
effort.

We believe fiscal 2022 will be a challenging year and Intevac does not expect be
profitable in fiscal 2022. Intevac expects that 2022 HDD equipment sales will be
similar to 2021 levels as we expect a customer to take delivery of one system in
backlog. We believe there will be improvements to our HDD equipment sales in
fiscal 2023 as we expect a customer to take delivery of up to eight systems in
backlog.

COVID-19
Update

The impact of
COVID-19,
including changes in consumer behavior, pandemic fears, and market downturns, as
well as restrictions on business and individual activities, has created
significant volatility in the global economy and led to reduced economic
activity. Although
COVID-19
vaccines are now broadly distributed and administered, there remains significant
uncertainty concerning the magnitude of the impact and the duration of the
COVID-19
pandemic. As new strains of
COVID-19
develop, the continued impacts to our business could be material to our fiscal
2022 results. Further, the impacts of inflation on our business and the broader
economy, which may be exacerbated by the economic recovery from the
COVID-19
pandemic, may also impact our financial condition and results of operations. Our
customers may delay or cancel orders due to reduced demand, supply chain
disruptions, and/or travel restrictions and border closures. We have experienced
pandemic-related delays in our evaluation and development work. In response to
COVID-19,
we implemented initiatives to safeguard our employees, including work-from-home
protocols. In June 2021, we began reopening our offices on a regional basis in
accordance with local authority guidelines while ensuring that our return to
work is thoughtful, prudent, and handled with a safety-first approach. All
employees in the United States who could work from home did so through the
middle of June 2021, when we fully reopened our offices as restrictions were
lifted by the applicable authorities. Effective March 29, 2022, 75% of the
employees are allowed to work onsite in Singapore. Our employees' health and
safety is our top priority, and we will continue to monitor local restrictions
across the world, the administration and efficacy of vaccines and the number of
new cases.

In Singapore, Intevac received government assistance under the Job Support
Scheme ("JSS"). The purpose of the JSS is to provide wage support to employers
to help them retain their local employees. Under the JSS, Intevac received
$66,000 in JSS grants in the first quarter of fiscal 2021. The Company did not
receive any JSS grants in the first quarter of fiscal 2022.

During the first quarter of fiscal 2022 and the first quarter of fiscal 2021,
the Company's expenses included approximately $18,000 and $43,000, respectively,
due to costs related to actions taken in response
to COVID-19.

Results of Operations

Net revenues

                                  Three Months Ended
                                                    Change over
                      April 2,       April 3,
                        2022           2021         prior period
                                    (In thousands)
Total net revenues   $    4,445     $    9,238     $       (4,793 )




                                       22

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The decrease in revenue in the three months ended April 2, 2022 versus the three
months ended April 3, 2021, was primarily driven by lower system sales. We did
not recognize revenue on any systems sales in the first quarter of fiscal 2022.
We recognized revenue on one MATRIX PVD system for advanced semiconductor
packaging in the first quarter of fiscal 2021. Revenue during the three-month
periods ended April 2, 2022 and April 3, 2021 also included revenue recognized
for disk equipment technology upgrades and spare parts.

Backlog

                April 2,       January 1,       April 3,
                  2022            2022            2021
                             (In thousands)
Total backlog   $  87,162     $     24,725     $    4,221


Backlog at April 2, 2022 included nine 200 Lean HDD systems. Backlog at January 1, 2022 included one 200 Lean HDD system. Backlog at April 3, 2021 did not include any 200 Lean HDD systems.

Revenue by geographic region

                              Three Months Ended
                      April 2, 2022        April 3, 2021
                                (in thousands)
United States        $           294      $           367
Asia                           4,151                5,021
Europe                            -                 3,850

Total net revenues   $         4,445      $         9,238



International sales include products shipped to overseas operations of U.S.
companies. Sales to the U.S. region for all periods presented were not
significant. The decrease in sales to the Asia region in the three months ended
April 2, 2022 versus the three months ended April 3, 2021, reflected lower spare
parts and service sales, offset in part by higher HDD upgrade sales. Sales to
the Asia region in both three month periods did not include any systems. Sales
to the Europe region in the three months ended April 3, 2021 included one MATRIX
PVD system for advanced semiconductor packaging.

Gross profit

                                      Three Months Ended
                         April 2,        April 3,        Change over

                           2022            2021          prior period
                                    (In thousands, except
                                         percentages)
TFE gross profit        $      723      $    2,134      $       (1,411 )
% of TFE net revenues         16.3 %          23.1 %

Cost of net revenues consists primarily of purchased materials, and also includes fabrication, assembly, test and installation labor and overhead, customer-specific engineering costs, warranty costs, royalties, provisions for inventory reserves and scrap.

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Gross margin was 16.3% in the three months ended April 2, 2022 compared to 23.1%
in the three months ended April 3, 2021. Lower gross margin during the three
months ended April 2, 2022 reflects $755,000 in charges for excess and obsolete
inventory as part of the Company's realignment effort. Gross margin for the
three months ended April 3, 2021 reflects the lower margin on the first MATRIX
PVD system for advanced semiconductor packaging. Gross margins will vary
depending on a number of factors, including revenue levels, product mix, product
cost, system configuration and pricing, factory utilization, and provisions for
excess and obsolete inventory.

Research and development expense

                                               Three Months Ended
                                    April 2,       April 3,       Change over

                                      2022           2021        prior period
                                                 (In thousands)

Research and development expense $ 4,160 $ 3,365 $ 795



R&D spending during the three months ended April 2, 2022 increased compared to
the three months ended April 3, 2021 primarily due to $1.5 million in
expenditures related to the disposal of certain lab equipment as part of the
realignment effort, offset by lower spending on R&D programs.

Selling, general and administrative expense

                                                                  Three Months Ended
                                                      April 2,        April 3,        Change over

                                                        2022            2021         prior period
                                                                    (In thousands)

Selling, general and administrative expense $ 4,249 $ 4,334 $ (85 )



Selling, general and administrative expense consists primarily of selling,
marketing, customer support, financial and management costs. Selling, general
and administrative expense for the three months ended April 2, 2022 decreased
compared to the three months ended April 3, 2021 as lower variable compensation
expenses and lower stock compensation expenses were offset
in-part
by
one-time
severance charges associated with the realignment effort and higher legal and
consulting fees. Selling, general and administrative expense for the three
months ended April 2, 2022, is net of $776,000 in TSA fees earned since the
Photonics divestiture. The agreed-upon charges for such services are generally
intended to allow the service provider to recover all costs and expenses of
providing such services.

Cost reduction plans


In March 2022, the Company's management approved a restructuring plan to realign
the Company's operational focus, scale the business and improve costs. The
restructuring program includes (i) reducing the Company's headcount and
(ii) eliminating several R&D programs and product offerings. As part of this
re-alignment
effort, the Company will no longer be pursuing several DCP projects including
the coating of the backside covers of smartphones, solar ion implantation (also
known as ENERGi
®
), and advanced packaging for semiconductor manufacturing. We incurred
restructuring costs of $1.2 million for estimated severance and the related
modification of certain stock-based awards. Other costs incurred as part of the
2022 cost reduction plan include: (i) a benefit of $1.3 million related to the
stock-based compensation forfeitures related to the employees affected by the
reduction in workforce, (ii) $1.5 million for fixed asset disposals and (iii)
$755,000 for write-offs of excess inventory. The 2022 Cost Reduction Plan
reduced the workforce by 6 percent. The cost of implementing the 2022 Cost
Reduction Plan was reported under cost of net revenues and operating expenses in
the condensed consolidated statements of operations. Implementation of the 2022
Cost Reduction Plan is expected to reduce salary, wages and other
employee-related expenses by approximately $2.1 million on an annual basis and
reduce depreciation expense by $720,000 on an annual basis.

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

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Interest income and other income (expense), net

                                                                  Three Months Ended
                                                    April 3,           April 3,        Change over

                                                      2021               2021         prior period
                                                                    (In thousands)

Interest income and other income (expense), net $ (8 ) $

29 $ (37 )



Interest income and other income (expense), net in the three months ended
April 2, 2022 included $9,000 of interest income on investments and other income
of $16,000, offset in part by $33,000 of foreign currency losses. Interest
income and other income (expense), net in the three months ended April 3, 2021
included $17,000 of interest income on investments and other income of $19,000,
offset in part by $7,000 of foreign currency losses. The decrease in interest
income in the three months ended April 2, 2022 compared to the same period in
the prior year resulted from lower interest rates, offset in part by higher
invested balances.

Income tax provision

                                    Three Months Ended
                        April 2,        April 3,       Change over

                          2022            2021        prior period
                                      (In thousands)
Income tax provision   $       26       $      32     $          (6 )


Intevac recorded income tax provisions of $26,000 for the three months ended
April 2, 2022 and $32,000 for the three months ended April 3, 2021. 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. The income tax expense for the
three months ended April 2, 2022 and for the three months ended April 3, 2021
was largely the result of foreign withholding taxes and income taxes in foreign
jurisdictions. For the three-month period ended April 2, 2022, Intevac recorded
a $26,000 income tax benefit on losses of our international subsidiaries and
recorded $51,000 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 April 3, 2021, Intevac recorded a $19,000 income tax benefit on
losses of our international subsidiaries and recorded $48,000 for withholding
taxes on royalties paid to the United States from Intevac's Singapore subsidiary
as a discrete item. For all periods presented, Intevac utilized net operating
loss 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 income tax expense consists primarily of income taxes in foreign
jurisdictions in which we conduct business and foreign withholding taxes. We
maintain a full valuation allowance for domestic deferred tax assets, including
net operating loss carryforwards and certain domestic tax credits. Intevac's
effective tax rate differs from the U.S. statutory rate in both 2022 and 2021
primarily due to the Company not recognizing an income tax benefit on the
domestic loss.

Discontinued operations

                                                                    Three Months Ended
                                                       April 2,        April 3,        Change over

                                                         2022            2021          prior period
                                                                      (In thousands)

Loss from discontinued operations, net of taxes $ 135 $

936 $ (801 )



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

                                       25

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Liquidity and Capital Resources


At April 2, 2022, Intevac had $117.2 million in cash, cash equivalents,
restricted cash and investments compared to $121.2 million at January 1, 2022.
During the first three months of fiscal 2022, cash, cash equivalents, restricted
cash and investments decreased by $4.0 million due primarily to cash used by
operating activities, purchases of fixed assets, and tax payments on net share
settlements offset in part by cash received from the sale of Intevac common
stock to Intevac's employees through Intevac's employee benefit plans.

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

                                                                April 2,       January 2,

                                                                  2022            2021
                                                                      (In thousands)
Cash and cash equivalents                                       $  98,034     $    102,728
Restricted cash                                                       786              786
Short-term investments                                              8,941           10,221
Long-term investments                                               9,407            7,427

Total cash, cash equivalents, restricted cash and investments $ 117,168

$ 121,162




Operating activities used cash of $4.1 million during the first three months of
fiscal 2022 compared to cash generated of $2.5 million during the first three
months of fiscal 2021.

Accounts receivable totaled $17.1 million at April 2, 2022 compared to
$14.3 million at January 1, 2022. Customer advances for products that had not
been shipped to customers and included in accounts receivable were $10.6 million
at April 2, 2022. Net inventories totaled $8.9 million at April 2, 2022 compared
to $5.8 million at January 1, 2022 due to increased manufacturing activities.
Accounts payable decreased to $3.9 million at April 2, 2022 from $5.3 million at
January 1, 2022. Accounts payable at January 1, 2022 included a payable of
$2.0 million as a commission to the investment banker for the Photonics sale.
Accrued payroll and related liabilities decreased to $3.3 million at April 2,
2022 compared to $5.5 million at January 1, 2022 due primarily to the settlement
of 2021 bonuses. Other accrued liabilities decreased to $3.0 million at April 2,
2022 compared to $3.7 million at January 1, 2022 primarily due to lower other
tax liability balances. Customer advances increased from $2.1 million at
January 1, 2022 to $15.3 million at April 2, 2022 primarily as a result of new
orders.

Investing activities used cash of $1.5 million during the first three months of
fiscal 2022. Purchases of investments net of proceeds from sales totaled
$891,000. Capital expenditures for the three months ended April 2, 2022 were
$618,000.

Financing activities generated cash of $1.0 million in the first three months of
fiscal 2022 from the sale of Intevac common stock to Intevac's employees through
Intevac's employee benefit plans. Tax payments related to the net share
settlement of restricted stock units were $135,000.

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

As of April 2, 2022, approximately $30.9 million of cash and cash equivalents
and $2.9 million of investments were domiciled in foreign tax jurisdictions.
Intevac expects a significant portion of these funds to remain offshore in the
short term. If the Company chose to repatriate these funds to the United States,
it would be required to accrue and pay additional taxes on any portion of the
repatriation subject to foreign withholding taxes.

We believe that our existing cash, cash equivalents and investments and cash
flows from operating activities will be adequate to meet our liquidity needs for
the next twelve months and for the foreseeable future beyond the next twelve
months. Our significant funding requirements include procurement of
manufacturing inventories, operating expenses,
non-cancelable
operating lease obligations, capital expenditures, settlement of the PAGA
litigation and variable compensation. We have flexibility over some of these
uses of cash, including capital expenditures and discretionary operating
expenses, to preserve our liquidity position. Capital expenditures for the
remainder of fiscal 2022 are projected to be approximately $4.0 million related
to network infrastructure and security, and laboratory and test equipment to
support our R&D programs.

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  Table of Contents

Off-Balance
Sheet Arrangements

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

Climate Change

We believe that neither climate change, nor governmental regulations related to climate change, have had any material effect on our business, financial condition or results of operations.

Critical Accounting Policies and Estimates


The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
("US GAAP") requires management to make judgments, assumptions and estimates
that affect the amounts reported. Intevac's significant accounting policies are
described in Note 1 to the consolidated financial statements included in Item 8
of Intevac's Annual Report on Form
10-K
for the year ended January 1, 2022, filed with the SEC on February 17, 2022.
Certain of these significant accounting policies are considered to be critical
accounting policies, as defined below.

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

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

There have been no material changes to our critical accounting policies during the three months ended April 2, 2022.

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