The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this document.

The information in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), which are subject to the "safe harbor" created by those sections. These forward-looking statements reflect our management's beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this report and are subject to risks and uncertainties. We may, in some cases, use words such as "anticipate," "believe," "could," "continue," "estimate," "expect," "intend," "may," "objective," "plan," "potential," "predict," "project," "should," "will," "would," or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements in this report include, but are not limited to, statements regarding:

• our plans to focus on oscillators, clock ICs, resonators and timing

synchronization solutions and to aggressively expand our presence in these

markets;

• the impact of the COVID-19 pandemic on our business, employees, revenue and


   other operating results, liquidity, and cash flows, and its impact on the
   businesses of our suppliers and customers, and our anticipated responses
   thereto;

• our ability to address market and customer demands and to timely develop new

or enhanced solutions to meet those demands;

• anticipated trends, challenges and growth in our business and the markets in

which we operate, including pricing expectations;

• our expectations regarding our revenue, gross margin, and expenses;

• expected impact of new legislation and IRS guidance issued in response to the

COVID-19 pandemic;

• our belief as to the sufficiency of our existing cash and cash equivalents and


   funds available for borrowing under our credit facilities to meet our cash
   needs for at least the next 12 months and our future capital requirements over
   the longer term, including the potential impact of the COVID-19 pandemic
   thereon;

• our expectations regarding dependence on our largest customer;

• our customer relationships and our ability to retain and expand our customer

relationships and to achieve design wins;

• the success, cost, and timing of new products;

• the size and growth potential of the markets for our solutions, and our

ability to serve and expand our presence in those markets;

• our plans to expand sales and marketing efforts through increased


   collaboration with our distributors, resellers, and contracted sales
   representatives, and our plans to introduce a self-service web portal as well
   as digital marketing campaigns for branding and lead generation;

• our goal to become the leading timing solution provider for advanced and

challenging applications;

• our positioning of being designed into current systems as well as future

products;

• our belief that our advanced packaging designs can enable the smallest

footprints in the industry;

• our expectations regarding competition in our existing and future markets;

• regulatory developments in the United States and foreign countries;

• the performance of, and our relationships with, our third-party suppliers and

manufacturers;

• our and our customers' ability to respond successfully to technological or

industry developments;

• our ability to attract and retain key personnel;

• intellectual property and related litigation;

• the adequacy and availability of our leased facilities;

• the accuracy of our estimates regarding capital requirements, expectations

regarding renewal of loans, and needs for additional financing.

In addition, any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward­looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expected or referenced in these forward-looking statements. These risks and uncertainties include, but are not limited to, those risks discussed in Part II, Item 1A Risk Factors of this report. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this report by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other





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person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

Overview

We are a leading provider of silicon timing solutions. Our timing solutions are the heartbeat of our customers' electronic systems, solve complex timing problems and enable industry-leading products. We provide solutions that are differentiated by high performance and reliability, programmability, small size, and low power consumption. Our products have been designed into over 250 applications across our target markets, including communications and enterprise, automotive, industrial, aerospace, and mobile, IoT and consumer.

We commenced commercial shipments of our first oscillator products in 2006. Substantially all of our revenue to date has been derived from sales of oscillator systems across our target end markets. We intend to focus on clock IC and timing sync solutions in the future. We seek to aggressively expand our presence in these two markets.

We sell our products primarily through distributors and resellers, who in turn sell to our end customers. We also sell products directly to end customers who integrate our products into their applications. Based on sell-through information provided by these distributors, we believe the majority of our end customers are based in the U.S.

We operate a fabless business model, allowing us to focus on the design, sales, and marketing of our products, quickly scale production, and significantly reduce our capital expenditures. We leverage our global network of distributors and resellers to address the broad set of end markets we serve. For our largest accounts, dedicated sales personnel work with the end customer to ensure that our solutions fully address the end customer's timing needs. Our smaller customers work directly with our distributors to select the optimum timing solution for their needs.

We were acquired by MegaChips in 2014 and were a wholly-owned subsidiary of MegaChips, a fabless semiconductor company based in Japan and traded on the Tokyo Stock Exchange, until November 25, 2019. On November 25, 2019, we completed the initial public offering of shares of our common stock. On June 16, 2020, we completed a follow-on public offering, in which we issued and sold 1,525,000 shares of our common stock and MegaChips sold 2,500,000 shares of our common stock held by them. On February 22, 2021, we completed an additional follow-on public offering, in which we issued and sold 1,500,000 shares of our common stock and MegaChips sold 1,500,000 shares of our common stock held by them. MegaChips continues to be our largest stockholder and held approximately 31.8% of our common stock as of March 31, 2021.

We are currently experiencing a growth in demand for some of our products, however, there are a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including Taiwan Semiconductor Manufacturing Company, which may limit our ability to fully satisfy the increase in demand. If we cannot ship our products to our customers on time and in the quantity required as a result of this supply constraint our sales could decline and we could lose customers.

Impact of COVID-19 on our Business

The future impact of the ongoing COVID-19 pandemic on our business remains unknown. In an effort to protect the health and safety of our employees, we took proactive actions and adopted social distancing policies at our locations around the world, including requiring employees to work from home ("WFH"), reducing the number of people in our sites at any one time, and suspending employee travel. In an effort to contain the COVID-19 pandemic or slow its spread, governments around the world have also enacted various measures, including orders to close all businesses not deemed "essential," isolate residents in their homes or places of residence, and practice social distancing. In addition, the United States and other countries in which we operate have imposed measures such as quarantines and "shelter-in-place" orders that restrict business operations and travel and require individuals to WFH, which has impacted all aspects of our business, as well as those of the third-parties we rely upon for our manufacturing, assembly, testing, shipping and other operations.





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We anticipate the global health crisis caused by the COVID-19 pandemic will continue to impact business activity across the globe and will continue to impact our business, employees and operations for the foreseeable future. We believe that the COVID-19 pandemic could cause delay and disruption in the manufacture, shipment, and sales of, and overall demand for, our products. In addition, we believe the production capabilities of our suppliers has been, and may continue to be, impacted as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or WFH orders. For example, on March 16, 2020, the government of Malaysia announced measures to restrict movement in that country to suppress the number of COVID-19 cases, which have been extended currently until August 2021. These restrictions could limit our suppliers' ability to operate their manufacturing facilities in that country. Any delay or disruption in the manufacture, shipment and sales of, or overall demand for, our products in turn may negatively and materially impact our operating and financial results, including revenue, gross margins, operating margins, cash flows and other operating results. Further, the resumption of normal business operations after such disruptions may be delayed and a resurgence of COVID-19 could result in continued disruption to us, our suppliers, and/or our customers. To date, we have experienced minimal impact from any supplier disruption. The duration and full magnitude of the COVID-19 pandemic's impact on credit and financial markets is also unknown, which creates uncertainty as to the financial condition of our distributors or customers. In addition, the deterioration in credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures. We may also experience losses on our holdings of cash and investments due to failures of financial institutions and other parties.

We currently have employees, third-party contractors, distributors, and customers in numerous countries throughout the world that have each been impacted by the COVID-19 pandemic. The COVID-19 pandemic has restricted and is expected to continue to restrict travel and use of our facilities and the facilities of our suppliers, customers, or other vendors in our supply chain, which could impact our business, interactions and relationships with our customers, third-party suppliers and contractors, and results of operations. We cannot predict with certainty what other impacts the COVID-19 pandemic may have on our business, employees, service providers, customers and results of operations.

There remains a high degree of uncertainty in the global business environment given the impact of the COVID-19 pandemic which creates challenges with visibility beyond the near term. We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, employees, operations, and prospects, or on our financial results for remainder of fiscal 2021 or beyond. For additional discussion, please see Part II, Item 1A Risk Factors of this report.

Results of Operations

Revenue

We derive revenue primarily from sales of silicon timing products to distributors and resellers who in turn sell to our end customers. We also sell products directly to end customers who integrate our products into their applications. Our sales are made pursuant to standard purchase orders which may be cancelled, reduced, or rescheduled, with little or no notice. We recognize product revenue upon shipment when we satisfy our performance obligations as evidenced by the transfer of control of our products to customers. We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products.





             Three Months Ended March 31,              Change
               2021                 2020             $          %
                      (in thousands except percentage)
Revenue   $       35,542       $       21,742     $ 13,800       63 %



Revenue increased by $13.8 million, or 63%, for the three months ended March 31, 2021 compared to the same period in the prior year. The increase was primarily related to 9% higher volume of shipments year over year and an increase of 15% in average selling price of our products ("ASPs"). The increase in sales volume was driven by higher demand for our products from new and existing customers, including new design wins at new and existing customers. The ASP increase was related to change in mix of the products we shipped and increase in selling prices for certain customers. We expect our revenue to fluctuate in the future primarily based on the volume of shipments and ASP changes. We may not be able to sustain our ASP increases in the future at this current rate.







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For the three months ended March 31, 2021, sales attributable to our largest end customer accounted for 37% of our revenue. Our end customers predominantly purchase our products from distributors. For the three months ended March 31, 2021, our top three distributors by revenue together accounted for approximately 62% of our revenue. Revenue attributable to our largest ten end customers accounted for 60% of our revenue for the three months ended March 31, 2021.

Cost of Revenue, Gross Profit, and Gross Margin

Cost of revenue consists of wafers acquired from third-party foundries, assembly, packaging, and test cost of our products paid to third-party contract manufacturers, and personnel and other costs associated with our manufacturing operations. Cost of revenue also includes depreciation of production equipment, inventory write-downs, amortization of internally developed software, shipping and handling costs, and allocation of overhead and facility costs. We also include credits for rebates received from foundries to cost of revenue.





                     Three Months Ended March 31,              Change
                       2021                 2020             $         %
                              (in thousands except percentage)
Cost of Revenue   $       16,725       $       11,766     $ 4,959       42 %
Gross Profit              18,817                9,976       8,841       89 %
Gross Margin                  53 %                 46 %



Gross profit increased by $8.8 million in the three months ended March 31, 2021 compared to the same period in the prior year. Gross profit increased a net $9.8 million mainly from higher sales volume and an increase in ASPs of our products. This increase was offset by higher other manufacturing and overhead costs of $1.0 million of which $0.4 million was related to higher stock-based compensation expense.

Gross margin was higher by 7% in the three months ended March 31, 2021 when compared to the same period in the prior year. The gross margin increased by 5% from higher sales volume and an increase in ASPs. There was additonal 2% improvement in our other manufacturing costs as it decreased as a percentage of revenue.





Operating Expenses

Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs are the most significant component of our operating expenses and consist of salaries, benefits, bonuses, stock-based compensation, and commissions. Our operating expenses also include consulting costs, allocated costs of facilities, information technology and depreciation.





                                   Three Months Ended March 31,                  Change
                                    2021                  2020              $             %
                                               (in thousands except percentage)
Operating Expenses:
Research and development       $        11,180       $         7,024     $  4,156            59 %
Selling, general and
administrative                          11,123                 7,808        3,315            42 %
Total operating expenses       $        22,303       $        14,832     $  7,471            50 %




Research and Development

Our research and development efforts are focused on the design and development of next-generation silicon timing systems solutions. Our research and development expense consists primarily of personnel costs, which include stock-based compensation, pre-production engineering mask costs, software license and intellectual property expenses, design tools and prototype-related expenses, facility costs, supplies, professional and consulting fees, and allocated overhead costs. We expense research and development costs as incurred. We believe that continued investment in our products and services is important for our future growth and acquisition of new customers and, as a result, we expect our research and development expenses to continue to increase in absolute dollars. However, we expect our research and development expense to fluctuate as a percentage of revenue from period to period depending on the timing of these expenses.







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Research and development expense increased by $4.2 million, or 59%, for the three months ended March 31, 2021 compared to the same period in the prior year, primarily due to an increase in stock-based compensation expense of $1.8 million, higher personnel costs of $1.4 million due to increased headcount, and higher project expenses.

Sales, General and Administrative

Sales, general and administrative expense consists of personnel costs, including stock-based compensation, professional and consulting fees, accounting and audit fees, legal costs, field application engineering support, travel costs, advertising expenses and allocated overhead costs. We expect sales, general and administrative expense to continue to increase in absolute dollars as we increase our personnel and grow our operations, although it may fluctuate as a percentage of revenue from period to period depending on the timing of these expenses.

Selling, general and administrative expense increased by $3.3 million, or 42%, for the three months ended March 31, 2021 compared to the same period in the prior year, primarily due to higher stock-based compensation expense of $2.0 million and higher personnel costs of $1.3 million largely related to increased headcount.

Other Expense (Income)

Other expense (income) consists primarily of interest expense on our outstanding debt, interest income on our cash balances, foreign exchange gains and losses, and asset dispositions. See Note 9 to our condensed consolidated financial statements under Item 1 for more information about our debt.





                                   Three Months Ended March 31,               Change
                                  2021                    2020             $          %
                                            (in thousands except percentage)
Interest Expense              $          -           $           303     $ (303 )     (100 %)
Other expense (income), net             39                       (68 )      107       (157 %)
Total other expense           $         39           $           235     $ (196 )      (83 %)



Other expense decreased $0.2 million for three months ended March 31, 2021 compared to the same period in the prior year, primarily as a result of interest expense savings paying down of all our outstanding loans under our credit facilities.

Income Tax Expense

Income tax expense consists primarily of state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We have a full valuation allowance for deferred tax assets as the realization of the full amount of our deferred tax asset is uncertain, including NOL, carryforwards, and tax credits related primarily to research and development. We expect to maintain this full valuation allowance until realization of the deferred tax assets becomes more likely than not.



                       Three Months Ended March 31,            Change
                          2021                  2020         $         %
                               (in thousands except percentage)
Income tax expense   $           (40 )         $    (2 )   $ (38 )   1900%






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Liquidity and Capital Resources

As of March 31, 2021 and December 31, 2020, we had cash and cash equivalents of $257.0 million and $73.5 million, respectively. Our principal use of cash is to fund our operations to support growth.

In June 2020, we completed a follow-on public offering of our shares, resulting in net proceeds to us of $45.8 million after deducting underwriting discounts and commissions and deferred offering costs. We used the funds obtained to pay down all our outstanding debt. In February 2021, we completed an additional follow-on public offering of our shares, resulting in net proceeds to us of $181.6 million after deducting underwriting discounts and commissions and deferred offering costs.

The Company canceled its $50.0 million credit facility with MUFG. We believe that our existing cash and cash equivalents will be sufficient to meet our cash needs for at least the next 12 months. Over the longer term, our future capital requirements will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, and the continuing market acceptance of our solutions. In the event that we need to borrow funds or issue additional equity, we cannot provide any assurance that any such additional financing will be available on terms acceptable to us, if at all. If we are unable to raise additional capital when we need it, it would harm our business, results of operations and financial condition.





                                               Three Months Ended March 31,
                                                 2021                 2020
                                                      (in thousands)

Net cash provided by operating activities $ 6,075 $ 2,035 Net cash used in investing activities

                (4,236 )            (1,417 )
Net cash provided by financing activities           181,588               7,212

Net increase in cash and cash equivalents $ 183,427 $ 7,830






Operating Activities

In the three months ended March 31, 2021, net cash provided by operating activities of $6.1 million was primarily due to a net loss of $3.6 million offset by non-cash expenses of $8.3 million and a change in operating assets and liabilities of $1.4 million. Non-cash expenses were mainly related to depreciation and amortization and stock-based compensation expense. Operating assets and liabilities increased primarily due to higher accounts payable due to timing of payments and higher accounts receivables due to timing of shipments partially offset by an increase in inventories as we managed our inventory levels.

In the three months ended March 31, 2020, net cash provided by operating activities of $2.0 million was primarily due to a net loss of $5.1 million offset by non-cash expenses of $4.7 million and a change in operating assets and liabilities of $2.4 million. Non-cash expenses were mainly related to depreciation and amortization, stock-based compensation expense, and non-cash operating lease costs. Operating assets and liabilities increased primarily due to by lower prepaid expenses and other current assets related to advance payments to suppliers for inventory, higher accrued expenses and other liabilities due to timing of payments and lower accounts receivables and related party receivables due to timing of shipments and collections partially offset by an increase in inventories as we managed our inventory levels and lower lease liabilities due to timing of payments.

Investing Activities

Our investing activities consist primarily of capital expenditures for property and equipment purchases. Our capital expenditures for property and equipment have primarily been for general business purposes, including machinery and equipment, leasehold improvements, acquired software, internally developed software used in production and support of our products, computer equipment used internally, and production masks to manufacture our products.

In the three months ended March 31, 2021, cash used in investing activities was $4.2 million. We paid $3.9 million largely to purchase test and other manufacturing equipment to support the increase in demand of our products and other property and equipment for general business purposes.

In the three months ended March 31, 2020, cash used in investing activities was approximately $1.4 million and consisted primarily of the purchase of production masks, internally developed software, and other property and equipment for general business purposes.

Financing Activities

Cash provided by financing activities includes proceeds from borrowings under our credit facilities and proceeds from issuance of shares.





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In the three months ended March 31, 2021, net cash provided by financing activities was $181.6 million, consisting of proceeds from issuance of shares of $190.5 million net of underwriting commissions and discounts of $8.6 million and deferred offering costs of $0.3 million.

In the three months ended March 31, 2020 cash used in financing activities was $7.2 million, consisting of borrowings of $12.0 million offset by repayments of $3.0 million under our short-term revolving line of credit and $1.8 million payment of tax withholdings paid on behalf of employees for net share settlement at the time of vesting.

Off-Balance Sheet Arrangements

During the periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these financial statements and accompanying disclosures requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and the accompanying notes. The Securities and Exchange Commission, or SEC, has defined a company's critical accounting policies as policies that are most important to the portrayal of a company's financial condition and results of operations, and which require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified our most critical accounting policies and estimates to be as follows: (1) revenue recognition; (2) inventory; (3) stock-based compensation; (4) accounting for income taxes and (5) segment reporting. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information not presently available. Actual results may differ significantly from these estimates if the assumptions, judgments, and conditions upon which they are based turn out to be inaccurate. Management believes that there have been no significant changes to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 16, 2021.

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