The
following table presents a roll forward of the inventory obsolescence reserve
for the indicated periods:
|
|
Three
Months Ended
September
30
|
|
Six
Months Ended
September
30
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Balance
at beginning of period
|
|
$
|
3,607
|
|
$
|
3,756
|
|
$
|
3,929
|
|
$
|
3,665
|
|
Increase
to provision
|
|
|
532
|
|
|
505
|
|
|
211
|
|
|
741
|
|
Write
offs
|
|
|
(1,161
|
)
|
|
(1,135
|
)
|
|
(1,162
|
)
|
|
(1,280
|
)
|
Balance
at end of period
|
|
$
|
2,978
|
|
|
3,126
|
|
$
|
2,978
|
|
|
3,126
|
|
7. Product
warranty
Genesis
accrues the estimated future cost of replacing faulty products under the
provisions of its warranty agreements as an increase to cost of revenues.
Product warranties typically cover a one-year period from the date of delivery
to the customer. Management estimates the accrual based on known product
failures (if any), historical experience, and other currently available evidence
and records the accrual within accrued liabilities. The following table presents
a roll forward of the product warranty accrual for the indicated periods:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
September
30
|
|
September
30
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Balance
at beginning of period
|
|
$
|
379
|
|
$
|
346
|
|
$
|
210
|
|
$
|
164
|
|
Increase
to provision
|
|
|
465
|
|
|
-
|
|
|
721
|
|
|
260
|
|
Processed
claims
|
|
|
(349
|
)
|
|
(231
|
)
|
|
(436
|
)
|
|
(309
|
)
|
Balance
at end of period
|
|
$
|
495
|
|
$
|
115
|
|
$
|
495
|
|
$
|
115
|
|
8. Intangible
assets
Intangible
assets consist of the following:
|
|
September
30, 2007
|
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|
Acquired
technology
|
|
$
|
39,832
|
|
$
|
(37,086
|
)
|
$
|
2,746
|
|
Patents
|
|
|
5,335
|
|
|
(1,440
|
)
|
|
3,895
|
|
Other
|
|
|
500
|
|
|
(500
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
45,667
|
|
$
|
(39,026
|
)
|
$
|
6,641
|
|
|
|
March
31, 2007
|
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Impairment
|
|
Net
|
|
Acquired
technology
|
|
$
|
48,792
|
|
$
|
(44,009
|
)
|
$
|
(3,425
|
)
|
$
|
1,358
|
|
Patents
|
|
|
5,132
|
|
|
(1,484
|
)
|
|
—
|
|
|
3,648
|
|
Other
|
|
|
500
|
|
|
(500
|
)
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
54,424
|
|
$
|
(45,993
|
)
|
$
|
(3,425
|
)
|
$
|
5,006
|
|
In
the
quarter ended December 31, 2006, the Company determined a triggering event
occurred due to a decline in projected revenue for products which incorporate
technology acquired from VM Labs in fiscal 2002, which required the Company
to
reassess the underlying value of the acquired technology. The Company engaged
an
independent valuation professional to assist with its measurement of fair
value
as part of the intangible asset impairment test. The recoverability of this
asset was assessed by comparing its carrying amount with its estimated fair
value using a discounted cash flow approach. An impairment was identified
for
which the Company recorded a non-cash impairment charge of $3,425 in the
quarter
ended December 31, 2006 prior to performing the goodwill impairment
analysis.
Estimated
future intangible assets’ amortization expense, based on current balances as of
September 30, 2007, is as follows:
For the year ended
March 31:
|
|
|
|
2008
|
|
$
|
765
|
|
2009
|
|
|
1,479
|
|
2010
|
|
|
1,261
|
|
2011
|
|
|
921
|
|
2012
|
|
|
480
|
|
Thereafter
|
|
|
1,735
|
|
Total
|
|
$
|
6,641
|
|
The
majority of the goodwill carried on the balance sheet arose in February
2002
when the Company acquired Sage Inc. for approximately $297,000.
The
Company is required to evaluate goodwill annually or whenever events or
changes
in circumstances indicate that the carrying amount may not be recoverable.
Impairment is tested at the reporting unit level by comparing the reporting
unit’s carrying amount to its fair value. Management has determined that the
Company has one reporting unit for purposes of goodwill impairment review
under
SFAS 142. Where the carrying amount of the reporting unit exceeds its fair
value, an impairment loss is recognized for the amount by which the carrying
amount of the reporting unit’s goodwill exceeds the implied fair value of that
goodwill.
In
the
quarter ended December 31, 2006, the Company determined a triggering event
occurred due to a sustained reduction in the Company’s market capitalization
plus the decline in current and projected revenue from certain customers,
which
required management to assess the recoverability of goodwill. Upon performing
the impairment test, it was found that the carrying value of goodwill exceeded
its implied fair value of $84,405 and therefore an impairment charge of
$97,576
was recorded in the quarter ending December 31, 2006. The Company engaged
an independent valuation professional to assist with its measurement of
fair
value as part of the goodwill impairment test. The fair value of the reporting
unit was estimated using a combination of the market approach and a discounted
cash flows approach.
|
|
September 30,
2007
|
|
March 31,
2007
|
|
|
|
Cost
|
|
Impairment
|
|
Net
|
|
Cost
|
|
Impairment
|
|
Net
|
|
Goodwill
|
|
$
|
84,405
|
|
$
|
-
|
|
$
|
84,405
|
|
$
|
181,981
|
|
$
|
(97,576
|
)
|
$
|
84,405
|
|
10.
Other long-term assets
Other
long-term assets consist of the following:
|
|
September
30, 2007
|
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Impairment
|
|
Net
|
|
Investment
|
|
$
|
10,190
|
|
$
|
—
|
|
$
|
(8,690
|
)
|
$
|
1,500
|
|
Production
mask sets
|
|
|
11,405
|
|
|
(6,653
|
)
|
|
—
|
|
|
4,752
|
|
Total
|
|
$
|
21,595
|
|
$
|
(6,653
|
)
|
$
|
(8,690
|
)
|
$
|
6,252
|
|
|
|
March
31, 2007
|
|
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|
Investment
|
|
$
|
10,190
|
|
$
|
—
|
|
$
|
10,190
|
|
Production
mask sets
|
|
|
8,930
|
|
|
(
3,760
|
)
|
|
5,170
|
|
Total
|
|
$
|
19,120
|
|
$
|
(3,760
|
)
|
$
|
15,360
|
|
In
October 2007, Mobilygen Corp. (“Mobilygen”) completed an additional round of
financing that indicated the value of the Company’s investment was impaired at
September 30, 2007. Under the terms of the financing the preferred shares
held
by Genesis were converted to common shares. As a result, in the current
quarter
the Company recorded an impairment of $8,690, to write down the investment
to
its estimated fair value.
11.
Income Taxes
In
June
2006, the Financial Standards Accounting Board (“FASB”) issued Financial
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
which clarifies the accounting for uncertainty in income taxes recognized
in a
company’s financial statements in accordance with FASB Statement No. 109,
“Accounting for Income Taxes.” The interpretation prescribes a recognition
threshold and measurement attribute criteria for the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a
tax return. The interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
We
adopted the provisions FIN 48 on April 1, 2007. No material adjustments
in the
reserve for unrecognized income tax benefits was recorded as a result of
the
implementation of FIN 48. At the adoption date of April 1, 2007, we had
$6,340
of unrecognized tax benefits, $1,258 of which would affect our effective
tax
rate if recognized. As at June 30, 2007, there was no change in the balance
of
unrecognized tax benefit.
At
September 30, 2007, we have $6,274 of unrecognized tax benefits. It is
possible
that this balance may decrease by approximately $238 in the next 12 months
due
to the settlement of an ongoing tax audit. These balances relate to certain
non-deductible expenditures.
We
recognize interest and penalties related to uncertain tax positions in
income
tax expense. As of September 30, 2007, we have approximately $519 of accrued
interest and penalties related to uncertain tax positions.
The
tax
years from 1999 onwards remain open to examination in Canada and the tax
years
from 1995 onwards remain open to examination in the United States.
12. Related
party transactions
In
March
2006, Genesis made an equity investment in Mobilygen and Elias Antoun,
our
president and CEO, joined Mobilygen’s Board of Directors.
In
March
2006, we entered into a cross-licensing agreement with Mobilygen, a privately
held company that is developing H.264 and other video codec solutions for
mobile
devices. The agreement allows for both companies access to certain technologies
for select markets and enables them to jointly define future products to
complement existing product portfolios.
In
October 2007, Mobilygen completed an additional round of financing that
indicated the value of the Company’s investment was impaired at September 30,
2007. Under the terms of the financing the preferred shares held by Genesis
were
converted to common shares. As a result, in the current quarter the Company
recorded an impairment of $8,690, to write down the investment to its estimated
fair value.
The
investment in Mobilygen is recorded within other long term assets. No financial
transactions were undertaken with Mobilygen during the three and six months
ended September 30, 2006.
13. Contingent
liabilities
Genesis
is not party to any material legal proceedings.
14.
Recent
Accounting Pronouncements
Statement
of Financial Accounting Standards No. 157, “Fair Value Measurement”
(“SFAS 157”) was issued in September 2006. SFAS 157 provides guidance
for using fair value to measure assets and liabilities. SFAS 157 also
expands disclosures about the extent to which companies measure assets
and
liabilities at fair value, the information used to measure fair value,
and the
effect of fair value measurement on earnings. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements
and
does not expand the use of fair value measurements in any new circumstances.
Under SFAS 157, fair value refers to the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction
between
market participants in the market in which the entity transacts. SFAS 157
is effective for fair value measurements and disclosures made by the Company
in
its fiscal year beginning on April 1, 2008. The Company is currently
reviewing the impact of this statement.
In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair
Value Option for Financial Assets and Financial Liabilities — Including an
Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159
permits an entity to choose to measure many financial instruments and certain
other items at fair value. Most of the provisions in SFAS 159 are elective;
however, the amendment to FASB Statement No. 115, “Accounting for Certain
Investments in Debt and Equity Securities”, applies to all entities with
available-for-sale and trading securities. SFAS 159 is effective for the
Company beginning April 1, 2008. The Company is currently assessing the
potential impact that the adoption of SFAS 159 will have on its financial
statements.
In
June
2007 the Emerging Issues Task Force (“EITF”) reached a consensus on Issue
07-03
Accounting for Advance Payments for Goods or Services to Be Used in Future
Research and Development.
Under
this EITF, an entity would defer and capitalize non-refundable advance
payments
made for research and development activities until the related goods are
delivered or the related services are performed. EITF 07-03 is effective
for
fiscal years beginning after December 15, 2007 and interim periods within
those
years. The Company is currently assessing the potential impact of this
new
EITF.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion contains forward-looking statements within the meaning
of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of
the Securities
Exchange Act of 1934, as amended, including statements
regarding anticipated
revenues and unit shipments, gross margins, operating expenses, inventory
levels, tax rates, amortization of intangibles and
stock-based compensation, liquidity and cash flow, business strategy, demand
for our
products, average selling prices, regional market growth, amount of sales
to distributors
and future competition. Words such as “anticipates,” “expects,” “intends,”
“plans,” “believes,” “seeks,” “estimates” and similar expressions
identify such
forward-looking statements. These forward-looking statements are subject
to risks
and uncertainties that could cause actual results to differ materially
from those
indicated in the forward-looking statements. Factors which could cause
actual results
to differ materially include those set forth in the following
discussion, and,
in particular, the risks discussed below under the subheading “Risk Factors”
and in
other documents we file with the Securities and Exchange Commission.
Unless required
by law, we undertake no obligation to update publicly any
forward-looking statements.
We
begin
Management’s Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) with a general discussion of our target markets, the
nature of our products, and some of the business issues we are facing as
a
company. Next, we address the Critical Accounting Policies and Estimates
that we
believe are important to understanding the assumptions and judgments
incorporated in our reported financial results. We then discuss our Results
of
Operations for the three and six month periods ended September 30, 2007
and
September 30, 2006 as viewed through the eyes of our management. Lastly,
we
provide an analysis of changes in our balance sheet and cash flows, and
discuss
our financial commitments. This MD&A should be read in conjunction with the
other sections of this Quarterly Report on Form 10-Q. Dollars are in thousands
unless otherwise noted.
OVERVIEW
We
develop and market image-processing and image enhancing solutions. We design,
develop and market integrated circuits that receive and process digital
video
and graphic images. In addition, Genesis is a leader in the emerging DisplayPort
digital interface standard with products that enable a high performance,
cost-effective, and scalable interface between and among PC and CE devices,
and
that is ideal for connecting a PC or TV display to sources of video, graphical,
and audio content. We also supply reference boards and designs that incorporate
our software and proprietary integrated circuits, or chips. Our products
are
primarily used in large-area liquid crystal displays (“LCDs”). These displays
may be used in desktop monitor applications or other types of display devices,
including LCD TVs, Plasma TVs, Rear Projection TVs, Digital CRT TVs, DVD
players
and AVRs (Audio/Video Receivers).
We
generate the majority of our revenue by selling our image-processing solutions
to the manufacturers of LCD monitors, flat panel displays and television
sets.
We outsource the manufacturing of our products to large semiconductor
manufacturers, thereby eliminating the need for capital-intensive plant
and
equipment. Our most significant cash operating expense is labor, with our
workforce employed in research and development of new products and technologies
and in marketing, sales, customer support, and distribution of our
products.
Our
primary target end-markets are LCD computer monitors and flat panel televisions.
We also design products that serve both applications, so-called multi-function
monitors, and it is difficult to distinguish between a monitor with television
capability and a television with a PC input. Both of these display devices
could
use the same Genesis chip. Similarly, we supply certain customers with
chips
originally designed for an LCD computer monitor that the customer may use
in
flat panel televisions. We assist customers in developing their designs.
Typically, a TV design will take substantially more time and support from
our
software application and field application engineers than a monitor design,
increasing our costs during a customer’s pre-production period.
The
growth in our target markets is limited by the industry’s capacity to supply LCD
panels or other digital displays. Furthermore, the availability of LCD
panels
from time to time has been constrained, causing unexpected increases in
the cost
of LCD panels to our customers, thus resulting in customers rapidly changing
their demand expectations for our products. Our products usually represent
less
than two percent of the average retail cost of a standard flat panel TV
today,
while the cost of the LCD panel within a LCD computer monitor or flat panel
TV
represents the majority of the cost of the finished product. The increase
in
production volumes of larger size LCD panels in new fabrication facilities
coming on line over the next few years is expected to result in lower-cost
panels and hence lower average selling prices of the end product. We believe
retail prices for televisions will continue to decline and we expect this
trend
to lead to an increase in demand for display controllers.
The
LCD
computer monitor and flat panel TV industries are very competitive and
growth
industries like ours tend to attract new entrants. The average selling
prices of
monitor display controllers, despite increased functionality, have declined
by
more than 40% over the past two fiscal years. Our strategy is to lead the
market
by integrating new features and functions and by providing the highest
image
quality at a cost-effective price. Our goal is to deliver the desired
feature-rich image quality through relationships with customers, patented
technologies, effective chip design, software capabilities, and customer
support. We also strive to become profitable by reducing product cost through
efficient chip design and driving costs down throughout our supply
chain.
Sales
to
distributors comprised approximately 30% of revenue for the three months
ended
September 30, 2007 and 28% for the six months ended September 30, 2007. We
are also using distributor relationships to enable us to increase our market
penetration of smaller customers with minimal incremental direct customer
support.
Average
selling prices and product margins of our products are typically highest
during
the initial periods following product introduction and decline over time
and as
volume increases.
Part
of
our overall strategy is to develop intellectual property that is used in
our
integrated circuits. We have and will continue to defend our intellectual
property rights against those companies that may use our technology without
the
proper authorization. At times we may enter into agreements that allow
customers
or other companies to license our patented technology.
Revenue
Recognition
Genesis
recognizes revenue primarily from semiconductor product sales to customers
when
a contract is established, the price is determined, shipment is made and
collectability is reasonably assured. Genesis has also periodically entered
into
license agreements and recognizes royalty revenue. Product sales to distributors
may be subject to agreements having a right of return on termination of
the
distributor relationship. Revenue, and related cost of revenues from sales
to
distributors, is deferred until the distributors resell the product, verified
by
point-of-sale reports. At the time of shipment to distributors, we record
a
trade receivable for the selling price, relieve inventory of the value
of the
product shipped and record the gross margin as deferred revenue, a component
of
accrued liabilities on our consolidated balance sheet. In certain circumstances,
where orders are placed with non-cancelable/non-return terms, we recognize
revenue upon shipment. Reserves for sales returns and allowances are recorded
at
the time of recognizing revenue. To date, we have not experienced significant
product returns.
Manufacturing
and Supply
We
generally need to place purchase orders for products before we receive
purchase
orders from our customers. This is because production lead times for silicon
wafers and substrates, from which our products are manufactured, can be
as long
as three to four months, while many of our customers place orders only
one month
or less in advance of their requested delivery date. We have agreements
with
suppliers in Asia such that we are dependent on the suppliers’ manufacturing
yields. We continue to review and, where feasible, establish alternative
sources
of supply to reduce our reliance on individual key suppliers and reduce
lead
times, though dual sourcing for specific products sometimes is more costly
due
to initial set-up costs and lower initial yields as each new manufacturing
supplier ramps up production. While we have frequent communication with
significant customers to review their requirements, we are restricted in
our
ability to react to fluctuations in demand for our products, which exposes
us to
the risk of having either too much or not enough of a particular product.
We
regularly evaluate the carrying value of inventory held.
Global
Operations
We
operate through subsidiaries and offices in several countries throughout
the
world. Our head office is located in Santa Clara (Silicon Valley),
California. Our research and development resources are located in the United
States, Canada and India. The majority of our customers are located in
Asia,
supported by our sales offices in China, Germany, Japan, Singapore, South
Korea,
and Taiwan. Our third party suppliers are located primarily in Taiwan.
Although
all of our revenues and virtually all of our costs of revenues are denominated
in U.S. dollars, portions of our operating expenses are denominated in
foreign currencies. Accordingly, our operating results are affected by
changes
in the exchange rate between the U.S. dollar and those currencies. Any
future strengthening of those currencies against the U.S. dollar could
negatively impact our operating results by increasing our operating expenses
as
measured in U.S. dollars.
We
do not
currently engage in any hedging or other transactions intended to manage
the
risks relating to foreign currency exchange rate fluctuations, other than
natural hedges that occur as a result of holding both assets and liabilities
denominated in foreign currencies. Our operating expenses are also affected
by
changes in the rate of inflation in the various countries in which we
operate.
Critical
Accounting Policies and Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires us to make estimates and assumptions that
affect
the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported
amounts of revenues and expenses during the reporting periods. As described
below, significant estimates are used in determining the allowance for
doubtful
accounts, inventory obsolescence provision, deferred tax asset valuation,
potential settlements and costs associated with patent litigation, royalty
obligations to third parties and the useful lives of intangible assets.
We
evaluate our estimates on an on-going basis, including those related to
product
returns, bad debts, inventories, investments, intangible assets, income
taxes,
warranty and royalty obligations, litigation and other contingencies. We
base
our estimates on historical experience and on various other assumptions
that are
believed to be reasonable under the circumstances, the results of which
form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ
from
these estimates under different assumptions or conditions.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our financial
statements:
|
• |
We
record estimated reductions to revenue for customer returns based
on
historical experience. A customer has a right to return products
only if
the product is faulty or upon termination of a distributor agreement,
although in certain circumstances we agree to accept returns
if
replacement orders are placed for other products or to maintain
our
business relationship. If actual customer returns increase, we
may be
required to recognize additional reductions to
revenue.
|
|
• |
We
record the estimated future cost of replacing faulty product
as an
increase to cost of revenues. To date we have not experienced
significant
returns related to quality. If returns increase as a result of
changes in
product quality, we may be required to recognize additional warranty
expense.
|
|
• |
We
maintain allowances for estimated losses resulting from the inability
of
our customers to make required payments and other disputes. If
the
financial condition of our customers were to deteriorate, resulting
in an
impairment of their ability to make payments, additional allowances
may be
required. We have not suffered any significant loss in this
area.
|
|
• |
We
provide for inventory obsolescence reserves against our inventory
for
estimated obsolete or unmarketable inventory equal to the difference
between the cost of inventory and the estimated market value
based upon
assumptions about future demand and market conditions. If actual
market
conditions are less favorable than those we project, additional
inventory
valuation reserves may be required.
|
|
• |
We
account for stock-based compensation in accordance with SFAS 123R,
stock based compensation is estimated at the grant date based
on the
award’s fair-value as calculated by the Black-Scholes option-pricing
model
and is recognized as expense ratably over the requisite service
period.
The Black-Scholes model requires various judgmental assumptions
including
volatility, and expected option life. In addition, share-based
compensation expense is adjusted to reflect estimated forfeiture
rates. If
any of the assumptions change significantly, stock-based compensation
expense may differ materially in the future from that recorded
in the
current period.
|
|
• |
We
provide for costs associated with settling litigation when we
believe that
we have a reasonable basis for estimating those costs. If actual
costs
associated with settling litigation differ from our estimates,
we may be
required to recognize additional
costs.
|
|
• |
Goodwill,
which represents the excess of cost over the fair value of net
assets
acquired in business combinations, is tested annually for impairment
or
more frequently if events or changes in circumstances indicate
that the
carrying amount may not be recoverable. The impairment tests
are performed
in accordance with FASB Statement of Financial Accounting Standards
No. 142, “Goodwill and Other Intangible Assets”. Accordingly, an
impairment loss is recognized to the extent that the carrying
amount of
goodwill exceeds its implied fair value. This determination is
made at the
reporting unit level. We have assigned all goodwill to a single,
enterprise-level reporting unit. The impairment test consists
of two
steps. First, we determine the fair value of the reporting unit.
The fair
value is then compared to its carrying amount. Second, if the
carrying
amount of the reporting unit exceeds its fair value, an impairment
loss is
recognized for any excess of the carrying amount of the reporting
unit’s
goodwill over the implied fair value of that goodwill. The implied
fair
value of goodwill would be determined by allocating the fair
value of the
reporting unit in a manner similar to a purchase price allocation
in
accordance with FASB Statement of Financial Accounting Standards
No. 141, “Business Combinations”. The residual fair value after this
allocation is the implied fair value of the reporting unit goodwill.
We
perform our annual impairment test on January 1st of each
year.
|
As
a
result of an impairment review that was performed in December 2006, the
Company
recorded a goodwill impairment charge of $97,576 in fiscal 2007. Goodwill
balances may also be affected by changes in other estimates, for example,
related to the ability to utilize acquired tax benefits, made at the time
of
acquisitions.
|
• |
We
adopted the provisions of the Financial Standards Accounting
Board (FASB)
Financial Interpretation No. 48, Accounting for Uncertainty in
Income
Taxes (“FIN 48”), as of April 1, 2007. FIN48 clarifies the accounting for
uncertainty in income taxes recognized in a company’s financial statements
in accordance with FASB Statement No. 109, Accounting for Income
Taxes.
The interpretation prescribes a recognition threshold and measurement
attribute criteria for the financial statement recognition and
measurement
of a tax position taken or expected to be taken in a tax return.
The
interpretation also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure
and
transition.
|
We
record
a valuation allowance to reduce our deferred tax assets to the amount that
we
believe is more likely than not to be realized. The Company has, and expects
to
continue to provide a valuation allowance on future tax benefits in certain
jurisdictions until it can demonstrate a sustained level of profitability
that
establishes its ability to utilize the assets in the jurisdictions that
the
assets relate.
|
• |
From
time to time, we incur costs related to potential merger activities.
When
we assess that we will be the acquirer for accounting purposes
in such
transactions and we expect to complete the transaction, direct
costs
associated with the acquisition are deferred and form part of
the final
purchase price. In the event these assessments change, any such
deferred
costs would be expensed. Costs associated with other merger activities
are
expensed as incurred.
|
Recent
Accounting Pronouncements
Please
refer to Note 14 of the condensed consolidated financial statements
contained in this Quarterly Report on Form 10-Q.
RESULTS
OF OPERATIONS
THREE
MONTHS ENDED SEPTEMBER 30, 2007
REVENUE
AND GROSS PROFIT
The
following table shows unaudited statement of operations data for the three
months ended September 30, 2007 and September 30, 2006:
|
|
Three
months ended
September
30
(dollars
in thousands)
|
|
|
|
2007
|
|
2006
|
|
Total
revenue
|
|
$
|
57,505
|
|
$
|
69,009
|
|
Gross
profit
|
|
|
19,057
|
|
|
30,784
|
|
Gross
profit percentage
|
|
|
33.1
|
%
|
|
44.6
|
%
|
Revenue
by geography:
|
|
|
|
|
|
|
|
United
States
|
|
$
|
203
|
|
$
|
683
|
|
China
|
|
|
19,080
|
|
|
26,230
|
|
Europe
|
|
|
1,351
|
|
|
9,213
|
|
Japan
|
|
|
10,701
|
|
|
6,351
|
|
South
Korea
|
|
|
19,382
|
|
|
19,319
|
|
Taiwan
|
|
|
5,445
|
|
|
6,002
|
|
Rest
of world
|
|
|
1,343
|
|
|
1,211
|
|
Total
revenue
|
|
$
|
57,505
|
|
$
|
69,009
|
|
Total
Revenues
Revenues
for the three months ended September 30, 2007 decreased by 17% to $57,505
from
$69,009 for the three months ended September 30, 2006. The revenue decline
year
over year is attributable to an 11% decrease in unit shipments to
15.1 million units for the quarter ended September 30, 2007 from
17.0 million units for the same period last year, as well as a decline in
the average selling prices (“ASPs”) for our products of 6%. The decrease in unit
shipments year over year is attributable to a loss in market share in both
monitor and flat panel TV products. The LCD computer monitor and flat panel
TV
industries are very competitive and growth industries like ours tend to
attract
new entrants. The average selling prices of monitor display controllers,
despite
increased functionality, have declined by more than 40% over the past two
fiscal
years. Going forward we do not expect the decline in ASPs for these products
to
continue at the same pace.
Our
products are designed for multiple applications. Therefore, we must estimate
whether the chips we have sold are used in LCD monitors or flat-panel
televisions. Estimated revenue from monitor controllers and licensing decreased
to $22,365 for the quarter ended September 30, 2007 from $23,334 for the
same
period last year, due to lower unit shipments and a decline in ASPs. Our
estimate of unit shipments into digital televisions and other related video
devices decreased by 23%, compared to the same period last year. Estimated
revenue from this market decreased by 23% to $35,140. During the second
quarter
of fiscal year 2008, we estimate that approximately 61% of total revenue
was
from TV and video products, compared with 66% for the same period last
year. We
expect revenue in the third quarter of fiscal 2008 to decrease slightly,
due to
seasonality.
Revenue
in China decreased 27% in the quarter ended September 30, 2007 compared
with the
same period last year. The revenue decline year over year is mainly attributable
to a loss in market share of monitor and TV products. Revenue in Europe
decreased $7,862 year over year due to a loss of significant TV designs
of one
of our customers. Revenue in Japan increased $4,350 in the quarter ended
September 30, 2007 compared to the same period last year due to customer
design
wins.
We
continue to ship the majority of our product to customers located in Asia,
and
we expect most of our revenue to come from this region in the future.
Gross
Profit
Gross
profit for the three months ended September 30, 2007 was $19,057, representing
a
decrease of approximately 38% compared with the quarter ended September
30, 2006
gross profit of $30,784. Gross profit represented 33.1% of revenues for
the
three months ended September 30, 2007, compared with 44.6% for the same
period
last year. The decrease in the gross profit percentage is primarily due
to a
lower percentage of revenue from our higher margin business, increased
pricing
pressures on our products and the write off of certain mask sets, partially
offset by royalty revenue received during the current quarter. We expect
that
our gross margins will continue to be under pressure during the next
quarter.
OPERATING
EXPENSES
Research
and Development
|
|
Three
months ended
|
|
|
|
September
30,
2007
|
|
September
30,
2006
|
|
|
|
$000
|
|
%
of
Revenue
|
|
$000
|
|
%
of
Revenue
|
|
Research
and development
|
|
$
|
16,009
|
|
|
27.8
|
%
|
$
|
17,401
|
|
|
25.2
|
%
|
Research
and development expenses include costs associated with research and development
personnel, application engineers, development tools, hardware and software
licenses, prototyping and the amortization of acquired intangibles.
Research
and development expenses for the three months ended September 30, 2007
were
$16,009, compared with $17,401 for the three months ended September 30,
2006.
The 8% decrease in research and development expenses in the current quarter
is
mainly due to the decrease in stock based compensation charges and amortization
of acquired intangibles compared to the same period last year, partially
offset
by the impact of the depreciation of the U.S. dollar in the current period.
The
company continues to invest in the research and development of technologies
addressing the television and video markets, especially the digital TV
market
and other related technologies, such as DisplayPort, a new digital interconnect
standard, MCTitm
by
Faroudja, our
motion compensation technology, and our universal demodulator technology
for our
digital television or “DTV” products. In addition, the mix of spending has
changed, as we devote increasing resources to improving performance and
integration of the more complex multimedia and video applications, especially
digital TV technologies, while the focus within the monitor applications
has
moved more towards technologies supporting multi-function monitors. Genesis’
move towards lower geometry processes, including 0.13 micron and lower,
for its
highly integrated system-on-a-chip or “SOC” digital TV chips has also increased
research and development spending.
Research
and development expenses for the quarters ended September 30, 2007 and
September
30, 2006 include stock based compensation charges of $1,633 and $2,467,
respectively, and amortization of acquired intangibles of $50 and $507,
respectively.
Selling,
General and Administrative
|
|
Three
months ended
|
|
|
|
September
30,
2007
|
|
September
30,
2006
|
|
|
|
$000
|
|
%
of
Revenue
|
|
$000
|
|
%
of
Revenue
|
|
Selling,
general and administrative
|
|
|
12,515
|
|
|
21.8
|
%
|
|
15,314
|
|
|
22.2
|
%
|
Selling,
general and administrative expenses consist of personnel and related overhead
costs for selling, including field application engineers, product marketing,
marketing communications, customer support, finance, human resources, legal
costs including settlement fees, IT, public company costs related, but
not
limited to, our compliance with the Sarbanes Oxley Act of 2002, general
management functions and commissions paid to sales representatives.
Selling,
general and administrative expenses for the three months ended September
30,
2007 were $12,515, compared with $15,314 in the three months ended September
30,
2006. The decrease in selling, general and administrative expenses is mainly
due
to legal fees and legal settlement costs incurred in the prior year, as
well as
a decrease in stock-based compensation of $608, partially offset by the
impact
of the depreciation of the U.S. dollar in the current quarter.
Selling,
general and administrative expenses for the quarters ended September 30,
2007
and September 30, 2006 include stock-based compensation charges of $1,671
and
$2,279, respectively.
NON
OPERATING INCOME AND EXPENSES
Interest
and Other Income (Loss)
|
|
Three
months ended
|
|
|
|
September 30,
2007
|
|
September 30,
2006
|
|
|
|
$000
|
|
$000
|
|
Interest
income
|
|
|
2,347
|
|
|
2,212
|
|
Loss
on investment
|
|
|
(8,690
|
)
|
|
-
|
|
Interest
and other income (loss)
|
|
|
(6,343
|
)
|
|
2,212
|
|
Interest
income includes interest earned on cash, cash equivalents and short-term
investments.
Interest
income earned for the three months ended September 30, 2007 was $2,347compared
with $2,212 for the three months ended September 30, 2006. The slight increase
is due to higher average cash, cash equivalents and short-term investments
during the second quarter of fiscal 2008 compared to the same period last
year.
In
the
current quarter, the Company recorded an impairment of $8,690, to write
down the
Mobilygen investment to its estimated fair value.
Provision
for Income Taxes
|
|
Three
months ended
|
|
|
|
September 30,
2007
|
|
September 30,
2006
|
|
|
|
$000
|
|
$000
|
|
Income
tax expense
|
|
|
1,022
|
|
|
173
|
|
We
recorded a net income tax expense of $1,022 for the three months ended
September
30, 2007 compared to an expense of $173 for the three months ended September
30,
2006. The income tax expense for the three months ended September 30, 2007
was primarily due to Canadian withholding tax and Indian income taxes.
Due to
the expiration of the Indian tax holiday, the Indian subsidiary is now
subject
to normal taxation under the provisions of the domestic Indian tax
statutes.
Our
accounting effective tax rate typically differs from the expected statutory
rates due to several permanent differences including, but not limited to,
research and experimental development tax credits, stock-based compensation
expense for which no tax benefits can be recognized, foreign exchange
fluctuations on the U.S. dollar working capital balances of foreign
subsidiaries, and differences in tax rates in foreign jurisdictions. Any
net tax
benefit of these items is partially offset by changes in the valuation
allowance
against net operating loss carry forwards. In assessing the realization
of
deferred tax assets, management considers whether it is more likely than
not
that some portion or all of its deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences
become deductible in the appropriate jurisdiction. Management considers
projected future taxable income, uncertainties related to the industry
in which
Genesis operates and tax planning strategies in making this assessment.
Historically, the Company has recorded the majority of its valuation allowance
against the tax attributes in the United States. FASB Statement No.
109, Accounting for Income Taxes, states that forming a conclusion that
a
valuation allowance is not needed is difficult when there is negative evidence,
such as losses in the jurisdictions to which the deferred tax asset
relate. As a result of the review undertaken in the third quarter of
fiscal 2007, the Company concluded that it was appropriate to establish
a full
valuation allowance in the financial statements against the tax attributes
in
Canada. In addition, we expect to provide a full valuation allowance on
future tax benefits until we can demonstrate a sustained level of profitability
that establishes our ability to utilize the assets in the jurisdictions
to which
the assets relate. Furthermore, in the near term we expect approximately
$1
million of income tax expense per quarter, while the company incurs operating
losses.
In
September 2007, a new US Canada Treaty Protocol was signed, which proposes
changes to the withholding tax rates applied to cross border interest payments
between related parties. If ratified, withholding tax rates on interest
payments
between related parties would be reduced from the existing 10% to 7% in
the
first year following entry into force, 4% in the second year and 0% in
the third
and later years following entry into force. When ratified, this change
would
impact the interest withholding tax for such periods. We do not expect
this
protocol to be ratified in the current fiscal year.
In
June
2006, the Financial Standards Accounting Board (“FASB”) issued Financial
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
which clarifies the accounting for uncertainty in income taxes recognized
in a
company’s financial statements in accordance with FASB Statement No. 109,
“Accounting for Income Taxes.” The interpretation prescribes a recognition
threshold and measurement attribute criteria for the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a
tax return. The interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
We
adopted the provisions FIN 48 on April 1, 2007. As a result of the
implementation of FIN 48, we recognized no material adjustment in the reserve
for unrecognized income tax benefits.
SIX
MONTHS ENDED SEPTEMBER 30, 2007
REVENUE
AND GROSS PROFIT
The
following table shows unaudited statement of operations data for the six
months
ended September 30, 2007 and September 30, 2006:
|
|
Six
months ended
September
30
(dollars
in thousands)
|
|
|
|
2007
|
|
2006
|
|
Total
revenue
|
|
$
|
101,489
|
|
$
|
124,908
|
|
Gross
profit
|
|
|
36,010
|
|
|
53,443
|
|
Gross
profit percentage
|
|
|
35.5
|
%
|
|
42.8
|
%
|
Revenue
by geography:
|
|
|
|
|
|
|
|
United
States
|
|
$
|
517
|
|
$
|
841
|
|
China
|
|
|
33,154
|
|
|
51,782
|
|
Europe
|
|
|
3,782
|
|
|
14,791
|
|
Japan
|
|
|
17,185
|
|
|
11,832
|
|
South
Korea
|
|
|
33,744
|
|
|
31,560
|
|
Taiwan
|
|
|
9,973
|
|
|
11,843
|
|
Rest
of world
|
|
|
3,134
|
|
|
2,259
|
|
Total
revenue
|
|
$
|
101,489
|
|
$
|
124,908
|
|
Total
Revenues
Revenues
for the six months ended September 30, 2007 decreased by 19% to $101,489
from
$124,908 for the six months ended September 30, 2006. The revenue decline
year
over year is attributable to a 15% decrease in unit shipments to
28.0 million units for the six months ended September 30, 2007 from
33.0 million units for the same period last year, as well as the declining
average selling prices (“ASPs”) of 4%. The decrease in unit shipments year over
year is attributable to a loss in market share in both monitor and flat
panel TV
products. The LCD computer monitor and flat panel TV industries are very
competitive and growth industries like ours tend to attract new entrants.
The
average selling prices of monitor display controllers, despite increased
functionality, have declined by more than 40% over the past two fiscal
years.
Going forward we do not expect the decline in ASPs for these products to
continue at the same pace.
Our
products are designed for multiple applications. Therefore, we must estimate
whether the chips we have sold are used in LCD monitors or flat-panel
televisions. Estimated revenue from monitor controllers and licensing decreased
to $43,733 for the six months ended September 30, 2007 from $47,839 for
the same
period last year, due to lower unit shipments. Our estimate of unit shipments
into digital televisions and other related video devices decreased by 23%,
compared to the same period last year. Estimated revenue from this market
decreased by 25% to $57,571. For the six months ended September 30, 2007,
we
estimate that approximately 57% of total revenue was from TV and video
products,
compared with 62% for the same period last year.
Revenue
in China decreased 36% in the six months ended September 30, 2007 compared
with
the same period last year. The revenue decline year over year is mainly
attributable to a loss in market share of monitor and TV products. Revenue
in
Europe decreased 74% year over year due to a loss of significant TV designs
of
one of our customers. Revenue in Japan increased 45% in the six months
ended
September 30, 2007, compared to the same period last year due to customer
design
wins.
We
continue to ship the majority of our product to customers located in Asia,
and
we expect most of our revenue to come from this region in the future.
Gross
Profit
Gross
profit for the six months ended September 30, 2007 was $36,010, representing
a
decrease of approximately 33% compared with the six months ended
September 30, 2006 gross profit of $53,443. Gross profit represented 35.5%
of
revenues for the six months ended September 30, 2007, compared with 42.8%
for
the same period last year. The decrease in the gross profit percentage
is
primarily due to a lower percentage of our higher margin business, increased
pricing pressures on our products and the write off of certain mask sets,
partially offset by a decrease in inventory reserves and royalty revenue
received during the six months ended September 30, 2007.
OPERATING
EXPENSES
Research
and Development
|
|
Six
months ended
|
|
|
|
September
30,2007
|
|
September
30,2006
|
|
|
|
$000
|
|
%
of
Revenue
|
|
$000
|
|
%
of
Revenue
|
|
Research
and development
|
|
$
|
32,242
|
|
|
31.8
|
%
|
$
|
32,318
|
|
|
25.9
|
%
|
Research
and development expenses include costs associated with research and development
personnel, application engineers, development tools, hardware and software
licenses, prototyping and the amortization of acquired intangibles.
Research
and development expenses for the six months ended September 30, 2007 were
$32,242, compared with $32,318 in the six months ended September 30, 2006.
The
company continues to invest in the research and development of technologies
addressing the television and video markets, especially the digital TV
market
and other related technologies, such as DisplayPort, a new digital interconnect
standard, MCTitm
by
Faroudja, our
motion compensation technology, and our universal demodulator technology
for our
DTV products. In addition, the mix of spending has changed, as we devote
increasing resources to improving performance and integration of the more
complex multimedia and video applications, especially digital TV technologies,
while the focus within the monitor applications has moved more towards
technologies supporting multi-function monitors. Genesis’ move towards lower
geometry processes, including 0.13 micron and lower, for its highly integrated
SOC digital TV chips has also increased research and development spending.
The
lower stock based compensation and amortization of acquired intangibles
charges
were offset by increased investment in research and development of technologies
addressing the television and video markets and the impact of the depreciation
of the U.S. dollar during the six months ended September 30, 2007 compared
to
the same period last year.
Research
and development expenses for the six months ended September 30, 2007 and
September 30, 2006 include stock based compensation charges of $3,483 and
$4,358, respectively, and amortization of acquired intangibles of $100
and $989,
respectively.
Selling,
General and Administrative
|
|
Six
months ended
|
|
|
|
September
30,2007
|
|
September
30,2006
|
|
|
|
$000
|
|
%
of
Revenue
|
|
$000
|
|
%
of
Revenue
|
|
Selling,
general and administrative
|
|
|
25,373
|
|
|
25.0
|
%
|
|
30,136
|
|
|
24.1
|
%
|
Selling,
general and administrative expenses consist of personnel and related overhead
costs for selling, including field application engineers, product marketing,
marketing communications, customer support, finance, human resources, legal
costs including settlement fees, IT, public company costs related, but
not
limited to, our compliance with the Sarbanes Oxley Act of 2002, general
management functions and commissions paid to sales representatives.
Selling,
general and administrative expenses for the six months ended September
30, 2007,
were $25,373, compared with $30,136 in the six months ended September 30,
2006.
The decrease in selling, general and administrative expenses is mainly
due to
legal fees and legal settlement costs incurred in the prior year, as well
as a
decrease in stock-based compensation of $1,731, during the six months ended
September 30, 2007, partially offset by the impact of the depreciation
of the
U.S. dollar in the current period.
Selling,
general and administrative expenses for the six months ended September
30, 2007
and September 30, 2006 include stock-based compensation charges of $3,571
and
$5,302, respectively.
NON
OPERATING INCOME AND EXPENSES
Interest
and Other Income (Loss)
|
|
Six
months ended
|
|
|
|
September 30,
2007
|
|
September 30,
2006
|
|
|
|
$000
|
|
$000
|
|
Interest
income
|
|
|
4,668
|
|
|
4,376
|
|
Gain
(loss) on investment
|
|
|
(8,690
|
)
|
|
3,217
|
|
Interest
and other income (loss)
|
|
|
(4,022
|
)
|
|
7,593
|
|
Interest
income includes interest earned on cash, cash equivalents and short-term
investments.
Interest
income earned for the six months ended September 30, 2007 was $4,668 compared
with $4,376 for the six months ended September 30, 2006. The increase is
due to
the combined effects of higher average cash, cash equivalents and short-term
investments and higher interest rates during the six months ended September
30,
2007 compared to the same period last year.
In
the
quarter ending September 30, 2007, the Company recorded an impairment of
$8,690,
to write down the Mobilygen investment to its estimated fair value. The
prior
period relates to a gain of $3,217, on the disposal of our entire investment
in
the shares of Techwell, Inc. in conjunction with their initial public offering.
Provision
for (Recovery of) Income Taxes
|
|
Six
months ended
|
|
|
|
September 30,
2007
|
|
September 30,
2006
|
|
|
|
$000
|
|
$000
|
|
Income
tax expense (recovery)
|
|
|
1,913
|
|
|
(2,966
|
)
|
We
recorded a net expense of income taxes of $1,913 for the six months ended
September 30, 2007 compared to a recovery of income taxes of $2,966 for
the six
months ended September 30, 2006. The income tax expense for the six months
ended
September 30, 2007 was primarily due to Canadian withholding tax and Indian
income taxes. Due to the expiration of the Indian tax holiday, the Indian
subsidiary is now subject to normal taxation under the provisions of the
domestic Indian tax statutes. The income tax recovery for the six months
ended
September 30, 2006 was primarily driven by the impact of the strengthening
of
the Canadian dollar, which increased the value of the Canadian dollar
denominated tax attributes and the favorable tax treatment of the sale
of the
Techwell investment, partially offset by Canadian withholding
taxes.
Our
accounting effective tax rate typically differs from the expected statutory
rates due to several permanent differences including, but not limited to,
research and experimental development tax credits, stock-based compensation
expense for which no tax benefits can be recognized, foreign exchange
fluctuations on the U.S. dollar working capital balances of foreign
subsidiaries, and differences in tax rates in foreign jurisdictions. Any
net tax
benefit of these items is partially offset by changes in the valuation
allowance
against net operating loss carry forwards. In assessing the realization
of
deferred tax assets, management considers whether it is more likely than
not
that some portion or all of its deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences
become deductible in the appropriate jurisdiction. Management considers
projected future taxable income, uncertainties related to the industry
in which
Genesis operates and tax planning strategies in making this assessment.
Historically, the Company has recorded the majority of its valuation allowance
against the tax attributes in the United States. FASB Statement No.
109, Accounting for Income Taxes, states that forming a conclusion that
a
valuation allowance is not needed is difficult when there is negative evidence,
such as losses in the jurisdictions to which the deferred tax asset
relate. As a result of the review undertaken in the third quarter of
fiscal 2007, the Company concluded that it was appropriate to establish
a full
valuation allowance in the financial statements against the tax attributes
in
Canada. In addition, we expect to provide a full valuation allowance on
future tax benefits until we can demonstrate a sustained level of profitability
that establishes our ability to utilize the assets in the jurisdictions
to which
the assets relate. Furthermore, in the near term we expect approximately
$1
million of income tax expense per quarter, while the company incurs operating
losses.
In
September 2007, a new US Canada Treaty Protocol was signed, which proposes
changes to the withholding tax rates applied to cross border interest payments
between related parties. If ratified, withholding tax rates on interest
payments
between related parties would be reduced from the existing 10% to 7% in
the
first year following entry into force, 4% in the second year and 0% in
the third
and later years following entry into force. When ratified, this change
would
impact the interest withholding tax for such periods until the current
intercompany financing structure is wound up. We do not expect this protocol
to
be ratified before 2008.
In
June
2006, the Financial Standards Accounting Board (“FASB”) issued Financial
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”),
which clarifies the accounting for uncertainty in income taxes recognized
in a
company’s financial statements in accordance with FASB Statement No. 109,
“Accounting for Income Taxes.” The interpretation prescribes a recognition
threshold and measurement attribute criteria for the financial statement
recognition and measurement of a tax position taken or expected to be taken
in a
tax return. The interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
We
adopted the provisions FIN 48 on April 1, 2007. As a result of the
implementation of FIN 48, we recognized no material adjustment in the reserve
for unrecognized income tax benefits.
LIQUIDITY
AND CAPITAL RESOURCES
Since
inception we have satisfied our liquidity needs primarily through cash
generated
from operations and sales of equity securities, initially by way of a public
offering, and subsequently under our stock option and employee stock purchase
plans. We believe that our existing cash balances together with any cash
generated from our operations will be sufficient to meet our capital and
operating requirements for the foreseeable future.
Periodically,
we may be required to use a portion of our cash balances to increase investment
in operating assets such as prepaid assets or inventory to assist in the
growth
of our business, or for property and equipment. Furthermore, because we
do not
have our own semiconductor manufacturing facility, we may be required to
make
deposits to secure supply in the event there is a shortage of manufacturing
capacity in the future. While we currently have no plans to raise additional
funds for such uses, we could be required or could elect to seek to raise
additional capital in the future.
From
time
to time we evaluate acquisitions and investments in businesses, products
or
technologies that are complimentary or strategic to our business. Any such
transactions, if consummated, may use a portion of our working capital
or
require the issuance of equity securities that may result in further dilution
to
our existing stockholders.
|
|
September
30,
2007
|
|
March 31,
2007
|
|
|
|
(Dollars
in thousands)
|
|
Cash
and cash equivalents
|
|
$
|
128,239
|
|
$
|
123,701
|
|
Short-term
investments
|
|
|
54,596
|
|
|
64,549
|
|
Total
cash, cash equivalents and short-term investments
|
|
$
|
182,835
|
|
$
|
188,250
|
|
Working
capital
|
|
$
|
192,816
|
|
$
|
202,108
|
|
Current
ratio
|
|
|
5.61
|
|
|
8.13
|
|
Receivables
days outstanding
|
|
|
48
|
|
|
46
|
|
Inventory
turnover days
|
|
|
36
|
|
|
61
|
|
At
September 30, 2007, cash equivalents and short-term investments totaled
$182,835
compared with $188,250 at March 31, 2007. Our current ratio at September
30, 2007 was 5.61 compared to 8.13 at March 31, 2007. Net cash generated
from operating activities was $151 for the six months ended September 30,
2007
compared with cash used in operating activities of $10,223 for the six
months
ended September 30, 2006.
Working
capital generation of cash related primarily to the increase in accounts
payable
and accrued liabilities, offset by an increase in accounts receivable.
Average
days of inventory on hand at September 30, 2007 decreased to 36 days, compared
to 61 days at March 31, 2007. The average inventory levels and inventory
turns
is impacted by a number of dynamic activities including the accuracy of
customer
forecasts, expected panel supplies, and pricing considerations. We expect
inventory levels to increase at the end of the third quarter as our new
products
ramp into production. Accounts receivable increased by $10,761 in September
30,
2007 compared to March 31, 2007, reflecting the increase in revenue during
the
current quarter. Days sales outstanding (“DSO”) increased at September 30, 2007
to 48 days from 46 days at March 31, 2007. Our credit policy is to offer
credit
to customers only after examination of their creditworthiness. Our payment
terms
range from cash in advance of shipment, to payment ninety days after shipment.
For the six months ended September 30, 2007, our three largest customers
accounted for 44% of revenue, compared with the three largest customers
for the
six months ended September 30, 2006 which represented 40% of revenue. Net
cash
from investing activities was $2,242 during the six months ended September
30,
2007, compared with a use of cash of $1,509 during the six months ended
September 30, 2006. The increase in cash was primarily due to an increase
in net
proceeds received on the maturity of short-term investments, partially
offset by
the proceeds on the sale of an investment during the six months ended September
30, 2006.
Net
cash
provided by financing activities was $2,145 for the six months ended September
30, 2007, and $4,500 for the six months ended September 30, 2006. These
amounts
represent funds received for the purchase of shares under the terms of
our stock
option and employee stock purchase plans.
Contractual
Obligations
As
of
September 30, 2007, our principal commitments consisted of obligations
outstanding under operating leases. The aggregate minimum annual payments
required under our lease obligations, excluding sub-lease income, by fiscal
year
are as follows:
|
|
Payments
Due By Fiscal Year (in thousands)
|
|
|
TOTAL
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
Operating
Leases
|
|
$
|
13,329
|
|
$
|
2,880
|
|
$
|
4,823
|
|
$
|
2,647
|
|
$
|
1,914
|
|
$
|
1,065
|
|
Our
lease
agreements expire at various dates through calendar year 2012.
Off-Balance
Sheet Arrangements
We
do not
have any off-balance sheet arrangements that have or are reasonably likely
to
have a material current or future effect on our financial condition, revenue
or
expenses, results of operations, liquidity, capital expenditures or capital
resources.
Capital
commitments
We
do not
have any capital commitments that will have a material future effect on
our
financial condition.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
are
exposed to financial market risks including changes in interest rates and
foreign currency exchange rates.
The
fair
value of our investment portfolio or related income would not be significantly
impacted by either a 10% increase or decrease in interest rates due mainly
to
the short-term nature of the major portion of our investment
portfolio.
We
carry
out a significant portion of our operations outside of the United States,
primarily in Canada and in India and to a lesser extent China, Japan, South
Korea, Singapore and Taiwan. Although virtually all of our revenues and
costs of
revenues are denominated in U.S. dollars, portions of our operating revenue
and expenses are denominated in foreign currencies. Accordingly, our operating
results are affected by changes in the exchange rate between the
U.S. dollar and those currencies. Any future strengthening of those
currencies against the U.S. dollar could negatively impact our operating
results by increasing our operating expenses as measured in U.S. dollars.
The maximum potential exposure on a near-term 10% depreciation in the
U.S. dollar is estimated to be approximately $4 million annually. We
do not currently engage in any hedging or other transactions intended to
manage
the risks relating to foreign currency exchange rate fluctuations, other
than
natural hedges that occur as a result of holding both assets and liabilities
denominated in foreign currencies. We may, in the future, undertake hedging
or
other such transactions, if we determine it is necessary to offset exchange
rate
risks.
ITEM 4. CONTROLS
AND PROCEDURES
Evaluation
of disclosure controls and procedures. Our
management evaluated, with the participation of our Chief Executive Officer
and
our Principal Accounting Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based
on this
evaluation, our Chief Executive Officer and our Principal Accounting Officer
have concluded that our disclosure controls and procedures as of the end
of the
period covered by this report are effective to ensure that information
we are
required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934 is accumulated and communicated to our management,
including our Chief Executive Officer and Principal Accounting Officer,
as
appropriate, to allow timely decisions regarding required disclosure, and
that
such information is recorded, processed, summarized and reported within
the time
periods specified in the Securities and Exchange Commission’s rules and
forms.
Changes
in internal control over financial reporting. There
were no changes in internal control over financial reporting that occurred
during the second quarter of fiscal 2008 that has materially affected,
or is
reasonably likely to materially affect, internal control over financial
reporting.
PART
II: OTHER INFORMATION
ITEM
1A. RISK FACTORS
Our
business involves risks and uncertainties. You should carefully consider
the risks
described below, together with all of the other information in this
Quarterly Report
on Form 10-Q, our Annual Report on Form 10-K/A for the year ended March 31,
2007 and other filings with the Securities and Exchange Commission
in evaluating our business. If any of the following risks actually
occur, our
business, financial condition, operating results and growth prospects
would likely
be adversely affected. In such an event, the trading price of our common
stock could
decline, and you could lose all or part of your investment in our
common stock.
Our past financial performance should not be considered to be a
reliable indicator
of future performance, and investors should not use historical trends
to anticipate
results or trends in future periods. These risks involve
forward-looking statements
and our actual results may differ substantially from those discussed
in these
forward-looking statements.
Our
quarterly revenues and operating results fluctuate significantly due to
a
variety of
factors, which may result in volatility or a decline in our stock
price.
Our
historical revenues and operating results have varied significantly from
quarter
to quarter. Moreover, our actual or projected operating results for some
quarters may not meet the expectations of stock market analysts and investors,
which may cause our stock price to decline. In addition to the factors
discussed
elsewhere in this “Risk Factors” section, a number of factors may cause our
revenue to fall short of our expectations or cause fluctuations in our
operating
results, including:
|
•
|
Our
ability to gain and maintain “design wins” with our customers and ramp up
new designs into production
volumes;
|
|
•
|
Changes
in product costs, quality or manufacturing yields or available
production
capacity at our fabrication
facilities;
|
|
•
|
Changes
in our expected operating expenses;
|
|
•
|
Growth
rate of the flat-panel TV and LCD monitor and DisplayPort product
markets,
our customers’ share of those markets, and the success of our customers’
products into which we are
designed;
|
|
•
|
Seasonal
consumer demand for flat-panel TV, high definition TV (“HDTV”) and LCD
monitors into which our products are
incorporated;
|
|
•
|
Changes
in the mix of products we sell, product costs or pricing, or
distribution
channels;
|
|
•
|
Our
inventory levels, and customer inventory levels of our
products;
|
|
•
|
Increased
competition and competitive pricing pressures;
|
|
•
|
The
timing of new product introductions by us and our
competitors;
|
|
•
|
Availability
and pricing of panels and other components for flat-panel TVs
and LCD
monitors;
|
|
•
|
Foreign
exchange rate fluctuations;
|
|
•
|
Factors
that impact tax rates and;
|
|
•
|
General
economic conditions and specific economic conditions to the
advanced
display and semiconductor
markets.
|
As
a
result of the fluctuation in our revenues and operating results, our stock
price
can be volatile, especially if our actual financial performance in a quarter
deviates from the financial targets we set at the beginning of that quarter,
or
from market expectations.
Our
success may depend in part on market adoption of the DisplayPort
digital interface
standard.
The
DisplayPort digital display interface, which is based on technology developed
by
Genesis and is expected to be used in our products, is a new interface
standard
that has yet to achieve widespread adoption. DisplayPort is an alternative
to
older, established interconnect standards such as DVI, and therefore could
face
significant obstacles to adoption. In addition, other new standards may
be
introduced which could impact DisplayPort’s success. If DisplayPort does not
achieve market adoption in the computer and/or consumer electronics industry,
our ability to generate revenue from DisplayPort-based products would be
limited.
Product
quality problems could increase our costs, cause customer claims, and
delay our
product shipments.
Although
we test our products, they are complex and may contain defects and errors.
In
the past, we have encountered defects and errors in our products. Delivery
of
products with defects or reliability, quality or compatibility problems
may
damage our reputation and our ability to retain existing customers and
attract
new customers. In addition, product defects and errors could result in
additional development costs, diversion of technical resources, delayed
product
shipments, increased product returns, and product liability claims against
us
which may not be covered by insurance. Any of these could harm our
business.
We
have had significant senior management and key employee turnover, and may
not
be able
to attract, retain and motivate the personnel we need to
succeed.
In
order
to compete, we must attract, retain and motivate executives and other key
employees, including those in managerial, technical, sales and marketing
positions. We have recently experienced significant turnover in our senior
management team. Several executives and other key employees have left the
company, while others have joined or have been appointed to senior management
roles, including the following:
|
•
|
In
May 2006, Tzoyao Chan, our Senior Vice President, Product Development,
resigned and Behrooz Yadegar joined the company as his
successor.
|
|
•
|
In
July 2006, Ken Murray, our Vice President, Human Resources,
resigned and
we appointed a successor.
|
|
•
|
In
August 2006, Mohammad Tafazzoli, our Senior Vice President,
Operations,
resigned and we appointed a
successor.
|
|
•
|
In
September 2006, Hildy Shandell, our Senior Vice President,
Corporate
Development, joined the company.
|
|
•
|
In
October 2006, Raphael Mehrbians, our Senior Vice President,
Product
Marketing, resigned and we appointed two Vice Presidents of
Marketing, but
have not yet appointed a Senior Vice
President.
|
|
•
|
In
May 2007, Michael Healy, our Chief Financial Officer, resigned.
Linda
Millage is currently serving as our interim Principal Accounting
Officer
in addition to her role as Senior Director of Finance and Worldwide
Controller. Effective as of November 5, 2007, we appointed
Rick Martig as
Chief Financial Officer.
|
|
•
|
In
June 2007, Anders Frisk, our Executive Vice President, resigned
and his
responsibilities have been assigned to Hildy Shandell and other
executive
management.
|
|
•
|
In
November 2007, Robert Haefling, our General Manager and Senior
Vice
President, Display Port, joined the
company.
|
In
addition, we have added new key technical personnel and have lost key longer
service technical personnel. We have experienced, and may continue to
experience, difficulty in hiring and retaining candidates with appropriate
qualifications.
We
may
not be able to attract and retain the senior management or other key employees
that we need. Competition for experienced employees in the semiconductor
industry can be intense. If we cannot attract and retain the employees
we need,
our business could be harmed, particularly if the departure of any executive
or
key employee results in a business interruption or if we are not successful
in
preserving material knowledge of our departing employees.
We
must increase our revenues and reduce our operating expenses in order to
return
to profitability
and we may not be able to achieve profitability on a quarterly
or annual
basis.
We
were
not profitable in the quarter ended September 30, 2007and we have not been
profitable since fiscal year 2006. Our net loss for the quarter ended
September 30, 2007 was approximately $16.8 million. As of September
30, 2007, we had an accumulated deficit of approximately $169.0 million.
Returning to profitability will depend in large part on our ability to
generate
and sustain increased revenue levels in future periods. We also need to
reduce
operating expenses to a level commensurate with our revenues, while successfully
executing our product development strategy. As a result, we have and expect
that
we may continue to implement cost reductions through reductions-in-force,
outsourcing, and the like. These efforts may be more costly than we expect
and
we may not be able to increase our revenue enough to offset our operating
expenses. We may not succeed in returning to profitability and could incur
losses in future periods and, even if we do return to profitability, we
may not
be able to maintain or increase our level of profitability. If we cannot
increase our revenue at a greater rate than our expenses, we will not become
profitable.
We
must sell our current products in greater volumes, or introduce new products
with improved
margins.
Average
selling prices for our products have declined in the past, in many cases
significantly, while many of our costs are fixed, and we expect the average
selling prices for our products to continue to decline in the future. When
average selling prices decline, our revenues decline unless we are able
to sell
more units, and our gross margins decline unless we are able to reduce
our
manufacturing and/or other supply chain costs by a commensurate amount.
We,
therefore, need to sell our current products in greater volumes to offset
the
decline in their ASPs, and introduce new products that have improved gross
margins.
We
face intense competition in our market, especially from larger,
better-known companies,
and we may lack sufficient financial or other resources to maintain
or improve
our competitive position.
The
markets in which we operate are intensely competitive and are characterized
by
technological change, changes in customer requirements, frequent new product
introductions and improvements, evolving industry standards and rapidly
declining average selling prices. We expect the level of competition to
increase
in the future. If we are unable to respond quickly and successfully to
these
developments, our competitive position will be harmed, and our products
or
technologies may become uncompetitive or obsolete.
Our
chief
competitors include both large and small companies, such as AMD (ATI
Technologies), Broadcom Corporation, LSI Corporation, Micronas Semiconductor
Holding AG, Mediatek Inc., MStar Semiconductor, Inc., National Semiconductor
Corporation, Novatek Microelectronics Corp., NXP Seminconductors, Pixelworks,
Inc., Realtek Semiconductor Corp., Renesas Technology Corp., Silicon Image,
Inc., ST Microelectronics, N.V., Trident Microsystems, Inc., and Zoran
Corporation. In addition, many of our current and potential customers have
their
own internally developed integrated circuit solutions, and may choose not
to
purchase solutions from third party merchant suppliers like Genesis. We
may also
face competition from start-up companies.
Some
of
our competitors, who may include our own customers, also include companies
with
greater financial and other resources than we have. Large companies may
have
advantages over us because of their longer operating histories, greater
brand
name recognition, larger customer bases or greater financial, technical
and
marketing resources. As a result, they may be able to adapt more quickly
to new
or emerging technologies and changes in customer requirements. They also
have
greater resources to devote to the promotion and sale of their products
than we
have. In addition, our overseas competitors have reduced cost structures
that
enable them to compete aggressively on price. Increased competition could
harm
our business, by, for example, increasing pressure on our profit margins
or
causing us to lose customers. Also, we have received a license from Silicon
Image, Inc. for certain of their digital visual interface (DVI) patents and
high definition multimedia interface (HDMI) patents, and must pay Silicon
Image
royalties on all of our DVI and HDMI products. This agreement, and other
royalty
obligations we may have, could hinder our ability to compete with unlicensed
competitors that are not required to pay royalties on competing products.
We may
not be able to compete successfully against our current or potential
competitors, especially those with significantly greater financial resources
or
brand name recognition.
Our
failure to respond quickly to customer demand for technological improvements
and integrate
new features could have an adverse effect on our ability to
compete.
To
compete successfully, we must develop new products and improve our existing
products at the same pace or ahead of our competitors. For example, in
order to
compete successfully in the digital television market, consumer electronics
manufacturers must first select our products for incorporation into their
digital televisions (giving us a so-called “design win”), and then we must be
able to deliver those products in high volumes in a timely fashion.
Manufacturers may not choose our digital television solution over our
competitors’ solutions. We often incur significant expenditures on the
development of a new product without any assurance that our product will
be
selected for a design win. Even if we are chosen, the design win may not
result
in any significant revenues to us, since sales of our products largely
depend on
the commercial success of our customers’ display products, and whether our
customers are relying on us merely as a secondary source.
In
addition, we need to design products for customers that continually require
higher functionality at lower costs. We must, therefore, continue to add
features to our products and to include these features on a single chip.
The
development process for these advancements is lengthy and will require
us to
accurately anticipate technological innovations and market trends. Developing
and enhancing these products is time-consuming, costly and complex.
There
is
a risk that these developments and enhancements will be late, fail to meet
customer or market specifications, and will not be competitive with other
products using alternative technologies that offer comparable functionality.
These types of events could continue to have a variety of negative effects
on
our competitive position and our financial results, such as reducing our
revenue, increasing our costs, lowering our gross margin percentage, and
requiring us to recognize and record impairments of our assets.
We
do not have long-term commitments from our customers, so it is difficult
for us
to forecast
our revenues, and could result in excess inventory.
Our
sales
are made on the basis of purchase orders rather than long-term purchase
commitments. In addition, our customers may cancel or defer purchase orders.
We
provide revenue guidance and manufacture our products according to our
estimates
of customer demand and we have limited visibility of such demand beyond
one
quarter. This process requires us to make multiple demand forecast assumptions,
each of which may introduce errors into our estimates. If we overestimate
customer demand, we may miss our revenue guidance, which could cause our
stock
price to decline. In addition, the timing and correction of this overestimation
could cause us to manufacture products that we may not be able to sell.
As a
result, we could have excess inventory, which could increase our losses.
Conversely, if we underestimate customer demand or if sufficient manufacturing
capacity were unavailable, we could forgo revenue opportunities, lose market
share and damage our customer relationships.
A
limited number of our customers comprise a significant portion of our revenues
and any
decrease in revenue from these customers could have an adverse effect on
our
net revenues
and operating results.
The
markets for our products are highly concentrated. Our revenues are derived
from
a limited number of customers. Revenues from our largest five customers
accounted for 63% of our revenues, with 25% of our revenues coming from
our
largest customer, for the quarter ended September 30, 2007. This customer
concentration increases the risk of quarterly fluctuations in our revenues
and
operating results. Any downturn in the business of our key customers or
potential new customers could have a negative impact on our sales to such
customers, which could adversely affect our net revenues and results of
operations. We expect that a small number of customers will continue to
account
for a large amount of our revenues. The decision by any large customer
to
decrease or cease using our products would harm our business. For example,
during fiscal year 2007, we lost significant TV designs with one of our
largest
customers. This loss has had a negative impact on our revenue and we expect
that
it will continue to negatively impact our revenue until we are able to
regain
design wins with that customer or other customers.
In
addition, several of our customers sell to a limited number of original
equipment manufacturers (OEMs). The decision by any large OEM to decrease
or
cease using our customer’s products could, in turn, cause our customer to
decrease or cease buying from us. Most of our sales are made on the basis
of
purchase orders rather than long-term agreements so that any customer could
cease purchasing products at any time without penalty.
The
concentration of our accounts receivable with a limited number of customers
exposes us to increased credit risk and could harm our operating results
and
cash flows.
As
of
September 30, 2007 and March 31, 2007, we had two customers that each
represented 10% or more of accounts receivable. The failure of any of these
customers to pay these balances or any other customer to pay their outstanding
balance would result in an operating expense and reduce our cash
flows.
Our
success will depend on the growth of the market for flat-panel televisions
and LCD
monitors, and our customers’ commercial success in those
markets.
Our
ability to generate revenues depends on the growth of the market for flat-panel
televisions, digital televisions and LCD computer monitors. Since we do
not sell
to every manufacturer in those markets, our revenues also depend on how
well our
customers’ products into which our products are incorporated perform in those
markets. To the extent that our customers’ share of the flat panel television,
LCD monitor or digital television markets declines or does not grow, the
sales
of our products will be negatively impacted. In addition, our growth will
also
depend upon emerging markets for consumer electronics such as HDTV. The
potential size of these markets and the timing of their development are
uncertain and will depend in particular upon:
|
•
|
A
continued reduction in the costs of products in the respective
markets;
|
|
•
|
The
availability, at a reasonable price, of components required
by such
products (such as LCD
panels); and
|
|
•
|
The
emergence of competing technologies and standards.
|
These
and
other potential markets may not develop as expected, which would harm our
business.
Our
customers experience fluctuating product cycles and seasonality, which
causes their
sales to fluctuate.
Our
products are incorporated into flat-panel and CRT displays. Because the
market
for flat-panel displays is characterized by numerous new product introductions,
our operating results may vary significantly from quarter to quarter. Our
customers also experience seasonality in the sales of their products, which
affects their orders of our products. Typically, the second half of the
calendar
year represents a disproportionate percentage of sales for our customers
due to
the holiday shopping period for consumer electronics products, and therefore,
a
disproportionate percentage of our sales. Historically revenues in the
third
fiscal quarter decrease from the second fiscal quarter due to seasonality.
Also,
our sales in the first quarter of the calendar year may be lower as a result
of
the Chinese New Year holiday in Asia. We expect these sales fluctuations
to
continue for the foreseeable future.
Our
semiconductor products are complex and are difficult to
manufacture cost-effectively.
Manufacturing
semiconductor products is a complex process. It is often difficult for
semiconductor foundries to achieve acceptable product yields. Product yields
depend on both our product design and the manufacturing process technology
unique to the semiconductor foundry. Since low yields may result from either
design or process difficulties, identifying yield problems may occur well
into
the production cycle, when a product exists which can be physically analyzed
and
tested. Low yields negatively impact our gross margins and our financial
results.
We
rely on distributors to sell our products, and disruptions to or
our failure
to effectively develop these channels could adversely affect our ability
to generate
revenues from the sale of our products.
We
derive
a substantial percentage of our total revenues from sales by distributors
of our
products. During the quarter ended September 30, 2007, revenues and sales
through distributors represented approximately 30% of our total revenue.
We
expect that our revenues will continue to depend, in part, on the performance
of
these distributors. We do not expect to have any long-term contracts or
minimum
purchase commitments with any of our distributors. In addition, our distributors
may sell products that are competitive with ours, may devote more resources
to
those competitive products and may cease selling our products altogether.
The
distributors through whom we sell our products may not be successful in
selling
our products for reasons beyond our control. If any of the foregoing occurs,
our
operating results will suffer.
Selling
to distributors reduces our ability to forecast sales and increases the
complexity of our business. Since our distributors act as intermediaries
between
us and the companies using our products, we must rely on our distributors
to
accurately report inventory levels and production forecasts. These arrangements
require us to manage a more complex supply chain and monitor the financial
condition and creditworthiness of our distributors and customers and make
it
more difficult for us to predict demand for our products. Our failure to
manage
one or more of these challenges could result in excess inventory or shortages
that could materially impact our operating results or limit the ability
of
companies using our semiconductors to deliver their products.
We
subcontract our manufacturing, assembly and test
operations.
We
do not
have our own fabrication facilities, assembly or testing operations. Instead,
we
rely on others to fabricate, assemble and test all of our products. We
do not
have any long-term supply contracts with any of these suppliers. Most of
our
products use silicon wafers manufactured by Taiwan Semiconductor Manufacturing
Corporation. If we were required to obtain silicon wafers from other
manufacturers, we could experience a material increase in the price we
must pay
for silicon wafers which could negatively impact our operating results.
There
are many risks associated with our dependence upon outside manufacturing,
including:
|
•
|
Lack
of adequate capacity during periods of excess
demand;
|
|
•
|
Increased
manufacturing cost or the unavailability of product in the
event that
manufacturing capacity becomes
constrained;
|
|
•
|
Reduced
control over manufacturing and delivery schedules of
products;
|
|
•
|
Reduced
control over quality assurance and reliability;
|
|
•
|
Difficulty
of managing manufacturing costs and
quantities;
|
|
•
|
Potential
misappropriation of intellectual
property; and
|
|
•
|
Political
or environmental risks (including earthquake and other natural
disasters)
in Taiwan, where the manufacturing facilities are
located.
|
We
depend
upon outside manufacturers to fabricate silicon wafers on which our integrated
circuits are imprinted. These wafers must be of acceptable quality and
in
sufficient quantity and the manufacturers must deliver them to assembly
and
testing subcontractors on time for packaging into final products. We have,
at
times, experienced delivery delays, long manufacturing lead times and product
quality issues. These manufacturers fabricate, test and assemble products
for
other companies. We cannot be sure that our manufacturers will devote adequate
resources to the production of our products or deliver sufficient quantities
of
finished products to us on time or at an acceptable cost. The lead-time
necessary to establish strategic relationships with new manufacturing partners
is considerable. We would be unable to readily obtain an alternative source
of
supply for any of our products if this proves necessary. Any occurrence
of these
manufacturing difficulties could harm our business or cause us to incur
costs to
obtain adequate and timely supply of products.
If
we do not achieve additional design wins in the future, our ability to
grow will
be seriously limited.
Our
future success depends on developers of advanced display products designing
our
products into their systems. To achieve design wins, we must define and
deliver
cost-effective, innovative and integrated semiconductors. Once a supplier’s
products have been designed into a system, the developer may be reluctant
to
change its source of components due to the significant costs associated
with
qualifying a new supplier. Accordingly, the failure on our part to obtain
additional design wins with leading branded manufacturers or integrators,
and to
successfully design, develop and introduce new products and product enhancements
could harm our business, financial condition and results of operations.
Achieving
a design win does not necessarily mean that a developer will order large
volumes
of our products. A design win is not a binding commitment by a developer
to
purchase our products. Rather, it is a decision by a developer to use our
products in the design process of that developer’s products. Developers can
choose at any time to discontinue using our products in their designs or
product
development efforts. If our products are chosen to be incorporated into
a
developer’s products, we may still not realize significant revenues from that
developer if that developer’s products are not commercially successful or if
that developer chooses to qualify, or incorporate the products of, a second
source.
Developers
can choose at any time to discontinue using our products during the development
process or stop ordering our products that have been in volume production
which
would negatively impact our revenues. Our
products require licenses of third-party technology that may not be available
to us
on reasonable terms, or at all.
We
license technology from third parties that is incorporated into our products.
Future products or product enhancements may require additional third-party
licenses, which may not be available to us on commercially reasonable terms,
or
at all. Third-party licenses may impact our gross margins. We also license
third-party intellectual property in order to comply with display technology
standards. For example, we signed the DVI Adopters Agreement and the HDMI
Adopters Agreement in order to obtain a license to those standards. However,
even though we licensed the DVI technology, Silicon Image, Inc., one of
the
promoters of the DVI standard, sued us for allegedly infringing certain
DVI
patents. In December 2006, we entered into a royalty-bearing Settlement
and
License Agreement with Silicon Image. If we are unable to obtain third-party
licenses required to develop new products and product enhancements, or
to comply
with applicable standards, we could be at competitive disadvantage.
Because
of the lengthy sales cycles for our products and the fixed nature of
a significant
portion of our expenses, we may incur substantial expenses before we
earn associated
revenue and may not ultimately achieve our forecasted sales for
our products.
Because
our products are based on new technology and standards, a lengthy sales
process,
typically requiring several months or more, is often required before potential
customers begin the technical evaluation of our products. This technical
evaluation can then exceed nine months and it may take an additional nine
months
before a customer commences volume shipments of systems that incorporate
our
products. However, even when a manufacturer decides to design our products
into
its systems, the manufacturer may never ship systems incorporating our
products.
Given our lengthy sales cycle, we experience a delay between the time we
increase expenditures for research and development, sales and marketing
efforts
and inventory and the time we generate revenues, if any, from these
expenditures. These long cycles, as well as our expectation that customers
will
tend to sporadically place large orders with short lead times, may cause
revenues and operating results to vary significantly and unexpectedly from
quarter to quarter. As a result, our business could be harmed if a significant
customer reduces or delays its orders or chooses not to release products
incorporating our products. Given our customer concentration and our lengthy
sales cycle, the loss or decline in volume of one or several key customers
could
have a material impact on our revenue for a sustained period of
time.
We
are subject to risks associated with international operations, which may
harm
our business.
We
depend
on product design groups located outside of the United States, primarily
in
Canada and India. We also rely on foreign third-party manufacturing, assembly
and testing operations. These foreign operations subject us to a number
of risks
associated with conducting business outside of the United States, including
the
following:
|
•
|
Unexpected
changes in, or impositions of, legislative or regulatory
requirements;
|
|
•
|
Delays
resulting from difficulty in obtaining export licenses for
certain
technology, tariffs, quotas and other trade barriers and
restrictions;
|
|
•
|
Imposition
of additional taxes and penalties;
|
|
•
|
The
burdens of complying with a variety of foreign
laws; and
|
|
•
|
Other
factors beyond our control, including acts of terrorism, which
may delay
the shipment of our products, impair our ability to travel
or our ability
to communicate with foreign
locations.
|
In
addition, the laws of certain foreign countries in which our products are
or may
be designed, manufactured or sold may not protect our products or intellectual
property rights to the same extent as the laws of the United States. This
increases the possibility of piracy of our technology and products.
Our
multi-jurisdictional tax structure is complex and we could be subject
to increased
taxation.
We
conduct business operations in a number of countries and are subject to
taxation
in those jurisdictions. We develop our tax position based upon the anticipated
nature and structure of our business and the tax laws, administrative practices
and judicial decisions now in effect in the countries in which we have
assets or
conduct business, all of which are subject to change or differing
interpretations. We are also subject to audit by local tax authorities
which
could result in additional tax expense in future periods. Any increase
in our
income tax expense could adversely impact on our future earnings and cash
flows.
In
addition, some of our subsidiaries provide products and services to, and
may
undertake significant transactions with, our other subsidiaries that are
incorporated in different jurisdictions. Some of these jurisdictions have
tax
laws with detailed transfer pricing rules which require that all transactions
with non-resident related parties be priced using arm’s-length pricing
principles. International transfer pricing is a complex area of taxation
and
generally involves a significant degree of judgment. If international taxation
authorities successfully challenge our transfer pricing policies, our income
tax
expense may be adversely affected.
Most
of our revenues will come from sales to customers outside of the United
States, which
creates additional business risks.
Most
of
our revenues come from sales to customers outside of the United States,
particularly to equipment manufacturers located in South Korea, China,
Europe,
Japan and Taiwan. For the quarter ended September 30, 2007, sales to regions
outside of the United States represented 99.6% of revenues. For that same
period, sales to China and South Korea alone constituted 33% and 34%,
respectively. These sales are subject to numerous risks, including:
|
•
|
Fluctuations
in currency exchange rates, tariffs, import restrictions and
other trade
barriers;
|
|
•
|
Unexpected
changes in regulatory requirements;
|
|
•
|
Political
and economic instability;
|
|
•
|
Exposure
to litigation or government investigations in these
countries;
|
|
•
|
Longer
payment periods;
|
|
•
|
Ability
to enforce contracts or payment terms;
|
|
•
|
Potentially
adverse tax consequences;
|
|
•
|
Export
license requirements; and
|
|
•
|
Unexpected
changes in diplomatic and trade
relationships.
|
Because
our sales are denominated in U.S. dollars, increases in the value of the
U.S. dollar could increase the price of our products in
non-U.S. markets and may make our products more expensive than competitors’
products denominated in local currencies.
The
cyclical nature of the semiconductor industry may lead to significant
variances in
the demand for our products.
In
the
past, significant downturns and wide fluctuations in supply and demand
have
characterized the semiconductor industry. Also, the industry has experienced
significant fluctuations in anticipation of changes in general economic
conditions, including economic conditions in Asia. These cycles have led
to
significant variances in product demand and production capacity. They have
also
accelerated the erosion of average selling prices per unit. We may experience
periodic fluctuations in our future financial results because of changes
in
industry-wide conditions.
We
have in the past and may in the future engage in acquisitions of
companies, products
or technologies, which involve numerous risks and the anticipated
benefits of
any acquisitions we make may never be realized.
Our
growth is dependent upon our ability to enhance our existing products and
introduce new products on a timely basis. One of the ways we may address
the
need to develop new products is through acquisitions of other companies
or
technologies, such as our prior acquisitions of Sage and the assets of
VM Labs.
These acquisitions and potential future acquisitions involve numerous risks,
including the following:
|
•
|
We
may experience difficulty in assimilating the acquired operations
and
employees;
|
|
•
|
We
may be unable to retain the key employees of the acquired
operations;
|
|
•
|
The
acquisitions may disrupt our ongoing business;
|
|
•
|
We
may not be able to incorporate successfully the acquired technologies
and
operations into our business and maintain uniform standards,
controls,
policies and procedures;
|
|
•
|
We
may lack the experience to enter into new markets, products
or
technologies; and
|
|
•
|
An
acquisition we choose to pursue may require a significant amount
of
capital, which limits our ability to pursue other strategic
opportunities.
|
Acquisitions
of high-technology companies are inherently risky, and recent or potential
future acquisitions may not be successful and may adversely affect our
business,
operating results or financial condition. We must also maintain our ability
to
manage growth effectively. Failure to manage growth effectively and successfully
integrate acquisitions made by us could materially harm our business and
operating results.
Intellectual
property infringement suits brought against us or our customers
may significantly
harm our business.
We
defended and settled claims brought against us by Silicon Image, Inc.,
alleging
that certain of our products that contain digital receivers infringe various
Silicon Image patent claims. In addition, IP Innovation LLC has sued Toshiba
Corporation and other companies that incorporate our products into their
displays, alleging patent infringement by certain consumer and professional
electronics products, including some that contain our display controller
products. Any future patent infringement lawsuits could subject us to permanent
injunctions preventing us from selling the accused products and/or cause
us to
incur significant costs, including defense costs, settlements and judgments.
In
addition, as a result of this lawsuit or any future patent infringement
lawsuits, our existing customers may decide to stop buying our products,
and
prospective customers may be unwilling to buy our products.
Intellectual
property lawsuits, regardless of their success, are time-consuming and
expensive
to resolve and divert management time and attention.
In
addition, if we are unsuccessful and our products (or our customers’ monitors or
televisions that contain our products) are found to infringe the intellectual
property rights of others, we could be forced to do one or more of the
following:
|
•
|
Stop
selling the products or using the technology that are allegedly
infringing;
|
|
•
|
Attempt
to obtain a license to the relevant intellectual property,
which license
may not be available on commercially reasonable terms or at
all;
|
|
•
|
Incur
substantial costs including defense costs, settlements and/or
judgments; and
|
|
•
|
Attempt
to redesign those products that are allegedly
infringing.
|
As
a
result, intellectual property litigation could have a material adverse
effect on
our revenues, financial results and market share.
We
may be required to indemnify our customers against claims of intellectual
property infringement.
From
time
to time, we enter into agreements with our customers that contain
indemnification provisions for claims based on infringement of third party
intellectual property rights. As a result, if such a claim based on our
products
is made against an indemnified customer, we may be required under our
indemnification obligations to defend or settle the litigation, and/or
to
reimburse that customer for its costs, including defense costs, settlements
and
judgments. From time to time, we receive requests for indemnification from
customers with whom we do not have indemnification agreements. We may also
be
subject to claims for indemnification under statutory or common law. Patent
litigation and any indemnification obligations we may have could have a
material
adverse effect on our revenues, financial results and market share, and
could
result in significant payments by us that could have a material adverse
effect
on our financial position.
We
may be unable to adequately protect our intellectual property. We rely
on
a combination
of patent, copyright, trademark and trade secret laws, as well
as non-disclosure
agreements and other methods to protect our proprietary
technologies.
We
have
been issued patents and have pending United States and foreign patent
applications. Our patents may be subject to challenges, may not be broad
enough
to protect our technology, or could be invalidated or circumvented. If
we are
not successful in obtaining the patent protection we need, our competitors
may
be able to replicate our technology and compete more effectively against
us. The
legal protections described above afford only limited protection. It is
possible
that we may also have to resort to litigation to enforce and protect our
copyrights, trademarks, patents and trade secrets, which litigation could
be
costly and a diversion of management resources. In addition, it is possible
that
existing or future patents, or even court rulings in our favor regarding
our
patents, may be challenged, invalidated or circumvented. Despite our efforts
to
protect our proprietary rights, unauthorized parties may attempt to copy
aspects
of our products, or otherwise attempt to obtain and use our intellectual
property or develop similar technology independently or design around our
patents. Monitoring unauthorized use of our products is difficult, and
the steps
we have taken may not prevent unauthorized use of our technology, particularly
in foreign countries where effective patent, copyright, trademark and trade
secret protection may be unavailable or may not protect our proprietary
rights
as fully as in the United States.
We
need to continually evaluate internal financial controls against
evolving standards.
The
Sarbanes-Oxley Act of 2002 and other rules and regulations of the Securities
and
Exchange Commission and the National Association of Securities Dealers
impose
duties on us and our executives, directors, attorneys and independent registered
public accountants. In order to comply with the Sarbanes-Oxley Act and
other
rules and regulations, we have evaluated our internal controls systems
that
require management to report on, and our independent auditors to attest
to, our
internal controls. If we are not able to maintain internal controls over
financial reporting we may not be able to meet the requirements of
Section 404. While we have met the requirements of Section 404
including the evaluation, documentation and testing of internal controls
for the
year ended March 31, 2007, we cannot be certain as to the future outcome of
our testing and resulting remediation actions or the impact of the same
on our
operations. We have an ongoing program to perform the system and process
evaluation and testing necessary to comply with these requirements and
we expect
to continue to incur significant expenses in connection with this process.
In
the event that our Chief Executive Officer, Principal Accounting Officer
or
independent registered public accounting firm determine in the future that
our
internal controls over financial reporting are not effective as defined
under
Section 404, investor perceptions may be adversely affected and could cause
a decline in the market price of our stock. In addition, current regulatory
standards are subject to change, and additional standards may be
imposed.
We
may become subject to judgments for securities class action
suits.
We
have
been a defendant in a securities class action suit. In March 2006, Genesis
and
the plaintiff signed an agreement to settle the lawsuit, and in December
2006,
the court issued a final judgment approving the settlement and dismissing
the
case with prejudice. However, we may be subject to future securities class
action suits, which could subject us to judgments in excess of our insurance
coverage and could harm our business. In addition, this kind of lawsuit,
regardless of its outcome, is likely to be time-consuming and expensive
to
resolve and may divert management time and resources.
A
breakdown in our information technology systems could cause a
business interruption,
impair our ability to manage our business or report results, or
result in
the unauthorized disclosure of our confidential and proprietary
information.
Our
information technology systems could suffer a sudden breakdown as a result
of
factors beyond our control, such as earthquakes, insecure connections or
problems with our outside consultants who provide information technology
services to us. If our information technology systems were to fail and
we were
not able to gain timely access to adequate alternative systems or back-up
information, this could have a negative impact on our ability to operate
and
manage our business and to report results in a timely manner. Also, any
breach
of our information systems by an unauthorized third party could result
in our
confidential information being made public or being used by a competitor,
which
could have a material adverse effect on our ability to realize the potential
of
our proprietary rights.
General
economic conditions may reduce our revenues and harm our
business.
As
our
business has grown, we have become increasingly subject to the risks arising
from adverse changes in domestic and global economic conditions. During
times of
economic slowdown, many industries may delay or reduce technology purchases.
As
a result, if economic conditions in the United States, Asia or Europe worsen,
or
if a wider or global economic slowdown occurs, reduced orders and shipments
may
cause us to fall short of our revenue expectations for any given period
and may
result in us carrying increased inventory. These conditions would negatively
affect our business and results of operations. If our inventory builds
up as a
result of order postponement, we would carry excess inventory that is either
unusable or that must be sold at reduced prices which will harm our revenues
and
gross margins. In addition, weakness in the technology market could negatively
affect the cash flow of our customers who could, in turn, delay paying
their
obligations to us. This would increase our credit risk exposure, which
could
harm our financial condition.
ITEM 6. EXHIBITS
EXHIBIT
INDEX
Exhibit
Number
|
Exhibit
Description
|
|
|
2.1(1)
|
Agreement
and Plan of Merger and Reorganization, dated as of September
27, 2001, by
and between Genesis Microchip Incorporated and Sage,
Inc.
|
|
|
2.2
(1)
|
Share
Exchange and Arrangement Agreement and Plan of Arrangement by
and among
the Registrant, Genesis Microchip Nova Scotia Corp., and Genesis
Microchip
Incorporated.
|
|
|
2.3
(2)
|
Agreement
and Plan of Merger, dated as of March 17, 2003, among Genesis
Microchip
Inc., Display Acquisition Corporation and Pixelworks, Inc. (with
Forms of
Voting Agreements).
|
|
|
3.1
(1)
|
Certificate
of Incorporation of the Registrant.
|
|
|
3.2
(3)
|
Amended
and Restated Bylaws of the Registrant.
|
|
|
3.3
(4)
|
Certificate
of Designation of Rights, Preferences and Privileges of Series
A
Participating Preferred Stock of the Registrant.
|
|
|
4.1(1)
|
Form
of Common Stock Certificate of the Registrant.
|
|
|
4.2
(4)
|
Preferred
Stock Rights Agreement, dated as of June 27, 2002, between the
Registrant
and Mellon Investor Services, L.L.C., as amended on March 16,
2003.
|
|
|
10.1(5)*
|
Offer
Letter of Employment with Anders Frisk, dated February 15,
2000.
|
|
|
10.2(5)*
|
Separation
Agreement and Release with Chandrashekar Reddy.
|
|
|
10.3(5)*
|
Consulting
Agreement with Chandrashekar Reddy.
|
|
|
10.4(6)*
|
1987
Stock Option Plan (including form of option agreement).
|
|
|
10.5(21)*
|
1997
Employee Stock Purchase Plan, as last amended on August 24, 2005
(including form of subscription agreement).
|
|
|
10.6
(21)*
|
1997
Non-Employee Stock Option Plan, as last amended on June 8,
2007.
|
|
|
10.7(23)*
|
Form
of 1997 Non-Employee Stock Option Plan Stock Option
Agreement.
|
|
|
10.8(6)*
|
Paradise
Electronics, Inc. 1997 Employee Stock Option Plan.
|
|
|
10.9(6)*
|
Form
of Paradise Electronics, Inc. 1997 Stock Option Plan Incentive
Stock
Option Agreement.
|
|
|
10.10
(6)*
|
Form
of Paradise Electronics, Inc. 1997 Stock Option Plan Nonstatutory
Stock
Option Agreement.
|
|
|
10.11(6)*
|
Sage,
Inc. Second Amended and Restated 1997 Stock Plan.
|
|
|
10.12
(23)*
|
Form
of Sage, Inc. Second Amended and Restated 1997 Stock Plan Stock
Option
Agreement.
|
|
|
10.13
(13)*
|
1997
Employee Stock Option Plan, as amended on September 19, 2005
and form of
Notice of Grant of Restricted Stock Units.
|
|
|
10.14
(23)*
|
Form
of 1997 Employee Stock Option Plan Stock Option
Agreement
|
|
|
10.15
(21)*
|
2000
Nonstatutory Stock Option Plan, as amended on June 8,
2007.
|
|
|
10.16
(10)*
|
Form
of 2000 Nonstatutory Stock Option Plan Stock Option Agreement
with
Nonemployee Directors.
|
|
|
10.17
(10)*
|
Form
of 2000 Nonstatutory Stock Option Plan International Stock Option
Agreement.
|
|
|
10.18
(10)*
|
Form
of 2000 Nonstatutory Stock Option Plan Stock Option Agreement
for
China.
|
|
|
10.19
(21)*
|
2001
Nonstatutory Stock Option Plan, as amended on June 8,
2007.
|
|
|
10.20
(6)*
|
Form
2001 Non-Statutory Stock Option Plan Restricted Stock Purchase
Agreement
|
|
|
10.21
(24)*
|
2003
Stock Plan.
|
|
|
10.22
(22)
|
2007
Employee Stock Purchase Plan
|
|
|
10.23
(22)
|
Form
of 2007 Employee Stock Purchase Plan Subscription
Agreement
|
|
|
10.24
(22)*
|
2007
Equity Incentive Plan
|
10.25*
|
Form
of 2007 Equity Incentive Plan Stock Option Agreement
|
|
|
10.26
(23)*
|
Form
of 2007 Equity Incentive Plan Restricted Stock Unit
|
|
|
10.27
(23)*
|
Form
of 2007 Equity Incentive Plan Restricted Stock Unit for Non-U.S.
Participants
|
|
|
10.28
(5)*
|
2001
Employee Stock Purchase Loan Plan (for non-officers).
|
|
|
10.29
(7)*
|
Offer
Letter with Michael Healy.
|
|
|
10.30
(8)*
|
CFO
“Tier 1” Change of Control Severance Agreement with Michael
Healy.
|
|
|
10.31
(8)*
|
CEO
“Tier 1” Change of Control Severance Agreement with Elias
Antoun.
|
|
|
10.32
(8)*
|
Form
of director and officer indemnification agreement.
|
|
|
10.33
(11)*
|
Amendment
No. 1 to Separation Agreement and Release with Chandrashekar
Reddy, dated
November 10, 2004.
|
|
|
10.34
(12)*
|
Offer
Letter of Employment with Elias Antoun, dated November 10,
2004.
|
|
|
10.35
(14)*
|
Offer
Letter with Behrooz Yadegar, dated April 11, 2006.
|
|
|
10.36
(15)*
|
Fiscal
Year 2007 Executive Bonus Plan, dated June 10, 2006.
|
|
|
10.37
(16)*
|
Separation
Agreement and Release with Tzoyao Chan, dated July 27,
2006
|
|
|
10.38
(17)*
|
Offer
Letter with Hildy Shandell, dated August 30, 2006
|
|
|
10.39
(17)*
|
Change
in Control Severance Agreement with Hildy Shandell, dated September
12,
2006
|
|
|
10.40
(18)
|
Lease
Agreement and Lease Rider Agreement with Transamerica Occidental
Life
Insurance Company, dated September 18, 2006.
|
|
|
10.41(19)*
|
Separation
Agreement and Release with Raphael Mehrbians, dated October 20,
2006.
|
|
|
10.42
(20)
|
Settlement
and License Agreement with Silicon Image, Inc., dated December
21,
2006.
|
|
|
10.43
(8)*
|
“Tier
2” Change of Control Agreement with Anders Frisk.
|
|
|
10.44
(8)*
|
Form
of “Tier 2” Change of Control Severance Agreement.
|
|
|
10.45
(25)
|
Summary
of Compensation Plan of Non-Employee Board Members.
|
|
|
10.46
(25)*
|
Offer
Letter with Linda Millage, effective May 1, 2007.
|
|
|
10.47*
|
Offer
Letter with Rick Martig, effective November 5, 2007
|
|
|
10.48*
|
Change
of Control Severance Agreement with Rick Martig, effective November
5,
2007
|
|
|
10.49*
|
Offer
Letter with Robert Haefling, effective November 1, 2007
|
|
|
10.50*
|
Change
of Control Severance Agreement with Robert Haefling, effective
November 1,
2007
|
|
|
31.1
|
Certification
of Chief Executive Officer, as required by Rule 13a-14(a) or
Rule
15d-14(a) of the Securities Exchange Act of 1934.
|
|
|
31.2
|
Certification
of Principal Accounting Officer, as required by Rule 13a-14(a)
or Rule
15d-14(a) of the Securities Exchange Act of 1934.
|
|
|
32.1
|
Certification
of Chief Executive Officer and Principal Accounting Officer,
as required
by Section 1350 of Chapter 63 of Title 18 of the United States
Code
(18 U.S.C. 1350).
|
__________
(1)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-4
(File No. 333-72202) filed with the Securities and Exchange
Commission on October 25, 2001, as amended.
|
|
|
(2)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on March 20, 2003.
|
|
|
(3)
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on July 1, 2002, as
amended.
|
|
|
(4)
|
Incorporated
by reference to the Registrant’s Registration Statement on
Form 8-A12G filed with the Securities and Exchange Commission on
August 5, 2002, as amended by the Registrant’s Statement on
Form 8-12G/A filed with the Securities and Exchange Commission on
March 31, 2003.
|
(5)
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K filed
with the Securities Exchange Commission on June 20, 2003.
|
|
|
(6)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-8
filed with the Securities Exchange Commission on February 21, 2002.
|
|
|
(7)
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q filed with
the Securities Exchange Commission on February 13, 2004.
|
|
|
(8)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on March 7, 2007.
|
|
|
(9)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-8
filed with the Securities Exchange Commission on October 15, 2003.
|
|
|
(10)
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q filed with
the Securities Exchange Commission on November 9, 2004.
|
|
|
(11)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on November 15, 2004.
|
|
|
(12)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on November 19, 2004.
|
|
|
(13)
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q filed with
the Securities Exchange Commission on November 8, 2005.
|
|
|
(14)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on May 10, 2006.
|
|
|
(15)
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K filed
with the Securities Exchange Commission on June 14, 2006.
|
|
|
(16)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on August 1, 2006.
|
|
|
(17)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on September 18, 2006.
|
|
|
(18)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on September 19, 2006.
|
|
|
(19)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on October 23, 2006.
|
|
|
(20)
|
Incorporated
by reference to the Registrant’s Current Report on Form 8-K filed
with the Securities Exchange Commission on December 22, 2006.
|
|
|
(21)
|
Incorporated
by reference to the Registrant’s Annual Report on Form 10-K filed
with the Securities Exchange Commission on June 12, 2007.
|
|
|
(22)
|
Incorporated
by reference to the Registrant’s Definitive Proxy Statement filed with the
Securities Exchange Commission on September 7, 2007
|
|
|
(23)
|
Incorporated
by reference to the Registrant’s Schedule TO-I filed with the Securities
Exchange Commission on October 18, 2007
|
|
|
(24)
|
Incorporated
by reference to the Registrant’s Registration Statement on Form S-8
filed with the Securities Exchange Commission on October 15,
2003.
|
|
|
(25)
|
Incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q filed with
the Securities Exchange Commission on August 9, 2007.
|
|
|
*
|
Identifies
a management contract or compensatory plan of arrangement required
to be
filed as an exhibit to this report pursuant to Item 14(c) of this
report.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
GENESIS
MICROCHIP INC.
|
|
|
By:
|
/s/
LINDA MILLAGE
|
|
Linda
Millage
|
|
Principal
Accounting Officer
|
|
|
|
(Authorized
Officer to sign on behalf of Registrant & Principal Accounting
Officer)
|
Date:
November 8, 2007