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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number 001-39135

SiTime Corporation

(Exact name of Registrant as specified in its Charter)

Delaware | 02-0713868
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
5451 Patrick Henry Drive Santa Clara, CA | 95054
(Address of principal executive offices) | (Zip Code)

Registrant’s telephone number, including area code: (408) 328-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, $0.0001 par value per share |  | SITM |  | The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer |  | ☒ |  | Accelerated filer |  | ☐
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☒
Emerging growth company |  | ☐ |  |  |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant based on the last reported sale of the common stock on June 30, 2021, on the Nasdaq Global Market, was $1,592,780,318 based on the closing price of the registrant’s common stock on such date of $126.59 per share.

The number of shares of Registrant’s Common Stock outstanding as of February 17, 2022 was 20,824,740.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference certain information from the registrant’s definitive proxy statement for the 2022 Annual Meeting of Stockholders to be filed no later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2021.

Table of Contents

|  | Page
PART I |  |
Item 1. | Business | 6
Item 1A. | Risk Factors | 16
Item 1B. | Unresolved Staff Comments | 38
Item 2. | Properties | 38
Item 3. | Legal Proceedings | 38
Item 4. | Mine Safety Disclosures | 38
PART II |  |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 39
Item 6. | [Reserved] | 41
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 42
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 50
Item 8. | Financial Statements and Supplementary Data | 51
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 77
Item 9A. | Controls and Procedures | 77
Item 9B. | Other Information | 79
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 79
PART III |  |
Item 10. | Directors, Executive Officers and Corporate Governance | 80
Item 11. | Executive Compensation | 80
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 80
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 81
Item 14. | Principal Accounting Fees and Services | 81
PART IV |  |
Item 15. | Exhibits and Financial Statement Schedules | 82
Item 16. | Form 10-K Summary | 86

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information in this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. We may, in some cases, use words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes

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to identify these forward-looking statements. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Forward-looking statements in this report include, but are not limited to, statements about:

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our plans to focus on oscillators, clock ICs, resonators and timing synchronization solutions and to aggressively expand our presence in these markets;
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the impact of the COVID-19 pandemic will have on our business, employees, revenue and other operating results, liquidity, and cash flows, and its impact on the businesses of our suppliers and customers, and our anticipated responses thereto;
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our expectations regarding our ability to address market and customer demands and to timely develop new or enhanced solutions to meet those demands;
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anticipated trends, challenges and growth in our business and the markets in which we operate, including pricing expectations;
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our expectations regarding our revenue, gross margin, and expenses;
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our belief as to the sufficiency of our existing cash and cash equivalents and funds available for borrowing under our credit facilities to meet our cash needs for at least the next 12 months and our future capital requirements over the longer term, including the potential impact of the COVID-19 pandemic thereon;
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our expectations regarding dependence on our largest customer;
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our customer relationships and our ability to retain and expand our customer relationships and to achieve design wins;
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our expectations regarding the success, cost, and timing of new products;
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the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets;
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our plans to expand sales and marketing efforts through increased collaboration with our distributors, resellers, and contracted sales representatives, and our plans to introduce a self-service web portal as well as digital marketing campaigns for branding and lead generation;
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our goal to become the leading timing solution provider for advanced and challenging applications;
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our positioning of being designed into current systems as well as future products;
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our belief that our advanced packaging designs can enable the smallest footprints in the industry;
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our expectations regarding competition in our existing and future markets;
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our expectations regarding regulatory developments in the United States and foreign countries;
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our expectations regarding the performance of, and our relationships with, our third-party suppliers and manufacturers;
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our expectations regarding our and our customers’ ability to respond successfully to technological or industry developments;
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our expectations regarding our ability to attract and retain key personnel;
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our expectations regarding intellectual property and related litigation;
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the adequacy and availability of our leased facilities;
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the accuracy of our estimates regarding capital requirements, expectations regarding renewal of loans, and needs for additional financing.

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this report and are subject to risks and uncertainties. We discuss many of these risks in greater detail in the “Risk Factor Summary” below and under Item 1. “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements. We qualify all of the forward-looking statements in this report by these cautionary statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity,

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performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Risk Factors Summary

Our business is subject to numerous risks, as more fully described in “Risk Factors” below. You should read these risks before you invest in our common stock. We may be unable, for many reasons, including those that are beyond our control, to implement or execute our business strategy. In particular, risks associated with our business include, among others:

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The impact and uncertainty related to the ongoing COVID-19 pandemic could adversely impact our business, results of operations and financial condition, as well as the businesses of our suppliers and customers;
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A downturn in the worldwide economy may harm our business;
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The third parties we rely upon for our raw materials, engineered materials, wafer fabrication and supply, assembly, packaging and testing may be unable to secure raw materials, reduce their resources available to us and our immediate suppliers, not meet satisfactory yields or quality, or increase pricing, which could harm our ability to ship our solutions to our customers on time and in the quantity required which could cause an unanticipated decline in our sales and loss of customers;
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A portion of our operations is located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability;
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We currently depend on one end customer for a large portion of our revenue; the loss of, or a significant reduction in orders from our customers, including this end customer, could significantly reduce our revenue and adversely impact our operating results;
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If we are unable to expand or further diversify our customer base, our business, financial condition, and results of operations could suffer;
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We generally do not have long-term purchase commitments with our customers, and orders may be cancelled, reduced, or rescheduled with little or no notice, which in turn exposes us to inventory risk and may harm our operating results;
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Our revenue and operating results may fluctuate from period to period due to, among other factors, the impact of the COVID-19 pandemic on our business as well as our suppliers and customers, customer demand, product life cycles, fluctuations in inventories held by our distributors or end customers, the gain or loss of significant customers, the availability of capacity in our supply chain, research and development costs, and product warranty claims. This in turn could cause our stock price to decline;
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Our success and future revenue depend on our ability to achieve design wins and to convince our current and prospective customers to design our products into their product offerings, as well as our customers’ ability to develop products that achieve market acceptance;
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Our target customer and product markets may not grow or develop as we currently expect, and if we fail to penetrate new markets and scale successfully within those markets, our revenue and financial condition would be harmed;
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If we are not able to successfully introduce and ship in volume new products in a timely manner, our business and revenue will suffer;
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Our gross margins may fluctuate due to a variety of factors, which could negatively impact our results of operations and our financial condition;
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Our revenue in recent periods may not be indicative of future performance and our revenue may fluctuate over time;

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•
Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process, which does not assure product sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer;
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We provide a lifetime warranty on our products and may be subject to warranty or product liability claims, which could harm our reputation, result in unexpected expenses, and cause us to lose market share;
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Defects in our products could harm our relationships with our customers and damage our reputation;
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We are subject to the cyclical nature of the semiconductor industry;
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If we fail to compete effectively, we may lose or fail to gain market share, which could negatively impact our operating results and our business;
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We may not be able to accurately predict our future capital needs, and we may not be able to obtain additional financing to fund our operations;
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We may seek, or be required to seek debt financing in the immediate or near term;
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If significant tariffs or other trade restrictions are placed on our products or third-party suppliers, our revenue and results of operations may be materially harmed;
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Failure to comply with the laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences;
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We are subject to government regulation, including import, export and economic sanctions laws and regulations that may expose us to liability and increase our costs;
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New or future changes to U.S. and non-U.S. tax laws, or tax regulatory authorities disagreeing with our positions and conclusions regarding certain tax positions, could materially adversely affect us;
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Breaches or other disruptions of our security systems may damage our reputation and adversely affect our business;
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We may fail to adequately protect our intellectual property and have received, and may in the future receive, claims of intellectual property infringement, misappropriation, or other claims, which in turn could result in significant expense, result in the loss of significant rights, and harm our relationship with our end customers and distributors;
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We may be impacted by risks associated with MegaChips’ ownership of a significant portion of our stock, for instance as long as MegaChips holds a significant amount of our stock, our other shareholders’ ability to influence matters requiring stockholder approval will be limited, and there could be potential conflicts of interest between us and affiliates of MegaChips, which could impact our business and operating results;
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Substantial future sales of our common stock could cause the market price of our common stock to decline; and
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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

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PART I

Item 1. Bu siness

Overview

We are a leading provider of silicon timing solutions. Our timing solutions are the heartbeat of our customers’ electronic systems. They solve complex timing problems and enable industry-leading products. We provide solutions that are differentiated by high performance and reliability, programmability, small size, and low power consumption. Our products have been designed into over 250 applications across our target markets, including communications and enterprise, automotive, industrial, aerospace, mobile, Internet of Thing (“IoT”), and consumer. Our current solutions include various types of oscillators, as well as resonators and clock integrated circuits (“ICs”). Our all-silicon solutions are based on three fundamental areas of expertise: micro-electro-mechanical systems (“MEMS”), analog mixed-signal design capabilities, and advanced system-level integration expertise. This expertise allows us to design MEMS resonators, analog circuits, as well as systems and packaging, and put these all together to deliver a system level solution that solves customers’ complex timing problems. In this aspect, we are different than quartz-based providers, who typically have expertise in designing and manufacturing resonators, but usually outsource the analog and packaging. We are also different in that our MEMS resonators are made with silicon, while the quartz suppliers use quartz crystal technology. Our timing solutions are designed to be resilient to environmental stresses. For the communications and enterprise market, our timing solutions provide high performance and resilience in dense, less-controlled environments that experience harsh conditions–an advantage as equipment moves closer to the customer with the rollout of 5G. For the automotive market, our solutions can be utilized in automotive electronics, including advanced driver assistance systems (“ADAS”) for self-driving cars, which require increased timing accuracy. For the industrial market, our products offer programmability and high reliability for the diverse operating conditions of industrial equipment, including high temperatures, mechanical shock and vibration. For the aerospace market, our solutions provide lower acceleration sensitivity for end products that operate in rugged conditions. For the mobile, IoT and consumer market, our silicon-based timing solutions have the advantage of offering high performance at optimal power consumption and size, as our customers fit more functionality into smaller devices.

We commenced commercial shipments of our first oscillator products in 2006. Substantially all of our revenue to date has been derived from sales of oscillator systems across our target end markets. We recently introduced products into the clock IC market, which we began sampling in 2019, and intend to focus on clock IC and timing sync solutions in the future. We seek to aggressively expand our presence in these two markets.

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

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

Industry Background

Timing Solutions Enable Innovation and are Rapidly Evolving

The ability to accurately measure and reference time has been essential to many of humankind’s greatest inventions and technological progress. Timing technology has continued to evolve over centuries, forming a critical aspect of broader technological advancement. Timing is the heartbeat of digital electronic systems, ensuring that the system runs smoothly and reliably by providing and distributing clock signals to various critical components such as CPUs, communication and interface chips, and radio frequency components. As electronics are expected to operate at higher performance levels in increasingly challenging environments, while also being more complex and footprint-constrained, we believe they will require more sophisticated timing solutions. For example, as 5G communications networks evolve, we expect that they will require higher precision from a greater number of oscillators and timing devices.

Key Building Blocks of Timing Solutions

Timing solutions comprise three key building blocks: resonators, oscillators, and clock ICs. While simpler systems generally require only an external resonator coupled with a basic embedded oscillator circuit, more complex systems require advanced timing

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solutions that may integrate a variety of resonators, oscillators, and clock ICs in a single chip package. The complexity of these timing solutions increases significantly when the performance requirements of the systems that use them increase, such as electronic systems required to support the 5G communication network infrastructure.

The key building blocks of SiTime’s timing solutions are:

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Resonators – mechanical silicon structures that vibrate at a precise frequency and provide the core accuracy and stability in oscillator systems;
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Oscillators – active systems that combine resonators with analog mixed-signal ICs that cause the resonators to vibrate, generating accurate and stable clock signals; and
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Clock ICs – integrated analog mixed-signal circuits that use phase-locked loops (“PLLs”), clock dividers, and drivers, and have multiple clock signals on the output of the system. Clock ICs require resonators and oscillators for timing references and may integrate these components into complex systems.

These three building blocks may be used individually or in combination, depending on the end product’s performance, price, and size requirements.

Limitations of Legacy Quartz-based Solutions

For over 70 years, quartz crystal has been the predominant technology of choice for resonators and will continue to play a role in the timing market. In a quartz oscillator, a quartz crystal resonator is paired with a silicon-based clock IC in a ceramic package. However, quartz timing devices, largely unchanged in decades, have many inherent limitations, including limited frequency ranges, sensitivity to rapid temperature changes, vulnerability to vibration and mechanical shock, susceptibility to frequency jumps at particular temperatures, and limited programmability. Quartz devices must be housed in ceramic packaging, and thus are difficult to integrate into standard semiconductor packages. Quartz products require dedicated manufacturing facilities and have relatively long lead times due to the need to specify various characteristics well in advance of production, without the ability to reconfigure them during the design cycle. In addition, as electronic systems become more complex, feature-rich, and robust, they require more sophisticated timing systems that can seamlessly integrate a variety of resonators, oscillators, and clock ICs in various system-level combinations. This seamless integration is more difficult with legacy quartz systems.

Silicon Timing Solutions Poised to Disrupt the Market

In recent years, advances in silicon-based manufacturing and packaging techniques have allowed the development of alternatives to quartz crystal technology. We believe that silicon MEMS is an ideal technology for resonator design. Specifically, its ability to integrate with other circuits in standard semiconductor packages has made scalable standard silicon manufacturing possible for resonators and broader timing technology. MEMS and silicon-based technologies can operate in a wide range of frequencies, are more resistant to vibration, mechanical shock, and temperature changes, and are less susceptible to frequency jumps. These technologies are also inherently well-suited to produce timing solutions that are small, and offer high performance, robustness and programmability. Timing solutions based on these technologies are manufactured using semiconductor processes in fabrication plants with high capacity, allowing for cost-effective high-volume manufacturing.

Significant Market Opportunity for Timing Solutions

According to Dedalus Consulting - 2019 Frequency Control Components Global Markets, End-Users, Applications & Competitors: Analysis & Forecasts and our estimates, the global timing market is expected to grow to $10.1 billion by 2024. Dedalus Consulting estimates that oscillators and standalone resonators will represent approximately $5.0 billion and $4.0 billion total addressable markets, respectively, in 2024. Based on our internal estimates, we believe clock ICs represent an approximate $1.0 billion total addressable market. As a subset of the broader timing market, the market for MEMS timing devices is projected to grow from $0.24 billion in 2021 to $1 billion by 2024, representing a compound annual growth rate of 62%, according to internal company estimates.

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The Opportunity for Advanced Solutions

From high-performance network infrastructure equipment to low-power battery-operated devices, precise timing solutions enable virtually all electronics. The complexity of such timing solutions increases significantly with the performance requirements of the systems in which they are used. Below are some examples of end markets in which we believe our silicon-based timing is enabling or has the potential to enable, greater functionality than legacy solutions:

Communications and Enterprise

Communications infrastructure equipment used in wireless base stations, wired infrastructure equipment, enterprise networks, and cloud data centers must provide high performance and stability in demanding environments, which may include temperature fluctuations, mechanical shocks, and vibration. If the timing solution within the equipment fails, networks can shut down, leading to service disruptions and higher operating costs. According to Gartner, “Recent reports on 5G pilots and testing have identified a wide range of projected data throughput speeds ranging from 10 times up to 1,000 times faster than 4G. Other reports estimate ranges of one to 10 gigabytes per second.”

Automotive, Industrial, and Aerospace

For automotive applications, timing technology must perform reliably over the life of an automobile in an environment characterized by vibration, mechanical shocks, electromagnetic interference, wide temperature ranges, and rapid temperature change. The AECC (Automotive Edge Computing Consortium) estimated in 2020 that “data traffic from connected vehicles will exceed 1,000 times the present volume, surpassing 10 exabytes per month by 2025.” These communication systems will require highly-reliable precise timing. We believe silicon-based timing can address many of the challenges associated with this demanding automotive ecosystem.

Industrial equipment, ranging from factory machinery to medical devices, is often exposed to environments characterized by temperature fluctuation, mechanical shocks, vibration, and electromagnetic interference. We believe silicon-based timing solutions can perform better than legacy quartz-based solutions in demanding industrial environments at comparable cost and with lower power consumption and higher reliability. In addition, with the highly diverse nature of industrial applications and the need for unique operating frequencies, we believe the programmable architecture of silicon timing products provides an advantage.

Timing devices used in aerospace and defense applications such as rockets and satellites need to withstand extreme vibration forces and temperature gradients during operation. Quartz-based solutions can be impacted by vibrating forces acting on the whole system. MEMS timing devices are well-suited for these applications, as they provide up to 50 times better acceleration sensitivity under vibration than comparable quartz-based solutions.

Mobile, IoT and Consumer

The growing reliance on mobile devices and the IoT revolution has enabled the proliferation of billions of internet-connected devices in industrial and consumer applications. These devices range from smartphones and personal wearable devices to electronics embedded in appliances and industrial machinery. Many of these devices need to package a significant amount of electronics in a limited battery-powered and size-constrained form factor, while still requiring high performance and high accuracy. Due to the ability to integrate with ICs, we believe silicon-based timing solutions are well-suited to optimize footprint, reliability, and power consumption of the overall system within mobile, IoT and consumer devices.

Our Solutions and Technology

Our silicon timing solutions comprise:

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MEMS resonators: We pioneered the silicon MEMS-based timing industry with the MEMS First®, EpiSeal®, and TempFlat® processes and technologies. These manufacturing processes have allowed the hermetically-sealed resonator die to be housed in industry-standard, low-cost plastic packages. These processes and technologies improve resonator stability, increase quality and reliability, and decrease aging effects. We believe our MEMS resonators are easy to integrate into silicon-based oscillators and clock ICs, and allow us to develop tightly-integrated high performance timing solutions.
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Oscillators and Clock ICs: We have a dedicated analog and mixed-signal engineering team focused on the most complex challenges related to oscillators and clock ICs. Our analog mixed-signal technologies include several innovative low-noise circuit-based oscillators, high-performance PLLs, low-noise data converters, and precision low-aging reference circuits.

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Many of our oscillators use temperature sensing to maximize frequency stability. Our low-power nano-ampere and high-resolution DualMEMS® micro-kelvin-resolution sensing technologies stabilize our timing solutions despite rapid temperature changes. We also offer what we consider to be leading solutions across a range of attributes, including Allan deviation, power supply noise rejection, temperature-sensing resolution, and integrated phase jitter.
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Advanced system-level integration: We have extensive know-how in integrating various timing components into elegant system-level solutions. Our ability to integrate MEMS-based resonators with analog mixed-signal products allows us to develop oscillators and clock ICs in diverse permutations, which helps us solve difficult timing challenges. Using advanced packaging designs, we believe we can design our products to fit in the smallest footprints in the industry.

We design each key building block of the timing system, from MEMS resonators to oscillator circuits to clock ICs. Our ability to combine our MEMS resonators with analog-mixed signal components in a fabless semiconductor supply chain allows us to build full timing solutions from the ground up, enabling our customers to focus on their core expertise.

Our flexible and programmable timing solutions offer the following benefits:

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High performance: Our portfolio of silicon-based MEMS timing products allows us to provide our customers with high performance solutions across a wide range of attributes including stability over temperature, vibration, phase jitter, and other metrics.
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Small size: Our solutions have a small footprint and package size, optimizing the end customer’s board area. Additionally, many of our products have added integrated functions such as on-chip regulators and load capacitors which reduce the need for external components and decrease the overall system size.
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Low power: Our solutions operate at low power levels and have differentiated power-saving features such as NanoDrive™ and FlexSwing™, making them well-suited for mobile, IoT and other battery-operated applications.
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Programmability: Our devices are configurable across a wide range of parameters, including frequency, stability metrics, voltage parameters, and temperature ranges, among others, resulting in design flexibility for the customer, and enabling us to produce a vast number of custom timing products on demand with short lead times.
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High quality and reliability: The combination of our materials, design, and manufacturing processes enables us to produce high quality products with long-term reliability. Our solutions offer low sensitivity to electromagnetic energy, mechanical shock, vibration, airflow, temperature gradients and power supply noise.
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Flexible integration: Our MEMS resonators and clock ICs allow a wide range of packaging and integration methodologies to support various levels of size, cost, and electrical, thermal, and mechanical performance.
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Leveraged product development: Our solutions employ different combinations of MEMS and circuit components, enabling us to generate a vast number of custom part numbers, including over 40,000 unique part numbers shipped as of December 31, 2021.
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Rapid time to market: Our solutions can typically be delivered within weeks of initial customer order and configuration, enabling us to reduce our end customers’ time to market.

Our Strategy

Our objective is to be the leading timing solution provider for advanced and challenging applications. Our solutions not only displace existing products by providing improved performance across a range of operational attributes, but also enable next-generation devices by providing high performance at affordable price points. Key elements of our strategy include:

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Extend our silicon-based timing leadership. We intend to continue driving innovation in the timing market and working with our ecosystem partners to help set the timing standards of the future. We plan to improve the performance of our current solution suite across a variety of key metrics, including size, power, frequency stability, phase noise, and signal quality, while adding new functionality.
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Advocate benefits of silicon technology. We intend to continue to educate current and prospective customers about the benefits of our silicon timing systems solutions relative to their existing and future products.

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•
Identify and promote new and emerging applications for our technologies. We intend to continue to collaborate with our end customers to identify timing challenges related to their product roadmaps and to develop innovative solutions to help them realize these products.
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Enable future technology innovation. We plan to continue to apply our MEMS analog and mixed-signal, and systems expertise, as well as partner with leading technology companies to develop innovative products.

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•
Broaden our product portfolio. We intend to continue to broaden our product portfolio by offering additional varieties of oscillators, expanding our business in standalone resonators, and expanding into the clock IC market.
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Continue to attract and acquire new customers. We intend to expand our end customer base by focusing on direct dialogue with large strategic accounts as well as partnerships with large distributors and resellers. We believe this multi-track strategy will allow us to provide differentiated solutions to a broad array of customers.
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Drive margin expansion of our products. We intend to use our technological expertise to deliver higher value and higher margin products. In addition, we intend to continue to reduce our costs through operational improvements and supply-chain management initiatives.
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Offer value on business metrics. In addition to differentiating our solutions based on technical features and value, we also intend to provide value to our customers on business metrics by leveraging our fabless semiconductor infrastructure. These benefits may include shorter lead times, higher quality and reliability, and therefore lower cost of ownership for the end customer.

Our Products

Our silicon timing products are designed to address a wide range of applications across a broad array of end markets. Our product portfolio encompasses oscillators, clock ICs, and resonators. The programmability of our product platforms enables us to generate solutions quickly to customer specifications.

Today, we primarily supply oscillator products that comprise a MEMS resonator and an analog mixed-signal IC that are integrated into a package. The following table illustrates our current portfolio of promoted products by target end market:

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Our Customers

We primarily sell our timing products to distributors and resellers, who in turn sell our products to our end customers. We work closely with our end customers throughout their design cycles and are able to develop long-term relationships as our technology becomes embedded in their products and at times sell directly to our end customers. As a result, we believe our products are well-positioned to be designed into their current systems and we are well-positioned to develop next generation solutions for their future products.

Pernas Electronics Co., Ltd. (“Pernas”) directly accounted for 24%, 26%, and 17% of our revenue for the years ended December 31, 2021, 2020 and 2019, respectively, Quantek Technology Corporation (“Quantek”) directly accounted for 10%, 18%, and 22% of our revenue for the years ended December 31, 2021, 2020, and 2019, respectively and Arrow Electronics, Inc. (“Arrow”) directly accounted for 14%, 15%, and 19% of our revenue for the years ended December 31, 2021, 2020, and 2019, respectively. Other than Pernas, Quantek, and Arrow, no other single customer accounted for more than 10% of our revenue in the years ended December 31, 2021, 2020, and 2019.

Based on the sell-through information provided to us from distributors and resellers who identify end customers, we believe that the majority of our products sold to Pernas and Quantek are in turn incorporated into products of Apple Inc. (“Apple”), our largest end

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customer. As a result, we believe revenue attributable to our largest end customer accounted for approximately 22%, 40%, and 35% of our revenue for the years ended December 31, 2021, 2020, and 2019, respectively.

Sales and Marketing

Our customers’ design cycle from initial engagement to volume shipment typically ranges from six months to three years, with product life cycles of up to ten years or more. For many of our products, early engagement with our customers’ technical staff is critical for success. To ensure an adequate level of early engagement, our sales, marketing, and customer and development engineers work closely with our customers and channel partners to understand, identify, and propose solutions to their systems’ challenges. We work closely with our customers, including technology leaders such as Nokia for the communications markets, to anticipate end customer market needs. In some cases, we work with our end customers to better understand the end customers’ market trends and new requirements that are being placed on our customers.

We sell our products worldwide through multiple channels, including our direct sales force and a network of distributors, contract manufacturers, contracted sales representatives, resellers, and independent design houses. Our global sales strategy includes direct sales and distributors covering over 15,000 end customer accounts since inception.

We have a strategic accounts strategy with dedicated account owners and our direct sales force focused on key decision-makers to provide high-value solutions for unique customer requirements. We intend to continue to expand our sales and marketing efforts through increased collaboration with our distributors, resellers, and contracted sales representatives. In addition, we intend to introduce a self-service web portal, which will support 24/7 availability and leverage an inside sales team to support a “self-service model” for customers.

We promote our products and brand through various means including digital marketing and online advertising, press releases, contributed articles, speaking opportunities, trade events, customer events, public relations and industry analyst relations.

Seasonality

Our revenue is subject to some seasonal variation. Based on the production schedules of key customers, our products typically see stronger revenue in the second half of our fiscal year. However, there can be no assurance that this trend will continue.

Manufacturing

We operate a fabless business model and use third-party foundries and assembly and test contractors to manufacture, assemble and test our semiconductor products. This outsourced manufacturing approach allows us to focus our resources on the design, sale, and marketing of our products. In addition, we believe that outsourcing many of our manufacturing and assembly activities provides us with the flexibility needed to respond to new market opportunities and scale for customer demand, simplifies our operations, and significantly reduces our capital commitments.

We subject our third-party manufacturing contractors to rigorous qualification requirements to meet the high quality and reliability standards required of our products. We carefully qualify each of our partners and their processes before applying the technology to our products. Our engineers work closely with our foundries and other contractors to increase yield, lower manufacturing costs, and improve product quality.

•
Fabrication. We currently utilize a range of semiconductor process generations to develop and manufacture our products. We use Robert Bosch LLC (“Bosch”) in Germany and Taiwan Semiconductor Manufacturing Company (“TSMC”) in Taiwan as our primary foundries and suppliers for our MEMS timing devices and analog mixed-signal circuit ICs, respectively.
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Package, Assembly and Testing. U pon the completion of processing at the foundry, we use third-party contractors for packaging, assembly and testing, including Advanced Semiconductor Engineering, Inc. (“ASE”), Carsem (M) Sdn Bhd. (“Carsem”), and United Test and Assembly Center Ltd. (“UTAC”) in Taiwan, Malaysia, and Thailand, respectively, as well as Daishinku Corp. (“Daishinku”), UTAC, Hana Semiconductor (Ayutthaya) Co., Ltd, and ASE for ceramic packaging for some of our products.
•
Warehousing. Our products are warehoused at our outsourced semiconductor assembly and test facilities located in Malaysia, Taiwan, and Thailand.

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We have a supply agreement with Bosch under which Bosch has agreed to fabricate our MEMS wafers based on purchase orders placed by us. Bosch has discretion whether to accept our purchase orders, and we can terminate purchase orders for convenience by giving written notice prior to shipment. The initial term of the supply agreement is for ten years through February 2027 and automatically renews unless terminated by either party with three years’ advance notice beginning in February 2024. Other than Bosch, we do not have long-term supply agreements with most of our third-party manufacturing contractors, and we purchase products on a purchase order basis.

Research and Development

We believe that our future success depends on our ability to introduce enhancements on our existing products and to develop new products for both existing and new markets. As a result, a significant majority of our operating expenses has been allocated towards this effort. Our research and development efforts are focused primarily on MEMS and advanced clock IC design and advanced system-level integration for timing solutions.

We have assembled a core team of experienced engineers and systems designers who conduct research and development activities in the United States, the Netherlands, Japan, Taiwan, and Ukraine. As of December 31, 2021, we had 85 engineers worldwide (representing approximately 30% of our total employee base).

Intellectual Property

We rely primarily on patent, copyright, trademark, and trade secret laws, as well as confidentiality and non-disclosure agreements, and other contractual protections, to protect our technologies and proprietary know-how. As of December 31, 2021, we had 83 issued U.S. patents, expiring generally between 2026 and 2039, and 38 pending U.S. patent applications. We also had two foreign issued patents expiring in 2035 and four pending foreign patent applications. Our issued patents and pending patent applications generally relate to our MEMS fabrication process, MEMS resonators, circuits, packaging, and oscillator systems.

In addition to our own intellectual property, we also use third-party licenses for certain technologies embedded in our MEMS solutions. For example, we have a license to certain patents from Bosch relating to the design and manufacture of MEMS-based timing applications. The patent rights obtained under the license agreement expire between 2021 and 2029, and the license agreement expires upon expiration of the last patent licensed under the agreement. We do not believe there will be any significant impact upon expiration of these patents.

We generally control access to and use of our confidential information and trade secrets through the use of internal and external controls, including contractual protections with employees, contractors, and customers. We rely in part on the laws of the United States and international laws to protect our work. All employees and consultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship. However, we cannot guarantee that we have entered into such agreements with every such party and we may not have adequate remedies in case of a breach of any such agreements. Our trade secrets could be disclosed to our competitors or others may independently develop substantially equivalent technologies or otherwise gain access to our trade secrets. Trade secrets can be difficult to protect and some courts inside and outside of the United States are less willing or unwilling to protect trade secrets. Despite our efforts to protect our intellectual property, unauthorized parties may still copy, misappropriate, or otherwise obtain and use our software, technology, or other information that we regard as our proprietary intellectual property. In addition, we intend to expand our international operations, and effective patent, copyright, trademark, and trade secret, and other intellectual property protection may not be available or may be limited in some foreign countries.

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The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which has resulted in protracted and expensive litigation for many companies. We have in the past received, and we may in the future receive, communications alleging liability for damages or challenging the validity of our intellectual property or proprietary rights. Any litigation, regardless of success or merit, could cause us to incur substantial expenses, reduce our sales, and divert the efforts of our management and other personnel. In the event we receive an adverse result in any litigation, we could be required to pay substantial damages, seek licenses from third parties, which may not be available on reasonable terms or at all, cease sale of products, expend significant resources to develop alternative technology, or discontinue the use of processes requiring the relevant technology.

Competition

The global semiconductor market in general, and the timing market in particular, is highly competitive. We compete in different target markets based on a number of competitive factors. We expect competition to increase and intensify as additional companies enter our markets and as internal resources of large original equipment manufacturers (“OEMs”) grow. Increased competition could result in price pressure, reduced gross margins, and loss of market share, any of which could harm our business, financial condition, and results of operations.

Our competitors range from large, international companies offering a wide range of timing products to smaller companies specializing in narrow market verticals. In the MEMS-based oscillator market, we primarily compete against Microchip Technology Inc. (“MCHP”) through their acquisition of Micrel, Incorporated. In the MEMS-based resonator market, we primarily compete against Murata Manufacturing Co., Ltd. In the analog mixed-signal IC and clocking market, we primarily compete against Renesas Electronics Corporation (through their acquisition of Integrated Device Technology, Inc.), Silicon Laboratories Inc., Texas Instruments Incorporated, Micrel (which is owned by MCHP), and Analog Devices, Inc. In the oscillator market, we primarily compete against quartz crystal suppliers such as Rakon Limited, Daishinku Corporation, Nihon Dempa Kogyo Co., Ltd., TXC Corporation, Seiko Epson Corporation, Kyocera Corporation and Vectron International (which is owned by MCHP). These quartz crystal suppliers typically own their own quartz manufacturing facilities.

Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. During past periods of downturns in our industry, competition in the markets in which we operate intensified as our customers reduced their purchase orders. Many of our competitors are substantially larger, have greater financial, technical, marketing, distribution, customer support, and other resources, are more established than we are, and have significantly better brand recognition and broader product offerings which may enable them to better withstand similar adverse economic or market conditions in the future. Any such development may materially and adversely affect our current and future target markets and our ability to compete successfully in those markets. We maintain our competitive position through our ability to successfully design, develop, and market complex timing solutions for the customers we serve.

Government Regulation

Our business activities are worldwide and subject to various federal, state, local and foreign regulations and our products are governed by a number of rules and regulations. To date, our compliance with these regulations has not had a material impact on our results of operations.

Human Capital Resources and Empowerment

We believe that our company culture, which promotes innovation, open communication, and teamwork, has been critical to our success. Our success depends largely upon the continued services of our executive officers and other key employees and on our ability to continue to attract, retain and motivate qualified employees, particularly highly-skilled engineers involved in the design, development, support and manufacture of new and existing products and processes and our sales and marketing team which is critical to achieving design wins, creating our brand awareness and reputation, and building long-lasting relationships with our customers and other industry participants. In order for us to attract the best talent, we aim to offer challenging work in an environment that enables our employees to learn, grow, and reach their full potential.

Our human capital resource objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and future employees. We strive to attract and retain the most talented employees in the industry and across the globe by offering competitive compensation and benefits that support their health, financial, and emotional well-being. Our compensation philosophy is based on rewarding each employee’s individual contributions. We use a combination of fixed and variable pay including base salary,

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bonuses, performance awards and stock-based compensation. The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees through the granting of stock-based compensation awards. We offer employees benefits that vary by country and are designed to meet or exceed local laws and to be competitive in the marketplace. Examples of benefits offered in the U.S. include: a 401(k) plan with employer contributions; health benefits; life, business travel and disability insurance; additional voluntary insurance; paid time off and parental leave, and paid counseling assistance. For further information concerning our equity incentive plans, see Note 9, Stock-based Compensation, of the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

We are committed to the health, safety and wellness of our employees. We provide our employees and their families with access to a variety of health and wellness programs, including benefits that support their physical and mental health. In response to the COVID-19 pandemic, we implemented safety measures designed to protect our employees. We believe we have been able to preserve our business continuity without sacrificing our commitment to keeping our employees safe during the COVID-19 pandemic.

We regularly review our employees and assess the needs of the business to identify our talent needs. We encourage all employees to continue learning and provide internal opportunities for cross functional work to support this. We regularly review succession plans and focus on promoting internal talent to help grow our employees' careers.

We conducted a survey in fiscal 2020 and had a participation rate of over 80% of all our employees and the survey results indicated that we excel in areas including initiative, empowerment, opportunities to learn and grow, and overall culture.

As of December 31, 2021, we had 279 full-time equivalent employees located in the United States, France, Malaysia, the Netherlands, Taiwan, Japan and Ukraine, including 137 in research and development, 109 in sales, general, and administrative, and 33 in operations. We consider relations with our employees to be good and have never experienced a work stoppage.

Corporate Information

We were incorporated in Delaware on December 3, 2003. Our principal executive offices are located at 5451 Patrick Henry Drive, Santa Clara, California 95054, and our telephone number is (408) 328-4400. Our corporate website address is www.sitime.com. Information found on, or accessible through, our website is not a part of, and is not incorporated into, this Annual Report on Form 10-K. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “SiTime,” “the company,” “we,” “us” and “our” refer to SiTime Corporation and its wholly-owned subsidiaries on a consolidated basis.

Available Information

Our website is located at https://www.sitime.com. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available, free of charge, on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the Securities and Exchange Commission (the “SEC”). The SEC also maintains a website that contains our SEC filings. The address of the website is www.sec.gov.

Item 1A. Ris k Factors.

Risks Related to Our Business and Our Industry

The COVID-19 pandemic could adversely affect our business, results of operations, and financial condition.

The effects of the ongoing COVID-19 pandemic on our business are evolving and difficult to predict. To date, the COVID-19 pandemic has significantly and negatively impacted the global economy and it is unclear how long the pandemic will continue to do so. To combat the spread of COVID-19, the United States and other foreign countries in which we operate have from time to time imposed measures such as quarantines and “shelter-in-place” orders that restrict business operations and travel and require individuals to work from home (“WFH”), which has impacted all aspects of our business as well as those of the third-parties we rely upon for our manufacturing, assembly, testing, shipping, and other operations. Among other things, the continued COVID-19 pandemic may result in:

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a global economic recession or depression that could significantly reduce demand and/or prices for our products;
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reduced productivity in our product development, operations, marketing, sales, and other activities;
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disruptions to our supply chain;
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increased costs resulting from WFH or from our efforts to mitigate the impact of the COVID-19 pandemic;
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reduced access to financing to fund our operations due to a deterioration of credit and financial markets; or
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higher rate of losses on our accounts receivables due to credit defaults.

The COVID-19 pandemic has also caused significant uncertainty and volatility in global financial markets and the trading prices for the common stock of technology companies, including us. Due to such volatility, we may not be able to raise additional capital, if needed, on favorable terms, or at all. Further adverse economic events resulting from the COVID-19 pandemic, including a recession, depression, or other sustained economic downturn, could materially and adversely affect our business, access to capital markets, and the value of our common stock.

In addition, given the inherent uncertainty surrounding COVID-19 due to rapidly changing governmental directives, public health challenges, and economic disruption and the duration of the foregoing, the potential impact that the COVID-19 pandemic could have on the other risk factors described in this “Risk Factors” section remain unclear.

As a result of the COVID-19 pandemic, we believe we have experienced some delay and disruption in the manufacture, shipment, and sales of our products. In addition, we believe the production capabilities of our suppliers has been, and will likely continue to be, impacted as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or WFH orders. Further, as WFH orders terminate and individuals return to work in offices, we may experience a reduction in demand for certain of our products that are incorporated in our customers’ products that experienced higher demand as a result of the increase in WFH during the COVID-19 pandemic. The continued disruption in the manufacture, shipment and sales of our products may negatively and materially impact our operating results. The resumption of normal business operations after such disruptions may be delayed and resurgences of COVID-19 could result in continued disruption to us, our suppliers, and/or our customers. As a result, the effects of the COVID-19 pandemic could have a material adverse impact on our business, results of operations, and financial condition in the future.

A downturn in the worldwide economy may harm our business.

The COVID-19 pandemic could cause an extended downturn in the worldwide economy, which would likely result in reduced demand for our products and our customers’ products. Reduced demand for our products could result in significant decreases in sales and margins. In addition, the deterioration in credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures. We may experience losses on our holdings of cash and investments due to failures of financial institutions and other parties. Adverse economic conditions may also result in a higher rate of losses on our accounts receivables due to credit defaults. As a result, a downturn in the worldwide economy could have a material adverse effect on our business, results of operations, and financial condition.

We depend on third parties for our wafer fabrication, assembly, packaging, and testing operations, which exposes us to certain risks that may harm our business.

We operate an outsourced manufacturing business model. As a result, we rely on third parties for all of our manufacturing operations, including wafer fabrication, assembly, packaging, and testing. Although we use multiple third-party supplier sources, we depend on these third parties to supply us with material of a requested quantity in a timely manner that meets our standards for yield, cost, and manufacturing quality. The manufacturing processes of our third-party suppliers for our products require specialized technology that requires certain raw and engineered materials. Many major components, product equipment items, engineered materials, and raw materials, that are procured or subcontracted by our third-party suppliers for manufacturing of our products are procured or subcontracted on a single or sole-source basis. Except for our agreement with Bosch for MEMS wafers, we do not have any long-term supply agreements with any of our other manufacturing suppliers. These third-party manufacturers often serve customers that are larger than us or require a greater portion of their services, which may decrease our relative importance and negotiating leverage with these third parties.

If market demand for wafers or production and assembly materials increases, if a supplier of our wafers fails to procure materials needed for manufacture of our products, or if a supplier of our wafers ceases or suspends operations, our supply of wafers and other materials could become limited. We currently have a ten-year supply agreement with Bosch for the fabrication of our MEMS wafers. This agreement expires in 2027 and may be terminated with three years’ advance notice beginning in February 2024. We currently rely on Bosch for our MEMS fabrication, and TSMC for our analog circuits fabrication, and any disruption in their supply of wafers or

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any increases in their wafer or materials prices could adversely affect our gross margins and our ability to meet customer demands in a timely manner, or at all, and lead to reduced revenue. There are currently a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including TSMC, and affecting outsourced semiconductor assembly and test providers (“OSATs”), which has limited and may continue to limit our ability to fully satisfy an increase in demand for some of our products. Moreover, wafers constitute a large portion of our product cost. If we are unable to negotiate volume discounts or otherwise purchase wafers at favorable prices and in sufficient quantities in a timely manner, our ability to ship our solutions to our customers on time and in the quantity required could be adversely affected, which in turn could cause an unanticipated decline in our sales, harm to our customer relationships, and our gross margins to be adversely affected.

To ensure continued wafer supply, we may be required to establish alternative wafer supply sources, which could require significant expenditures and limit our negotiating leverage. We currently rely on Bosch and TSMC as our primary foundries and suppliers for our MEMS timing devices and analog circuits, respectively, and only a few foundry vendors have the capability to manufacture our most advanced solutions, in particular with respect to our MEMS solution. If we engage alternative supply sources, we may incur additional costs and encounter difficulties and/or delays in qualifying the supply sources. For example, we have a license agreement with Bosch under which Bosch granted us a license to use certain patents. Under this agreement, we are required to pay a royalty fee to Bosch if we engage third parties to manufacture, or if we decide to manufacture ourselves, certain generations of our MEMS wafers through March 31, 2024. In addition, shipments could be significantly delayed while these sources are qualified for volume production. If we are unable to maintain our relationship with Bosch or TSMC, our ability to produce high-quality products could suffer, which in turn could harm our business, financial condition, and results of operations.

We currently primarily rely on Advanced Semiconductor Engineering, Inc. (“ASE”), Carsem (M) Sdn. Bhd. (“Carsem”), and United Test and Assembly Center Ltd. (“UTAC”) for assembly and testing, as well as Daishinku Corp. (“Daishinku”) and UTAC for ceramic packaging for some of our products. We enter into capacity agreements with certain of our OSATs from time to time which may adversely impact our gross margins and results of operations if we do not purchase required minimum quantities.

Certain of our manufacturing, packaging, assembly, and testing facilities are located outside of the United States, including Malaysia, Taiwan, and Thailand, where we are subject to increased risk of political and economic instability, difficulties in managing operations, difficulties in enforcing contracts and our intellectual property, severe weather, and employment and labor difficulties. Additionally, public health crises, such as an outbreak of contagious diseases like the COVID-19 pandemic, may affect the production capabilities of our suppliers, including as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or work-from-home orders. Restrictions like these could limit our suppliers’ ability to operate their manufacturing facilities.

Any of these factors could result in manufacturing and supply problems, and delays in our ability to provide our solutions to our customers on a timely basis, or at all. If we experience manufacturing problems at a particular location, we may be required to transfer manufacturing to a new location or supplier. Converting or transferring manufacturing from a primary location or supplier to a backup facility could be expensive and could take several quarters or more. During such a transition, we would be required to meet customer demand from our then-existing inventory, as well as any partially finished goods that could be modified to the required product specifications. In addition, our end customers may require requalification with a new wafer manufacturer. We typically maintain at least a three-month supply of our MEMS wafers for which Bosch is our primary supplier. We do not otherwise maintain sufficient inventory to address a lengthy transition period. As a result, we may not be able to meet customer needs during such a transition, which could damage our customer relationships. Although we maintain business disruption insurance, this insurance may not be adequate to cover any losses we may experience as a result of such difficulties.

If one or more of the third parties we rely on for our manufacturing operations terminates its relationship with us, or if we encounter any problems with our manufacturing supply chain, our ability to ship our solutions to our customers on time and in the quantity required would be adversely affected, which in turn could cause an unanticipated decline in our sales, harm to our customer relationships and loss of customers.

A portion of our operations is located outside of the United States, which subjects us to additional risks, including increased complexity and costs of managing international operations and geopolitical instability.

We outsource the fabrication and assembly of all of our products to third parties that are primarily located in Germany and Asia. In addition, we conduct research and development activities in the United States, Japan, the Netherlands, Taiwan, and Ukraine and work with third-party contractors in Russia. We also conduct marketing and administrative functions in the United States, Japan, the Netherlands, China, Taiwan, Malaysia, and Ukraine. Certain of the critical functions for our business are performed in locations outside of the United States. In addition, members of our sales force are located in various locations outside of the United States. In addition, approximately 94%, 93% and 93% of our revenue for the years ended December 31, 2021, 2020 and 2019, respectively, was from distributors with ship-to locations outside the United States, although we believe the majority of our end customers are based in

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the U.S. based on sell-through information provided by these distributors. As a result of our international focus, we face numerous challenges and risks, including:

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complexity and costs of managing international operations, including manufacturing, assembly, and testing of our products and associated costs;
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geopolitical and economic instability and military conflicts;
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limited protection for, and vulnerability to theft of, our intellectual property rights, including our trade secrets;
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compliance with local laws and regulations and unanticipated changes in local laws and regulations, including tax laws and regulations;
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trade and foreign exchange restrictions and higher tariffs, including the ongoing trade tensions between the U.S. and China that has resulted in higher tariffs on certain semiconductor products;
•
timing and availability of import and export licenses and other governmental approvals, permits, and licenses, including export classification requirements;
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foreign currency fluctuations and exchange losses relating to our international operating activities;
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restrictions imposed by the U.S. government or foreign governments on our ability to do business with certain companies or in certain countries as a result of international political conflicts or the COVID-19 pandemic and the complexity of complying with those restrictions;
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transportation delays and other consequences of limited local infrastructure, and disruptions, such as large scale outages or interruptions of service from utilities or telecommunications providers;
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difficulties in staffing international operations;
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changes in immigration policies which may impact our ability to hire personnel;
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local business and cultural factors that differ from our normal standards and practices;
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differing employment practices and labor relations;
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requirements in foreign countries which may impact availability of personnel, such as mandatory military service in countries such as Ukraine;
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heightened risk of terrorist acts;
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regional health issues and the impact of public health epidemics on employees and the global economy, such as the worldwide COVID-19 pandemic;
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power outages and natural disasters; and
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travel, work-from-home or other restrictions or stoppages, like those currently imposed by governments around the world as a result of the COVID-19 pandemic.

These risks could harm our international operations, delay new product releases, increase our operating costs, and hinder our ability to grow our operations and business and, consequently, our business, financial condition, and results of operations could suffer. For example, we rely on TSMC in Taiwan for the fabrication of our analog circuits and have sales force personnel in Taiwan and China. If political tensions between China and Taiwan were to increase further, it could disrupt our business and adversely affect our financial condition and results of operations given that we rely primarily on TSMC in Taiwan for our analog circuits. In addition, given the current political and military situation in Russia and Ukraine, or if the relationship between Russia and the United States worsens further, or if either Russia or the United States imposes significant new economic sanctions or restrictions on doing business, and we are restricted or precluded from continuing our operations in Russia or Ukraine, it could disrupt our business, our costs could increase, and our product development efforts, business, financial condition, and results of operations could be significantly harmed. Further, the ongoing COVID-19 pandemic has led to travel, work-from-home, and other restrictions, which has significantly impacted our domestic and international operations and the operations of our suppliers, distributors, partners, and customers. At this point, the extent to which the COVID-19 pandemic may impact our business remains uncertain but it may materially adversely affect our business, financial condition or results of operations.

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We currently depend on one end customer for a large portion of our revenue. The loss of, or a significant reduction in orders from our customers, including this end customer, could significantly reduce our revenue and adversely impact our operating results.

We believe that our operating results for the foreseeable future will continue to depend to a significant extent on revenue attributable to Apple, our largest end customer. Sales attributable to this end customer have historically accounted for a large portion of our revenue and accounted for approximately 22%, 40% and 35% of our revenue for the years ended December 31, 2021, 2020 and 2019, respectively. Revenue attributable to this end customer increased from 2019 to 2020 and increased in absolute dollars but decreased as a percentage of revenue from years ended December 31, 2020 to 2021. We anticipate revenue attributable to this customer will fluctuate from period to period, although we expect to remain dependent on this end customer for a substantial portion of our revenue for the foreseeable future. Although we sell our products to this customer through distributors on a purchase order basis, including Pernas Electronics Co., Ltd. (“Pernas”), Arrow Electronics, Inc. (“Arrow”), and Quantek Technology Corporation (“Quantek”), we have a development and supply agreement, which provides a general framework for certain transactions with Apple. This agreement continues until either party terminates for material breach. Under this agreement, we have agreed to develop and deliver new products to this end customer at its request, provided it also meets our business purposes, and have agreed to indemnify it for intellectual property infringement or any injury or damages caused by our products. This end customer does not have any minimum or binding purchase obligations to us under this agreement and could elect to discontinue making purchases from us with little or no notice. If our end customers were to choose to work with other manufacturers or our relationships with our customers is disrupted for any reason, it could have a significant negative impact on our business. Any reduction in sales attributable to our larger customers, including our largest end customer, would have a significant and disproportionate impact on our business, financial condition, and results of operations.

Because most of our sales are made pursuant to standard purchase orders, orders may be cancelled, reduced, or rescheduled with little or no notice and without penalty. Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from our customers expose us to the risks of inventory shortages or excess inventory. This in turn could cause our operating results to fluctuate.

Our end customers, or the distributors through which we sell to these customers, may choose to use products in addition to ours, use a different product altogether, or develop an in-house solution. In addition, the inability of our customers or their contract manufacturers to obtain sufficient supplies of third-party components used with our products could result in a decline in the demand of our products and a loss of sales. Any of these events could significantly harm our business, financial condition, and results of operations. In addition, if our distributors’ relationships with our end customers, including our larger end customers, are disrupted for inability to deliver sufficient products or for any other reason, it could have a significant negative impact on our business, financial condition, and results of operations.

If we are unable to expand or further diversify our customer base, our business, financial condition, and results of operations could suffer.

We sell our products primarily through distributors and resellers, who in turn sell to our end customers. We also sell directly to our end customers. For the years ended December 31, 2021, 2020 and 2019, our top three distributors by revenue together accounted for approximately 48%, 59%, and 59% of our revenue, respectively. Based on our shipment information, we believe that revenue attributable to our ten largest end customers accounted for 49%, 58%, and 57% of our revenue in the years ended December 31, 2021, 2020 and 2019, respectively. Sales attributable to our largest end customer accounted for approximately 22%, 40%, and 35%, respectively of our revenue for the years ended December 31, 2021, 2020 and 2019, respectively. We expect the composition of our largest end customers to vary from period to period, and that revenue attributable to our largest ten end customers in any given period may decline over time. Our relationships with existing customers may deter potential customers who compete with these customers from buying our silicon timing systems solutions. If we are unable to expand or further diversify our customer base, it could harm our business, financial condition, and results of operations.

Because we do not have long-term purchase commitments with our customers, orders may be cancelled, reduced, or rescheduled with little or no notice, which in turn exposes us to inventory risk, and may cause our business and results of operations to suffer.

We sell our products primarily through distributors and resellers, with no long-term or minimum purchase commitments from them or their end customers. Substantially all of our sales to date have been made on a purchase order basis, which orders may be cancelled, changed, or rescheduled with little or no notice or penalty. As a result, our revenue and operating results could fluctuate materially and could be materially and disproportionately impacted by purchasing decisions of our customers, including our larger customers. In the future, our distributors or their end customers may decide to purchase fewer units than they have in the past, may alter their purchasing patterns at any time with limited or no notice, or may decide not to continue to purchase our silicon timing systems solutions at all, any of which could cause our revenue to decline materially and materially harm our business, financial condition, and results of operations. Cancellations of, reductions in, or rescheduling of customer orders could also result in the loss of anticipated sales without

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allowing us sufficient time to reduce our inventory and operating expenses, as a substantial portion of our expenses are fixed at least in the short term. In addition, changes in forecasts or the timing of orders expose us to the risks of inventory shortages or excess inventory. As we no longer intend to acquire inventory to pre-build custom products, we may not be able to fulfill increased demand in the short term. Any of the foregoing events could materially and adversely affect our business, financial condition, and results of operations.

Our revenue and operating results may fluctuate from period to period, which could cause our stock price to fluctuate.

Our revenue and operating results have fluctuated in the past and may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. We expect our revenue to fluctuate in the future primarily based on the volume of shipments of our products and average selling price ("ASP") changes. Though our ASP increased in 2021 compared to 2020, we may not be able to sustain ASP increases in the future. Factors relating to our business that may contribute to fluctuations in our operating results include the following factors, as well as other factors described elsewhere in this report:

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the impact of the COVID-19 pandemic on our business, suppliers, and customers;
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customer demand and product life cycles;
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the receipt, reduction, or cancellation of, or changes in the forecasts or timing of, orders by customers;
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fluctuations in the levels of inventories held by our distributors or end customers;
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the gain or loss of significant customers;
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supply chain disruptions, delays, shortages, and capacity limitations as a result of the COVID-19 pandemic or other reasons;
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market acceptance of our products and our customers’ products;
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our ability to develop, introduce, and market new products and technologies on a timely basis;
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the timing and extent of product development costs;
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new product announcements and introductions by us or our competitors;
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our research and development costs and related new product expenditures and our ability to achieve cost reductions in a timely or predictable manner;
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seasonality and fluctuations in sales by product manufacturers that incorporate our silicon timing systems solutions into their products;
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end-market demand into which we have limited insight, including cyclicality, seasonality, and the competitive landscape;
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cyclical fluctuations in the semiconductor market;
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fluctuations in our manufacturing yields;
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significant warranty claims, including those not covered by our suppliers; and
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new accounting pronouncements or changes in existing accounting standards
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changes in our pricing, product cost, and product mix.

As a result of these and other factors, you should not rely on the results of any prior quarterly or annual periods, or any historical trends reflected in such results, as indications of our future revenue or operating performance. Fluctuations in our revenue and operating results could cause our stock price to decline and, as a result, you may lose some or all of your investment.

Our success and future revenue depend on our ability to achieve design wins and to convince our current and prospective customers to design our products into their product offerings. If we do not continue to win designs or our products are not designed into our customers’ product offerings, our results of operations and business will be harmed.

We sell our silicon timing systems solutions to customers who select our solutions for inclusion in their product offerings. This selection process is typically lengthy and may require us to incur significant design and development expenditures and dedicate scarce engineering resources in pursuit of a single design win with no assurance that our solutions will be selected. If we fail to convince our current or prospective customers to include our products in their product offerings or to achieve a consistent number of design wins, our business, financial condition, and results of operations will be harmed.

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Because of our extended sales cycle, our revenue in future years is highly dependent on design wins we are awarded in prior years. It is typical that a design win will not result in meaningful revenue for a year or more, if at all. If we do not continue to achieve design wins in the short term, our revenue in the following years will deteriorate.

Further, a significant portion of our revenue in any period may depend on a single product design win with a large customer. As a result, the loss of any key design win or any significant delay in the ramp of volume production of the customer’s products into which our product is designed could adversely affect our business, financial condition, and results of operations. We may not be able to maintain sales to our key customers or continue to secure key design wins for a variety of reasons, and our customers can stop incorporating our products into their product offerings with limited notice to us and suffer little or no penalty.

If we fail to anticipate or respond to technological shifts or market demands, or to timely develop new or enhanced products or technologies in response to the same, it could result in decreased revenue and the loss of our design wins to our competitors. Due to the interdependence of various components in the systems within which our products and the products of our competitors operate, customers are unlikely to change to another design, once adopted, until the next generation of a technology. As a result, if we fail to introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely fashion, and our designs do not gain acceptance, we will lose market share and our competitive position.

The loss of a key customer or design win, a reduction in sales to any key customer, a significant delay or negative development in our customers’ product development plans, or our inability to attract new significant customers or secure new key design wins could seriously impact our revenue and materially and adversely affect our business, financial condition, and results of operations.

We may experience difficulties demonstrating the value to customers of newer solutions if they believe existing solutions are adequate to meet end customer expectations. If we are unable to sell new generations of our product, our business would be harmed.

As we develop and introduce new solutions, we face the risk that customers may not value or be willing to bear the cost of incorporating these newer solutions into their product offerings, particularly if they believe their customers are satisfied with prior offerings. Regardless of the improved features or superior performance of the newer solutions, customers may be unwilling to adopt our new solutions due to design or pricing constraints. Because of the extensive time and resources that we invest in developing new solutions, if we are unable to sell new generations of our solutions, our revenue could decline and our business, financial condition, and results of operations would be negatively affected.

Some of our customer and other third-party agreements provide for joint and/or custom product development, which subject us to a number of risks, and any failure to execute on any of these arrangements could have a material adverse effect on our business, results of operations, and financial condition.

We have entered into development, product collaboration and technology licensing arrangements with some of our customers and other third parties, and we expect to enter into new arrangements of these kinds from time to time in the future. These agreements may increase risks for us, such as the risks related to timely delivery of new products, risks associated with the ownership of the intellectual property developed, risks that such activities may not result in products that are commercially successful or available in a timely fashion, and risks that third parties involved may abandon or fail to perform their obligations related to such agreements. In addition, such arrangements may provide for exclusivity periods during which we may only sell specified products or technologies to that particular customer. Any failure to timely develop commercially successful products under such arrangements as a result of any of these and other challenges could have a material adverse effect on our business, results of operations, and financial condition.

The success of our products is dependent on our customers’ ability to develop products that achieve market acceptance, and our customers’ failure to do so could negatively affect our business.

The success of our silicon timing systems solutions is heavily dependent on the timely introduction, quality, and market acceptance of our customers’ products incorporating our solutions, which are impacted by factors beyond our control. Our customers’ products are often very complex and subject to design complexities that may result in design flaws, as well as potential defects, errors, and bugs. We have in the past been subject to delays and project cancellations as a result of design flaws in the products developed by our customers, changing market requirements, such as the customer adding a new feature, or because a customer’s product fails their end customer’s evaluation or field trial. In other cases, customer products are delayed due to incompatible deliverables from other vendors. We incur significant design and development costs in connection with designing our products for customers’ products that may not ultimately achieve market acceptance. If our customers discover design flaws, defects, errors, or bugs in their products, or if they experience changing market requirements, failed evaluations or field trials, or incompatible deliverables from other vendors, they may delay, change, or cancel a project, and we may have incurred significant additional development costs and may not be able to recoup our costs, which in turn would adversely affect our business, financial condition, and results of operations.

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Our target customer and product markets may not grow or develop as we currently expect, and if we fail to penetrate new markets and scale successfully within those markets, our revenue and financial condition would be harmed.

Our target markets include the communications and enterprise, automotive, industrial, aerospace, and mobile, IoT, and consumer markets. Substantially all of our revenue for the years ended December 31, 2021, 2020 and 2019 was derived from sales in the IoT and mobile, industrial, and consumer markets. In 2017, we began introducing products for the automotive market. In addition, within the timing market, substantially all of our revenue to date has been attributable to sales of MEMS oscillators. We intend to focus on clock IC and timing sync solutions in the future. Any deterioration in our target customer or product markets or reduction in capital spending to support these markets could lead to a reduction in demand for our products, which would adversely affect our revenue and results of operations. Further, if our target customer markets, including the 5G communications or IoT and mobile markets, do not grow or develop in ways that we currently expect, demand for our technology may not materialize as expected, which would also negatively impact our business, financial condition, and results of operations.

We may be unable to predict the timing or development of trends in our target markets with any accuracy. If we fail to accurately predict market requirements or market demand for these solutions, our business will suffer. A market shift towards an industry standard that we may not support could significantly decrease the demand for our solutions.

Our future revenue growth, if any, will depend in part on our ability to expand within our existing markets, our ability to continue to penetrate emerging markets, such as the 5G communications market, which we entered in 2019, and our ability to enter into new markets, such as the industrial, medical, and military markets. Each of these markets presents distinct and substantial challenges and risks and, in many cases, requires us to develop new customized solutions to address the particular requirements of that market. Meeting the technical requirements and securing design wins in any of these new markets will require a substantial investment of our time and resources. We cannot assure you that we will secure design wins from these or other new markets, or that we will achieve meaningful revenue from sales in these markets. If any of these markets do not develop as we currently anticipate or if we are unable to penetrate them and scale in them successfully, our revenue could decline.

The average selling prices of our individual products have fluctuated historically over time and may do so in the future, which could harm our revenue and gross margins.

Although on average selling prices of our products have increased over time as we introduce higher end products, the average selling prices of our individual products generally decrease over time. Our revenue is derived from sales to large distributors and, in some cases, we have agreed in advance to price reductions, generally over a period of time ranging from two months to three years, once the specified product begins to ship in volume. However, our customers may change their purchase orders and demand forecasts at any time with limited notice due in part to fluctuating end-market demand, which can sometimes lead to price renegotiations. Although these price renegotiations can sometimes result in the average selling prices of the specified product fluctuating over the shorter term, we expect average selling prices of individual products generally to decline over the longer term as that product and our end customers’ products mature.

We seek to offset the anticipated reductions in our average selling prices of individual products by reducing the cost of our products through improvements in manufacturing yields and lower wafer, assembly, and testing costs, developing new products, enhancing lower-cost products on a timely basis, and increasing unit sales. However, if we are unable to offset these anticipated reductions in our average selling prices, our business, financial condition, and results of operations could be negatively affected.

If we are not able to successfully introduce and ship in volume new products in a timely manner, our business and revenue will suffer.

We have developed products that we anticipate will have product life cycles of ten years or more, as well as other products in more volatile high growth or rapidly changing areas, which may have shorter life cycles. Our future success depends, in part, on our ability to develop and introduce new technologies and products that generate new sources of revenue to replace, or build upon, existing revenue streams. If we are unable to repeatedly introduce, in successive years, new products that ship in volume, or if our transition to these new products does not successfully occur prior to any decrease in revenue from our prior products, our revenue will likely decline significantly and rapidly.

Our gross margins may fluctuate due to a variety of factors, which could negatively impact our results of operations and our financial condition.

Our gross margins may fluctuate due to a number of factors, including customer and product mix, market acceptance of our new products, timing and seasonality of the end-market demand, yield, wafer pricing, packaging, and testing costs, competitive pricing dynamics, the impact of the COVID-19 pandemic, and geographic and market pricing strategies.

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To attract new customers or retain existing customers, we have in the past and will in the future offer certain customers favorable prices, which would decrease our average selling prices and likely impact gross margins. Further, we may also offer pricing incentives to our customers on earlier generations of products that inherently have a higher cost structure, which would negatively affect our gross margins. In addition, in the event our customers, including our larger end customers, exert more pressure with respect to pricing and other terms with us, it could put downward pressure on our margins.

Because we do not operate our own manufacturing, assembly, or testing facilities, we may not be able to reduce our costs as rapidly as companies that operate their own facilities, and our costs may even increase, which could further reduce our gross margins. For instance, we expect to see increases in our manufacturing costs in fiscal year 2022 due to an industry wide increase in costs. We rely primarily on obtaining yield improvements and volume-based cost reductions to drive cost reductions in the manufacture of existing products, introducing new products that incorporate advanced features and optimize die size, and other price and performance factors that enable us to increase revenue while maintaining gross margins. To the extent that such cost reductions or revenue increases do not occur at a sufficient level and in a timely manner, our business, financial condition, and results of operations could be adversely affected.

In addition, we maintain an inventory of our products at various stages of production and in some cases as finished good inventory. We hold these inventories in anticipation of customer orders. If those customer orders do not materialize in a timely manner, we may have excess or obsolete inventory which we would have to reserve or write-down, and our gross margins would be adversely affected.

Our revenue in recent periods may not be indicative of future performance and our revenue may fluctuate over time.

Our recent revenue should not be considered indicative of our future performance. For the years ended December 31, 2021, 2020 and 2019, our revenue was $218.8 million, $116.2 million, and $84.1 million, respectively. You should not rely on our revenue for any previous quarterly or annual periods as any indication of our revenue for future fiscal periods. As we grow our business, our revenue may fluctuate in future periods due to a number of reasons, which may include slowing demand for our products, increasing competition, the impact of the COVID-19 pandemic, a decrease in the growth of our overall market or market saturation, and our failure to capitalize on growth opportunities.

If we are unable to manage our growth effectively, we may not be able to execute our business plan and our operating results could suffer.

In order to succeed in executing our business plan, we will need to manage our growth effectively as we make significant investments in research and development and sales and marketing, and expand our operations and infrastructure both domestically and internationally. If our revenue does not increase to offset these increases in our expenses, we may not achieve or maintain profitability in future periods.

To manage our growth effectively, we must continue to expand our operations, engineering, financial accounting, internal management, and other systems, procedures, and controls. This may require substantial managerial and financial resources, and our efforts may not be successful. Any failure to successfully implement systems enhancements and improvements will likely have a negative impact on our ability to manage our expected growth, as well as our ability to ensure uninterrupted operation of key business systems and compliance with the rules and regulations applicable to public companies. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new silicon timing systems solutions, and we may fail to satisfy customer product or support requirements, maintain the quality of our solutions, execute our business plan or respond to competitive pressures, any of which could negatively affect our business, financial condition, and results of operations.

Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process, which does not assure product sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer.

Prior to purchasing our silicon timing systems solutions, our customers require that both our solutions and our third-party contractors undergo extensive qualification processes, which involve testing of our products in the customers’ systems, as well as testing for reliability. This qualification process may continue for several months. However, qualification of a product by a customer does not assure any sales of the product to that customer. Even after successful qualification and sales of a product to a customer, a subsequent revision in our third-party contractors’ manufacturing process or our selection of a new supplier may require a new qualification process with our customers, which may result in delays and in our holding excess or obsolete inventory. After our products are qualified, it can take several months or more before the customer commences volume production of components or systems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing, and management efforts, to qualifying our products with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of those products to the customer may be precluded or delayed, which would cause our business, financial condition, and results of operations to suffer.

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We provide a lifetime warranty on our products and may be subject to warranty or product liability claims, which could result in unexpected expenses and loss of market share.

We provide a lifetime warranty on our products and generally agree to indemnify our customers for defects in our products or failure of our products to meet our product specifications. Defects in our products could make our products unsafe and create a risk of property damage or personal injury. These risks may increase where our products are incorporated into specialized end products in industries such as automotive, aerospace, defense, and medical device. We may be subject to warranty or product liability claims. These claims may require us to make significant expenditures to defend those claims, replace our solutions, refund payments, or pay damage awards. This risk is exacerbated by the lifetime warranty of our products, which exposes us to warranty claims for the entire product lifecycle.

Our silicon timing systems solutions have only been incorporated into end products since 2008. Accordingly, the operation of our products and technology has not been validated over longer periods. If a customer’s product fails in use, the customer may incur significant monetary damages, including a product recall or associated replacement expenses as well as lost revenue. The customer may claim that a defect in our product caused the product failure and assert a claim against us to recover monetary damages. In certain situations, circumstances might warrant that we consider incurring the costs or expenses related to a recall of one of our products in order to avoid the potential claims that may be raised should a customer reasonably rely upon our product and suffer a failure due to a design or manufacturing process defect. In addition, the cost of defending these claims and satisfying any arbitration award or judgment with respect to these claims would result in unexpected expenses, which could be substantial, and could harm our business, financial condition, and results of operations. Although we carry product liability insurance, this insurance is subject to significant deductibles and may not adequately cover our costs arising from defects in our products or otherwise.

Defects in our products or failures to meet product specifications could harm our relationships with our customers and damage our reputation.

Our products must meet demanding specifications for quality, performance, and reliability. Defects in our products or failure of our products to meet required product specifications may cause our customers to be reluctant to buy our products, which could harm our ability to retain existing customers and attract new customers and adversely impact our reputation. The process of identifying a defective or potentially defective product in systems that have been widely distributed may be lengthy and require significant resources. Further, if we are unable to determine the root cause of a problem or find an appropriate solution, we may delay shipment to customers. As a result, we may incur significant replacement costs and contract damage claims from our customers, and our reputation, business, financial condition, and results of operations may be adversely affected.

Though we are not currently aware of any occurrences, from time to time our products may be diverted from our supply chain or authorized distribution channels and sold on the “black market” or “gray market.” Customers purchasing our products on the black market or the gray market may use our products for purposes for which they were not intended, or may purchase counterfeit or substandard products, for instance that have been altered or damaged, which could result in damage to property or persons which could harm our business and cause our reputation to be adversely affected.

If we fail to accurately anticipate and respond to rapid technological change in the industries in which we operate, our ability to attract and retain customers could be impaired and our competitive position could be harmed.

We operate in industries characterized by rapidly changing technologies as well as technological obsolescence. The introduction of new products by our competitors, the delay or cancellation of any of our customers’ product offerings for which our silicon timing systems solutions are designed, the market acceptance of products based on new or alternative technologies, or the emergence of new industry standards could render our existing or future products uncompetitive, obsolete, and otherwise unmarketable. Our failure to anticipate or timely develop new or enhanced products or technologies in response to changing market demand, whether due to technological shifts or otherwise, could result in the loss of customers and decreased revenue and have an adverse effect on our business, financial condition, and results of operations.

If our products do not conform to, or are not compatible with, existing or emerging industry standards, demand for our existing solutions may decrease, which in turn would harm our business and operating results.

We design certain of our products to conform to current industry standards. Some industry standards may not be widely adopted or implemented uniformly and competing standards may emerge that may be preferred by our distributors or our end customers.

Our ability to compete in the future will depend on our ability to identify and ensure compliance with evolving industry standards in our target markets, as well as in the timing IC industry. The emergence of new industry standards could render our products incompatible with products developed by third-party suppliers or make it difficult for our products to meet the requirements of certain OEMs. If our customers or our third-party suppliers adopt new or competing industry standards with which our solutions are not compatible, or if industry groups fail to adopt standards with which our solutions are compatible, our products would become less

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desirable to our current or prospective customers. As a result, our sales would suffer, and we could be required to make significant expenditures to develop new products. Although we believe our products are compliant with applicable industry standards, proprietary enhancements may not in the future result in conformance with existing industry standards under all circumstances. If our products do not conform to, or are not compatible with, existing or emerging standards, it would harm our business, financial condition, and results of operations.

We may be unable to make the substantial investments that are required to remain competitive in our business.

The semiconductor industry requires substantial and continuous investment in research and development in order to bring to market new and enhanced solutions. We expect our research and development expenditures to increase in the future as part of our strategy to increase demand for our solutions in our current markets and to expand into additional markets. We are a smaller company with limited resources, and we may not have sufficient resources to maintain the level of investment in research and development required to remain competitive. In addition, we cannot assure you that the technologies, which are the focus of our research and development expenditures, will become commercially successful or generate any revenue.

If we fail to compete effectively, we may lose or fail to gain market share, which could negatively impact our operating results and our business.

The global semiconductor market in general, and the timing IC market in particular, is highly competitive. We expect competition to increase and intensify as additional companies enter our target markets, and as internal silicon design resources of large OEMs grow. Increased competition could result in price pressure, reduced gross margins and loss of market share, any of which could harm our business, financial condition, and results of operations. Our competitors range from large, international companies offering a wide range of semiconductor and quartz products to smaller companies, including start-ups, specializing in narrow market verticals. In the MEMS-based oscillator market, we primarily compete against Microchip Technology Inc. (“MCHP”) through their acquisition of Micrel, Incorporated. In the MEMS-based resonator market, we primarily compete against Murata Manufacturing Co., Ltd. In the analog mixed-signal IC and clocking market, we primarily compete against Renesas Electronics Corporation (through their acquisition of Integrated Device Technology, Inc.), Skyworks Solutions Inc., Texas Instruments Incorporated, Micrel (which is owned by MCHP), and Analog Devices, Inc. In the oscillator market, we primarily compete against quartz crystal suppliers such as Rakon Limited, Daishinku Corporation, Nihon Dempa Kogyo Co., Ltd., TXC Corporation, Seiko Epson Corporation, Kyocera Corporation, and Vectron International (which is owned by MCHP), as well as semiconductor suppliers such as Skyworks Solutions Inc. In the Aerospace-defense market for oscillators, we also typically complete against, small, specialized companies that offer quartz-based solutions for various applications. We expect competition in our current markets to increase in the future as existing competitors improve or expand their technology and product offerings and as new competitors enter these markets. In addition, our future growth will depend in part on our ability to successfully enter and compete in new markets. Some of these markets will likely be served by only a few large, multinational OEMs with substantial negotiating and buying power relative to us and, in some instances, with internally developed silicon solutions that can be competitive to our products.

Our ability to compete successfully depends, in part, on factors that are outside of our control, including industry and general economic trends. Many of our competitors are substantially larger, have greater financial, technical, marketing, distribution, customer support, government support, and other resources, are more established than we are, and have significantly better brand recognition and broader product offerings. This in turn may enable them to better withstand adverse economic or market conditions, such as those caused by the COVID-19 pandemic, in the future and significantly reduce their pricing so as to compete against us. Our ability to compete successfully will depend on a number of factors, including:

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our ability to define, design, and regularly introduce new products that anticipate the functionality and integration needs of our customers’ next-generation products and applications;
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our ability to build strong and long-lasting relationships with our customers and other industry participants;
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our ability to capitalize on, and prevent losses due to, vertical integration by significant customers;
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our solutions’ performance and cost-effectiveness relative to those of competing products;
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our ability to achieve design wins;
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the effectiveness and success of our customers’ products utilizing our solutions within their competitive end markets;
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our research and development capabilities to provide innovative solutions and maintain our product roadmap;
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the strength of our sales and marketing efforts, including those of our distributors, and our brand awareness and reputation;

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our ability to secure capacity with our foundry and assembly partners to manufacture and assemble our products;
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our ability to deliver products in volume on a timely basis at competitive prices;
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our ability to withstand or respond to significant price competition;
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our ability to build and expand international operations in a cost-effective manner;
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our ability to obtain, maintain, protect, and enforce our intellectual property rights, including obtaining intellectual property rights from third-parties that may be necessary to meet the evolving demands of the market;
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our ability to defend potential patent infringement claims arising from third-parties;
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our ability to promote and support our customers’ incorporation of our solutions into their products; and
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our ability to retain high-level talent, including our management team and engineers.

Our competitors may also establish cooperative relationships among themselves or with third-parties or may acquire companies that provide similar products to ours. As a result, new competitors or alliances may emerge that could capture significant market share. Additionally, timing suppliers, especially resonator suppliers, may engage directly with our customers to help the customer build timing products, and eliminate the need for an external timing supplier in some of their applications. Any of these factors, alone or in combination with others, could harm our business, financial condition, and results of operations and result in a loss of market share and an increase in pricing pressure.

We depend on our executive officers and other key employees, and the loss of one or more of these employees or an inability to attract or retain highly skilled employees could adversely affect our business.

Our success depends largely upon the continued services of our executive officers and other key employees, including our engineering and sales and marketing personnel. From time to time, there may be changes in our executive management team or other key personnel, which could disrupt our business. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. The loss of one or more of our executive officers or other key employees could have an adverse effect on our business.

In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel in the San Francisco Bay Area, where our headquarters is located, and in other locations where we maintain offices, is intense, especially for engineers with MEMS technology and advanced clock IC design expertise. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to recruit and retain highly skilled employees. Further, changes in immigration policies may negatively impact our ability to attract and retain personnel, including personnel with specialized technical expertise. If we fail to attract new personnel or fail to retain or motivate our current personnel, our business and future growth prospects could be adversely affected.

Our company culture has contributed to our success and if we cannot maintain this culture as we grow, our business could be harmed.

We believe that our company culture, which promotes innovation, open communication, and teamwork, has been critical to our success. We face a number of challenges that may affect our ability to sustain our corporate culture, including:

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the potential failure to identify, attract, reward, and retain people in leadership positions in our organization who share and further our culture, values, and mission;
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the increasing size and geographic diversity of our workforce;
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competitive pressures to move in directions that may divert us from our mission, vision, and values;
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the continued challenges of a rapidly-evolving industry; and
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the increasing need to develop expertise in new areas of business that affect us.

If we are not able to maintain our culture, our business, financial condition, and results of operations could be adversely affected.

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If the foundries with which we contract do not achieve satisfactory yields or quality, our reputation and customer relationships could be harmed.

We depend on satisfactory wafer foundry manufacturing capacity, wafer prices, and production yields, as well as timely wafer delivery to meet customer demand and enable us to maintain gross margins. The fabrication of our products is a complex and technically demanding process. Minor deviations in the manufacturing process can cause substantial decreases in yields and, in some cases, cause production to be suspended. Our foundry vendors may experience manufacturing defects and reduced manufacturing yields from time to time. Further, any new foundry vendors we employ may present additional and unexpected manufacturing challenges that could require significant management time and focus. Changes in manufacturing processes or the inadvertent use of defective or contaminated materials by the foundries that we employ could result in lower than anticipated production yields or unacceptable performance of our devices. Many of these problems are difficult to detect at an early stage of the manufacturing process and may be time-consuming and expensive to correct. Poor production yields from the foundries that we employ, or defects, integration issues, or other performance problems in our solutions could significantly harm our customer relationships and financial results and give rise to financial or other damages to our customers. Any product liability claim brought against us, even if unsuccessful, would likely be time-consuming and costly to defend.

Manufacturing yields for new products initially tend to be lower as we complete product development and commence volume manufacturing, and typically increase as we bring the product to full production. Our business model includes this assumption of improving manufacturing yields and, as a result, material variances between projected and actual manufacturing yields will have a direct effect on our gross margin and profitability. The difficulty of accurately forecasting manufacturing yields and maintaining cost competitiveness through improving manufacturing yields will continue to be magnified by the increasing process complexity of manufacturing semiconductor products.

Raw material and engineered material availability and price fluctuations have in the past and may in the future increase the cost of our products, impact our ability to meet customer commitments, and may adversely affect our results of operations.

The cost of raw and engineered materials is a key element in the cost of our products. Our inability to offset material price inflation through increased prices to customers, suppliers, productivity actions, or through commodity hedges could adversely affect our results of operations. Many major components, product equipment items, engineered materials, and raw materials, are procured or subcontracted on a single or sole-source basis. Although we maintain a qualification and performance surveillance process and we believe that sources of supply for engineered materials, raw materials, and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Our inability to fill our supply needs would jeopardize our ability to ship our solutions to our customers on time and in the quantity required, which could, in turn, result in reduced sales and profits, and damage to our customer relationships.

Furthermore, increases in the price of silicon wafers, testing costs, and commodities, which may result in increased production costs, mainly assembly and packaging costs, may result in a decrease in our gross margins. Moreover, our suppliers may pass the increase in engineered materials, raw materials and commodity costs onto us which would further reduce the gross margin of our products. In addition, as we are a fabless company, global market trends such as a shortage of capacity to fulfill our fabrication needs also may increase our raw material costs and thus decrease our gross margin.

We rely on our relationships with industry and technology leaders to enhance our product offerings and our inability to continue to develop or maintain such relationships in the future would harm our ability to remain competitive.

We develop many of our silicon timing systems products for applications in systems that are driven by industry and technology leaders in the communications and computing markets. We work with distributors, resellers, OEMs, and system manufacturers to define industry conventions and standards within our target markets. We believe that these relationships enhance our ability to achieve market acceptance and widespread adoption of our products. If we are unable to continue to develop or maintain these relationships, our silicon timing systems solutions could become less desirable to our customers, our sales could suffer and our competitive position could be harmed.

We are subject to the cyclical nature of the semiconductor industry.

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand. The industry experienced a significant downturn during past global recessions. These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices. Any downturns in the semiconductor industry could harm our business, financial condition, and results of operations. Furthermore, any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity. We are

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dependent on the availability of this capacity to manufacture and assemble our products and we can provide no assurance that adequate capacity will be available to us in the future.

Our ability to receive timely payments from, or the deterioration of the financial conditions of, our distributors or our end customers could adversely affect our operating results.

Our ability to receive timely payments from or the deterioration of the financial condition of, our distributors or our end customers could adversely impact our collection of accounts receivable, and, as a result, our revenue. We regularly review the collectability and creditworthiness of our customers to determine an appropriate allowance for credit losses. However, the extent of the COVID-19 pandemic’s impact on credit and financial markets is unknown, which creates uncertainty as to the financial condition of our distributors and customers. Based on our review of our customers annually and as of December 31, 2021, substantially all of which are large distributors, resellers, OEMs, and system manufacturers, we had $0.1 million and $0.1 million in allowance for credit losses as of December 31, 2021 and December 31, 2020, respectively. If our credit losses, however, were to exceed our current or future allowance for credit losses, our business, financial condition, and results of operations would be adversely affected.

We may not be able to accurately predict our future capital needs, and we may not be able to obtain additional financing to fund our operations.

We may need to raise additional funds in the future. Any required additional financing may not be available on terms acceptable to us, or at all. If we raise additional funds by issuing equity securities or convertible debt, stockholders may experience significant dilution of their ownership interest, and the newly-issued securities may have rights senior to those of the holders of our common stock. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur additional interest expense. If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations or limit our production activities, and we may not be able to expand our business, develop or enhance our solutions, take advantage of business opportunities, or respond to competitive pressures, which could negatively impact our revenue and the competitiveness of our products.

We may seek, or be required to seek, debt financing in the immediate or near term.

We may seek, or be required to seek, debt financing. Any required financing may not be available on terms acceptable to us, or at all. The terms of any financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur additional interest expense. If financing is not available when required or is not available on acceptable terms, it could harm our liquidity position and we may have to scale back our operations or limit our production activities, which in turn would harm our business, operating results, and financial condition.

If significant tariffs or other trade restrictions are placed on our products or third-party suppliers, our revenue and results of operations may be materially harmed.

Most of our revenue has been from sales of products to distributors with ship-to locations outside of the United States. Many of our third-party suppliers are located outside of the United States. If significant tariffs or other restrictions are placed on certain goods, existing tariffs are increased, or any related counter-measures are taken by other countries, our revenue and results of operations may be materially and adversely affected. For example, beginning in July 2018, the U.S. Trade Representative imposed tariffs on products from China. Then the prior U.S. administration imposed new or additional tariffs on Chinese products with short notice and China then imposed certain retaliatory tariffs. It is uncertain if the current U.S. administration may further alter trade agreements and terms between China and the United States, including limiting trade with China and imposing additional tariffs on imports from China. In the event that these or future tariffs are imposed on imports of our products or on our third-party suppliers, or that China or other countries take retaliatory trade measures in response to existing or future tariffs, our business may be impacted and we may be required to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results.

Fluctuations in exchange rates between and among the currencies of the countries in which we do business could adversely affect our results of operations.

Our sales have been historically denominated in U.S. dollars. An increase in the value of the U.S. dollar relative to the currencies of the countries in which our customers operate could impair the ability of our customers to cost-effectively purchase or integrate our solutions into their product offerings, which may materially affect the demand for our solutions and cause these customers to reduce their orders, which in turn would adversely affect our revenue and business. If we increase operations in other currencies in the future, we may experience foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. Certain of our employees are located in Malaysia, the Netherlands, Taiwan, Japan, France, and Ukraine, and we have engineering consultants in

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Russia. Accordingly, a portion of our payroll as well as certain other operating expenses are paid in currencies other than the U.S. dollar. Our results of operations are denominated in U.S. dollars, and the difference in exchange rates in one period compared to another may directly impact period-to-period comparisons of our results of operations. Furthermore, currency exchange rates have been especially volatile in the recent past, and these currency fluctuations may make it difficult for us to predict our results of operations.

Failure to comply with the laws associated with our activities outside of the United States could subject us to penalties and other adverse consequences.

We face significant risks if we fail to comply with anti-corruption laws and anti-bribery laws, including, without limitation, the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. Travel Act, and the UK Bribery Act 2010, that prohibit improper payments or offers of payment to foreign governments and political parties by us for the purpose of obtaining or retaining business. In many foreign countries, particularly in countries with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other applicable laws and regulations. Any violation of these laws could result in severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracting, which could have an adverse effect on our reputation, business, financial condition, and results of operations.

We are subject to government regulation, including import, export and economic sanctions laws and regulations that may expose us to liability and increase our costs.

Our products and technology are subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration Regulations (“EAR”) and economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. These regulations may limit the export of our products and technology, and provision of our services outside of the United States, or may require export authorizations, including by license, a license exception, or other appropriate government authorizations and conditions, including annual or semi-annual reporting. Export control and economic sanctions laws may also include prohibitions on the sale or supply of certain of our products to embargoed or sanctioned countries, regions, governments, persons, and entities. For example, we sell to markets in Asia where multiple companies have been added to the Entity List, requiring license for exports of items subject to control under the EAR. To our knowledge, we have not sold products subject to the EAR to Entity List persons. In addition, various countries regulate the importation of certain products, through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products. The exportation, re-exportation, and importation of our products and technology and the provision of services, including by our partners, must comply with U.S. and other laws or else we may be adversely affected through reputational harm, government investigations, penalties, and a denial or curtailment of our ability to export our products and technology. Although we take precautions to prevent our products and technology from being provided in violation of such laws, our products and technology may have previously been, and could in the future be, provided inadvertently in violation of such laws, despite the precautions we take. Changes in export or import laws or sanctions policies also may adversely impact our operations, delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products and technology to certain countries, regions, governments, persons, or entities altogether, which could adversely affect our business, financial condition, and results of operations.

Changes in environmental laws or regulations, including conflict minerals rules, could impair our ability to compete in international markets.

Our product or manufacturing standards could be impacted by new or revised environmental rules and regulations or other social initiatives. For example, the SEC adopted disclosure requirements in 2012 relating to the sourcing of certain minerals from the Democratic Republic of Congo and certain other adjoining countries. These rules, which required reporting starting in 2014, could adversely affect our costs, the availability of minerals used in our products, and our relationships with customers and suppliers. Also, since our supply chain is complex, we may face reputational challenges with our customers, stockholders, and other stakeholders if we are unable to sufficiently verify the origins for any conflict minerals used in the products that we sell.

New or future changes to U.S. and non-U.S. tax laws could materially adversely affect us.

New or future changes in tax laws, regulations, and treaties, or the interpretation thereof, in addition to tax regulations enacted but not in effect, tax policy initiatives and reforms under consideration in the United States or related to the Organization for Economic Co-operation and Development’s (“OECD”), Base Erosion and Profit Shifting Project (“BEPSP”), the European Commission’s state aid investigations, and other initiatives could have an adverse effect on the taxation of international businesses. Furthermore, countries where we are subject to taxes, including the United States, are independently evaluating their tax policy and we may see significant changes in legislation and regulations concerning taxation. Certain countries have already enacted legislation, including those related to BEPSP, which could affect international businesses, and other countries have become more aggressive in their approach to audits and enforcement of their applicable tax laws. In addition, we are unable to predict what future tax reform may be proposed or enacted

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or what effect such changes would have on our business, but any changes, to the extent they are brought into tax legislation, regulations, policies, or practices, could increase our effective tax rates in the countries where we have operations and have an adverse effect on our overall tax rate, along with increasing the complexity, burden and cost of tax compliance, all of which could impact our business, financial condition, and results of operations.

Tax regulatory authorities may disagree with our positions and conclusions regarding certain tax positions resulting in unanticipated costs or non-realization of expected benefits.

A tax authority may disagree with tax positions that we have taken. For example, the Internal Revenue Service (“IRS”), or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual property in connection with our intercompany research and development cost sharing arrangement and legal structure. A tax authority may take the position that material income tax liabilities, interest, and penalties are payable by us, in which case, we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could be materially adverse to us and affect our anticipated effective tax rate or operating income, and we could be required to pay substantial penalties and interest where applicable.

Catastrophic events may disrupt our business.

Our corporate headquarters and some of our suppliers and foundry vendors are located in areas that are in active earthquake zones or are subject to power outages, natural disasters, political, social, or economic unrest, and other potentially catastrophic events. In the event of a major earthquake, hurricane, flooding, or other catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war, terrorist attack, political, social, or economic unrest, or disease outbreak, such as the current COVID-19 pandemic, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, breaches of data security, or loss of critical data, any of which could have an adverse effect on our future results of operations.

State, federal, and foreign laws and regulations related to privacy, data use, and security could adversely affect us.

We are subject to state and federal laws and regulations related to privacy, data use, and security. In addition, in recent years, there has been a heightened legislative and regulatory focus on data security, including requiring consumer notification in the event of a data breach. Legislation has been introduced in Congress and there have been several Congressional hearings addressing these issues. From time to time, Congress has considered, and may do so again, legislation establishing requirements for data security and response to data breaches that, if implemented, could affect us by increasing our costs of doing business. In addition, several states have enacted privacy or security breach legislation requiring varying levels of consumer notification in the event of a security breach. For example, California passed the California Consumer Privacy Act (“CCPA”), which enhances consumer protection and privacy rights by granting consumers resident in California new rights with respect to the collection of their personal data and imposing new operational requirements on businesses, and went into effect in January 2020. The CCPA includes a statutory damages framework and private rights of action against businesses that fail to comply with certain CCPA terms or implement reasonable security procedures and practices to prevent data breaches. Additionally, in November 2020, California voters passed the California Privacy Rights Act of 2020 (“CPRA”). Effective in most material respects starting on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding the CCPA with additional data privacy compliance requirements that may impact our business. Several other states are considering similar legislation.

Foreign governments are raising similar privacy and data security concerns. In particular, the European Union has enacted a General Data Protection Regulation (“GDPR”), which became effective in May 2018. China, Russia, Japan, and other countries in Latin America and Asia are also strengthening their privacy laws and the enforcement of privacy and data security requirements. Complying with such laws and regulations may be time-consuming and require additional resources, and could therefore adversely affect our business, financial condition, and results of operations.

Breaches or other disruptions of our security systems may damage our reputation and adversely affect our business.

Our security systems are designed to protect our and our customers’, suppliers’, and employees’ confidential information, as well as maintain the physical security of our facilities. We continue to assess and improve the quality of our networks, endpoints, security systems, and policies and procedures related to cybersecurity risks and incidents. We are not aware of any past cybersecurity incidents that have materially impacted our business. We may not have current capability to detect new or unknown security vulnerabilities. Cybersecurity threats, which include computer viruses, spyware, malware, ransomware, attempts to access information, denial of service attacks, and other electronic security breaches, are persistent and evolve quickly. Such threats have recently increased in frequency, scope, magnitude, and cost. Since the techniques used to obtain unauthorized access or to sabotage systems change frequently and are often not recognized until after they are launched against a target, we may be unable to anticipate these techniques

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or to implement adequate preventative measures. Accidental or willful security breaches or other unauthorized access by third parties to our information systems or facilities, or the existence of computer viruses in our data or software, could expose us to a risk of information loss, misappropriation of proprietary and confidential information, as well as work stoppages or disruptions.

We also rely on third-party cloud-based service providers of corporate infrastructure services relating to, among other things, human resources, electronic communication services, and finance functions, and we are, of necessity, dependent on the security systems of these providers. These technologies are subject to failure, including as a result of an inability to have such technologies properly supported, updated, expanded, or integrated into other technologies. These technologies may also contain open source and third-party software which may unbeknownst to us contain defects or viruses.

Any security breaches or other unauthorized access by third parties to the systems of our cloud-based service providers or the existence of computer viruses in their data or software could expose us to a risk of information loss and misappropriation of confidential information.

Any loss, theft, or misuse of this information could result in, among other things, unfavorable publicity, damage to our reputation, difficulty in marketing our products, allegations by our customers that we have not performed our contractual obligations, regulatory fines or penalties, litigation by affected parties, and possible financial obligations for liabilities and damages related to the theft or misuse of this information, any of which could have an adverse effect on our business, financial condition, results of operations, reputation, and relationships with our customers and suppliers.

We might not be able to utilize a significant portion of our net operating loss carryforwards and research and development tax credit carryforwards.

As of December 31, 2021, we had U.S. federal and state net operating loss (“NOL”), carryforwards of approximately $259.6 million and $64.5 million, respectively, and U.S. federal and state research and development tax credit carryforwards of approximately $3.9 million and $3.6 million, respectively. The U.S. federal NOL carryforwards begin to expire in 2025 and the state NOL carryforwards begin to expire in 2028. The U.S. federal research and development tax credit carryforwards begin to expire in 2025 and the state research and development tax credit carryforwards carry forward indefinitely. These net operating loss and U.S. federal tax credit carryforwards could expire unused and/or be unavailable to offset future income tax liabilities. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of California state law, if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We completed a Section 382 analysis and determined an ownership change occurred in 2014 and concluded that it had no impact on U.S. federal and California net operating losses or on U.S. federal research and development credits. Our initial public offering in November 2019 did not result in a change in ownership of greater than 50% under Section 382. We also had a follow-on offering on June 16, 2020, which resulted in greater than 50% change under Section 382. We completed an updated Section 382 analysis based on this new change event and determined that it will not prohibit us from eventually utilizing our carryforwards. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If we determine that an ownership change has occurred and our ability to use our historical net operating loss and tax credit carryforwards is materially limited, it would harm our future business, financial condition, and results of operations by effectively increasing our future tax obligations. In addition, under the Tax Act, federal NOLs incurred in 2018 and in future years may be carried forward indefinitely but generally may not be carried back and the deductibility of such NOLs is limited to 80% of taxable income. Under the CARES Act, which was signed into law in 2020, an NOL from a tax year beginning in 2018, 2019 or 2020 can be carried back five years and would not be subject to the 80%-of-income limitation if they are exhausted during the five-year carryback period or during 2018, 2019 or 2020. The Company will not carry back any NOLs as they did not have taxable income in prior years.

Risks Related to Intellectual Property

Our failure to adequately protect our intellectual property rights could impair our ability to compete effectively or defend ourselves from litigation, which could harm our business, financial condition, and results of operations.

Our success depends, in part, on our ability to protect our intellectual property. We rely primarily on patent, copyright, trademark, and trade secret laws, as well as confidentiality and non-disclosure agreements, and other contractual protections, to protect our technologies and proprietary know-how, all of which offer only limited protection. The steps we have taken to protect our intellectual property rights may not be adequate to prevent the misappropriation, infringement, or other violation of our proprietary information or infringement of our intellectual property rights, and our ability to prevent such misappropriation, infringement, or other violation is uncertain, particularly in countries outside of the United States. As of December 31, 2021, we had 83 issued U.S. patents, expiring generally between 2026 and 2039 and 38 pending U.S. patent applications (including two provisional applications). We also had two foreign issued patents expiring in 2036 and four pending foreign patent applications. Our issued patents and pending patent

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applications generally relate to our MEMS fabrication process, MEMS resonators, circuits, packaging, and oscillator systems. We cannot assure you that any patents from any pending patent applications (or from any future patent applications) will be issued, and even if the pending patent applications are granted, the scope of the rights granted to us may not be meaningful or provide us with any commercial advantage. For example, these patents could be opposed, contested, circumvented, designed around by third parties, be narrowed or declared invalid or unenforceable in judicial or administrative proceedings including re-examination, inter partes review, post-grant review, interference and derivation proceedings and equivalent proceedings in foreign jurisdictions, or be subject to ownership claims by third parties. The failure of our patents to adequately protect our technology might make it easier for our competitors to offer similar products or technologies. Our foreign patent protection is less comprehensive than our U.S. patent protection and may not protect our intellectual property rights in some countries where our products are sold or may be sold in the future. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. Further, we are currently unable to take advantage of selling our products online in certain countries where we do not own trademarks for our corporate name. Many U.S.-based companies have encountered substantial third-party intellectual property infringement in foreign countries, including countries where we sell products. If such an impermissible use of our intellectual property or trade secrets were to occur, our ability to sell our solutions at competitive prices may be adversely affected and our business, financial condition, and results of operations could be adversely affected.

The legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain and evolving. We cannot assure you that others will not develop or patent similar or superior technologies or solutions, or that our patents, trademarks, and other intellectual property will not be challenged, invalidated, or circumvented by others.

We also have a license to certain patents from Bosch relating to the design and manufacture of MEMS-based timing applications. The patent rights obtained under the license agreement expire between 2021 and 2029, and the license agreement expires upon expiration of the last patent licensed under the agreement. We do not believe there will be any significant impact upon expiration of these patents.

We believe that the success of our business depends more on proprietary technology, information and processes, and know-how than on our patents or trademarks. Much of our proprietary information and technology related to manufacturing processes is not patented and may not be patentable.

Unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our technologies without paying us for doing so, which could harm our business. Monitoring unauthorized use of our intellectual property is difficult and costly. It is possible that unauthorized use of our intellectual property may have occurred or may occur without our knowledge. We cannot assure you that the steps we have taken will prevent unauthorized use of our intellectual property, or that others will not develop technologies similar or superior to our technology or design around our intellectual property. Our failure to effectively protect our intellectual property could reduce the value of our technology in licensing arrangements or in cross-licensing negotiations.

In addition, we also rely on contractual protections with our customers, suppliers, distributors, employees, and consultants, and we implement security measures designed to protect our trade secrets and know-how. However, we cannot assure you that we have entered into such agreements with every such party, that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach, or that our customers, suppliers, distributors, employees, or consultants will not assert rights to intellectual property or damages arising out of such contracts.

We may in the future need to initiate infringement claims or litigation in order to try to protect or enforce our intellectual property rights. Litigation, whether we are a plaintiff or a defendant, can be expensive and time-consuming and may divert the efforts of our management and other personnel, which could harm our business, whether or not such litigation results in a determination favorable to us. Litigation also puts our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, any enforcement of our patents or other intellectual property may provoke third parties to assert counterclaims against us. If we are unable to meaningfully protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies, our business, financial condition, results of operations, reputation, and competitive position could be harmed.

We may face intellectual property infringement, misappropriation, or other claims, which could be time-consuming and costly to defend or settle and which could result in the loss of significant rights and harm our relationships with our customers and distributors.

The semiconductor industry in which we operate is characterized by companies that hold patents and other intellectual property rights and vigorously pursue, protect, and enforce intellectual property rights. From time to time, third parties may assert against us and our customers and distributors their patent and other intellectual property rights to technologies that are important to our business. For example, in March 2019, VTT Technical Research Centre of Finland, Ltd. filed suit in the United States District Court for the Northern District of California alleging infringement by us of a patent. The District Court ruled in our favor, VTT filed an appeal with

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the U.S. Court of Appeals for the Federal Circuit (“CAFC”), on June 9, 2021, a hearing was held at the CAFC, and on June 10, 2021 the CAFC affirmed the District Court’s judgment. Any litigation, regardless of success or merit, could cause us to incur substantial expenses, reduce our sales, and divert the efforts of our management and other personnel. In the event we receive an adverse result in any litigation, we could be required to pay substantial damages, seek licenses from third parties, which may not be available on reasonable terms or at all, cease sale of products, expend significant resources to develop alternative technology, or discontinue the use of processes requiring the relevant technology. For more information regarding this matter, see Note 6 in Notes to the Consolidated Financial Statements in Item 8 of Part II of this Report.

In addition, our commercial success depends upon our ability to manufacture and sell our products without infringing, misappropriating, or otherwise violating the intellectual property rights of others. Claims that our products, processes, or technology infringe, misappropriate, or otherwise violate third-party intellectual property rights, regardless of their merit or resolution, could be costly to defend or settle and could divert the efforts and attention of our management and other personnel. We may in the future, particularly as a public company with an increased profile and visibility, receive communications from others alleging our infringement, misappropriation, or other violation of patents, trade secrets, or other intellectual property rights. We cannot assure you that, if made, these claims will not be successful, and lawsuits resulting from such allegations, even if we believe they are invalid, could subject us to significant liability for damages, invalidate our proprietary rights, and prevent us from selling specific products. Moreover, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

Intellectual property claims could also harm our relationships with our customers or distributors and might deter future customers from doing business with us. We do not know whether we will prevail in any such proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation. If any future proceedings result in an adverse outcome, we could be required to:

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cease the manufacture, use or sale of the applicable products, processes, or technology;
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pay substantial damages for infringement by us or our customers;
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expend significant resources to develop non-infringing products, processes, or technology, which may not be successful;
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license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;
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cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor;
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lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; or
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pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available.

Any of the foregoing results could adversely affect our business, financial condition, and results of operations.

Any potential dispute involving patents or other intellectual property could affect our customers, which could trigger our indemnification obligations to them and result in substantial expense to us.

In any potential dispute involving patents or other intellectual property, our customers could also become the target of litigation. Our agreements with customers and other third-parties generally include indemnification or other provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our solutions included in their products. Large indemnity payments or damage claims from contractual breach could harm our business, financial condition, and results of operations. From time to time, customers may require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their intellectual property and trade secrets. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any litigation against our customers could trigger technical support and indemnification obligations under some of our agreements, which could result in substantial expense to us.

In addition, other customers, or end customers with whom we do not have formal agreements requiring us to indemnify them may ask us to indemnify them if a claim is made as a condition to awarding future design wins to us. Because some of our customers are larger than we are and have greater resources than we do, they may be more likely to be the target of an infringement claim by third parties

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than we would be, which could increase our chances of becoming involved in a future lawsuit. If any such claims were to succeed, we might be forced to pay damages on behalf of our customers that could increase our expenses, disrupt our ability to sell our solutions and reduce our revenue and profit. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other current and prospective customers and reduce demand for our solutions. In addition to the time and expense required for us to supply support or indemnification to our customers, any such litigation could severely disrupt or shut down the business of our customers, which in turn could hurt our relations with our customers and cause the sale of our products to decrease. Any of the foregoing could harm our business, financial condition, and results of operations.

Risks Related to MegaChips Corporation’s Ownership Position in Our Common Stock

As long as MegaChips holds a significant amount of our stock, our other shareholders’ ability to influence matters requiring stockholder approval will be limited.

MegaChips owns 5,000,000 shares of our common stock, representing approximately 24% of our outstanding common stock as of December 31, 2021. For so long as MegaChips or its successors in interest continue to hold the largest ownership position in our outstanding common stock, we expect MegaChips to continue to hold at least one out of eight seats on our board of directors, and to be influential in electing members of our board of directors. As long as MegaChips continues to be our largest stockholder, it will continue to have significant influence over us.

For example, as long as MegaChips continues to hold a significant or the largest ownership position in our outstanding common stock, MegaChips may have the ability to affect the outcome of any stockholder vote during this period. As a result, MegaChips will have the ability to exert significant influence over many matters affecting us, either through its board representative or as a stockholder, including:

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determinations with respect to our business plans and policies, including the appointment and removal of our officers;
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any determinations with respect to mergers and other business combinations;
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our acquisition or disposition of assets;
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our financing activities;
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the allocation of business opportunities that may be suitable for us and MegaChips;
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the payment of dividends on our common stock; and
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the number of shares available for issuance under our stock plans.

MegaChips’ voting control may discourage transactions involving a change of control of us, including transactions in which other holders of our common stock might otherwise receive a premium for their shares over the then current market price. In addition, as a result of this voting control and representations on our board of directors, persons who we would like to invite to join our board of directors may decline to do so.

Our inability to resolve any disputes that arise between us and MegaChips with respect to our past and ongoing relationships may adversely affect our operating results.

Disputes may arise between MegaChips and us in a number of areas relating to our past and ongoing relationships, including:

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labor, tax, employee benefit, indemnification, and other matters arising from our separation from MegaChips;
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employee retention and recruiting;
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sales or distributions by MegaChips of our products under our distribution agreement with MegaChips;
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sales or distributions by MegaChips of all or any portion of its ownership interest in us;
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the nature, quality, and pricing of services MegaChips has agreed to provide us; and
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business opportunities that may be attractive to both MegaChips and us.

We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party.

We have entered into an integration and purchase agreement with MegaChips for the sale of resonators by us to MegaChips. The agreements we entered into with MegaChips may be amended upon agreement between the parties. Because MegaChips is a major

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stockholder with representatives on our board of directors, we may not have the leverage to negotiate amendments to these agreements on terms as favorable to us compared to those we would negotiate with an unaffiliated third party.

There could be potential conflicts of interest between us and affiliates of MegaChips, which could impact our business and operating results.

Some of our directors have or had affiliations with MegaChips. Affiliations of directors with MegaChips could create, or appear to create, conflicts of interest with respect to matters involving both us and MegaChips. For example, corporate opportunities may arise that concern both of our businesses, such as the potential acquisition of a particular business or technology that is complementary to both of our businesses. Our Board has adopted a Related Persons Transactions Policy to address actual or perceived conflicts of interest of directors, officers and greater than 5% stockholders on a case-by-case basis. If any corporate opportunity arises and if our directors and officers do not pursue it on our behalf, we may not become aware of, and may potentially lose, a significant business opportunity.

Risks Related to Our Common Stock

Substantial future sales of our common stock could cause the market price of our common stock to decline.

The market price of our common stock could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers, and significant stockholders, including MegaChips, or the perception in the market that holders of a large number of shares intend to sell their shares.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:

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authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;
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require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
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specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, or our Chief Executive Officer;
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establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
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establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;
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prohibit cumulative voting in the election of directors;
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provide that our directors may be removed only for cause;
•
provide that vacancies on our board of directors may be filled by a majority of directors then in office, even if less than a quorum; and
•
require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder. Any delay or prevention of a change of control transaction or changes in our management could cause our stock price to decline.

Our bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and federal district courts will be the sole and exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us or our directors, officers, or other employees.

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Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (d) any action asserting a claim against us governed by the internal affairs doctrine. Section 27 of the Securities Exchange Act of 1934, or the Exchange Act, creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts are the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.

Any person or entity purchasing or otherwise acquiring any interest in our capital stock shall be deemed to have notice of and consented to the provisions of our bylaws described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, or other employees. Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, and results of operations and result in a diversion of the time and resources of our management and board of directors.

We may make acquisitions in the future that could disrupt our business, cause dilution to our stockholders, reduce our financial resources, and harm our business.

In the future, we may acquire other businesses, products, or technologies. Our ability to make acquisitions and successfully integrate personnel, technologies, or operations of any acquired business is unproven. If we complete acquisitions, we may not achieve the combined revenue, cost synergies, or other benefits from the acquisition that we anticipate, strengthen our competitive position, or achieve our other goals in a timely manner, or at all, and these acquisitions may be viewed negatively by our customers, financial markets, or investors. In addition, any acquisitions we make may create difficulties in integrating personnel, technologies, and operations from the acquired businesses and in retaining and motivating key personnel. Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, subject us to additional liabilities, increase our expenses, and adversely impact our business, financial condition, and results of operations. Acquisitions may also reduce our cash available for operations and other uses, and could result in an increase in amortization expense related to identifiable assets acquired, potentially dilutive issuances of equity securities, or the incurrence of debt, any of which could harm our business, financial condition, and results of operations.

Our stock price may be volatile and may decline, resulting in a loss of some or all of our stockholder investment.

The trading price and volume of our common stock is likely to be volatile and could fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

•
actual or anticipated fluctuations in our results of operations due to, among other things, changes in customer demand, product life cycles, pricing, ordering patterns, and unforeseen operating costs;
•
the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;
•
announcements with respect to developments, status, and impact on us, our competition, our constituents, and our suppliers of the COVID 19 global pandemic;
•
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates or ratings by any securities analysts who follow us, or our failure to meet these estimates or the expectations of investors;
•
announcements by our significant customers of changes to their product offerings, business plans, or strategies;
•
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
•
changes in operating performance and stock market valuations of other technology companies generally, or those in the semiconductor industry;
•
timing and seasonality of the end-market demand;

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•
cyclical fluctuations in the semiconductor market;
•
price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole;
•
actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
•
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
•
any major change in our management;
•
lawsuits threatened or filed against us; and
•
other events or factors, including those resulting from war, incidents of terrorism, the COVID-19 pandemic, or responses to these events.

In addition, the market for technology stocks and the stock markets in general have experienced extreme price and volume fluctuations. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, financial condition, and results of operations.

We are a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.

We are a smaller reporting company, and will cease to be able to report as a smaller reporting company commencing with our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. As a result, we will be able to take advantage of the reduced disclosure obligations regarding executive compensation in our 2022 proxy statement. If some investors find our common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.

Item 1B. Unresolved Staff Comments.

None

Item 2. Pr operties.

Our principal executive offices are located in a leased facility in Santa Clara, California, consisting of approximately 50,400 square feet of office space under lease that expires in March 2027. This facility accommodates our principal engineering, sales, marketing, operations, finance, and administrative activities. We also lease offices in Michigan, Japan, Malaysia, the Netherlands, Taiwan and Ukraine. We do not own any real property. We believe that our leased facilities are adequate to meet our current needs and that additional facilities will be available on commercially reasonable terms for lease to meet future needs.

Item 3. Legal Proceedings.

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently a party to any legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, and results of operations.

Item 4. Mine Safe ty Disclosures.

Not applicable

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities.

Market Information for Common Stock

Our common stock has been quoted on the Nasdaq Global Market under the symbol “SITM” since our initial public offering in November 2019. Prior to that time, there was no public market for our common stock.

As of February 17, 2022, there were 17 holders of record (not including beneficial holders of stock held in street names) of our common stock.

Dividend Policy

We have never paid any cash dividends on our common stock. Our board of directors currently intends to retain any future earnings to support operations and to finance the growth and development of our business and does not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board.

Stock Performance Graph

The following information shall not be deemed to be soliciting material or to be filed with the SEC, or subject to Regulations 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

The following line graph compares for the period beginning November 21, 2019, the initial trading date of our common stock on the Nasdaq Global Market, and ending on December 31, 2021, the last day of our fiscal year, the cumulative total stockholder return for our common stock, the Nasdaq Composite Index and Philadelphia Semiconductor Index and assumes reinvestment of any

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dividends. The stockholder return shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock, and we do not make or endorse any predictions as to future stockholder returns.

|  | Base |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Period |  |  | December 31, |  |  | March 31, |  |  | June 30, |  |  | September 30, |  |  | December 31, |  |  | March 31, |  |  | June 30, |  |  | September 30, |  |  | December 31, |
Company Name/Index |  | 11/21/2019 |  |  | 2019 |  |  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2021 |  |  | 2021 |  |  | 2021 |  |  | 2021 |
SiTime Corporation |  |  | 100.00 |  |  |  | 150.89 |  |  |  | 128.82 |  |  |  | 280.53 |  |  |  | 497.22 |  |  |  | 662.31 |  |  |  | 583.43 |  |  |  | 749.05 |  |  |  | 1,208.11 |  |  |  | 1,731.01 |
Nasdaq composite index |  |  | 100.00 |  |  |  | 105.22 |  |  |  | 90.29 |  |  |  | 117.95 |  |  |  | 130.95 |  |  |  | 151.13 |  |  |  | 155.34 |  |  |  | 170.08 |  |  |  | 169.43 |  |  |  | 183.46 |
Philadelphia Semiconductor index |  |  | 100.00 |  |  |  | 109.24 |  |  |  | 89.22 |  |  |  | 117.91 |  |  |  | 132.54 |  |  |  | 165.10 |  |  |  | 184.56 |  |  |  | 197.58 |  |  |  | 192.43 |  |  |  | 233.06 |

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Item 6. [R e served]

41

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. The MD&A contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks and uncertainties, which are discussed under Item 1A.

Overview

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

In 2021, we advanced our technology, expanded our product portfolio, increased our worldwide workforce, and generated a significant increase in revenue and profit. We saw continued strong revenue growth, increased gross margins, increased operating margins, increased net income and positive cash flow. Revenue grew 88% from $116.2 million in 2020 to $218.8 million in 2021. Gross margins increased by 14% from 50% in 2020 to 64% in 2021, while operating margins expanded from a 7% loss in 2020 to a 15% income in 2021. In addition, we raised $460.6 million during the year from our two stock offerings.

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

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

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

We were acquired by MegaChips in 2014 and were a wholly-owned subsidiary of MegaChips, a fabless semiconductor company based in Japan and traded on the Tokyo Stock Exchange, until November 25, 2019. On November 25, 2019, we completed the initial public offering of shares of our common stock. On June 16, 2020, we completed a follow-on public offering, in which we issued and sold 1,525,000 shares of our common stock and MegaChips sold 2,500,000 shares of our common stock held by it. On February 22, 2021, we completed an additional follow-on public offering, in which we issued and sold 1,500,000 shares of our common stock and MegaChips sold 1,500,000 shares of our common stock held by it. On November 10, 2021 we completed a follow-on public offering, in which we issued and sold 1,300,000 shares of our common stock and MegaChips sold 1,000,000 shares of our common stock held by it. MegaChips continues to be our largest stockholder and held approximately 24.0% of our common stock as of December 31, 2021.

We are currently experiencing a growth in demand for some of our products, however, there are a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, including Taiwan Semiconductor Manufacturing Company, and affecting outsourced semiconductor assembly and test providers, which may limit our ability to fully satisfy the increase in demand. If we cannot ship our products to our customers on time and in the quantity required as a result of this supply constraint our sales could decline or could grow at a lower rate and we could lose customers. We believe that the effects of the industry-wide supply constraints on other timing device suppliers have contributed in part to our revenue and gross margin growth in 2021; however, we may not be able to sustain these revenue and gross margin increases in the future. It is not clear how long the industry-wide supply constraints will continue, or what the resulting impact will be on our gross margin and revenue when the industry-wide supply constraints resolve. For additional discussion please see Part I, Item 1A Risk Factors of this report, especially the risk factor titled “Our revenue and operating results may fluctuate from period to period, which could cause our stock price to fluctuate."

Impact of COVID-19 on our Business

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

We anticipate the COVID-19 pandemic will continue to impact business activity across the globe and will continue to impact our business, employees and operations for the foreseeable future. We believe that as a result of the COVID-19 pandemic we have experienced some delay and disruption in the manufacture, shipment, and sales of our products. In addition, we believe the production capabilities of our suppliers has been, and will likely continue to be, impacted as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or WFH orders. These restrictions could limit our suppliers’ ability to operate their manufacturing facilities in that country. Any delay or disruption in the manufacture, shipment and sales of, or overall demand for, our products in turn may negatively and materially impact our operating and financial results, including revenue, gross margins, operating margins, cash flows and other operating results. Further, the resumption of normal business operations after such disruptions may be delayed and a resurgence of COVID-19 could result in continued disruption to us, our suppliers, and/or our customers. To date, we have experienced minimal impact from any supplier disruption resulting from COVID-19.

The duration and full magnitude of the COVID-19 pandemic’s impact on credit and financial markets is also unknown, which creates uncertainty as to the financial condition of our distributors or customers. In addition, the deterioration in credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures. We may also experience losses on our holdings of cash and investments due to failures of financial institutions and other parties.

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

There remains a high degree of uncertainty in the global business environment given the impact of the COVID-19 pandemic which creates challenges with visibility beyond the near term. Further, as WFH orders terminate and individuals return to work in offices, we may experience a reduction in demand for certain of our products that are incorporated in our customers’ products that experienced higher demand as a result of the increase in WFH during the COVID-19 pandemic. We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, employees, operations, and prospects, or on our financial results for 2022 and beyond. For additional discussion, please see Part I, Item 1A Risk Factors of this report.

Key Factors Affecting Our Performance

Customer Orders and Forecasts

Because our sales are made pursuant to standard purchase orders, orders may be cancelled, reduced, or rescheduled with little or no notice and without penalty. Cancellations of orders could result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating expenses. In addition, changes in forecasts or the timing of orders from customers exposes us to the risks of inventory shortages or excess inventory. We may not be able to fulfill increased demand, at least in the short term, as we do not intend to acquire excess inventory to pre-build custom products.

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Design Wins with New and Existing Customers

Our solutions enable our customers to differentiate their product offerings and position themselves to gain market share. We work closely with our customers to understand their product roadmaps and strategies. Our end customers continuously develop new products in existing and new application areas. We also consider design wins critical to our future success and anticipate being increasingly dependent on revenue from new design wins for our new higher-end products with higher average selling prices (“ASPs”). The selection process is typically lengthy and may require us to incur significant design and development expenditures in pursuit of a design win with no assurance that our solutions will be selected. As a result, the loss of any key design win or any significant delay in the ramp of volume production of the customer’s products into which our product is designed could adversely affect our business.

Customer Demand and Product Life Cycles

Once customers design our silicon timing systems solutions into their products, we closely monitor all aspects of their demand cycle, including the initial design phase, prototype production, volume production, and inventories, as well as end-market demand, including seasonality, cyclicality, and the competitive landscape. Given our customer relationships and the long-term aspects of our solutions, we benefit from visibility into customer demand. This in turn provides an opportunity for us to monitor and refine our business fundamentals.

Product Adoption within New Markets and Applications

As we evaluate new market opportunities and bring new products to market, we pay particular attention to forecasts by industry analysts and the adoption curve of technology. We also analyze in detail potential competing forces that could hinder such adoption. If we fail to anticipate or respond to technological shifts or market demands, or to timely develop new or enhanced products or technologies in response to the same, it could result in decreased revenue and the loss of our design wins to our competitors.

Pricing, Product Cost, and Product Mix

The ASPs of our products vary significantly. While the ASP of any individual product generally decreases over time, our average ASPs have historically remained relatively flat as we continue to introduce new higher-end products with higher ASPs. Our pricing and margins depend on customer demand as well as the volumes and the features of the timing devices we provide to our customers. We continually monitor and work to reduce the cost of our products and improve the potential value our solutions provide to our customers as we target new design win opportunities and manage the product life cycles of our existing customer designs. Since we rely on third-party wafer foundries and assembly and test contractors to manufacture, assemble, and test our products, we maintain a close relationship with our suppliers to improve quality and increase yields.

Gross margin, or gross profit as a percentage of revenue, has been, and will continue to be, affected by a variety of factors, including ASPs, and product mix in a given period, material costs, yields, inventory write-downs and manufacturing operations costs. We believe the primary driver of gross margin is the ASPs negotiated between us and our customers relative to material costs and yield improvement. As our products mature and unit volumes increase, we expect their ASPs to decline. These declines often coincide with improvements in manufacturing yields and lower wafer, assembly, and testing costs, which offset some or all of the margin reduction that results from lower ASPs. However, we expect our gross margin to fluctuate on a quarterly basis as a result of changes in ASPs due to new product introductions, existing product transitions into high-volume manufacturing, manufacturing costs, and our product mix.

Cyclical Nature of the Semiconductor Industry

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand. Downturns in the semiconductor industry have been characterized by diminished product demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices. Any prolonged or significant downturn in the semiconductor industry generally could adversely affect our business and reduce demand for our products and otherwise harm our business, financial condition and results of operations. Furthermore, any significant upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity. We are dependent on the availability of this capacity to manufacture and assemble our products and we can provide no assurance that adequate capacity will be available to us in the future.

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Results of Operations

The following table summarizes our results of operations for the periods presented.

|  | Year Ended December 31, |  |  | Change 2021 vs 2020 |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | $ |  |  | % |
|  | (in thousands, except percentage) |
Revenue |  | $ | 218,808 |  |  | $ | 116,156 |  |  | $ | 84,074 |  |  | $ | 102,652 |  |  |  | 88 | %
Cost of revenue |  |  | 79,346 |  |  |  | 58,224 |  |  |  | 44,516 |  |  |  | 21,122 |  |  |  | 36 | %
Gross profit |  |  | 139,462 |  |  |  | 57,932 |  |  |  | 39,558 |  |  |  | 81,530 |  |  |  | 141 | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research and development |  |  | 52,104 |  |  |  | 31,652 |  |  |  | 23,795 |  |  |  | 20,452 |  |  |  | 65 | %
Selling, general and administrative |  |  | 54,515 |  |  |  | 34,893 |  |  |  | 20,636 |  |  |  | 19,622 |  |  |  | 56 | %
Total operating expenses |  |  | 106,619 |  |  |  | 66,545 |  |  |  | 44,431 |  |  |  | 40,074 |  |  |  | 60 | %
Income (loss) from operations |  |  | 32,843 |  |  |  | (8,613 | ) |  |  | (4,873 | ) |  |  | 41,456 |  |  |  | (481 | %)
Interest expense |  |  | — |  |  |  | (726 | ) |  |  | (1,714 | ) |  |  | 726 |  |  |  | (100 | %)
Other expense, net |  |  | (488 | ) |  |  | (32 | ) |  |  | (28 | ) |  |  | (456 | ) |  |  | 1425 | %
Income (loss) before income taxes |  |  | 32,355 |  |  |  | (9,371 | ) |  |  | (6,615 | ) |  |  | 41,726 |  |  |  | (445 | %)
Income tax (expense) benefit |  |  | (78 | ) |  |  | (1 | ) |  |  | 8 |  |  |  | (77 | ) |  |  | 7700 | %
Net income (loss) attributable to common stockholders and comprehensive income (loss) |  | $ | 32,277 |  |  | $ | (9,372 | ) |  | $ | (6,607 | ) |  | $ | 41,649 |  |  |  | (444 | %)

A discussion of changes in our results of operations from fiscal 2019 to fiscal 2020 has been omitted from this Form 10-K, but may be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for fiscal 2020 filed with the Securities and Exchange Commission on February 16, 2021.

Revenue

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

|  | Year Ended December 31, |  |  | Change 2021 vs 2020 |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | $ |  |  | % |
|  | (in thousands except percentage) |
Revenue |  | $ | 218,808 |  |  | $ | 116,156 |  |  | $ | 84,074 |  |  | $ | 102,652 |  |  |  | 88 | %

Revenue increased by $102.7 million, or 88%, for 2021 compared to 2020. The increase was primarily related to 34% higher volume of shipments year over year and a 40% increase in average selling price ("ASP") of our products. The increase in sales volume was driven by higher demand for our products from new and existing customers, including new design wins at our existing customers. The ASP increase was related to change in mix of the products we shipped and increase in selling prices for certain products.

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Cost of Revenue, Gross Profit, and Gross Margin

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

|  | Year Ended December 31, |  |  | Change 2021 vs 2020 |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | $ |  |  | % |
|  | (in thousands except percentage) |
Cost of Revenue |  | $ | 79,346 |  |  | $ | 58,224 |  |  | $ | 44,516 |  |  | $ | 21,122 |  |  |  | 36 | %
Gross Profit |  |  | 139,462 |  |  |  | 57,932 |  |  |  | 39,558 |  |  |  | 81,530 |  |  |  | 141 | %
Gross Margin |  |  | 64 | % |  |  | 50 | % |  |  | 47 | % |  |  |  |  |  |

Gross profit increased by $81.5 million in the year ended December 31, 2021 compared to the same period in 2020. Gross profit increased $86.6 million mainly from higher sales volume and an increase in ASPs of our products. This increase was offset by higher other manufacturing and overhead costs of $5.1 million of which $1.0 million was related to higher stock-based compensation expense.

Gross margin was higher by 14% in the year ended December 31, 2021 compared to the same period in 2020. The gross margin increased by 11% from higher sales volume and an increase in ASPs. There was additional 3% improvement in our other manufacturing costs as it decreased as a percentage of revenue.

We expect to see increases in our manufacturing costs in fiscal year 2022 due to an industry wide increase in costs. Gross margin may fluctuate from time to time due to a variety of factors.

Operating Expenses

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

|  | Year Ended December 31, |  |  | Change 2021 vs 2020 |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | $ |  |  | % |
|  | (in thousands except percentage) |
Operating Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research and development |  | $ | 52,104 |  |  | $ | 31,652 |  |  | $ | 23,795 |  |  | $ | 20,452 |  |  |  | 65 | %
Selling, general and administrative |  |  | 54,515 |  |  |  | 34,893 |  |  |  | 20,636 |  |  |  | 19,622 |  |  |  | 56 | %
Total operating expenses |  | $ | 106,619 |  |  | $ | 66,545 |  |  | $ | 44,431 |  |  | $ | 40,074 |  |  |  | 60 | %

Research and Development

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

Research and development expense increased by $20.5 million, or 65%, for the year ended December 31, 2021 compared to the same period in 2020, primarily due to higher personnel costs of $10.0 million due to increased headcount, an increase in stock-based compensation expense of $6.1 million, and higher ongoing new product related expenses of $6.9 million primarily consisting of consulting and supplies. These were offset by non-recurring engineering contra-expense recognized of $2.4 million.

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Sales, General and Administrative

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

Selling, general and administrative expense increased by $19.6 million, or 56%, for the year ended December 31, 2021 compared to the same period in 2020, primarily due to higher stock-based compensation expense of $6.2 million, higher personnel costs of $4.2 million, higher commission expenses of $4.5 million due to increased revenue, and higher consulting fees of $3.4 million.

Other Expense

Other expense consists primarily of interest expense on our outstanding debt, interest income on our cash balances, and foreign exchange gains and losses. See Note 7 to our consolidated financial statements under Item 8 for more information about our debt.

|  | Year Ended December 31, |  |  | Change 2021 vs 2020 |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | $ |  |  | % |
|  | (in thousands except percentage) |
Interest Expense |  | $ | - |  |  | $ | (726 | ) |  | $ | (1,714 | ) |  | $ | 726 |  |  |  | (100 | %)
Other expense, net |  |  | (488 | ) |  |  | (32 | ) |  |  | (28 | ) |  |  | (456 | ) |  |  | 1425 | %
Total other expense |  | $ | (488 | ) |  | $ | (758 | ) |  | $ | (1,742 | ) |  | $ | 270 |  |  |  | (36 | %)

Other expense decreased $0.3 million for the year ended December 31, 2021 compared to the same period in 2020, primarily as a result of no interest expense in 2021 on our outstanding revolving short-term debt as we paid in full all of our debt on July 24, 2020, offset by a net unrealized loss on foreign exchange rates due to increased activities in our foreign subsidiaries.

Income Tax Benefit (Expense)

Income tax expense consists primarily of state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We have a full valuation allowance for deferred tax assets as the realization of the full amount of our deferred tax asset is uncertain, including net operation losses (NOL), carryforwards, and tax credits related primarily to research and development. We expect to maintain this full valuation allowance until realization of the deferred tax assets becomes more likely than not. At December 31, 2021 and 2020, we had federal NOL carry-forwards of approximately $259.6 million and $201.5 million, respectively, and state NOL carry-forwards of approximately $64.5 million and $64.0 million, respectively. We had research and development tax credit carryforwards of approximately $3.9 million and $3.9 million, respectively for U.S. federal income tax purposes and $3.6 million and $3.6 million, respectively for state income tax purposes. Of the federal NOL carryforwards, approximately $148.4 million will expire in various years through 2036, if not utilized, and approximately $111.2 million will carry forward indefinitely. NOL carryforwards for state income tax purposes, if not utilized, will expire in various years through 2040. The research and development credit carryforwards for federal tax purposes will expire in various years through 2038, and state tax credits carry forward indefinitely.

|  | Year Ended December 31, |  |  | Change 2021 vs 2020 |
|  | 2021 |  |  | 2020 |  |  | 2019 |  |  | $ |  |  | % |
|  | (in thousands except percentage) |
Income tax (expense) benefit |  | $ | (78 | ) |  | $ | (1 | ) |  | $ | 8 |  |  | $ | (77 | ) |  |  | 7700 | %

Liquidity and Capital Resources

As of December 31, 2021 and 2020, we had cash and cash equivalents of $559.5 million and $73.5 million, respectively. Historically, the primary sources of our liquidity have been cash generated from our operations and the issuance of shares of our common stock. In June 2020, we completed a follow-on public offering of our shares, resulting in net proceeds to us of $45.8 million after deducting underwriting discounts and commissions and deferred offering costs. On July 24, 2020, we paid down all outstanding loans with The Bank of Tokyo Mitsubishi UFJ, Ltd. ("MUFG") of $35.0 million and closed our credit facilities with MegaChips Corporation and Sumitomo Mitsui Banking Corporation ("SMBC"). On February 22, 2021, we completed an additional follow-on

47

public offering, in which we issued and sold 1,500,000 shares of our common stock, resulting in net proceeds to us of $181.6 million after deducting underwriting discounts and commissions and deferred offering costs. On November 10, 2021 we completed a follow-on public offering, in which we issued and sold 1,300,000 shares of our common stock, resulting in net proceeds to us of $279.0 million after deducting underwriting discounts and commissions and deferred offering costs.

Our principal use of cash is to fund our operations to support growth. Our purchase obligations primarily include design and simulation licenses. As of December 31, 2021, such purchase obligations were $5.4 million. For information about our contractual obligations refer to "Note 5 - Lease" and “Note 6 – Commitments and Contingencies” of the Notes to Consolidated Financial Statements.

We expect to continue our investing activities, primarily in the purchase of property and equipment and capitalized software, to support research and development, sales and marketing, product support, and administrative staff.

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

Cash Flows

The following table summarizes our cash flows for the periods indicated:

|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
Net cash provided by operating activities |  | $ | 59,078 |  |  | $ | 16,604 |  |  | $ | 7,378 |
Net cash used in investing activities |  |  | (33,788 | ) |  |  | (7,793 | ) |  |  | (3,202 | )
Net cash provided by financing activities |  |  | 460,646 |  |  |  | 1,296 |  |  |  | 51,353 |
Net increase in cash and cash equivalents |  | $ | 485,936 |  |  | $ | 10,107 |  |  | $ | 55,529 |

Operating Activities

In 2021, net cash provided by operating activities of $59.1 million was primarily due to net income of $32.3 million and non-cash expenses of $39.9 million, partially offset by a change in operating assets and liabilities of $13.1 million, Non-cash expenses were mainly related to depreciation and amortization and stock-based compensation expense. The changes in operating assets and liabilities resulted in cash provided primarily due to higher accounts receivables due to timing of shipments and an increase in inventories as we managed our inventory levels, partially offset by lower prepaid expenses and other current assets related to advance payments to suppliers for inventory and higher accounts payable and accrued expenses and other liabilities due to timing of payments.

In 2020, net cash provided by operating activities of $16.6 million was primarily due to a net loss of $9.4 million being more than offset by non-cash expenses of $24.9 million and a change in operating assets and liabilities of $1.1 million. Non-cash expenses were mainly related to depreciation and amortization, stock-based compensation expense, inventory write-down, and impairment of internal-use software. The changes in operating assets and liabilities resulted in cash provided primarily due to higher accounts receivables due to timing of shipments and an increase in inventories as we managed our inventory levels being more than offset by lower prepaid expenses and other current assets related to advance payments to suppliers for inventory and higher accounts payable and accrued expenses and other liabilities due to timing of payments.

Investing Activities

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

48

In 2021, cash used in investing activities was $33.8 million. We paid $30.9 million largely to purchase test and other manufacturing equipment to support the increase in demand of our products and other property and equipment for general business purposes. We paid $2.9 million to purchase intangible assets.

In 2020, cash used in investing activities was $7.8 million and consisted primarily of the purchase of production masks, internally developed software, and other property and equipment for general business purposes.

Financing Activities

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

In 2021, cash provided by financing activities was $460.6 million, consisting of proceeds from issuance of shares of $461.3 million net of underwriting commissions and discounts of $21.7 million and deferred offering costs of $0.6 million.

In 2020, cash provided by financing activities was $1.3 million, consisting of proceeds from issuance of shares of $45.8 million net of underwriting commissions and discounts of $2.7 million and deferred offering costs of $0.3 million and borrowings of $35.0 million offset by repayments of $76.0 million under our short-term revolving line of credit and $3.5 million payment of tax withholdings paid on behalf of employees for net share settlement at the time of vesting.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from these estimates. To the extent that there are material differences between these estimates and our actual results, our future financial statements will be affected.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Revenue Recognition

We derive our revenue from product sales to distributors and resellers, who in turn sell to original equipment manufacturers or other end customers. We recognize product revenue, at a point in time, upon shipment when we satisfy our performance obligations as evidenced by the transfer of control of our products to customers. We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products. Variable consideration is estimated and reflected as an adjustment to the transaction price. We determine variable consideration at the end of each reporting period, which consists primarily of price adjustments and product returns by estimating the amount of consideration we expect to receive from our customers based on historical experience. If variable considerations are anticipated to exceed historical experience, we may adjust our sales returns allowance accordingly to properly reflect our net revenue. Since our performance obligations relate to contracts with a duration of less than one year, we do not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

Inventories

Inventories consist of raw materials, work-in-process, and finished goods and are stated at the lower of standard cost, determined using first-in first out method or market net realizable value. We review and set standard costs to approximate actual manufacturing costs. We perform detailed reviews of the net realizable value of inventories, both on hand as well as for inventories that we are committed to purchase at the end of each reporting period. We write-down the inventory value for estimated deterioration, excess, obsolete and other factors based on management’s assessment of future demand and market conditions of our inventory. These estimates may include uncertain elements such as our demand forecast. These forecasts are developed based on current backlogs, inputs from our customers, and internal analyses which may consists of customer historical purchasing trends, actual and anticipated design wins, market and economic conditions, technology changes, new product introductions, changes in strategic direction and other factors. If our demand forecast for specific products is greater than actual demand and we fail to reduce manufacturing output

49

accordingly, we could be required to write down additional inventory, which would have a negative impact on our gross margin. Once written-down, inventory write-downs are not reversed until the inventory is sold or scrapped.

Stock-Based Compensation

Stock-based compensation expense is measured at the grant date based on the fair value of the equity award and is recognized as expense over the requisite service period, which is generally the vesting period. We have elected to recognize forfeitures as they occur.

The fair value of each restricted stock unit is estimated based on the market price of our common shares on the date of grant.

We amortize stock-based compensation expense for time-based awards under the straight-line attribution method over the vesting period. Stock-based compensation expense for performance-based awards is recognized when it becomes probable that the performance conditions will be met. We amortize stock-based compensation expense for performance-based awards using the accelerated method.

Income Taxes

Deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to a level which, more likely than not, will be realized.

A tax position can be recognized only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date and then only in an amount more likely than not to be sustained upon review by the tax authorities. We consider many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

Recent Accounting Pronouncements

See Note 2 to our consolidated financial statements under Item 8 for information regarding recently issued accounting pronouncements.

Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.

Foreign Currency Risk

Substantially all of our revenue is denominated in U.S. dollars. Our expenses are generally denominated in the currencies in which our operations are located, which is primarily in the United States and, to a lesser extent, in Malaysia, the Netherlands, France, Taiwan, Japan, and Ukraine. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchanges rates applicable to our business would not have a material impact on our historical consolidated financial statements. We do not currently have a hedging policy with respect to foreign currency exchange risk.

Interest Rate Risk

We had cash and cash equivalents of $559.5 million and $73.5 million as of December 31, 2021 and 2020, respectively, consisting of bank deposits. Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant, and we believe that an immediate 10% change in interest rates would not have a material effect on our cash and cash equivalents. We paid down all our debt in the year 2020.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Our exposure to interest rates relates to the change in the amounts of interest we must pay on our short-term revolving line of credit which changes at time of renewals. The effect of a hypothetical 10% change in interest rates applicable to our business would not have a material impact on our historical consolidated financial statements.

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Item 8. Financial Statement s and Supplementary Data.

Index to Consolidated Financial Statements and Financial Statement Schedule |
| Page
Report of Independent Registered Public Accounting Firm (BDO USA, LLP, San Jose, California, PCAOB ID#243) | 53
Consolidated Balance Sheets | 54
Consolidated Statements of Operations and Comprehensive Income (Loss) | 55
Consolidated Statements of Stockholders’ Equity | 56
Consolidated Statements of Cash Flows | 57
Notes to Consolidated Financial Statements | 58
Schedule II – Valuation and Qualifying Accounts | 87

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Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
SiTime Corporation
Santa Clara, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of SiTime Corporation (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 25, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Inventories

As described in Note 1 to the consolidated financial statements, the Company’s consolidated inventory balance is stated at lower of

52

cost or net realizable value. The valuation of inventories is adjusted by the Company when conditions indicated a decline in value due to obsolescence and is based on estimates for inventory levels in excess of management’s forecasted demand. Forecasting customer demand can be challenging due to uncertain elements such as market conditions outside the Company’s control.

We identified the valuation of inventory as a critical audit matter. To value inventory, management makes significant judgments related to: i) forecasting future demand for excess units on hand based on the Company’s historical sales and market conditions, and ii) obsolescence of certain products based on forecasted demand. Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

•
Assessing the appropriateness of management’s valuation methodology by evaluating quantitative and qualitative factors including (i) excess units on hand based on ending inventory quantities compared to forecasted shipment quantities, and (ii) obsolete inventory based on age, quality and other specifically identified units.
•
Testing the accuracy and completeness of underlying data used in management’s excess and obsolete inventory valuation assessment.
•
Evaluating the reasonableness of management's assumptions related to forecasted demand by (i) performing retrospective review of the Company’s prior year estimates to actual results, (ii) evaluating the reasonableness of sales forecasts by comparing to current backlog and historical sales data used in the analysis, and (iii) specific product considerations such as technology changes or alternative uses.

/s/ BDO USA, LLP
We have served as the Company's auditor since 2019.
San Jose, California

February 25, 2022

53

SiTime Corporation

Consolidated B alance Sheets

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands, except per share data) |
Assets: |  |  |  |  |  |
Current assets: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 559,461 |  |  | $ | 73,525 |
Accounts receivable, net |  |  | 38,376 |  |  |  | 23,920 |
Related party accounts receivable |  |  | - |  |  |  | 736 |
Inventories |  |  | 23,630 |  |  |  | 12,350 |
Prepaid expenses and other current assets |  |  | 4,476 |  |  |  | 2,649 |
Total current assets |  |  | 625,943 |  |  |  | 113,180 |
Property and equipment, net |  |  | 37,902 |  |  |  | 11,708 |
Intangible assets, net |  |  | 5,977 |  |  |  | 2,069 |
Right-of-use assets, net |  |  | 8,194 |  |  |  | 8,892 |
Other assets |  |  | 193 |  |  |  | 162 |
Total assets |  | $ | 678,209 |  |  | $ | 136,011 |
Liabilities and Stockholders' Equity: |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Accounts payable |  | $ | 13,103 |  |  | $ | 6,182 |
Accrued expenses and other current liabilities |  |  | 24,282 |  |  |  | 12,963 |
Total current liabilities |  |  | 37,385 |  |  |  | 19,145 |
Lease liabilities |  |  | 6,398 |  |  |  | 6,986 |
Other non-current liabilities |  |  | 1,929 |  |  |  | — |
Total liabilities |  |  | 45,712 |  |  |  | 26,131 |
Commitments and contingencies (Note 6) |  |  |  |  |  |
Stockholders’ equity: |  |  |  |  |  |
Common stock, $0.0001 par value - 200,000 shares authorized; 20,825 and 17,150 shares issued and outstanding at December 31, 2021 and December 31, 2020 |  |  | 2 |  |  |  | 2 |
Additional paid-in capital |  |  | 663,614 |  |  |  | 173,274 |
Accumulated deficit |  |  | (31,119 | ) |  |  | (63,396 | )
Total stockholders’ equity |  |  | 632,497 |  |  |  | 109,880 |
Total liabilities and stockholders’ equity |  | $ | 678,209 |  |  | $ | 136,011 |

The accompanying notes are an integral part of the consolidated financial statements.

54

SiTime Corporation

Consolidated Statements of Operatio ns and Comprehensive Income (Loss)

|  | Year Ended |
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |
|  | (in thousands, except per share data) |
Revenue |  | $ | 218,808 |  |  | $ | 116,156 |  |  | $ | 84,074 |
Cost of revenue |  |  | 79,346 |  |  |  | 58,224 |  |  |  | 44,516 |
Gross profit |  |  | 139,462 |  |  |  | 57,932 |  |  |  | 39,558 |
Operating expenses: |  |  |  |  |  |  |  |  |
Research and development |  |  | 52,104 |  |  |  | 31,652 |  |  |  | 23,795 |
Selling, general and administrative |  |  | 54,515 |  |  |  | 34,893 |  |  |  | 20,636 |
Total operating expenses |  |  | 106,619 |  |  |  | 66,545 |  |  |  | 44,431 |
Income (loss) from operations |  |  | 32,843 |  |  |  | (8,613 | ) |  |  | (4,873 | )
Interest expense |  |  | - |  |  |  | (726 | ) |  |  | (1,714 | )
Other expense, net |  |  | (488 | ) |  |  | (32 | ) |  |  | (28 | )
Income (loss) before income taxes |  |  | 32,355 |  |  |  | (9,371 | ) |  |  | (6,615 | )
Income tax (expense) benefit |  |  | (78 | ) |  |  | (1 | ) |  |  | 8 |
Net income (loss) |  | $ | 32,277 |  |  | $ | (9,372 | ) |  | $ | (6,607 | )
Net income (loss) attributable to common stockholders and comprehensive income (loss) |  | $ | 32,277 |  |  | $ | (9,372 | ) |  | $ | (6,607 | )
Net income (loss) per share attributable to common stockholders, basic |  | $ | 1.70 |  |  | $ | (0.58 | ) |  | $ | (0.63 | )
Net income (loss) per share attributable to common stockholders, diluted |  | $ | 1.53 |  |  | $ | (0.58 | ) |  | $ | (0.63 | )
Weighted-average shares used to compute basic net income (loss) per share |  |  | 19,006 |  |  |  | 16,064 |  |  |  | 10,558 |
Weighted-average shares used to compute diluted net income (loss) per share |  |  | 21,144 |  |  |  | 16,064 |  |  |  | 10,558 |

The accompanying notes are an integral part of the consolidated financial statements.

55

SiTime Corporation

Consolidated Statements of Stockholders’ Equity

|  |  |  |  |  |  |  | Additional |  |  |  |  |  | Total |
|  | Common Stock |  |  | Paid-in |  |  | Accumulated |  |  | Stockholders' |
|  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Equity |
|  | (in thousands) |
Balances at December 31, 2018 |  |  | 10,000 |  |  | $ | 1 |  |  | $ | 58,431 |  |  | $ | (47,417 | ) |  | $ | 11,015 |
Stock-based compensation expense |  |  | — |  |  |  | — |  |  |  | 1,379 |  |  |  | — |  |  |  | 1,379 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (6,607 | ) |  |  | (6,607 | )
Issuance of common stock upon initial public offering net of underwriting discounts and commissions and other offering costs |  |  | 4,945 |  |  |  | 1 |  |  |  | 56,352 |  |  |  | — |  |  |  | 56,353 |
Issuance of shares upon vesting of restricted stock units, net of tax withholdings |  |  | 23 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balances at December 31, 2019 |  |  | 14,968 |  |  |  | 2 |  |  |  | 116,162 |  |  |  | (54,024 | ) |  |  | 62,140 |
Stock-based compensation expense |  |  | — |  |  |  | — |  |  |  | 14,816 |  |  |  | — |  |  |  | 14,816 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (9,372 | ) |  |  | (9,372 | )
Issuance of common stock upon follow-on public offering net of underwriting discounts and commissions and other offering costs |  |  | 1,525 |  |  |  | — |  |  |  | 45,789 |  |  |  | — |  |  |  | 45,789 |
Issuance of shares upon vesting of restricted stock units, net of tax withholdings |  |  | 657 |  |  |  | — |  |  |  | (3,493 | ) |  |  | — |  |  |  | (3,493 | )
Balances at December 31, 2020 |  |  | 17,150 |  |  | $ | 2 |  |  | $ | 173,274 |  |  | $ | (63,396 | ) |  | $ | 109,880 |
Stock-based compensation expense |  |  | — |  |  |  | — |  |  |  | 29,694 |  |  |  | — |  |  |  | 29,694 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 32,277 |  |  |  | 32,277 |
Issuance of common stock upon follow-on public offerings net of underwriting discounts and commissions and other offering costs |  |  | 2,800 |  |  |  | — |  |  |  | 460,646 |  |  |  | — |  |  |  | 460,646 |
Issuance of shares upon vesting of restricted stock units |  |  | 875 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balances at December 31, 2021 |  |  | 20,825 |  |  | $ | 2 |  |  | $ | 663,614 |  |  | $ | (31,119 | ) |  | $ | 632,497 |

The accompanying notes are an integral part of the consolidated financial statements.

56

SiTime Corporation

Consolidated Statem ents of Cash Flows

|  | Year Ended |
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |
|  | (in thousands) |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | 32,277 |  |  | $ | (9,372 | ) |  | $ | (6,607 | )
Adjustments to reconcile net loss to net cash provided by |  |  |  |  |  |  |  |  |
operating activities |  |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  | 7,926 |  |  |  | 6,402 |  |  |  | 8,273 |
Stock-based compensation expense |  |  | 29,992 |  |  |  | 16,009 |  |  |  | 1,379 |
Inventory write-down |  |  | 1,817 |  |  |  | 1,446 |  |  |  | 321 |
Impairment of internal-use software |  |  | — |  |  |  | 959 |  |  |  | — |
Other |  |  | 117 |  |  |  | 106 |  |  |  | 9 |
Changes in assets and liabilities: |  |  |  |  |  |  |  |  |
Accounts receivable |  |  | (14,456 | ) |  |  | (6,261 | ) |  |  | 1,521 |
Related party accounts receivable |  |  | 736 |  |  |  | 337 |  |  |  | 363 |
Inventories |  |  | (13,096 | ) |  |  | (2,070 | ) |  |  | 8,144 |
Prepaid expenses and other assets |  |  | (1,859 | ) |  |  | 2,951 |  |  |  | (3,145 | )
Accounts payable |  |  | 5,826 |  |  |  | 2,606 |  |  |  | (1,148 | )
Accrued expenses and other liabilities |  |  | 9,798 |  |  |  | 3,491 |  |  |  | (1,732 | )
Net cash provided by operating activities |  |  | 59,078 |  |  |  | 16,604 |  |  |  | 7,378 |
Cash flows from investing activities |  |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (30,878 | ) |  |  | (6,098 | ) |  |  | (1,426 | )
Cash paid for intangibles |  |  | (2,910 | ) |  |  | (1,695 | ) |  |  | (1,776 | )
Net cash used in investing activities |  |  | (33,788 | ) |  |  | (7,793 | ) |  |  | (3,202 | )
Cash flows from financing activities |  |  |  |  |  |  |  |  |
Proceeds from public offering, net of underwriting discounts and commissions and other offering costs |  |  | 460,646 |  |  |  | 45,789 |  |  |  | 56,353 |
Tax withholding paid on behalf of employees for net share settlement |  |  | — |  |  |  | (3,493 | ) |  |  | — |
Proceeds from loans from financial institutions |  |  | — |  |  |  | 35,000 |  |  |  | — |
Principal payments on loans to financial institutions |  |  | — |  |  |  | (76,000 | ) |  |  | (2,000 | )
Principal payments on loan to MegaChips |  |  | — |  |  |  | - |  |  |  | (3,000 | )
Net cash provided by financing activities |  |  | 460,646 |  |  |  | 1,296 |  |  |  | 51,353 |
Net increase in cash and cash equivalents |  |  | 485,936 |  |  |  | 10,107 |  |  |  | 55,529 |
Cash and cash equivalents |  |  |  |  |  |  |  |  |
Beginning of period |  |  | 73,525 |  |  |  | 63,418 |  |  |  | 7,889 |
End of period |  | $ | 559,461 |  |  | $ | 73,525 |  |  | $ | 63,418 |
Supplemental disclosure of cash flow information |  |  |  |  |  |  |  |  |
Interest paid during the period |  | $ | - |  |  | $ | 799 |  |  | $ | 2,167 |
Income taxes paid |  |  | 24 |  |  |  | 1 |  |  |  | 1 |
Supplemental disclosure of noncash flow information |  |  |  |  |  |  |  |  |
Unpaid property and equipment |  |  | 1,437 |  |  |  | 343 |  |  |  | 77 |
Unpaid intangibles, net |  |  | 3,178 |  |  |  | — |  |  |  | — |
Right-of-use assets acquired under operating leases |  |  | 689 |  |  |  | 382 |  |  |  | 10,763 |

The accompanying notes are an integral part of the consolidated financial statements.

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SiTime Corporation

Notes to Consolidated Financial Statements

1. The Company and Summary of Significant Accounting Policies

SiTime Corporation (the “Company”) was incorporated in the State of Delaware in December 2003. The Company is a provider of silicon timing systems. The Company primarily supplies oscillator products that comprise a MEMS resonator and clock IC that is integrated into a package, as well as standalone resonators. The Company has also started to sample clock ICs. The Company’s products are designed to address a wide range of applications across a broad array of end markets. The Company operates a fabless business model and leverages its global network of distributors and resellers to address the broad set of end markets that it serves.

Outbreak of Coronavirus Disease 2019 (“the COVID-19 pandemic”)

On March 11, 2020, the World Health Organization characterized the outbreak of the coronavirus disease known as COVID-19 as a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and several states and municipalities have declared public health emergencies. To combat the spread of the COVID-19 pandemic, the United States and other foreign countries in which the Company operates have imposed measures such as quarantines and “shelter-in-place” orders that are restricting business operations and travel and requiring individuals to work from home (“WFH”), which has impacted all aspects of the Company’s business as well as those of the third-parties the Company relies upon for manufacturing, assembly, testing, shipping and other operations.

During 2021, the Company experienced a growth in demand for some of its products, however, there are a number of industry-wide supply constraints affecting the supply of analog circuits manufactured by certain foundries, and affecting outsourced semiconductor assembly and test providers, which has limited and may continue to limit the Company's ability to fully satisfy the increase in demand. If the Company cannot ship its products to its customers on time and in the quantity required as a result of this supply constraint the Company's sales could decline and the Company could lose customers. As a result of the COVID-19 pandemic the Company has also experienced some delay and disruption in the manufacture, shipment, and sales of its products. In addition, the production capabilities of the Company's suppliers have been, and will likely continue to be, impacted as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or WFH orders.

The COVID-19 pandemic has negatively impacted business activity across the globe and has impacted the Company's employees and operations. The inputs into the Company’s judgments and estimates consider the economic implications of the COVID-19 pandemic, as the Company knows them, on the Company’s critical and significant accounting estimates. The extent to which the COVID-19 pandemic may impact the Company’s business will depend on future developments, which are highly uncertain, including the future effects of the COVID-19 pandemic on its employees, customers, suppliers, results of operations, financial condition, or liquidity for 2022 and beyond. To date, the Company has experienced minimal impact from any supplier disruption resulting from COVID-19.

Reporting Calendar

The Company’s fiscal year begins on January 1 of the year stated and ends on December 31 of the same year. The Company reports its results on a calendar year basis.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Initial and Follow-on Public Offerings

On November 25, 2019, the Company completed its initial public offering (“IPO”), in which it issued and sold 4,945,000 shares of its common stock including the full exercise of the underwriters’ over-allotment option to purchase an additional 645,000 shares at $13.00 per share, resulting in net proceeds of $56.4 million after deducting underwriting discounts, commissions and offering costs of $7.9 million.

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On June 16, 2020, the Company completed a follow-on public offering (“June 2020 Offering”), in which it issued and sold 1,525,000 shares of its common stock, resulting in net proceeds to the Company of $45.8 million after deducting underwriting discounts and commissions of $2.7 million and deferred offering costs of $0.3 million.

On February 22, 2021, the Company completed an additional follow-on public offering, in which we issued and sold 1,500,000 shares of its common stock, resulting in net proceeds to the Company of $181.6 million after deducting underwriting discounts and commissions of $8.6 million and deferred offering costs of $0.3 million.

On November 10, 2021 the Company completed a follow-on public offering, in which it issued and sold 1,300,000 shares of its common stock, resulting in net proceeds to the Company of $279.0 million after deducting underwriting discounts and commissions of $13.2 million and deferred offering costs of $0.3 million.

Stock Split

On October 16, 2019, a pricing committee of the Company’s board of directors approved an amendment and restatement of the Company’s certificate of incorporation to (i) increase the total number of authorized shares of its common stock to 200,000,000 shares, (ii) change the par value of its common stock to $0.0001 per share, and (iii) effect a 30,000-for-1 stock split of its common stock, which was within the range previously approved by its sole stockholder. These changes became effective upon filing of the Company’s amended and restated certificate of incorporation on October 18, 2019. Subsequently, on November 6, 2019, the Company’s board of directors and sole stockholder approved an amendment and restatement of the Company’s certificate of incorporation to effect a 2-for-3 reverse stock split of its common stock, which became effective on November 6, 2019. The share and per share amounts in these consolidated financial statements and accompanying notes have been adjusted to reflect such stock split and reverse stock split.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The significant areas requiring the use of management estimates and assumptions include revenue recognition, non-recurring engineering services, estimate of reserve for excess and obsolete inventories, sales and warranty reserves, estimate of reserves for accounts receivable, internally developed software capitalization, and valuation allowances for deferred tax assets. Actual results may differ materially from such estimates. Management believes that the estimates, and judgments upon which they rely, are reasonable based upon information available to them at the time that these estimates and judgments are made. To the extent that there are material differences between these estimates and actual results, the Company’s consolidated financial statements will be affected.

Foreign Currency Remeasurement

The Company and its wholly-owned subsidiaries use the U.S. dollar as the functional currency. Foreign currency assets and liabilities are remeasured into U.S. dollars at the end-of-period exchange rates except for non-monetary assets and liabilities, which are measured at historical exchange rates. Revenue and expenses are remeasured using an average exchange rate in effect for the period, except for items related to non-monetary assets and liabilities, which are measured at historical exchange rates. Gains or losses from foreign currency remeasurement and transactions are included in other expense, net. For the years ended December 31, 2021, 2020, and 2019, foreign currency remeasurement and transactions gains and losses resulting in a net charge of $0.5 million, $0.1 million and less than $0.1 million, respectively.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash balances in the Company’s bank checking and savings accounts and liquid short-term investments with original or remaining maturities of 90 days or less at the date of purchase, readily convertible to known amounts of cash.

Fair Value Measurements

The carrying amounts of the Company’s financial instruments, which include cash equivalents, accounts receivable, accounts payable, accrued liabilities, and other current liabilities, approximate their fair values due to their short maturities. The Company determines fair value measurements used in its consolidated financial statements based upon the price that would be received to sell an

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asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2: Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3: Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

At December 31, 2021 and 2020, cash balances in bank checking and savings accounts of $339.3 million and $18.4 million, were valued using Level 1 of the fair value hierarchy. At December 31, 2021 and December 31, 2020, highly liquid money market funds of $220.2 million and $55.1 million, respectively, were valued using Level 1, of the fair value hierarchy, quoted prices in active markets for identical assets and are included in cash equivalents.

There were no transfer s between Level 1 and Level 2 categories during any of the periods presented.

Accounts Receivable and Allowances for Credit Losses

Accounts receivable are stated at amounts estimated by management to be net realizable value. An allowance for credit losses is recorded when it is probable that amounts will not be collected based on historical collection trends, age of outstanding receivables, specific customer circumstances, existing economic conditions and future forecasted information. The Company performs periodic credit evaluations of its customers’ financial condition and generally requires no collateral from its customers. Losses have not been significant in any of the periods presented.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalents amount is subject to concentration of credit risk. Substantially all of the Company's cash and cash equivalents balances are in excess of Federal Deposit Insurance Corporation insurance limits with financial institutions.

The Company extends credit based on an evaluation of the customer’s financial condition and collateral is not typically required. The Company primarily sells its products through third-party distributors and resellers. For the years ended December 31, 2021, 2020, and 2019, three distributors directly accounted for 10% or more of the Company’s revenue.

The following table discloses these customers’ percentage of revenue for the respective periods:

|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Customer |  |  |  |  |  |
Pernas Electronics Co. Ltd. |  | 24% |  | 26% |  | 17%
Quantek Technology Corporation |  | 10% |  | 18% |  | 22%
Arrow Electronics, Inc. |  | 14% |  | 15% |  | 19%

Revenue from sales to one end customer through multiple distributors accounted for 22%, 40% and 23% of consolidated revenues for the years ended December 31, 2021, 2020, and 2019, respectively. No other distributors or end customers accounted for 10% or more of the Company's consolidated revenues for the years ended December 31, 2021, 2020, and 2019.

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At December 31, 2021 and 2020, three customers accounted for 10% or more of accounts receivable, as disclosed below:

|  | As of December 31,
|  | 2021 |  | 2020
Customer |  |  |  |
Pernas Electronics Co. Ltd. |  | 16% |  | 31%
Quantek Technology Corporation |  | 13% |  | 22%
Smith & Associates |  | 11% |  | n/a
Arrow Electronics, Inc. |  | 14% |  | 18%

Inventories

Inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. The Company, at least quarterly, assesses the recoverability of all inventories to determine whether adjustments are required to record inventory at the lower of cost or net realizable value. The Company reduces the value of inventory by establishing excess and obsolete inventories reserves based on management’s assessment of future demand and market conditions. Actual demand may differ from forecasted demand and such differences may have a material effect on recorded value of inventory. Inventory reserve write-downs, once established, are not released until the related inventory has been sold or scrapped. Rebates from the Company’s foundries are recorded as a reduction of inventory cost and are recognized in cost of revenue over the inventory turnover days of the Company. Most of the Company’s inventory is warehoused at its contract manufacturers.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation. Depreciation of property and equipment is recognized on a straight-line basis over the estimated useful lives of the respective assets as follows:

Lab and manufacturing equipment |  | 3 to 7 years
Computer equipment |  | 3 years
Furniture and fixtures |  | 5 years
Leasehold improvements |  | Shorter of remaining lease term or estimated useful lives of the assets

The Company capitalizes the costs of purchased mask sets that are utilized during the photolithography phase of manufacturing our products, when technological feasibility and marketability have been established. The capitalization occurs upon the completion of a detailed design, the absence of significant development uncertainties and the determination of market acceptance. Such amounts are included in property and equipment in the consolidated balance sheets and are amortized to cost of revenue over their estimated useful life of 5 to 7 years. However, if significant uncertainties exist regarding the future utility of a particular mask set, then its related costs are expensed to research and development at the time the significant uncertainties are identified.

Maintenance and repair costs are charged to expense as incurred, and expenditures that extend the useful lives of assets are capitalized. Upon retirement or sale of the property and equipment, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is recorded in operating expenses.

Intangible Assets

Intangible assets include the costs related to acquired software as well as costs related to software internally developed, or modified solely to meet the Company’s internal requirements, with no substantive plans to market such software at the time of development. The Company develops proprietary design automation software for its MEMS-based resonators. Costs incurred during the preliminary planning and evaluation stage of the project and during post implementation operational stage are expensed as incurred. Costs incurred during the application development stage of the software are capitalized. The Company defines the configuration and coding process as the application development stage. Capitalized internal use software costs are amortized, on a straight-line basis under cost of revenue over the estimated useful life of approximately 2 to 3 years. Purchased intangibles with finite lives are amortized using the straight-line method over the estimated economic lives of the assets of 3 to 5 years.

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Leases

The Company applies the guidance in Accounting Standards Codification (“ASC”), Topic 842 to individual leases of assets. The Company recognizes a transaction as a lease when it receives substantially all of the economic benefits from and directs the use of specified property, plant and equipment.

Operating leases are included in right-of-use (“ROU”), assets, accrued expenses and other current liabilities, and lease liabilities in the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the present value of the Company’s obligation to make lease payments arising from the lease. The Company currently does no t have any finance leases.

The Company has elected the practical expedient within ASC Topic 842 to not separate lease and non-lease components within lease transactions for all classes of assets. Additionally, the Company has elected the short-term lease exception for all classes of assets and does not apply the recognition requirements for leases of 12 months or less and recognizes lease payments for short-term leases as expense either straight-line over the lease term or as incurred depending on whether the lease payments are fixed or variable. These elections are applied consistently for all leases.

When discount rates implicit in leases cannot be readily determined, the Company uses the applicable incremental borrowing rate at lease commencement to perform lease classification tests on lease components and to measure ROU assets and lease liabilities. The incremental borrowing rate used by the Company was based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.

The Company determined that no events or changes in circumstances indicate that impairment of its long-lived assets has occurred.

Warranty

The Company provides limited lifetime warranty coverage on all of its products by guaranteeing that all timing components from the Company will be free from defects in workmanship and materials and will conform to specifications for the life of the system. This assurance-type warranty is not considered a separate performance obligation, and thus no transaction price is allocated to it. The Company records the warranty costs in cost of revenue in the consolidated statements of operations and comprehensive income (loss). The warranty reserve is calculated using historical claim information to project future warranty claims activity and is recorded within accrued expenses and other current liabilities and other non-current liabilities on the consolidated balance sheets based on the expected timing of the related payments. To date, the Company has had negligible returns of any defective products, and hence the warranty reserve balances as of December 31, 2021 and 2020 were less than $0.1 million.

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Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts in the consolidated financial statements of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards, using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. A valuation allowance is provided in order to reduce the deferred tax assets to a level which, more likely than not, will be realized.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) and The Coronavirus Aid, Relief, and Economic Security (“CARES Act”) , make broad and complex changes to the U.S. tax code. These computations require significant judgments and estimates to be made regarding the interpretation of the provisions within the Tax Act along with the preparation and analysis of information not previously required.

While the Company believes it has adequately reserved for its uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes and the effective tax rate in the period in which such determination is made.

The Company recognizes tax positions in the consolidated financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority. Liabilities are established for differences between positions taken in a tax return and amounts recognized in the consolidated financial statements. The Company reports interest and penalties related to uncertain tax positions, if any, in the provision for income taxes in the consolidated statements of operations and comprehensive income (loss). To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall provision for income taxes in the period that such determination is made.

Revenue Recognition

The Company derives revenue from its product sales to distributors and resellers, who in turn sell to original equipment manufacturers or other end customers. The Company recognizes product revenue, at a point in time, upon shipment when it satisfies its performance obligations as evidenced by the transfer of control of its products to customers. The Company measures revenue based on the amount of consideration it expects to be entitled to in exchange for products. Variable consideration is estimated and reflected as an adjustment to the transaction price. The Company determines variable consideration, which consists primarily of price adjustments and product returns by estimating the amount of consideration the Company expects to receive from its customers based on historical experience of price adjustments and product returns. Initial estimates of price adjustments and product returns are updated at the end of each reporting period if additional information becomes available. Changes to the Company’s estimated variable consideration were not material for the periods presented. Since the Company’s performance obligations relate to contracts with a duration of less than one year, it does not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

The Company’s payment terms vary by contract type and type of customer and generally range from 30 to 60 days from shipment. The Company has also elected to recognize the cost for freight and shipping when control over the products sold passes to customers and revenue is recognized.

As a practical expedient, the Company records the incremental costs of obtaining a contract, consisting primarily of sales commissions, when incurred because the amortization period is one year or less. These costs are recorded within sales and marketing expenses. The Company entered into a distribution agreement with MegaChips, whereby the Company appointed MegaChips as the exclusive distributor of its products in Japan. The Company recognizes revenue upon shipment derived from sales of products through MegaChips in the amount of expected payments from parties which purchased the products as adjusted for estimated price concessions and product returns. In connection with the Company's efforts to contract directly with distributors in Japan, the Company and MegaChips mutually terminated the Distribution Agreement effective November 3, 2021.

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Cost of Revenue

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

Research and Development Expenses

Research and development costs consist primarily of personnel cost, material cost, and facilities related expenses, incurred in the course of planned research and development of new products. Research and development costs are expensed as incurred.

Non-recurring engineering services

The Company has certain contracts to provide non-recurring engineering (NRE) services for research and development arrangements through 2023, which do not meet the requirement to be accounted for under ASC 606, Revenue from Contracts with Customers. The Company recognizes the payments received under these NRE arrangements as liabilities and recognizes them as an offset to research a nd development expense as the company achieve the milestones of the contract. As the progress towards completion occurs, the Company uses an input method based on the ratio of costs incurred to date to total estimated costs of the project. Significant judgment is required to estimate the remaining effort to complete the project. These estimates are reassessed throughout the term of the arrangement. A liability of $5.7 million and $0.5 million was recorded as accrued expenses and other current liabilities, and other non-current liabilities, respectively, in the consolidated balance sheet as of December 31, 2021. For the year ended December 31, 2021, the Company recorded $2.4 million as a reduction of research and development expenses in the consolidated statement of operations. There were no reduction of research and development expenses recorded during the years ended December 31, 2020 and 2019.

Selling, General and Administrative Expenses

Selling, general and administrative expenses primarily consist of personnel costs, field application engineering support, travel costs, professional and consulting fees, accounting and audit fees, legal, advertising expenses, and allocated overhead costs. Selling, general and administrative costs are expensed as incurred. Advertising expenses were $1.5 million, $0.3 million and $0.3 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

Stock-Based Compensation

The Company grants restricted stock units (“RSUs”) of its own common stock and such grants are valued at the fair market value of the Company’s stock on the date of the grant and recognizes the compensation expense using the straight-line method over the requisite service period.

The Company amortizes stock-based compensation expense for time-based awards under the straight-line attribution method over the vesting period. Stock-based compensation expense for performance-based awards is recognized when it becomes probable that the performance conditions will be met. The Company amortizes stock-based compensation expense for performance-based awards using the accelerated method.

The Company recognizes forfeitures as they occur.

Net Income (Loss) Per Share Attributable to Common Stockholders

Basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period. Refer to "Note 3 - Net Income (Loss) Per Share" for further discussion regarding potentially dilutive and anti-dilutive securities.

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Comprehensive Income (Loss)

The Company has no components of other comprehensive income loss. Therefore, net income (loss) equals comprehensive income (loss) for all periods presented.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Guidance

In December 2019, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. The adoption of this standard on January 1, 2021 did not have any impact on the Company’s consolidated financial position, results of operations, cash flows or financial disclosures.

3. Net Income (Loss) Per Share

The following table summarizes the computation of basic and diluted net income (loss) per share attributable to common stockholders of the Company:

|  | Year Ended December 31 |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands, except per share data) |
Net income (loss) attributable to common stockholders |  | $ | 32,277 |  |  | $ | (9,372 | ) |  | $ | (6,607 | )
Weighted-average shares outstanding |  |  |  |  |  |  |  |  |
Weighted average shares used to compute basic net income (loss) per share |  |  | 19,006 |  |  |  | 16,064 |  |  |  | 10,558 |
Dilutive effect of employee equity incentive plans |  |  | 2,138 |  |  |  | - |  |  |  | - |
Weighted average shares used to compute diluted net income (loss) per share |  |  | 21,144 |  |  |  | 16,064 |  |  |  | 10,558 |
Net income (loss) attributable to common stockholders per share, basic |  | $ | 1.70 |  |  | $ | (0.58 | ) |  | $ | (0.63 | )
Net income (loss) attributable to common stockholders per share, diluted |  | $ | 1.53 |  |  | $ | (0.58 | ) |  | $ | (0.63 | )

Potential dilutive securities include dilutive common shares from share-based awards attributable to the assumed exercise of vested restricted stock units using the treasury stock method. Under the treasury stock method, potential common shares outstanding are not included in the computation of diluted net income per share if their effect is anti-dilutive.

Anti-dilutive potential shares from share-based awards are excluded from the calculation of diluted earnings per share if either their exercise price exceeded the average market price during the period or the share-based awards were determined to be anti-dilutive based on applying the treasury stock method. During the year ended December 31, 2021, 2020 and 2019 the Company had 3,955, 2,095,135 and 118,545 potential shares from share-based awards that are anti-dilutive, respectively. Anti-dilutive potential shares from share-based awards are excluded from the calculation of diluted loss per share for the years ended December 31, 2020 and 2019 due to the net losses reported in these periods.

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4. Balance Sheets Components

Accounts Receivable, net

Accounts receivable, net consisted of the following:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands) |
Accounts receivable, gross |  | $ | 38,426 |  |  | $ | 23,970 |
Allowance for credit losses |  |  | (50 | ) |  |  | (50 | )
Accounts receivable, net |  | $ | 38,376 |  |  | $ | 23,920 |

Inventory

Inventory consisted of the following:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands) |
Raw materials |  | $ | 1,841 |  |  | $ | 435 |
Work in progress |  |  | 16,963 |  |  |  | 10,184 |
Finished goods |  |  | 4,826 |  |  |  | 1,731 |
Total inventories |  | $ | 23,630 |  |  | $ | 12,350 |

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands) |
Advance to suppliers |  | $ | — |  |  | $ | 853 |
Prepaid expenses |  |  | 2,398 |  |  |  | 1,074 |
Other current assets |  |  | 2,078 |  |  |  | 722 |
Total prepaid and other current assets |  | $ | 4,476 |  |  | $ | 2,649 |

Property and Equipment, Net

Property and equipment, net consisted of the following:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands) |
Lab and manufacturing equipment |  | $ | 44,283 |  |  | $ | 21,958 |
Computer equipment |  |  | 1,977 |  |  |  | 1,121 |
Furniture and fixtures |  |  | 433 |  |  |  | 237 |
Construction in progress |  |  | 7,100 |  |  |  | 638 |
Leasehold improvements |  |  | 5,211 |  |  |  | 4,134 |
|  |  | 59,004 |  |  |  | 28,088 |
Accumulated depreciation |  |  | (21,102 | ) |  |  | (16,380 | )
Total property and equipment, net |  | $ | 37,902 |  |  | $ | 11,708 |

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Depreciation expense related to property and equipment was $5.7 million, $3.7 million, and $3.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Intangible Assets, Net

Intangible assets, net consisted of the following:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands) |
|  | Gross Assets |  |  | Accumulated Amortization |  |  | Net Assets |  |  | Gross Assets |  |  | Accumulated Amortization |  |  | Net Assets |
|  | (in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |
Internal use software |  | $ | 9,434 |  |  | $ | (8,633 | ) |  | $ | 801 |  |  | $ | 9,377 |  |  | $ | (8,312 | ) |  | $ | 1,065 |
Purchased intangibles |  |  | 11,703 |  |  |  | (6,527 | ) |  |  | 5,176 |  |  |  | 5,663 |  |  |  | (4,659 | ) |  |  | 1,004 |
Intangible assets |  | $ | 21,137 |  |  | $ | (15,160 | ) |  | $ | 5,977 |  |  | $ | 15,040 |  |  | $ | (12,971 | ) |  | $ | 2,069 |

Amortization expense for intangible assets was $2.2 million, $2.7 million, and $4.9 million, for the years ended December 31, 2021, 2020 and 2019, respectively. During the year ended December 31, 2021, the Company purchased and capitalized software costs of $6.0 million to support research and development efforts. During the year ended December 31, 2020, the Company recorded impairment charges of $1.0 million related to capitalized cost of software that was within the development phase and was being developed solely to meet the Company’s internal needs. The impairment charge was recorded as research and development expense in the consolidated statement of operations.

As of December 31, 2021 and 2020, the Company had $0.8 million and $0.7 million, respectively, of intangibles that were still in development stage and were not being amortized. The estimated aggregate future amortization expense for intangible assets in development stage and subject to amortization as of December 31, 2021 is summarized as below:

|  | As of |
|  | December 31, 2021 |
|  | (in thousands) |
2022 |  | $ | 2,277 |
2023 |  |  | 2,207 |
2024 |  |  | 1,311 |
2025 |  |  | 168 |
2026 |  |  | 14 |
|  | $ | 5,977 |

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands) |
Accrued payroll and related benefits |  | $ | 7,237 |  |  | $ | 5,362 |
Deferred non-recurring engineering services |  |  | 5,666 |  |  |  | - |
Revenue reserves |  |  | 4,517 |  |  |  | 3,063 |
Short term lease liability |  |  | 1,336 |  |  |  | 1,264 |
Accrued customer rebates |  |  | 784 |  |  |  | 380 |
Other accrued expenses |  |  | 4,742 |  |  |  | 2,894 |
Total accrued expenses and other current liabilities |  | $ | 24,282 |  |  | $ | 12,963 |

5. Leases

The Company leases real estate property under operating leases.

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The Company signed a non-cancellable operating lease agreement for its corporate headquarters in Santa Clara, California, that commenced on October 20, 2016 and will expire on December 31, 2026. In January 2021, the Company signed an amendment to its Santa Clara office space lease where the lessor provided the Company lease incentives of $0.4 million and extended the term of the lease by three months. The amendment was accounted as a single modified lease and the remaining payments were remeasured using an updated discount rate. The agreement provides for an option to renew for an additional 5 years and for monthly rent payments through the term of the lease.

The Company leases office space in Santa Clara, Michigan, Malaysia, Japan, Taiwan, the Netherlands, and Ukraine all under non-cancellable operating leases with various expiration dates through March 2027. The remaining lease terms vary from a few months to 6 years. For its leases the Company has options to extend the lease term for periods varying from one to five years. These renewal options are not considered in the remaining lease term unless it is reasonably certain that the Company will exercise such options. The Company also has variable lease payments that are primarily composed of common area maintenance and utility charges.

The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheet as of December 31, 2021 and 2020:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
|  | (in thousands) |
Right-of-use assets |  | $ | 8,194 |  |  | $ | 8,892 |
Lease liabilities included in accrued expenses and other current liabilities |  |  | 1,336 |  |  |  | 1,264 |
Lease liabilities - non-current |  |  | 6,398 |  |  |  | 6,986 |
Total operating lease liabilities |  | $ | 7,734 |  |  | $ | 8,250 |
Weighted-average remaining lease term (years) |  |  | 5.0 |  |  |  | 5.9 |
Weighted-average discount rate |  |  | 4.5 | % |  |  | 4.2 | %

The table below presents certain information related to the lease costs for operating leases for the years ended December 31, 2021, 2020, and 2019:

|  | Year Ended December 31 |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
Operating lease cost |  | $ | 1,761 |  |  | $ | 1,696 |  |  | $ | 1,419 |
Short-term lease cost |  |  | 579 |  |  |  | 356 |  |  |  | 313 |
Variable lease cost |  |  | 599 |  |  |  | 332 |  |  |  | 494 |
Total lease cost |  | $ | 2,939 |  |  | $ | 2,384 |  |  | $ | 2,226 |

Cash paid for operating lease liabilities was $1.7 million, $2.3 million, and $3.9 million for the years ended December 31, 2021, 2020, and 2019 respectively. The Company sub-leased a portion of its Santa Clara facility through March 31, 2019 and received $0.1 million in sub-lease income for the year ended December 31, 2019, which was included in the short-term lease cost above.

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Undiscounted Cash Flows

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2021:

|  | (in thousands) |
2022 |  | $ | 1,633 |
2023 |  |  | 1,737 |
2024 |  |  | 1,698 |
2025 |  |  | 1,580 |
2026 |  |  | 1,622 |
2027 and beyond |  |  | 416 |
Total minimum lease payments |  |  | 8,686 |
Less: amount of lease payments representing interest |  |  | (952 | )
Present value of future minimum lease payments |  |  | 7,734 |
Less: current obligations under leases |  |  | (1,336 | )
Long-term lease liabilities |  | $ | 6,398 |

During the three months ended December 2021, the Company entered into three operating leases that commence in 2022 with 2 to 5.3 year terms, for which the Company expects to record Right-of Use Asset of approximately $3.0 million and a Lease Liability of approximately $3.0 million at the commencement of these leases.

6. Commitments and Contingencies

Purchase Commitments

The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and to help ensure adequate component supply, the Company enters into agreements with the Company’s contract manufacturers and suppliers that allow them to procure inventory based upon criteria as defined by the Company. A portion of the Company’s reported purchase commitments arising from these agreements consists of firm, non-cancelable purchase commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule, and adjust the Company’s requirements based on its business needs prior to when production starts. However, in situations where the Company is unable to cancel, reschedule, or adjust the purchase commitment due to changing customer demand, excess inventories could result in material inventory provisions. As of December 31, 2021, the Company had commitments totaling $5.4 million primarily for design and simulation licenses which will be paid through June 2024.

Commitments for MEMS Wafer Supplier Agreement

The Company purchases MEMS wafers required for its silicon timing systems products under a multi-year manufacturing agreement with a third-party supplier. Under this agreement, the Company has agreed to minimum quantity purchase commitments and is responsible for research and development, tooling, and samples cost, in addition to wafer costs. The Company has historically met the supplier’s minimum wafer quantity requirements.

Indemnification

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify other parties to such agreements with respect to certain matters. Typically, these obligations arise in the context of contracts that the Company has entered into, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations and covenants or terms and conditions related to such matters as the sale and/or delivery of its products, title to assets sold, certain intellectual property claims, defective products, specified environmental matters, and certain income taxes. Further, the Company’s obligations under these agreements may be limited in terms of time, amount, or the scope of its responsibility and in some instances, the Company may have recourse against third parties for certain payments made under these agreements. It is not possible to predict the maximum potential amount of future payments under these agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, the Company has had no material indemnification claims under these agreements.

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Legal Matters

From time to time, the Company may be a party to various litigation claims in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with legal counsel, the need to record a liability for litigation and contingencies. Accrual estimates are recorded when and if it is determined that such a liability for litigation and contingencies are both probable and reasonably estimable.

In March 2019, VTT Technical Research Centre of Finland, Ltd. ("VTT") filed suit in the United States District Court for the Northern District of California alleging infringement by the Company of a patent relating to specific combinations of features set forth in U.S. Patent No. 8,558,643. The complaint sought unspecified monetary damages and injunctive relief. On January 22, 2020, the Company participated in a mediation that had been ordered by the Court. The case was not resolved at the mediation. A Markman Hearing was held on May 15, 2020 relating to a number of different disputed claim terms, and on July 9, 2020 the Court issued a Markman Order relating to those disputed claim terms. Among its determinations, the Court found that one of the disputed claim terms was indefinite, as well as any claim that had this claim term in it. On July 17, 2020, the Court issued a judgment finding all claims of U.S. Patent No. 8,558,643 invalid, based upon its Markman Order. VTT filed a Notice of Appeal of the Court's judgment with the US Court of Appeals for the Federal Circuit and filed its opening brief on November 19, 2020 and the Company filed its response brief on January 28, 2021. VTT filed its reply on March 4, 2021. On June 9, 2021, a hearing was held at the CAFC and on June 10, 2021 the CAFC affirmed the Court’s judgment. The Company believes this litigation matter is now fully resolved.

7. Debt Obligations

Terminated Revolving Lines of Credit and Loans

The Bank of Tokyo-Mitsubishi Credit Facility

On August 31, 2015, the Company entered into a bank transaction agreement with The Bank of Tokyo Mitsubishi UFJ, Ltd. ("MUFG"). The agreement provided for a revolving line of credit with a maximum available borrowing of $20.0 million, which was increased to $50.0 million in June 2018. Between August 2015 and December 31, 2019, the Company borrowed $139.0 million in several draw-downs against the revolving line of credit with terms ranging from one month to one year and interest rate ranging between 1.01% to 4.07%.

On July 24, 2020, the Company paid $76.0 million to pay down all outstanding loans and cancel the line of credit with MUFG of which $12.0 million of loans were prepaid with a penalty of $0.1 million.

Sumitomo Mitsui Banking Corporation Credit Facility

On September 22, 2017, the Company entered into an uncommitted and revolving credit line agreement with Sumitomo Mitsui Banking Corporation (SMBC). The revolving credit line has a maximum available borrowing availability of up to $20.0 million. The Company could draw loans under the revolving credit line from time to time through September 21, 2018, as long as the principal amount at any time did not exceed $20.0 million in the aggregate. Such term was extended for an additional year through September 20, 2019 and further extended for an additional year through September 21, 2020. The Company repaid the remaining outstanding balance of $2.0 million on the SMBC revolving credit line during 2019 and closed its line of credit in September 2020.

MegaChips Loan

On September 13, 2016, the Company entered into a loan agreement with MegaChips for a revolving credit limit of up to $30.0 million (the “MegaChips Loan Agreement”). Loans under the MegaChips Loan Agreement bore interest at a rate equal to the interest rate at which MegaChips procured the funds from SMBC, plus 0.09%. The outstanding balance of $3.0 million under the revolving line with MegaChips was repaid on December 12, 2019 upon maturity. During the year ended December 31, 2020, the Company closed its revolving line of credit with MegaChips.

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8. Stockholders’ Equity

The Company’s certificate of incorporation, as amended and currently in effect, authorizes the Company to issue 200,000,000 shares of common stock, par value $0.0001 per share. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when and if declared by the board of directors, subject to the prior rights of holders of all classes of preferred stock outstanding. The Company has never declared any dividends.

9. Stock-based Compensation

SiTime Corporation 2019 Stock Incentive Plan

Upon completion of its IPO in November 2019, the Company adopted the SiTime Corporation 2019 Stock Incentive Plan (the “2019 Plan”), which initially reserved approximately 3.4 million shares of the Company’s common stock. The 2019 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, and other forms of equity compensation (collectively, “stock awards”), and cash awards, all of which may be granted to employees (including officers), directors, and consultants or affiliates. Awards granted under the 2019 Plan vest at the rate specified by the plan administrator, for restricted stock unit awards primarily over two to five years. As of December 31, 2021, 0.4 million shares were still reserved for issuance.

Activity of RSUs, cash restricted stock unit award (“CRSU”) and performance based restricted stock unit awards ("PRSU") granted under the 2019 Plan is set forth below:

|  | RSU |  |  | Grant Date |  |  | CRSU |  | Grant Date |  |  | PRSU |  | Grant Date |
|  | Number of |  |  | Fair Value |  |  | Number of |  | Fair Value |  |  | Number of |  | Fair Value |
|  | Shares |  |  | per share |  |  | Shares |  | per share |  |  | Shares |  | per share |
Balance at December 31, 2018 |  |  | — |  |  |  | — |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Granted |  |  | 3,012,399 |  |  |  | 13.00 |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Vested |  |  | (23,077 | ) |  |  | 13.00 |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Forfeited |  |  | - |  |  |  | — |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Balance at December 31, 2019 |  |  | 2,989,322 |  |  |  | 13.00 |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Granted |  |  | 682,517 |  |  |  | 53.42 |  |  |  | 11,844 |  |  | 48.62 |  |  |  | — |  |  | - |
Vested |  |  | (766,934 | ) |  |  | 15.46 |  |  |  | (11,220 | ) |  | 49.37 |  |  |  | — |  |  | - |
Forfeited |  |  | (169,199 | ) |  |  | 13.72 |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Balance at December 31, 2020 |  |  | 2,735,706 |  |  |  | 22.35 |  |  |  | 624 |  |  | 35.05 |  |  |  | — |  |  | - |
Granted |  |  | 438,474 |  |  |  | 128.55 |  |  |  | 3,025 |  |  | 111.93 |  |  |  | 58,954 |  |  | 261.39 |
Vested |  |  | (874,462 | ) |  |  | 27.94 |  |  |  | (3,649 | ) |  | 98.78 |  |  |  | — |  |  | - |
Forfeited |  |  | (72,521 | ) |  |  | 33.34 |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Balance at December 31, 2021 |  |  | 2,227,197 |  |  |  | 40.56 |  |  |  | — |  |  | - |  |  |  | 58,954 |  |  | 261.39 |

The difference between the number of RSUs vested and the shares of common stock issued during the year ended December 31, 2020 is the result of RSUs withheld in satisfaction of minimum tax withholding obligations associated with the vesting. The total fair value, as of the vesting date, of awards vested during the years ended December 31, 2021, 2020 and 2019 were $161.2 million, $43.7 million and $0.3 million, respectively.

Executive Bonus and Retention Plan

On August 4, 2020, the Compensation Committee of the Company adopted and approved the Executive Bonus and Retention Plan (the “Bonus and Retention Plan”). In August 2020, the Compensation Committee approved target bonus amounts and performance goals for the second half of the fiscal year 2020 (the “2020 Goals”), in January 2021, the Compensation Committee approved target bonus amounts and performance goals for the first half of the fiscal year 2021 (the “1H2021 Goals”), and in July 2021 the Compensation Committee approved target bonus amounts and performance goals for the second half of the fiscal year 2021 (the “2H2021 Goals”). The 2020 Goals, the 1H2021 Goals and the 2H2021 Goals are based on the achievement of revenue and Non-GAAP operating profit, as well as individual performance goals. The awards for the actual payouts are granted in the quarter following the end of the performance period. The target bonuses were granted based on a fixed dollar amount to be settled in a variable amount of RSUs on the vesting date and hence the awards have been classified as liability-based awards until settled. Such expense is included in the non-cash adjustment within stock-based compensation expense on the consolidated cash flow statements.

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When such awards are granted in RSUs upon achievement of goals, the Company reclassifies the liability to additional paid in capital. The liability of $1.5 million for 2H2021 Goals was recorded as accrued expenses and other current liabilities in the consolidated balance sheet as of December 31, 2021. Actual payouts for 2020 Goals ranged from 119% to 144% of target, for 1H2021 Goals ranged from 76% to 141% of target, and 2H2021 Goals ranged from 138% to 150% of target, in each case based on performance.

On December 17, 2021, the Compensation Committee of the Company approved PRSUs with performance goals for the year 2022 (the “PRSU 2022 Goals”). The PRSU 2022 Goals are based on the achievement of revenue. These grants are included in the RSU awards granted in the table above.

In the year ended December 31, 2020, the Company granted CRSUs as part of an employee bonus plan. The Company ended this program effective April 1, 2021. Generally, such units were granted quarterly and fully vested at the end of the quarter they were granted except units granted to new hires that had a one-year cliff vesting. Such awards were classified as liability-based awards.

Total stock-based compensation expense for employees recognized in the consolidated statements of operations and comprehensive income (loss) was as follows:

|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
Equity based awards |  |  |  |  |  |  |  |  |
Cost of revenue |  | $ | 1,654 |  |  | $ | 613 |  |  | $ | 36 |
Research and development |  |  | 11,087 |  |  |  | 4,682 |  |  |  | 346 |
Selling, general and administrative |  |  | 14,422 |  |  |  | 9,521 |  |  |  | 997 |
|  | $ | 27,163 |  |  | $ | 14,816 |  |  | $ | 1,379 |
Liability based awards - to be settled in equity |  |  |  |  |  |  |  |  |
Cost of revenue |  | $ | 114 |  |  | $ | — |  |  | $ | — |
Research and development |  |  | 492 |  |  |  | 445 |  |  |  | - |
Selling, general and administrative |  |  | 2,223 |  |  |  | 748 |  |  |  | - |
|  |  | 2,829 |  |  |  | 1,193 |  |  |  | - |
Total stock-based compensation - equity and liability based |  | $ | 29,992 |  |  | $ | 16,009 |  |  | $ | 1,379 |
Liability based awards - cash settled |  |  |  |  |  |  |  |  |
Cost of revenue |  | $ | 102 |  |  | $ | 264 |  |  | $ | — |
Research and development |  |  | 143 |  |  |  | 415 |  |  |  | - |
Selling, general and administrative |  |  | 108 |  |  |  | 278 |  |  |  | - |
|  | $ | 353 |  |  | $ | 957 |  |  | $ | — |
Total stock-based compensation expense |  | $ | 30,345 |  |  | $ | 16,966 |  |  | $ | 1,379 |
Stock-based compensation expense recorded to additional paid-in capital |  |  |  |  |  |  |  |  |
Equity based awards |  | $ | 27,163 |  |  | $ | 14,816 |  |  | $ | 1,379 |
Liability based awards - settled in equity |  |  | 2,531 |  |  |  | - |  |  |  | - |
Total stock-based compensation expense recorded to additional paid-in capital |  | $ | 29,694 |  |  | $ | 14,816 |  |  | $ | 1,379 |

At December 31, 2021, there was $82.5 million and $0.6 million of unrecognized compensation costs related to RSUs granted and liability-based awards, respectively. The unrecognized compensation cost is expected to be recognized over a weighted average period of 3.24 years and 0.43 years for liability-based awards.

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10. Income Taxes

The components of income (loss) before income taxes were as follows:

|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
United States |  | $ | 32,379 |  |  | $ | (9,645 | ) |  | $ | (6,485 | )
Foreign |  |  | (24 | ) |  |  | 274 |  |  |  | (130 | )
|  | $ | 32,355 |  |  | $ | (9,371 | ) |  | $ | (6,615 | )

The components of income tax (expense) benefit were as follows:

|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
United States |  | $ | (12 | ) |  | $ | (1 | ) |  | $ | 8 |
Foreign |  |  | (66 | ) |  |  | — |  |  |  | — |
|  | $ | (78 | ) |  | $ | (1 | ) |  | $ | 8 |

The material components of the deferred tax assets and liabilities consisted of net operating loss carry-forwards and tax credit carry-forwards.

|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
Deferred tax assets (liabilities): |  |  |  |  |  |  |  |  |
Accrual, write-down and other |  | $ | 5,442 |  |  | $ | 3,249 |  |  | $ | 2,469 |
Depreciation and amortization |  |  | (818 | ) |  |  | 257 |  |  |  | 76 |
Net operating loss and credits carry forwards |  |  | 64,690 |  |  |  | 52,445 |  |  |  | 42,949 |
Total gross deferred tax assets (liabilities) |  |  | 69,314 |  |  |  | 55,951 |  |  |  | 45,494 |
Valuation allowance |  |  | (69,314 | ) |  |  | (55,951 | ) |  |  | (45,494 | )
Total net deferred tax assets |  | $ | — |  |  | $ | — |  |  | $ | — |

The net valuation allowance increased by $13.4 million for the year ended December 31, 2021.

A reconciliation of the Company’s effective tax rate to the statutory U.S. federal rate is as follows:

|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
US Federal Rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
R&D Credits |  |  | - |  |  |  | - |  |  |  | (10.9 | )
Permanent differences and others |  |  | (63.3 | ) |  |  | 90.4 |  |  |  | (18.3 | )
Change in valuation allowance |  |  | 42.3 |  |  |  | (111.4 | ) |  |  | 8.2 |
|  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | %

The reported amount of income tax expense differs from an expected amount based on statutory rates primarily due to the Company’s valuation allowance.

As of December 31, 2021 and 2020, based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be realized. Accordingly, management has applied a full valuation allowance against its net deferred tax assets at December 31, 2021 and 2020.

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At December 31, 2021 and 2020, the Company has federal net operating loss carry-forwards of approximately $259.6 million and $201.5 million, respectively, and state net operating loss carry-forwards of approximately $64.5 million and $64.0 million, respectively. At December 31, 2021 and 2020, the Company has net operating loss carryforwards for foreign income tax purposes of approximately $2.3 million and $2.2 million, respectively. These federal, state, and foreign net operating loss carry-forwards will expire beginning in 2025, 2028, and 2028, respectively. Of the total federal net operating loss carryforward, $111.2 million will not expire as a result of the Tax Act.

At December 31, 2021 and 2020, the Company also has federal research and development tax credit carry-forwards of approximately $3.9 million and $3.9 million, respectively, and state research and development tax credit carry-forwards of approximately $3.6 million and $3.6 million, respectively. The federal tax credits begin to expire in 2025, and the California tax credits carry forward indefinitely.

Utilization of the net operating loss carry-forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (“the Code”), and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

As of December 31, 2021 and 2020, the Company had $2.4 million and $2.4 million of total unrecognized tax benefits. The Company currently has a full valuation allowance against its net deferred tax assets which would impact the timing of the effective tax rate benefit should any of these uncertain tax positions be favorably settled in the future. If the Company is able to eventually recognize these uncertain tax positions, none of the unrecognized benefit would reduce the Company’s effective tax rate due to full valuation allowance of the Company’s deferred tax assets. The Company’s policy is to record interest and penalties related to unrecognized tax benefits as income tax expense. D uring the years ended December 31, 2021 and 2020, the Company had immaterial amounts related to the accrual of interest and penalties.

A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows:

|  | December 31, |
|  | 2021 |  |  | 2020 |
|  | (in thousands) |
Beginning balance |  | $ | 2,436 |  |  | $ | 2,184 |
Increase (decrease) in balance related to tax position taken during prior periods |  |  | — |  |  |  | — |
Increase (decrease) in balance related to tax position taken during the current period |  |  | (5 | ) |  |  | 252 |
Ending balance |  | $ | 2,431 |  |  | $ | 2,436 |

The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized tax benefits will increase or decrease within 12 months of the years ended December 31, 2021 and 2020.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, local, and foreign jurisdictions, where applicable. Due to the Company’s net losses, its federal, state and local, and foreign tax returns since inception are subject to audit.

As of December 31, 2021, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations are as follows:

Jurisdiction |  | Earliest Tax Year Subject to Examination
U.S. federal |  | 2018
California State |  | 2017
Michigan State |  | 2017

11. 401(k) Plan

The Company has a 401(k) retirement plan that qualifies as a defined contribution plan. All employees are eligible to participate on the first day of the month following their hire date with the Company. Under the defined contribution plan, employees may contribute up to the lesser of 90% of their pre-tax salaries per year or the maximum contribution allowed under the Code. The Company may make discretionary matching contributions, if deferral contributions are made by the employees. The Company’s

74

matching contributions for the years ended December 31, 2021, 2020, and 2019 resulted in expense of $1.0 million, $0.6 million, and $0.6 million respectively.

12. Segment Information and Operations by Geographic Area

The Company operates in one reportable segment related to the design, development, and sale of silicon timing systems solutions. The chief operating decision maker, for the Company is the Chief Executive Officer. The Company’s Chief Executive Officer reviews operating results on an aggregate basis and manages the Company’s operations as a whole for the purpose of evaluating financial performance and allocating resources. Accordingly, the Company has determined that it has a single reportable and operating segment structure.

Revenue by geographic area are presented based upon the ship-to location of the original equipment manufacturers, the contract manufacturers, or the distributors who purchased the Company’s products. For sales to the distributors, their geographic location may be different from the geographic locations of the ultimate end customers. The following table sets forth revenue by country for countries with 10% or more of the Company’s revenue during any of the periods presented:

|  | Year Ended |
|  | December 31, 2021 |  |  | December 31, 2020 |  |  | December 31, 2019 |
|  | (in thousands) |
Taiwan |  | $ | 66,390 |  |  | $ | 55,789 |  |  | $ | 39,060 |
Hong Kong |  |  | 82,503 |  |  |  | 30,306 |  |  |  | 16,534 |
United States |  |  | 14,221 |  |  |  | 8,522 |  |  |  | 5,677 |
Other |  |  | 55,694 |  |  |  | 21,539 |  |  |  | 22,803 |
Total |  | $ | 218,808 |  |  | $ | 116,156 |  |  | $ | 84,074 |

The following table sets forth the Company’s total property and equipment and intangible assets attributable to operations by country as of the periods presented:

|  | As of |
|  | December 31, 2021 |  |  | December 31, 2020 |
United States |  |  | 57 | % |  |  | 68 | %
Malaysia |  |  | 31 | % |  |  | 7 | %
Taiwan |  |  | 5 | % |  |  | 12 | %
Other |  |  | 7 | % |  |  | 13 | %

13. Related Party Transactions

The Company entered into an agreement with MegaChips, whereby the Company appointed MegaChips as a non-exclusive sales representative of its products in Japan. The Company sold products through MegaChips to distributors, resellers, or direct customers in Japan. The Company paid MegaChips a fixed percentage of the revenue as sales commission, which is recorded as commission expense and included in sales and marketing in the consolidated statements of operations and comprehensive loss. In connection with the Company's efforts to contract directly with distributors in Japan, the Company and MegaChips mutually terminated the Distribution Agreement effective November 3, 2021.

MegaChips has been the largest stockholder of the Company and held approximately 24.0% and 43.7% of the Company’s outstanding common stock as of December 31, 2021 and December 31, 2020, respectively.

As of December 31, 2021 and 2020, the Company had accounts receivable from MegaChips of $0.0 million and $0.7 million, respectively.

During the year ended December 31, 2020, the Company entered into an asset purchase agreement with MegaChips Corporation. The Company recorded the equipment of $0.1 million on the consolidated balance sheet under “Property and equipment, net.”

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During the year ended December 31, 2020 the Company entered into an equipment purchase agreement with MegaChips Taiwan Corporation, a wholly-owned subsidiary of MegaChips Corporation. The Company recorded the equipment of $0.1 million on the consolidated balance sheet under “Property and equipment, net.”

During the year ended December 31, 2020 the Company entered into a services and secondment agreement with MegaChips LSI USA Corporation, a wholly-owned subsidiary of MegaChips Corporation. The Company records the transactions as consulting expenses as part of its research and development expense on the consolidated statement of operations and comprehensive loss. The service and secondment agreement with MegaChips LSI USA Corporation was terminated on August 31, 2021.

In May 2021, the Company signed a consulting agreement with Akira Takata, a member of the Board of Directors of the Company. As a consultant, Mr. Takata provided sales consulting services through December 31, 2021, for which he received monthly cash fees of $5,000, reimbursement of expenses, and an equity award of 500 RSUs that fully vested on November 20, 2021. In December 2021, the Company signed an amendment to extend the consulting agreement with Akira Takata through December 31, 2022.

The following is a summary of significant balances, transactions and payments with the related parties and affiliates.

Components of Statement of Operations and Comprehensive Loss |  | Year ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
MegaChips |  |  |  |  |  |  |  |  |
Sales through distribution agreement |  | $ | 8,167 |  |  | $ | 5,714 |  |  | $ | 5,071 |
License expense |  |  | — |  |  |  | 148 |  |  |  | 158 |
Commission expense |  |  | 340 |  |  |  | 228 |  |  |  | 202 |
Interest expense |  |  | — |  |  |  | — |  |  |  | 94 |
Affiliates |  |  |  |  |  |  |  |  |
Consulting fees |  |  | 254 |  |  |  | 380 |  |  |  | — |

Components of Consolidated Cash Flows |  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  | (in thousands) |
MegaChips |  |  |  |  |  |  |  |  |
Cash paid for principal |  | $ | — |  |  | $ | — |  |  | $ | 3,000 |
Cash paid for equipment |  |  | — |  |  |  | 209 |  |  |  | — |
Cash paid for commissions |  |  | 340 |  |  |  | 228 |  |  |  | 228 |
Cash paid for licenses |  |  | — |  |  |  | 25 |  |  |  | 329 |
Affiliates |  |  |  |  |  |  |  |  |
Cash paid for consulting fees |  |  | 254 |  |  |  | 380 |  |  |  | — |

14. Subsequent Events

Adoption of Inducement Plan

On February 23, 2022, the Compensation Committee of the Board of Directors of SiTime (the “Committee”) approved and adopted the SiTime Corporation 2022 Inducement Award Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of equity or equity-based awards in the form of non-qualified stock options, restricted stock units, and other stock-based awards. The Inducement Plan’s terms are substantially similar to the terms of SiTime’s 2019 Stock Incentive Plan, with the addition of certain terms and conditions intended to comply with the Nasdaq inducement award exception. The Inducement Plan was adopted by the Committee without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

The Committee has reserved 250,000 shares of SiTime’s common stock for issuance pursuant to awards granted under the Inducement Plan (subject to customary adjustments in the event of a change in capital structure of SiTime). Awards under the Inducement Plan may be granted only to employees who satisfy the standards for inducement grants under Rule 5635(c)(4) of the Nasdaq Listing Rules, and only when the award is an inducement material to such individual’s entering into employment with SiTime, its subsidiaries or its affiliates within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

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Item 9. Changes in and Disagreements With Accou ntants on Accounting and Financial Disclosure.

None

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15 (e) and 15d – 15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), as appropriate, to allow for timely decisions regarding required disclosure.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Control over Financial Reporting; Attestation Report of the Registered Public Accounting Firm.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on our evaluation under the criteria set forth in Internal Control - Integrated Framework (2013) issued by the COSO, our management concluded our internal control over financial reporting was effective as of December 31, 2021.

The effectiveness of the Company's internal control over financial reporting as of December 31, 2021 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report and is incorporated herein by reference.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

77

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

SiTime Corporation

Santa Clara, CA

Opinion on Internal Control over Financial Reporting

We have audited SiTime Corporation’s (the “Company’s”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the accompanying index and our report dated February 25, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Santa Clara, California

February 25, 2022

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Item 9B. Other Information.

Adoption of Inducement Plan

On February 23, 2022, the Compensation Committee of the Board of Directors of SiTime (the “Committee”) approved and adopted the SiTime Corporation 2022 Inducement Award Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of equity or equity-based awards in the form of non-qualified stock options, restricted stock units, and other stock-based awards. The Inducement Plan’s terms are substantially similar to the terms of SiTime’s 2019 Stock Incentive Plan, with the addition of certain terms and conditions intended to comply with the Nasdaq inducement award exception. The Inducement Plan was adopted by the Committee without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

The Committee has reserved 250,000 shares of SiTime’s common stock for issuance pursuant to awards granted under the Inducement Plan (subject to customary adjustments in the event of a change in capital structure of SiTime). Awards under the Inducement Plan may be granted only to employees who satisfy the standards for inducement grants under Rule 5635(c)(4) of the Nasdaq Listing Rules, and only when the award is an inducement material to such individual’s entering into employment with SiTime, its subsidiaries or its affiliates within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

The foregoing description of the terms of the Inducement Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Inducement Plan, which is filed as Exhibit 10.29 to this Form 10-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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PART III

Item 10. Directors, Executive Off icers and Corporate Governance.

The information required by this item will be set forth under the captions “Election of Directors – Directors and Nominees” and “Election of Directors – Executive Officers, Directors and Director Nominees” in our definitive proxy statement to be filed with the SEC, in connection with our 2022 annual meeting of stockholders (the “Proxy Statement”), which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2021, and is incorporated in this report by reference.

Item 405 of Regulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16(a) of the Exchange Act. To the extent disclosure for delinquent reports is being made, it can be found under the section entitled “Delinquent Section 16(a) Reports” in the Proxy Statement and is incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics that applies to all of our officers and employees, including our chief executive officer, chief financial officer, corporate controller, and other employees who perform financial or accounting functions. The Code of Business Conduct and Ethics sets forth the basic principles that guide the business conduct of our employees and is available on our website at www.sitime.com. We have also adopted a Code of Ethics for Senior Financial Officers that specifically applies to our chief executive officer (our principal executive officer) and chief financial officer (our principal financial officer and principal accounting officer). Stockholders may request a free copy of our Code of Ethics for Senior Financial Officers by contacting us at SiTime Corporation, Attention: Investor Relations, 5451 Patrick Henry Drive, Santa Clara, California 95054.

To date, there have been no waivers under our Code of Business Conduct and Ethics or Code of Ethics for Senior Financial Officers. We will disclose on our website amendments to, or waivers from, our Code of Ethics for Senior Financial Officers, in accordance with applicable laws and regulations.

We have a separately designated standing audit committee of our board of directors (the “Audit Committee”) established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Raman K. Chitkara, Edward H. Frank, and Torsten G. Kreindl. All of such members meet the independence standards established by the Nasdaq listing rules for serving on an audit committee. SEC regulations require us to disclose whether a director qualifying as an “audit committee financial expert” serves on our Audit Committee. Our board of directors has determined that Messrs. Chitkara and Kreindl qualify as an “audit committee financial expert” within the meaning of such regulations. The Audit Committee financial report required by this item will be contained in our Proxy Statement under the caption “Report of the Audit Committee of the Board of Directors” and is hereby incorporated by reference.

Information regarding procedures by which stockholders may recommend nominees to our board of directors is set forth under the caption “Director Nominations” under “Corporate Governance” in the Proxy Statement.

Item 11. Executiv e Compensation.

The information required by this item will be set forth under the captions “Executive Compensation” and “Corporate Governance – Non-Employee Director Compensation” in the Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters.

The information required by this item will be set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” and “Executive Compensation – Equity Compensation Plan Information” in the Proxy Statement and is incorporated herein by reference.

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Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item will be set forth under the captions “Certain Relationships and Related Person Transactions” and “Corporate Governance — Director Independence” in the Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accoun ting Fees and Services.

The information required by this item will be set forth under the caption “Ratification of the Appointment of Independent Registered Public Accountants — Principal Accounting Fees and Services” in the Proxy and is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financ ial Statement Schedules.

(a)
The following documents are filed as a part of this Annual Report on Form 10-K:
1.
Financial Statements:

Consolidated Balance Sheets as of December 31, 2021 and 2020 |  | 54
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2021, 2020, and 2019 |  | 55
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020, and 2019 |  | 56
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019 |  | 57
Notes to Consolidated Financial Statements |  | 58

2.
Financial Statement Schedule (Valuation and Qualifying Accounts) for the years ended December 31, 2021, 2020, and 2019:

Schedule II—Valuation and Qualifying Accounts |  | 87

3.
Exhibits:

The documents listed below are filed (or furnished, as noted) as exhibits to this Annual Report on Form 10-K:

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Exhibit Index

|  |  |  | Incorporation by Reference
Exhibit |  |  |  |  |  |  |  | Exhibit/Appendix |  |  |  |  | Filed
Number |  | Exhibit Description |  | Form |  | File Number |  | Reference |  |  | Filing Date |  | Herewith
3.1 |  | Restated Certificate of Incorporation of SiTime Corporation |  | 8-K |  | 001-39135 |  |  | 3.1 |  |  | 11/26/2019 |  |
3.2 |  | Amended and Restated Bylaws of the Company |  | 8-K |  | 001-39135 |  |  | 3.2 |  |  | 6/29/2021 |  |
4.1 |  | Form of Common Stock Certificate of the Company |  | S-1 |  | 333-234305 |  |  | 4.1 |  |  | 10/23/2019 |  |
4.2 |  | Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 |  | 10-K |  | 001-39135 |  |  | 4.2 |  |  | 2/16/2021 |  |
10.1+ |  | Form of Indemnification Agreement between the Company and its directors and officers |  | 10-K |  | 001-39135 |  |  | 10.1 |  |  | 2/16/2021 |  |
10.2+ |  | 2019 Stock Incentive Plan and Forms of Stock Option Agreement, Notice of Exercise, Stock Option Grant Notice, Restricted Stock Unit Agreement, and Restricted Stock Agreement thereunder |  | S-1 |  | 333-234305 |  |  | 10.2 |  |  | 10/23/2019 |  |
10.3+ |  | New Terms of Employment, dated October 21, 2014, between Rajesh Vashist and the Company |  | S-1 |  | 333-234305 |  |  | 10.3 |  |  | 10/23/2019 |  |
10.4+ |  | Amendment to Terms of Employment Letter, dated June 14, 2016, between Rajesh Vashist and the Company |  | S-1 |  | 333-234305 |  |  | 10.4 |  |  | 10/23/2019 |  |
10.5+ |  | Offer of Employment, dated September 24, 2019, between Arthur D. Chadwick and the Company |  | S-1 |  | 333-234305 |  |  | 10.5 |  |  | 10/23/2019 |  |
10.6+ |  | Offer of Employment, dated January 27, 2018, between Lionel Bonnot and the Company |  | S-1 |  | 333-234305 |  |  | 10.6 |  |  | 10/23/2019 |  |
10.7+ |  | New Terms of Employment, dated October 20, 2014, between Piyush B. Sevalia and the Company |  | S-1 |  | 333-234305 |  |  | 10.7 |  |  | 10/23/2019 |  |

83

10.8+ |  | Change of Control and Severance Agreement, between the Company and Rajesh Vashist |  | S-1 |  | 333-234305 |  |  | 10.8 |  |  | 10/23/2019 |  |
10.9+ |  | Form of Change of Control and Severance Agreement, between the Company and its Executives |  | S-1 |  | 333-234305 |  |  | 10.9 |  |  | 10/23/2019 |  |
10.12 |  | Integration and Purchase Agreement, dated March 15, 2019, between the Company and MegaChips Corporation |  | S-1 |  | 333-234305 |  | 10.16 |  |  | 10/23/2019 |  |
10.13 |  | Lease, dated April 15, 2016, between the Company and Batton Associates, LLC |  | S-1 |  | 333-234305 |  | 10.17 |  |  | 10/23/2019 |  |
10.14* |  | License Agreement, dated August 1, 2018, between the Company and Robert Bosch LLC |  | S-1 |  | 333-234305 |  | 10.18 |  |  | 10/23/2019 |  |
10.15* |  | Amended and Restated Manufacturing Agreement, dated February 23, 2017, between the Company and Robert Bosch LLC |  | S-1 |  | 333-234305 |  | 10.19 |  |  | 10/23/2019 |  |
10.16* |  | Amendment No. 1 to Amended and Restated Manufacturing Agreement, dated August 1, 2018, between the Company and Robert Bosch LLC |  | S-1 |  | 333-234305 |  |  | 10.20 |  |  | 10/23/2019 |  |
10.18* |  | Asset purchase agreement dated February 20, 2020, by and among MegaChips Taiwan Corporation and SiTime Corporation |  | 10-Q |  | 001-39135 |  | 10.2 |  |  | 5/7/2020 |  |
10.19+ |  | Offer of Employment, dated June 5, 2020, between Vincent P. Pangrazio and SiTime Corporation |  | 8-K |  | 001-39135 |  | 10.1 |  |  | 6/9/2020 |  |
10.20+ |  | Executive Bonus and Retention Plan |  | 10-Q |  | 001-39135 |  | 10.2 |  |  | 8/6/2020 |  |
10.21* |  | Asset Purchase Agreement dated August 4, 2020, by and among MegaChips Corporation and SiTime Corporation |  | 10-Q |  | 001-39135 |  | 10.3 |  |  | 8/6/2020 |  |

84

10.22+ |  | Offer of Employment dated November 16, 2020, between Fari Assaderaghi and SiTime Corporation |  | 10-K |  | 001-39135 |  |  | 10.22 |  |  | 2/16/2021 |  |
10.23+ |  | Independent Director Compensation Policy |  | 10-K |  | 001-39135 |  |  | 10.23 |  |  | 2/16/2021 |  |
10.24+ |  | Letter Agreement dated April 1, 2021 between Christine Heckart and SiTime Corporation |  | 8-K |  | 001-39135 |  |  | 10.1 |  |  | 4/5/2021 |  |
10.25+ |  | Consulting Agreement, dated May 15, 2021, between Akira Takata and SiTime Corporation |  | 10-Q |  | 001-39135 |  |  | 10.2 |  |  | 8/5/2021 |  |
10.26+ |  | Amendment No. 1 to Consulting Agreement, dated December 30, 2021, between Akira Takata and SiTime Corporation |  |  |  |  |  |  |  |  |  |  |  | X
10.27 |  | First Amendment to Lease, dated January 7, 2021, between Batton Associates, LLC and SiTime Corporation |  | 10-Q |  | 001-39135 |  |  | 10.1 |  |  | 11/4/2021 |  |
10.28+ |  | Letter Agreement, dated October 18, 2021, between Rajesh Vashist and SiTime Corporation |  |  |  |  |  |  |  |  |  |  |  | X
10.29+ |  | SiTime Corporation 2022 Inducement Award Plan and Form of Restricted Stock Unit Agreement |  |  |  |  |  |  |  |  |  |  |  | X
21.1 |  | Subsidiaries of the Company |  |  |  |  |  |  |  |  |  |  |  | X
23.1 |  | Consent of BDO USA, LLP, Independent Registered Public Accounting Firm |  |  |  |  |  |  |  |  |  |  |  | X
24.1 |  | Power of Attorney (see signature page hereto) |  |  |  |  |  |  |  |  |  |  |  | X
31.1 |  | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  |  |  |  |  | X

85

31.2 |  | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  |  |  |  |  | X
32.1# |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  |  |  |  |  | X
32.2# |  | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  |  |  |  |  |  |  |  |  |  |  | X
101.INS |  | XBRL Instance Document |  |  |  |  |  |  |  |  |  |  |  | X
101.SCH |  | XBRL Taxonomy Extension Schema Document |  |  |  |  |  |  |  |  |  |  |  | X
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document |  |  |  |  |  |  |  |  |  |  |  | X
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document |  |  |  |  |  |  |  |  |  |  |  | X
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document |  |  |  |  |  |  |  |  |  |  |  | X
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document |  |  |  |  |  |  |  |  |  |  |  | X

All references in the table above to previously filed documents or descriptions are incorporating those documents and descriptions by reference thereto.

All references to documents filed as exhibits to periodic reports are to periodic reports of SiTime Corporation, SEC File No. 001-39135.

_____________

+ Indicates a management contract or compensatory plan.

* Portions of this exhibit have been omitted in accordance with Item 601 of Regulation S-K.

# In accordance with Item 601(b)(32)(ii) of Regulation S‑K and SEC Release No. 34‑47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10‑K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent that the Company specifically incorporates it by reference.

Item 16. Form 10-K Summary.

None

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SCHEDULE II

VALUATION AND Q UALIFYING ACCOUNTS

|  | Valuation and Qualifying Accounts |
|  | Balance at Beginning of Period |  |  | Additions Charged to Expenses or Other Accounts |  |  | Deductions Credited to Expenses or Other Accounts |  |  | Balance at End of Period |
|  | (in thousands) |
Allowance for credit losses |  |  |  |  |  |  |  |  |  |  |  |
Year Ended December 31, 2021 |  | $ | 50 |  |  | $ | — |  |  | $ | — |  |  | $ | 50 |
Year Ended December 31, 2020 |  | $ | 129 |  |  | $ | — |  |  | $ | (79 | ) |  | $ | 50 |
Year Ended December 31, 2019 |  | $ | 168 |  |  | $ | — |  |  | $ | (39 | ) |  | $ | 129 |
Deferred tax valuation allowance |  |  |  |  |  |  |  |  |  |  |  |
Year Ended December 31, 2021 |  | $ | 55,951 |  |  | $ | 13,363 |  |  | $ | — |  |  | $ | 69,314 |
Year Ended December 31, 2020 |  | $ | 45,494 |  |  | $ | 10,457 |  |  | $ | — |  |  | $ | 55,951 |
Year Ended December 31, 2019 |  | $ | 45,496 |  |  | $ | — |  |  | $ | (2 | ) |  | $ | 45,494 |

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SIGNA TURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  | SiTime Corporation
Date: February 25, 2022 |  | By: | /s/ Arthur D. Chadwick
|  |  | Arthur D. Chadwick
|  |  | Executive Vice President, Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Rajesh Vashist and Arthur D. Chadwick, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place, or stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name |  | Title |  | Date
/s/ Rajesh Vashist |  | Chief Executive Officer and Director (Principal Executive Officer) |  | February 25, 2022
Rajesh Vashist |  |  |  |
/s/ Arthur D. Chadwick |  | Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) |  | February 25, 2022
Arthur D. Chadwick |  |  |  |
/s/ Raman K. Chitkara |  | Director |  | February 25, 2022
Raman K. Chitkara |  |  |  |
/s/ Edward H. Frank |  | Director |  | February 25, 2022
Edward H. Frank |  |  |  |
/s/ Torsten G. Kreindl |  | Director |  | February 25, 2022
Torsten G. Kreindl |  |  |  |
/s/ Katherine E. Schuelke |  | Director |  | February 25, 2022
Katherine E. Schuelke |  |  |  |
/s/ Akira Takata |  | Director |  | February 25, 2022
Akira Takata |  |  |  |
/s/ Christine Heckart |  | Director |  | February 25, 2022
Christine Heckart |  |  |  |
/s/ Tom D. Yiu |  | Director |  | February 25, 2022
Tom D. Yiu |  |  |  |

88