Summary of Significant Accounting Policies	12 Months Ended
Mar. 31, 2023
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Parent and its wholly-owned subsidiaries, Transphorm Technology, TPJ, Transphorm Aizu and TJE. Upon consolidation, all significant intercompany accounts and transactions have been eliminated. 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 financial statements and accompanying notes. Management bases its estimates and assumptions on historical experience, knowledge of current conditions, and its belief of what could occur in the future, given available information. Actual results could differ from those estimates, and such differences could be material to the consolidated financial statements. Estimates are used for, but not limited to, the determinations of fair value of stock awards and promissory notes, accrual of expenses, revenue recognition, allowance for doubtful accounts, inventory reserve, and useful lives for property and equipment. Cash, Cash Equivalents and Restricted Cash The Company considers all highly-liquid investments with original maturities of 90 days or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist principally of bank deposits and money market funds. Restricted cash of $0.6 million as of March 31, 2023 and 2022 consists of a $0.5 million letter of credit held for purchases from a vendor in current assets and $0.1 million of long-term deposit in other assets. Foreign Currency Risk and Hedging The Company is exposed to foreign currency risk due to its operations in Japan (Yen). Assets and liabilities of the operations are re-measured into U.S. currency at exchange rates in effect at the balance sheet dates through the consolidated statements of comprehensive loss. Gains or losses resulting from foreign currency transactions are re-measured using the rates on the dates on which those elements are recognized during the period and are included in other income or expense in the consolidated statements of operations. Changes in the value of our cash balance due to fluctuations in foreign exchange rate are presented on the consolidated statements of cash flows as effect of foreign exchange rate changes on cash, cash equivalents and restricted cash. As of March 31, 2023 and 2022, the Company had foreign cash and cash equivalents of $0.2 million and $0.1 million, respectively, which represented 1.0% and 0.2%, respectively, of total cash and cash equivalents. Concentrations of Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The majority of the Company’s cash, cash equivalents, and restricted cash are held with one major financial institution, which exposes the Company to credit risk in the event of default by the financial institution holding its cash. Substantially all cash amounts on deposit with major financial institutions exceed Federal Deposit Insurance Corporation insured limits. Risks associated with cash holdings in excess of insured limits are mitigated by banking with high-quality institutions. The Company’s investment policy restricts investments to high-quality investments and limits the amounts invested with any one issuer, industry or geographic area. To date, the Company has not experienced any significant losses on its cash and cash equivalents. The Company periodically evaluates the relative credit standing of these financial institutions. The Company is subject to risks common in the power conversion components industry, including, but not limited to, technological obsolescence, dependence on key personnel, market acceptance of its products, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed. Comprehensive Loss Comprehensive loss is comprised of net loss and other comprehensive loss. Other comprehensive loss includes the impact of foreign currency translation adjustments. Accounts Receivable Accounts receivable are analyzed and allowances for uncollectible accounts are recorded, as required. Provisions for uncollectible accounts, if any, are recorded as bad debt expense and included in general and administrative expenses in the accompanying consolidated statements of operations. The process for determining the appropriate level of allowances for doubtful accounts involves judgment, and the Company considers such factors as the age of the underlying receivables, historical and projected collection trends, the composition of outstanding receivables, current economic conditions and regulatory changes. An account is fully reserved when reasonable collection efforts have been unsuccessful and it is probable that the receivable will not be recovered. No provision for doubtful accounts was recorded for the years ended March 31, 2023 or 2022 as substantially all of the accounts receivables were expected to be collected subsequently. Inventory Inventories are stated at the lower of cost or estimated net realizable value. Standard cost is generally computed based on actual cost on a first-in, first-out basis and is adjusted on a periodic basis. Standard cost includes the cost of raw materials, internal labor, overhead (including depreciation) and costs for foundry and packaging for offshore assembly providers. Standard cost is based on the normal utilization and yield of installed factory capacity, which are inputs that require management’s judgement in determining. Cost associated with underutilization of capacity and yield is expensed as incurred. Inventory held at consignment locations is included in our finished goods inventory. The Company performs periodic reviews of inventory items to identify excess and obsolete inventories on hand by comparing on-hand balances to anticipated usage using recent historical activity as well as anticipated or forecasted demand. If estimates of customer demand diminish further or market conditions become less favorable than those projected by the Company, additional inventory carrying value adjustments may be required. The Company maintains an inventory reserve for obsolete inventory and generally makes inventory value adjustments against the inventory reserve. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally ranging from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the related lease term. Depreciation for equipment commences once it is placed in service, and depreciation for buildings and leasehold improvements commences once they are ready for their intended use. The Company expenses maintenance and repair costs that do not extend the life of the asset as they are incurred. The Company evaluates the carrying amount of its property and equipment whenever events or changes in circumstances indicate that the assets may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of an asset or asset group and its eventual disposition are less than the carrying amount of the asset or asset group. To date, there have been no such impairment losses. Goodwill Goodwill arose for the acquisition of a business in February 2014 based in Japan and was accounted for as the purchase of a business. Goodwill generated from business combinations and deemed to have indefinite lives are not subject to amortization and instead are tested for impairment at least annually unless certain events occur or circumstances change. Goodwill represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The Company tests for goodwill impairment annually, on March 31, or earlier if events or changes in circumstances indicate goodwill might possibly be impaired. Impairment exists when the carrying value of the goodwill exceeds its implied fair value. An impairment loss would be recognized in an amount equal to that excess as a charge to operations in the consolidated statements of operations. For the years ended March 31, 2023 and 2022, no impairment charge was recorded related to goodwill. Intangible Assets Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives, which generally range from three to ten years. Each reporting period, the Company evaluates the estimated remaining useful lives of intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization. If it is determined that the carrying values might not be recoverable based upon the existence of one or more indicators of impairment, the Company performs a test for recoverability using various methodologies, such as the income approach or cost approach, to determine the fair value of intangible assets depending upon the nature of the assets. If assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their respective fair values. For the years ended March 31, 2023 and 2022, no impairment charges were recorded related to intangible assets. Revenue Recognition The Company derives its revenues primarily through the sale and delivery of promised goods and services to distributors and end-users in various sectors such as, but not limited to, the gaming, industrial, IT, and consumer products industries. The Company disaggregates revenue based on the following contract types: •Commercial product and service contracts, including contracts for sales of high-powered GaN-based products manufactured utilizing the Company’s proprietary and patented epiwafer technology and wafer fabrication and other assembly processes, sales of GaN epiwafers for the radio frequency and power markets, and the provision of epiwafer growth services and products to the Company’s strategic partners. •Government contracts for research and development related services and activities. •Licensing contracts, including licenses to use the Company’s patented proprietary technology. The Company follows a five-step approach for recognizing revenue, consisting of the following: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when, or as, the entity satisfies a performance obligation. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing components associated with its revenue contracts, as payment is received within one year. Commercial Product and Service Contracts Sales prices are documented in executed customer or distributor agreements and subsequent individual invoices. Performance obligations consist of the delivery of promised products or services, each of which are considered to be separate although the invoices typically do not include more than one performance obligation. For invoices with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price. Performance obligations are satisfied, and revenue is recognized when control of a good or service promised in a contract is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service at a point in time, and revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products or services. Revenue is recognized over time if the customer receives the benefits as the Company performs services, if the customer controls the asset as it is being produced (continuous transfer of control), or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment for performance to date. The Company recognizes revenue ratably over time under the cooperation and development agreement with Yaskawa Electric Corporation (“Yaskawa”), a related party through share ownership. A portion of the Company’s products are sold through distributors. Distributors stock inventory and sell the Company’s products to their own customer base. The Company recognizes revenue upon shipment of its products to its distributors. Master supply or distributor agreements are in place with many of the Company's customers and contain terms and conditions including, but not limited to, payment, delivery, incentives and warranty. These agreements sometimes require minimum purchase commitments. If a master supply, distributor or other similar agreement is not in place with a customer, the Company considers a purchase order, which is governed by the Company’s standard terms and conditions, to be the contract governing the relationship with that customer. Pricing terms are negotiated independently on a stand-alone basis. Revenue is measured based on the amount of net consideration to which the Company expects to be entitled to receive in exchange for products or services. Government contracts Government contract revenue is principally generated under research and development contracts with agencies of the U.S. government. These contracts may include cost-plus fixed fee and fixed price terms. All payments received for work performed on contracts with agencies of the U.S. government are subject to adjustment upon audit by the Defense Contract Audit Agency. Performance obligations under government contracts are satisfied and revenue is recognized over time because the customer receives the benefits as the Company performs work, the customer controls the asset as it is being produced (continuous transfer of control), and the Company has a contractual right to payment for performance to date. Licensing contracts From time to time, the Company may enter into licensing arrangements related to its intellectual property. Revenue from licensing arrangements is recognized when earned and estimable. The timing of revenue recognition is dependent on the terms of each license agreement. Generally, the Company will recognize non-refundable upfront licensing fees related to patent licenses immediately upon receipt of the funds if the Company has no significant future obligations to perform under the arrangement. In the case that the arrangement gives rise to variable consideration in the form of milestone and royalty payments, the Company evaluates the royalties to determine if they qualify for the sales and usage-based royalty exception. In the case of the Company’s royalty arrangement with Nexperia, the Company determined the royalties qualify for the sales and usage-based royalty exception, as the license of intellectual property is the predominant item to which the royalty relates and revenue is recognized upon the subsequent sale occurring. The variable amounts are recognized at the net consideration the Company expects to receive upon satisfaction of contractually agreed upon development targets and sales volumes. Research and Development The Company is a party to research grant contracts with the U.S. government for which the Company is reimbursed for specified costs incurred for its research projects. These projects include energy saving initiatives for which the U.S. government offers reimbursement funds. Such reimbursements are recorded as an offset to research and development expenses when the related qualified research and development expenses are incurred. Reimbursable costs are recognized in the same period the costs are incurred up to the limit of approved funding amounts on qualified expenses. Grant reimbursement of $0.6 million and $0.3 million was recorded as an offset to research and development expense for the years ended March 31, 2023 and 2022, respectively. Stock-Based Compensation All share-based payments, including grants of stock options and restricted stock units (“RSUs”), are measured at the fair value of the share-based awards on the grant date and expense is recognized over their respective vesting periods, which is generally one to four years. The estimated fair value of stock options at the grant date is determined using the Black-Scholes-Merton pricing model, and the RSUs are measured using the fair market value of the stock price at grant date. The Company recognizes the fair value of share-based payments as compensation expense for all expected-to-vest stock-based awards over the vesting period of the award using the straight-line attribution or graded vesting method provided that the amount of compensation cost recognized at any date is no less than the portion of the grant-date fair value of the award that is vested at that date. The Black-Scholes-Merton option pricing model requires the following assumptions: •Expected volatility - The Company utilizes the historical volatility of representative public companies to determine its expected volatility, as the trading history of the Company’s common stock is limited. •Forfeitures - The Company adopted ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting and has elected to account for forfeitures as they occur and therefore, stock-based compensation expense has been calculated based on actual forfeitures in the statements of operations, rather than our previous approach which was net of estimated forfeitures. •Expected dividend yield - The Company has not issued any common stock dividends; therefore, a dividend yield of zero was used. •Risk-free interest rate - The Company bases the risk-free interest rate used in the Black-Scholes-Merton option pricing model on the implied yield currently available on United States Treasury zero-coupon issues with an equivalent expected term. •Expected Term - The expected term of stock options represents the period that the Company’s stock options are expected to be outstanding. The Company generally uses the simplified method to calculate the expected term for employee grants as the Company has limited historical exercise data or alternative information to reasonably estimate an expected term assumption. The simplified method assumes that all options will be exercised midway between the weighted average vesting date and the contractual term of the option. Changes in the deemed fair value of the common stock, the underlying assumptions in the calculations, the number of options granted or the terms of such options, the treatment of tax benefits, and other changes may result in significant differences in the amounts or timing of the compensation expense recognized. Income (Loss) Per Share Basic income (loss) per share is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is calculated by dividing the net loss attributable to common stockholders by the sum of the weighted average number of common shares outstanding plus potential dilutive common shares outstanding during the period. Potential dilutive securities, comprised of stock warrants, restricted stock units and stock options, are not reflected in diluted income (loss) per share because such shares are anti–dilutive. Dilutive impact of potential common shares resulting from common stock equivalents is determined by applying the treasury stock method. For the year ended March 31, 2023, there were 7,049,192 shares, consisting of 2,909,204 stock options, 816,022 restricted stock units and 3,323,966 stock warrants, that were not included in the computation of diluted loss per share because their effect would be anti-dilutive. For the year ended March 31, 2022, there were 6,491,081 shares, consisting of 2,879,008 stock options, 954,775 restricted stock units and 2,657,298 stock warrants, that were not included in the computation of diluted loss per share because their effect would be anti-dilutive. Fair Value Measurement Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of the Company’s financial instruments such as cash equivalents, accounts receivable, revolving credit facility, accounts payable and accrued liabilities approximate fair values due to the short-term nature of these items. The fair value of the foreign currency forward and option contracts are discussed in Note 15. Income Taxes The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). ASC 740 prescribes the use of the liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted statutory tax rates in effect at the balance sheet date. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exists. Equity Method Investments The Company uses the equity method to account for investments in entities that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies. The Company's proportionate share of the net income or loss of these companies is included in consolidated net loss. Judgments regarding the level of influence over each equity method investment include consideration of key factors such as the Company's ownership interest, representation on the board of directors or other management body and participation in policy-making decisions. Segment Reporting The Company’s operations and its financial performance is evaluated on a consolidated basis by the chief operating decision maker. The Company’s chief operating decision maker is the Parent’s Chief Executive Officer. Accordingly, the Company considers all of its operations to be aggregated in one reportable operating segment. For the year ended March 31, 2023 and 2022, total revenue was $16.5 million, all from U.S. operations. For the year ended March 31, 2022, total revenue was $24.1 million, of which $23.4 million was from U.S. operations and $0.7 million was from Japan operations. Accounting Standard Adopted The Company adopted ASU 2016-02, Leases (Topic 842) effective April 1, 2022, pursuant to ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities which deferred the effective date of the standard for smaller reporting companies. The standard requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on their balance sheet for all leases, including operating leases, with a term of greater than 12 months. In July 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-11, which adds a transition option permitting entities to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the consolidated financial statements. Under this transition option, comparative reporting would not be required, and the provisions of the standard would be applied prospectively to leases in effect at the date of adoption. The Company elected to use the optional transition method provided by ASU 2018-11. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its ASC 840 assessment regarding definition of a lease, lease classification, and initial direct costs. The following practical expedients were applied implementing this standard. •The Company did not reassess whether any expired or existing contracts are, or contain, leases. Additionally, the Company did not reassess for lease classifications of expired or existing leases, or initial direct costs for any existing leases. •The Company elected the short-term lease exception, which allows the Company to account for leases with a lease term of twelve months or less similar to existing operating leases. The cost of these leases is disclosed, but is not recognized in the ROU asset and lease liability balances. Consistent with ASC 842 requirements, leases that are one month or less are not included in the disclosures. Operating lease ROU assets represent the Company’s right to use the underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using incremental borrowing rate at the lease commencement date. The Company chose the practical expedients and reviewed the lease and non-lease components for any impairment or otherwise, subsequently determining that no cumulative-effect adjustment to equity was necessary as part of implementing the modified retrospective approach for its adoption of ASC 842. Operating lease expense, which is comprised of amortization of the ROU asset and the interest accreted on the lease liability, is recognized on a straight-line basis over the lease term and is recorded in lease expense in the consolidated statements of operations. Recently Issued Accounting Standards under Evaluation Debt - In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. Among other provisions, the amendments in this ASU significantly change the guidance on the issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, excluding entities eligible to be smaller reporting companies as defined by the SEC. As the Company is a smaller reporting company, the ASU is effective for fiscal years beginning after December 15, 2023. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and the adoption is not expected to have a significant impact on the consolidated financial statements. Financial Instruments - In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for the Company’s 2024 fiscal year. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and the adoption is not expected to have a significant impact on the consolidated financial statements.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management bases its estimates and assumptions on historical experience, knowledge of current conditions, and its belief of what could occur in the future, given available information. Actual results could differ from those estimates, and such differences could be material to the consolidated financial statements. Estimates are used for, but not limited to, the determinations of fair value of stock awards and promissory notes, accrual of expenses, revenue recognition, allowance for doubtful accounts, inventory reserve, and useful lives for property and equipment.

The Company considers all highly-liquid investments with original maturities of 90 days or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist principally of bank deposits and money market funds. Restricted cash of $0.6 million as of March 31, 2023 and 2022 consists of a $0.5 million letter of credit held for purchases from a vendor in current assets and $0.1 million of long-term deposit in other assets.

The Company is exposed to foreign currency risk due to its operations in Japan (Yen). Assets and liabilities of the operations are re-measured into U.S. currency at exchange rates in effect at the balance sheet dates through the consolidated statements of comprehensive loss. Gains or losses resulting from foreign currency transactions are re-measured using the rates on the dates on which those elements are recognized during the period and are included in other income or expense in the consolidated statements of operations. Changes in the value of our cash balance due to fluctuations in foreign exchange rate are presented on the consolidated statements of cash flows as effect of foreign exchange rate changes on cash, cash equivalents and restricted cash. As of March 31, 2023 and 2022, the Company had foreign cash and cash equivalents of $0.2 million and $0.1 million, respectively, which represented 1.0% and 0.2%, respectively, of total cash and cash equivalents.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The majority of the Company’s cash, cash equivalents, and restricted cash are held with one major financial institution, which exposes the Company to credit risk in the event of default by the financial institution holding its cash. Substantially all cash amounts on deposit with major financial institutions exceed Federal Deposit Insurance Corporation insured limits. Risks associated with cash holdings in excess of insured limits are mitigated by banking with high-quality institutions. The Company’s investment policy restricts investments to high-quality investments and limits the amounts invested with any one issuer, industry or geographic area. To date,

The Company is subject to risks common in the power conversion components industry, including, but not limited to, technological obsolescence, dependence on key personnel, market acceptance of its products, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.

Accounts receivable are analyzed and allowances for uncollectible accounts are recorded, as required. Provisions for uncollectible accounts, if any, are recorded as bad debt expense and included in general and administrative expenses in the accompanying consolidated statements of operations. The process for determining the appropriate level of allowances for doubtful accounts involves judgment, and the Company considers such factors as the age of the underlying receivables, historical and projected collection trends, the composition of outstanding receivables, current economic conditions and regulatory changes. An account is fully reserved when reasonable collection efforts have been unsuccessful and it is probable that the receivable will not be recovered. No provision for doubtful accounts was recorded for the years ended March 31, 2023 or 2022 as substantially all of the accounts receivables were expected to be collected subsequently.

Inventories are stated at the lower of cost or estimated net realizable value. Standard cost is generally computed based on actual cost on a first-in, first-out basis and is adjusted on a periodic basis. Standard cost includes the cost of raw materials, internal labor, overhead (including depreciation) and costs for foundry and packaging for offshore assembly providers. Standard cost is based on the normal utilization and yield of installed factory capacity, which are inputs that require management’s judgement in determining. Cost associated with underutilization of capacity and yield is expensed as incurred. Inventory held at consignment locations is included in our finished goods inventory.

The Company performs periodic reviews of inventory items to identify excess and obsolete inventories on hand by comparing on-hand balances to anticipated usage using recent historical activity as well as anticipated or forecasted demand. If estimates of customer demand diminish further or market conditions become less favorable than those projected by the Company, additional inventory carrying value adjustments may be required. The Company maintains an inventory reserve for obsolete inventory and generally makes inventory value adjustments against the inventory reserve.

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is determined using the straight-line method over the estimated useful lives of the respective assets, generally ranging from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the related lease term. Depreciation for equipment commences once it is placed in service, and depreciation for buildings and leasehold improvements commences once they are ready for their intended use. The Company expenses maintenance and repair costs that do not extend the life of the asset as they are incurred.

Goodwill arose for the acquisition of a business in February 2014 based in Japan and was accounted for as the purchase of a business. Goodwill generated from business combinations and deemed to have indefinite lives are not subject to amortization and instead are tested for impairment at least annually unless certain events occur or circumstances change. Goodwill represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The Company tests for goodwill impairment annually, on March 31, or earlier if events or changes in circumstances indicate goodwill might possibly be impaired. Impairment exists when the carrying value of the goodwill exceeds its implied fair value. An impairment loss would be recognized in an amount equal to that excess as a charge to operations in the consolidated statements of operations. For the years ended March 31, 2023 and 2022, no impairment charge was recorded related to goodwill.

Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives, which generally range from three to ten years. Each reporting period, the Company evaluates the estimated remaining useful lives of intangible assets and whether events or changes in circumstances warrant a revision to the remaining periods of amortization.

If it is determined that the carrying values might not be recoverable based upon the existence of one or more indicators of impairment, the Company performs a test for recoverability using various methodologies, such as the income approach or cost approach, to determine the fair value of intangible assets depending upon the nature of the assets. If assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their respective fair values. For the years ended March 31, 2023 and 2022, no impairment charges were recorded related to intangible assets.

The Company derives its revenues primarily through the sale and delivery of promised goods and services to distributors and end-users in various sectors such as, but not limited to, the gaming, industrial, IT, and consumer products industries. The Company disaggregates revenue based on the following contract types:

•Commercial product and service contracts, including contracts for sales of high-powered GaN-based products manufactured utilizing the Company’s proprietary and patented epiwafer technology and wafer fabrication and other assembly processes, sales of GaN epiwafers for the radio frequency and power markets, and the provision of epiwafer growth services and products to the Company’s strategic partners.

The Company follows a five-step approach for recognizing revenue, consisting of the following: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when, or as, the entity satisfies a performance obligation. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing components associated with its revenue contracts, as payment is received within one year.

Sales prices are documented in executed customer or distributor agreements and subsequent individual invoices. Performance obligations consist of the delivery of promised products or services, each of which are considered to be separate although the invoices typically do not include more than one performance obligation. For invoices with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price.

Performance obligations are satisfied, and revenue is recognized when control of a good or service promised in a contract is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service at a point in time, and revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products or services.

Revenue is recognized over time if the customer receives the benefits as the Company performs services, if the customer controls the asset as it is being produced (continuous transfer of control), or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment for performance to date. The Company recognizes revenue ratably over time under the cooperation and development agreement with Yaskawa Electric Corporation (“Yaskawa”), a related party through share ownership.

Master supply or distributor agreements are in place with many of the Company's customers and contain terms and conditions including, but not limited to, payment, delivery, incentives and warranty. These agreements sometimes require minimum purchase commitments. If a master supply, distributor or other similar agreement is not in place with a customer, the Company considers a purchase order, which is governed by the Company’s standard terms and conditions, to be the contract governing the relationship with that customer.

Government contract revenue is principally generated under research and development contracts with agencies of the U.S. government. These contracts may include cost-plus fixed fee and fixed price terms. All payments received for work performed on contracts with agencies of the U.S. government are subject to adjustment upon audit by the Defense Contract Audit Agency. Performance obligations under government contracts are satisfied and revenue is recognized over time because the customer receives the benefits as the Company performs work, the customer controls the asset as it is being produced (continuous transfer of control), and the Company has a contractual right to payment for performance to date.

From time to time, the Company may enter into licensing arrangements related to its intellectual property. Revenue from licensing arrangements is recognized when earned and estimable. The timing of revenue recognition is dependent on the terms of each license agreement. Generally, the Company will recognize non-refundable upfront licensing fees related to patent licenses immediately upon receipt of the funds if the Company has no significant future obligations to perform under the arrangement.

In the case that the arrangement gives rise to variable consideration in the form of milestone and royalty payments, the Company evaluates the royalties to determine if they qualify for the sales and usage-based royalty exception. In the case of the Company’s royalty arrangement with Nexperia, the Company determined the royalties qualify for the sales and usage-based royalty exception, as the license of intellectual property is the predominant item to which the royalty relates and revenue is recognized upon the subsequent sale occurring. The variable amounts are recognized

The Company is a party to research grant contracts with the U.S. government for which the Company is reimbursed for specified costs incurred for its research projects. These projects include energy saving initiatives for which the U.S. government offers reimbursement funds. Such reimbursements are recorded as an offset to research and development expenses when the related qualified research and development expenses are incurred. Reimbursable costs are recognized in the same period the costs are incurred up to the limit of approved funding amounts on qualified expenses. Grant reimbursement of $0.6 million and $0.3 million was recorded as an offset to research and development expense for the years ended March 31, 2023 and 2022, respectively.

All share-based payments, including grants of stock options and restricted stock units (“RSUs”), are measured at the fair value of the share-based awards on the grant date and expense is recognized over their respective vesting periods, which is generally one to four years. The estimated fair value of stock options at the grant date is determined using the Black-Scholes-Merton pricing model, and the RSUs are measured using the fair market value of the stock price at grant date. The Company recognizes the fair value of share-based payments as compensation expense for all expected-to-vest stock-based awards over the vesting period of the award using the straight-line attribution or graded vesting method provided that the amount of compensation cost recognized at any date is no less than the portion of the grant-date fair value of the award that is vested at that date.

•Forfeitures - The Company adopted ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting and has elected to account for forfeitures as they occur and therefore, stock-based compensation expense has been calculated based on actual forfeitures in the statements of operations, rather than our previous approach which was net of estimated forfeitures.

•Expected Term - The expected term of stock options represents the period that the Company’s stock options are expected to be outstanding. The Company generally uses the simplified method to calculate the expected term for employee grants as the Company has limited historical exercise data or alternative information to reasonably estimate an expected term assumption. The simplified method assumes that all options will be exercised midway between the weighted average vesting date and the contractual term of the option.

Changes in the deemed fair value of the common stock, the underlying assumptions in the calculations, the number of options granted or the terms of such options, the treatment of tax benefits, and other changes may result in significant differences in the amounts or timing of the compensation expense recognized.

Basic income (loss) per share is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is calculated by dividing the net loss attributable to common stockholders by the sum of the weighted average number of common shares outstanding plus potential dilutive common shares outstanding during the period. Potential dilutive securities, comprised of stock warrants, restricted stock units and stock options, are not reflected in diluted income (loss) per share because such shares are anti–dilutive. Dilutive impact of potential common shares resulting from common stock equivalents is determined by applying the treasury stock method.

For the year ended March 31, 2023, there were 7,049,192 shares, consisting of 2,909,204 stock options, 816,022 restricted stock units and 3,323,966 stock warrants, that were not included in the computation of diluted loss per share because their effect would be anti-dilutive. For the year ended March 31, 2022, there were 6,491,081 shares, consisting of 2,879,008 stock options, 954,775 restricted stock units and 2,657,298 stock warrants, that were not included in the computation of diluted loss per share because their effect would be anti-dilutive.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying values of the Company’s financial instruments such as cash equivalents, accounts receivable, revolving credit facility, accounts payable and accrued liabilities approximate fair values due to the short-term nature of these items. The fair value of the foreign currency forward and option contracts are discussed in Note 15.

The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”). ASC 740 prescribes the use of the liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted statutory tax rates in effect at the balance sheet date. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding their realizability exists.

The Company uses the equity method to account for investments in entities that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies. The Company's proportionate share of the net income or loss of these companies is included in consolidated net loss. Judgments regarding the level of influence over each equity method investment include consideration of key factors such as the Company's ownership interest, representation on the board of directors or other management body and participation in policy-making decisions.

The Company’s operations and its financial performance is evaluated on a consolidated basis by the chief operating decision maker. The Company’s chief operating decision maker is the Parent’s Chief Executive Officer. Accordingly, the Company considers all of its operations to be aggregated in one reportable operating segment. For the year ended March 31, 2023 and 2022, total revenue was $16.5 million, all from U.S. operations. For the year ended March 31, 2022, total revenue was $24.1 million, of which $23.4 million was from U.S. operations and $0.7 million was from Japan operations.

The Company adopted ASU 2016-02, Leases (Topic 842) effective April 1, 2022, pursuant to ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities which deferred the effective date of the standard for smaller reporting companies. The standard requires lessees to recognize a right-of-use (“ROU”) asset and a lease liability on their balance sheet for all leases, including operating leases, with a term of greater than 12 months. In July 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-11, which adds a transition option permitting entities to apply the provisions of the new standard at its adoption date instead of the earliest comparative period presented in the consolidated financial statements. Under this transition option, comparative reporting would not be required, and the provisions of the standard would be applied prospectively to leases in effect at the date of adoption. The Company elected to use the optional transition method provided by ASU 2018-11. The Company also elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its ASC 840 assessment regarding definition of a lease, lease classification, and initial direct costs. The following practical expedients were applied implementing this standard.

•The Company elected the short-term lease exception, which allows the Company to account for leases with a lease term of twelve months or less similar to existing operating leases. The cost of these leases is disclosed, but is not recognized in the ROU asset and lease liability balances. Consistent with ASC 842 requirements, leases that are one month or less are not included in the disclosures.

Operating lease ROU assets represent the Company’s right to use the underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based on the present value of the remaining lease payments using incremental borrowing rate at the lease commencement date. The Company chose the practical expedients and reviewed the lease and non-lease components for any impairment or otherwise, subsequently determining that no cumulative-effect adjustment to equity was necessary as part of implementing the modified retrospective approach for its adoption of ASC 842. Operating lease expense, which is comprised of amortization of the ROU asset and the interest accreted on the lease liability, is recognized on a straight-line basis over the lease term and is recorded in lease expense in the consolidated statements of operations.

Debt - In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, to address the complexity in accounting for certain financial instruments with characteristics of liabilities and equity. Among other provisions, the amendments in this ASU significantly change the guidance on the issuer’s accounting for convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, excluding entities eligible to be smaller reporting companies as defined by the SEC. As the Company is a smaller reporting company, the ASU is effective for fiscal years beginning after December 15, 2023. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and the adoption is not expected to have a significant impact on the consolidated financial statements.

Financial Instruments - In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for the Company’s 2024 fiscal year. Early adoption is permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and the adoption is not expected to have a significant impact on the consolidated financial statements.