10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 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 1-35256

DSP GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-2683643
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)
2055 Gateway Place, Suite 480, San Jose, California	95110
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 986-4300

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, $.001 per share	DSPG	The NASDAQ Stock Market LLC

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, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one).

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 of 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2021, there were 24,458,457 shares of Common Stock ($.001 par value per share) outstanding.

INDEX

DSP GROUP, INC.

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed consolidated balance sheets—June 30, 2021 and December 31, 2020	2
	Condensed consolidated statements of operations—Three and six month periods ended June 30, 2021 and 2020	4
	Condensed consolidated statements of comprehensive income—Three and six month periods ended June 30, 2021 and 2020	5
	Condensed consolidated statements of cash flows—Six month periods ended June 30, 2021 and 2020	7
	Condensed consolidated statements of stockholders’ equity—Three and six month periods ended June 30, 2021 and 2020	9
	Notes to condensed consolidated financial statements—June 30, 2021	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosure	54
Item 5.	Other Information	54
Item 6.	Exhibits	54
SIGNATURES		55

1

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DSP GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share data)

	June 30, 2021		December 31, 2020
	Unaudited		Audited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	16,175	$	16,936
Restricted deposit		574		548
Marketable securities and short-term deposits		48,681		50,615
Trade receivables		13,502		11,003
Other accounts receivable and prepaid expenses		5,111		3,460
Inventories		6,384		9,061
TOTAL CURRENT ASSETS		90,427		91,623
PROPERTY AND EQUIPMENT, NET		6,501		6,574
NON-CURRENT ASSETS:
Long-term marketable securities		64,507		60,454
Operating lease right of use		10,386		11,102
Long-term prepaid expenses and lease deposits		2,470		2,888
Deferred income taxes		6,410		6,893
Severance pay fund		15,331		16,285
Intangible assets, net		6,527		7,549
Goodwill		13,105		13,105
TOTAL NON-CURRENT ASSETS		118,736		118,276
TOTAL ASSETS	$	215,664	$	216,473

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

2

DSP GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share data)

	June 30, 2021			December 31, 2020
	Unaudited			Audited
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade payables	$	11,197		$	10,708
Operating lease liability		2,874			2,974
Accrued compensation and benefits		9,661			8,728
Income tax accruals and payables		3,454			3,620
Accrued expenses and other accounts payable		3,250			2,993
Short-term bank loans		-			211
Deferred income		169			172
TOTAL CURRENT LIABILITIES		30,605			29,406
NON-CURRENT LIABILITIES:
Deferred income taxes		948			1,073
Accrued severance pay		15,797			16,647
Operating lease liability		9,182			10,075
Earn-out liability		1,945			1,945
Accrued pensions		1,058			1,089
TOTAL NON-CURRENT LIABILITIES		28,930			30,829
STOCKHOLDERS’ EQUITY:
Capital stock:
Common stock, $ 0.001 par value - Authorized shares: 50,000,000 shares at June 30, 2021 (unaudited) and December 31, 2020; Issued and outstanding shares: 23,974,936 and 23,709,924 shares at June 30, 2021 (unaudited) and December 31, 2020, respectively		24			24
Additional paid-in capital		401,921			396,335
Treasury stock at cost		(107,717	)		(108,509	)
Accumulated other comprehensive loss		(970	)		(637	)
Accumulated deficit		(137,129	)		(130,975	)
TOTAL STOCKHOLDERS’ EQUITY		156,129			156,238
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	215,664		$	216,473

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

3

DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(U.S. dollars in thousands, except per share amounts)

	Three months ended						Six months ended
	June 30,						June 30,
	2021			2020			2021			2020
Revenues	$	35,807		$	28,336		$	68,454		$	56,575
Cost of revenues (1)		16,676			14,075			32,342			27,934
Gross profit		19,131			14,261			36,112			28,641
Operating expenses:
Research and development, net (2)		10,630			8,455			21,110			18,809
Sales and marketing (3)		5,326			4,435			10,528			9,446
General and administrative (4)		3,161			2,627			5,814			4,975
Intangible assets amortization		429			104			848			208
Total operating expenses		19,546			15,621			38,300			33,438
Operating loss		(415	)		(1,360	)		(2,188	)		(4,797	)
Financial income, net		94			289			735			1,192
Loss before taxes on income		(321	)		(1,071	)		(1,453	)		(3,605	)
Tax on income (tax benefit)		78			6			289			(62	)
Net loss	$	(399	)	$	(1,077	)	$	(1,742	)	$	(3,543	)
Net loss per share:
Basic and Diluted	$	(0.02	)	$	(0.05	)	$	(0.07	)	$	(0.15	)
Weighted average number of shares used in per share computations of net loss:
Basic and Diluted		24,204			23,301			24,131			23,321

(1) Includes equity-based compensation expense in the amount of $185 and $129 for the three months ended June 30, 2021 and 2020, and $346 and $249 for the six months ended June 30, 2021 and 2020, respectively.

(2) Includes equity-based compensation expense in the amount of $1,305 and $826 for the three months ended June 30, 2021 and 2020, respectively; and $2,447 and $1,577 for the six months ended June 30, 2021 and 2020, respectively.

(3) Includes equity-based compensation expense in the amount of $745 and $620 for the three months ended June 30, 2021 and 2020, respectively; and $1,371 and $1,175 for the six months ended June 30, 2021 and 2020, respectively.

(4) Includes equity-based compensation expense in the amount of $770 and $706 for the three months ended June 30, 2021 and 2020, respectively; and $1,371 and $1,112 for the six months ended June 30, 2021 and 2020, respectively.

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

4

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED) (U.S. dollars in thousands)

	Three months ended June 30,
	2021			2020
Net loss:	$	(399	)	$	(1,077	)
Other comprehensive income (loss):
Available-for-sale securities:
Changes in unrealized gains (losses)		(54	)		630
Reclassification adjustments for gains included in net loss		-			(4	)
Net change		(54	)		626
Cash flow hedges:
Changes in unrealized gains		20			17
Reclassification adjustments for gains included in net loss		(26	)		(52	)
Net change		(6	)		(35	)
Change in unrealized components of defined benefit plans:
Amortization of actuarial loss and prior service benefit		6			6
Net change		6			6
Foreign currency translation adjustments, net		(30	)		(27	)
Other comprehensive income (loss)		(84	)		570
Comprehensive (loss)	$	(483	)	$	(507	)

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

5

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED) (U.S. dollars in thousands)

	Six months ended June 30,
	2021			2020
Net loss:	$	(1,742	)	$	(3,543	)
Other comprehensive income (loss):
Available-for-sale securities:
Changes in unrealized gains (losses)		(356	)		382
Reclassification adjustments for losses (gains) included in net loss		8			(12	)
Net change		(348	)		370
Cash flow hedges:
Changes in unrealized gains		31			52
Reclassification adjustments for gains included in net loss		(31	)		(52	)
Net change		-			-
Change in unrealized components of defined benefit plans:
Amortization of actuarial loss and prior service benefit		12			12
Net change		12			12
Foreign currency translation adjustments, net		3			(47	)
Other comprehensive income (loss)		(333	)		335
Comprehensive loss	$	(2,075	)	$	(3,208	)

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

6

DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollars in thousands)

	Six months ended June 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(1,742	)	$	(3,543	)
Adjustments required to reconcile net loss to net cash provided by operating activities:
Depreciation		821			801
Equity-based compensation expenses related to employees’ stock options, SARs and RSUs		5,535			4,113
Realized losses (gains) from sale of marketable securities, net		8			(12	)
Capital loss (gain) from sale and disposal of property and equipment		1			(44	)
Amortization of intangible assets		848			208
Operating lease amortization expenses		1,256			1,228
Change in operating lease liability		(1,533	)		(1,393	)
Accrued interest and amortization of premium on marketable securities and deposits		599			170
Change in operating assets and liabilities:
Deferred income tax assets and liabilities, net		351			(268	)
Trade receivables, net		(2,526	)		4,812
Other accounts receivable and prepaid expenses		(1,658	)		(277	)
Inventories		2,677			(660	)
Long-term prepaid expenses and lease deposits		418			(142	)
Trade payables		491			616
Accrued compensation and benefits		1,903			1,434
Income tax accruals		(126	)		378
Accrued expenses and other accounts payable		138			1,243
Accrued severance pay, net		100			180
Accrued pensions		20			19
Net cash provided by operating activities		7,581			8,863
Cash flows from investing activities:
Purchase of marketable securities		(20,183	)		(43,587	)
Purchase of short-term deposits		(8,000	)		(5,000	)
Proceeds from maturity of marketable securities		15,423			39,439
Proceeds from sales of marketable securities		4,692			9,558
Proceeds from redemption of short-term deposits		5,000			3,000
Proceeds from sale of fixed assets		12			44
Purchases of property and equipment		(767	)		(577	)
Decrease in restricted deposits		(34	)		17
Other investing activities		172			-
Net cash provided by (used in) investing activities	$	(3,685	)	$	2,894

7

	Six months ended June 30,
	2021			2020
Cash flows from financing activities:
Issuance of common stock and treasury stock upon exercise of stock options	$	774		$	1,477
Repayment of a short – term bank loan		(211	)		-
Purchase of treasury stock		(5,182	)		(3,736	)
Net cash (used in) financing activities		(4,619	)		(2,259	)
Increase (decrease) in cash and cash equivalents		(723	)		9,498
Cash and cash equivalents at the beginning of the year		16,936			28,737
Erosion due to exchange rate differences		(38	)		(37	)
Cash and cash equivalents at the end of the year	$	16,175		$	38,198

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

8

DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(U.S. dollars in thousands)

Three months ended June 30, 2020	Number of common stock			Common stock		Additional paid‑In capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total stockholders’ equity
Balance at March 31, 2020		23,205		$	23	$	388,387	$	(113,532	)	$	(123,775	)	$	(1,124	)	$	149,979
Net loss		-			-		-		-			(1,077	)		-			(1,077	)
Change in accumulated other comprehensive income		-			-		-		-			-			570			570
Purchase of treasury stock		(22	)		*)		-		(294	)		-			-			(294	)
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		227			*)		66		2,294			(1,057	)		-			1,303
Equity-based compensation					-		2,281		-			-			-			2,281
Balance at June 30, 2020		23,410		$	23	$	390,734	$	(111,532	)	$	(125,909	)	$	(554	)	$	152,762
Three months ended June 30, 2021
Balance at March 31, 2021		24,227		$	24	$	398,916	$	(103,300	)	$	(135,848	)	$	(886	)	$	158,906
Net loss		-			-		-		-			(399	)		-			(399	)
Change in accumulated other comprehensive loss		-			-		-		-			-			(84	)		(84	)
Purchase of treasury stock		(339	)		*)		-		(5,299	)		-			-			(5,299	)
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		87			*)		-		882			(882	)		-			-
Equity-based compensation					-		3,005		-			-			-			3,005
Balance at June 30, 2021		23,975		$	24	$	401,921	$	(107,717	)	$	(137,129	)	$	(970	)	$	156,129

(*) Represents an amount lower than $1.

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

9

DSP GROUP, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(U.S. dollars in thousands and shares in thousands)

	Number of common stock			Common stock		Additional paid‑in capital		Treasury stock			Accumulate deficit			Other comprehensive income (loss)			Total stockholders’ equity
Six months ended June 30, 2020
Balance at December 31, 2019		23,111		$	23	$	386,534	$	(113,862	)	$	(118,712	)	$	(889	)	$	153,094
Net loss		-			-		-		-			(3,543	)		-			(3,543	)
Change in accumulated other comprehensive income		-			-		-		-			-			335			335
Purchase of treasury stock		(305	)		*)		-		(3,736	)		-			-			(3,736	)
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		105			*)		-		1,052			(30	)		-			1,022
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and restricted stock units by employees and directors		499			*)		87		5,014			(3,624	)		-			1,477
Equity-based compensation		-			-		4,113		-			-			-			4,113
Balance at June 30, 2020		23,410		$	23	$	390,734	$	(111,532	)	$	(125,909	)	$	(554	)	$	152,762
Six months ended June 30, 2021
Balance at December 31, 2020		23,710		$	24	$	396,335	$	(108,509	)	$	(130,975	)	$	(637	)	$	156,238
Net loss		-			-		-		-			(1,742	)		-			(1,742	)
Change in accumulated other comprehensive loss		-			-		-		-			-			(333	)		(333	)
Purchase of treasury stock		(339	)		*)		-		(5,299	)		-			-			(5,299	)
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		95			*)		-		961			(5	)		-			956
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and restricted stock units by employees and directors		509			*)		51		5,130			(4,407	)		-			774
Equity-based compensation		-			-		5,535		-			-			-			5,535
Balance at June 30, 2021		23,975		$	24	$	401,921	$	(107,717	)	$	(137,129	)	$	(970	)	$	156,129

(*) Represents an amount lower than $1.

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

10

DSP GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(UNAUDITED)

(U.S. dollars in thousands, except share and per share data)

NOTE A—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K of DSP Group, Inc. (the “Company”) for the year ended December 31, 2020.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2020, contained in the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 15, 2021, have been applied consistently in these unaudited interim condensed consolidated financial statements, except as noted below:

Recently Issued and Adopted Accounting Pronouncements 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14—Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”) which improves disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This standard is effective for fiscal years ending after December 15, 2020, for public business entities. Early adoption is permitted for all entities. Entities are to apply the amendments in this update on a retrospective basis for all periods presented. The adoption of ASU 2018-14 did not have a material impact on the Company’s condensed consolidated financial statements.

Use of Estimates

The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the interim condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Acquisition of SoundChip

In July 2020, the Company completed the acquisition of SoundChip SA, a privately-held Swiss company (“SoundChip”) for an initial purchase price of approximately $15 million (with a portion held in escrow in accordance with the agreement terms), subject to working capital adjustments (the “Initial Purchase Price”) and agreed to pay future contingent cash milestone payments of up to $6 million upon the achievement of certain customer and product sales milestones during the period from July 1, 2020 to December 31, 2022.

11

 

The results of operations of SoundChip have been included in the Company’s consolidated financial statements since July 1, 2020. The Company did not provide pro forma disclosure according to ASC 810 for the SoundChip acquisition due to immateriality.

The preliminary purchase price allocation ("PPA") was based on information available at the time of closing of the SoundChip acquisition. During 2021, the Company finalized the PPA for SoundChip as a result of finalizing the working capital adjustments as stated above.

The following table summarizes adjustments since the preliminary PPA was disclosed as of December 31, 2020:

	Preliminary estimated fair value			Adjustments			Fair value
Cash	$	443		$	-		$	443
Property and equipment		456			-			456
Current assets		2,301			-			2,301
Other non-current assets		1,042			-			1,042
Current liabilities		(1,007	)		25			(982	)
Other long-term liabilities		(1,945	)		-			(1,945	)
Net tangible assets acquired		1,290			-			1,315
Deferred tax liability		(1,121	)		-			(1,121	)
Intangible assets:
Developed technology		7,189			-			7,189
Backlog		54			-			54
Customer relationships		678			-			678
Total intangible assets		7,921			-			7,921
Goodwill		6,862			(197	)		6,665
Net assets acquired	$	14,952					$	14,780

NOTE B— OPERATING LEASES

The Company has entered into various non-cancelable operating lease agreements of its offices and car leases. The Company's leases have original lease periods expiring between 2021 and 2030. Many leases include one or more options to renew. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement date. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total operating lease cost during the three and six months ended June 30, 2021 was $799 and $1,630, respectively, out of which an amount of $799 and $1,630 represented the total cash paid for amounts included in the measurement of operating lease liabilities during the three and six months ended June 30, 2021, respectively.

Total operating lease cost during the three and six months ended June 30, 2020 was $691 and $1,400, respectively, out of which an amount of $691 and $1,400 represented the total cash paid for amounts included in the measurement of operating lease liabilities during the three and six months ended June 30, 2020, respectively.

12

 

Other information about lease amounts recognized in the Company’s consolidated financial statements is summarized as follows (unaudited):

	June 30, 2021			June 30, 2020
Weighted-average remaining lease term – operating leases (years)		6.66			7.70
Weighted-average discount rate – operating leases		5.03	%		5.05	%

As of June 30, 2021, and 2020 (unaudited), the Company’s operating lease liabilities were as follows:

	June 30, 2021			June 30, 2020
Gross lease liabilities	$	14,490		$	15,022
Less: imputed interest		(2,434	)		(2,850	)
Present value of lease liabilities		12,056			12,172
Less: current portion of lease liabilities		(2,874	)		(2,404	)
Total long-term lease liabilities	$	9,182		$	9,768

NOTE C—INVENTORIES

Inventories are stated at the lower of cost or net realizable value. The Company periodically evaluates the quantities on hand relative to current and historical selling prices, and historical and projected sales volume. Based on these evaluations, provisions are made in each period to write inventory down to its net realizable value. Inventories are composed of the following:

	June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)
Work‑in‑process	$	5,585	$	5,972
Finished goods		799		3,089
	$	6,384	$	9,061

Inventory write-off amounted to $29 for the six months ended June 30, 2021 due to aging of certain inventory items that are not expected to be sold.

For the six months ended June 30, 2020, the Company recorded $91 of income due to the utilization of inventory that was written off in the past.

NOTE D—NET LOSS PER SHARE

Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period. For the same periods, diluted net loss per share further includes the effect of dilutive stock options, stock appreciation rights and restricted share units outstanding during the period, all in accordance with FASB ASC No. 260 “Earnings per Share.” The following table sets forth the computation of basic and diluted net loss per share:

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
	(Unaudited)
Net loss	$	(399	)	$	(1,077	)	$	(1,742	)	$	(3,543	)
Loss per share:
Basic and Diluted	$	(0.02	)	$	(0.05	)	$	(0.07	)	$	(0.15	)
Weighted average number of shares of common stock outstanding during the period used to compute basic net loss per share (in thousands)		24,204			23,301			24,131			23,321
Incremental shares attributable to exercise of outstanding options, stock appreciation rights and restricted stock units (assuming proceeds would be used to purchase treasury stock) (in thousands)		-			-			-			-
Weighted average number of shares of common stock used to compute diluted net loss per share (in thousands)		24,204			23,301			24,131			23,321

13

 

NOTE E — MARKETABLE SECURITIES AND TIME DEPOSITS

The Company accounts for investments in marketable securities in accordance with FASB ASC No.320-10 “Investments in Debt and Equity Securities.” Management determines the appropriate classification of its investments in government and corporate marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date.

The Company classifies marketable securities as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of taxes, reported in other comprehensive income. The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and interest are included in financial income, net. Interest and dividends on securities are included in financial income, net. The following is a summary of available-for-sale securities at June 30, 2021 and December 31, 2020:

	Amortized cost				Unrealized gains, net				Fair value
	June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)		(Unaudited)		(Audited)		(Unaudited)		(Audited)
Short-term deposits		25,230	$	22,241	$	-	$	-		25,230	$	22,241
U.S. GSE securities		1,146		1,149		10		11		1,156		1,160
Corporate obligations		86,802		87,319		-		349		86,802		87,668
	$	113,178	$	110,709	$	10	$	360	$	113,188	$	111,069

The amortized cost of marketable debt securities at June 30, 2021, by contractual maturities, is shown below (unaudited):

			Unrealized gains (losses)
	Amortized cost		Gains		Losses			Fair value
Due in one year or less	$	23,427	$	37	$	(13	)	$	23,451
Due after one year to five years		64,521		267		(281	)		64,507
	$	87,948	$	304	$	(294	)	$	87,958

14

 

The actual maturity dates may differ from the contractual maturities because debtors may have the right to call or prepay obligations without penalties.

The total fair value of marketable securities with outstanding unrealized losses as of June 30, 2021 amounted to $48,883, and the unrealized losses for these marketable securities amounted to $294.

Management believes that as of June 30, 2021, the unrealized losses in the Company’s investments in all types of marketable securities were temporary and no credit loss was realized in the Company’s consolidated interim statements of operations.

The Company assessed available-for-sale debt securities with an amortized cost basis in excess of estimated fair value to determine what amount of the difference, if any, is caused by expected credit losses in accordance with ASC 326 “Financial Instruments – Credits Losses.” Allowance for credit losses on available-for-sale debt securities are recognized as a charge in the condensed consolidated statement of operation, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders' equity. The unrealized losses related to the Company’s marketable securities were primarily due to changes in interest rates. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity and because the unrealized losses are not as a result of a credit loss, the Company does not consider the losses to be a credit loss at June 30, 2021.

Proceeds from maturity of available-for-sale marketable securities during the first half of 2021 and 2020 were $15,423 and $39,439, respectively. Proceeds from sales of available-for-sale marketable securities during the first half of 2021 and 2020 were $4,692 and $9,558, respectively. Net realized loss from the sale of available-for-sale securities for the six months ended June 30, 2021 were $8 compared to net realized gain for the three months ended June 30, 2020 of $12. The Company determines realized gains or losses on the sale of available-for-sale marketable securities based on a specific identification method.

NOTE F—TAXES ON INCOME

The effective tax rate used in computing the provision for income taxes is based on projected fiscal year income before taxes, including estimated income by tax jurisdiction.

The total amount of net unrecognized tax benefits was $3,268 and $3,449 at June 30, 2021 (unaudited) and December 31, 2020, respectively. The Company accrues interest and penalties, relating to unrecognized tax benefits, in its provision for income taxes. At June 30, 2021 (unaudited) and December 31, 2020, the Company had accrued interest and penalties relating to unrecognized tax benefits of $302 and $329, respectively.

The Company intends to permanently reinvest earnings of its foreign operations and its current operating plans do not demonstrate a need to repatriate foreign earnings to fund the Company’s U.S. operations. However, if these funds were needed for the Company’s operations in the United States, the Company would be required to accrue and pay taxes in several countries to repatriate these funds. The determination of the amount of additional taxes related to the repatriation of these earnings is not practicable, as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated.

NOTE G—SIGNIFICANT CUSTOMERS

The Company sells its products primarily through distributors and directly to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who incorporate the Company’s products into consumer products. The Company’s future performance will depend, in part, on the continued success of its distributors in marketing and selling its products. The loss of the Company’s distributors and the Company’s inability to obtain satisfactory replacements in a timely manner may harm the Company’s sales and results of operations. In addition, the Company expects that a limited number of customers, varying in identity from period-to-period, will account for a substantial portion of its revenues in any period. The loss of, or reduced demand for products from, any of the Company’s major customers could have a material adverse effect on the Company’s business, financial condition and results of operations.

15

 

The following table represents the Company’s sales, as a percentage of the Company’s total revenues, for the three and six month periods ended June 30, 2021 and 2020, of the Company’s significant customers:

	Three months ended June 30,		Six months ended June 30,
	(Unaudited)
Major customers/ distributors	2021	2020	2021	2020
VTech Holdings Ltd.	14%	22%	16%	21%
Nexty Electronics ¹ ²	9%	8%	9%	10%
Ascend Technology Inc. ¹ ³	35%	39%	33%	38%

¹ Distributor.

² Nexty Electronics sells the Company’s products to a limited number of customers; none of those customers accounted for 10% or more of the Company’s total revenues for the three and six month periods ended June 30, 2021 and 2020.

³ Ascend Technology sells the Company’s products to a limited number of customers; one of those customers Cisco Systems accounted for 12% and 21% for the three month periods ended June 30, 2021 and 2020, and 12% and 18% of the Company’s total revenues for the six month periods ended June 30, 2021 and 2020.

NOTE H—DERIVATIVE INSTRUMENTS

In accordance with Topic 815 “Derivatives and Hedging,” for derivative instruments that are designated and qualify as a cash flow hedge (i.e. hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any gain or loss on a derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in current earnings during the period of change.

As of June 30, 2021 the Company had no outstanding option and foreign exchange forward contracts. See Note L for information on the fair value of hedging contracts.

The fair value of derivative assets and derivative liabilities were both $0 as of June 30, 2021.

The amount recorded as income in research and development expenses, sales and marketing expenses and general and administrative expenses in the condensed consolidated statements of income for the six months ended June 30, 2021 that resulted from the above referenced hedging transactions was $24, $3 and $4, respectively.

The amount recorded as income in research and development expenses, sales and marketing expenses and general and administrative expenses in the condensed consolidated statements of income for the six months ended June 30, 2020 that resulted from the above referenced hedging transactions was $41, $4 and $7, respectively.

16

 

The effect of derivative instruments in cash flow hedging transactions on income and other comprehensive income (“OCI”) for the three and six months ended June 30, 2021 and 2020 is summarized below:

	Gains on Derivatives Recognized in OCI
	for the three months ended June 30,				for the six months ended June 30,
	(Unaudited)
	2021		2020		2021		2020
Foreign exchange forward and option contracts	$	20	$	17	$	31	$	52

	Gains Reclassified from OCI into Income
		for the three months ended June 30				for the six months ended June 30,
		Unaudited
	Location	2021		2020		2021		2020
Foreign exchange forward and option contracts	Operating expenses	$	26	$	52	$	31	$	52

NOTE I—CONTINGENCIES

From time to time, the Company may become involved in litigation relating to claims arising from its ordinary course of business. In addition, as is typical in the semiconductor industry, the Company has been and may from time to time be notified of claims that the Company may be infringing patents or intellectual property rights owned by third parties. The Company currently believes that there are no claims or actions pending or threatened against it, the ultimate disposition of which would have a material adverse effect on the Company.

NOTE J—EQUITY-BASED COMPENSATION

Grants for the three months ended June 30, 2021 and 2020

The weighted average estimated fair value of employee restricted stock units (“RSUs”) granted during the three months ended June 30, 2021 and 2020 was $12.51 and $15.47 per share, respectively (using the weighted average pre vest cancellation rate of 4.22% and 4.27% for the three months ended June 30, 2021 and 2020, respectively, on an annual basis).

Employee stock benefit plans

As of June 30, 2021, the Company has two equity incentive plans from which the Company may grant future equity awards and one expired equity incentive plan from which no future equity awards may be granted but had outstanding equity awards granted prior to expiration. The Company also has one employee stock purchase plan. As of June 30, 2021, approximately 468,000 shares of common stock remain available for grant under the Company’s employee stock purchase plan and 433,000 shares of common stock remain available for grant under the Company’s equity incentive plans.

17

 

The table below presents a summary of information relating to the Company’s stock option, RSU and SAR grants pursuant to its equity incentive plans (unaudited):

	Number of Options/ SARs/RSUs			Weighted average exercise price		Weighted average remaining contractual term (years) (3)		Aggregate value (**)
	in thousands							in thousands
Outstanding at March 31, 2021		1,836		$	1.86
RSUs granted		66			-
Options / SARs / RSUs cancelled/forfeited/expired		(20	)		-
Options / SARs exercised and RSUs vested		(88	)	$	0.08
Outstanding at June 30, 2021 (1)		1,794		$	1.90		3.23	$	23,155
Exercisable at June 30, 2021 (2)		338		$	9.84		3.21	$	1,678

(*)    Represents an amount lower than $1.

(**) Calculation of aggregate intrinsic value is based on the share price of the Company’s common stock on June 30, 2021 ($14.80 per share).

(1) Due to the ceiling imposed on the SAR grants, the outstanding amount above can be exercised for a maximum of 1,765 thousand shares of the Company’s common stock as of June 30, 2021. SAR grants made on or after January 1, 2012 are convertible for a maximum number of shares of the Company’s common stock equal to 50% of the SARs subject to the grant.

(2) Due to the ceiling imposed on the SAR grants, the exercisable amount above can be exercised for a maximum of 310 thousand shares of the Company’s common stock as of June 30, 2021.

(3) Calculation of weighted average remaining contractual term does not include RSUs that were granted, which have indefinite contractual term.

Additional information about stock options, SARs and RSUs outstanding and exercisable at June 30, 2021 with exercise prices above $14.80 per share (the closing price of the Company’s common stock on June 30, 2021) is as follows:

	Exercisable				Unexercisable				Total
Exercise prices	Number of Options/ SARs / RSUs (in thousands)		Weighted average exercise price		Number of Options/ SARs / RSUs (in thousands)		Weighted average exercise price		Number of Options/ S ARs / RSUs (in thousands)		Weighted average exercise price
Less than $14.80		338	$	9.84		1,456	$	0.06		1,794	$	1.90
Above $14.80		-	$	-		-	$	-		-	$	-
Total		338	$	9.84		1,456	$	0.06		1,794	$	1.90

The Company’s aggregate equity-based compensation expense for the three months ended June 30, 2021 and 2020 totaled $3,005 and $2,281, respectively.

As of June 30, 2021, there was $12,294 of total unrecognized equity-based compensation expense related to unvested equity-based compensation awards granted under the Company’s equity incentive plans. This amount is expected to be recognized during the period from 2021 through 2025.

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NOTE K—PENSION LIABILITY

The information in this note represents the net periodic pension and post-retirement benefit costs and related components in accordance with FASB ASC No. 715 “Employers’ Disclosures about Pensions and Other Post-Retirement Benefits.” The components of net pension and post-retirement periodic benefit cost (income) for the six months ended June 30, 2020 and 2019 (unaudited) are as follows:

	Six months ended June 30,
	2021		2020
Components of net periodic benefit cost:
Service cost and amortization of loss	$	15	$	14
Interest cost		5		5
Net periodic benefit cost	$	20	$	19

The net pension liability as of June 30, 2021 amounted to $1,058.

NOTE L—FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis:

The Company measures its cash equivalents, short-term deposits, marketable securities and foreign currency derivative contracts at fair value. Cash equivalents, short-term deposits and marketable securities are classified within Level 1 or Level 2 value hierarchies as they are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Foreign currency derivative contracts are classified within Level 2 value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table provides information by value level for assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021:

	Balance as of		Fair value measurements
Description	December 31, 2021		Level 1		Level 2		Level 3
Assets
Cash equivalents
Money market mutual funds	$	919	$	919	$	-	$	-
Short-term marketable securities
U.S. GSE securities	$	425	$	-	$	425	$	-
Corporate debt securities	$	23,026	$	-	$	23,026	$	-
Long-term marketable securities
U.S. GSE securities	$	731	$	-	$	731	$	-
Corporate debt securities	$	63,776	$	-	$	63,776	$	-
Liabilities
Earn-out liability	$	1,945	$	-	$	-	$	1,945

19

 

The following table provides information by value level for assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020.

	Balance as of		Fair value measurements
Description	December 31, 2020		Level 1		Level 2		Level 3
Assets
Cash equivalents
Money market mutual funds	$	962	$	962	$	-	$	-
Short-term marketable securities
U.S. GSE securities	$	425	$	-	$	425	$	-
Corporate debt securities	$	27,949	$	-	$	27,949	$	-
Long-term marketable securities
U.S. GSE securities	$	735	$	-	$	735	$	-
Corporate debt securities	$	59,719	$	-	$	59,719	$	-
Liabilities
Earn-out liability	$	1,945	$	-	$	-	$	1,945

In addition to the assets and liabilities described above, the Company’s financial instruments also include cash and cash equivalents, restricted and short-term deposits, trade receivables, other accounts receivable, trade payables, accrued expenses and other payables. The fair value of these financial instruments was not materially different from their carrying values at June 30, 2021 due to the short-term maturity of these instruments.

NOTE M—STOCKHOLDERS’ EQUITY

During the six months ended June 30, 2021, the Company repurchased 339 thousand shares of common stock at an average purchase price of $15.62 per share for an aggregate purchase price of $5,299. As of June 30, 2021, 28 thousands shares of common stock remained authorized for repurchase under the Company's board-authorized share repurchase program.

During the six months ended June 30, 2020, the Company repurchased 305 thousand shares of common stock at an average purchase price of $12.26 per share for an aggregate purchase price of $3,736.

Repurchases of common stock are accounted for as treasury stock, and result in a reduction of stockholders’ equity. The Company reissues treasury shares pursuant to its stock purchase plan, upon exercise of options and upon vesting of restricted stock units. Reissuance of treasury shares is accounted for in accordance with ASC No. 505-30 whereby gains are credited to additional paid-in capital and losses are charged to additional paid-in capital to the extent that previous net gains are included therein; otherwise losses are charged to retained earnings.

During the first six months of 2021, the Company issued approximately 604 thousand shares of common stock out of treasury stock to employees who exercised their stock options, SARs or vested RSUs, or purchased shares from the Company’s 1993 Employee Stock Purchase Plan.

20

 

NOTE N—SEGMENT INFORMATION

Description of segments:

The Company operates under two reportable segments.

The Company’s segment information has been prepared in accordance with ASC 280, “Segment Reporting.” Operating segments are defined as components of an enterprise engaging in business activities about which separate financial information is available that is evaluated regularly by the Company’s chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is its Chief Executive Officer, who evaluates the Company’s performance and allocates resources based on segment revenues and operating income.

The Company’s reporting segments up until December 31, 2020 were: Home, Unified Communications and SmartVoice.

As a result of an organization change that took place starting in 2021 and the way management views the Company’s business operations, as of January 1, 2021, the Company’s reporting segments were changed to Cordless and IoAT. The classification of the Company’s business segments is based on a number of factors that management uses to evaluate, view and run the Company’s business operations, which include, but are not limited to, customer base, homogeneity of products and technology.

A description of the types of products provided by each business segment is as follows:

Cordless – This segment includes integrated circuit products targeted for cordless phones sold in retail or supplied by telecommunication service providers. Revenues from this segment amounted to 33% and 35% of the Company’s total revenues for the first half of 2021 and 2020, respectively, and 31% and 35% of the Company’s total revenues for the second quarter of 2021 and 2020, respectively.

IoAT (Internet of Audio Things) – This segment includes the following products:

(i)    SmartHome (home gateways and home automation) – Wireless chipset solutions for converged communication at home. Target applications include: home gateway devices supplied by telecommunication service and security providers with DECT/CAT-iq and ULE functionality for data and two-way voice; home automation and home security. Revenues from SmartHome products amounted to 15% of the Company’s total revenues for both the first half of 2021 and 2020 and 16% and 15% of the Company’s revenues for the second quarter of 2021 and 2020, respectively.

(ii)    Unified Communications — Comprehensive suite of solutions for Unified Communications products, including office solutions for businesses of all sizes, from low-cost VoIP terminals with converged voice and data applications, to high-end conferencing systems. Revenues from the Company’s Unified Communications products represented 32% and 36% of its total revenues for the first half of 2021 and 2020, respectively, and 33% and 36% of the Company’s revenues for the second quarter of 2021 and 2020, respectively.

(iii)    SmartVoice — SmartVoice hardware and software solutions provide voice activation and recognition, sound event detection (SED), voice enhancement, always-on wake-word detection, far-end noise elimination targeted for mobile phones, mobile headsets/hearables, wearables, tablets, consumer home electronics, security systems and other devices that incorporate the Company’s noise suppression and voice quality enhancement HDClear technology. SmartVoice includes an active noise cancellation (ANC) solution for hearables (headphones and true wireless stereo (TWS) earbud) applications. Revenues from the Company’s SmartVoice products represented 19% and 14% of the Company’s total revenues for the first half of 2021 and 2020, respectively, and 20% and 14% of the Company’s revenues for the second quarter of 2021 and 2020, respectively.

21

 

Segment data:

The Company derives the results of its business segments directly from its internal management reporting system and by using certain allocation methods. The accounting policies the Company uses to derive business segment results are substantially the same as those the Company uses for consolidation of its financial statements. The CODM measures the performance of each business segment based on several metrics, including earnings from operations. The CODM uses these results, in part, to evaluate the performance of, and to assign resources to, each of the business segments. The Company does not allocate to its business segments certain operating expenses, which it manages separately at the corporate level. These unallocated costs include primarily amortization of purchased intangible assets, equity-based compensation expenses, and certain corporate governance costs.

Selected operating results information for each business segment was as follows for the three months ended June 30, 2021 and 2020 (unaudited):

	Three months ended June 30,
	Revenues				Income (loss) from operations
	2021		2020		2021			2020
Cordless	$	11,048	$	9,939	$	4,531		$	3,577
IoAT	$	24,759	$	18,397	$	(614	)	$	(1,942	)
Total	$	35,807	$	28,336	$	3,917		$	1,635

Selected operating results information for each business segment was as follows for the six months ended June 30, 2021 and 2020 (unaudited):

	Six months ended June 30,
	Revenues				Income (loss) from operations
	2021		2020		2021			2020
Cordless	$	22,918	$	19,996	$	9,052		$	6,774
IoAT	$	45,536	$	36,579	$	(3,107	)	$	(6,148	)
Total	$	68,454	$	56,575	$	5,945		$	626

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and six months periods ended June 30, 2021 (unaudited):

	Three months			Six months
Income from operations	$	3,917		$	5,945
Unallocated corporate, general and administrative expenses		(648	)		(1,250	)
Equity-based compensation expenses		(3,005	)		(5,535	)
Intangible assets amortization expenses		(429	)		(848	)
Amortization of employee retention expenses related to the acquisition of SoundChip		(250	)		(500	)
Financial income, net		94			735
Total consolidated loss before taxes	$	(321	)	$	(1,453	)

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and six months ended June 30, 2020 (unaudited):

	Three months			Six months
Income from operations	$	1,635		$	626
Unallocated corporate, general and administrative expenses		(610	)		(1,102	)
Equity-based compensation expenses		(2,281	)		(4,113	)
Intangible assets amortization expenses		(104	)		(208	)
Financial income, net		289			1,192
Total consolidated loss before taxes	$	(1,071	)	$	(3,605	)

22

 

NOTE O —ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated balances of other comprehensive income for the three months ended June 30, 2021 (unaudited):

	Unrealized gains (losses) on available- for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Unrealized gains (losses) on components of defined benefit plans			Unrealized losses on foreign currency translation			Total
Beginning balance	$	64		$	6		$	(485	)	$	(471	)	$	(886	)
Other comprehensive income (loss) before reclassifications		(54	)		20			-			(30	)		(64	)
Losses (gains) reclassified from accumulated other comprehensive income		-			(26	)		6			-			(20	)
Net current period other comprehensive income (loss)		(54	)		(6	)		6			(30	)		(84	)
Ending balance	$	10		$	-		$	(479	)	$	(501	)	$	(970	)

The following table provides details about reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2021 (unaudited):

Details about accumulated other comprehensive income (loss) components	Losses (gains) reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement of income (loss)
Gains on available-for-sale marketable securities		-		Financial income, net
		-		Provision for income taxes
		-		Total, net of income taxes
Gains on cash flow hedges		(20	)	Research and development
		(2	)	Sales and marketing
		(4	)	General and administrative
		(26	)	Total, before income taxes
		-		Provision for income taxes
		(26	)	Total, net of income taxes
Losses on components of defined benefit plans		3		Research and development
		3		Sales and marketing
		6		Total, before income taxes
		-		Provision for income taxes
		6		Total, net of income taxes
Total reclassifications for the period	$	(20	)	Total, net of income taxes

23

 

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2021 (unaudited):

	Unrealized gains (losses) on available- for-sale marketable securities			Unrealized gains (losses) on Cash Flow Hedges			Unrealized gains (losses) on components of defined benefit plans			Unrealized gains (losses) on foreign currency translation			Total
Beginning balance	$	358		$	-		$	(491	)	$	(504	)	$	(637	)
Other comprehensive income (loss) before reclassifications		(356	)		31			-			3			(322	)
Losses (gains) reclassified from accumulated other comprehensive income (loss)		8			(31	)		12			-			(11	)
Net current period other comprehensive income (loss)		(348	)		-			12			3			(333	)
Ending balance	$	10		$	-		$	(479	)		(501	)	$	(970	)

The following table provides details about reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2021 (unaudited):

Details about accumulated other comprehensive income (loss) components	Losses (gains) reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement of income (loss)
Losses on available-for-sale marketable securities	$	8		Financial income, net
		-		Provision for income taxes
		8		Total, net of income taxes
Gains on cash flow hedges		(24	)	Research and development
		(3	)	Sales and marketing
		(4	)	General and administrative
		(31	)	Total, before income taxes
		-		Provision for income taxes
		(31	)	Total, net of income taxes
Losses on components of defined benefit plans		7		Research and development
		5		Sales and marketing
		12		Total, before income taxes
		-		Provision for income taxes
		12		Total, net of income taxes
Total reclassifications for the period	$	(11	)	Total, net of income taxes

24

 

NOTE P—GOVERNMENT GRANTS

Government grants received by the Company’s Israeli subsidiary relating to categories of operating expenditures are credited to the consolidated statements of income during the period during which the expenditure to which they relate is charged. Royalty and non-royalty-bearing grants from the Israeli Innovation Authority ("IIA") for funding certain approved research and development projects are recognized at the time when the Company’s Israeli subsidiary is entitled to such grants, on the basis of the related costs incurred, and are included as a deduction from research and development expenses, net.

The Company recorded grants in the amount of $911 and $907 for the three month periods ended June 30, 2021 and 2020, respectively.

The Company recorded grants in the amount of $1,452 and $1,120 for the six month periods ended June 30, 2021 and 2020, respectively.

The Company’s Israeli subsidiary is obligated to pay royalties amounting to 5% of the sales of certain products, the development of which benefited from grants received from the IIA in previous years. The obligation to pay these royalties is contingent on actual sales of such products. Grants received from the IIA may become repayable if certain criteria under the grants are not met. In addition, the grants may be required to be repaid with a multiple of up to six times the initial grant amount in case the technology that was developed using these grants are transferred, directly or indirectly, to a third party.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report and certain information incorporated herein by reference contain forward-looking statements, which are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this report, other than statements that are purely historical in nature, are forward-looking statements. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. Forward-looking statements include statements regarding:

● Our expectation that revenues from our IoAT businesses will increase in 2021 as compared to 2020;

● Our expectation that sales of digital cordless telephony products will continue to represent a substantial percentage of our revenues for the remainder of 2021;

● Our belief that we are uniquely positioned to leverage our leadership in the IoAT businesses to meet customers’ needs and allow them to develop innovative products that provide a safer, user friendly, and more productive environment, both at the office and at home;

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● Our belief that our business is directly benefitting from increased adoption of voice user interfaces, a surge in voice call traffic, and demand for intuitive, seamless, and reliable collaboration tools;

● Our belief that even as countries and communities start to re-open, we foresee a continued reliance on these services as many companies will utilize a hybrid model of WFH and in-office work;

● Our belief that our company is well positioned to service the market trends resulting from the pandemic through our best-in-class product offering for UC endpoints, as well as for portable terminals, headsets, IoT, VUIs, and AI at the edge;

● Our belief that our available cash and cash equivalents on June 30, 2021 should be sufficient to finance our operations for the foreseeable future;

● We believe we are well positioned to service the market trends resulting from the pandemic through our best-in-class product offering for UC endpoints, as well as for portable terminals, headsets, IoT, VUIs, and AI at the edge; and

●  We expect such revenues to represent more than two-thirds of our total revenues for 2021. The expected increase in revenues from our IoAT businesses will be driven mainly by all products within this segment.

All forward-looking statements included in this Quarterly Report on Form 10‑Q are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement. Many factors may cause actual results to differ materially from those express or implied by the forward –looking statements contained in this report. These factors include, but are not limited to, our dependence on one primary distributor, our OEM relationships and competition, as well as those risks described in Part II Item 1A “Risk Factors” of this Form 10‑Q.

Moreover, the full impact of the COVID-19 pandemic and its derivations continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on the company’s financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to estimate the full effect of the COVID-19 outbreak and its derivations on the company’s results of operations, financial condition or liquidity for fiscal year 2021. The following discussions are subject to the future effects of the COVID-19 pandemic and its derivations.

This Quarterly Report on Form 10‑Q includes trademarks and registered trademarks of DSP Group. Products or service names of other companies mentioned in this Quarterly Report on Form 10‑Q may be trademarks or registered trademarks of their respective owners.

DSP Group, Inc. is referred to in this Quarterly Report as “DSP Group,” “we,” “us” “our” or “company.”

Overview

The following discussion and analysis is intended to provide investors with a narrative of our financial results and an evaluation of our financial condition and results of operations. The discussion should be read in conjunction with our condensed consolidated financial statements and notes thereto.

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Business Overview

DSP Group is a leading global provider of wireless chipset solutions for converged communications, delivering system solutions that combine semiconductors and software with reference designs. We provide a broad portfolio of wireless chipsets integrating DECT, Wi-Fi, PSTN and VoIP technologies with state-of-the-art application processors. We also enable converged voice, audio and data connectivity across diverse consumer products – from cordless and VoIP phones to home gateways and connected multimedia screens. Our Home segment consists of cordless telephony products and SmartHome products, which are comprised of our home gateway and home automation products. Our Unified Communications segment consists of a comprehensive set of solutions for Unified Communications (VoIP office products). Our SmartVoice segment consists of products targeted at mobile, IoT and wearable device markets that incorporate our noise suppression and voice quality enhancement HDClear technology, as well as other third-party advanced voice processing, always on and sensor hub functionalities.

In 2013, we defined three initiatives aimed at growing market verticals, which align well with our expertise. We called these initiatives Unified Communications, SmartHome, and SmartVoice, which together we referred to as “growth initiatives.” Our past research and development investments paid off and our strategy with respect to such initiatives has proven successful. Starting in 2018, our growth initiatives accounted for a majority of our total revenues. Reflecting our success in turning growth initiatives into our core expertise, we changed the terminology for these market verticals that we operate in from “growth initiatives” to Internet of Audio Things or “IoAT” businesses. Furthermore, as of January 1, 2021, we changed our reporting segments from Home, Unified Communications and SmartVoice, to Cordless and IoAT.

In July 2020, we completed the acquisition of SoundChip SA, a privately-held Swiss company (“SoundChip”) for an initial purchase price of approximately $15 million and agreed to pay future contingent cash milestone payments of up to $6 million upon the achievement of certain customer and product sales milestones. SoundChip is a leading supplier of active noise cancellation (ANC) technology, engineering services, design tools and production-line test systems for headsets. The acquisition combines SoundChip’s proven capabilities in hybrid ANC with our SmartVoice™ advanced low-power voice processing platform, algorithms, and mixed-signal expertise to streamline the delivery of cutting-edge wireless and true wireless stereo (TWS) headsets, from concept through to manufacturing. SoundChip operations were consolidated as of July 1, 2020^t and are included in the IoAT segment.

Our innovative products and solutions are foundational to the technological shifts that are accelerated by the pandemic. As a result, we are uniquely positioned to leverage our leadership in the IoAT businesses to meet customers’ needs and allow them to develop innovative products that provide a safer, user friendly, and more productive environment, both at the office and at home. For instance, with more employees working remotely, and offices reconfiguring workspaces to cater to social distancing requirements, high-quality voice-centric communication is essential. In particular, our business is directly benefitting from increased adoption of voice user interfaces, a surge in voice call traffic, and demand for intuitive, seamless, and reliable collaboration tools. The widespread mandatory stay-at-home orders around the globe created a surge in the number of individuals working from home or other remote locations. In this reality, flexible and collaborative work-from-home (WFH) approaches have become essential for preserving business continuity and productivity in the now “elastic” enterprise. Even as countries and communities start to re-open, we foresee a continued reliance on these services as many companies will utilize a hybrid model of WFH and in-office work. Also, individuals worldwide have recently become sensitive to the health risks of touching commonly-used surfaces, which accelerates the adoption of voice as a user interfaces (VUIs) as a “must have feature” for a broad array of products to address the increasing preference for contactless, germ-free, voice-enabled human-machine interface. Moreover, amid the pandemic, voice call volume increased significantly, which drove demand for the integration of DECT/ULE in home gateways to ensure quality of service and full home coverage. We believe we are well positioned to service the market trends resulting from the pandemic through our best-in-class product offering for UC endpoints, as well as for portable terminals, headsets, IoT, VUIs, and AI at the edge.

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In the first half of 2021, revenues from our IoAT businesses, namely sales from our Unified Communications, SmartHome and SmartVoice products, were $45.5 million as compared to $36.6 million for the first half of 2020 and represented an increase of 24% year-over-year. Revenues from IoAT businesses represented 67% and 65% of total revenues for the comparable periods. Revenues from our Unified Communications products represented 32% of our total revenues for the first half of 2021, as compared to 36% of our total revenues for the first half of 2020. Revenues from our SmartVoice products represented 19% of our total revenues for the first half of 2021, as compared to 14% of our total revenues for the first half of 2020. Revenues from SmartHome products accounted for 15% of our total revenues for both the first half of 2021 and 2020. Year-over-year, Unified Communications products increased by 7%, revenues from SmartVoice products increased by 66% and revenues from SmartHome products increased by 28%. Based on a strong pipeline of design wins, our current mix IoAT business products and anticipated commercialization schedules of customers incorporating such products, we anticipate annual revenues generated from our IoAT businesses to increase in 2021, as compared to 2020. We expect such revenues to represent more than two-thirds of our total revenues for 2021. The expected increase in revenues from our IoAT businesses will be driven mainly by all products within this segment.

Our revenues were $68.5 million for the first half of 2021, a 21% increase as compared to the first half of 2020. Revenue derived from cordless segment represented 33% and 35% of our total revenues for the first half of 2021 and 2020, respectively, and increased by 15% for the first half of 2021, as compared to the same period in 2020.

Our gross margin increased to 52.8% of our total revenues for the first half of 2021 from 50.6% for the first half of 2020, primary due to (i) higher revenues for the first half of 2021, as compared to the same period in 2020, (ii) improvement in production yield and direct contribution of certain products in the first half of 2021, and (iii) changes in the mix of products sold and mix of customers for the first half of 2021, as compared to the first half of 2020.

Our operating loss was $2.2 million for the first half of 2021, as compared to an operating loss of $4.8 million for the first half of 2020. The decrease in our operating loss is attributable to an increase in our revenues and gross margins for the first half of 2021, as compared to the corresponding period of 2020, partially offset by an increase in our operating expenses for the comparable periods.

Our operating expenses amounted to $38.3 million for the first half of 2021, as compared to $33.4 million for the first half of 2020. The increase in our operating expenses for the first half of 2021, as compared to the first half of 2020, is attributable mainly to (i) an increase of $2.3 million in our research and development expenses for the first half of 2021, as compared to the corresponding period of 2020, (ii) an increase of $1.1 million in our sales and marketing expenses for the first half of 2021, as compared to the corresponding period of 2020, (iii) an increase of $0.8 million in our general and administrative expenses for the first half of 2021, as compared to the corresponding period of 2020, and (iv) an increase of $0.6 million in our amortization of intangible assets in the first half of 2021, as compared to the corresponding period of 2020.

As of June 30, 2021, our principal source of liquidity consisted of cash and cash equivalents of $16.2 million and marketable securities, short and long-term deposits of $113.2 million, totaling $129.4 million.

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COVID-19

The full impact of the COVID-19 pandemic and its derivations continues to evolve. As such, there is continued uncertainty as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the continuing evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to fully estimate the effects of the COVID-19 outbreak and its derivations on our results of operations, financial condition, liquidity or capital resources for 2021. During 2020, we experienced some short-term slowdown in the Unified Communications market due to reduced spending in enterprise IT infrastructure as a result of work-from-home activities.  Furthermore, there are certain industry-wide supply chain constraints that are placing certain limitations on our product deliveries. Therefore, while we are confident about our engagement pipeline and the long-term prospects of our IoAT businesses, we may face some near-term challenges that will negatively impact our revenues for 2021.[DW1]  The following discussion about our results of operations are subject to the future effects of the COVID-19 pandemic and its derivations.

RESULTS OF OPERATIONS

The following tables represent our total revenues and our revenues by product family for the three and six month periods ended June 30, 2021 and 2020 (dollars in millions):

	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
Total Revenues (1)	$	35.8		$	28.3			26	%	$	68.5		$	56.6			21	%
Cordless (2)	$	11.05		$	9.9			11	%	$	22.9		$	20.0			15	%
Percentage of total revenues		31	%		35	%					33	%		35	%
SmartHome (3)	$	5.75		$	4.3			33	%	$	10.6		$	8.3			28	%
Percentage of total revenues		16	%		15	%					15	%		15	%
Unified Communications (4)	$	11.8		$	10.1			16	%	$	21.8		$	20.4			7	%
Percentage of total revenues		33	%		36	%					32	%		36	%
SmartVoice (5)	$	7.2		$	3.9			82	%	$	13.2		$	7.9			66	%
Percentage of total revenues		20	%		14	%					19	%		14	%

1.	The increase in revenues for the second quarter and the first six months of 2021 as compared to the same periods in 2020 was primarily as a result of an increase in sales of all our products.
2.	The increase in cordless revenues for the second quarter and first six months of 2021 as compared to the same periods in 2020 was mainly attributable to increased demand in all cordless markets as a result of the COVID-19 pandemic which resulted in an increase in voice calls.
3.	The increase of our SmartHome product sales for the second quarter and first six months of 2021 as compared to the same periods in 2020 is attributable mainly to an increase in customer demand for home gateway and home automation products.
4.	The increase in our Unified Communications product sales for the second quarter and first six months of 2021, as compared to same periods in 2020, is mainly attributable to a growth in market demand for our Unified Communications products. Within the hybrid work models environment, businesses and employers around the globe had to renovate and adapt the office space to cope with the new challenges derived from a hybrid workforce. This precipitated a HW replacement cycle and purchases of additional devices that support employees at their home or virtual office.
5.	The increase in our SmartVoice product sales for the second quarter and first six months of 2021, as compared to the same periods in 2020, was attributable to an increase in the number of customers and design wins in this segment, as well as the integration of SoundChip revenues starting from July 1, 2020.

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The following table shows the breakdown of revenues for all product lines for the periods based on the geographic location of our customers (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
United States	$	1,611	$	623	$	2,734	$	1,509
Japan		3,486		2,338		6,862		5,966
Europe		1,974		1,268		4,018		2,978
Hong-Kong		8,743		8,115		18,067		15,390
China		6,766		5,376		13,470		9,580
Taiwan		10,427		9,171		18,406		18,103
South Korea		1,966		1,126		3,036		2,324
Other		834		319		1,861		725
Total revenues	$	35,807	$	28,336	$	68,454	$	56,575

Sales to our customers in United States increased for the second quarter and first six months of 2021 as compared to the same periods of 2020, representing an increase of 158% and 81% in absolute dollars. The increase in our sales to the United States for the comparable periods resulted mainly from an increase in sales to one of our U.S. customers.

Sales to our customers in Japan increased for the second quarter and the first six months of 2021 as compared to the same periods of 2020, representing an increase of 49% and 15% in absolute dollars. The increase in our sales to Japan for the comparable periods resulted mainly from an increase in sales through our distributor, Nexty Electronics Corporation (“Nexty Electronics”). The increase in sales to Nexty Electronics resulted mainly from an increase in sales to Panasonic Communications Ltd. (“Panasonic”).

Sales to our customers in Europe increased for the second quarter and first six months of 2021 as compared to the same periods of 2020, representing an increase of 56% and 35%, respectively, in absolute dollars. The increase in our sales to Europe for the comparable periods resulted mainly from an increase in sales to one of our German customers.

Sales to our customers in Hong Kong increased for the second quarter and first six months of 2021, as compared to the same periods of 2020, representing an increase of 8% and 17% in absolute dollars, resulting mainly from (i) an increase in sales to our customer, SGW Global, representing an increase of 91% and 76% in sales for the comparable periods, and (ii) an increase in sales to several other customers in Hong Kong.

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Sales to our customers in China increased for the second quarter and first half of 2021, as compared to the same periods of 2020, representing an increase of 26% and 41%, respectively, in absolute dollars. The increase in our sales to China for the comparable periods resulted mainly from an increase in sales to our customer, Lenovo, representing an increase of 93% and 197% in sales for the comparable periods. Sales to our customers in Taiwan increased for the second quarter and first half of 2021, as compared to the same periods of 2020, representing an increase of 14% and 2%, respectively, in absolute dollars. The increase in our sales to Taiwan for the second quarter of 2021, as compared to the same periods of 2020 resulted mainly from an increase in sales through our distributor, Ascend Technology Inc. (“Ascend Technology”). The increase in sales to Ascend Technology resulted mainly from an increase in sales to Avaya and other customers in Taiwan, offset to some extent by a decrease in sales to Cisco.

Sales to our customers in South Korea increased for the second quarter and first six months of 2021, as compared to the same periods of 2020, representing an increase of 75% and 31%, respectively, in absolute dollars, resulted mainly from increased demands from our customers in South Korea.

Sales to other customers increased for the second quarter and first six months of 2021, respectively, as compared to the same periods of 2020, representing an increase of 161% and 157% in absolute dollars. The increase in our sales to other customers for the comparable periods resulted mainly from an increase in sales to one of our customers located in Brazil.

As our products are generally incorporated into consumer electronics products sold by our OEM customers, our revenues are affected by seasonal buying patterns of consumer electronics products sold by our OEM customers that incorporate our products, as well as inventory correction cycles within the market.

Significant customers. The loss of any of our significant customers or distributors could have a material adverse effect on our business, financial condition and results of operations. The following table represents our total revenues, as a percentage of our total revenues, from our significant customers for the three and six months periods ended June 30, 2021 and 2020:

	Three months ended June 30,		Six months ended June 30,
	2021	2020	2021	2020
VTech Holdings Ltd. (“VTech”)	14%	22%	16%	21%
Cisco	12%	21%	12%	18%

The following table represents our total revenues, as a percentage of our total revenues, through our main distributors for the three and six-month periods ended June 30, 2021 and 2020:

	Three months ended June 30,		Six months ended June 30,
	2021	2020	2021	2020
Nexty Electronics (1)	9%	8%	9%	10%
Ascend Technology (2)	35%	39%	33%	38%

(1) Our distributor, Japan-based Nexty Electronics, sells our products to a limited number of customers; none of those customers has accounted for 10% or more of our revenues for the three and six month periods ended June 30, 2021 and 2020.

(2) Ascend Technology sells our products to a limited number of customers. One of those customers – Cisco – accounted for 12% and 21% of our total revenues for the three month periods ended June 30, 2021 and 2020, respectively, and 12% and 18% of our total revenues for the six month periods ended June 30, 2021 and 2020, respectively.

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Significant products. Revenues from our digital cordless telephony products represented 33% and 35% of our total revenues for the six months ended June 30, 2021 and 2020, respectively. Revenues from our digital cordless telephony products represented 31% and 35% of our total revenues for the second quarter of 2021 and 2020, respectively. We believe that sales of digital cordless telephony products will continue to represent a substantial percentage of our revenues for the remainder of 2021.

Revenues from our Unified Communications products represented 32% and 36% of our total revenues for the six months ended June 30, 2021 and 2020, respectively. Revenues from our Unified Communications products represented 33% and 36% of our total revenues for the second quarter of 2021 and 2020, respectively.

Revenues from our SmartVoice products represented 19% and 14% of our total revenues for the six months ended June 30, 2021 and 2020, respectively. Revenues from our SmartVoice products represented 20% and 14% of our total revenues for the second quarter of 2021 and 2020, respectively.

Revenues from our SmartHome products represented 15% of our total revenues for both six month periods ended June 30, 2021 and 2020. Revenues from our SmartHome products represented 16% and 15% of our total revenues for the second quarter of 2021 and 2020, respectively.

Gross profit. Gross profit as a percentage of revenues was 53.4 % for the second quarter of 2020 and 50.3% for the second quarter of 2020. Gross profit as a percentage of revenues was 52.8% for the first half of 2021 and 50.6% for the first half of 2020. The increase in our gross profit for the comparable periods was primarily due to (i) higher revenues for the second quarter and first six months of 2021, (ii) an improvement in direct contribution and production yield of certain of our products, and (ii) a change in the mix of products sold and mix of customers.

Cost of goods sold consists primarily of costs of wafer manufacturing and fabrication, assembly and testing of integrated circuit devices and related overhead costs, and compensation and associated expenses related to manufacturing and testing support, inventory obsolesce and logistics personnel.

Research and development expenses, net. Our research and development expenses, net, increased to $10.6 million for the second quarter of 2021 from $8.5 million for the second quarter of 2020. The increase for the second quarter of 2021 was mainly due to (i) an increase in payroll and payroll related expenses in the amount of $1.2 million, as compared to the second quarter of 2020, mostly due to an increase in the number of employees and decrease in the USD rate versus the Israeli Shekel in the second quarter of 2021, (ii) an increase in IP and development tools expenses in the amount of $0.2 million, as compared to the second quarter of 2020 and (iii) an increase of $0.5 million in equity-based compensation expenses as compared to the second quarter of 2020. Our research and development expenses, net, increased to $21.1 million for the first half of 2021 from $18.8 million for the first half of 2020. The increase for the first half of 2021 was mainly due to (i) an increase in payroll and payroll related expenses in the amount of $2.4 million, as compared to the first half of 2020, mostly due to an increase in the number of employees and decrease in the USD rate versus the Israeli Shekel in the first half of 2021 and (ii) an increase of $0.9 million in equity based compensation expenses as compared to the first half of 2020. Those increases were partially offset by a decrease in tape out and IP expenses in the amount of $1.2 million, as compared to the first half of 2020.

Our research and development expenses, net, as a percentage of our total revenues were 30% for the three months ended June 30, 2021, and 2020 and 31% and 33% for the six months ended June 30, 2021 and 2020, respectively. The decrease in research and development expenses, net, as a percentage of revenues for the first half of 2021, as compared to the first half of 2020, was mainly due to an increase in revenues, partially offset by an increase in research and development expenses for the comparable periods.

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Research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, expenses related to tape out and mask work, subcontracting, labor contractors and engineering expenses, depreciation and maintenance fees related to equipment and software tools used in research and development, and facilities expenses associated with and allocated to research and development activities.

Sales and marketing expenses. Our sales and marketing expenses increased to $5.3 million for the second quarter of 2021 from $4.4 million for the second quarter of 2020. The increase for the second quarter of 2021 was mainly due to (i) an increase in payroll and payroll related expenses in amount of $0.4 million, as compared to the second quarter of 2020, (ii) an increase of $0.1 million in representatives and distributors sales commissions for the second quarter of 2021, (iii) an amount of $0.15 million in the second quarter of 2021, of amortization of employee’s retention expenses related to the acquisition of SoundChip, and (iv) an increase of $0.1 million in equity-based compensation expenses for the second quarter of 2021.

Our sales and marketing expenses increased to $10.5 million for the first half of 2021 from $9.4 million for the first half of 2020. The increase in sales and marketing expenses for the first half of 2021, as compared to the comparable period of 2020, was mainly due to (i) an increase in salaries and payroll related expenses in the amount of $0.7 million for the first half of 2021, as compared to the first half of 2020, mainly as a result of an increase in the number of sales and marketing employees, (ii) an increase of $0.2 million in sales commissions for the first half of 2021, (iii) an increase of $0.2 million in equity-based compensation expenses for the first half of 2021, as compared to the first half of 2020, (iv) an increase in the first half of 2021 in an amount of $0.3 million of amortization of employee’s retention expenses related to the acquisition of SoundChip. The increase in sales and marketing expenses was partially offset by a decrease of $0.3 million in trade shows and travel expenses for the first half of 2021, as compared to the first half of 2020, and a decrease of $0.2 million in consultants and subcontractors expenses in the first half of 2021, as compared to the same period in 2020.

Our sales and marketing expenses, net, as a percentage of our total revenues were 15% and 16% for the three months ended June 30, 2021 and 2020, respectively, and 15% and 17% for the first half of 2021 and 2020, respectively. The decrease as a percentage of our total revenues for the three and six month periods ended June 30, 2021 as compared to the comparable periods in 2020was mainly due to an increase in revenues for the comparable periods, partially offset by an increase in sales and marketing expenses in the comparable periods.

Sales and marketing expenses consist mainly of sales commissions, payroll expenses to direct sales and marketing employees, travel, trade show expenses, and facilities expenses associated with and allocated to sales and marketing activities.

General and administrative expenses. Our general and administrative expenses increased to $3.2 million for the second quarter of 2021, from $2.6 million for the second quarter of 2020. The increase in our general and administrative expenses for the second quarter of 2021 was mainly due to (i) an increase of $0.4 million in payroll and payroll related expenses, as compared to the second quarter of 2020, (ii) an increase of $0.1 million in professional expenses, especially directors and officers insurance expenses in the second quarter of 2021 as compared to the same period in 2020, and (iii) an increase of $0.1 million in equity-based compensation expenses for the second quarter of 2021 as compared to the same period in 2020.

Our general and administrative expenses were $5.8 million and $5.0 million for the first half of 2021 and 2020, respectively. The increase in general and administrative expenses for the first half of 2021, as compared to the comparable period of 2020, was mainly due to (i) an increase in equity-based compensation expenses for the first half of 2021 in the amount of $0.3 million as compared to the first half of 2020, (ii) an increase of $0.1 million in professional expenses, especially directors and officers insurance expenses as compared to the first half of 2020, and (iii) an increase in payroll and payroll related expenses in amount of $0.4 million in the first half of 2021 as compared to the first half of 2020.

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General and administrative expenses as a percentage of our total revenues were 9% for both the three months ended June 30, 2021 and 2020, and 8% and 9% for the first six months of 2021 and 2020, respectively. The decrease as a percentage of our total revenues for the six month periods ended June 30, 2021 compared to the comparable period of 2020 was mainly attributable to an increase in revenues for the comparable periods, partially offset by an increase in our general and administrative expenses in the first half of 2021, as compared to the first half of 2020.

Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, accounting and legal fees, expenses related to investor relations as well as facilities expenses associated with general and administrative activities.

Description of segments.

We operate under two reportable segments.

Our segment information has been prepared in accordance with ASC 280, “Segment Reporting.” Operating segments are defined as components of an enterprise engaging in business activities about which separate financial information is available that is evaluated regularly by our chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. Our CODM is our Chief Executive Officer, who evaluates our performance and allocates resources based on segment revenues and operating income.

Our reporting segments up until December 31, 2020 were: Home, Unified Communications and SmartVoice.

As a result of an organization change that took place starting in 2021 and the way management views the business operations, as of January 1, 2021 our operating segments were changed to: Cordless and IoAT.

The classification of our business segments is based on a number of factors that management uses to evaluate, view and run our business operations, which include, but are not limited to, customer base, homogeneity of products and technology.

A description of the types of products provided by each business segment is as follows:

Cordless – This segment includes integrated circuit products targeted for cordless phones sold in retail or supplied by telecommunication service providers. Revenues from this segment amounted to 33% and 35% of the Company’s total revenues for the first half of 2021 and 2020, respectively, and 31% and 35% of the Company’s total revenues for the second quarter of 2021 and 2020, respectively.

IoAT (Internet of Audio Things) – This segment includes the following products:

(iv)    SmartHome (home gateways and home automation) – Wireless chipset solutions for converged communication at home. Target applications include: home gateway devices supplied by telecommunication service and security providers with DECT/CAT-iq and ULE functionality for data and two-way voice; home automation and home security. Revenues from SmartHome products amounted to 15% of our total revenues for both the first half of 2021 and 2020, respectively, and 16% and 15% of our revenues for the second quarter of 2021 and 2020, respectively.

(v)    Unified Communications — Comprehensive suite of solutions for Unified Communications products, including office solutions for businesses of all sizes, from low-cost VoIP terminals with converged voice and data applications, to high-end conferencing systems. Revenues from our Unified Communications products represented 32% and 36% of our total revenues for the first half of 2021 and 2020, respectively, and 33% and 36% of our revenues for the second quarter of 2021 and 2020.

(vi)    SmartVoice — SmartVoice hardware and software solutions provide voice activation and recognition, sound event detection (SED), voice enhancement, always-on wake-word detection, far-end noise elimination targeted for mobile phones, mobile headsets/hearables, wearables, tablets, consumer home electronics, security systems and other devices that incorporate the Company’s noise suppression and voice quality enhancement HDClear technology. SmartVoice includes an active noise cancellation (ANC) solution for hearables (headphones and true wireless stereo (TWS) earbud) applications. Revenues from our SmartVoice products represented 19% and 14% of our total revenues for the first half of 2021 and 2020, respectively, and 20% and 14% of our revenues for the second quarter of 2021 and 2020.

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Segment data:

We derive the results of our business segments directly from our internal management reporting system and by using certain allocation methods. The accounting policies we use to derive business segment results are substantially the same as those we use for consolidation of our financial statements. The CODM measures the performance of each business segment based on several metrics, including earnings from operations. The CODM uses these results, in part, to evaluate the performance of, and to assign resources to, each of the business segments. We do not allocate to our business segments certain operating expenses, which are managed separately at the corporate level. These unallocated costs include primarily amortization of purchased intangible assets, equity-based compensation expenses, and certain corporate governance costs.

Selected operating results information for each business segment was as follows for the three months ended June 30, 2021 and 2020:

	Revenues				Income (loss) from operations
	Three months ended March 31,
	2021		2020		2021			2020
	Unaudited
Cordless	$	11,048	$	9,939	$	4,531		$	3,577
IoAT		24,759		18,397		(614	)		(1,942	)
Total	$	35,807	$	28,336	$	3,917		$	1,635

Selected operating results information for each business segment was as follows for the six months ended June 30, 2021 and 2020:

	Revenues				Income (loss) from operations
	Six months ended March 31,
	2021		2020		2021			2020
	Unaudited
Cordless	$	22,918	$	19,996	$	9,052		$	6,774
IoAT		45,536		36,579		(3,107	)		(6,148	)
Total	$	68,454	$	56,575	$	5,945		$	626

Sales to our customers in the Cordless segment increased for the second quarter and first half of 2021, as compared to the second quarter and first half of 2020, representing an increase of 11% and 15% in absolute dollars, respectively. The increase in cordless revenues for both the comparable periods was mainly attributable to increased customer demand in all cordless markets as a result of the COVID-19 pandemic which resulted in an increase in voice calls.

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Sales to our customers in the IoAT segment increased for the second quarter and first half of 2021 as compared to the second quarter and first half of 2020, representing an increase of 35% and 24%, respectively, in absolute dollars.

The increase in IoAT revenues for the second quarter and first half of 2021 as compared to the same periods in 2020 was mainly attributable to an increase in customer demand for our SmartVoice, Unified communications and SmartHome products.

The reconciliation of segment operating results information to our consolidated financial information is included in Note N to our condensed consolidated financial statements.

Amortization of intangible assets. For the second quarter of 2021 and 2020, we recorded an expense of $0.4 million and $0.1 million, respectively, relating to the amortization of intangible assets associated with previous acquisitions. During the first half of 2021 and 2020, we recorded an expense of $0.8 million and $0.2 million, respectively, relating to the amortization of intangible assets associated with previous acquisitions. The increase in the second quarter and first half of 2021 was attributable to the amortization of intangible assets related to our acquisition of SoundChip in July 2020.

Financial income, net. Financial income, net, amounted to $0.1 and $0.3 million for the three month periods ended June 30, 2021 and 2020, respectively. Financial income, net, amounted to $0.7 million and $1.2 million for the first six months of 2021 and 2020, respectively.

Financial income, net, for the second quarter of 2021 decreased in the amount of $0.2 million as a result of a decrease in marketable securities and deposits interest for the second quarter of 2021, as compared to the second quarter of 2020, due to a decrease in interest rates.

Financial income, net, for the first half of 2021 decreased in the amount of $0.5 million as a result of a decrease in marketable securities and deposits interest for the first half of 2021, as compared to the first half of 2020, due to a decrease in interest rates.

Provision for income taxes. We had $0.1 million of income tax expenses for the second quarter of 2021 as compared to no income tax expenses for the second quarter of 2020. We had $0.3 million of income tax expenses for the first six months of 2020, as compared to $0.1 million of income tax benefit for the first half of 2020.

The tax expenses for the second quarter of 2021 was mainly attributable to current tax expenses in an amount of $0.35 million, offset to some extent by income tax benefit in the amount of $0.25 million that resulted from changes in deferred taxes related to intangible assets acquired in previous acquisitions and equity-based compensation expenses.

The tax expenses for the first half of 2021 was mainly attributable to current tax expenses in an amount of $0.7 million, offset to some extent by income tax benefit in the amount of $0.4 million that resulted from changes in deferred taxes related to intangible assets acquired in previous acquisitions and equity-based compensation expenses. The income tax benefit for the first half of 2020 was attributable to income in the amount of $0.1 million from changes in other deferred taxes, mainly related to losses incurred by our Israeli subsidiary for tax purposes, less current tax expenses.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities. During the first six months of 2021, we generated $7.6 million of cash and cash equivalents from our operating activities, as compared to $8.9 million of cash generated from our operating activities for the first half of 2020. The decrease in net cash provided from operating activities for the first half of 2021, as compared to the first half of 2020, was mainly as a result of changes in working capital items for the first half of 2021, as compared to the first half of 2020 (mainly an increase in accounts receivable in the amount of $2.5 million for the first half of 2021, as compared to a decrease in accounts receivable in the amount of $4.8 million for the first half of 2020), offset by some extent by a decrease in net loss for the first half of 2021, as compared to the first half of 2020.

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Investing activities. We invest excess cash in marketable securities of varying maturity, depending on our projected cash needs for operations, capital expenditures and other business purposes. During the first half of 2021, we purchased $28.2 million of marketable securities and short-term deposits, compared to $48.6 million purchased during the first half of 2020. During the first half of 2021, $20.4 million of marketable securities and short-term deposits matured and were called by the issuers, as compared to $42.4 million during the first half of 2020. During the first half of 2021 and 2020, $4.7 million and $9.6 million, respectively, of marketable securities were sold. As of June 30, 2021, the amortized cost of our marketable securities and deposits was $113.2 million and their stated market value was $113.2 million as well.

Our capital equipment purchases, consisting primarily of research and development software tools, computers, peripheral, engineering test and lab equipment, leasehold improvements, furniture and fixtures, totaled $0.8 and $0.6 million, for the first six months of 2021 and 2020, respectively.

Financing activities. During the first six months of 2021, we paid an aggregate purchase price of $5.2 million to repurchase approximately 331,000 shares of common stock at an average purchase price of $15.63 per share.

During the first six months of 2020, we paid an aggregate purchase price of $3.7 million to repurchase approximately 305,000 shares of common stock at an average purchase price of $12.26 per share.

In addition, during the first half of 2021, we received $0.8 million upon the exercise of employee and director stock options. During the first half of 2020, we received $1.5 million upon the exercise of employee and director stock options. We cannot predict cash flows from exercises of stock options for future periods.

Our board of directors has previously approved a number of shares repurchase programs, including those in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, for the repurchase of our common stock. At June 30, 2021, 27,885 shares of our common stock are available for repurchase under our board-authorized share repurchase program.

As of June 30, 2021, we had cash and cash equivalents totaling approximately $16.2 million and marketable securities and time deposits of approximately $113.2 million. Out of total cash, cash equivalents and marketable securities of $129.4 million, $118.7 million was held by foreign entities. Our intent is to permanently reinvest earnings of our foreign operations and our current operating plans do not demonstrate a need to repatriate foreign earnings to fund our U.S. operations. However, if these funds were needed for our operations in the United States, we would be required to accrue and pay taxes in several countries to repatriate these funds. The determination of the amount of additional taxes related to the repatriation of these earnings is not practicable, as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated.

Our working capital at June 30, 2021 was approximately $59.8 million, compared to $84.1 as of June 30, 2020. The decrease in working capital was mainly due to (i) replacement of short-term marketable securities with long-term marketable securities and deposits, (ii) the repurchase of our common stock in the amount of $5.2 million from June 30, 2020 through June 30, 2021 and (iii) net cash of $13.9 million used for the acquisition of SoundChip in 2020. The above-mentioned decreases were partially offset by net cash generated from operating activities from June 30, 2020 through June 30, 2021. We believe that our current cash, cash equivalents, cash deposits and market securities will be enough to meet our cash requirements for both the short and long term.

In addition, as part of our business strategy, we may evaluate potential acquisitions of businesses, products and technologies. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products or businesses. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot assure you that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all. See the section of the risk factors entitled "We may engage in future acquisitions that could dilute our stockholders’ equity and harm our business, results of operations and financial condition." for more detailed information.

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Off-Balance sheet arrangements

We do not have any off-balance sheet arrangements, as such term is defined in recently enacted rules by the Securities and Exchange Commission, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk. It is our policy not to enter into interest rate derivative financial instruments, except for hedging of foreign currency exposures discussed below. We do not currently have any significant interest rate risk since we do not have any financial obligations.

The majority of our cash and cash equivalents are invested in high grade certificates of deposits with major U.S., European and Israeli banks. Generally, cash and cash equivalents and short term deposits may be redeemed and therefore minimal credit risk exists with respect to them. Nonetheless, cash deposits with these banks exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits in the U.S. or similar limits in foreign jurisdictions to the extent such deposits are even insured in such foreign jurisdictions. While we monitor on a systematic basis the cash balances and adjust the balances as appropriate, these balances could be impacted if one or more of the financial institutions with which we deposit our funds fails or is subject to other adverse conditions in the financial or credit markets. To date we have experienced no loss of principal or lack of access to our cash; however, we can provide no assurances that access to our cash will not be affected if the financial institutions that we hold our cash fail or if there is significant instability in the financial and credit markets.

We hold an investment portfolio of marketable securities consisting principally of debentures of U.S. and European corporations, and state and political subdivisions of the U.S. government. We intend, and have the ability, to hold investments in marketable securities even with a decline in fair value until recovery of any temporary declines in their market value. However, we can provide no assurance that we will recover any present declines in the market value of our investments.

Interest rate fluctuations relating to our cash and cash equivalents and within our investment portfolio have not had, and we do not currently anticipate such fluctuations will have, a material effect on our financial position on an annual or quarterly basis.

Foreign currency exchange rate risk. A significant part of our sales and expenses are denominated in U.S. dollars. Part of our expenses in Israel are paid in NIS, which subjects us to the risks of foreign currency fluctuations between the U.S. dollar and the NIS. Our primary expenses paid in NIS are employee salaries and lease payments on our Israeli facilities. Furthermore, a portion of our expenses for our European operations are paid in the Euro, which subjects us to the risks of foreign currency fluctuations between the U.S. dollar and the Euro. Our primary expenses paid in Euro are employee salaries, lease and operational payments on our European facilities. To partially protect the company against an increase in value of forecasted foreign currency cash flows resulting from salary and lease payments denominated in NIS during 2020, we instituted a foreign currency cash flow hedging program. The option and forward contracts used are designated as cash flow hedges, as defined by FASB ASC No. 815,” Derivatives and Hedging,” and are all effective as hedges of these expenses. For more information about our hedging activity, see Note 2 to our notes to our consolidated financial statements for the year ended December 31, 2020. An increase in the value of the NIS and the Euro in comparison to the U.S. dollar could increase the cost of our research and development expenses and general and administrative expenses, all of which could harm our operating profit. Although we currently are using a hedging program to minimize the effects of currency fluctuations relating to the NIS, our hedging position is partial, may not exist at all in the future and may not succeed in minimizing our foreign currency fluctuation risks.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Management’s discussion and analysis of financial condition and results of operations—quantitative and qualitative disclosures about market risk."

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2021.

There has been no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in litigation relating to claims arising from our ordinary course of business. In addition, as is typical in the semiconductor industry, we have been and may from time to time be notified of claims that we may be infringing patents or intellectual property rights owned by third parties. We currently believe that there are no claims or actions pending or threatened against us, the ultimate disposition of which would have a material adverse effect on our company.

ITEM 1A. RISK FACTORS.

There are no material changes to the Risk Factors described under the title “Factors That May Affect Future Performance” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 other than (1) changes to the Risk Factor below entitled “We generate a significant amount of our total revenues from the sale of digital cordless telephony products and our business and operating results may be materially adversely affected if we do not continue to succeed in this highly competitive market or if sales within the overall cordless digital market decreases;” (2) changes to the Risk Factor below entitled “We rely significantly on revenue derived from a limited number of customers;” (3) changes to the Risk Factor below entitled “Because we have significant international operations, we may be subject to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our business;” (4) changes to the Risk Factor below entitled “We are exposed to fluctuations in currency exchange rates,” and (5) changes to the Risk Factor below entitled “Because we have significant operations in Israel, we may be subject to political, economic and or conditions affecting Israel that could increase our operating expenses and disrupt our business.”

Trends, Risks and Uncertainties Related to Our Business

The COVID-19 pandemic, or other outbreak of disease or similar public health threat, could materially and adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, and these measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers.

We have seen that demand for consumer electronic products has softened due to social distancing and other restrictions. Also, we have noticed a slowdown in spending on enterprise IT infrastructure which negatively affects revenues from our Unified Communications segment. Furthermore, certain industry-wide supply chain constraints are placing certain limitations on our product deliveries. Therefore, we face near-term challenges, related to a shortfall in consumer spending and demand for consumer electronic products, as well as near-term decrease in revenues from our Unified Communications segment.

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The spread of COVID-19 also has caused us to modify our business practices, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and communities.  Such actions may result in further disruptions to our supply chain, operations and facilities, and workforce. We cannot assure you that such measures will be sufficient to mitigate the risks posed by COVID-19, and our ability to perform critical functions could be harmed.

We cannot at this time quantify or forecast the full business impact of COVID-19. The degree to which COVID-19 impacts our business, financial condition, and results of operations will depend on future developments, which are highly uncertain, and to what extent normal economic and operating conditions can resume.

In order to sustain the future growth of our business, we must penetrate new markets and our new products must achieve widespread market acceptance but such additional revenue opportunities may not be implemented and may not be achieved.

In order to expand our business and increase our revenues, we must penetrate new markets and introduce new products, especially our Unified Communications, SmartVoice and SmartHome product families. To sustain the future growth of our business, we need to introduce new products as sales of our cordless products continue to decline as expected. We have invested significant resources in pursuing potential opportunities for revenue growth in new product initiatives. We also are exploring opportunities to expand sales of our products in new geographies. However, there are no assurances that we will be successful in the development, sales and marketing of our products in these competitive markets. Moreover, there are no assurances that we will recoup our investments made pursuing additional revenue opportunities. Our inability to penetrate such markets and increase our market share in those markets or lack of customer acceptance of those products may harm our business and potential growth.

Because the markets in which we compete are subject to rapid changes, our products may become obsolete or unmarketable.

The markets for our products and services are characterized by rapidly changing technology, short product life cycles, evolving industry standards, changes in customer needs, geo-political influences, demand for higher levels of integration, growing competition and new product introductions. Our future growth is dependent not only on the continued success of our existing products but also successful introduction of new products. Our ability to adapt to changing technology and anticipate future standards, and the rate of adoption and acceptance of those standards, will be a significant factor in maintaining or improving our competitive position and prospects for growth. If new industry standards emerge, our products or our customers’ products could become unmarketable or obsolete, and we could lose market share. We may also have to incur substantial unanticipated costs to comply with these new standards. If our product development and improvements take longer than planned, the availability of our products would be delayed. Any such delay may render our products obsolete or unmarketable, which would have a negative impact on our ability to sell our products and our results of operations. Moreover, if any of our competitors implement new technologies before us, those competitors may be able to provide products that are more effective or with more user-friendly features than ours, possibly at lower prices, which could adversely impact our sales and impact our market share. Our failure to develop and introduce competitive new products that are compatible with industry standards and that satisfy customer requirements, and the failure of our products to achieve broad market acceptance, could have a negative impact on our ability to sell our products and our results of operations.

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Because our quarterly operating results may fluctuate significantly, the price of our common stock may decline.

Our quarterly results of operations may vary significantly in the future for a variety of reasons, many of which are outside our control, including the following:

● fluctuations in volume and timing of product orders;

● timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;

● supply chain constraints that may affect customer deliveries;

● changes in demand for our products due to seasonal consumer buying patterns and other factors;

● timing of new product introductions by us and by our customers or competitors;

● changes in the mix of products sold by us or our competitors;

● fluctuations in the level of sales by our OEM customers and other vendors of end products incorporating our products;

● timing and size of expenses, including expenses to develop new products and product improvements, and expenses resulting from restructuring activities;

● the timing and amount of funding from Israeli Innovation Authority (“IIA”);

● entry into new geographies;

● currency exchange fluctuations;

● our ability to scale our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers;

● Geo-political policies outside of our control;

● mergers and acquisitions by us, our competitors and our existing and potential customers; and

● general economic conditions, including current economic conditions in the United States and worldwide, and the adverse effects on the semiconductor and consumer electronics industries.

Each of the above factors is difficult to forecast and could harm our business, financial condition and results of operations. Also, we sell our products to OEM customers that operate in consumer markets. As a result, our revenues are affected by seasonal buying patterns of consumer products sold by our OEM customers that incorporate our products and the market acceptance of such products supplied by our OEM customers.

Our future success is dependent on market acceptance of our SmartVoice, SmartHome and Unified Communications product families, which are intensively competitive markets with dominant and established players.

Our ability to increase our revenues and offset declining revenues from our cordless product family are substantially dependent on our ability to gain market share for our SmartVoice, SmartHome and Unified Communications product families. Moreover, we are targeting a new market with our SmartVoice product family, a market with dominant and established players selling to OEM customers with whom they have established relationships. In order to gain market share, we will need to earn the business of such customers, with whom we do not have established relationships. If we are unable to generate significant revenues from our SmartVoice product family and gain significant and sustainable market share in the mobile device market, our operating results would be adversely affected. Furthermore, our future growth is also dependent on the market acceptance of our Unified Communications products, a market where we also compete with existing and potential competitors, many of whom have significantly greater financial, technical, manufacturing, marketing, sales and distribution resources and management expertise than we do. In addition, our continued success and growth in the new markets in which we have recently gained market share, which markets are highly competitive, is highly dependent on our ability to be designed into future flagship products of top tier OEMs.

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The market for mobile device components is highly competitive and we expect competition to intensify in the future.

The market for mobile device components is highly competitive and characterized by the presence of large companies with significantly greater resources than we have. Our SmartVoice product family relates only to the voice and audio subsystem of a mobile device and there are only a limited number of OEMs that address this market. Our main competitors include Knowles Corporation, Synaptics and Cirrus Logic. We also face competition from other companies and could face competition from new market entrants. We also compete against solutions internally developed by OEMs, as well as combined third-party software and hardware systems. Notwithstanding prior design wins with any OEM customer, our SmartVoice products may be designed out as a result of internal solutions or replacement with software systems in future products of such OEM customer. If we are unable to compete effectively, we may not succeed in achieving additional design wins and may have to lower our pricing in an attempt to gain design wins, both of which would adversely impact our operating results.

Our future business growth depends on the growth in demand for mobile devices with improved sound quality and always-on capability.

Our SmartVoice product family is designed to enhance the sound quality and minimize background noise for mobile device users and to enable always-on capabilities in mobile and other wearable devices. OEMs and ODMs may decide that the costs of improving sound quality outweigh the benefits or that always-on voice technology is not a required feature, both of which could limit demand for our SmartVoice product family. Moreover, users may also be satisfied with existing sound quality or blame poor quality on phone carriers. The market that we are targeting is evolving rapidly and is technologically challenging. New mobile devices with different components or software may be introduced that provide the same functionality as SmartVoice product family. Our future business growth will depend on the growth of this market and our ability to adapt to technological changes, user preferences and OEM demands. Our business could be materially adversely affected if we fail to do so.

We generate a significant amount of our total revenues from the sale of digital cordless telephony products and our business and operating results may be materially adversely affected if we do not continue to succeed in this competitive market or if sales within the overall cordless digital market continue to decrease.

Sales of our digital cordless telephony products comprised 33% of our total revenues for the first half of 2021 and 35% for the same period of 2020. Although we historically generated a majority of our revenue from cordless telephony products, the traditional cordless telephony market using fixed-line telephony is declining and will continue to decline, potentially steeper than prior years, which reduces our revenues derived from, and unit sales of, cordless telephony products.

We rely significantly on revenue derived from a limited number of customers.

We expect that a limited number of customers, varying in identity from period to period, will account for a substantial portion of our revenues in any period.

The following table represents our sales from our 10% and above customers as a percentage of our total revenues for the six months ended June 30, 2021 and 2020:

	Six months ended June 30,
10% Customers	2021	2020
VTech	16%	21%
Cisco	12%	18%

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Typically, our sales are made on a purchase order basis, and most of our customers have not entered into a long-term agreement requiring it to purchase our products. Moreover, we do not typically require our customers to purchase a minimum quantity of our products, and our customers can generally reschedule the delivery date of their orders on short notice without significant penalties. A significant amount of our revenues will continue to be derived from a limited number of large customers. Furthermore, the primary customers for our products are original equipment manufacturers (OEMs) and original design manufacturers (ODMs). This industry is highly cyclical and has been subject to significant economic downturns at various times. These downturns are characterized by production overcapacity and reduced revenues, which at times may affect the financial stability of our customers. Therefore, the loss of one of our major customers, or reduced demand for products from, or the reduction in purchasing capability of, one of our major customers, could have a material adverse effect on our business, financial condition and results of operations.

Because our products are components of end products, if OEMs do not incorporate our products into their end products or if the end products of our OEM customers do not achieve market acceptance, we may not be able to generate adequate sales of our products.

Our products are not sold directly to the end-user; rather, we deliver hardware and software components to OEMs and ODMs who incorporate them into their products. As a result, we rely upon OEMs and ODMs to incorporate our products into their end products at the design stage. Once an OEM designs a competitor’s product into its end product, it becomes significantly more difficult for us to sell our products to that customer because changing suppliers involves significant cost, time, effort and risk for the customer. As a result, we may incur significant expenditures on the development of a new product without any assurance that an OEM will select our product for design into its own product and without this “design win” it becomes significantly difficult to sell our products. This is especially the case for our SmartVoice product family. Moreover, even after an OEM agrees to design our products into its end products, the design cycle is long and may be delayed or discontinued due to factors beyond our control which may result in the end product incorporating our products not to reach the market until long after the initial “design win” with the OEM or not at all. From initial product design-in to volume production, many factors could impact the timing and/or amount of sales actually realized from the design-in. These factors include, but are not limited to, changes in the competitive position of our technology, our customers’ financial stability, and our ability to ship products according to our customers’ schedule and specifications. Moreover, the continued uncertainty about the sustainability of the global economic recovery and outlook may further prolong an OEM customer’s decision-making process and design cycle.

Furthermore, we rely on the end products of our OEM customers that incorporate our products to achieve market acceptance. Many of our OEM customers face intense competition in their markets. If end products that incorporate our products are not accepted in the marketplace, we may not achieve adequate sales volume of our products, which would have a negative effect on our results of operations.

Our revenues, gross margins and profitability may be materially adversely affected by the continued decline in average selling prices of our products and other factors, including increases in assembly and testing expenses, and raw material and commodity costs.

We have experienced and will continue to experience a decrease in the average selling prices of our products. Decreasing average selling prices could result in decreased revenues even if the volume of products sold increases. Decreasing average selling prices may also require us to sell our products at much lower gross margin than in the past and reduce profitability. Although we have to date been able to partially offset on an annual basis the declining average selling prices of our products through general operational efficiencies and manufacturing cost reductions by achieving a higher level of product integration and improving our yield percentages, there is no guarantee that our ongoing efforts will be successful or that they will keep pace with the anticipated, continued decline in average selling prices of our products.

In addition to the continued decline in the average selling prices of our products, our gross profit may decrease in the future due to other factors, including the roll-out of new products in any given period and the penetration of new markets which may require us to sell products at a lower margin, our failure to introduce new engineering processes and mix of products sold. Our gross margins also are affected by the product mix. For example, mature products typically have lower average gross margins than newer products. Therefore, increased sales of certain mature products would lower our gross margins. The pressures in the supply chain make it very difficult for us to increase or even maintain our product pricing, which further adversely affects our gross margins. Furthermore, increases in the price of silicon wafers, testing costs and commodities such as gold and oil, 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 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 “under-capacity” problems so that there is a shortage of capacity to fulfill our fabrication needs also may increase our raw material costs and thus decrease our gross margin.

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We are dependent on a small number of OEM customers, and our business could be harmed by the loss of any of these customers or reductions in their purchasing volumes.

We sell our products to a limited number of OEM customers directly or through a network of distributors. Moreover, many North American, European and Japanese OEMs are moving their manufacturing sites to Southeast Asia and China, as a result of the cyclical nature of manufacturing capacity issues and cost of silicon integrated circuits, the continued decline of average selling prices of chipsets and other industry-wide factors. In addition, OEMs located in Southeast Asia and China are growing and gaining competitive strength. As a result, the mix of our OEM customers may change in the future. However, we may not succeed in attracting new customers as these potential customers may have pre-existing relationships with our current or potential competitors. This trend also may promote the consolidation of OEMs located in North America, Europe and Japan with OEMs located in Southeast Asia, which may reduce the number of our potential customers and reduce the volume of chipsets the combined OEM customer may purchase from us. However, as is common in our industry, we typically do not enter into long-term contracts with our customers in which they commit to purchase products from us. The loss of any of our OEM customers may have a material adverse effect on our results of operations. To attract new customers, we may be faced with intense price competition, which may affect our revenues and gross margins.

Because the markets in which we compete are highly competitive, and many of our competitors may have greater resources than we do, we cannot be certain that our products will be accepted in the marketplace or capture market share.

The markets in which we operate are extremely competitive and characterized by rapid technological change, evolving standards, short product life cycles and price erosion. We expect competition to intensify as current competitors expand their product offerings and new competitors enter the market. Given the highly competitive environment in which we operate, we cannot be sure that any competitive advantages enjoyed by our current products would be sufficient to establish and sustain our new products in the market. Any increase in materials price or competition could result in the erosion of our market share, to the extent we have obtained market share, and would have a negative impact on our financial condition and results of operations.

In our current business activities and new markets that we enter, we face current and potential competition from competitors that may have significantly greater financial, technical, manufacturing, marketing, sales and distribution resources and management expertise than we do. The expenditure of greater resources to expand our current product lines may increase our operating expenses and reduce our gross profit. There are no assurances that we will succeed in developing and introducing new products that are responsive to market demands. These competitors may also have pre-existing relationships with our customers or potential customers. Further, in the event of a manufacturing capacity shortage, these competitors may be able to manufacture products when we are unable to do so. Our principal competitor in the cordless market is Dialog Semiconductors. Our principal competitors in the Unified Communications market include Broadcom, Dialog Semiconductors (to be acquired by Renesas Technologies), Intel, Texas Instruments and Taiwanese IC vendors. Our principal competitors in the SmartVoice market include Knowles Corporation, Cirrus Logic, Synaptics, Microchip and developers of noise cancellation software running on mobile phones such as Qualcomm.

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Because we depend on independent foundries and other third party suppliers to manufacture, test and package all of our integrated circuit products, we are subject to additional risks that may materially disrupt our business.

All of our integrated circuit products are manufactured, tested and packaged by independent foundries and other third party suppliers. While these foundries and other third party suppliers have been able to adequately meet the demands of our increasing business and market dynamics, we are and will continue to be dependent upon these foundries and third party suppliers to achieve acceptable manufacturing yields, quality levels and costs, and to allocate to us a sufficient portion of their foundry, assembly and test capacity to meet our needs in a timely manner. For example, the industry is now facing some near-term challenges associated with certain industry-wide supply chain constraints that are placing certain limitations on our product deliveries that could negatively impact our revenues for 2021.

During worldwide shortages in foundry, such as the present time, assembly and/or test capacity, we may not be able to obtain a sufficient allocation of such capacity to meet our product needs or we may incur additional costs to ensure specified quantities of products and services. Under-capacity at the current foundries and other third party suppliers we use, or future foundries or other third party suppliers we may use, to manufacture, test and assemble our integrated circuit products may lead to increased operating costs and lower gross margins. In addition, such a shortage could lengthen our products’ manufacturing, testing and assembly cycle and cause a delay in the shipment of our products to our customers. This could ultimately lead to a loss of sales of our products, harm our reputation and competitive position, and our revenues could be materially reduced. Our business could also be harmed if our current foundries or other third party suppliers terminate their relationship with us and we are unable to obtain satisfactory replacements to fulfill customer orders on a timely basis and in a cost-effective manner. Moreover, we do not have long term capacity guarantee agreements with our foundries and with other third party suppliers.

In addition, as TSMC produces a significant portion of our integrated circuit products and ASE tests and assembles a significant portion of our products, earthquakes, aftershocks or other natural disasters in Asia, or adverse changes in the political situation in Taiwan, could preclude us from obtaining an adequate supply of wafers to fill customer orders. Such events could harm our reputation, business, financial condition, and results of operations.

Our research and development expenses may increase if the grants we currently receive from the Israeli government are reduced or withheld.

We currently receive research grants from programs of the Israeli Innovation Authority (“IIA”). To be eligible for these grants, we must meet certain development conditions and comply with periodic reporting obligations. Although we have met such conditions in the past, should we fail to meet such conditions in the future our research grants may be repayable, reduced or withheld. Such reduction can also take place due to different allocation and methodology that IIA is implementing. The reduction of such research grants may increase our research and development expenses, which in turn may reduce our operating income. Our research and development expenses may increase if the grants from the IIA are reduced which may negatively affect our financial results.

As we depend on independent subcontractors, located in Asia, to assemble and test our semiconductor products, we are subject to additional risks that may materially disrupt our business.

Independent subcontractors, located in Asia, assemble and test our semiconductor products. Because we rely on independent subcontractors to perform these services, we cannot directly control our product delivery schedules or quality levels. We are dependent on these subcontractors to allocate to us a sufficient portion of their capacity to meet our needs in a timely manner. Our future success also depends on the financial viability of our independent subcontractors. If the capital structures of our independent subcontractors weaken, we may experience product shortages, production delays, quality assurance problems, increased manufacturing costs, and/or supply chain disruption. All of this could ultimately lead to a loss of sales of our products, harm our reputation and competitive position, and our revenues could be materially harmed. Moreover, the economic, market, social, and political situations in countries where some of our independent subcontractors are located are unpredictable, can be volatile, and can have a significant impact on our business because we may not be able to obtain product in a timely manner. Market and political conditions, including currency fluctuation, terrorism, political strife, war, labor disruption, and other factors, including natural or man-made disasters, adverse changes in tax laws, tariff, import or export quotas, power and water shortages, or interruption in air transportation, in areas where our independent subcontractors are located also could have a severe negative impact on our operating capabilities.

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We are subject to order and shipment uncertainties and if we are unable to accurately predict customer demand, our business may be harmed.

We typically sell products pursuant to shorter term purchase orders rather than long-term purchase commitments. Customers can generally change or defer purchase orders on short notice without incurring a significant penalty. Given current market conditions, we have less ability to accurately predict what or how many products our customers will need in the future. In addition, we have little visibility into and no control of the demand by our customer’s customers – generally consumer electronics retailers and businesses. Furthermore, based on discussions with our customers, we understand that our customers also have less visibility into their product demands. A decrease in the consumer electronics retailers’ or businesses’ demand or a build-up of their inventory, both of which are out of the control of our customers and us, may cause a cancellation, change or deferral of purchase orders on short notice by our customers. Anticipating demand is difficult because our customers and their customers face volatile pricing and unpredictable demand for their own products, and are increasingly focused on cash preservation and tighter inventory management. Based on these trends, our customers are reluctant to place orders with normal lead times, and we are seeing a shift to shorter lead-times and rush orders. However, we place orders with our suppliers based on forecasts of our customers’ demand and, in some instances, may establish buffer inventories to accommodate anticipated demand. Our forecasts are based on multiple assumptions, each of which may introduce error into our estimates. If we overestimate our customers’ demand or our customers overestimate their demand, we may allocate resources to manufacturing products that we may not be able to sell when we expect to, if at all. As a result, we could hold excess or obsolete inventory, which would reduce our profit margins and adversely affect our financial results. Conversely, if we underestimate our customers’ demand or our customers underestimate their demand and insufficient manufacturing capacity is available, we could forego revenue opportunities and potentially lose market share and damage our customer relationships.

Furthermore, we maintain inventory, or hubbing, arrangements with certain of our customers. Pursuant to these arrangements, we deliver products to a customer or a designated third party warehouse based upon the customer’s projected needs, but do not recognize product revenue unless and until the customer reports that it has removed our product from the warehouse to incorporate into its end products. Since we own inventory that is physically located in a third party’s warehouse, our ability to effectively manage inventory levels may be impaired, causing our total inventory turns to decrease, which could increase expenses associated with excess and obsolete product and negatively impact our cash flow.

Because the manufacture of our products is complex, the foundries on which we depend may not achieve the necessary yields or product reliability that our business requires.

The manufacture of our products is a highly complex and precise process, requiring production in a highly controlled environment. Changes in manufacturing processes or the inadvertent use of defective or contaminated materials by a foundry could adversely affect the foundry’s ability to achieve acceptable manufacturing yields and product reliability. If the foundries we currently use do not achieve the necessary yields or product reliability, our ability to fulfill our customers’ needs could suffer. This could ultimately lead to a loss of sales of our products and have a negative effect on our gross margins and results of operations.

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Furthermore, there are other significant risks associated with relying on these third-party foundries, including:

● risks due to the fact that we have reduced control over production cost, delivery schedules and product quality;

● less recourse if problems occur as the warranties on wafers or products supplied to us are limited; and

● increased exposure to potential misappropriation of our intellectual property.

The possible emerging trend of our OEM customers outsourcing their production may cause our revenue to decline.

We believe there may be an emerging trend of our OEM customers outsourcing their production to third parties. We have invested substantial resources to build relationships with our OEM customers. However, the outsourcing companies whom our OEM customers may choose to outsource production may not have prior business relationship with us or may instead have prior or ongoing relationships with our competitors. The emergence of this trend may require us to expend substantial additional resources to build relationships with these outsourcing companies, which would increase our operating expenses. Even if we do expend such resources, there are no assurances that these outsourcing companies will choose to incorporate our chipsets rather than chipsets of our competitors. Our inability to retain an OEM customer once such customer chooses to outsource production would have a material adverse effect on our future revenue.

Because our products are complex, the detection of errors in our products may be delayed, and if we deliver products with material defects, our credibility will be harmed, the sales and market acceptance of our products may decrease and product liability claims may be made against us.

Our products are complex and may contain errors, defects and bugs when introduced. If we deliver products with material errors, defects or bugs, our credibility and the market acceptance and sales of our products could be significantly harmed. Furthermore, the nature of our products may also delay the detection of any such error or defect. If our products contain material errors, defects and bugs, then we may be required to expend significant capital and resources to alleviate these problems. This could result in the diversion of technical and other resources from our other development efforts. Any actual or perceived problems or delays may also adversely affect our ability to attract or retain customers. Furthermore, the existence of any defects, errors or failures in our products could lead to product liability claims or lawsuits against us or against our customers. We generally provide our customers with a standard warranty for our products, generally lasting one year from the date of purchase. Although we attempt to limit our liability for product defects to product replacements, we may not be successful, and customers may sue us or claim liability for the defective products. A successful product liability claim could result in substantial cost and divert management’s attention and resources, which would have a negative impact on our financial condition and results of operations.

We may have exposure to additional tax liabilities as a result of our foreign operations.

We are subject to income taxes in the United States and various foreign jurisdictions. In addition to our significant operations in Israel, we have operations in Germany, Switzerland, the United Kingdom, Hong Kong, China, Japan, South Korea and India. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. In the ordinary course of a global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities and as an example, we are now under audit for one of our subsidiaries, the outcome of which could have material adverse impact on our financial condition. Our intercompany transfer pricing may be reviewed by the U.S. Internal Revenue Service and by foreign tax jurisdictions. Although we believe that our tax estimates are reasonable, due to the complexity of our corporate structure, the multiple intercompany transactions and the various tax regimes, we cannot assure you that a tax audit or tax dispute to which we may be subject will result in a favorable outcome for us. If taxing authorities do not accept our tax positions and impose higher tax rates on our foreign operations, our overall tax expenses could increase.

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We may experience difficulties in transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

A growing trend in our industry is the integration of greater semiconductor content into a single chip to achieve higher levels of functionality. In order to remain competitive, we must achieve higher levels of design integration and deliver new integrated products on a timely basis. This will require us to expend greater research and development resources, and may require us to modify the manufacturing processes for some of our products, to achieve greater integration. We periodically evaluate the benefits, on a product-by-product basis, of migrating to smaller geometry process technologies to reduce our costs. Although this migration to smaller geometry process technologies has helped us to offset the declining average selling prices of our products, this effort may not continue to be successful. Also, because we are a fabless semiconductor company, we depend on our foundries to transition to smaller geometry processes successfully. We cannot assure you that our foundries will be able to effectively manage the transition. In case our foundries or we experience significant delays in this transition or fail to efficiently implement this transition, our business, financial condition and results of operations could be materially and adversely affected.

Trends, Risks and Uncertainties Related to International Operations

Because we have significant international operations, we may be subject to political, economic and other conditions relating to our international operations that could increase our operating expenses and disrupt our business.

Although the majority of end users of the consumer products that incorporate our products are located in the U.S., we are dependent on sales to OEM customers, located outside of the U.S., that manufacture these consumer and Unified Communications products. Also, we depend on a network of distributors to sell our products that also are primarily located outside of the U.S. Export sales shipped to manufacturers in Europe and Asia, including Japan and Asia Pacific, represented 96% and 97% of our total revenues for the first half of 2021 and 2020, respectively. Furthermore, we have material operations in Germany, United Kingdom, Hong Kong, China and India and employ a number of individuals within those foreign operations. As a result, the occurrence of any negative international political, economic or geographic events, as well as our failure to mitigate the challenges in managing an organization operating in various countries, could result in significant revenue shortfalls and disrupt our workforce within our foreign operations. These shortfalls and disruptions could cause our business, financial condition and results of operations to be harmed. Some of the risks of doing business internationally include:

● unexpected changes in foreign government regulatory requirements;

● fluctuations in the exchange rate for the U.S. dollar;

● import and export license requirements;

● imposition of tariffs and other barriers and restrictions;

● burdens of complying with a variety of foreign laws, treaties and technical standards;

● uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property;

● difficulty in collecting accounts receivable and longer payment cycles for international customers than existing customers;

● difficulty in staffing and managing foreign operations and maintaining the morale and productivity of employees within foreign operations;

● multiple and possibly overlapping tax structures and potentially adverse tax consequences;

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● political and economic instability, including protectionist policies; and

● changes in diplomatic and trade relationships.

One or more of these factors may have a material adverse effect on our future operations and consequently, on our business, financial conditions and operating results.

Because we have significant operations in Israel, we may be subject to political, economic and other conditions affecting Israel that could increase our operating expenses and disrupt our business.

Our principal research and development facilities are located in the State of Israel and most of our executive officers and some of our directors are residents of Israel. Although substantially all of our sales currently are being made to customers outside of Israel, we are nonetheless directly influenced by the political, economic and military conditions affecting Israel. Any major hostilities involving Israel, or the interruption or curtailment of trade between Israel and its present trading partners, could significantly harm our business, operating results and financial condition. In addition, certain of our employees are currently obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called to active military duty at any time. Although we have operated effectively under these requirements since our inception, we cannot predict the effect of these obligations on the company in the future. Our operations could be disrupted by the absence, for a significant period, of one or more of our key employees due to military service.

The tax benefits available to us under Israeli law require us to meet several conditions, and may be terminated or reduced in the future, which would increase our taxes.

We enjoy certain tax benefits in Israel, particularly as a result of our facilities in Israel having been granted Approved Enterprise and Beneficiary Enterprise status. To be eligible for tax benefits, we must meet certain conditions, relating principally to adherence to the investment program filed with the Investment Center of the Israeli Ministry of Economy and periodic reporting obligations. Although we believe we have met such conditions in the past, should we fail to meet such conditions in the future, we would be subject to corporate tax in Israel at the standard corporate tax rate (23% for 2021) and could be required to refund tax benefits (including with interest and adjustments for inflation based on the Israeli consumer price index) already received. Our average tax rate for our investment programs also may change in the future due to circumstances outside of our control, including changes to legislation. Additionally, if we increase our activities outside of Israel, for example, by acquisitions, our increased activities may not be eligible for inclusion in Israeli tax benefit programs. The termination or reduction of certain programs and tax benefits or a requirement to refund tax benefits (including with interest and adjustments for inflation based on the Israeli consumer price index) already received may have a material adverse effect on our business, operating results and financial condition.

We are exposed to fluctuations in currency exchange rates.

A significant portion of our business is conducted outside the United States. Export sales to manufacturers in Europe and Asia, including Japan and Asia Pacific, represented 96% and 98% and of our total revenues for the second quarter of 2021 and 2020. Although most of our revenue and expenses are transacted in U.S. dollars, we may be exposed to currency exchange fluctuations in the future as business practices evolve and we are forced to transact business in local currencies. Moreover, part of our expenses in Israel are paid in Israeli currency, which subjects us to the risks of foreign currency fluctuations between the U.S. dollar and the New Israeli Shekel (NIS) and to economic pressures resulting from Israel’s general rate of inflation. Our primary expenses paid in NIS are employee salaries and lease payments on our Israeli facilities. Furthermore, a portion of our expenses for our European operations are paid in the Euro, which subjects us to the risks of foreign currency fluctuations between the U.S. dollar and the Euro. Our primary expenses paid in the Euro are employee salaries, lease and operational payments on our European facilities. As a result, an increase in the value of the NIS and Euro in comparison to the U.S. dollar could increase the cost of our technology development, research and development expenses and general and administrative expenses, all of which could harm our operating profit. From time to time, we use derivative instruments in order to minimize the effects of currency fluctuations, but our hedging positions may be partial, may not exist at all in the future or may not succeed in minimizing our foreign currency fluctuation risks. Our financial results may be harmed if the trend relating to the devaluation of the U.S. dollars continues for an extended period.

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New tariffs and other trade measures could adversely affect our consolidated results of operations, financial position and cash flows.

General trade tensions between the U.S. and China remain unresolved. While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our consolidated results of operations, financial position and cash flows. Furthermore, changes in U.S. trade policy could trigger retaliatory actions by affected countries, which could impose restrictions on our ability to do business in or with affected countries or prohibit, reduce or discourage purchases of our products by foreign customers, leading to increased costs of components contained in our products, increased costs of manufacturing our products, and higher prices for our products in foreign markets. For example, there are risks that the Chinese government may, among other things, require the use of local suppliers, compel companies that do business in China to partner with local companies to conduct business and provide incentives to government-backed local customers to buy from local suppliers. Changes in, and responses to, U.S. trade and tariff policy could reduce the competitiveness of our products and cause our sales and revenues to drop, which could materially and adversely impact our business and results of operations.

Trends, Risks and Uncertainties Related to Intellectual Property

Third party claims of infringement or other claims against us could adversely affect our ability to market our products, require us to redesign our products or seek licenses from third parties, and seriously harm our operating results and disrupt our business.

As is typical in the semiconductor industry, we and our customers have been and may from time to time be notified of claims that we may be infringing patents or intellectual property rights owned by third parties. In addition, patent infringement claims are increasingly being asserted by patent holding companies (so-called patent “trolls”), which do not use technology and whose sole business is to enforce patents against companies, such as us, for monetary gain. Because such patent holding companies do not provide services or use technology, the assertion of our own patents by way of counter-claim may be ineffective. We have received claims that our products infringe upon the proprietary rights of such patent holding companies. In addition, third parties have asserted and may in the future assert intellectual property infringement claims against our customers, which we have agreed in certain circumstances to indemnify and defend against such claims. If litigation becomes necessary to determine the validity of any third party claims, it could result in significant expense to us and could divert the efforts of our technical and management personnel, whether or not the claim has merit and notwithstanding that the litigation is determined in our favor.

If it appears necessary or desirable, we may try to obtain licenses for those patents or intellectual property rights that we are allegedly infringing. Although holders of these types of intellectual property rights commonly offer these licenses, we cannot assure you that licenses will be offered or that the terms of any offered licenses will be acceptable to us. Our failure to obtain a license for key intellectual property rights from a third party for technology used by us could cause us to incur substantial liabilities, suspend the manufacturing of products utilizing the technology or damage the relationship with our customers. Alternatively, we could be required to expend significant resources to develop non-infringing technology. We cannot assure you that we would be successful in developing non-infringing technology. The occurrence of any of these events could harm our business, financial condition or results of operations.

We may not be able to adequately protect or enforce our intellectual property rights, which could harm our competitive position.

Our success and ability to compete is in part dependent upon our internally-developed technology and other proprietary rights, which we protect through a combination of copyright, trademark and trade secret laws, as well as through confidentiality agreements and licensing arrangements with our customers, suppliers, employees and consultants. In addition, we have filed a number of patents in the United States and in other foreign countries with respect to new or improved technology that we have developed. However, the status of any patent involves complex legal and factual questions, and the breadth of claims allowed is uncertain. Accordingly, we cannot assure you that any patent application filed by us will result in a patent being issued, or that the patents issued to us will not be infringed by others. Also, our competitors and potential competitors may develop products with similar technology or functionality as our products, or they may attempt to copy or reverse engineer aspects of our product line or to obtain and use information that we regard as proprietary. Moreover, the laws of certain countries in which our products are or may be developed, manufactured or sold, including Hong Kong, Japan, Korea, China and Taiwan, may not protect our products and intellectual property rights to the same extent as the laws of the United States. Policing the unauthorized use of our products is difficult and may result in significant expense to us and could divert the efforts of our technical and management personnel. Even if we spend significant resources and efforts to protect our intellectual property, we cannot assure you that we will be able to prevent misappropriation of our technology. Use by others of our proprietary rights could materially harm our business and expensive litigation may be necessary in the future to enforce our intellectual property rights.

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General Risk Factors

Our operating results are affected by general economic conditions and the highly cyclical nature of the semiconductor industry.

The general worldwide economic conditions remain uncertain which continues to make it difficult for our customers, the end-product customers, our vendors and us to accurately forecast and plan future business activities. Moreover, we operate within the semiconductor industry which experiences significant fluctuations in sales, availability and profitability. Downturns in the semiconductor industry are characterized by diminished product demand, excess customer inventories, accelerated erosion of prices and excess production capacity. These factors could cause substantial fluctuations in our revenues and in our results of operations. If global economic and market conditions remain uncertain or deteriorate, we could experience a material adverse impact on our business and results of operations.

We may engage in future acquisitions that could dilute our stockholders’ equity and harm our business, results of operations and financial condition.

We have pursued, and will continue to pursue, growth opportunities through internal development and acquisition of complementary businesses, products and technologies. We are unable to predict whether or when any other prospective acquisition will be completed. The process of integrating an acquired business may be prolonged due to unforeseen difficulties and may require a disproportionate amount of our resources and management’s attention. There are no assurances that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our operations, or expand into new markets. Further, once integrated, acquisitions may not achieve comparable levels of revenues, profitability or productivity as our existing business or otherwise perform as expected. The occurrence of any of these events could harm our business, financial condition or results of operations. Future acquisitions may require substantial capital resources, which may require us to seek additional debt or equity financing. Future acquisitions by us could result in the following, any of which could seriously harm our results of operations or the price of our stock:

● issuance of equity securities that would dilute our current stockholders’ percentages of ownership;

● large one-time write-offs;

● the incurrence of debt and contingent liabilities;

● difficulties in the assimilation and integration of operations, personnel, technologies, products and information systems of the acquired companies;

● diversion of management’s attention from other business concerns;

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● contractual disputes;

● risks of entering geographic and business markets in which we have no or only limited prior experience; and

● potential loss of key employees of acquired organizations.

We are exposed to the credit risk of our customers and to credit exposures in weakened markets, which could result in material losses.

Most of our sales are on an open credit basis. Because of current conditions in the global economy, our exposure to credit risks relating to sales on an open credit basis has increased. We expect demand for enhanced open credit terms, for example, longer payment terms, to continue and believe that such arrangements are a competitive factor in obtaining business. Although we monitor and attempt to mitigate credit risks, including through insurance coverage from time to time, there can be no assurance that our efforts will be effective. Moreover, even if we attempt to mitigate credit risks through insurance coverage, such coverage may not be sufficient to cover all of our losses and we would be subject to a deductible under any insurance coverage. As a result, our future credit risk exposure may increase. Although any losses to date relating to credit exposure of our customers have not been material, future losses, if incurred, could harm our business and have a material adverse effect on our operating results and financial condition. Moreover, the loss of a customer due to its financial default also could harm our future business and potential growth.

Our executive officers and key personnel are critical to our business, and because there is significant competition for personnel in our industry, we may not be able to attract and retain such qualified personnel.

Our success depends to a significant degree upon the continued contributions of our executive management team, and our technical, marketing, sales customer support and product development personnel. The loss of significant numbers of such personnel could significantly harm our business, financial condition and results of operations. We do not have any life insurance or other insurance covering the loss of any of our key employees. Because our products are specialized and complex, our success depends upon our ability to attract, train and retain qualified personnel, including qualified technical, marketing and sales personnel. However, the competition for personnel is intense and we may have difficulty attracting and retaining such personnel.

An unfavorable government review of our federal income tax returns or changes in our effective tax rates could adversely affect our operating results.

Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles or interpretations thereof. In addition, we are subject to the periodic examination of our income tax returns by the IRS and other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, as an example, we are now under audit for one of our subsidiaries. The outcome from this examination may have an adverse effect on our operating results and financial condition.

Our business operations would be disrupted if the information technology systems we rely on fail to function properly.

We rely on complex information technology systems to manage our business which operates in many geographical locations. For example, to achieve short delivery lead times and superior levels of customer service while maintaining low levels of inventory, we frequently adjust our production schedules with manufacturers and subcontractors. We develop and adjust these schedules based on end customer demand as communicated by our customers and distributors and based on our inventory levels, manufacturing cycle times, component lead times, and projected production yields. We combine and distribute all of this information electronically over a complex global communications network. Our ability to estimate demand and to adjust our production schedules is highly dependent on this network. Any delay in the implementation of, or disruption in the transition to, new or enhanced processes, systems or controls, could adversely affect our ability to manage customer orders and manufacturing schedules, as well as generate accurate financial and management information in a timely manner. These systems are also susceptible to power and telecommunication disruptions and other system failures. Failure of our IT systems or difficulties in managing them could result in business disruption. Our business could be significantly disrupted and we could be subject to third party claims associated with such disruptions.

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A breach of our information technology systems could subject us to liability, reputational damage or interrupt the operation of our business.

We rely upon our information technology systems and infrastructure for our business. We could experience theft of confidential information or reputational damage from industrial espionage attacks, ransonware malware or other cyber attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. Similarly, data privacy breaches by those who access our systems may pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, our patients, employees, customers or other business partners, may be exposed to unauthorized persons or to the public. Cyber-attacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. There can be no assurance that our efforts to protect our data and information technology systems will prevent breaches in our systems (or that of our third-party providers) that could adversely affect our business and result in financial and reputational harm to us, theft of trade secrets and other proprietary information, legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties.

If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.

Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. Under accounting principles generally accepted in the United States of America, we assess potential impairment of our goodwill and intangible assets at least annually, as well as on an interim basis to the extent that factors or indicators become apparent that could reduce the fair value of any of our businesses below book value. Impairment may result from significant changes in the manner of use of the acquired asset, negative industry or economic trends and significant underperformance relative to historic or projected operating results. If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which could negatively impact our operating results.

Trends, Risks and Uncertainties Related to Our Common Stock

The anti-takeover provisions in our certificate of incorporation and bylaws could prevent or discourage a third party from acquiring us.

Our certificate of incorporation and bylaws contain provisions that may prevent or discourage a third party from acquiring us, even if the acquisition would be beneficial to our stockholders. Our board of directors also has the authority to fix the rights and preferences of shares of our preferred stock and to issue such shares without a stockholder vote. Our bylaws also place limitations on the authority to call a special meeting of stockholders. Our stockholders may take action only at a meeting of stockholders and not by written consent. We have advance notice procedures for stockholders desiring to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders. In addition, these factors may also adversely affect the market price of our common stock, and the voting and other rights of the holders of our common stock.

Our stock price may be volatile so stockholders may not be able to resell shares of our common stock at or above the price they paid for them.

Announcements of developments related to our business, announcements by competitors, quarterly fluctuations in our financial results, changes in the general conditions of the highly dynamic industry in which we compete or the national economies in which we do business, and other factors could cause the price of our common stock to fluctuate, perhaps substantially. In addition, in recent years, the stock market has experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. These factors and fluctuations could have a material adverse effect on the market price of our common stock.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The table below sets forth information with respect to repurchases of our common stock during the second quarter ended June 30, 2021.

Period	(a) Total number of shares purchased		(b) average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number of shares that may yet be purchased under the plans or programs) (1)
Month #1 (April 1, 2021 to April 30, 2021)		-		-		-		‌367,238
Month #2 (May 1, 2021 to May 31, 2021)		57,238		15.27		57,238		‌310,000
Month #3 (June 1, 2021 to June 30, 2021)		282,115		15.69		282,115		27,885	(1)

(1) The number represents the number of shares of our common stock that remained available for repurchase as of June 30, 2021 under previously authorized share repurchase programs.

Our board of directors has previously approved a number of shares repurchase programs, including those in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, for the repurchase of our common stock. At June 30, 2021, 27,885 shares of our common stock are available for repurchase under our board-authorized share repurchase program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS.

Exhibit 31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101.INS Inline XBRL Instance Document

Exhibit 101.SCH Inline XBRL Taxonomy Schema Linkbase Document

Exhibit 101.CAL Inline XBRL Taxonomy Calculation Linkbase Document

Exhibit 101.DEF Inline XBRL Taxonomy Definition Linkbase Document

Exhibit 101.LAB Inline XBRL Taxonomy Labels Linkbase Document

Exhibit 101.PRE Inline XBRL Taxonomy Presentation Linkbase Document

Exhibit 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DSP GROUP, INC. (Registrant)
Date: August 9, 2021	By:	/s/ Dror Levy Dror Levy, Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ofer Elyakim, certify that:

1. I have reviewed this quarterly report on Form 10‑Q of DSP Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our provision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2021

/s/ Ofer Elyakim

Ofer Elyakim

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Dror Levy, certify that:

1. I have reviewed this quarterly report on Form 10‑Q of DSP Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our provision, 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;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2021

/s/ Dror Levy

Dror Levy

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

In connection with the periodic report of DSP Group, Inc. (the "Company") on Form 10‑Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission (the "Report"), I, Ofer Elyakim, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.

Date: August 9, 2021

/s/ Ofer Elyakim

Ofer Elyakim

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION

In connection with the periodic report of DSP Group, Inc. (the "Company") on Form 10‑Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission (the "Report"), I, Dror Levy, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification has not been, and shall not be deemed, "filed" with the Securities and Exchange Commission.

Date: August 9, 2021

/s/ Dror Levy

Dror Levy

Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Aug. 02, 2021
Document Information [Line Items]
Entity Central Index Key	0000915778
Entity Registrant Name	DSP GROUP INC /DE/
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	1-35256
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-2683643
Entity Address, Address Line One	2055 Gateway Place, Suite 480
Entity Address, City or Town	San Jose
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	95110
City Area Code	408
Local Phone Number	986-4300
Title of 12(b) Security	Common Stock, $.001 per share
Trading Symbol	DSPG
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		24,458,457

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
CURRENT ASSETS:
Cash and cash equivalents	$ 16,175	$ 16,936
Restricted deposit	574	548
Marketable securities and short-term deposits	48,681	50,615
Trade receivables	13,502	11,003
Other accounts receivable and prepaid expenses	5,111	3,460
Inventories	6,384	9,061
TOTAL CURRENT ASSETS	90,427	91,623
PROPERTY AND EQUIPMENT, NET	6,501	6,574
NON-CURRENT ASSETS:
Long-term marketable securities	64,507	60,454
Operating lease right of use	10,386	11,102
Long-term prepaid expenses and lease deposits	2,470	2,888
Deferred income taxes	6,410	6,893
Severance pay fund	15,331	16,285
Intangible assets, net	6,527	7,549
Goodwill	13,105	13,105
TOTAL NON-CURRENT ASSETS	118,736	118,276
TOTAL ASSETS	215,664	216,473
CURRENT LIABILITIES:
Trade payables	11,197	10,708
Operating lease liability	2,874	2,974
Accrued compensation and benefits	9,661	8,728
Income tax accruals and payables	3,454	3,620
Accrued expenses and other accounts payable	3,250	2,993
Short-term bank loans	0	211
Deferred income	169	172
TOTAL CURRENT LIABILITIES	30,605	29,406
NON-CURRENT LIABILITIES:
Deferred income taxes	948	1,073
Accrued severance pay	15,797	16,647
Total long-term lease liabilities	9,182	10,075
Earn-out liability	1,945	1,945
Accrued pensions	1,058	1,089
TOTAL NON-CURRENT LIABILITIES	28,930	30,829
STOCKHOLDERS’ EQUITY:
Common stock, $ 0.001 par value - Authorized shares: 50,000,000 shares at June 30, 2021 (unaudited) and December 31, 2020; Issued and outstanding shares: 23,974,936 and 23,709,924 shares at June 30, 2021 (unaudited) and December 31, 2020, respectively	24	24
Additional paid-in capital	401,921	396,335
Treasury stock at cost	(107,717)	(108,509)
Accumulated other comprehensive loss	(970)	(637)
Accumulated deficit	(137,129)	(130,975)
TOTAL STOCKHOLDERS’ EQUITY	156,129	156,238
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 215,664	$ 216,473

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Jun. 30, 2021	Dec. 31, 2020
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	50,000,000	50,000,000
Common stock, issued (in shares)	23,974,936	23,709,924
Common stock, outstanding (in shares)	23,974,936	23,709,924

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues		$ 35,807	$ 28,336	$ 68,454	$ 56,575
Cost of revenues (1)	[1]	16,676	14,075	32,342	27,934
Gross profit		19,131	14,261	36,112	28,641
Operating expenses:
Research and development, net (2)	[2]	10,630	8,455	21,110	18,809
Sales and marketing (3)	[3]	5,326	4,435	10,528	9,446
General and administrative (4)	[4]	3,161	2,627	5,814	4,975
Intangible assets amortization		429	104	848	208
Total operating expenses		19,546	15,621	38,300	33,438
Operating loss		(415)	(1,360)	(2,188)	(4,797)
Financial income, net		94	289	735	1,192
Loss before taxes on income		(321)	(1,071)	(1,453)	(3,605)
Tax on income (tax benefit)		78	6	289	(62)
Net loss		$ (399)	$ (1,077)	$ (1,742)	$ (3,543)
Net loss per share:
Basic and Diluted (in dollars per share)		$ (0.02)	$ (0.05)	$ (0.07)	$ (0.15)
Weighted average number of shares used in per share computations of net loss:
Basic and Diluted (in shares)		24,204	23,301	24,131	23,321

[1] Includes equity-based compensation expense in the amount of $185 and $129 for the three months ended June 30, 2021 and 2020, and $346 and $249 for the six months ended June 30, 2021 and 2020, respectively.

[2] Includes equity-based compensation expense in the amount of $1,305 and $826 for the three months ended June 30, 2021 and 2020, respectively; and $2,447 and $1,577 for the six months ended June 30, 2021 and 2020, respectively.

[3] Includes equity-based compensation expense in the amount of $745 and $620 for the three months ended June 30, 2021 and 2020, respectively; and $1,371 and $1,175 for the six months ended June 30, 2021 and 2020, respectively.

[4] Includes equity-based compensation expense in the amount of $770 and $706 for the three months ended June 30, 2021 and 2020, respectively; and $1,371 and $1,112 for the six months ended June 30, 2021 and 2020, respectively.

XML

Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Equity-based compensation expense included in cost of revenues	$ 185	$ 129	$ 346	$ 249
Equity-based compensation expenses included in research and development, net	1,305	826	2,447	1,577
Equity-based compensation expense included in sales and marketing	745	620	1,371	1,175
Equity-based compensation expense included in general and administrative	$ 770	$ 706	$ 1,371	$ 1,112

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Net loss	$ (399)	$ (1,077)	$ (1,742)	$ (3,543)
Available-for-sale securities:
Changes in unrealized gains (losses)	(54)	630	(356)	382
Reclassification adjustments for gains included in net loss	0	(4)	8	(12)
Net change	(54)	626	(348)	370
Cash flow hedges:
Changes in unrealized gains	20	17	31	52
Reclassification adjustments for gains included in net loss	(26)	(52)	(31)	(52)
Net change	(6)	(35)	0	0
Change in unrealized components of defined benefit plans:
Amortization of actuarial loss and prior service benefit	6	6	12	12
Net change	6	6	12	12
Foreign currency translation adjustments, net	(30)	(27)	3	(47)
Other comprehensive income (loss)	(84)	570	(333)	335
Comprehensive (loss)	(483)	(507)	(2,075)	(3,208)
Net loss	$ (399)	$ (1,077)	$ (1,742)	$ (3,543)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities:
Net loss	$ (1,742)	$ (3,543)
Adjustments required to reconcile net loss to net cash provided by operating activities:
Depreciation	821	801
Equity-based compensation expenses related to employees’ stock options, SARs and RSUs	5,535	4,113
Realized losses (gains) from sale of marketable securities, net	8	(12)
Capital loss (gain) from sale and disposal of property and equipment	1	(44)
Amortization of intangible assets	848	208
Operating lease amortization expenses	1,256	1,228
Change in operating lease liability	(1,533)	(1,393)
Accrued interest and amortization of premium on marketable securities and deposits	599	170
Change in operating assets and liabilities:
Deferred income tax assets and liabilities, net	351	(268)
Trade receivables, net	(2,526)	4,812
Other accounts receivable and prepaid expenses	(1,658)	(277)
Inventories	2,677	(660)
Long-term prepaid expenses and lease deposits	418	(142)
Trade payables	491	616
Accrued compensation and benefits	1,903	1,434
Income tax accruals	(126)	378
Accrued expenses and other accounts payable	138	1,243
Accrued severance pay, net	100	180
Accrued pensions	20	19
Net cash provided by operating activities	7,581	8,863
Cash flows from investing activities:
Purchase of marketable securities	(20,183)	(43,587)
Purchase of short-term deposits	(8,000)	(5,000)
Proceeds from maturity of marketable securities	15,423	39,439
Proceeds from sales of marketable securities	4,692	9,558
Proceeds from redemption of short-term deposits	5,000	3,000
Proceeds from sale of fixed assets	12	44
Purchases of property and equipment	(767)	(577)
Decrease in restricted deposits	(34)	17
Other investing activities	172	0
Net cash provided by (used in) investing activities	(3,685)	2,894
Issuance of common stock and treasury stock upon exercise of stock options	774	1,477
Repayment of a short – term bank loan	(211)	0
Purchase of treasury stock	(5,182)	(3,736)
Net cash (used in) financing activities	(4,619)	(2,259)
Increase (decrease) in cash and cash equivalents	(723)	9,498
Cash and cash equivalents at the beginning of the year	16,936	28,737
Erosion due to exchange rate differences	(38)	(37)
Cash and cash equivalents at the end of the year	$ 16,175	$ 38,198

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Common Stock Outstanding [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Dec. 31, 2019	23,111
Balance at Dec. 31, 2019	$ 23	$ 386,534	$ (113,862)	$ (118,712)	$ (889)	$ 153,094
Net loss	0	0	0	(3,543)	0	(3,543)
Change in accumulated other comprehensive income (loss)	$ 0	0	0	0	335	$ 335
Purchase of treasury stock (in shares)	(305)					(305)
Purchase of treasury stock		0	(3,736)	0	0	$ (3,736)
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors (in shares)	499
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		87	5,014	(3,624)	0	1,477
Equity-based compensation	$ 0	4,113	0	0	0	4,113
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan (in shares)	105
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		0	1,052	(30)	0	1,022
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan (in shares)	105
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		0	1,052	(30)	0	1,022
Balance (in shares) at Jun. 30, 2020	23,410
Balance at Jun. 30, 2020	$ 23	390,734	(111,532)	(125,909)	(554)	152,762
Balance (in shares) at Mar. 31, 2020	23,205
Balance at Mar. 31, 2020	$ 23	388,387	(113,532)	(123,775)	(1,124)	149,979
Net loss	0	0	0	(1,077)	0	(1,077)
Change in accumulated other comprehensive income (loss)	$ 0	0	0	0	570	570
Purchase of treasury stock (in shares)	(22)
Purchase of treasury stock		0	(294)	0	0	(294)
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors (in shares)	227
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		66	2,294	(1,057)	0	1,303
Equity-based compensation	$ 0	2,281	0	0	0	2,281
Balance (in shares) at Jun. 30, 2020	23,410
Balance at Jun. 30, 2020	$ 23	390,734	(111,532)	(125,909)	(554)	152,762
Balance (in shares) at Dec. 31, 2020	23,710
Balance at Dec. 31, 2020	$ 24	396,335	(108,509)	(130,975)	(637)	156,238
Net loss	0	0	0	(1,742)	0	(1,742)
Change in accumulated other comprehensive income (loss)	$ 0	0	0	0	(333)	$ (333)
Purchase of treasury stock (in shares)	(339)					(339)
Purchase of treasury stock		0	(5,299)	0	0	$ (5,299)
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors (in shares)	509
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		51	5,130	(4,407)	0	774
Equity-based compensation	$ 0	5,535	0	0	0	5,535
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan (in shares)	95
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		0	961	(5)	0	956
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan (in shares)	95
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		0	961	(5)	0	956
Balance (in shares) at Jun. 30, 2021	23,975
Balance at Jun. 30, 2021	$ 24	401,921	(107,717)	(137,129)	(970)	156,129
Balance (in shares) at Mar. 31, 2021	24,227
Balance at Mar. 31, 2021	$ 24	398,916	(103,300)	(135,848)	(886)	158,906
Net loss	0	0	0	(399)	0	(399)
Change in accumulated other comprehensive income (loss)	$ 0	0	0	0	(84)	(84)
Purchase of treasury stock (in shares)	(339)
Purchase of treasury stock		0	(5,299)	0	0	(5,299)
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors (in shares)	87
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		0	882	(882)	0	0
Equity-based compensation	$ 0	3,005	0	0	0	3,005
Balance (in shares) at Jun. 30, 2021	23,975
Balance at Jun. 30, 2021	$ 24	$ 401,921	$ (107,717)	$ (137,129)	$ (970)	$ 156,129

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Note A - Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE A—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K of DSP Group, Inc. (the “Company”) for the year ended December 31, 2020.

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2020, contained in the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 15, 2021, have been applied consistently in these unaudited interim condensed consolidated financial statements, except as noted below:

Recently Issued and Adopted Accounting Pronouncements 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14—Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”) which improves disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This standard is effective for fiscal years ending after December 15, 2020, for public business entities. Early adoption is permitted for all entities. Entities are to apply the amendments in this update on a retrospective basis for all periods presented. The adoption of ASU 2018-14 did not have a material impact on the Company’s condensed consolidated financial statements.

Use of Estimates

The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the interim condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Acquisition of SoundChip

In July 2020, the Company completed the acquisition of SoundChip SA, a privately-held Swiss company (“SoundChip”) for an initial purchase price of approximately $15 million (with a portion held in escrow in accordance with the agreement terms), subject to working capital adjustments (the “Initial Purchase Price”) and agreed to pay future contingent cash milestone payments of up to $6 million upon the achievement of certain customer and product sales milestones during the period from July 1, 2020 to December 31, 2022.

The results of operations of SoundChip have been included in the Company’s consolidated financial statements since July 1, 2020. The Company did not provide pro forma disclosure according to ASC 810 for the SoundChip acquisition due to immateriality.

The preliminary purchase price allocation ("PPA") was based on information available at the time of closing of the SoundChip acquisition. During 2021, the Company finalized the PPA for SoundChip as a result of finalizing the working capital adjustments as stated above.

The following table summarizes adjustments since the preliminary PPA was disclosed as of December 31, 2020:

	Preliminary estimated fair value			Adjustments			Fair value
Cash	$	443		$	-		$	443
Property and equipment		456			-			456
Current assets		2,301			-			2,301
Other non-current assets		1,042			-			1,042
Current liabilities		(1,007	)		25			(982	)
Other long-term liabilities		(1,945	)		-			(1,945	)
Net tangible assets acquired		1,290			-			1,315
Deferred tax liability		(1,121	)		-			(1,121	)
Intangible assets:
Developed technology		7,189			-			7,189
Backlog		54			-			54
Customer relationships		678			-			678
Total intangible assets		7,921			-			7,921
Goodwill		6,862			(197	)		6,665
Net assets acquired	$	14,952					$	14,780

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Note B - Operating Leases

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE B— OPERATING LEASES

The Company has entered into various non-cancelable operating lease agreements of its offices and car leases. The Company's leases have original lease periods expiring between 2021 and 2030. Many leases include one or more options to renew. The Company does not assume renewals in the determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement date. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Total operating lease cost during the three and six months ended June 30, 2021 was $799 and $1,630, respectively, out of which an amount of $799 and $1,630 represented the total cash paid for amounts included in the measurement of operating lease liabilities during the three and six months ended June 30, 2021, respectively.

Total operating lease cost during the three and six months ended June 30, 2020 was $691 and $1,400, respectively, out of which an amount of $691 and $1,400 represented the total cash paid for amounts included in the measurement of operating lease liabilities during the three and six months ended June 30, 2020, respectively.

Other information about lease amounts recognized in the Company’s consolidated financial statements is summarized as follows (unaudited):

	June 30, 2021			June 30, 2020
Weighted-average remaining lease term – operating leases (years)		6.66			7.70
Weighted-average discount rate – operating leases		5.03	%		5.05	%

As of June 30, 2021, and 2020 (unaudited), the Company’s operating lease liabilities were as follows:

	June 30, 2021			June 30, 2020
Gross lease liabilities	$	14,490		$	15,022
Less: imputed interest		(2,434	)		(2,850	)
Present value of lease liabilities		12,056			12,172
Less: current portion of lease liabilities		(2,874	)		(2,404	)
Total long-term lease liabilities	$	9,182		$	9,768

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Note C - Inventories

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Inventory Disclosure [Text Block]

NOTE C—INVENTORIES

Inventories are stated at the lower of cost or net realizable value. The Company periodically evaluates the quantities on hand relative to current and historical selling prices, and historical and projected sales volume. Based on these evaluations, provisions are made in each period to write inventory down to its net realizable value. Inventories are composed of the following:

	June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)
Work‑in‑process	$	5,585	$	5,972
Finished goods		799		3,089
	$	6,384	$	9,061

Inventory write-off amounted to $29 for the six months ended June 30, 2021 due to aging of certain inventory items that are not expected to be sold.

For the six months ended June 30, 2020, the Company recorded $91 of income due to the utilization of inventory that was written off in the past.

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Note D - Net Loss Per Share

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE D—NET LOSS PER SHARE

Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period. For the same periods, diluted net loss per share further includes the effect of dilutive stock options, stock appreciation rights and restricted share units outstanding during the period, all in accordance with FASB ASC No. 260 “Earnings per Share.” The following table sets forth the computation of basic and diluted net loss per share:

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
	(Unaudited)
Net loss	$	(399	)	$	(1,077	)	$	(1,742	)	$	(3,543	)
Loss per share:
Basic and Diluted	$	(0.02	)	$	(0.05	)	$	(0.07	)	$	(0.15	)
Weighted average number of shares of common stock outstanding during the period used to compute basic net loss per share (in thousands)		24,204			23,301			24,131			23,321
Incremental shares attributable to exercise of outstanding options, stock appreciation rights and restricted stock units (assuming proceeds would be used to purchase treasury stock) (in thousands)		-			-			-			-
Weighted average number of shares of common stock used to compute diluted net loss per share (in thousands)		24,204			23,301			24,131			23,321

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Note E - Marketable Securities and Time Deposits

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE E — MARKETABLE SECURITIES AND TIME DEPOSITS

The Company accounts for investments in marketable securities in accordance with FASB ASC No.320-10 “Investments in Debt and Equity Securities.” Management determines the appropriate classification of its investments in government and corporate marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date.

The Company classifies marketable securities as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of taxes, reported in other comprehensive income. The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and interest are included in financial income, net. Interest and dividends on securities are included in financial income, net. The following is a summary of available-for-sale securities at June 30, 2021 and December 31, 2020:

	Amortized cost				Unrealized gains, net				Fair value
	June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)		(Unaudited)		(Audited)		(Unaudited)		(Audited)
Short-term deposits		25,230	$	22,241	$	-	$	-		25,230	$	22,241
U.S. GSE securities		1,146		1,149		10		11		1,156		1,160
Corporate obligations		86,802		87,319		-		349		86,802		87,668
	$	113,178	$	110,709	$	10	$	360	$	113,188	$	111,069

The amortized cost of marketable debt securities at June 30, 2021, by contractual maturities, is shown below (unaudited):

			Unrealized gains (losses)
	Amortized cost		Gains		Losses			Fair value
Due in one year or less	$	23,427	$	37	$	(13	)	$	23,451
Due after one year to five years		64,521		267		(281	)		64,507
	$	87,948	$	304	$	(294	)	$	87,958

The actual maturity dates may differ from the contractual maturities because debtors may have the right to call or prepay obligations without penalties.

The total fair value of marketable securities with outstanding unrealized losses as of June 30, 2021 amounted to $48,883, and the unrealized losses for these marketable securities amounted to $294.

Management believes that as of June 30, 2021, the unrealized losses in the Company’s investments in all types of marketable securities were temporary and no credit loss was realized in the Company’s consolidated interim statements of operations.

The Company assessed available-for-sale debt securities with an amortized cost basis in excess of estimated fair value to determine what amount of the difference, if any, is caused by expected credit losses in accordance with ASC 326 “Financial Instruments – Credits Losses.” Allowance for credit losses on available-for-sale debt securities are recognized as a charge in the condensed consolidated statement of operation, and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in stockholders' equity. The unrealized losses related to the Company’s marketable securities were primarily due to changes in interest rates. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be at maturity and because the unrealized losses are not as a result of a credit loss, the Company does not consider the losses to be a credit loss at June 30, 2021.

Proceeds from maturity of available-for-sale marketable securities during the first half of 2021 and 2020 were $15,423 and $39,439, respectively. Proceeds from sales of available-for-sale marketable securities during the first half of 2021 and 2020 were $4,692 and $9,558, respectively. Net realized loss from the sale of available-for-sale securities for the six months ended June 30, 2021 were $8 compared to net realized gain for the three months ended June 30, 2020 of $12. The Company determines realized gains or losses on the sale of available-for-sale marketable securities based on a specific identification method.

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Note F - Taxes on Income

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE F—TAXES ON INCOME

The effective tax rate used in computing the provision for income taxes is based on projected fiscal year income before taxes, including estimated income by tax jurisdiction.

The total amount of net unrecognized tax benefits was $3,268 and $3,449 at June 30, 2021 (unaudited) and December 31, 2020, respectively. The Company accrues interest and penalties, relating to unrecognized tax benefits, in its provision for income taxes. At June 30, 2021 (unaudited) and December 31, 2020, the Company had accrued interest and penalties relating to unrecognized tax benefits of $302 and $329, respectively.

The Company intends to permanently reinvest earnings of its foreign operations and its current operating plans do not demonstrate a need to repatriate foreign earnings to fund the Company’s U.S. operations. However, if these funds were needed for the Company’s operations in the United States, the Company would be required to accrue and pay taxes in several countries to repatriate these funds. The determination of the amount of additional taxes related to the repatriation of these earnings is not practicable, as it may vary based on various factors such as the location of the cash and the effect of regulation in the various jurisdictions from which the cash would be repatriated.

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Note G - Significant Customers

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Significant Customers Disclosure [Text Block]

NOTE G—SIGNIFICANT CUSTOMERS

The Company sells its products primarily through distributors and directly to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) who incorporate the Company’s products into consumer products. The Company’s future performance will depend, in part, on the continued success of its distributors in marketing and selling its products. The loss of the Company’s distributors and the Company’s inability to obtain satisfactory replacements in a timely manner may harm the Company’s sales and results of operations. In addition, the Company expects that a limited number of customers, varying in identity from period-to-period, will account for a substantial portion of its revenues in any period. The loss of, or reduced demand for products from, any of the Company’s major customers could have a material adverse effect on the Company’s business, financial condition and results of operations.

The following table represents the Company’s sales, as a percentage of the Company’s total revenues, for the three and six month periods ended June 30, 2021 and 2020, of the Company’s significant customers:

	Three months ended June 30,		Six months ended June 30,
	(Unaudited)
Major customers/ distributors	2021	2020	2021	2020
VTech Holdings Ltd.	14%	22%	16%	21%
Nexty Electronics ¹ ²	9%	8%	9%	10%
Ascend Technology Inc. ¹ ³	35%	39%	33%	38%

¹ Distributor.

² Nexty Electronics sells the Company’s products to a limited number of customers; none of those customers accounted for 10% or more of the Company’s total revenues for the three and six month periods ended June 30, 2021 and 2020.

³ Ascend Technology sells the Company’s products to a limited number of customers; one of those customers Cisco Systems accounted for 12% and 21% for the three month periods ended June 30, 2021 and 2020, and 12% and 18% of the Company’s total revenues for the six month periods ended June 30, 2021 and 2020.

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Note H - Derivative Instruments

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE H—DERIVATIVE INSTRUMENTS

In accordance with Topic 815 “Derivatives and Hedging,” for derivative instruments that are designated and qualify as a cash flow hedge (i.e. hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any gain or loss on a derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item is recognized in current earnings during the period of change.

As of June 30, 2021 the Company had no outstanding option and foreign exchange forward contracts. See Note L for information on the fair value of hedging contracts.

The fair value of derivative assets and derivative liabilities were both $0 as of June 30, 2021.

The amount recorded as income in research and development expenses, sales and marketing expenses and general and administrative expenses in the condensed consolidated statements of income for the six months ended June 30, 2021 that resulted from the above referenced hedging transactions was $24, $3 and $4, respectively.

The amount recorded as income in research and development expenses, sales and marketing expenses and general and administrative expenses in the condensed consolidated statements of income for the six months ended June 30, 2020 that resulted from the above referenced hedging transactions was $41, $4 and $7, respectively.

The effect of derivative instruments in cash flow hedging transactions on income and other comprehensive income (“OCI”) for the three and six months ended June 30, 2021 and 2020 is summarized below:

	Gains on Derivatives Recognized in OCI
	for the three months ended June 30,				for the six months ended June 30,
	(Unaudited)
	2021		2020		2021		2020
Foreign exchange forward and option contracts	$	20	$	17	$	31	$	52

	Gains Reclassified from OCI into Income
		for the three months ended June 30				for the six months ended June 30,
		Unaudited
	Location	2021		2020		2021		2020
Foreign exchange forward and option contracts	Operating expenses	$	26	$	52	$	31	$	52

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Note I - Contingencies

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE I—CONTINGENCIES

From time to time, the Company may become involved in litigation relating to claims arising from its ordinary course of business. In addition, as is typical in the semiconductor industry, the Company has been and may from time to time be notified of claims that the Company may be infringing patents or intellectual property rights owned by third parties. The Company currently believes that there are no claims or actions pending or threatened against it, the ultimate disposition of which would have a material adverse effect on the Company.

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Note J - Equity-based Compensation

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

NOTE J—EQUITY-BASED COMPENSATION

Grants for the three months ended June 30, 2021 and 2020

The weighted average estimated fair value of employee restricted stock units (“RSUs”) granted during the three months ended June 30, 2021 and 2020 was $12.51 and $15.47 per share, respectively (using the weighted average pre vest cancellation rate of 4.22% and 4.27% for the three months ended June 30, 2021 and 2020, respectively, on an annual basis).

Employee stock benefit plans

As of June 30, 2021, the Company has two equity incentive plans from which the Company may grant future equity awards and one expired equity incentive plan from which no future equity awards may be granted but had outstanding equity awards granted prior to expiration. The Company also has one employee stock purchase plan. As of June 30, 2021, approximately 468,000 shares of common stock remain available for grant under the Company’s employee stock purchase plan and 433,000 shares of common stock remain available for grant under the Company’s equity incentive plans.

The table below presents a summary of information relating to the Company’s stock option, RSU and SAR grants pursuant to its equity incentive plans (unaudited):

	Number of Options/ SARs/RSUs			Weighted average exercise price		Weighted average remaining contractual term (years) (3)		Aggregate value (**)
	in thousands							in thousands
Outstanding at March 31, 2021		1,836		$	1.86
RSUs granted		66			-
Options / SARs / RSUs cancelled/forfeited/expired		(20	)		-
Options / SARs exercised and RSUs vested		(88	)	$	0.08
Outstanding at June 30, 2021 (1)		1,794		$	1.90		3.23	$	23,155
Exercisable at June 30, 2021 (2)		338		$	9.84		3.21	$	1,678

(*)    Represents an amount lower than $1.

(**) Calculation of aggregate intrinsic value is based on the share price of the Company’s common stock on June 30, 2021 ($14.80 per share).

(1) Due to the ceiling imposed on the SAR grants, the outstanding amount above can be exercised for a maximum of 1,765 thousand shares of the Company’s common stock as of June 30, 2021. SAR grants made on or after January 1, 2012 are convertible for a maximum number of shares of the Company’s common stock equal to 50% of the SARs subject to the grant.

(2) Due to the ceiling imposed on the SAR grants, the exercisable amount above can be exercised for a maximum of 310 thousand shares of the Company’s common stock as of June 30, 2021.

(3) Calculation of weighted average remaining contractual term does not include RSUs that were granted, which have indefinite contractual term.

Additional information about stock options, SARs and RSUs outstanding and exercisable at June 30, 2021 with exercise prices above $14.80 per share (the closing price of the Company’s common stock on June 30, 2021) is as follows:

	Exercisable				Unexercisable				Total
Exercise prices	Number of Options/ SARs / RSUs (in thousands)		Weighted average exercise price		Number of Options/ SARs / RSUs (in thousands)		Weighted average exercise price		Number of Options/ S ARs / RSUs (in thousands)		Weighted average exercise price
Less than $14.80		338	$	9.84		1,456	$	0.06		1,794	$	1.90
Above $14.80		-	$	-		-	$	-		-	$	-
Total		338	$	9.84		1,456	$	0.06		1,794	$	1.90

The Company’s aggregate equity-based compensation expense for the three months ended June 30, 2021 and 2020 totaled $3,005 and $2,281, respectively.

As of June 30, 2021, there was $12,294 of total unrecognized equity-based compensation expense related to unvested equity-based compensation awards granted under the Company’s equity incentive plans. This amount is expected to be recognized during the period from 2021 through 2025.

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Note K - Pension Liability

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Retirement Benefits [Text Block]

NOTE K—PENSION LIABILITY

The information in this note represents the net periodic pension and post-retirement benefit costs and related components in accordance with FASB ASC No. 715 “Employers’ Disclosures about Pensions and Other Post-Retirement Benefits.” The components of net pension and post-retirement periodic benefit cost (income) for the six months ended June 30, 2020 and 2019 (unaudited) are as follows:

	Six months ended June 30,
	2021		2020
Components of net periodic benefit cost:
Service cost and amortization of loss	$	15	$	14
Interest cost		5		5
Net periodic benefit cost	$	20	$	19

The net pension liability as of June 30, 2021 amounted to $1,058.

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Note L - Fair Value Measurements

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

NOTE L—FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis:

The Company measures its cash equivalents, short-term deposits, marketable securities and foreign currency derivative contracts at fair value. Cash equivalents, short-term deposits and marketable securities are classified within Level 1 or Level 2 value hierarchies as they are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs. Foreign currency derivative contracts are classified within Level 2 value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments.

The following table provides information by value level for assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021:

	Balance as of		Fair value measurements
Description	December 31, 2021		Level 1		Level 2		Level 3
Assets
Cash equivalents
Money market mutual funds	$	919	$	919	$	-	$	-
Short-term marketable securities
U.S. GSE securities	$	425	$	-	$	425	$	-
Corporate debt securities	$	23,026	$	-	$	23,026	$	-
Long-term marketable securities
U.S. GSE securities	$	731	$	-	$	731	$	-
Corporate debt securities	$	63,776	$	-	$	63,776	$	-
Liabilities
Earn-out liability	$	1,945	$	-	$	-	$	1,945

The following table provides information by value level for assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020.

	Balance as of		Fair value measurements
Description	December 31, 2020		Level 1		Level 2		Level 3
Assets
Cash equivalents
Money market mutual funds	$	962	$	962	$	-	$	-
Short-term marketable securities
U.S. GSE securities	$	425	$	-	$	425	$	-
Corporate debt securities	$	27,949	$	-	$	27,949	$	-
Long-term marketable securities
U.S. GSE securities	$	735	$	-	$	735	$	-
Corporate debt securities	$	59,719	$	-	$	59,719	$	-
Liabilities
Earn-out liability	$	1,945	$	-	$	-	$	1,945

In addition to the assets and liabilities described above, the Company’s financial instruments also include cash and cash equivalents, restricted and short-term deposits, trade receivables, other accounts receivable, trade payables, accrued expenses and other payables. The fair value of these financial instruments was not materially different from their carrying values at June 30, 2021 due to the short-term maturity of these instruments.

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Note M - Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE M—STOCKHOLDERS’ EQUITY

During the six months ended June 30, 2021, the Company repurchased 339 thousand shares of common stock at an average purchase price of $15.62 per share for an aggregate purchase price of $5,299. As of June 30, 2021, 28 thousands shares of common stock remained authorized for repurchase under the Company's board-authorized share repurchase program.

During the six months ended June 30, 2020, the Company repurchased 305 thousand shares of common stock at an average purchase price of $12.26 per share for an aggregate purchase price of $3,736.

Repurchases of common stock are accounted for as treasury stock, and result in a reduction of stockholders’ equity. The Company reissues treasury shares pursuant to its stock purchase plan, upon exercise of options and upon vesting of restricted stock units. Reissuance of treasury shares is accounted for in accordance with ASC No. 505-30 whereby gains are credited to additional paid-in capital and losses are charged to additional paid-in capital to the extent that previous net gains are included therein; otherwise losses are charged to retained earnings.

During the first six months of 2021, the Company issued approximately 604 thousand shares of common stock out of treasury stock to employees who exercised their stock options, SARs or vested RSUs, or purchased shares from the Company’s 1993 Employee Stock Purchase Plan.

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Note N - Segment Information

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE N—SEGMENT INFORMATION

Description of segments:

The Company operates under two reportable segments.

The Company’s segment information has been prepared in accordance with ASC 280, “Segment Reporting.” Operating segments are defined as components of an enterprise engaging in business activities about which separate financial information is available that is evaluated regularly by the Company’s chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is its Chief Executive Officer, who evaluates the Company’s performance and allocates resources based on segment revenues and operating income.

The Company’s reporting segments up until December 31, 2020 were: Home, Unified Communications and SmartVoice.

As a result of an organization change that took place starting in 2021 and the way management views the Company’s business operations, as of January 1, 2021, the Company’s reporting segments were changed to Cordless and IoAT. The classification of the Company’s business segments is based on a number of factors that management uses to evaluate, view and run the Company’s business operations, which include, but are not limited to, customer base, homogeneity of products and technology.

A description of the types of products provided by each business segment is as follows:

Cordless – This segment includes integrated circuit products targeted for cordless phones sold in retail or supplied by telecommunication service providers. Revenues from this segment amounted to 33% and 35% of the Company’s total revenues for the first half of 2021 and 2020, respectively, and 31% and 35% of the Company’s total revenues for the second quarter of 2021 and 2020, respectively.

IoAT (Internet of Audio Things) – This segment includes the following products:

(i)    SmartHome (home gateways and home automation) – Wireless chipset solutions for converged communication at home. Target applications include: home gateway devices supplied by telecommunication service and security providers with DECT/CAT-iq and ULE functionality for data and two-way voice; home automation and home security. Revenues from SmartHome products amounted to 15% of the Company’s total revenues for both the first half of 2021 and 2020 and 16% and 15% of the Company’s revenues for the second quarter of 2021 and 2020, respectively.

(ii)    Unified Communications — Comprehensive suite of solutions for Unified Communications products, including office solutions for businesses of all sizes, from low-cost VoIP terminals with converged voice and data applications, to high-end conferencing systems. Revenues from the Company’s Unified Communications products represented 32% and 36% of its total revenues for the first half of 2021 and 2020, respectively, and 33% and 36% of the Company’s revenues for the second quarter of 2021 and 2020, respectively.

(iii)    SmartVoice — SmartVoice hardware and software solutions provide voice activation and recognition, sound event detection (SED), voice enhancement, always-on wake-word detection, far-end noise elimination targeted for mobile phones, mobile headsets/hearables, wearables, tablets, consumer home electronics, security systems and other devices that incorporate the Company’s noise suppression and voice quality enhancement HDClear technology. SmartVoice includes an active noise cancellation (ANC) solution for hearables (headphones and true wireless stereo (TWS) earbud) applications. Revenues from the Company’s SmartVoice products represented 19% and 14% of the Company’s total revenues for the first half of 2021 and 2020, respectively, and 20% and 14% of the Company’s revenues for the second quarter of 2021 and 2020, respectively.

Segment data:

The Company derives the results of its business segments directly from its internal management reporting system and by using certain allocation methods. The accounting policies the Company uses to derive business segment results are substantially the same as those the Company uses for consolidation of its financial statements. The CODM measures the performance of each business segment based on several metrics, including earnings from operations. The CODM uses these results, in part, to evaluate the performance of, and to assign resources to, each of the business segments. The Company does not allocate to its business segments certain operating expenses, which it manages separately at the corporate level. These unallocated costs include primarily amortization of purchased intangible assets, equity-based compensation expenses, and certain corporate governance costs.

Selected operating results information for each business segment was as follows for the three months ended June 30, 2021 and 2020 (unaudited):

	Three months ended June 30,
	Revenues				Income (loss) from operations
	2021		2020		2021			2020
Cordless	$	11,048	$	9,939	$	4,531		$	3,577
IoAT	$	24,759	$	18,397	$	(614	)	$	(1,942	)
Total	$	35,807	$	28,336	$	3,917		$	1,635

Selected operating results information for each business segment was as follows for the six months ended June 30, 2021 and 2020 (unaudited):

	Six months ended June 30,
	Revenues				Income (loss) from operations
	2021		2020		2021			2020
Cordless	$	22,918	$	19,996	$	9,052		$	6,774
IoAT	$	45,536	$	36,579	$	(3,107	)	$	(6,148	)
Total	$	68,454	$	56,575	$	5,945		$	626

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and six months periods ended June 30, 2021 (unaudited):

	Three months			Six months
Income from operations	$	3,917		$	5,945
Unallocated corporate, general and administrative expenses		(648	)		(1,250	)
Equity-based compensation expenses		(3,005	)		(5,535	)
Intangible assets amortization expenses		(429	)		(848	)
Amortization of employee retention expenses related to the acquisition of SoundChip		(250	)		(500	)
Financial income, net		94			735
Total consolidated loss before taxes	$	(321	)	$	(1,453	)

The reconciliation of segment operating results information to the Company’s consolidated financial information was as follows for the three and six months ended June 30, 2020 (unaudited):

	Three months			Six months
Income from operations	$	1,635		$	626
Unallocated corporate, general and administrative expenses		(610	)		(1,102	)
Equity-based compensation expenses		(2,281	)		(4,113	)
Intangible assets amortization expenses		(104	)		(208	)
Financial income, net		289			1,192
Total consolidated loss before taxes	$	(1,071	)	$	(3,605	)

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Note O - Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

NOTE O —ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in accumulated balances of other comprehensive income for the three months ended June 30, 2021 (unaudited):

	Unrealized gains (losses) on available- for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Unrealized gains (losses) on components of defined benefit plans			Unrealized losses on foreign currency translation			Total
Beginning balance	$	64		$	6		$	(485	)	$	(471	)	$	(886	)
Other comprehensive income (loss) before reclassifications		(54	)		20			-			(30	)		(64	)
Losses (gains) reclassified from accumulated other comprehensive income		-			(26	)		6			-			(20	)
Net current period other comprehensive income (loss)		(54	)		(6	)		6			(30	)		(84	)
Ending balance	$	10		$	-		$	(479	)	$	(501	)	$	(970	)

The following table provides details about reclassifications out of accumulated other comprehensive income for the three months ended June 30, 2021 (unaudited):

Details about accumulated other comprehensive income (loss) components	Losses (gains) reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement of income (loss)
Gains on available-for-sale marketable securities		-		Financial income, net
		-		Provision for income taxes
		-		Total, net of income taxes
Gains on cash flow hedges		(20	)	Research and development
		(2	)	Sales and marketing
		(4	)	General and administrative
		(26	)	Total, before income taxes
		-		Provision for income taxes
		(26	)	Total, net of income taxes
Losses on components of defined benefit plans		3		Research and development
		3		Sales and marketing
		6		Total, before income taxes
		-		Provision for income taxes
		6		Total, net of income taxes
Total reclassifications for the period	$	(20	)	Total, net of income taxes

The following table summarizes the changes in accumulated balances of other comprehensive income (loss) for the six months ended June 30, 2021 (unaudited):

	Unrealized gains (losses) on available- for-sale marketable securities			Unrealized gains (losses) on Cash Flow Hedges			Unrealized gains (losses) on components of defined benefit plans			Unrealized gains (losses) on foreign currency translation			Total
Beginning balance	$	358		$	-		$	(491	)	$	(504	)	$	(637	)
Other comprehensive income (loss) before reclassifications		(356	)		31			-			3			(322	)
Losses (gains) reclassified from accumulated other comprehensive income (loss)		8			(31	)		12			-			(11	)
Net current period other comprehensive income (loss)		(348	)		-			12			3			(333	)
Ending balance	$	10		$	-		$	(479	)		(501	)	$	(970	)

The following table provides details about reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2021 (unaudited):

Details about accumulated other comprehensive income (loss) components	Losses (gains) reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement of income (loss)
Losses on available-for-sale marketable securities	$	8		Financial income, net
		-		Provision for income taxes
		8		Total, net of income taxes
Gains on cash flow hedges		(24	)	Research and development
		(3	)	Sales and marketing
		(4	)	General and administrative
		(31	)	Total, before income taxes
		-		Provision for income taxes
		(31	)	Total, net of income taxes
Losses on components of defined benefit plans		7		Research and development
		5		Sales and marketing
		12		Total, before income taxes
		-		Provision for income taxes
		12		Total, net of income taxes
Total reclassifications for the period	$	(11	)	Total, net of income taxes

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Note P - Government Grants

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Government Grants [Text Block]

NOTE P—GOVERNMENT GRANTS

Government grants received by the Company’s Israeli subsidiary relating to categories of operating expenditures are credited to the consolidated statements of income during the period during which the expenditure to which they relate is charged. Royalty and non-royalty-bearing grants from the Israeli Innovation Authority ("IIA") for funding certain approved research and development projects are recognized at the time when the Company’s Israeli subsidiary is entitled to such grants, on the basis of the related costs incurred, and are included as a deduction from research and development expenses, net.

The Company recorded grants in the amount of $911 and $907 for the three month periods ended June 30, 2021 and 2020, respectively.

The Company recorded grants in the amount of $1,452 and $1,120 for the six month periods ended June 30, 2021 and 2020, respectively.

The Company’s Israeli subsidiary is obligated to pay royalties amounting to 5% of the sales of certain products, the development of which benefited from grants received from the IIA in previous years. The obligation to pay these royalties is contingent on actual sales of such products. Grants received from the IIA may become repayable if certain criteria under the grants are not met. In addition, the grants may be required to be repaid with a multiple of up to six times the initial grant amount in case the technology that was developed using these grants are transferred, directly or indirectly, to a third party.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued and Adopted Accounting Pronouncements 

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes. ASU 2019-12 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14—Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”) which improves disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This standard is effective for fiscal years ending after December 15, 2020, for public business entities. Early adoption is permitted for all entities. Entities are to apply the amendments in this update on a retrospective basis for all periods presented. The adoption of ASU 2018-14 did not have a material impact on the Company’s condensed consolidated financial statements.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the interim condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Business Combinations Policy [Policy Text Block]

Acquisition of SoundChip

In July 2020, the Company completed the acquisition of SoundChip SA, a privately-held Swiss company (“SoundChip”) for an initial purchase price of approximately $15 million (with a portion held in escrow in accordance with the agreement terms), subject to working capital adjustments (the “Initial Purchase Price”) and agreed to pay future contingent cash milestone payments of up to $6 million upon the achievement of certain customer and product sales milestones during the period from July 1, 2020 to December 31, 2022.

The results of operations of SoundChip have been included in the Company’s consolidated financial statements since July 1, 2020. The Company did not provide pro forma disclosure according to ASC 810 for the SoundChip acquisition due to immateriality.

The preliminary purchase price allocation ("PPA") was based on information available at the time of closing of the SoundChip acquisition. During 2021, the Company finalized the PPA for SoundChip as a result of finalizing the working capital adjustments as stated above.

The following table summarizes adjustments since the preliminary PPA was disclosed as of December 31, 2020:

	Preliminary estimated fair value			Adjustments			Fair value
Cash	$	443		$	-		$	443
Property and equipment		456			-			456
Current assets		2,301			-			2,301
Other non-current assets		1,042			-			1,042
Current liabilities		(1,007	)		25			(982	)
Other long-term liabilities		(1,945	)		-			(1,945	)
Net tangible assets acquired		1,290			-			1,315
Deferred tax liability		(1,121	)		-			(1,121	)
Intangible assets:
Developed technology		7,189			-			7,189
Backlog		54			-			54
Customer relationships		678			-			678
Total intangible assets		7,921			-			7,921
Goodwill		6,862			(197	)		6,665
Net assets acquired	$	14,952					$	14,780

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Note A - Basis of Presentation and Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

	Preliminary estimated fair value			Adjustments			Fair value
Cash	$	443		$	-		$	443
Property and equipment		456			-			456
Current assets		2,301			-			2,301
Other non-current assets		1,042			-			1,042
Current liabilities		(1,007	)		25			(982	)
Other long-term liabilities		(1,945	)		-			(1,945	)
Net tangible assets acquired		1,290			-			1,315
Deferred tax liability		(1,121	)		-			(1,121	)
Intangible assets:
Developed technology		7,189			-			7,189
Backlog		54			-			54
Customer relationships		678			-			678
Total intangible assets		7,921			-			7,921
Goodwill		6,862			(197	)		6,665
Net assets acquired	$	14,952					$	14,780

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Note B - Operating Leases (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Lease, Cost [Table Text Block]

	June 30, 2021			June 30, 2020
Weighted-average remaining lease term – operating leases (years)		6.66			7.70
Weighted-average discount rate – operating leases		5.03	%		5.05	%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

	June 30, 2021			June 30, 2020
Gross lease liabilities	$	14,490		$	15,022
Less: imputed interest		(2,434	)		(2,850	)
Present value of lease liabilities		12,056			12,172
Less: current portion of lease liabilities		(2,874	)		(2,404	)
Total long-term lease liabilities	$	9,182		$	9,768

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Note C - Inventories (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)
Work‑in‑process	$	5,585	$	5,972
Finished goods		799		3,089
	$	6,384	$	9,061

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Note D - Net Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
	(Unaudited)
Net loss	$	(399	)	$	(1,077	)	$	(1,742	)	$	(3,543	)
Loss per share:
Basic and Diluted	$	(0.02	)	$	(0.05	)	$	(0.07	)	$	(0.15	)
Weighted average number of shares of common stock outstanding during the period used to compute basic net loss per share (in thousands)		24,204			23,301			24,131			23,321
Incremental shares attributable to exercise of outstanding options, stock appreciation rights and restricted stock units (assuming proceeds would be used to purchase treasury stock) (in thousands)		-			-			-			-
Weighted average number of shares of common stock used to compute diluted net loss per share (in thousands)		24,204			23,301			24,131			23,321

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Note E - Marketable Securities and Time Deposits (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Available-for-sale Securities [Table Text Block]

	Amortized cost				Unrealized gains, net				Fair value
	June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020		June 30, 2021		December 31, 2020
	(Unaudited)		(Audited)		(Unaudited)		(Audited)		(Unaudited)		(Audited)
Short-term deposits		25,230	$	22,241	$	-	$	-		25,230	$	22,241
U.S. GSE securities		1,146		1,149		10		11		1,156		1,160
Corporate obligations		86,802		87,319		-		349		86,802		87,668
	$	113,178	$	110,709	$	10	$	360	$	113,188	$	111,069

Investments Classified by Contractual Maturity Date [Table Text Block]

			Unrealized gains (losses)
	Amortized cost		Gains		Losses			Fair value
Due in one year or less	$	23,427	$	37	$	(13	)	$	23,451
Due after one year to five years		64,521		267		(281	)		64,507
	$	87,948	$	304	$	(294	)	$	87,958

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Note G - Significant Customers (Tables)

6 Months Ended

Jun. 30, 2021

Customer Concentration Risk [Member]

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Three months ended June 30,		Six months ended June 30,
	(Unaudited)
Major customers/ distributors	2021	2020	2021	2020
VTech Holdings Ltd.	14%	22%	16%	21%
Nexty Electronics ¹ ²	9%	8%	9%	10%
Ascend Technology Inc. ¹ ³	35%	39%	33%	38%

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Note H - Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) [Table Text Block]

	Gains on Derivatives Recognized in OCI
	for the three months ended June 30,				for the six months ended June 30,
	(Unaudited)
	2021		2020		2021		2020
Foreign exchange forward and option contracts	$	20	$	17	$	31	$	52

Derivative Instruments, Gain (Loss) [Table Text Block]

	Gains Reclassified from OCI into Income
		for the three months ended June 30				for the six months ended June 30,
		Unaudited
	Location	2021		2020		2021		2020
Foreign exchange forward and option contracts	Operating expenses	$	26	$	52	$	31	$	52

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Note J - Equity-based Compensation (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Share-based Payment Arrangement, Activity [Table Text Block]

	Number of Options/ SARs/RSUs			Weighted average exercise price		Weighted average remaining contractual term (years) (3)		Aggregate value (**)
	in thousands							in thousands
Outstanding at March 31, 2021		1,836		$	1.86
RSUs granted		66			-
Options / SARs / RSUs cancelled/forfeited/expired		(20	)		-
Options / SARs exercised and RSUs vested		(88	)	$	0.08
Outstanding at June 30, 2021 (1)		1,794		$	1.90		3.23	$	23,155
Exercisable at June 30, 2021 (2)		338		$	9.84		3.21	$	1,678

Share-based Payment Arrangement, Option, Exercise Price Range [Table Text Block]

	Exercisable				Unexercisable				Total
Exercise prices	Number of Options/ SARs / RSUs (in thousands)		Weighted average exercise price		Number of Options/ SARs / RSUs (in thousands)		Weighted average exercise price		Number of Options/ S ARs / RSUs (in thousands)		Weighted average exercise price
Less than $14.80		338	$	9.84		1,456	$	0.06		1,794	$	1.90
Above $14.80		-	$	-		-	$	-		-	$	-
Total		338	$	9.84		1,456	$	0.06		1,794	$	1.90

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Note K - Pension Liability (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Six months ended June 30,
	2021		2020
Components of net periodic benefit cost:
Service cost and amortization of loss	$	15	$	14
Interest cost		5		5
Net periodic benefit cost	$	20	$	19

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Note L - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Balance as of		Fair value measurements
Description	December 31, 2021		Level 1		Level 2		Level 3
Assets
Cash equivalents
Money market mutual funds	$	919	$	919	$	-	$	-
Short-term marketable securities
U.S. GSE securities	$	425	$	-	$	425	$	-
Corporate debt securities	$	23,026	$	-	$	23,026	$	-
Long-term marketable securities
U.S. GSE securities	$	731	$	-	$	731	$	-
Corporate debt securities	$	63,776	$	-	$	63,776	$	-
Liabilities
Earn-out liability	$	1,945	$	-	$	-	$	1,945

	Balance as of		Fair value measurements
Description	December 31, 2020		Level 1		Level 2		Level 3
Assets
Cash equivalents
Money market mutual funds	$	962	$	962	$	-	$	-
Short-term marketable securities
U.S. GSE securities	$	425	$	-	$	425	$	-
Corporate debt securities	$	27,949	$	-	$	27,949	$	-
Long-term marketable securities
U.S. GSE securities	$	735	$	-	$	735	$	-
Corporate debt securities	$	59,719	$	-	$	59,719	$	-
Liabilities
Earn-out liability	$	1,945	$	-	$	-	$	1,945

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Note N - Segment Information (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three months ended June 30,
	Revenues				Income (loss) from operations
	2021		2020		2021			2020
Cordless	$	11,048	$	9,939	$	4,531		$	3,577
IoAT	$	24,759	$	18,397	$	(614	)	$	(1,942	)
Total	$	35,807	$	28,336	$	3,917		$	1,635

	Six months ended June 30,
	Revenues				Income (loss) from operations
	2021		2020		2021			2020
Cordless	$	22,918	$	19,996	$	9,052		$	6,774
IoAT	$	45,536	$	36,579	$	(3,107	)	$	(6,148	)
Total	$	68,454	$	56,575	$	5,945		$	626

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

	Three months			Six months
Income from operations	$	3,917		$	5,945
Unallocated corporate, general and administrative expenses		(648	)		(1,250	)
Equity-based compensation expenses		(3,005	)		(5,535	)
Intangible assets amortization expenses		(429	)		(848	)
Amortization of employee retention expenses related to the acquisition of SoundChip		(250	)		(500	)
Financial income, net		94			735
Total consolidated loss before taxes	$	(321	)	$	(1,453	)

	Three months			Six months
Income from operations	$	1,635		$	626
Unallocated corporate, general and administrative expenses		(610	)		(1,102	)
Equity-based compensation expenses		(2,281	)		(4,113	)
Intangible assets amortization expenses		(104	)		(208	)
Financial income, net		289			1,192
Total consolidated loss before taxes	$	(1,071	)	$	(3,605	)

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Note O - Accumulated Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2021

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Unrealized gains (losses) on available- for-sale marketable securities			Unrealized gains (losses) on cash flow hedges			Unrealized gains (losses) on components of defined benefit plans			Unrealized losses on foreign currency translation			Total
Beginning balance	$	64		$	6		$	(485	)	$	(471	)	$	(886	)
Other comprehensive income (loss) before reclassifications		(54	)		20			-			(30	)		(64	)
Losses (gains) reclassified from accumulated other comprehensive income		-			(26	)		6			-			(20	)
Net current period other comprehensive income (loss)		(54	)		(6	)		6			(30	)		(84	)
Ending balance	$	10		$	-		$	(479	)	$	(501	)	$	(970	)

	Unrealized gains (losses) on available- for-sale marketable securities			Unrealized gains (losses) on Cash Flow Hedges			Unrealized gains (losses) on components of defined benefit plans			Unrealized gains (losses) on foreign currency translation			Total
Beginning balance	$	358		$	-		$	(491	)	$	(504	)	$	(637	)
Other comprehensive income (loss) before reclassifications		(356	)		31			-			3			(322	)
Losses (gains) reclassified from accumulated other comprehensive income (loss)		8			(31	)		12			-			(11	)
Net current period other comprehensive income (loss)		(348	)		-			12			3			(333	)
Ending balance	$	10		$	-		$	(479	)		(501	)	$	(970	)

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

Details about accumulated other comprehensive income (loss) components	Losses (gains) reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement of income (loss)
Gains on available-for-sale marketable securities		-		Financial income, net
		-		Provision for income taxes
		-		Total, net of income taxes
Gains on cash flow hedges		(20	)	Research and development
		(2	)	Sales and marketing
		(4	)	General and administrative
		(26	)	Total, before income taxes
		-		Provision for income taxes
		(26	)	Total, net of income taxes
Losses on components of defined benefit plans		3		Research and development
		3		Sales and marketing
		6		Total, before income taxes
		-		Provision for income taxes
		6		Total, net of income taxes
Total reclassifications for the period	$	(20	)	Total, net of income taxes

Details about accumulated other comprehensive income (loss) components	Losses (gains) reclassified from accumulated other comprehensive income (loss)			Affected line item in the statement of income (loss)
Losses on available-for-sale marketable securities	$	8		Financial income, net
		-		Provision for income taxes
		8		Total, net of income taxes
Gains on cash flow hedges		(24	)	Research and development
		(3	)	Sales and marketing
		(4	)	General and administrative
		(31	)	Total, before income taxes
		-		Provision for income taxes
		(31	)	Total, net of income taxes
Losses on components of defined benefit plans		7		Research and development
		5		Sales and marketing
		12		Total, before income taxes
		-		Provision for income taxes
		12		Total, net of income taxes
Total reclassifications for the period	$	(11	)	Total, net of income taxes

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Note A - Basis of Presentation and Summary of Significant Accounting Policies (Details Textual) - SoundChip [Member] $ in Millions	Jul. 01, 2020 USD ($)
Business Combination, Consideration Transferred, Total	$ 15
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 6

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Note A - Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Business Acquisitions (Details) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2020	Jun. 30, 2021	Jul. 01, 2020
Goodwill	$ 13,105	$ 13,105
SoundChip [Member]
Cash	443		$ 443
Property and equipment	456		456
Current assets	2,301		2,301
Other non-current assets	1,042		1,042
Current liabilities	(982)		(1,007)
Current liabilities	25
Other long-term liabilities	(1,945)		(1,945)
Net tangible assets acquired	1,315		1,290
Deferred tax liability	(1,121)		(1,121)
Intangible assets	7,921		7,921
Goodwill	6,665		6,862
Goodwill, adjustments	(197)
Net assets acquired	14,780		14,952
SoundChip [Member] | Developed Technology Rights [Member]
Intangible assets	7,189		7,189
SoundChip [Member] | Backlog [Member]
Intangible assets	54		54
SoundChip [Member] | Customer Relationships [Member]
Intangible assets	$ 678		$ 678

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Note B - Operating Leases (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Operating Lease, Cost	$ 799	$ 691	$ 1,630	$ 1,400
Operating Lease, Payments	$ 799	$ 691	$ 1,630	$ 1,400
Minimum [Member]
Lessee, Operating Lease, Remaining Lease Term (Year)	1 year		1 year
Maximum [Member]
Lessee, Operating Lease, Remaining Lease Term (Year)	10 years		10 years

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Note B - Operating Leases - Information About Lease Amounts (Details)	Jun. 30, 2021	Jun. 30, 2020
Weighted-average remaining lease term – operating leases (years) (Year)	6 years 7 months 28 days	7 years 8 months 12 days
Weighted-average discount rate – operating leases	5.03%	5.05%

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Note B - Operating Leases - Lease Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020	Jun. 30, 2020
Gross lease liabilities	$ 14,490		$ 15,022
Less: imputed interest	(2,434)		(2,850)
Present value of lease liabilities	12,056		12,172
Less: current portion of lease liabilities	(2,874)	$ (2,974)	(2,404)
Total long-term lease liabilities	$ 9,182	$ 10,075	$ 9,768

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Note C - Inventories (Details Textual) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Inventory Write-down	$ 29
Income from Inventory Previously Written Off		$ 91

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Note C - Inventories - Components of Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Work-in-process	$ 5,585	$ 5,972
Finished goods	799	3,089
Inventories	$ 6,384	$ 9,061

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Note D - Net Loss Per Share - Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Net loss	$ (399)	$ (1,077)	$ (1,742)	$ (3,543)
Basic and Diluted (in dollars per share)	$ (0.02)	$ (0.05)	$ (0.07)	$ (0.15)
Weighted average number of shares of common stock outstanding during the period used to compute basic net loss per share (in thousands) (in shares)	24,204	23,301	24,131	23,321
Incremental shares attributable to exercise of outstanding options, stock appreciation rights and restricted stock units (assuming proceeds would be used to purchase treasury stock) (in thousands) (in shares)	0	0	0	0
Weighted average number of shares of common stock used to compute diluted net loss per share (in thousands) (in shares)	24,204	23,301	24,131	23,321

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Note E - Marketable Securities and Time Deposits (Details Textual) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total		$ 48,883
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax		294
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Total		0
Proceeds from Maturities, Prepayments and Calls of Debt Securities, Available-for-sale		15,423	$ 39,439
Proceeds from Sale of Debt Securities, Available-for-sale		4,692	$ 9,558
Debt Securities, Available-for-sale, Realized Loss	$ 12	(8)
Corporate Debt Securities [Member]
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Total		$ 0

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Note E - Marketable Securities and Time Deposits - Marketable Securities and Time Deposits (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Marketable securities and time deposits, amortized cost	$ 87,948
Marketable securities and time deposits, estimated fair value	87,958
Debt Securities and Time Deposits [Member]
Marketable securities and time deposits, amortized cost	113,178	$ 110,709
Marketable securities and time deposits, unrealized gains (losses), net	10	360
Marketable securities and time deposits, estimated fair value	113,188	111,069
Debt Securities and Time Deposits [Member] | Short-term Deposits [Member]
Marketable securities and time deposits, amortized cost	25,230	22,241
Marketable securities and time deposits, unrealized gains (losses), net	0	0
Marketable securities and time deposits, estimated fair value	25,230	22,241
Debt Securities and Time Deposits [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Marketable securities and time deposits, amortized cost	1,146	1,149
Marketable securities and time deposits, unrealized gains (losses), net	10	11
Marketable securities and time deposits, estimated fair value	1,156	1,160
Debt Securities and Time Deposits [Member] | Corporate Debt Securities [Member]
Marketable securities and time deposits, amortized cost	86,802	87,319
Marketable securities and time deposits, unrealized gains (losses), net	0	349
Marketable securities and time deposits, estimated fair value	$ 86,802	$ 87,668

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Note E - Marketable Securities and Time Deposits - Marketable Debt Securities by Contractual Maturities (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Marketable debt securities, amortized cost	$ 87,948
Marketable debt securities, unrealized gains	304
Marketable debt securities, unrealized losses	(294)
Marketable debt securities, estimated fair value	87,958
Due in One Year or Less [Member]
Marketable debt securities, amortized cost	23,427
Marketable debt securities, unrealized gains	37
Marketable debt securities, unrealized losses	(13)
Marketable debt securities, estimated fair value	23,451
Due after One Year to Five Years [Member]
Marketable debt securities, amortized cost	64,521
Marketable debt securities, unrealized gains	267
Marketable debt securities, unrealized losses	(281)
Marketable debt securities, estimated fair value	$ 64,507

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Note F - Taxes on Income (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Unrecognized Tax Benefits, Ending Balance	$ 3,268	$ 3,449
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	$ 302	$ 329

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Note G - Significant Customers (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Customer Concentration Risk [Member] | Revenue Benchmark [Member] | Cisco Systems, Inc. [Member]
Concentration Risk, Percentage	12.00%	21.00%	12.00%	18.00%

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Note G - Significant Customers - Sales to Major Customers (Distributors) As a Percentage of Total Revenues (Details) - Customer Concentration Risk [Member] - Revenue Benchmark [Member]		3 Months Ended		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
VTech Holdings Ltd [Member]
Concentration risk, percentage		14.00%	22.00%	16.00%	21.00%
Nexty Electronics Corporation [Member]
Concentration risk, percentage	[1],[2]	9.00%	8.00%	9.00%	10.00%
Ascend Technology Inc [Member]
Concentration risk, percentage	[1],[3]	35.00%	39.00%	33.00%	38.00%

[1] Distributor.

[2] Nexty Electronics sells the Company’s products to a limited number of customers; none of those customers accounted for 10% or more of the Company’s total revenues for the three and six month periods ended June 30, 2021 and 2020.

[3] Ascend Technology sells the Company’s products to a limited number of customers; one of those customers Cisco Systems accounted for 12% and 21% for the three month periods ended June 30, 2021 and 2020, and 12% and 18% of the Company’s total revenues for the six month periods ended June 30, 2021 and 2020.

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Note H - Derivative Instruments (Details Textual) - Foreign Exchange Forward Contracts and Put Options [Member] - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Price Risk Cash Flow Hedge Asset, at Fair Value	$ 0
Derivative, Fair Value, Net, Total	0
Research and Development Expense [Member]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total	24	$ 41
Selling and Marketing Expense [Member]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total	3	4
General and Administrative Expense [Member]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total	$ 4	$ 7

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Note H - Derivative Instruments - Effect of Derivative Instruments in Cash Flow Hedging Transactions on Income and Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Foreign Exchange Forward Contracts and Put Options [Member]
Foreign exchange forward and option contracts	$ 20	$ 17	$ 31	$ 52

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Note H - Derivative Instruments - Gains (Losses) on Derivatives Reclassified From OCI to Income (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Foreign Exchange Forward Contracts and Put Options [Member] | Operating Expense [Member]
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net, Total	$ 26	$ 52	$ 31	$ 52

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Note J - Equity-based Compensation (Details Textual) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		114 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2020 USD ($) $ / shares	Jun. 30, 2021 USD ($) $ / shares shares	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share) | $ / shares	$ 12.51	$ 15.47
Share-based Compensation Arrangement by Share-based Payment Award, Weighted Average Pre Vest Cancel Rate	4.22%	4.27%
Share-based Compensation Arrangement by Share-based Payment Award, Number of Equity Incentive Plans from Which Future Equity Awards May Be Granted	2		2		2
Share-based Compensation Arrangement by Share-based Payment Award Number of Employee Purchase Plans	1		1		1
Share Price (in dollars per share) | $ / shares	$ 14.80		$ 14.80		$ 14.80
Share-based Payment Arrangement, Expense | $	$ 3,005	$ 2,281	$ 5,535	$ 4,113
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount | $	$ 12,294		$ 12,294		$ 12,294
Stock Appreciation Rights (SARs) [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares to be Issued Upon Exercise of Outstanding Awards (in shares)	1,765,000		1,765,000		1,765,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant as Percentage of Company Outstanding Common Stock					50.00%
Share-based Compensation Arrangement by Share-based Payment Award, Options and Stock Appreciation Rights, Exercisable, Number (in shares)	310,000		310,000		310,000
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	468,000		468,000		468,000
Equity Incentive Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in shares)	433,000		433,000		433,000

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Note J - Equity-based Compensation - Stock Options, SARs and RSUs Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
Outstanding at March 31, 2021 (in shares) | shares	1,836
Outstanding at March 31, 2021 (in dollars per share) | $ / shares	$ 1.86
Options / SARs / RSUs cancelled/forfeited/expired (in shares) | shares	(20)
Options / SARs / RSUs cancelled/forfeited/expired, weighted average exercise price (in dollars per share) | $ / shares	$ 0
Options / SARs exercised and RSUs vested (in shares) | shares	(88)
Options / SARs exercised and RSUs vested, weighted average exercise price (in dollars per share) | $ / shares	$ 0.08
Outstanding (in shares) | shares	1,794	[1]
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 1.90	[1]
Outstanding, weighted average remaining contractual term (Year)	3 years 2 months 23 days	[1],[2]
Outstanding, aggregate value | $	$ 23,155	[1],[3]
Exercisable (in shares) | shares	338	[4]
Exercisable, weighted average exercise price (in dollars per share) | $ / shares	$ 9.84	[4]
Exercisable, weighted average remaining contractual term (Year)	3 years 2 months 15 days	[2],[4]
Exercisable, aggregate value | $	$ 1,678	[3],[4]
Restricted Stock Units (RSUs) [Member]
Non-option instruments granted (in shares) | shares	66
Non-option instruments, weighted average exercise price (in dollars per share) | $ / shares	$ 0

[1] Due to the ceiling imposed on the SAR grants, the outstanding amount above can be exercised for a maximum of 1,765 thousand shares of the Company’s common stock as of June 30, 2021. SAR grants made on or after January 1, 2012 are convertible for a maximum number of shares of the Company’s common stock equal to 50% of the SARs subject to the grant.

[2] Calculation of weighted average remaining contractual term does not include RSUs that were granted, which have indefinite contractual term.

[3] Calculation of aggregate intrinsic value is based on the share price of the Company’s common stock on June 30, 2021 ($14.80 per share).

[4] Due to the ceiling imposed on the SAR grants, the exercisable amount above can be exercised for a maximum of 310 thousand shares of the Company’s common stock as of June 30, 2021.

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Note J - Equity-based Compensation - Company's Stock Options and SAR Units Outstanding and Exercisable (Details) shares in Thousands	Jun. 30, 2021 $ / shares shares
Number of Options/ SARs / RSUs - Exercisable (in shares) | shares	338
Weighted Average Exercise Price - Exercisable (in dollars per share) | $ / shares	$ 9.84
Number of Options/ SARs / RSUs - Unexercisable (in shares) | shares	1,456
Weighted Average Exercise Price - Unexercisable (in dollars per share) | $ / shares	$ 0.06
Number of Options/ SARs / RSUs (in shares) | shares	1,794
Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 1.90
Range 1 [Member]
Number of Options/ SARs / RSUs - Exercisable (in shares) | shares	338
Weighted Average Exercise Price - Exercisable (in dollars per share) | $ / shares	$ 9.84
Number of Options/ SARs / RSUs - Unexercisable (in shares) | shares	1,456
Weighted Average Exercise Price - Unexercisable (in dollars per share) | $ / shares	$ 0.06
Number of Options/ SARs / RSUs (in shares) | shares	1,794
Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 1.90
Range 2 [Member]
Number of Options/ SARs / RSUs - Exercisable (in shares) | shares	0
Weighted Average Exercise Price - Exercisable (in dollars per share) | $ / shares	$ 0
Number of Options/ SARs / RSUs - Unexercisable (in shares) | shares	0
Weighted Average Exercise Price - Unexercisable (in dollars per share) | $ / shares	$ 0
Number of Options/ SARs / RSUs (in shares) | shares	0
Weighted Average Exercise Price (in dollars per share) | $ / shares	$ 0

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Note K - Pension Liability (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Liability, Defined Benefit Pension Plan, Noncurrent	$ 1,058	$ 1,089

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Note K - Pension Liability - Components of Net Periodic Benefit Costs (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Service cost and amortization of loss	$ 15	$ 14
Interest cost	5	5
Net periodic benefit cost	$ 20	$ 19

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Note L - Fair Value Measurements - Fair Value Measurements of Assets and Liabilities on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Earn-out Liability [Member]
Earn-out liability	$ 1,945	$ 1,945
Fair Value, Inputs, Level 1 [Member] | Earn-out Liability [Member]
Earn-out liability	0	0
Fair Value, Inputs, Level 2 [Member] | Earn-out Liability [Member]
Earn-out liability	0	0
Fair Value, Inputs, Level 3 [Member] | Earn-out Liability [Member]
Earn-out liability	1,945	1,945
Money Market Funds [Member]
Money market mutual funds	919	962
Money Market Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Money market mutual funds	919	962
Money Market Funds [Member] | Fair Value, Inputs, Level 2 [Member]
Money market mutual funds	0	0
Money Market Funds [Member] | Fair Value, Inputs, Level 3 [Member]
Money market mutual funds	0	0
US Government-sponsored Enterprises Debt Securities [Member]
Short-term securities	425	425
Long-term securities	731	735
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Short-term securities	0	0
Long-term securities	0	0
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Short-term securities	425	425
Long-term securities	731	735
US Government-sponsored Enterprises Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Short-term securities	0	0
Long-term securities	0	0
Corporate Debt Securities [Member]
Short-term securities	23,026	27,949
Long-term securities	63,776	59,719
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 1 [Member]
Short-term securities	0	0
Long-term securities	0	0
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 2 [Member]
Short-term securities	23,026	27,949
Long-term securities	63,776	59,719
Corporate Debt Securities [Member] | Fair Value, Inputs, Level 3 [Member]
Short-term securities	0	0
Long-term securities	$ 0	$ 0

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Note M - Stockholders' Equity (Details Textual) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Treasury Stock, Shares, Acquired (in shares)			339	305
Treasury Stock Acquired, Average Cost Per Share (in dollars per share)			$ 15.62	$ 12.26
Treasury Stock, Value, Acquired, Par Value Method	$ 5,299	$ 294	$ 5,299	$ 3,736
Stock Repurchase Program, Remaining Number of Shares Authorized to be Repurchased (in shares)	28		28
1993 Employee Stock Purchase Plan (ESPP) [Member]
Stock Issued During Period, Shares, Employee Stock Ownership Plan (in shares)			604

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Note N - Segment Information (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Number of Reportable Segments			2
Product Concentration Risk [Member] | Revenue, Segment Benchmark [Member] | Home [Member] | Smart Home [Member]
Concentration Risk, Percentage	16.00%	15.00%	15.00%	15.00%
Product Concentration Risk [Member] | Revenue, Segment Benchmark [Member] | Home [Member] | Telephony [Member]
Concentration Risk, Percentage	31.00%	35.00%	33.00%	35.00%
Product Concentration Risk [Member] | Revenue, Segment Benchmark [Member] | Office [Member] | VoIP [Member]
Concentration Risk, Percentage	33.00%	36.00%	32.00%	36.00%
Product Concentration Risk [Member] | Revenue, Segment Benchmark [Member] | SmartVoice [Member] | HDClear [Member]
Concentration Risk, Percentage	20.00%	14.00%	19.00%	14.00%

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Note N - Segment Information - Selected Operating Results (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues	$ 35,807	$ 28,336	$ 68,454	$ 56,575
Income from operations	3,917	1,635	5,945	626
Cordless [Member]
Revenues	11,048	9,939	22,918	19,996
Income from operations	4,531	3,577	9,052	6,774
IoAT [Member]
Revenues	24,759	18,397	45,536	36,579
Income from operations	$ (614)	$ (1,942)	$ (3,107)	$ (6,148)

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Note N - Segment Information - Reconciliation of Segment Operating Results (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Income from operations	$ 3,917	$ 1,635	$ 5,945	$ 626
Unallocated corporate, general and administrative expenses	(648)	(610)	(1,250)	(1,102)
Equity-based compensation expenses	(3,005)	(2,281)	(5,535)	(4,113)
Intangible assets amortization expenses	(429)	(104)	(848)	(208)
Amortization of employee retention expenses related to the acquisition of SoundChip	(250)		(500)
Financial income, net	94	289	735	1,192
Total consolidated loss before taxes	$ (321)	$ (1,071)	$ (1,453)	$ (3,605)

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Note O - Accumulated Other Comprehensive Income (Loss) - Changes in Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Balance	$ 158,906	$ 149,979	$ 156,238	$ 153,094
Change in accumulated other comprehensive income (loss)	(84)	570	(333)	335
Balance	156,129	152,762	156,129	152,762
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Balance	64		358
Other comprehensive income (loss) before reclassifications	(54)		(356)
Losses (gains) reclassified from accumulated other comprehensive income	0		8
Change in accumulated other comprehensive income (loss)	(54)		(348)
Balance	10		10
Accumulated Gain (Loss), Net, Cash Flow Hedge, Parent [Member]
Balance	6		0
Other comprehensive income (loss) before reclassifications	20		31
Losses (gains) reclassified from accumulated other comprehensive income	(26)		(31)
Change in accumulated other comprehensive income (loss)	(6)		0
Balance	0		0
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance	(485)		(491)
Other comprehensive income (loss) before reclassifications	0		0
Losses (gains) reclassified from accumulated other comprehensive income	6		12
Change in accumulated other comprehensive income (loss)	6		12
Balance	(479)		(479)
Accumulated Foreign Currency Adjustment Attributable to Parent [Member]
Balance	(471)		(504)
Other comprehensive income (loss) before reclassifications	(30)		3
Losses (gains) reclassified from accumulated other comprehensive income	0		0
Change in accumulated other comprehensive income (loss)	(30)		3
Balance	(501)		(501)
AOCI Attributable to Parent [Member]
Balance	(886)	(1,124)	(637)	(889)
Other comprehensive income (loss) before reclassifications	(64)		(322)
Losses (gains) reclassified from accumulated other comprehensive income	(20)		(11)
Change in accumulated other comprehensive income (loss)	(84)	570	(333)	335
Balance	$ (970)	$ (554)	$ (970)	$ (554)

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Note O - Accumulated Other Comprehensive Income (Loss) - Reclassifications Out of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Financial income, net		$ 94	$ 289	$ 735	$ 1,192
Provision for income taxes		78	6	289	(62)
Total, net of income taxes		(399)	(1,077)	(1,742)	(3,543)
Research and development	[1]	10,630	8,455	21,110	18,809
Sales and marketing	[2]	5,326	4,435	10,528	9,446
General and administrative	[3]	3,161	$ 2,627	5,814	$ 4,975
Reclassification out of Accumulated Other Comprehensive Income [Member]
Total, net of income taxes		(20)		(11)
Reclassification out of Accumulated Other Comprehensive Income [Member] | AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Financial income, net		0		8
Provision for income taxes		0		0
Total, net of income taxes		0		8
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Gain (Loss) from Cash Flow Hedges Attributable to Parent [Member]
Provision for income taxes		0		0
Total, net of income taxes		(26)		(31)
Research and development		(20)		(24)
Sales and marketing		(2)		(3)
General and administrative		(4)		(4)
Total, before income taxes		(26)		(31)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Provision for income taxes		0		0
Total, net of income taxes		6		12
Research and development		3		7
Sales and marketing		3		5
Total, before income taxes		$ 6		$ 12

[1] Includes equity-based compensation expense in the amount of $1,305 and $826 for the three months ended June 30, 2021 and 2020, respectively; and $2,447 and $1,577 for the six months ended June 30, 2021 and 2020, respectively.

[2] Includes equity-based compensation expense in the amount of $745 and $620 for the three months ended June 30, 2021 and 2020, respectively; and $1,371 and $1,175 for the six months ended June 30, 2021 and 2020, respectively.

[3] Includes equity-based compensation expense in the amount of $770 and $706 for the three months ended June 30, 2021 and 2020, respectively; and $1,371 and $1,112 for the six months ended June 30, 2021 and 2020, respectively.

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Note P - Government Grants (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Financial Grants in Support of Research and Development	$ 911	$ 907	$ 1,452	$ 1,120
Financial Grants in Support of Research and Development, Royalty Obligation	5.00%		5.00%