Company Quick10K Filing
Aquantia
Price182.80 EPS-1
Shares36 P/E-170
MCap6,540 P/FCF-585
Net Debt-4 EBIT-38
TEV6,535 TEV/EBIT-174
TTM 2019-06-30, in MM, except price, ratios
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-06
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-31 Filed 2018-03-07
10-Q 2017-09-30 Filed 2017-12-06
8-K 2019-09-19
8-K 2019-07-10
8-K 2019-06-19
8-K 2019-05-07
8-K 2019-05-06
8-K 2019-05-06
8-K 2019-05-06
8-K 2019-03-01
8-K 2019-02-12
8-K 2019-01-23
8-K 2018-10-25
8-K 2018-07-25
8-K 2018-06-29
8-K 2018-04-26
8-K 2018-04-25
8-K 2018-04-06
8-K 2018-02-08
8-K 2018-02-06
8-K 2018-01-12

AQ 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 aq-ex311_8.htm
EX-31.2 aq-ex312_6.htm
EX-32.1 aq-ex321_7.htm

Aquantia Earnings 2019-06-30

Balance SheetIncome StatementCash Flow
0.20.10.0-0.0-0.1-0.22017201820192020
Assets, Equity
0.10.10.0-0.0-0.1-0.12017201820192020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12017201820192020
Ops, Inv, Fin

10-Q 1 aq-10q_20190630.htm 10-Q aq-10q_20190630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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, 2019

OR

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

For the transition period from ____  to ____

Commission File Number: 001-38270

 

AQUANTIA CORP.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-1199709

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

91 E. Tasman Drive, Suite 100

San Jose, CA 95134

(Address of principal executive offices)

Registrant’s telephone number, including area code: (408) 228-8300

 

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

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.00001 par value

      

AQ

 

New York Stock Exchange

 

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

  

Non-accelerated filer

 

  

  

Small reporting company

 

Emerging growth company

 

 

 

 

 

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of August 2, 2019, the registrant had 36,085,333 shares of common stock, $0.00001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

3

 

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018

4

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months ended June 30, 2019 and 2018

5

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2019 and 2018

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

25

Item 4.

Controls and Procedures

26

 

 

 

PART II.

OTHER INFORMATION

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 6.

Exhibits

30

 

 

Signatures

31

 

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

 

AQUANTIA CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for par value and share amounts)

(unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,297

 

 

$

6,684

 

Short-term investments

 

 

45,914

 

 

 

60,730

 

Accounts receivable

 

 

7,526

 

 

 

16,927

 

Inventories

 

 

20,317

 

 

 

14,474

 

Prepaid expenses and other current assets

 

 

1,427

 

 

 

2,018

 

Total current assets

 

 

79,481

 

 

 

100,833

 

Property and equipment, net

 

 

10,721

 

 

 

9,225

 

Operating lease assets, net

 

 

5,386

 

 

 

 

Intangible assets, net

 

 

3,345

 

 

 

3,748

 

Other assets

 

 

618

 

 

 

617

 

Total assets

 

$

99,551

 

 

$

114,423

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,851

 

 

$

5,495

 

Accrued liabilities

 

 

14,486

 

 

 

13,907

 

Operating lease liabilities - short term

 

 

840

 

 

 

 

Total current liabilities

 

 

22,177

 

 

 

19,402

 

Operating lease liabilities - long term

 

 

6,048

 

 

 

 

Other long-term liabilities

 

 

413

 

 

 

1,799

 

Total liabilities

 

 

28,638

 

 

 

21,201

 

Commitments and contingencies (Note 3 and Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.00001 par value, 95,000,000 shares authorized as of each

   of June 30, 2019 and December 31, 2018; 36,078,275 and 35,050,425 shares

   outstanding at June 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

309,269

 

 

 

300,791

 

Accumulated other comprehensive income (loss)

 

 

38

 

 

 

(123

)

Accumulated deficit

 

 

(238,394

)

 

 

(207,446

)

Total stockholders’ equity

 

 

70,913

 

 

 

93,222

 

Total liabilities and stockholders’ equity

 

$

99,551

 

 

$

114,423

 

 

See accompanying notes to condensed consolidated financial statements.   

 

3


 

AQUANTIA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

9,231

 

 

$

30,432

 

 

$

26,253

 

 

$

58,790

 

Cost of revenue

 

 

4,846

 

 

 

12,914

 

 

 

12,902

 

 

 

25,155

 

Gross profit

 

 

4,385

 

 

 

17,518

 

 

 

13,351

 

 

 

33,635

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

15,004

 

 

 

12,772

 

 

 

31,074

 

 

 

25,346

 

Sales and marketing

 

 

2,652

 

 

 

2,614

 

 

 

5,371

 

 

 

4,901

 

General and administrative

 

 

4,932

 

 

 

3,324

 

 

 

8,354

 

 

 

6,321

 

Total operating expenses

 

 

22,588

 

 

 

18,710

 

 

 

44,799

 

 

 

36,568

 

Loss from operations

 

 

(18,203

)

 

 

(1,192

)

 

 

(31,448

)

 

 

(2,933

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

344

 

 

 

291

 

 

 

712

 

 

 

539

 

Total other income (expense)

 

 

344

 

 

 

291

 

 

 

712

 

 

 

539

 

Loss before income tax expense

 

 

(17,859

)

 

 

(901

)

 

 

(30,736

)

 

 

(2,394

)

Provision for (benefit from) income taxes

 

 

22

 

 

 

(68

)

 

 

212

 

 

 

(193

)

Net loss

 

$

(17,881

)

 

$

(833

)

 

$

(30,948

)

 

$

(2,201

)

Net loss per share, basic and diluted

 

$

(0.50

)

 

$

(0.02

)

 

$

(0.87

)

 

$

(0.07

)

Weighted-average shares used to compute net loss per share, basic and diluted

 

 

35,775

 

 

 

33,836

 

 

 

35,468

 

 

 

33,666

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(17,881

)

 

$

(833

)

 

$

(30,948

)

 

$

(2,201

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) - short-term investments

 

 

42

 

 

 

52

 

 

 

161

 

 

 

(79

)

Comprehensive loss

 

$

(17,839

)

 

$

(781

)

 

$

(30,787

)

 

$

(2,280

)

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

AQUANTIA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

loss

 

 

Deficit

 

 

Equity

 

BALANCE—December 31, 2018

 

35,050,425

 

 

 

 

 

 

300,791

 

 

 

(123

)

 

 

(207,446

)

 

 

93,222

 

Other comprehensive loss (gain) - unrealized

   loss (gain) on short-term investments

 

 

 

 

 

 

 

 

 

 

119

 

 

 

 

 

 

119

 

Exercise of stock options

 

132,692

 

 

 

 

 

 

392

 

 

 

 

 

 

 

 

 

392

 

Issuance of restricted stock units

 

325,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

2,290

 

 

 

 

 

 

 

 

 

2,290

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,067

)

 

 

(13,067

)

BALANCE—March 31, 2019

 

35,508,553

 

 

$

 

 

$

303,473

 

 

$

(4

)

 

$

(220,513

)

 

$

82,956

 

Other comprehensive loss (gain) - unrealized

   loss (gain) on short-term investments

 

 

 

 

 

 

 

 

 

 

42

 

 

 

 

 

 

42

 

Exercise of stock options

 

320,601

 

 

 

 

 

 

1,334

 

 

 

 

 

 

 

 

 

1,334

 

ESPP Purchase

 

186,120

 

 

 

 

 

 

1,573

 

 

 

 

 

 

 

 

 

1,573

 

Issuance of restricted stock units

 

63,001

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

2,889

 

 

 

 

 

 

 

 

 

2,889

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,881

)

 

 

(17,881

)

BALANCE—June 30, 2019

 

36,078,275

 

 

$

 

 

$

309,269

 

 

$

38

 

 

$

(238,394

)

 

$

70,913

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

loss

 

 

Deficit

 

 

Equity

 

BALANCE—December 31, 2017

 

33,523,683

 

 

 

 

 

 

288,719

 

 

 

(96

)

 

 

(197,709

)

 

 

90,914

 

Cumulative effect upon adoption of ASC 606

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

35

 

Other comprehensive loss (gain) - unrealized

   loss (gain) on short-term investments

 

 

 

 

 

 

 

 

 

 

(131

)

 

 

 

 

 

(131

)

Exercise of stock options

 

3,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of restricted stock units

 

102,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of restricted stock units (reversed, not yet issued)

 

(137,529

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock, net

   upon exercise of warrants

 

48,305

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchase of stock options

 

(3,626

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IPO Costs

 

 

 

 

 

 

 

(22

)

 

 

 

 

 

 

 

 

(22

)

Stock-based compensation expense

 

 

 

 

 

 

 

978

 

 

 

 

 

 

 

 

 

978

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,368

)

 

 

(1,368

)

BALANCE—March 31, 2018

 

33,536,799

 

 

$

 

 

$

289,675

 

 

$

(227

)

 

$

(199,042

)

 

$

90,406

 

Other comprehensive loss (gain) - unrealized

   loss (gain) on short-term investments

 

 

 

 

 

 

 

 

 

 

52

 

 

 

 

 

 

52

 

Exercise of stock options

 

520,400

 

 

 

 

 

 

1,673

 

 

 

 

 

 

 

 

 

1,673

 

ESPP Purchase

 

207,935

 

 

 

 

 

 

 

1,591

 

 

 

 

 

 

 

 

 

 

 

1,591

 

Repurchase of stock options

 

(4,929

)

 

 

 

 

 

(16

)

 

 

 

 

 

 

 

 

(16

)

Stock-based compensation expense

 

 

 

 

 

 

 

1,162

 

 

 

 

 

 

 

 

 

1,162

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(833

)

 

 

(833

)

BALANCE—June 30, 2018

 

34,260,205

 

 

$

 

 

$

294,085

 

 

$

(175

)

 

$

(199,875

)

 

$

94,035

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

AQUANTIA CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited) 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(30,948

)

 

$

(2,201

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,179

 

 

 

2,755

 

Stock-based compensation expense

 

 

5,179

 

 

 

2,140

 

Accretion of investment premium, net of amortization of discount

 

 

(222

)

 

 

 

Loss (Gain) on disposal of fixed assets and lease impairment

 

 

 

 

 

(70

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

9,401

 

 

 

(988

)

Inventories

 

 

(5,843

)

 

 

2,071

 

Operating lease assets, net

 

 

512

 

 

 

 

Prepaid expenses and other assets

 

 

590

 

 

 

2,570

 

Accounts payable

 

 

1,124

 

 

 

(2,527

)

Accrued and other liabilities

 

 

609

 

 

 

633

 

Operating lease liabilities

 

 

(426

)

 

 

 

Net cash provided by (used in) operating activities

 

 

(16,845

)

 

 

4,383

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(4,040

)

 

 

(1,981

)

Proceeds from sales of PP&E

 

 

 

 

 

70

 

Proceeds from sales of short-term investments

 

 

1,000

 

 

 

 

Proceeds from maturities of short-term investments

 

 

26,085

 

 

 

20,553

 

Purchases of short-term investments

 

 

(11,886

)

 

 

(21,137

)

Net cash provided by (used in) investing activities

 

 

11,159

 

 

 

(2,495

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options and preferred stock warrants

 

 

1,726

 

 

 

1,657

 

Proceeds from employee stock purchase plan

 

 

1,573

 

 

 

1,591

 

Purchases of IP licenses

 

 

 

 

 

(26

)

Payment of costs related to initial public offering

 

 

 

 

 

(276

)

Net cash provided by financing activities

 

 

3,299

 

 

 

2,946

 

Net decrease in cash and cash equivalents

 

 

(2,387

)

 

 

4,834

 

Cash and cash equivalents at beginning of period

 

 

6,684

 

 

 

8,040

 

Cash and cash equivalents at end of period

 

$

4,297

 

 

$

12,874

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

17

 

 

$

 

Cash paid for income taxes

 

$

207

 

 

$

80

 

Cash paid for amounts included in the lease liabilities

 

$

770

 

 

$

 

Cashless exercises of warrants, net of assumed proceeds from shares

 

$

 

 

$

550

 

Property and equipment received and accrued

 

$

318

 

 

$

1,002

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


 

AQUANTIA CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Organization, Description of Business and Basis for Presentation

Organization—Aquantia Corp. (together with its subsidiaries, the “Company”) was incorporated in Delaware on January 27, 2004. The Company is a leader in the design, development and marketing of advanced high-speed communications integrated circuits, or ICs, for Ethernet connectivity in the data center, enterprise infrastructure, access and automotive markets.

Pending Acquisition

On May 6, 2019, the Company and Marvell Technology Group Ltd., a Bermuda exempted company (“Marvell”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Marvell and Aquantia Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Marvell (“Merger Sub”) providing for the merger of Merger Sub with and into the Company (the “Merger”) with the Company surviving the Merger as a wholly owned subsidiary of Marvell. At a special meeting of the Company’s stockholders held on July 10, 2019, the stockholders adopted the Merger Agreement.

Under the terms of the Merger Agreement, Marvell will acquire all outstanding shares of the Company’s common stock in exchange for consideration of $13.25 per share in cash.  The Merger Agreement contains representations and warranties customary for transactions of this type. The Merger is expected to close before the end of the calendar year 2019, subject to the satisfaction or waiver of a number of closing conditions. The Merger Agreement provides Marvell and the Company with certain termination rights and, under certain circumstances, may require Marvell or the Company to pay a termination fee.

The Company recorded acquisition-related costs of approximately $1.9 million for each of the three and six months ended June 30, 2019 primarily for outside legal and external financial advisory fees associated with the pending acquisition by Marvell. These costs were recorded in general and administrative expense in the Company’s condensed consolidated statements of operations and comprehensive loss in the respective reporting periods. Additional acquisition-related costs are expected to be incurred through the closing of the Merger.

Basis of Presentation and Principles of ConsolidationThe accompanying unaudited condensed consolidated financial statements included herein have been prepared by us in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, normal recurring adjustments considered necessary for a fair presentation have been reflected in these condensed consolidated financial statements.  Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.

The condensed consolidated balance sheet as of December 31, 2018 has been derived from the audited financial statements for the fiscal year then ended included in the Company’s Annual Report on Form 10-K filed with the SEC on March 6, 2019 (the “2018 Annual Report on Form 10-K”), but does not include all of the information and notes required by U.S. GAAP for complete consolidated financial statements. The financial information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements as of and for the fiscal year ended December 31, 2018 and the related notes thereto included in the 2018 Annual Report on Form 10-K.

2. Summary of Significant Accounting Policies

During the three and six months ended June 30, 2019, there have been no changes in our significant accounting policies as described in the Company’s 2018 Annual Report on Form 10-K, except as discussed below:

Recent Accounting Pronouncements

Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (herein referred to as “ASC 842”). The new guidance requires entities to recognize assets and liabilities for leases and additional disclosures to better understand the amount, timing and uncertainty of cash flows arising from leases. The guidance was effective for financial statements issued for fiscal years beginning after December 15, 2018. Early adoption was permitted. The Company adopted this guidance in the first quarter of 2019 using the modified retrospective approach, electing the package of practical expedients, which allows for the carryforward of the Company’s historical lease classification and assessment on whether a contract is or contains a lease, and the practical expedient to not separate lease and non-lease components. The Company has elected not to record on the balance sheet leases with an initial term of twelve months or less and that do not have a purchase option that the Company is reasonably certain to exercise. The Company also elected the optional transition method that permits adoption of the new standard as of the effective date without adjusting comparative periods presented. Adoption of the

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standard resulted in the recognition of $5.9 million of right-of-use assets and $7.3 million of lease liabilities on our condensed consolidated balance sheet at adoption related to our leases. The difference of $1.4 million represented lease incentives and deferred rent for leases that existed as of the date of adoption, which reduced the right-of-use asset recorded at the date of adoption. The adoption of the standard on January 1, 2019 did not have a material impact on the Company’s consolidated statements of operations, stockholders’ equity or cash flows. See Note 3 for additional information.

3. Balance Sheet Components

Inventories consisted of the following (in thousands):

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2019

 

 

2018

 

Processed wafers

 

$

1,847

 

 

$

1,233

 

Work in process

 

 

7,979

 

 

 

5,990

 

Finished goods

 

 

10,491

 

 

 

7,251

 

Total inventories

 

$

20,317

 

 

$

14,474

 

 

Property and equipment, net consisted of the following (in thousands):

 

 

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

Estimated Useful Lives

 

2019

 

 

2018

 

Machinery and equipment

 

2-3 years

 

$

16,530

 

 

$

15,237

 

Production masks

 

4 years

 

 

8,101

 

 

 

5,401

 

Software and computer equipment

 

3 years

 

 

4,617

 

 

 

4,492

 

Leasehold improvements

 

Shorter of estimated life of asset or remaining lease term

 

 

1,414

 

 

 

1,414

 

Office furniture and fixtures

 

3 years

 

 

163

 

 

 

117

 

Total property and equipment

 

 

 

 

30,825

 

 

 

26,661

 

Less: accumulated depreciation and

   amortization

 

 

 

 

(20,104

)

 

 

(17,436

)

Property and equipment, net

 

 

 

$

10,721

 

 

$

9,225

 

 

Depreciation and amortization of property and equipment totaled $1.4 million and $1.2 million for the three months ended June 30, 2019 and 2018, respectively. Depreciation and amortization of property and equipment totaled $2.8 million and $2.4 million for the six months ended June 30, 2019 and 2018, respectively.

Intangible assets, net were carried at cost, less accumulated amortization. Intangible assets were as follows (in thousands):

 

 

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

Estimated Useful Lives

 

2019

 

 

2018

 

IP license

 

7 years

 

$

5,416

 

 

$

5,416

 

Patents

 

10-12 years

 

 

348

 

 

 

348

 

Total intangible assets

 

 

 

 

5,764

 

 

 

5,764

 

Less: accumulated amortization

 

 

 

 

(2,419

)

 

 

(2,016

)

Intangible assets, net

 

 

 

$

3,345

 

 

$

3,748

 

 

Amortization of intangible assets totaled $0.2 million and $0.2 million for the three months ended June 30, 2019 and 2018, respectively. Amortization of intangible assets totaled $0.4 million and $0.4 million for the six months ended June 30, 2019 and 2018, respectively.

Amortization expense related to amortizable intangibles in future periods as of June 30, 2019 is expected to be as follows (in thousands):

 

2019 (remaining)

 

$

405