Price | 182.80 | EPS | -1 | |
Shares | 36 | P/E | -170 | |
MCap | 6,540 | P/FCF | -585 | |
Net Debt | -4 | EBIT | -38 | |
TEV | 6,535 | 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 |
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 |
Balance Sheet | Income Statement | Cash Flow |
---|---|---|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
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.
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.
|
| Page |
PART I. | 3 | |
Item 1. | 3 | |
| Unaudited Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 | 3 |
| 4 | |
| 5 | |
| 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. | 25 | |
Item 4. | 26 | |
|
|
|
PART II. | 28 | |
Item 1. | 28 | |
Item 1A. | 28 | |
Item 2. | 29 | |
Item 6. | 30 | |
|
| |
31 |
2
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
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
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
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
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 Consolidation—The 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
7
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 |