Company Quick10K Filing
Mosys
Price2.44 EPS-1
Shares2 P/E-3
MCap5 P/FCF-24
Net Debt-6 EBIT-2
TEV-1 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-12
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-03-17
10-Q 2019-09-30 Filed 2019-11-13
10-Q 2019-06-30 Filed 2019-08-13
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-03-12
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-08
S-1 2018-05-24 Public Filing
10-Q 2018-03-31 Filed 2018-05-11
S-1 2018-01-04 Public Filing
10-K 2017-12-31 Filed 2018-03-12
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-10
10-Q 2017-03-31 Filed 2017-05-12
10-K 2016-12-31 Filed 2017-03-30
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-13
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-14
10-Q 2013-09-30 Filed 2013-11-08
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-03
10-K 2012-12-31 Filed 2013-03-12
10-Q 2012-09-30 Filed 2012-11-07
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-08
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-15
10-Q 2010-09-30 Filed 2010-11-03
10-Q 2010-06-30 Filed 2010-08-13
10-Q 2010-03-31 Filed 2010-05-12
10-K 2009-12-31 Filed 2010-03-26
8-K 2020-08-06 Earnings, Exhibits
8-K 2020-07-15 Shareholder Vote
8-K 2020-06-25 Other Events, Exhibits
8-K 2020-05-13
8-K 2020-05-07
8-K 2020-05-05
8-K 2020-04-17
8-K 2020-02-20
8-K 2019-11-06
8-K 2019-08-27
8-K 2019-08-23
8-K 2019-08-06
8-K 2019-05-24
8-K 2019-05-09
8-K 2019-04-15
8-K 2019-02-20
8-K 2018-12-28
8-K 2018-11-06
8-K 2018-10-12
8-K 2018-10-02
8-K 2018-09-21
8-K 2018-09-14
8-K 2018-09-13
8-K 2018-08-13
8-K 2018-08-13
8-K 2018-07-25
8-K 2018-05-10
8-K 2018-02-26

MOSY 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1. The Company and Summary of Significant Accounting Policies
Note 2: Fair Value of Financial Instruments
Note 3. Balance Sheet Detail
Note 4. Commitments and Contingencies
Note 5. Business Segments, Concentration of Credit Risk and Significant Customers
Note 6. Income Tax Provision
Note 7. Stock - Based Compensation
Note 8: Stockholders' Equity
Note 9. Notes Payable
Note 10. Leases
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 mosy-ex311_6.htm
EX-31.2 mosy-ex312_8.htm
EX-32.1 mosy-ex321_7.htm

Mosys Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
907254361802012201420172020
Assets, Equity
4.63.11.60.1-1.4-2.92012201420172020
Rev, G Profit, Net Income
30186-6-18-302012201420172020
Ops, Inv, Fin

10-Q 1 mosy-10q_20200630.htm 10-Q mosy-10q_20200630.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, 2020

 

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 000-32929

 

MOSYS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

   

77-0291941

(State or other jurisdiction

 

(I.R.S. Employer

of Incorporation or organization)

 

Identification Number)

 

2309 Bering Drive

San Jose, California, 95131

(Address of principal executive office and zip code)

 

(408) 418-7500

(Registrant’s telephone number, including area code)

 

 

 

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, par value $0.001 per share

MOSY

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 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, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer 

 

Accelerated filer 

Non-accelerated filer 

 

Smaller reporting company 

Emerging growth company 

 

 

 

 

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

 

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

 

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 3,536,512 as of August 5, 2020.

 

 


 

MOSYS, INC.

 

FORM 10-Q

June 30, 2020

 

TABLE OF CONTENTS

 

PART I —

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited):

3

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

3

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2020 and 2019

4

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

 

Item 2.

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

18

 

 

 

Item 4.

Controls and Procedures

24

 

 

 

PART II —

OTHER INFORMATION

24

 

 

 

Item 1.

Legal Proceedings

24

 

 

 

Item 1A.

Risk Factors

24

 

 

 

Item 6.

Exhibits

26

 

 

 

 

Signatures

27

 

 

 

 

 


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MOSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,375

 

 

$

6,053

 

Short-term investments

 

 

 

 

 

300

 

Accounts receivable

 

 

601

 

 

 

1,175

 

Inventories

 

 

1,016

 

 

 

968

 

Prepaid expenses and other

 

 

311

 

 

 

472

 

Total current assets

 

 

9,303

 

 

 

8,968

 

Property and equipment, net

 

 

127

 

 

 

197

 

Right-of-use lease asset, net

 

 

63

 

 

 

156

 

Other

 

 

18

 

 

 

78

 

Total assets

 

$

9,511

 

 

$

9,399

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

48

 

 

$

218

 

Deferred revenue

 

 

 

 

 

166

 

Short-term lease liability

 

 

66

 

 

 

166

 

PPP note payable, current

 

 

195

 

 

 

 

Accrued expenses and other

 

 

1,302

 

 

 

1,155

 

Total current liabilities

 

 

1,611

 

 

 

1,705

 

Convertible notes payable

 

 

2,970

 

 

 

2,858

 

PPP note payable

 

 

384

 

 

 

 

Total liabilities

 

 

4,965

 

 

 

4,563

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 20,000 shares authorized; none issued and

   outstanding

 

 

 

 

 

 

Common stock, $0.001 par value; 120,000 shares authorized; 3,534 shares

   and 2,179 shares issued and outstanding at June 30, 2020 and

   December 31, 2019, respectively

 

 

3

 

 

 

2

 

Additional paid-in capital

 

 

245,426

 

 

 

243,281

 

Accumulated deficit

 

 

(240,883

)

 

 

(238,447

)

Total stockholders’ equity

 

 

4,546

 

 

 

4,836

 

Total liabilities and stockholders’ equity

 

$

9,511

 

 

$

9,399

 

 

 

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

3


 

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

1,679

 

 

$

2,810

 

 

$

2,747

 

 

$

6,196

 

Royalty and other

 

 

289

 

 

 

256

 

 

 

481

 

 

 

390

 

Total net revenue

 

 

1,968

 

 

 

3,066

 

 

 

3,228

 

 

 

6,586

 

Cost of net revenue

 

 

604

 

 

 

1,228

 

 

 

1,134

 

 

 

2,582

 

Gross profit

 

 

1,364

 

 

 

1,838

 

 

 

2,094

 

 

 

4,004

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

985

 

 

 

981

 

 

 

1,946

 

 

 

2,134

 

Selling, general and administrative

 

 

964

 

 

 

932

 

 

 

2,099

 

 

 

1,904

 

Total operating expenses

 

 

1,949

 

 

 

1,913

 

 

 

4,045

 

 

 

4,038

 

Loss from operations

 

 

(585

)

 

 

(75

)

 

 

(1,951

)

 

 

(34

)

Interest expense

 

 

(56

)

 

 

(56

)

 

 

(111

)

 

 

(110

)

Other income, net

 

 

2

 

 

 

28

 

 

 

18

 

 

 

51

 

Net loss

 

 

(639

)

 

 

(103

)

 

 

(2,044

)

 

 

(93

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deemed dividend for warrant exercise price adjustment

 

 

(392

)

 

 

 

 

 

(392

)

 

 

 

Net loss attributable to common stockholders

 

$

(1,031

)

 

$

(103

)

 

$

(2,436

)

 

$

(93

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.32

)

 

$

(0.05

)

 

$

(0.88

)

 

$

(0.04

)

Shares used in computing net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

3,265

 

 

 

2,159

 

 

 

2,780

 

 

 

2,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(639

)

 

$

(103

)

 

$

(2,044

)

 

$

(93

)

Net unrealized gains on available-for-sale securities

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Comprehensive loss

 

$

(639

)

 

$

(102

)

 

$

(2,044

)

 

$

(92

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:  Share and per share amounts for the three and six months ended June 30, 2019 have been adjusted to reflect the impact of a 1-for-20 reverse stock split effected in August 2019, as discussed in Note 1.

 

 

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

 

 

4


 

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Total

 

Balance as of December 31, 2019

 

 

2,179

 

 

$

2

 

 

$

243,281

 

 

 

 

 

$

(238,447

)

 

$

4,836

 

Issuance of common stock for release of awards

 

 

20

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Exercise of pre-funded warrants

 

 

116

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

 

 

 

 

 

 

68

 

 

 

 

 

 

 

 

 

68

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,405

)

 

 

(1,405

)

Balance as of March 31, 2020

 

 

2,315

 

 

 

2

 

 

 

243,350

 

 

 

 

 

 

(239,852

)

 

 

3,500

 

Issuance of common stock for release of awards

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of common stock, net of financing costs

 

 

1,218

 

 

 

1

 

 

 

1,618

 

 

 

 

 

 

 

 

 

1,619

 

Deemed dividend for warrant exercise price adjustment

 

 

 

 

 

 

 

 

392

 

 

 

 

 

 

(392

)

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

66

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(639

)

 

 

(639

)

Balance as of June 30, 2020

 

 

3,534

 

 

$

3

 

 

$

245,426

 

 

$

 

 

$

(240,883

)

 

$

4,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Total

 

Balance as of December 31, 2018

 

 

2,148

 

 

$

2

 

 

$

243,022

 

 

 

 

 

$

(235,867

)

 

$

7,157

 

Issuance of common stock for release of awards

 

 

9

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Stock-based compensation

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

(4

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

10

 

Balance as of March 31, 2019

 

 

2,157

 

 

 

2

 

 

 

243,017

 

 

 

 

 

 

(235,857

)

 

 

7,162

 

Issuance of common stock for release of awards

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

119

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(103

)

 

 

(103

)

Balance as of June 30, 2019

 

 

2,162

 

 

$

2

 

 

$

243,136

 

 

$

1

 

 

$

(235,960

)

 

$

7,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:  Share and per share amounts for the three and six months ended June 30, 2019 have been adjusted to reflect the impact of a 1-for-20 reverse stock split effected in August 2019, as discussed in Note 1.

 

 

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

5


 

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(2,044

)

 

$

(93

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

82

 

 

 

111

 

Stock-based compensation

 

 

134

 

 

 

115

 

Accrued interest

 

 

112

 

 

 

110

 

Other

 

 

(7

)

 

 

(7

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

574

 

 

 

267

 

Inventories

 

 

(48

)

 

 

547

 

Prepaid expenses and other assets

 

 

221

 

 

 

(21

)

Accounts payable

 

 

(170

)

 

 

(148

)

Deferred revenue and other liabilities

 

 

(19

)

 

 

(490

)

Net cash provided by (used in) operating activities

 

 

(1,165

)

 

 

391

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(12

)

 

 

(55

)

Proceeds from maturities of short-term investments

 

 

300

 

 

 

500

 

Purchases of short-term investments

 

 

 

 

 

(1,567

)

Net cash provided by (used in) investing activities

 

 

288

 

 

 

(1,122

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from PPP note

 

 

579

 

 

 

 

Proceeds from sale of common stock, net of financing costs

 

 

1,619

 

 

 

 

Net proceeds from exercise of pre-funded warrants

 

 

2

 

 

 

 

Taxes paid to net share settle equity awards

 

 

(1

)

 

 

(1

)

Net cash provided by (used in) financing activities

 

 

2,199

 

 

 

(1

)

Net increase (decrease) in cash and cash equivalents

 

 

1,322

 

 

 

(732

)

Cash and cash equivalents at beginning of period

 

 

6,053

 

 

 

7,104

 

Cash and cash equivalents at end of period

 

$

7,375

 

 

$

6,372

 

Supplemental disclosure:

 

 

 

 

 

 

 

 

Issuance of convertible note in settlement of accrued interest

 

$

112

 

 

$

78

 

Fair value of warrant exercise price adjustment considered as deemed dividend

 

$

392

 

 

$

 

 

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

 

6


 

MOSYS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. The Company and Summary of Significant Accounting Policies

MoSys, Inc. (the Company) was incorporated in California in September 1991 and reincorporated in September 2000 in Delaware. The Company’s strategy and primary business objective is to be an IP-rich fabless semiconductor company focused on the development and sale of integrated circuit (IC) and related software and firmware products.

The accompanying condensed consolidated financial statements of the Company have been prepared without audit.  

The condensed consolidated balance sheet as of December 31, 2019 has been derived from the audited consolidated financial statements at that date. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted in accordance with these rules and regulations of the Securities and Exchange Commission (SEC). The information in this report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in its most recent annual report on Form 10-K filed with the SEC.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other future period.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year ends on December 31 of each calendar year.

Risks and Uncertainties

The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets.

COVID-19

The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020.  This has negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place” and created significant disruption of the financial markets. The full extent of the COVID-19 impact on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by U.S. and foreign government agencies to prevent disease spread, all of which are uncertain, out of the Company’s control, and cannot be predicted.

Reverse Stock Split

On August 27, 2019, the Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a 1-for-20 reverse stock split of the Company’s shares of common stock. Such amendment and ratio were previously approved by the Company’s stockholders and board of directors, respectively.

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As a result of the reverse stock split, which was effective August 28, 2019, every 20 shares of the Company’s pre-reverse split outstanding common stock were combined and reclassified into one share of common stock. Proportionate voting rights and other rights of common stock holders were not affected by the reverse stock split. No fractional shares were issued in connection with the reverse stock split; stockholders who would otherwise hold a fractional share of the Company’s common stock received cash in an amount equal to the product obtained by multiplying (i) the closing sale price of the common stock on the effective date of the reverse stock split as reported on The Nasdaq Stock Market, by (ii) the number of shares of the common stock held by the stockholder that would otherwise have been exchanged for the fractional share interest. All stock options and restricted stock units outstanding and common stock reserved for issuance under the Company’s equity incentive plans and warrants outstanding and the conversion price of the convertible notes outstanding immediately prior to the reverse stock split were adjusted by dividing the number of affected shares of common stock by 20 and, as applicable, multiplying the exercise price by 20, as a result of the reverse stock split.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period.  Actual results could differ from those estimates.

Cash Equivalents and Investments

The Company invests its excess cash in money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments. Management generally determines the appropriate classification of securities at the time of purchase. All securities are classified as available-for-sale. The Company’s available-for-sale short-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income. Realized gains and losses and declines in the value judged to be other than temporary are included in the other income, net line item in the condensed consolidated statements of operations and comprehensive loss. The cost of securities sold is based on the specific identification method.  As of June 30, 2020 the Company did not have any short-term investments.

Fair Value Measurements

The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

Level 1— Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Level 2— Pricing is provided by third party sources of market information obtained through the Company’s investment advisors, rather than models. The Company does not adjust for, or apply, any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s Level 2 securities may include cash equivalents and available-for-sale securities, which consist primarily of certificates of deposit, corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings. The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities.

Level 3— Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity.

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Allowance for Doubtful Accounts

The Company establishes an allowance for doubtful accounts to ensure that its trade receivables balances are not overstated due to uncollectibility. The Company performs ongoing customer credit evaluations within the context of the industry in which it operates and generally does not require collateral from its customers. A specific allowance of up to 100% of the invoice value is provided for any problematic customer balances. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment of management. There was no allowance for doubtful accounts receivable at either June 30, 2020 or December 31, 2019.

Inventories

The Company values its inventories at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. The Company records inventory reserves for estimated obsolescence or unmarketable inventories based upon assumptions about future demand and market conditions. Once a reserve is established, it is maintained until the product to which it relates is sold or otherwise disposed of. If actual market conditions are less favorable than those expected by management, additional adjustment to inventory valuation may be required. Charges for obsolete and slow-moving inventories are recorded based upon an analysis of specific identification of obsolete inventory items and quantification of slow moving inventory items. The Company recorded a $0.1 million write down of inventory during the six months ended June 30, 2020 and recorded no material inventory write-downs during the six months ended June 30, 2019.

  

Revenue Recognition

The Company generates revenue primarily from sales of IC products and licensing of its IP. Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

IC products

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied.

The majority of the Company's contracts have a single performance obligation to transfer products. Accordingly, the Company recognizes revenue when title and risk of loss have been transferred to the customer, generally at the time of shipment of products. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products and is generally based upon a negotiated, formula, list or fixed price. The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically less than 60 days.

Royalty and other

The Company’s licensing contracts typically provide for royalties based on the licensee’s use of the Company’s memory technology in its currently shipping commercial products. The Company estimates its royalty revenue in the calendar quarter in which the licensee uses the licensed technology.  Payments are generally received in the subsequent quarter.

Contract liabilities – deferred revenue

The Company’s contract liabilities consist of advance customer payments and deferred revenue. The Company classifies advance customer payments and deferred revenue as current or non-current based on the timing of when the Company expects to recognize revenue.

During the six months ended June 30, 2020, the Company recognized revenue of $0.2 million that had been included in deferred revenue as of December 31, 2019.

See Note 5 for disaggregation of revenue by geography.

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Cost of Net Revenue

Cost of net revenue consists primarily of direct and indirect costs of IC product sales and engineering personnel costs directly related to maintenance and support services specified in licensing agreements. Maintenance and support typically include engineering support to assist in the commencement of production of a licensee’s products.

 

Warrants

As of June 30, 2020, the Company had the following warrants outstanding to purchase its common stock (share amounts in thousands):  

 

 

 

Warrant type

 

Number of Shares

 

 

Exercise Price

 

 

Expiration

Common stock

 

 

33

 

 

$

47.00

 

 

January 2023

Common stock

 

 

1,846

 

 

$

2.40

 

 

October 2023

 

Per Share Amounts

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share gives effect to all potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of stock options, vesting of stock awards and shares issuable in conjunction with the outstanding convertible notes.  

 

The following table sets forth securities outstanding which were excluded from the computation of diluted net income (loss) per share as their inclusion would be anti-dilutive (in thousands):  

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Options outstanding to purchase common stock

 

 

161

 

 

 

82

 

Unvested restricted common stock units

 

 

81

 

 

 

107

 

Convertible notes

 

 

262

 

 

 

240

 

Warrants

 

 

1,879

 

 

 

1,994

 

Total

 

 

2,383

 

 

 

2,423

 

 

 

Note 2: Fair Value of Financial Instruments

The estimated fair values of financial instruments outstanding were (in thousands):

 

 

 

June 30, 2020

 

 

 

 

 

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Cash and cash equivalents

 

$

7,375

 

 

$

 

 

$

 

 

$

7,375

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

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