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 2020-03-31 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 2020-07-15 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. Convertible Notes
Note 9. Leases
Note 10. Subsequent Event
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_7.htm
EX-31.2 mosy-ex312_8.htm
EX-32.1 mosy-ex321_6.htm

Mosys Earnings 2020-03-31

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_20200331.htm 10-Q mosy-10q_20200331.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 March 31, 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 3,532,512 as of April 30, 2020.

 

 


 

MOSYS, INC.

 

FORM 10-Q

March 31, 2020

 

TABLE OF CONTENTS

 

PART I —

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited):

3

 

 

 

 

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

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019

4

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 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

17

 

 

 

Item 4.

Controls and Procedures

22

 

 

 

PART II —

OTHER INFORMATION

22

 

 

 

Item 1.

Legal Proceedings

22

 

 

 

Item 1A.

Risk Factors

22

 

 

 

Item 6.

Exhibits

24

 

 

 

 

Signatures

25

 

 

 

 

 


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MOSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,640

 

 

$

6,053

 

Short-term investments

 

 

 

 

 

300

 

Accounts receivable

 

 

539

 

 

 

1,175

 

Inventories

 

 

1,105

 

 

 

968

 

Prepaid expenses and other

 

 

567

 

 

 

472

 

Total current assets

 

 

7,851

 

 

 

8,968

 

Property and equipment, net

 

 

162

 

 

 

197

 

Right-of-use lease asset

 

 

109

 

 

 

156

 

Other

 

 

18

 

 

 

78

 

Total assets

 

$

8,140

 

 

$

9,399

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

107

 

 

$

218

 

Deferred revenue

 

 

122

 

 

 

166

 

Short-term lease liability

 

 

116

 

 

 

166

 

Accrued expenses and other

 

 

1,325

 

 

 

1,155

 

Total current liabilities

 

 

1,670

 

 

 

1,705

 

Convertible notes payable

 

 

2,970

 

 

 

2,858

 

Total liabilities

 

 

4,640

 

 

 

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; 2,315 shares

   and 2,179 shares issued and outstanding at March 31, 2020 and

   December 31, 2019, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

243,350

 

 

 

243,281

 

Accumulated deficit

 

 

(239,852

)

 

 

(238,447

)

Total stockholders’ equity

 

 

3,500

 

 

 

4,836

 

Total liabilities and stockholders’ equity

 

$

8,140

 

 

$

9,399

 

 

 

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

3


 

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Net revenue

 

 

 

 

 

 

 

 

Product

 

$

1,068

 

 

$

3,386

 

Royalty and other

 

 

192

 

 

 

134

 

Total net revenue

 

 

1,260

 

 

 

3,520

 

Cost of net revenue

 

 

530

 

 

 

1,354

 

Gross profit

 

 

730

 

 

 

2,166

 

Operating expenses

 

 

 

 

 

 

 

 

Research and development

 

 

961

 

 

 

1,153

 

Selling, general and administrative

 

 

1,135

 

 

 

972

 

Total operating expenses

 

 

2,096

 

 

 

2,125

 

Income (loss) from operations

 

 

(1,366

)

 

 

41

 

Interest expense

 

 

(55

)

 

 

(54

)

Other income, net

 

 

16

 

 

 

23

 

Income (loss) before income tax provision

 

 

(1,405

)

 

 

10

 

Income tax provision

 

 

 

 

 

 

Net income (loss)

 

$

(1,405

)

 

$

10

 

Net income (loss) per share

 

 

 

 

 

 

 

 

Basic

 

$

(0.61

)

 

$

0.00

 

Diluted

 

$

(0.61

)

 

$

0.00

 

Shares used in computing net income (loss) per share

 

 

 

 

 

 

 

 

Basic

 

 

2,295

 

 

 

2,153

 

Diluted

 

 

2,295

 

 

 

2,271

 

 

 

Note:  Share and per share amounts for the three months ended March 31, 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:  Share and per share amounts for the three months ended March 31, 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)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,405

)

 

$

10

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

41

 

 

 

72

 

Stock-based compensation

 

 

68

 

 

 

(4

)

Accrued interest

 

 

55

 

 

 

54

 

Other

 

 

(3

)

 

 

(2

)

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

636

 

 

 

(549

)

Inventories

 

 

(137

)

 

 

246

 

Prepaid expenses and other assets

 

 

(35

)

 

 

(248

)

Accounts payable

 

 

(111

)

 

 

(21

)

Deferred revenue and other liabilities

 

 

183

 

 

 

(284

)

Net cash used in operating activities

 

 

(708

)

 

 

(726

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(6

)

 

 

(48

)

Proceeds from maturities of short-term investments

 

 

300

 

 

 

 

Purchases of short-term investments

 

 

 

 

 

(1,564

)

Net cash provided by (used in) investing activities

 

 

294

 

 

 

(1,612

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Exercise of pre-funded warrants

 

 

2

 

 

 

 

Taxes paid to net share settle equity awards

 

 

(1

)

 

 

(1

)

Net cash provided by (used in) financing activities

 

 

1

 

 

 

(1

)

Net decrease in cash and cash equivalents

 

 

(413

)

 

 

(2,339

)

Cash and cash equivalents at beginning of period

 

 

6,053

 

 

 

7,104

 

Cash and cash equivalents at end of period

 

$

5,640

 

 

$

4,765

 

Supplemental disclosure:

 

 

 

 

 

 

 

 

Issuance of convertible notes in settlement of accrued interest

 

$

112

 

 

$

78

 

 

 

 

 

 

 

 

 

 

 

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 firmware products. Its Bandwidth Engine ICs combine the Company’s proprietary high-density embedded memory with its high-speed 10 gigabits per second and higher interface technology.

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 months ended March 31, 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.

 

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.

 

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.

7


 

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 March 31, 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.

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 March 31, 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 no material inventory write-downs during the three month periods ended March 31, 2020 and 2019.

8


 

  

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.

 

The Company may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the terms of sale.

 

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 three months ended March 31, 2020, the Company recognized revenue of $44,000 that had been included in deferred revenue as of December 31, 2019.

See Note 5 for disaggregation of revenue by geography.

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.

 

 

 

9


 

Warrants

As of March 31, 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

 

 

$

6.00

 

 

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 the computation of basic and diluted net loss per share for the periods indicated (in thousands, except per share amounts):

 

 

Three months ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,405

)

 

$

10

 

Denominator:

 

 

 

 

 

 

 

 

Add: weighted-average common shares outstanding

 

 

2,295

 

 

 

2,153

 

Total shares: basic

 

 

2,295

 

 

 

2,153

 

Add: weighted-average unvested restricted stock units

 

 

 

 

 

3

 

Add: weighted-average shares issuable on conversion of warrants

 

 

 

 

 

115

 

Total shares: diluted

 

 

2,295

 

 

 

2,271

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.61

)

 

$

0.00

 

 

 

 

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):

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Options outstanding to purchase common stock

 

 

161

 

 

 

82

 

Unvested restricted common stock units

 

 

82

 

 

 

 

Convertible debt

 

 

254

 

 

 

240

 

Warrants

 

 

1,879

 

 

 

1,879

 

Total

 

 

2,376

 

 

 

2,201

 

 

 

 

 

10


 

 

Note 2: Fair Value of Financial Instruments

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

 

 

 

March 31, 2020

 

 

 

 

 

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Cash and cash equivalents

 

$

5,640

 

 

$

 

 

$

 

 

$

5,640

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Cash and cash equivalents

 

$

6,053

 

 

$

 

 

$

 

 

$

6,053

 

Short-term investments

 

 

300

 

 

 

 

 

 

 

 

 

300

 

 

 

$

6,353

 

 

$

 

 

$

 

 

$

6,353

 

 

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) (in thousands):

 

 

 

March 31, 2020

 

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

 

$

4,891

 

 

$

4,891

 

 

$

 

 

$

 

 

 

 

December 31, 2019

 

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

 

$

4,574

 

 

$

4,574

 

 

$

 

 

$

 

Corporate notes and commercial paper

 

$

300

 

 

$

 

 

$

300

 

 

$

 

 

There were no transfers in or out of Level 1 and Level 2 securities during the three months ended March 31, 2020 or 2019.

 

Note 3. Balance Sheet Detail

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Inventories:

 

 

 

 

 

 

 

 

Work-in-process

 

$

593

 

 

$

746

 

Finished goods

 

 

512

 

 

 

222

 

 

 

$

1,105

 

 

$

968

 

 

 

Note 4. Commitments and Contingencies

Indemnification

In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. The Company has also entered into indemnification agreements with its officers and directors. No material amounts were reflected in the Company’s condensed consolidated financial statements for the three months ended March 31, 2020 or 2019 related to these indemnifications.

11


 

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement. To date, the Company has not made any material payments related to these indemnification agreements.

Legal Matters

The Company is not a party to any legal proceeding that the Company believes is likely to have a material adverse effect on its condensed consolidated financial position or results of operations. From time to time the Company may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts.

 

Note 5. Business Segments, Concentration of Credit Risk and Significant Customers

 

The Company operates in one business segment and uses one measurement of profitability for its business.  Net revenue is attributed to the United States and to all foreign countries based on the geographical location of the customer.

 

The Company recognized revenue from shipment of product and licensing of its technologies to customers by geographical location as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

North America

 

$

812

 

 

$

2,487

 

Japan

 

 

237

 

 

 

906

 

Taiwan

 

 

138

 

 

 

74

 

Rest of world

 

 

73

 

 

 

53

 

Total net revenue

 

$

1,260

 

 

$

3,520

 

 

Customers who accounted for at least 10% of total net revenue were:

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Customer A

 

26%

 

14%

Customer B

 

19%

 

26%

Customer C

 

14%

 

23%

Customer D

 

12%

 

*%

Customer E

 

11%

 

*%

Customer F

 

*%

 

15%

Customer G

 

*%

 

13%

 

*

Represents less than 10%

 

Three customers accounted for 81% of accounts receivable as of March 31, 2020. Four customers accounted for 85% of accounts receivable as of December 31, 2019.

Note 6. Income Tax Provision

The Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income. A valuation allowance is established for any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets will not be realized.

The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations.  All tax returns from 2014 to 2019 may be subject to examination by the Internal Revenue Service, California and other states. Returns filed in foreign jurisdictions may be subject to examination for the years 2010 to 2019.  As of March 31, 2020, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

12


 

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. The CARES Act includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits. The Company is evaluating the impact, if any, the CARES Act and other economic stimulus measures will have on the Company’s financials and required disclosures.

 

Note 7. Stock-Based Compensation

The expense relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value. The unamortized compensation cost, as of March 31, 2020, was $0.2 million related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 2.1 years.  The expense related to restricted stock units (RSUs) is recognized over a three-to-five year vesting period and is based on the fair value of the underlying stock on the dates of grant.  The unamortized compensation cost, as of March 31, 2020, was $0.3 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 1.9 years.

For the three months ended March 31, 2020 and 2019, there were no excess tax benefits associated with the exercise of stock options due to the Company’s historical loss positions.

Valuation Assumptions

   There were no awards granted during the three months ended March 31, 2020.  The fair value of the Company’s stock options granted during the three months ended March 31, 2019 was estimated on the grant dates using the Black-Scholes valuation option-pricing model with the following assumptions:

 

 

 

Three Months Ended

 

 

 

March 31, 2019

 

Risk-free interest rate

 

 

2.5

%

Volatility

 

 

128.4

%

Expected life (years)

 

3.0 - 5.0

 

Dividend yield

 

 

%

 

 

The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates, as published by the U.S. Department of the Treasury as of the grant date for terms equal to the expected terms of the options. The expected volatility was based on the historical volatility of the Company’s stock price over the expected term of the options. The expected term of options granted was derived from historical data based on employee exercises and post‑vesting employment termination behavior. A dividend yield of zero is applied because the Company has never paid dividends, and has no intention to pay dividends in the near future.  The Company accounts for forfeitures as they occur.   

Common Stock Options and Restricted Stock

A summary of option and RSU activity under the Company’s Amended and Restated 2010 Equity Incentive Plan (the 2010 Plan) is presented below (in thousands, except exercise price):

 

 

 

 

 

 

 

Options outstanding

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

Shares

 

 

 

 

 

 

Average

 

 

 

Available

 

 

Number of

 

 

Exercise

 

 

 

for Grant

 

 

Shares

 

 

Prices

 

Balance as of January 1, 2020

 

 

88

 

 

 

161

 

 

$

10.85

 

Activity

 

 

 

 

 

 

 

 

 

Balance as of March 31, 2020

 

 

88

 

 

 

161

 

 

$

10.85

 

 

 

13


 

A summary of RSU activity under the Plan is presented below (in thousands, except for fair value):

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

Number of

 

 

Grant-Date

 

 

 

Shares

 

 

Fair Value

 

Non-vested shares as of January 1, 2020

 

 

103

 

 

$

3.75

 

Vested

 

 

(21

)

 

$

3.80

 

Non-vested shares as of March 31, 2020

 

 

82

 

 

$

3.74

 

 

 

 

 

 

 

 

 

 

 

 

The total intrinsic value of the RSUs outstanding as of March 31, 2020 was $0.1 million.

In August 2019, the Company’s stockholders approved the 2019 Stock Incentive Plan (the 2019 Plan), and, as a result, the 2010 Plan was automatically terminated. No future grants of awards will be made under the 2010 Plan, although it will continue to govern prior awards granted thereunder, until all such awards granted have been exercised, forfeited, canceled, expired or otherwise terminated in accordance with the terms of such grants.  The 2019 Plan authorizes the board of directors or the compensation committee of the board of directors to grant a broad range of awards including stock options, stock appreciation rights, restricted stock, performance-based awards, and restricted stock units. Under the 2019 Plan, 182,500 shares have been reserved for issuance.

The term of all incentive stock options granted to a person who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of the Company’s stock may not exceed five years. The exercise price of stock options granted under the 2019 Plan must be at least equal to the fair market value of the shares on the date of grant.  Generally, options granted under the 2019 Plan will vest over a three to four-year period and have a term of 10 years from the date of grant.  In addition, the 2019 Plan provides for automatic acceleration of vesting for options granted to non-employee directors upon a change of control of the Company.  As of March 31, 2020, no awards had been granted under the 2019 Plan.

The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2020 (in thousands, except contractual life and exercise price):

 

 

 

Options Outstanding

 

 

Options Exercisable

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining

 

 

Weighted