3 unchanged sentences
(Unaudited, in thousands, except par value)
−Removed: September 30,
Current assets:
−Removed: Accounts receivable, net of allowances of $361 and $299 as of September 30, 2020
+Added: Cash and cash equivalents
+Added: Accounts receivable, net of allowances of $132 and $178 as of March 31, 2021
and December 31, 2020, respectively
8 unchanged sentences
Current portion - contractual payment obligation
−Removed: Current portion - financial liabilities, net of debt issuance costs of $235 and $41 as of
−Removed: September 30, 2020 and December 31, 2019, respectively
+Added: Current portion - financial liabilities, net of debt issuance costs of $136
+Added: and $59 as of March 31, 2021 and December 31, 2020, respectively
Operating lease liabilities
3 unchanged sentences
Total current liabilities
−Removed: Long-term contractual payment obligation
Long-term operating lease liabilities
6 unchanged sentences
5,000 shares authorized;
−Removed: issued and outstanding as of September 30, 2020 and December 31, 2019
+Added: issued and outstanding as of March 31, 2021 and December 31, 2020
Common stock, $0.001 par value:
1 unchanged sentence
19,581 and 19,450 shares
−Removed: issued and 17,966 and 16,986 shares outstanding as of September 30, 2020 and
+Added: issued and 18,161 and 18,055 shares outstanding as of March 31, 2021 and
December 31, 2020, respectively
Additional paid-in capital
−Removed: Treasury stock, 1,354 and 1,223 shares as of September 30, 2020 and December 31, 2019,
+Added: Treasury stock, 1,420 and 1,395 shares as of March 31, 2021 and December 31, 2020,
Accumulated deficit
4 unchanged sentences
IDENTIV, INC.
−Removed: CONDENSED CONSOLIDATED S TATEMENTS OF COMPREHENSIVE INCOME (LOSS)
+Added: CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands, except per share data)
−Removed: Three Months Ended September 30,
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
Cost of revenue
3 unchanged sentences
General and administrative
−Removed: Increase (decrease) in fair value of earnout liability
Restructuring and severance
Total operating expenses
−Removed: Income (loss) from operations
+Added: Loss from operations
Non-operating income (expense):
Interest expense, net
−Removed: Foreign currency (losses) gains, net
−Removed: Income (loss) before income tax provision
+Added: Foreign currency gains (losses), net
+Added: Loss before income tax provision
Income tax provision
−Removed: Net income (loss)
−Removed: Other comprehensive income (loss):
+Added: Other comprehensive loss:
Foreign currency translation adjustment
−Removed: Liquidation of subsidiary with noncontrolling interest
−Removed: Comprehensive income (loss)
−Removed: Net income (loss) per common share:
−Removed: Weighted average shares used in computing net
−Removed: income (loss) per common share:
+Added: Comprehensive loss
+Added: Net loss per common share:
+Added: Weighted average common shares outstanding, basic and diluted
The accompanying notes are an integral part of these condensed consolidated financial statements.
2 unchanged sentences
(Unaudited, in thousands)
−Removed: Three Months Ended September 30, 2020
Convertible Preferred Stock
1 unchanged sentence
Stockholders'
−Removed: Balances, June 30, 2020
−Removed: Unrealized income from foreign
−Removed: currency translation adjustments
−Removed: Issuance of common stock in connection
−Removed: with vesting of stock awards
−Removed: Stock-based compensation
−Removed: Shares withheld in payment of taxes in
−Removed: connection with net share settlement of
−Removed: restricted stock units
−Removed: Balances, September 30, 2020
−Removed: Nine Months Ended September 30, 2020
−Removed: Convertible Preferred Stock
−Removed: Comprehensive
−Removed: Stockholders'
Balances, December 31, 2019
−Removed: Unrealized income from foreign
−Removed: currency translation adjustments
−Removed: Issuance of common stock in connection
−Removed: with vesting of stock awards
−Removed: Stock-based compensation
−Removed: Shares withheld in payment of taxes in
−Removed: connection with net share settlement of
−Removed: restricted stock units
−Removed: Issuance of common stock in connection
−Removed: with Viscount Earnout
−Removed: Issuance of shares to non-employees
−Removed: Issuance of common stock in connection
−Removed: with warrant exercise
−Removed: Issuance of warrants
−Removed: Balances, September 30, 2020
−Removed: Three Months Ended September 30, 2019
−Removed: Convertible Preferred Stock
−Removed: Comprehensive
−Removed: Noncontrolling
−Removed: Stockholders'
−Removed: Balances, June 30, 2019
Unrealized loss from foreign
6 unchanged sentences
restricted stock units
−Removed: Liquidation of subsidiary with
−Removed: noncontrolling interest
−Removed: Balances, September 30, 2019
−Removed: Nine Months Ended September 30, 2019
+Added: Issuance of common stock in connection with
+Added: warrant exercise
+Added: Balances, March 31, 2020
Convertible Preferred Stock
Comprehensive
−Removed: Noncontrolling
Stockholders'
3 unchanged sentences
Issuance of common stock in connection
−Removed: with acquisition of business
−Removed: Issuance of common stock in connection
with vesting of stock awards
+Added: Proceeds of exercise of
+Added: stock options
Stock-based compensation
2 unchanged sentences
restricted stock units
−Removed: Issuance of common stock in connection
−Removed: with warrant exercise
−Removed: Cancellation of holdback shares in
−Removed: connection with acquisition
−Removed: Liquidation of subsidiary with
−Removed: noncontrolling interest
−Removed: Balances, September 30, 2019
+Added: Issuance of common stock in connection with
+Added: warrant exercise
+Added: Balances, March 31, 2021
The accompanying notes are an integral part of these condensed consolidated financial statements.
2 unchanged sentences
(Unaudited, in thousands)
−Removed: Nine Months Ended
−Removed: September 30,
+Added: Three Months Ended March 31,
Cash flows from operating activities:
−Removed: Net (loss) income
−Removed: Adjustments to reconcile net (loss) income to net cash (used in) provided by
+Added: Adjustments to reconcile net loss to net cash used in
operating activities:
1 unchanged sentence
Accretion of interest on contractual payment obligation
−Removed: Stock-based compensation expense
Amortization of debt issuance costs
+Added: Stock-based compensation expense
Impairment of right-of-use operating lease asset
−Removed: (Decrease) increase in fair value of earnout liability
−Removed: Changes in operating assets and liabilities, net of acquisition:
+Added: Changes in operating assets and liabilities:
Accounts receivable
4 unchanged sentences
Accrued expenses and other liabilities
−Removed: Net cash (used in) provided by operating activities
+Added: Net cash used in operating activities
Cash flows from investing activities:
Capital expenditures
−Removed: Acquisition of business, net of cash acquired
Net cash used in investing activities
2 unchanged sentences
Repayments under revolving loan facility
−Removed: Borrowings under East West Bank term loan
Repayments under East West Bank term loan
−Removed: Proceeds from April 21 Funds promissory notes
−Removed: Proceeds from Paycheck Protection Program promissory note
−Removed: Repayments of notes payable
Taxes paid related to net share settlement of restricted stock units
+Added: Proceeds from exercise of stock options
Net cash provided by financing activities
−Removed: Effect of exchange rates on cash
−Removed: Net increase in cash
−Removed: Cash at beginning of period
−Removed: Cash at end of period
+Added: Effect of exchange rates on cash and cash equivalents
+Added: Net increase (decrease) in cash and cash equivalents
+Added: Cash and cash equivalents at beginning of period
+Added: Cash and cash equivalents at end of period
Supplemental Disclosures of Cash Flow Information:
1 unchanged sentence
Taxes paid, net
−Removed: Non-cash investing and financing activities:
−Removed: Common stock issued to settle vendor liability
−Removed: Common stock issued to settle earnout liability
−Removed: Fair value of warrants issued in connection with financial liabilities
−Removed: Common stock issued for acquisition of business, net
−Removed: Liquidation of subsidiary with noncontrolling interest
−Removed: Cancellation of holdback shares in connection with acquisition
The accompanying notes are an integral part of these condensed consolidated financial statements.
1 unchanged sentence
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
−Removed: September 30, 2020
+Added: March 31, 2021
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Identiv, Inc.
−Removed: and its wholly and majority owned subsidiaries (“Identiv” or the “Company”).
+Added: and its wholly owned subsidiaries (the “Company”).
All intercompany balances and transactions have been eliminated in consolidation.
−Removed: Certain reclassifications have been made to the fiscal year 2019 condensed consolidated financial statements to conform to the fiscal year 2020 presentation.
−Removed: The reclassifications had no impact on net income (loss), total assets, total liabilities, or stockholders’ equity.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
4 unchanged sentences
In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company’s unaudited condensed consolidated financial statements have been included.
−Removed: The results of operations for the three months and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any future period.
−Removed: The condensed consolidated balance sheet as of December 31, 2019 has been derived from audited consolidated financial statements at that date, but does not include all disclosures required by U.S.
+Added: The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future period.
+Added: The unaudited condensed consolidated balance sheet as of December 31, 2020 has been derived from audited consolidated financial statements at that date, but does not include all disclosures required by U.S.
GAAP for complete financial statements.
2 unchanged sentences
Significant Accounting Policies
−Removed: No material changes have been made to the Company's significant accounting policies disclosed in Note 1, Summary of Significant Accounting Policies , in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
+Added: No material changes have been made to the Company's significant accounting policies disclosed in Note 2, Significant Accounting Policies and Recent Accounting Pronouncements , in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Recent Accounting Pronouncements
7 unchanged sentences
Additionally, ASU No.
−Removed: 2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies (“SRC”) as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company if it continues to be classified as a SRC.
+Added: 2019-10 defers the effective date for the adoption of the new standard on credit losses for public filers that are considered small reporting companies as defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, which will be fiscal 2023 for the Company if it continues to be classified as a smaller reporting company.
In February 2020, the FASB issued ASU 2020-02, which provides guidance regarding methodologies, documentation, and internal controls related to expected credit losses.
2 unchanged sentences
Topic 326 requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.
−Removed: While the Company is currently evaluating the impact of Topic 326, Company does not expect the adoption of the ASU to have a material impact on its condensed consolidated financial statements.
−Removed: In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”) , which simplifies the accounting for incomes taxes by removing certain exceptions to the general prin ciples in Topic 740 and amending existing guidance to improve consistent application.
+Added: While the Company is currently evaluating the impact of Topic 326, the Company does not expect the adoption of the ASU to have a material impact on its consolidated financial statements.
+Added: In December 2019, FASB issued ASU 2019-12, Income Taxes (740), Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application.
ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted.
−Removed: The Company is curren tly evaluating the impact this standard will have on its condensed consolidated financial statements .
+Added: This standard did not have a material impact on the Company’s condensed consolidated financial statements.
Revenue Recognition
5 unchanged sentences
Nature of Products and Services
−Removed: The Company derives revenue primarily from sales of hardware products, software licenses, professional services, software maintenance and support, and extended hardware warranties.
+Added: The Company derives revenues from sales of hardware products, software licenses, subscriptions, professional services, software maintenance and support, and extended hardware warranties.
Hardware Product Revenue — The Company generally has two performance obligations in arrangements involving the sale of hardware products.
The first performance obligation is to transfer the hardware product (which includes software integral to the functionality of the hardware product).
−Removed: The second performance obligation is to provide assurance that the product complies with its agreed-upon specifications and is free from defects in material and workmanship for a period of one to three years (i.e.
−Removed: assurance warranty).
+Added: The second performance obligation is to provide assurance that the product complies with its agreed-upon specifications and is free from defects in material and workmanship for a period of one to three years (i.e., assurance warranty).
The entire transaction price is allocated to the hardware product and is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time.
6 unchanged sentences
The software license revenue is recognized upon delivery of the license to the customer, while the software updates and technical support revenue is recognized over the term of the support contract.
+Added: Subscription Revenue — Subscription revenue consist of fees received in consideration for providing customers access to one or more of the Company’s software-as-a-service (“SaaS”) based solutions.
+Added: These SaaS arrangements include access to the Company’s licensed software and, in certain arrangements, use of various hardware devices over the contract term.
+Added: These SaaS arrangements do not provide the customer the right to take possession of the software supporting the subscription service, or if applicable, any hardware devices at any time during the contract period, and as such are not considered separate performance obligations.
+Added: Revenue is recognized ratably on a straight-line basis over the term of the contract beginning when the service is made available to the customer.
+Added: Subscription contract terms range from month-to-month to six years in length and billed monthly or annually.
Professional Services Revenue — Professional services revenue consists primarily of programming customization services performed relating to the integration of the Company’s software products with the customers other systems, such as human resources systems.
1 unchanged sentence
Software Maintenance and Support Revenue — Support and maintenance contract revenue consists of the services provided to support the specialized programming applications performed by the Company’s professional services group.
−Removed: Support and maintenance contracts are typically billed at inception of the contract and recognized as revenue over the contract period, typically over a one to three year period.
+Added: Support and maintenance contracts are typically billed at inception of the contract and recognized as revenue over the contract period, typically over a one or three year period.
Extended Hardware Warranties Revenue — Sales of the Company’s hardware products may also include optional extended hardware warranties, which typically provide assurance that the product will continue function as initially intended.
−Removed: Extended hardware warranty contracts are typically billed at inception of the contrac t and recognized as revenue over the respective contract period, typically over one to two year periods after the expiration of the original assurance warranty .
+Added: Extended hardware warranty contracts are typically billed at inception of the contract and recognized as revenue over the respective contract period, typically over one to two year periods after the expiration of the original assurance warranty.
When Performance Obligation is
12 unchanged sentences
Established pricing practices for software licenses bundled with software maintenance, which are separately observable in renewal transactions
+Added: Subscriptions
+Added: Ratably over the course of the subscription term (over time)
+Added: In advance of subscription term
+Added: Contractually stated or list price
Professional services
−Removed: As services are performed and/or when the contract is fulfilled (point-in-time)
+Added: As services are performed and/or when contract is fulfilled (point-in-time)
Within 30-60 days of delivery
16 unchanged sentences
In instances where SSP is not directly observable, such as when the product or service is not sold separately, the Company determines the SSP using information that may include market conditions and other observable inputs.
−Removed: The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSPs reflect the most current information or trends.
+Added: The determination of SSP is an ongoing process and information is reviewed regularly in order to ensure SSPs reflect current information or trends.
Disaggregation of Revenue
1 unchanged sentence
The geographic regions that are tracked are the Americas, Europe and the Middle East, and Asia-Pacific regions.
−Removed: The Company operates as two operating segments.
Total net revenue based on the disaggregation criteria described above is as follows (in thousands):
−Removed: Three Months Ended September 30,
−Removed: Europe and the Middle East
−Removed: Nine Months Ended September 30,
+Added: Three Months Ended March 31,
Europe and the Middle East
5 unchanged sentences
The primary purpose of the Company’s invoicing terms is to provide customers with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from its customers.
−Removed: Changes in deferred revenue during the nine months ended September 30, 2020 and 2019 were as follows (in thousands):
−Removed: Nine Months Ended September 30,
+Added: Changes in deferred revenue during the three months ended March 31, 2021 and March 2020 were as follows (in thousands):
+Added: Three Months Ended March 31,
Deferred revenue, beginning of period
−Removed: Fair value of deferred revenue acquired in acquisition, net of recognition
Deferral of revenue billed in current period, net of recognition
2 unchanged sentences
Unsatisfied Performance Obligations
−Removed: Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $0.9 million as of September 30, 2020.
−Removed: Since the Company typically invoices customers at contract inception, this amount is included in its deferred revenue balance.
−Removed: As of September 30, 2020, the Company expects to recognize 18% of the revenue related to these unsatisfied performance obligations during the remainder of 2020, 52% during 2021, and 30% thereafter.
+Added: Revenue expected to be recognized in future periods related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, and contracts where revenue is recognized as invoiced, was approximately $0.8 million as of March 31, 2021.
+Added: Since the Company typically invoices customers at contract inception, this amount is included in the deferred revenue balance.
+Added: As of March 31, 2021, the Company expects to recognize 53% of the revenue related to these unsatisfied performance obligations during the remainder of 2021, 32% during 2022, and 15% thereafter.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year.
−Removed: The Company has determined that certain sales incentive programs (i.e.
−Removed: commissions) meet the requirements to be capitalized.
+Added: The Company has determined that certain sales incentive programs (i.e., commissions) meet the requirements to be capitalized.
Capitalized incremental costs related to contracts are amortized over the respective contract periods.
−Removed: For the nine months ended September 30, 2020 and 2019, total capitalized costs to obtain contracts were immaterial.
−Removed: Business Combinations
−Removed: Thursby Software Systems
−Removed: On November 1, 2018, the Company completed the acquisition of Thursby Software Systems, Inc.
−Removed: (“Thursby”), a provider of security software for mobile devices, pursuant to an Agreement and Plan of Merger (the “Thursby Agreement”).
−Removed: Under the terms of the Thursby Agreement, at the closing of the acquisition, the Company acquired all of the outstanding shares of Thursby for total purchase consideration of $3.1 million, consisting of:
−Removed: $0.6 million in cash, net of cash acquired;
−Removed: the issuance of 426,621 shares of the Company’s common stock with a value of approximately $2.5 million.
−Removed: An aggregate of up to $0.5 million, or 85,324 shares, of the Company’s common stock issuable at the closing of the transaction were held back for a period of up to 12 months following the closing for the satisfaction of certain indemnification claims.
−Removed: In the fourth quarter of 2019, the Company and Wi lliam Thursby reached agreement as to the satisfaction of the indemnification claims, and accordingly, the Company released the 85,324 holdback shares.
−Removed: Additionally, in the event that revenue from Thursby products was greater than $8.0 million, $11.0 million, or $15.0 million in product shipments in 2019, the Company would have been obligated to issue earnout consideration of up to a maximum of $7.5 million payable in shares of the Company’s common stock, subject to certain conditions.
−Removed: In the event that such revenue was less than $15.0 million in 2019, but 2020 revenue from Thursby products exceeds $15.0 million, the Company will be obligated to issue an additional $2.5 million in earnout consideration payable in shares of the Company’s common stock.
−Removed: The maximum total earnout consideration payable for all periods is $7.5 million in the aggregate, payable in shares of the Company’s common stock.
−Removed: Management has assessed the probability of the issuance of shares related to the earnout consideration and determined it as remote.
−Removed: Accordingly, no value was ascribed to the earnout consideration as of September 30, 2020.
−Removed: Acquisition related intangibles included in the below table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):
−Removed: Gross Purchased
−Removed: Intangible Assets
−Removed: Estimated Useful Life
−Removed: Customer relationships
−Removed: Developed technology
−Removed: Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.
−Removed: The acquisition of Thursby resulted in $3.6 million of goodwill, which is not deductible for tax purposes.
−Removed: With the addition of the Thursby security software for mobile devices, the Company believes this goodwill largely reflects the synergistic strengthening of its Identity offerings providing complete solutions for secure and convenient logical access across smart cards and derived credentials on Apple iOS and Android mobile devices.
−Removed: In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter.
−Removed: See Note 6, Goodwill and Intangible Assets .
−Removed: Viscount Systems, Inc.
−Removed: On January 2, 2019, the Company completed the purchase of substantially all the assets of the Freedom, Liberty, and Enterphone™ MESH products and services of Viscount Systems, Inc.
−Removed: (“Viscount”) and the assumption of certain liabilities (the “Asset Purchase”).
−Removed: Under the terms of the Asset Purchase, the Company was obligated to pay at closing aggregate consideration of $2.9 million consisting of:
−Removed: payment in cash of approximately $1.3 million, and
−Removed: the issuance of 419,288 shares of the Company’s common stock with a value of approximately $1.6 million.
−Removed: An aggregate of approximately 31,447 shares of the Company’s common stock issuable at the closing of the transaction were held back for 12 months following the closing for the satisfaction of certain indemnification claims.
−Removed: In the first quarter of 2020, the Company released the 31,447 holdback shares as the indemnification claims were satisfied.
−Removed: Additionally, in the event that revenue from the assets purchased under the agreement in 2019 was greater than certain specified revenue targets, the Company would be obligated to issue earnout consideration of up to a maximum of $3.5 million payable in shares of the Company’s common stock (subject to certain conditions).
−Removed: In the event that such revenue targets were not met in 2019, but 2020 revenue from the assets purchased exceeds certain higher targets for 2020, then the Company will be obligated to issue up to a maximum of $2.25 million in earnout consideration in the form of common stock.
−Removed: The maximum total earnout consideration liability for all periods is $3.5 million in the aggregate, payable in the Company’s common stock.
−Removed: At December 31, 2019, management had assessed the probability of the issuance of shares related to the earnout consideration and determined its fair value to be $750,000.
−Removed: In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the 2019 revenue targets were achieved.
−Removed: In the second quarter of 2020, the Company issued to the selling stockholders earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000.
−Removed: The Company recognized a reduction in earnout consideration expense of $261,000 in the statement of comprehensive income (loss) during the quarter ended June 30, 2020, representing the settlement date fair value of the shares issued and the recorded earnout liability.
−Removed: Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company.
−Removed: The following table summarizes the fair values of assets acquired and liabilities assumed at the dat e of acquisition (in thousands):
−Removed: Accounts receivable
−Removed: Prepaid expenses and other current assets
−Removed: Property and equipment
−Removed: Operating lease ROU assets
−Removed: Customer relationships
−Removed: Developed technology
−Removed: Total identifiable assets acquired
−Removed: Accounts payable
−Removed: Operating lease liabilities
−Removed: Accrued expenses and liabilities
−Removed: Deferred revenue
−Removed: Earnout consideration liability
−Removed: Other current liabilities
−Removed: Long-term operating lease liabilities
−Removed: Total liabilities assumed
−Removed: Net identifiable assets acquired
−Removed: Net purchase price
−Removed: Acquisition related intangibles included in the above table are finite-lived and are being amortized on a straight-line basis over their estimated lives, which approximates the pattern in which the economic benefits of the intangible assets are expected to be realized, as follows (in thousands):
−Removed: Gross Purchased
−Removed: Intangible Assets
−Removed: Estimated Useful Life
−Removed: Customer relationships
−Removed: Developed technology
−Removed: Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired.
−Removed: The Asset Purchase resulted in $1.2 million of goodwill.
−Removed: With the addition of Viscount’s products and services, the Company believes this goodwill largely reflects the expansion of its Premises offerings with advanced, complementary solutions for the commercial and small- and medium-sized business markets, leveraging Freedom’s IT-centric software, defined architecture, and hardware-light platform.
−Removed: In accordance with ASC 350, goodwill will not be amortized but is tested for impairment at least annually in the fourth quarter.
−Removed: See Note 6, Goodwill and Intangible Assets .
+Added: For the three months ended March 31, 2021, total capitalized costs to obtain contracts were immaterial.
Fair Value Measurements
1 unchanged sentence
The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement.
−Removed: Under ASC Topic 820, Fair Value Measurement and Disclosures (“ASC 820”) , the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:
+Added: Under ASC 820, Fair Value Measurement and Disclosures (“ASC 820”) , the fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 – Quoted prices (unadjusted) for identical assets and liabilities in active markets;
2 unchanged sentences
Assets and Liabilities Measured at Fair Value on a Recurring Basis
−Removed: As of September 30, 2020 and December 31, 2019, there were nominal cash equivalents.
−Removed: The Company’s only liabilities measured at fair value on a recurring basis are the contingent consideration associated with the acquisitions of Thursby and Viscount .
−Removed: The fair value of the earnout consideration is based on achieving certain revenue and profit targets as defined under the respective acquisition agreements.
−Removed: The valuation of the earnout consideration is classified as a Level 3 measurement as it is based on significant unobservable inputs and involves management judgment and assumptions about achieving revenue and profit targets and discount rates.
−Removed: The unobservable inputs used in the measurement of the earnout consideration are highly sensitive to fluctuations and any changes in the inputs or the probability weighting thereof could significantly change the measured value of the earnout consideration at each reporting period.
−Removed: As of December 31, 2019, management had assessed the probability of the issuance of shares related to the Viscount earnout consideration and determined its fair value to be $750,000.
−Removed: In the first quarter of 2020, the Company and the selling stockholders of the net assets acquired from Viscount reached agreement that certain of the 2019 revenue targets were achieved.
−Removed: Accordingly, in the second quarter of 2020, the Company issued to the selling stockholders the related earnout consideration consisting of 157,233 shares of its common stock with a fair value of approximately $489,000.
−Removed: Changes in the fair value of liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands):
−Removed: Consideration
−Removed: Balance as of December 31, 2019
−Removed: Decrease in fair value of earnout liability
−Removed: Issuance of common stock in connection with earnout consideration
−Removed: Balance as of September 30, 2020
+Added: As of March 31, 2021 and December 31, 2020, the only assets measured and recognized at fair value on a recurring basis were nominal cash equivalents.
+Added: As of March 31, 2021 and December 31, 2020, there were no liabilities measured and recognized at fair value on a recurring basis, other than contingent consideration related to prior acquisitions as of December 31, 2020 which had no fair value.
Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
2 unchanged sentences
For additional discussion of measurement criteria used in evaluating potential impairment involving goodwill and intangible assets, refer to Note 5, Goodwill and Intangible Assets .
−Removed: Privately-held investments, which are normally carried at cost, are measured at fair value due to events and circumstances that the Company identified as significantly impacting the fair value of the investments.
−Removed: The Company estimates the fair value of its privately-held investments using an analysis of the financial condition and near-term prospects of the investee, including recent financing activities and the investee's capital structure.
−Removed: As of September 30, 2020 and December 31, 2019, the Company had $ 348,000 of privately-held investments measured at fair value on a nonrecurring basis which were classified as Level 3 assets due to the absence of quoted market prices and inherent lack of liquidity.
+Added: As of March 31, 2021 and December 31, 2020, the Company had $ 348,000 of privately-held investments measured at fair value on a nonrecurring basis, which were classified as Level 3 assets due to the absence of quoted market prices and inherent lack of liquidity.
The Company reviews its investments to identify and evaluate investments that have an indication of possible impairment.
−Removed: The Company adjusts the carrying value for its privately-held investments for impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis.
+Added: The Company adjusts the carrying value for its privately-held investments for any impairment if the fair value is less than the carrying value of the respective assets on an other-than-temporary basis.
The amount of privately-held investments is included in other assets in the accompanying condensed consolidated balance sheets.
−Removed: As of September 30, 2020 and December 31, 2019, there were no liabilities that are measured and recognized at fair value on a non-recurring basis.
+Added: As of March 31, 2021 and December 31, 2020, there were no liabilities that are measured and recognized at fair value on a non-recurring basis.
Assets and Liabilities Not Measured at Fair Value
−Removed: The carrying amounts of the Company's accounts receivable, prepaid expenses and other current assets, accounts payable, financial liabilities and other accrued liabilities approximate fair value due to their short maturities.
−Removed: Based on the borrowing rates currently available to the Company for debt with similar terms, the carrying value of the outstanding debt approximates fair value.
+Added: The carrying amounts of the Company's accounts receivable, prepaid expenses and other current assets, accounts payable, and other accrued liabilities approximate fair value due to their short maturities.
+Added: The carrying value of the Company’s financial liabilities approximates fair value based upon borrowing rates currently available to the Company for loans with similar terms.
Goodwill and Intangible Assets
The following table summarizes the activity in goodwill (in thousands):
−Removed: Balance as of December 31, 2019
+Added: Balance at December 31, 2020
Currency translation adjustment
−Removed: Balance as of September 30, 2020
−Removed: The Company tests goodwill for impairment on an annual basis, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.
−Removed: In testing for goodwill impairment, the Company compares the fair value of its reporting unit to its carrying value including the goodwill of that unit.
−Removed: If the carrying value, including goodwill, exceeds the reporting unit’s fair value, the Company will recognize an impairment loss for the amount by which the carrying amount exceeds the reporting unit’s fair value.
−Removed: No impairment of goodwill was identified during the nine months ended September 30, 2020 and 2019.
+Added: Balance at March 31, 2021
+Added: In accordance with ASC 350, Intangibles – Goodwill and Other , the Company tests goodwill for impairment on an annual basis, in the fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.
+Added: The Company performs an initial assessment of qualitative factors to determine whether the existence of events and circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
+Added: In performing the qualitative assessment, the Company identifies and considers the significance of relevant key factors, events, and circumstances that affect the fair value of its reporting units.
+Added: These factors include external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned financial performance.
+Added: If, after assessing the totality of relevant events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit exceeds its carrying value and there is no indication of impairment, no further testing is performed;
+Added: however, if the Company concludes otherwise, then the Company will perform the quantitative impairment test which compares the estimated fair value of the reporting unit to its carrying value, including goodwill.
+Added: If the carrying amount of the reporting unit is in excess of its fair value, an impairment loss would be recorded in the consolidated statement of comprehensive loss.
+Added: During the quarters ended March 31, 2021 and 2020, the Company noted no indicators of goodwill impairment and concluded no further testing was necessary.
Intangible Assets
2 unchanged sentences
Amortization period (in years)
−Removed: Gross carrying amount as of September 30, 2020
+Added: Gross carrying amount at March 31, 2021
Accumulated amortization
−Removed: Intangible assets, net as of September 30, 2020
−Removed: Gross carrying amount as of December 31, 2019
+Added: Intangible assets, net at March 31, 2021
+Added: Gross carrying amount at December 31, 2020
Accumulated amortization
−Removed: Intangible assets, net as of December 31, 2019
+Added: Intangible assets, net at December 31, 2020
Each period, the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.
If a revision to the remaining period of amortization is warranted, amortization is prospectively adjusted over the remaining useful life of the intangible asset.
−Removed: Intangible assets subject to amortization are amortized on a straight-line basis over their useful lives as shown in the table above.
+Added: Intangible assets subject to amortization are amortized on a straight-line basis over their useful lives as indicated in the table above.
The Company performs an evaluation of it its amortizable intangible assets for impairment at the end of each reporting period.
−Removed: No impairment of intangible assets was identified during the nine months ended September 30, 2020.
−Removed: The following table illustrates the amortization expense included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019, respectively (in thousands):
−Removed: Three Months Ended
−Removed: Nine Months Ended
−Removed: September 30,
−Removed: September 30,
+Added: The Company did not identify any impairment indicators during the three months ended March 31, 2021 and 2020.
+Added: The following table summarizes the amortization expense included in the condensed consolidated statements of comprehensive loss for the three months ended March 31, 2021 and 2020, respectively (in thousands):
+Added: Three Months Ended March 31,
Cost of revenue
Selling and marketing
−Removed: The estimated annual future amortization expense for purchased intangible assets with definite lives as of September 30, 2020 was as follows (in thousands):
−Removed: 2020 (remaining three months)
+Added: The estimated annual future amortization expense for purchased intangible assets with definite lives as of March 31, 2021 was as follows (in thousands):
+Added: 2021 (remaining nine months)
Balance Sheet Components
1 unchanged sentence
Inventories consists of (in thousands):
−Removed: September 30,
Raw materials
2 unchanged sentences
Property and equipment, net consists of (in thousands):
−Removed: September 30,
Building and leasehold improvements
4 unchanged sentences
Property and equipment, net
−Removed: The Company recorded depreciation expense of $0.2 million and $0.3 million during the three months ended September 30, 2020 and 2019, respectively, and $0.6 million and $0.8 million during the nine months ended September 30, 2020 and 2019, respectively.
+Added: The Company recorded depreciation expense of $0.2 million during each of the three months ended March 31, 2021 and 2020 .
Other accrued expenses and liabilities consist of (in thousands):
−Removed: September 30,
Accrued professional fees
1 unchanged sentence
Accrued warranties
−Removed: Earnout liability
+Added: Accrued restructuring
Other accrued expenses
9 unchanged sentences
The Company’s remaining payment obligation under the 2009 Settlement Agreement, as amended, was extended through October 31, 2021.
−Removed: The Company included approximately $28,000 and $115,000 of interest expense during the three and nine months ended September 30, 2020, respectively, and approximately $33,000 and $115,000 during the three and nine months ended September 30, 2019, respectively, in its condensed consolidated statements of operations for interest accreted on the payment obligation.
−Removed: The payment obligation under the 2009 Settlement Agreement, as amended, as of September 30, 2020, was as follows (in thousands):
−Removed: 2020 (remaining three months)
+Added: The Company included approximately $19,000 and $32,000 of interest expense during the three months ended March 31, 2021 and 2020, respectively, in its condensed consolidated statements of comprehensive loss for interest accreted on the payment obligation.
+Added: The payment obligation under the 2009 Settlement Agreement, as amended, as of March 31, 2021 , is as follows (in thousands):
+Added: 2021 (remaining nine months)
Present value discount factor
−Removed: Current portion - contractual payment obligation
−Removed: Long-term contractual payment obligation
Financial Liabilities
Financial liabilities consist of (in thousands):
−Removed: September 30,
Revolving loan facility
−Removed: East West Bank term loan
April 21 Funds promissory notes
3 unchanged sentences
Long-term financial liabilities
−Removed: On February 8, 2017, the Company entered into Loan and Security Agreements with East West Bank (“EWB”) and Venture Lending & Leasing VII, Inc.
−Removed: and Venture Lending VIII, Inc.
−Removed: (collectively referred to as “VLL7 and VLL8”).
−Removed: The Loan and Security agreement, as amended, with EWB provided a $16.0 million revolving loan facility (“Revolving Loan Facility”), and the Loan and Security Agreement with VLL7 and VLL8 provided a $10.0 million term loan facility (“Term Loan”).
−Removed: All amounts due under the Term Loan were paid in full in May 2018.
−Removed: On February 6, 2019, the Company entered into an amendment (the “Tenth Amendment”) to its Loan and Security Agreement, as amended, with EWB which increased the Revolving Loan Facility from $16.0 million to $20.0 million, lowered the interest rate from prime rate plus 1.0% to prime rate plus 0.75%, extended the maturity date to February 8, 2021, and amended certain financial covenants, including covenants with respect to minimum EBITDA levels.
−Removed: On March 27, 2019, the Company entered into an amendment (the “Eleventh Amendment”) which modified certain financial covenants.
−Removed: On January 28, 2020, the Company entered into an amendment (the “Twelfth Amendment”) to its Loan and Security Agreement with EWB, which provided a new term loan facility (“EWB Term Loan”) in a principal amount of $4.5 million , which was received on January 28, 2020, and reduced the Revolving Loan Facility under the Loan and Security Agreement from $20.0 million to $15.5 million.
−Removed: The EWB Term Loan has an interest rate equal to the pri me rate plus 2.25%, began to amortize on February 1, 2020, with principal in the amount of $250,000 due monthly through the first anniversary of the Term Loan, and the remainder due on such first anniversary.
−Removed: In addition, certain definitions in the Loan an d Security Agreement were amended pursuant to the Twelfth Amendment, including the definition of EBITDA and Borrowing Base, and a new fixed charge coverage ratio financial covenant was added.
−Removed: Upon repayment of the EWB Term Loan in full, the Revolving Loan Facility will be increased to $20.0 million and the fixed charge coverage ratio financial covenant will no longer apply.
−Removed: Legal and administrative costs of $90,000 were recorded as a direct reduction from the carrying amount of the EWB Term Loan and are bei ng amortized as interest expense over the remaining term of the Loan and Security Agreement with EWB.
−Removed: On May 5, 2020, the Company entered into an amendment (the “Thirteenth Amendment”) to its Loan and Security Agreement with EWB.
−Removed: Under the Thirteenth Amendment, certain definitions were amended, including the definitions of Permitted Indebtedness and EBITDA, and certain financial covenants were amended, including reducing from $4.0 million to $3.0 million the amount of unrestricted cash that must be held in the Company’s accounts with EWB during the period from May 1, 2020 through September 30, 2020 and providing for minimum trailing six-month EBITDA of at least $0.6 million during such period and of $0.3 million thereafter.
−Removed: In addition, the Company is not required to make monthly principal payments on the EWB Term Loan for the three payment dates of May 1, 2020, June 1, 2020 and July 1, 2020.
−Removed: In addition, as discussed in Note 11, Stockholders’ Equity, the Company amended the EWB Warrant.
−Removed: The Company calculated the fair value of the amended EWB Warrant using the Black Scholes pricing model using the following assumptions:
−Removed: estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years.
−Removed: The fair value of the amended EWB Warrant of $42,000, as well as legal and administrative costs of $92,000, were recorded as a direct reduction from the carrying amount of the Revolving Loan Facility and are being amortized as interest expense over the remaining term of the Loan and Security Agreement with EWB.
−Removed: The Company may voluntarily prepay amounts outstanding under the Revolving Loan Facility, without prepayment charges.
−Removed: In the event the Revolving Loan Facility is terminated prior to its maturity, the Company would be required to pay an early termination fee in the amount of 1.0% of the revolving line.
−Removed: Additional borrowing requests under the Revolving Loan Facility are subject to various customary conditions precedent, including satisfaction of a borrowing base test as more fully described in the Revolving Loan Facility.
−Removed: The Revolving Loan Facility contains customary representations and warranties, customary affirmative and negative covenants, including, limits or restrictions on the Company's ability to incur liens, incur indebtedness, make certain restricted payments, merge or consolidate and dispose of assets, and various financial and liquidity covenants.
−Removed: In addition, the Revolving Loan Facility contains customary events of default that entitle EWB to cause any or all of the Company's indebtedness under the Revolving Loan Facility to become immediately due and payable.
+Added: East West Bank
+Added: On February 8, 2017, the Company entered into a Loan and Security Agreement with East West Bank (“EWB”).
+Added: Following subsequent amendments, on February 8, 2021 the Company amended and restated the Loan and Security Agreement in its entirety (the “Loan and Security Agreement”).
+Added: The Loan and Security Agreement provides for a $20.0 million revolving loan facility subject to a borrowing base and a $4.0 million non-formula revolving loan facility that is not subject to a borrowing base.
+Added: The Company’s obligations under the Loan and Security Agreement are collateralized by substantially all of its assets.
+Added: The maturity date of the main revolving loan facility is February 8, 2023.
+Added: The non-formula revolving loan facility will terminate on February 7, 2022, however the Company may, at its option if certain conditions are met, convert prior to their maturity any loans under the non-formula revolving loan facility to a term loan that will fully amortize and mature on February 1, 2025.
+Added: Advances under the revolving loan facilities and the term loan (if converted) will initially bear interest at a per annum rate equal to the prime rate as determined under the Loan and Security Agreement plus 0.25%.
+Added: On April 30, 2021, the Company entered into an amendment to its Loan and Security Agreement which reduced the per annum interest rate to the prime interest rate.
+Added: The Company may voluntarily prepay amounts outstanding under the revolving loan facilities and the term loan without prepayment charges.
+Added: In the event the Loan and Security Agreement is terminated prior to February 8, 2023, the Company would be required to pay an early termination fee in the amount of 2.0% of the main revolving loan line if terminated prior to February 8, 2022 and 1% of the main revolving loan line thereafter.
+Added: Additional borrowing requests under the revolving loan facilities are subject to various customary conditions precedent, including a borrowing base for the main revolving loan facility.
+Added: The Loan and Security Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on the Company’s ability to incur liens, incur indebtedness, make certain restricted payments (including dividends), merge or consolidate and dispose of assets.
+Added: In addition, the Loan and Security Agreement contains financial covenants requiring that the Company (i) hold $5 million in unrestricted cash in accounts with EWB, (ii) maintain a monthly minimum trailing six-month EBITDA of $0.6 million for the first two quarters of 2021 and $1.2 million thereafter and (iii) maintain, if the Company converts into the term loan and starting with the quarter ending March 31, 2022, a quarterly fixed charge coverage ratio of at least 1.35:1.00.
+Added: The Loan and Security Agreement contains customary events of default that entitle EWB to cause any or all of the Company’s indebtedness under it to become immediately due and payable.
The events of default (some of which are subject to applicable grace or cure periods), include, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults.
Upon the occurrence and during the continuance of an event of default, EWB may terminate its lending commitment and/or declare all or any part of the unpaid principal of all loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan and Security Agreement to be immediately due and payable.
−Removed: As of September 30, 2020, the Company was in compliance with all financial covenants under the Revolving Loan Facility.
+Added: As of March 31, 2021, the Company was in compliance with all financial covenants under the Revolving Loan Facility.
+Added: April 21 Funds
On May 5, 2020, the Company issued secured subordinated promissory notes in an aggregate principal amount of $4.0 million (the “Notes”) to 21 April Fund, LP and 21 April Fund, Ltd.
(collectively referred to as the “April 21 Funds”) pursuant to a Note and Warrant Purchase Agreement entered into with the April 21 Funds (the “Note Purchase Agreement”).
−Removed: The Notes are secured by the Company’s assets, but subordinate to the Company’s obligations to EWB under its Loan and Security Agreement.
−Removed: Proceeds from the sale of the Notes must be used for expenses incurred by the Company in connection with its provisions of goods and services under a statement of work with a third party.
+Added: The Notes are collateralized by the Company’s assets, but subordinate to the Company’s obligations to EWB under its Loan and Security Agreement.
+Added: Proceeds from the sale of the Notes were only to be used for expenses incurred by the Company in connection with its provisions of goods and services under a statement of work with a third party.
The Notes have an initial term of nine months and do not bear interest during this period.
−Removed: However, if the Notes are not repaid on or before the nine-month anniversary of issuance, (a) the Notes will thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes remain unpaid, as further detailed in the Note Purchase Agreement.
+Added: If the Notes are not repaid on or before the nine-month anniversary of issuance, (a) the Notes will thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes remain unpaid, as further detailed in the Note Purchase Agreement.
In the event the Notes are not paid in full by the first anniversary of their issuance, May 5, 2021, they shall thereafter bear interest of 12% per annum, payable quarterly, and additional warrants would be issuable to the April 21 Funds.
1 unchanged sentence
estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years.
−Removed: The relative fair value of the warrants of $290,000 was recorded as a direct reduction from the carrying amount of the Notes and is being amortized as interest expense over the term of the April 21 Funds promissory notes.
−Removed: On April 9, 2020, the Com pany entered into a promissory note (the “Note”) under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.
−Removed: The Note is dated April 8, 2020 with EWB.
−Removed: The Company borrowed a princ ipal amount of approximately $2.9 million.
−Removed: The interest on the Note is 1.00% per annum.
−Removed: The Note is payable two years from the date of the Note, and there is no prepayment penalty.
−Removed: All interest which accrues during the initial six months of the loan period is deferred and payable on the maturity date of the Note.
+Added: The relative fair value of the warrants of $290,000 was recorded as a direct reduction from the carrying amount of the Notes and was being amortized as interest expense over the term of the April 21 Funds promissory notes.
+Added: On February 5, 2021, the Company entered into an amendment to the secured subordinated promissory note with April 21 Funds, which extended the initial term of the Notes to March 31, 2021.
+Added: As a result of the amendment, if the Notes were repaid on or before March 31, 2021, the Company would incur no further interest on the Notes, or be obligated to issue additional warrants.
+Added: As of March 31, 2021, the principal amount outstanding under the Notes was $2.8 million.
+Added: On March 31, 2021, April 21 Funds waived any additional warrants issuable, and interest payable, to April 21 Funds through May 5, 2021.
+Added: On April 13, 2021, the Company repaid the remaining principal amount outstanding of $2.8 million.
+Added: Paycheck Protection Program
+Added: On April 9, 2020, the Company entered into a promissory note (the “PPP Note”) under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.
+Added: The PPP Note is dated April 8, 2020 with EWB.
+Added: The Company borrowed a principal amount of approximately $2.9 million.
+Added: The interest on the PPP Note is 1.0% per annum.
+Added: The PPP Note is payable two years from the date of the PPP Note, and there is no prepayment penalty.
+Added: All interest which accrues during the initial six months of the loan period is deferred and payable on the maturity date of the PPP Note.
Notes issued under the CARES Act may be eligible for forgiveness in whole or in part in accordance with Small Business Administration rules established for the Paycheck Protection Program.
−Removed: The prin cipal amount outstanding, including accrued interest, is included in current portion – financial liabilities in the accompanying condensed consolidated balance sheet s , as the Company expects all amounts outstanding will be forgiven in the first quarter of 2021.
+Added: The principal amount outstanding, including accrued interest, is included in current portion – financial liabilities and other accrued expenses and liabilities in the accompanying condensed consolidated balance sheets, as the Company expects all amounts outstanding will be forgiven in 2021.
The Company conducts business globally and, as a result, files federal, state and foreign tax returns.
2 unchanged sentences
Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal.
−Removed: The Company applies the provisions of, and accounts for uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.
+Added: The Company applies the provisions of, and accounted for uncertain tax positions in accordance with ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.
It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.
3 unchanged sentences
While timing of the resolution and/or finalization of tax audits is uncertain, the Company does not believe that its unrecognized tax benefits would materially change in the next 12 months.
−Removed: The CARES Act, which was enacted on March 27, 2020, includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits.
+Added: On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (the “Act”) into la w.
+Added: The $1.9 trillion Act includes COVID-19 relief, as well as broader stimulus, but also includes several revenue-raising and business tax provisions.
+Added: The CARES Act also includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits.
Several foreign (non-U.S.) jurisdictions in which we operate have taken similar economic stimulus measures.
−Removed: The Company analyzed the provisions of the CARES Act and determined there was no effect on its provision for the current period and will continue to evaluate the impact, if any, the CARES Act may have on the Company’s condensed consolidated financial statements and disclosures .
−Removed: On June 29, 2020, California Governor Gavin Newsom signed Assembly Bill 85 (“AB85”) into law as part of the California 2020 Budget Act, which temporarily suspends the use of California net operating losses and imposes a cap on the amount of business incentive tax credits that companies can utilize against their net income for tax years 2020, 2021, and 2022.
−Removed: The Company analyzed the provisions of AB 85 and determined there was no impact on the Company’s provision for income taxes for the current period and will continue to evaluate the impact, if any, AB 85 may have on the Company’s condensed consolidated financial statements and disclosures.
+Added: The Act and the CARES Act had no material impact on the Company’s condensed consolidated financial statements and disclosures.
Stockholders’ Equity
Series B Convertible Preferred Stock Dividend Accretion
−Removed: The following tables summarize Series B convertible preferred stock and the accretion of dividend activity for the nine months ended September 30, 2020 (in thousands):
+Added: The following tables summarize Series B convertible preferred stock and the accretion of dividend activity for the three months ended March 31, 2021 and 2020 (in thousands):
Series B Convertible Preferred Stock:
−Removed: Balance as of December 31, 2019
+Added: Balance at beginning of period
Cumulative dividends on Series B convertible preferred stock
−Removed: Balance as of September 30, 2020
+Added: Balance at end of period
Number of Common Shares Issuable Upon Conversion:
−Removed: Balance as of December 31, 2019
+Added: Number of shares at beginning of period
Cumulative dividends on Series B convertible preferred stock
−Removed: Balance as of September 30, 2020
−Removed: Based on the current conversion price, the outstanding shares, including the accretion of dividends, of Series B convertible preferred stock as of September 30, 2020 would be convertible into 5,673,281 shares of the Company’s common stock.
−Removed: However, the conversion rate will be subject to adjustment in the event of certain instances, such as if the Company issues shares of its common stock at a price less than $4.00 per common share, subject to a minimum conversion price of $3.27 per share.
−Removed: As of September 30, 2020, none of the contingent conditions to adjust the conversion rate had occurred.
+Added: Number of shares at end of period
+Added: Based on the current conversion price, the outstanding shares, including the accretion of dividends, of Series B convertible preferred stock as of March 31, 2021 would be convertible into 5,813,161 shares of the Company’s common stock.
+Added: However, the conversion rate will be subject to adjustment in certain instances, such as if the Company issues shares of its common stock at a price less than $4.00 per common share, subject to a minimum conversion price of $3.27 per share.
+Added: As of March 31, 2021, none of the contingent conditions to adjust the total common shares to convert the shares had been met.
Each share of Series B convertible preferred stock is entitled to a cumulative annual dividend of 5% for the first six (6) years following the issuance of such share and 3% for each year thereafter, with the Company retaining the option to settle each year’s dividend after the tenth (10 th ) year in cash.
3 unchanged sentences
Common Stock Warrants
−Removed: On February 8, 2017, the Company entered into Loan and Security Agreements with each of EWB and VLL7 and VLL8 as discussed in Note 9, Financial Liabilities .
−Removed: In connection with the Company’s Revolving Loan Facility, the Company issued to EWB a warrant (the "EWB Warrant") to purchase up to 40,000 shares of the Company's common stock at a per share exercise price of $3.64, and in connection with the Company’s Term Loan Facility, issued to each of VLL7 and VLL8 a warrant to purchase 290,000 shares of the Company's common stock at a per share exercise price of $2.00 (the “VLL7 Warrant” and the “VLL8 Warrant,” respectively).
−Removed: Each of the EWB Warrant, the VLL7 Warrant and the VLL8 Warrant was immediately exercisable for cash or by net exercise and expire on February 8, 2022.
−Removed: On January 30, 2020, each of VLL7 and VLL8 exercised their warrant on a cashless net exercise basis, with each receiving 193,494 shares of the Company’s common stock.
−Removed: On May 5, 2020, the Company entered into the Thirteenth Amendment to its Loan and Security Agreement with EWB, as discussed in Note 9, Financial Liabilities .
−Removed: In connection with the Thirteenth Amendment, the Company amended the EWB Warrant reducing its exercise price from $3.64 to $3.50 per share and extending the expiration date of the EWB Warrant from February 8, 2022 to February 8, 2023.
+Added: On February 8, 2017, the Company entered into a Loan and Security Agreement with EWB .
+Added: In connection with the Loan and Security Agreement, the Company issued to EWB a warrant (the "EWB Warrant") to purchase up to 40,000 shares of the Company's common stock at a per share exercise price of $3.64 which were immediately exercisable for cash or by net exercise and expired on February 8, 2022.
+Added: On May 5, 2020, the Company entered into an amendment to the Loan and Security Agreement, which included amending the EWB Warrant, reducing its exercise price from $3.64 to $3.50 per share and extended the expiration date of the EWB Warrant from February 8, 2022 to February 8, 2023.
+Added: The Company calculated the fair value of the amended EWB Warrant using the Black Scholes pricing model using the following assumptions:
+Added: estimated volatility of 63.2%, risk free interest rate of 0.24%, no dividend yield, and an expected life of three years.
+Added: The fair value of the amended EWB Warrant of $42,000, as well as legal and administrative costs of $92,000, were recorded as a direct reduction from the carrying amount of the Revolving Loan Facility and amortized as interest expense over the remaining term of the Loan and Security Agreement.
+Added: On February 11, 2021, EWB exercised their warrant on a cashless net exercise basis receiving 27,599 shares of the Company’s common stock.
On May 5, 2020, the Company entered into a Note and Warrant Purchase Agreement with the April 21 Funds, as discussed in Note 8 , Financial Liabilities, in which the Company issued warrants (“April 21 Funds Warrants”) to purchase 275,000 shares of common stock of the Company.
1 unchanged sentence
provided, that in the event that the Note is not paid in full by the nine-month anniversary of issuance, the term of the April 21 Funds Warrants shall be extended for a period of time equal to the period of time from such nine-month anniversary until the date the Note is fully paid (“Extension Warrants”).
−Removed: The Extension Warrants have a term of three years from the date of issuance of the latest Extension Warrant to be issued (subject to early termination upon an acquisition).
+Added: The Extension Warrants would have a term of three years from the date of issuance of the latest Extension Warrant to be issued (subject to early termination upon an acquisition).
The shares of common stock issuable upon exercise of the April 21 Fund Warrants and any Extension Warrants that may be issued are entitled to the same resale registration rights granted to the April 21 Funds Warrants under the Stockholders Agreement dated December 21, 2017 in connection with the April 21 Funds previous purchase of certain securities of the Company.
−Removed: Below is the summary of outstanding warrants issued by the Company as of S eptember 30, 2020:
+Added: Below is the summary of outstanding warrants issued by the Company as of March 31, 2021:
Number of Shares
2 unchanged sentences
Expiration Date
−Removed: East West Bank Warrant
−Removed: February 8, 2017
−Removed: February 8, 2023
April 21 Funds Warrants
−Removed: Co mmon Stock Reserved for Future Issuance
−Removed: Common stock reserved for future issuance as of September 30, 2020 was as follows:
−Removed: Exercise of outstanding stock options, vesting of restricted stock units ("RSU"), and
−Removed: issuance of RSUs vested but not released
+Added: Common Stock Reserved for Future Issuance
+Added: Common stock reserved for future issuance as of March 31, 2021 was as follows:
+Added: Exercise of outstanding stock options, vesting of restricted stock units ("RSU"), vesting of
+Added: performance stock units ("PSU"), and issuance of RSUs vested but not released
Employee Stock Purchase Plan
4 unchanged sentences
Stock Incentive Plans
−Removed: The Company maintains a stock-based compensation plan, the 2011 Incentive Compensation Plan (the “2011 Plan”), as amended, to attract, motivate, retain and reward employees, directors and consultants by providing its Board or a committee of the Board the discretion to award equity incentives to these persons.
+Added: The Company maintains a stock-based compensation plan, the 2011 Incentive Compensation Plan, as amended, (the “2011 Plan”), to attract, motivate, retain and reward employees, directors and consultants by providing its Board or a committee of the Board the discretion to award equity incentives to these persons.
On June 6, 2011, the Company’s stockholders approved the 2011 Plan, which is administered by the Compensation Committee of the Board.
2 unchanged sentences
In aggregate, as of June 6, 2011, 859,956 shares were available for future grant under the 2011 Plan, including shares rolled over from the 2007 Plan and the 2010 Plan.
−Removed: Subsequent to June 6, 2011 through June 30, 2020, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 4,400,000 shares.
+Added: Subsequent to June 6, 2011 through March 31, 2021, the number of shares of common stock authorized for issuance under the 2011 Plan has been increased by an aggregate of 4,400,000 shares.
Stock Option Plans
−Removed: A summary of activity for the Company’s stock option plans for the nine months ended September 30, 2020 is as follows:
+Added: A summary of activity for the Company’s stock option plans for the three months ended March 31, 2021 is as follows:
Average Exercise
2 unchanged sentences
Contractual Term
−Removed: Balance as of December 31, 2019
+Added: Balance at December 31, 2020
Cancelled or Expired
−Removed: Balance as of September 30, 2020
−Removed: Vested or expected to vest as of
−Removed: September 30, 2020
−Removed: Exercisable as of September 30, 2020
+Added: Balance at March 31, 2021
+Added: Vested or expected to vest at
+Added: March 31, 2021
+Added: Exercisable at March 31, 2021
The aggregate intrinsic value in the table above represents the difference between the fair value of the Company’s common stock and the option exercise price of in-the-money options multiplied by the number of such options.
−Removed: The following table summarizes information about options outstanding as of September 30, 2020 :
+Added: The following table summarizes information about options outstanding as of March 31, 2021:
Options Outstanding
7 unchanged sentences
$4.36 - $26.40
−Removed: As of September 30, 2020, there was no unrecognized stock-based compensation expense related to stock options .
+Added: As of March 31, 2021, there was no unrecognized stock-based compensation expense related to stock options .
Restricted Stock Units
−Removed: The following is a summary of RSU activity for the nine months ended September 30, 2020:
+Added: The following is a summary of RSU activity for the three months ended March 31, 2021:
Weighted Average
−Removed: Unvested as of December 31, 2019
−Removed: Unvested as of September 30, 2020
+Added: Unvested at December 31, 2020
+Added: Unvested at March 31, 2021
Shares vested but not released
The fair value of the Company’s RSUs is calculated based upon the fair market value of the Company’s stock on the date of grant.
−Removed: As of September 30, 2020, there was $3.3 million of unrecognized compensation expense related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.2 years.
+Added: As of March 31, 2021, there was $2.6 million of unrecognized compensation expense related to unvested RSUs granted, which is expected to be recognized over a weighted average period of 2.5 years.
+Added: Performance Stock Units
+Added: The Company granted 200,000 PSUs to a certain key employee during the year ended December 31, 2020, with a grant date fair value of $6.38 per share.
+Added: The PSUs are subject to the attainment of performance goals established by the Company’s Compensation Committee, the periods during which performance is to be measured, and other limitations and conditions.
+Added: Performance goals are based on pre-established objectives that specify the manner of determining the number of PSUs that will vest if performance goals are attained.
+Added: If the employee terminates employment, the non-vested portion of the PSUs will not vest and all rights to the non-vested portion will terminate.
+Added: The following is a summary of PSU activity for the three months ended March 31, 2021:
+Added: Unvested at December 31, 2020
+Added: Unvested at March 31, 2021
+Added: As of March 31, 2021, there was $1.1 million of unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a period of 1.8 years.
+Added: No tax benefit was realized from PSUs for the three months ended March 31, 2021.
Stock-Based Compensation Expense
−Removed: The following table illustrates all employee stock-based compensation expense related to stock options and RSUs included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 (in thousands):
−Removed: Three Months Ended
−Removed: Nine Months Ended
−Removed: September 30,
−Removed: September 30,
+Added: The following table summarizes stock-based compensation expense related to stock options, RSUs, and PSUs included in the condensed consolidated statements of comprehensive loss for the three months ended March 31, 2021 and 2020 (in thousands):
+Added: Three Months Ended March 31,
Cost of revenue
3 unchanged sentences
Restricted Stock Unit Net Share Settlements
−Removed: During the nine months ended September 30, 2020 and 2019, the Company repurchased 130,745 and 136,519 shares, respectively, of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees.
−Removed: Net Income (Loss) per Common Share
−Removed: Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders during the period by the weighted average number of common shares outstanding during that period.
−Removed: Diluted net income (loss) per common share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock or the if-converted method of accounting.
−Removed: The calculations for basic and diluted net income (loss) per common share for the three and nine months ended September 30, 2020 are as follows:
−Removed: Three Months Ended September 30,
−Removed: Nine Months Ended September 30,
−Removed: Basic net income (loss) per common share:
−Removed: Net income (loss)
−Removed: Accretion of Series B preferred stock dividends
−Removed: Net income (loss) available to common stockholders
−Removed: Weighted average common shares outstanding - basic
−Removed: Net income (loss) per common share - basic
−Removed: Diluted net income (loss) per common share:
−Removed: Net income (loss) available to common stockholders
−Removed: Accretion of Series B preferred stock dividends, if
−Removed: Net income (loss) available to common stockholders
+Added: During the three months ended March 31, 2021 and 2020, the Company repurchased 25,327 and 48,335 shares, respectively, of common stock surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of RSUs issued to employees.
+Added: Net Loss per Common Share
+Added: Basic loss per share is computed by dividing net loss, adjusted for the accretion of preferred dividends, for the period by the weighted average number of common shares outstanding during the period.
+Added: Diluted loss per share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period plus the dilutive effect, if any, of outstanding stock options, RSUs, PSUs, and warrants using the treasury stock method.
+Added: The following table sets forth the computation of basic net loss per share:
+Added: Three Months Ended March 31,
+Added: Accretion of Series B convertible preferred stock dividends
+Added: Numerator for basic net loss per share - net loss available to common stockholders
Weighted average common shares outstanding - basic
−Removed: Dilutive securities:
−Removed: Stock options, RSUs, and Warrants
−Removed: Weighted average common shares outstanding - diluted
−Removed: Net income (loss) per common share - diluted
−Removed: The following common stock equivalents have been excluded from diluted net income (loss) per common share for the three and nine months ended September 30, 2020 and 2019 because their inclusion would have been anti-dilutive (in thousands):
−Removed: Three Months Ended September 30,
−Removed: Nine Months Ended September 30,
+Added: Net loss per common share - basic
+Added: The following common stock equivalents have been excluded from diluted net loss per share for the three months ended March 31, 2021 and 2020 because their inclusion would have been anti-dilutive (in thousands):
+Added: Three Months Ended March 31,
Shares of common stock subject to outstanding RSUs
+Added: Shares of common stock subject to outstanding PSUs
Shares of common stock subject to outstanding stock options
Shares of common stock subject to outstanding warrants
−Removed: Shares of common stock issuable upon conversion of Series B
−Removed: convertible preferred stock
+Added: Shares of common stock issuable upon conversion of Series B convertible preferred stock
Segment Reporting, Geographic Information, and Concentration of Credit Risk
7 unchanged sentences
The Company does not report total assets, capital expenditures or operating expenses by operating segment as such information is not used by the CODM for purposes of assessing performance or allocating resources.
−Removed: Net revenue and gross profit information by segment for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):
−Removed: Three Months Ended September 30,
−Removed: Nine Months Ended September 30,
+Added: Net revenue and gross profit information by segment for the three months ended March 31 , 20 2 1 and 20 20 are as follows (in thousands):
+Added: Three Months Ended March 31,
Gross profit margin
5 unchanged sentences
General and administrative
−Removed: Increase (decrease) in fair value of earnout liability
Restructuring and severance
Total operating expenses:
−Removed: Income (loss) from operations
+Added: Loss from operations
Non-operating income (expense):
Interest expense, net
−Removed: Foreign currency (losses) gains, net
−Removed: Income (loss) before income tax provision
+Added: Foreign currency gains (losses), net
+Added: Loss before income tax provision
Geographic Information
Geographic net revenue is based on the customer’s ship-to location.
−Removed: Information regarding net revenue by geographic region for the three and nine months ended September 30, 2020 and 2019 is as follows (in thousands):
−Removed: Three Months Ended
−Removed: Nine Months Ended
−Removed: September 30,
−Removed: September 30,
+Added: Information regarding net revenue by geographic region for the three months ended March 31, 2021 and 2020 is as follows (in thousands):
+Added: Three Months Ended March 31,
Europe and the Middle East
2 unchanged sentences
Concentration of Credit Risk
−Removed: No customer accounted for 10% or more of net revenue for either of the three or nine months ended September 30, 2020 or 2019.
−Removed: No customer accounted for 10% of net accounts receivable as of September 30, 2020 or December 31, 2019.
−Removed: Long-lived assets by geographic location as of September 30, 2020 and December 31, 2019 are as follows (in thousands):
−Removed: September 30,
+Added: No customer accounted for 10% or more of net revenue for either of the three months ended March 31, 2021 or 2020.
+Added: As of March 31, 2021, one customer accounted for 11% of accounts receivable .
+Added: No customer accounted for 10% of net accounts receivable at December 31, 2020.
+Added: Long-lived assets by geographic location as of March 3 1 , 20 2 1 and December 31, 20 20 are as follows (in thousands):
Property and equipment, net:
5 unchanged sentences
Restructuring and Severance
−Removed: Restructuring expenses incurred in the three and nine months ended September 30, 2019 consist primarily of facility rental related costs associated with the sublet 3VR office space in San Francisco, California, offset by sublease income received from a tenant which is subletting the office space over the remaining term of the original lease.
−Removed: The restructuring accrual at September 30, 2019 related to the Company’s future rental payment obligation associated with vacated office space at its Fremont, California facility.
−Removed: In the three and nine months ended September 30, 2020, the Company incurred restructuring expenses of $163,000 and $1,645,000, respectively, consisting of severance related costs of $145,000 and $229,000, respectively, and facility rental related costs associated with the 3VR office space of approximately $18,000 and $1,416,000, respectively.
−Removed: The facility rental related costs included a charge of $1,199,000 associated with the impairment of the ROU operating lease asset, which was subleased, but has gone into default due to non-payment of rent beginning April 1, 2020.
−Removed: Sublease income of $198,000 was received in the first quarter of 2020, however, since the first quarter of 2020, no rental payments have been received.
+Added: Restructuring expenses incurred during the three months ended March 31, 2021 of $388,000, consists of facility rental related costs of $329,000, which included a charge of $281,000 resulting from the impairment of a right-of-use operating lease asset for office space the Company vacated in the first quarter of 2021, and severance related costs of $59,000.
+Added: Restructuring expenses incurred during the three months ended March 31, 2020 of $65,000 consists primarily of severance related costs.
The Company’s leases consist primarily of operating leases for administrative office space, research and development facilities, a manufacturing facility, and sales offices in various countries around the world.
1 unchanged sentence
Some lease agreements contain lease and non-lease components, which are accounted for as a single lease component.
−Removed: Total rent expense was approximately $0.4 million and $1.2 million for the three and nine months ended September 30, 2020 , respectively.
−Removed: Total rent expense was approximately $0.4 million and $1.1 million for the three and nine months ended September 30, 2019, respectively.
+Added: Total rent expense was approximately $0.3 million and $0.4 million for the three months ended March 31, 2021 and 2020, respectively.
Initial lease terms are determined at commencement and may include options to extend or terminate the lease when it is reasonably certain the Company will exercise the option.
−Removed: Remaining lease terms range from one to seven years, some of which include options to extend for up to five years.
+Added: Remaining lease terms range from one to five years, some of which include options to extend for up to five years.
Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets.
As the Company’s leases do not provide an implicit rate, the present value of future lease payments is determined using the Company’s incremental borrowing rate based on information available at the lease commencement date.
−Removed: The table below reconciles the undiscounted cash flows for the first five years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of September 30, 2020 (in thousands):
−Removed: September 30,
−Removed: 2020 (remaining three months)
+Added: The table below reconciles the undiscounted cash flows for the first five years and the total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as of March 31, 2021 (in thousands):
+Added: 2021 (remaining nine months)
Total minimum lease payments
3 unchanged sentences
Long-term operating lease liabilities
−Removed: As of September 30 , 2020, the weighted average remaining lease term for the Company’s operating leases was 2.9 years, and the weighted average discount rate used to determine the present value of the Company’s operating leases was 6.4%.
+Added: As of March 31, 2021, the weighted average remaining lease term for the Company’s operating leases was 2.8 years, and the weighted average discount rate used to determine the present value of the Company’s operating leases was 6.3%.
Sublease rental income due in the future under non-cancelable subleases was $1.6 million.
−Removed: Cash paid for amounts included in the measurement of operating lease liabilities was $0.4 million and $1.4 million for the three and nine months ended September 30, 2020, respectively.
−Removed: Cash received from sublease rentals was $0 and $0.2 million for the three and nine months ended September 30, 2020, respectively.
−Removed: The Company does not expect to receive any additional sublease rental income related to the subleased 3VR office space, as the sublease has gone into default due to non-payment a discussed in Note 15, Restructuring and Severance.
+Added: Cash paid for amounts included in the measurement of operating lease liabilities was $0.4 million for the three months ended March 31, 2021.
+Added: No cash was received from sublease rental income for the three months ended March 31, 2021.
Commitments and Contingencies
−Removed: The following table summarizes the Company’s principal contractual commitments, excluding operating leases, as of September 30, 2020 (in thousands):
−Removed: 2020 (remaining three months)
+Added: The following table summarizes the Company’s principal contractual commitments, excluding operating leases, as of March 31, 2021 (in thousands):
+Added: 2021 (remaining nine months)
Purchase commitments for inventories are highly dependent upon forecasts of customer demand.
1 unchanged sentence
These changes may lead to vendor cancellation charges on these purchases or contractual commitments.
−Removed: The following table summarizes the Company’s warranty accrual account activity during the nine months ended Septe mber 3 0 , 2020 and 2019:
−Removed: Nine Months Ended September 30,
+Added: The following table summarizes the Company’s warranty accrual account activity during the three months ended March 31, 2021 and 2020:
+Added: Three Months Ended March 31,
Balance at beginning of period
−Removed: Warranty accrual acquired in acquisition
Accruals for warranties charged to expense
5 unchanged sentences
If actual return rates and/or repair and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be required in future periods.
+Added: Historically the warranty accrual and the expense amounts have been immaterial.
+Added: Subsequent Events
+Added: On April 7, 2021, the Company sold an aggregate of 3,779,342 shares of its common stock at a public offering price of $10.65 per share in an underwritten public offering.
+Added: The Company received net proceeds of approximately $37.9 million from the sale of the common stock in the public offering, after deducting the underwriting discount and other offering related expenses of $2.3 million.
+Added: There were no other subsequent events except as disclosed within Note 8, Financial Liabilities.
+Added: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
+Added: This Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other parts of this Quarterly Report on Form 10-Q (“Quarterly Report”) contain forward-looking statements, within the meaning of the safe harbor provisions under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties.
+Added: Forward-looking statements reflect current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.
+Added: Forward-looking statements can also be identified by words such as “will,” “believe,” “could,” “should,” “would,” “may,” “anticipate,” “intend,” “plan,” “estimate,” “expect,” “project” or the negative of these terms or other similar expressions.
+Added: Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements.
+Added: Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A of this Report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 under the heading “Risk Factors,” The following discussion should be read in conjunction with the audited consolidated financial statements and notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020.
+Added: We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
+Added: Each of the terms the “Company,” “Identiv,” “we” and “us” as used herein refers collectively to Identiv, Inc.
+Added: and its wholly-owned subsidiaries, unless otherwise stated.
+Added: Identiv is a global provider of secure identification and physical security.
+Added: We are leveraging our Radio Frequency Identification (“RFID”) based physical device-management expertise as well as our physical access, video and analytics solutions to provide leading solutions as our customers, and our customers’ customers, embracing the Internet of Things (“IoT”).
+Added: Customers in the technology and mobility, consumer, government, healthcare, education and other sectors rely on Identiv’s identification and access solutions.
+Added: Identiv’s platform encompasses RFID and Near-Field Communication (“NFC”), cybersecurity, and the full spectrum of physical access, video, and audio security.
+Added: We are bringing the benefits of the IoT to a wide range of physical, connected items.
+Added: Identiv’s mission is to digitally enable every physical thing and every physical place on the planet.
+Added: Our full continuum of security solutions is delivered through our platform of RFID enabled devices, mobile, client/server, cloud, web, dedicated hardware and software defined architectures.
+Added: In doing so, we believe that we will create smart physical security and a smarter physical world.
+Added: We have organized our operations into two reportable business segments, principally by solution families:
+Added: Identity and Premises.
+Added: Our Identity segment includes products and solutions enabling secure access to information serving the logical access and cyber-security market, and protecting connected objects and information using RFID embedded security.
+Added: Our Premises segment includes our solutions to address the premises security market for government and enterprise, including access control, video surveillance, analytics, audio, access readers and identities.
+Added: Factors Affecting Our Performance
+Added: Market Adoption
+Added: Our financial performance depends on the pace, scope and depth of end-user adoption of our RFID products in multiple industries.
+Added: That pace, scope and depth accelerated during 2020 causing large fluctuations in our operating results.
+Added: For example, in 2019 our Identity segment experienced a reduction from 2018 overall with modest gains in our RFID business offset by lower access card revenue.
+Added: During 2020, we saw several events that we believe are opening up the third wave of RFID deployments which is occurring at a much faster pace of growth than historically.
+Added: We believe significant improvement in chip capabilities at lower costs, combined with the incorporation of the full NFC Data Exchange Format (“NDEF”) protocol by Apple in its iPhone 12 and iOS 14 has accelerated the opportunities for product engineers to integrate RFID into their products to create new and more engaging customer experiences, product reliability and performance.
+Added: As the market hit this pivot point, we expanded both our capacity and technical leadership.
+Added: We track growth indicators including design wins, customer launches and technology launches.
+Added: We have made investments in our technology, world class quality and automation, and we believe that our competitive advantages will continue to drive growth.
+Added: We believe the underlying, long-term trend is continued RFID adoption by multiple verticals.
+Added: We also believe that expanding use cases fosters adoption across verticals and into other markets.
+Added: In addition, we do not have any significant concentration of customers so we believe that our demand will continue to be resilient to the loss of any individual customer or application.
+Added: If RFID market adoption, and adoption of our products specifically, does not meet our expectations then our growth prospects and operating results will be adversely affected.
+Added: If we are unable to meet end-user or customer volume or performance expectations, then our business prospects may be adversely affected.
+Added: In contrast, if our RFID sales exceed expectations, then our revenue and profitability may be positively affected.
+Added: Given the uncertainties of the specific timing of our new customer deployments, we cannot assure you that we have appropriate inventory and capacity levels or that we will not experience inventory shortfalls or overages in the future.
+Added: We mitigate those risks by being deeply embedded in our customers design cycle, working with our chip partners on long lead time components, managing our limited capital equipment needs within a short cycle and future proofing our facilities with the most recent expansion to accommodate several scenarios for growth potential.
+Added: If end users with sizable projects change or delay them, we may experience significant fluctuation in revenue on a quarterly or annual basis, and we anticipate that uncertainty to continue to characterize our business for the foreseeable future.
+Added: Seasonality and Other Factors
+Added: In our business overall, we may experience variations in demand for our offerings from quarter to quarter, and typically experience a stronger demand cycle in the second half of our fiscal year.
+Added: Sales of our physical access control solutions and related products to U.S.
+Added: Government agencies are subject to annual government budget cycles and generally are highest in the third quarter of each year.
+Added: Sales of our identity readers, many of which are sold to government agencies worldwide, are impacted by project schedules of government agencies, as well as roll-out schedules for application deployments.
+Added: Further, this business is typically subject to seasonality based on differing commercial and global government budget cycles.
+Added: Lower sales are expected in the U.S.
+Added: in the first half, and in particular, the first quarter of the year, with higher sales typically in the second half of each year.
+Added: In Asia-Pacific, with fiscal year-ends in March and June, order demand can be higher in the first quarter as customers attempt to complete projects before the end of the fiscal year.
+Added: Accordingly, our net revenue levels in the first quarter each year often depend on the relative strength of project completions and sales mix between our U.S.
+Added: customer base and our international customer base.
+Added: Purchasing of our Products and Services for U.S.
+Added: Federal Government Security Programs
+Added: In addition to the general seasonality of demand, overall U.S.
+Added: Federal Government expenditure patterns have a significant effect on demand for our products due to the significant portion of revenue that are typically sourced from U.S.
+Added: Federal Government agencies.
+Added: Drivers of growth included our technology strength and proven security solutions, work from home mandates, and continued strength in investments for security across a number of different agencies.
+Added: We believe that the success and growth of our business will continue through the U.S.
+Added: Federal Government focus on security and our successful procurement of government business.
+Added: If there are changes in government purchasing policies or budgetary constraints there could be implications for our growth prospects and operating results.
+Added: If we are unable to meet end-user or customer volume or performance expectations, then our business prospects may be adversely affected.
+Added: Effects of the COVID-19 Pandemic on our Business.
+Added: In March 2020, the World Health Organization characterized the coronavirus (“COVID-19”) a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.
+Added: The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy.
+Added: In view of the rapidly changing business environment created by the uncertainty related to the depth and or duration of the impact resulting from COVID-19, we have experienced delays in our sales in select vertical markets and are currently unable to determine if there will be any continued disruption and the extent to which this may have future impact on our business .
+Added: We continue to monitor the progression of the pandemic and its effect on our financial position, results of operations, and cash flows.
+Added: Results of Operations
+Added: The following table includes net revenue and net profit information by business segment and reconciles gross profit to loss before income taxes (in thousands).
+Added: Three Months Ended March 31,
+Added: Gross profit margin
+Added: Gross profit margin
+Added: Gross profit margin
+Added: Operating expenses:
+Added: Research and development
+Added: Selling and marketing
+Added: General and administrative
+Added: Restructuring and severance
+Added: Total operating expenses:
+Added: Loss from operations
+Added: Non-operating income (expense):
+Added: Interest expense, net
+Added: Foreign currency gains (losses), net
+Added: Loss before income taxes
+Added: Geographic net revenue based on each customer’s ship-to location is as follows (in thousands):
+Added: Three Months Ended March 31,
+Added: Europe and the Middle East
+Added: Percentage of net revenue:
+Added: Europe and the Middle East
+Added: Net revenue for the three months ended March 31, 2021 was $22.2 million, an increase of 22% compared with $18.1 million for the comparable period of 2020 .
+Added: Net revenue in the Americas was $15.1 million for the three months ended March 31, 2021, an increase of 9% compared to $13.9 million for the comparable period of 2020.
+Added: Net revenue from our Premises solution for security programs within various U.S.
+Added: government agencies and commercial customers for access control and video solutions, as well as reader, controller and appliance products, represented approximately 51% of our net revenue in the Americas.
+Added: Net revenue in Europe, the Middle East, and Asia-Pacific was approximately $7.0 million for the three months ended March 31, 2021, an increase of 65% compared with the comparable period of 2020.
+Added: Sales of RFID and NFC products and smart card readers comprise a significant proportion of our net revenue in these regions.
+Added: Net revenue in our Identity segment, which represented 62 % of our net revenue, was $ 13 .
+Added: 7 million for the three months ended March 31 , 2021, an increase of 38 % compared with $ 9.9 million for the comparable period of 2020 .
+Added: Net revenue in this segment in the Americas for the three months ended March 31 , 2021 increased 16 % compared with the comparable period of 2020 primarily due to higher sales of RFID transponder products and smart card readers.
+Added: The primary driver of higher sales of our RFID transponder products was the broad adoption of NFC, and the continued demand for smart card reader products with shelter in place actions driving the need for more work from home technologies.
+Added: Net revenue in this segment in Europe, the Middle East, and the Asia-Pacific increased approximately 80 % for the three months ended March 31 , 2021 compared with the comparable period of 2020 due to higher sale s of RFID transponder products and smart card readers.
+Added: RFID transponder pr oducts comprised approximately 63 % of net revenue in these regions for the three months ended March 31 , 2021, and 45 % of net revenue for the three months ended March 31 , 2020, while smart card reader sales for the three months ended March 31 , 2021 and 2020 comprised approximately 24 % and 36% of the net revenue.
+Added: Net revenue in our Premises segment, which represented 38% of our net revenue, was $8.5 million for the three months ended March 31, 2021 , an increase of 3% compared with $8.2 million for the comparable period of 2020.
+Added: Net revenue in this segment in the Americas for the three months ended March 31, 2021 increased 4% compared with the comparable period of 2020 primarily due to higher Hirsch Velocity software product sales and related support services, particularly in the federal government, partially offset by lower sales of video technology and analytics software products and related support services.
+Added: Net revenue in this segment across Europe, the Middle East, and Asia-Pacific was comparable to the comparable period of 2020 .
+Added: As a general trend, U.S.
+Added: Federal agencies continue to be subject to security improvement mandates under programs such as Homeland Security Presidential Directive-12 (“HSPD-12”) and reiterated in memoranda from the Office of Management and Budget (“OMB M-11-11”).
+Added: We believe that our solutions for trusted physical access is an attractive offering to help federal agency customers move towards compliance with federal directives and mandates.
+Added: To address sales opportunities in the United States in general and with our U.S.
+Added: Government customers in particular, we focus on a strong U.S.
+Added: sales organization and our sales presence in Washington D.C.
+Added: More recently, in response to the new needs for health and safety in the physical security market overall, due to the COVID-19 pandemic, we have released products to address these trends.
+Added: During 2020, we launched our contact tracing downloadable extension for our Velocity access system, our occupancy tracking system based on our 3VR platform, our MobilisID touchless reader and our temperature tracking tag.
+Added: In addition, with the economic impact of the COVID-19 pandemic creating more uncertainty for our customers, we have released several products which are subscription based and which allow payments over time for our physical access and video solutions as a service.
+Added: Gross Profit and Gross Margin
+Added: Gross profit for the three months ended March 31, 2021 was $7.7 million, or 35% of net revenue, compared with $7.5 million, or 41% of net revenue in the comparable period of 2020.
+Added: Gross profit represents net revenue less direct cost of product sales, manufacturing overhead, other costs directly related to preparing the product for sale including freight, scrap, inventory adjustments and amortization, where applicable.
+Added: In our Identity segment, gross profit was $3.4 million in the three months ended March 31, 2021 compared with $3.0 million in the comparable period of 2020.
+Added: Gross profit margins in the Identity segment decreased to 25% in the three months ended March 31, 2021 from 30% in the comparable period of 2020 primarily due to the change in product mix, with a higher proportion of lower margin RFID transponder product sales.
+Added: In our Premises segment, gross profit was $4.3 million in the three months ended March 31, 2021 compared with $4.5 million in the comparable period of 2020.
+Added: Gross profit margins in the Premises segment decreased to 51% in the three months ended March 31, 2021 from 55% in the comparable period of 2020 primarily due to product mix, with lower sales of higher margin video analytics software and services compared to the comparable period in 2020.
+Added: We expect there will be variation in our total gross profit from period to period, as our gross profit has been and will continue to be affected primarily by varying mix among our products.
+Added: Within each product category, gross margins have tended to be consistent, but over time may be affected by a variety of factors, including, without limitation, competition, product pricing, the volume of sales in any given quarter, manufacturing volumes, product configuration and mix, the availability of new products, product enhancements, software and services, risk of inventory write-downs and the cost and availability of components.
+Added: Operating Expenses
+Added: Information about our operating expenses for the three months ended March 31, 2021 and 2020 is set forth below (dollars in thousands).
+Added: Research and Development
+Added: Three Months Ended March 31,
+Added: Research and development
+Added: as a % of net revenue
+Added: Research and development expenses consist primarily of employee compensation and fees for the development of hardware, software and firmware products.
+Added: We focus the bulk of our research and development activities on the continued development of existing products and the development of new offerings for emerging market opportunities.
+Added: Research and development expenses for the three months ended March 31, 2021 decreased compared to the comparable prior year period primarily due to lower headcount and related costs, partially offset by higher external contractor costs.
+Added: Selling and Marketing
+Added: Three Months Ended March 31,
+Added: Selling and marketing
+Added: as a % of net revenue
+Added: Selling and marketing expenses consist primarily of employee compensation as well as amortization expense of certain intangible assets, customer lead generation activities, tradeshow participation, advertising and other marketing and selling costs.
+Added: Selling and marketing expenses for the three months ended March 31, 2021 decreased compared to the comparable prior year period primarily due to lower amortization expense associated with intangible assets that were fully amortized in the fourth quarter of 2020, and higher recruiting fees in the three months ended March 31, 2020.
+Added: General and Administrative
+Added: Three Months Ended March 31,
+Added: General and administrative
+Added: as a % of net revenue
+Added: General and administrative expenses consist primarily of compensation expenses for employees performing administrative functions, and professional fees incurred for legal, auditing and other consulting services.
+Added: General and administrative expense for the three months ended March 31, 2021 decreased compared to the prior year period primarily due t o reductions in headcount and related costs associated with our continued integration efforts across general and administrative functions.
+Added: Restructuring and Severance Charges
+Added: Three Months Ended March 31,
+Added: Restructuring and severance
+Added: Restructuring expenses incurred during the three months ended March 31, 2021 of $388,000, consists of facility rental related costs of $329,000, which included a charge of $281,000 resulting from the impairment of a right-of-use operating lease asset for office space we vacated in the first quarter of 2021, and severance related costs of $59,000.
+Added: Restructuring expenses incurred during the three months ended March 31, 2020 of $65,000 consist primarily of severance related costs.
+Added: See Note 14, Restructuring and Severance, in the accompanying notes to our unaudited condensed consolidated financial statements for more information.
+Added: Non-operating Income (Expense)
+Added: Information about our non-operating income (expense) for the three months ended March 31, 2021 and 2020 is set forth below (dollars in thousands).
+Added: Three Months Ended March 31,
+Added: Interest expense, net
+Added: Foreign currency gains (losses), net
+Added: Interest expense, net consists of interest on financial liabilities, amortization of debt issuance costs, and interest accretion expense for a liability on a contractual payment obligation arising from our acquisition of Hirsch Electronics Corporation.
+Added: The decrease in interest expense for the three months ended March 31, 2021 compared to the comparable period of 2020 was primarily attributable to lower borrowings outstanding under our revolving loan facility with our lender.
+Added: See Note 7, Contractual Payment Obligation and Note 8, Financial Liabilities , in the accompanying notes to our unaudited condensed consolidated financial statements for more information.
+Added: Changes in currency valuation in the periods mainly were the result of exchange rate movements between the U.S.
+Added: dollar, the Indian Rupee, the Canadian dollar, and the euro.
+Added: Our foreign currency gains and losses primarily result from the valuation of current assets and liabilities denominated in a currency other than the functional currency of the respective entity in the local financial statements.
+Added: Income Tax Provision
+Added: Three Months Ended March 31,
+Added: Income tax provision
+Added: Effective tax rate
+Added: As of March 31, 2021, our deferred tax assets are fully offset by a valuation allowance.
+Added: Accounting Standards Codification (“ASC”) 740, Income Taxes , provides for the recognition of deferred tax assets if realization of such assets is more-likely-than-not.
+Added: Based upon the weight of available evidence, which includes historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting our future results, we provided a full valuation allowance against all of our net U.S.
+Added: and foreign deferred tax assets.
+Added: We reassess the need for our valuation allowance on a quarterly basis.
+Added: If it is later determined that a portion or all of the valuation allowance is not required, it generally will be a benefit to the income tax provision in the period such determination is made.
+Added: We recorded an income tax provision during the three months ended March 31, 2021.
+Added: The effective tax rates for the three months ended March 31, 2021 and 2020 differ from the federal statutory rate of 21% primarily due to a change in valuation allowance, and the provision or benefit in certain foreign jurisdictions, which are subject to higher tax rates.
+Added: Liquidity and Capital Resources
+Added: As of March 31, 2021, our working capital, defined as current assets less current liabilities, was $10.1 million, a decrease of $1.8 million compared to $11.9 million as of December 31, 2020.
+Added: As of March 31, 2021, our cash balance was $11.5 million.
+Added: Sale of Common Stock
+Added: On April 7, 2021, we sold an aggregate of 3,779,342 shares of our common stock at a public offering price of $10.65 per share in an underwritten public offering.
+Added: We received net proceeds of approximately $37.9 million from the sale of the common stock in the public offering, after deducting the underwriting discount and other offering related expenses of $2.3 million.
+Added: East West Bank
+Added: On February 8, 2017, we entered into a loan and security agreement with East West Bank (“EWB”).
+Added: Following subsequent amendments, on February 8, 2021 we amended and restated the Loan and Security Agreement in its entirety (the “Loan and Security Agreement”).
+Added: The Loan and Security Agreement provides for a $20.0 million revolving loan facility subject to a borrowing base and a $4.0 million non-formula revolving loan facility that is not subject to a borrowing base.
+Added: Our obligations under the Loan and Security Agreement are collateralized by substantially all of our assets.
+Added: The maturity date of the main revolving loan facility is February 8, 2023.
+Added: The non-formula revolving loan facility will terminate on February 7, 2022, however we may, at our option if certain conditions are met, convert prior to their maturity any loans under the non-formula revolving loan facility to a term loan that will fully amortize and mature on February 1, 2025.
+Added: Advances under the revolving loan facilities and the term loan (if converted) will initially bear interest at a per annum rate equal to the prime rate as determined under the Loan and Security Agreement plus 0.25%.
+Added: On April 30, 2021, we entered into an amendment to our Loan and Security Agreement which reduced the per annum interest rate to the prime interest rate.
+Added: We may voluntarily prepay amounts outstanding under the revolving loan facilities and the term loan without prepayment charges.
+Added: In the event the Loan and Security Agreement is terminated prior to February 8, 2023, we would be required to pay an early termination fee in the amount of 2.0% of the main revolving loan line if terminated prior to February 8, 2022 and 1% of the main revolving loan line thereafter.
+Added: Additional borrowing requests under the revolving loan facilities are subject to various customary conditions precedent, including a borrowing base for the main revolving loan facility.
+Added: The Loan and Security Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, limits or restrictions on our ability to incur liens, incur indebtedness, make certain restricted payments (including dividends), merge or consolidate and dispose of assets.
+Added: In addition, the Loan and Security Agreement contains financial covenants requiring that we (i) hold $5 million in unrestricted cash in accounts with EWB, (ii) maintain a monthly minimum trailing six-month EBITDA of $0.6 million for the first two quarters of 2021 and $1.2 million thereafter and (iii) maintain, if we convert into the term loan and starting with the quarter ending March 31, 2022, a quarterly fixed charge coverage ratio of at least 1.35 :
+Added: The Loan and Security Agreement contains customary events of default that entitle EWB to cause any or all of our indebtedness under it to become immediately due and payable.
+Added: The events of default (some of which are subject to applicable grace or cure periods), include, among other things, non-payment defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and material judgment defaults.
+Added: Upon the occurrence and during the continuance of an event of default, EWB may terminate its lending commitment and/or declare all or any part of the unpaid principal of all loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan and Security Agreement to be immediately due and payable.
+Added: See Note 8, Financial Liabilities and Note 10, Stockholders’ Equity in the accompanying notes to our unaudited condensed consolidated financial statements for more information.
+Added: April 21 Funds
+Added: On May 5, 2020, we issued secured subordinated promissory notes in an aggregate principal amount of $4.0 million (the “Notes”) to 21 April Fund, LP and 21 April Fund, Ltd.
+Added: (collectively referred to as the “April 21 Funds”) pursuant to a Note and Warrant Purchase Agreement entered into with the April 21 Funds (the “Note Purchase Agreement”).
+Added: The Notes are collateralized by our assets, but subordinate to our obligations to EWB under the Loan and Security Agreement.
+Added: Proceeds from the sale of the Notes were only to be used for expenses incurred by us in connection with our provisions of goods and services under a statement of work with a third party.
+Added: The Notes have an initial term of nine months and do not bear interest during this period.
+Added: However, if the Notes are not repaid on or before the nine-month anniversary of issuance, (a) the Notes will thereafter bear interest of 8% per annum, payable quarterly, and (b) additional warrants to purchase common stock would be issuable to the April 21 Funds for each month all or a portion of the Notes remain unpaid.
+Added: In the event the Notes are not paid in full by the first anniversary of their issuance, May 5, 2021, they shall thereafter bear interest of 12% per annum, payable quarterly, and additional warrants would be issuable to the April 21 Funds.
+Added: On February 5, 2021, we entered into an amendment to our secured subordinated promissory note with April 21 Funds, which extended the initial term of the Notes to March 31, 2021.
+Added: As a result of the amendment, if the Notes are repaid on or before March 31, 2021, we will incur no further interest on the Notes, or be obligated to issue additional warrants.
+Added: As of March 31, 2021, the principal amount outstanding under the Notes was $2.8 million.
+Added: On March 31, 2021, April 21 Funds waived any additional warrants issuable, and interest payable, to April 21 Funds through May 5, 2021.
+Added: On April 13, 2021, we repaid the remaining principal amount outstanding of $2.8 million.
+Added: Paycheck Protection Program
+Added: On April 9, 2020, we entered into a promissory note (the PPP Note”) under the Paycheck Protection Program established under Section 1102 of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.
+Added: The PPP Note is dated April 8, 2020 with EWB.
+Added: We borrowed a principal amount of approximately $2.9 million.
+Added: The interest on the PPP Note is 1.0% per annum.
+Added: The PPP Note is payable two years from the date of the PPP Note, and there is no prepayment penalty.
+Added: All interest which accrues during the initial six months of the loan period is deferred and payable on the maturity date of the PPP Note.
+Added: Notes issued under the CARES Act may be eligible for forgiveness in whole or in part in accordance with Small Business Administration rules established for the Paycheck Protection Program.
+Added: The principal amount outstanding, including accrued interest, is included in current portion – financial liabilities and other accrued expenses and liabilities in the accompanying consolidated balance sheets, as we expect all amounts outstanding will be forgiven in 2021.
+Added: As our previously unremitted earnings have been subjected to U.S.
+Added: federal income tax, we expect any repatriation of these earnings to the U.S.
+Added: would not incur significant additional taxes related to such amounts.
+Added: However, our estimates are provisional and subject to further analysis.
+Added: Generally, most of our foreign subsidiaries have accumulated deficits and cash and cash equivalents that are held outside the United States are typically not cash generated from earnings that would be subject to tax upon repatriation if transferred to the United States.
+Added: We have access to the cash held outside the United States to fund domestic operations and obligations without any material income tax consequences.
+Added: As of March 31, 2021, the amount of cash included at such subsidiaries was $1.6 million.
+Added: We have not, nor do we anticipate the need to, repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.
+Added: We have historically incurred operating losses and negative cash flows from operating activities, and we may continue to incur losses in the future.
+Added: As of March 31, 2021, we had a total accumulated deficit of $412.1 million.
+Added: During the three months ended March 31, 2021, we had a net loss of $1.5 million.
+Added: We believe our existing cash balance, together with cash generated from operations and available credit under our Loan and Security Agreement, as well as the $37.9 million net proceeds received in our underwritten public offering in April 2021, will be sufficient to satisfy our working capital needs to fund operations for the next twelve months.
+Added: We may also use cash to acquire or invest in complementary businesses, technologies, services or products that would change our cash requirements.
+Added: We may also choose to finance our business through public or private equity offerings, debt financings or other arrangements.
+Added: However, there can be no assurance that additional capital will be available to us or that such capital will be available to us on acceptable terms.
+Added: If we raise funds by issuing equity securities, dilution to stockholders could result.
+Added: Debt or any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock.
+Added: The terms of debt securities issued or borrowings could impose significant restrictions on our operations.
+Added: The incurrence of additional indebtedness or the issuance of certain debt or equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely affect our ability to conduct our business.
+Added: Our Loan and Security Agreement imposes restrictions on our operations, increases our fixed payment obligations and has restrictive covenants.
+Added: In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline.
+Added: If we are not able to secure additional funding when needed, we may have to curtail or reduce the scope of our business or forgo potential business opportunities.
+Added: The following summarizes our cash flows for the three months ended March 31, 2021 and 2020 (in thousands):
+Added: Net cash used in operating activities
+Added: Net cash used in investing activities
+Added: Net cash provided by financing activities
+Added: Effect of exchange rates on cash and cash equivalents
+Added: Net increase (decrease) in cash and cash equivalents
+Added: Cash and cash equivalents at beginning of period
+Added: Cash and cash equivalents at end of period
+Added: Cash flows from operating activities
+Added: Cash used in operating activities for the three months ended March 31, 2021 was primarily due to net loss of $1.5 million, a decrease in cash from net changes in operating assets and liabilities of $0.5 million, and adjustments for certain non-cash items of $1.6 million, consisting primarily of depreciation, amortization, amortization of debt issuance costs, stock-based compensation, and impairment of a right-of-use operating lease asset .
+Added: Cash used in operating activities for the three months ended March 31, 2020 was primarily due to net loss of $2.0 million, a decrease in cash from net changes in operating assets and liabilities of $3.2 million, and adjustments for certain non-cash items of $1.5 million, consisting primarily of depreciation, amortization, amortization of debt issuance costs, and stock-based compensation.
+Added: Cash flows from investing activities
+Added: Cash used in investing activities for the three months ended March 31, 2021 and 2020 was $1.1 million and $0.1 million, respectively, which related to capital expenditures.
+Added: Cash flows from financing activities
+Added: Cash provided by financing activities during the three months ended March 31, 2021 was primarily due to net borrowings under our revolving loan facility of $2.2 million, partially offset by taxes paid related to net share settlement of restricted stock units of $0.3 million.
+Added: Cash provided by financing activities during the three months ended March 31, 2020 was primarily due to net borrowings under our revolving loan and term loan facilities of $3.6 million, partially offset by taxes paid related to net share settlement of restricted stock units of $0.2 million.
+Added: Off-Balance Sheet Arrangements
+Added: We have not entered into off-balance sheet arrangements, or issued guarantees to third parties, except as disclosed in Note 7, Contractual Payment Obligation .
+Added: Critical Accounting Policies and Estimates
+Added: Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
+Added: The preparation of these financial statements requires management to establish accounting policies that contain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.
+Added: These policies relate to revenue recognition, inventory, income taxes, goodwill, intangible and long-lived assets and stock-based compensation.
+Added: We have other important accounting policies and practices;
+Added: however, once adopted, these other policies either generally do not require us to make significant estimates or assumptions or otherwise only require implementation of the adopted policy and not a judgment as to the policy itself.
+Added: Management bases its estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
+Added: Despite our intention to establish accurate estimates and assumptions, actual results may differ from these estimates under different assumptions or conditions.
+Added: During the three months ended March 31, 2021, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020.
+Added: Recent Accounting Pronouncements
+Added: See Note 2, S ignificant Accounting Policies and Recent Accounting Pronouncements, in the accompanying notes to our unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report for a description of recent accounting pronouncements, which is incorporated herein by reference.
+Added: Quantitative and Qualitative Disclosures About Market Risk
+Added: Not required.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.