Item 9A. Controls and Procedures
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this Annual Report on Form 10-K.
Based on this evaluation, and due to the finding of the material weakness described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Notwithstanding the material weakness in internal control over financial reporting described below, management believes and has concluded that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.
Management ’ s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
During the year-end financial reporting process of fiscal 2023, a material weakness was identified in internal control over financial reporting within the Company’s demand forecast process regarding excess and obsolete inventory. The material weakness resulted from ineffective design of the controls related to management’s review and documentation of the Company’s inventory demand information and other assumptions used to determine the inventory carrying value adjustments necessary to record such quantities at the lower of their cost or net realizable value.
A material weakness is a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. We do not believe that this material weakness resulted in any material errors.
Ernst & Young LLP independently assessed the effectiveness of our internal control over financial reporting, as stated in the firm’s attestation report, which appears in Part II, Item 8 of this Annual Report on Form 10-K.
Remediation
Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. These remediation actions are ongoing and include or are expected to include:
•
Increased frequency of inventory reserve calculations and reconcile data between the inventory demand forecast system and our financial system at the same frequency;
•
Amend inventory provision spreadsheet formats to include additional columns and color coding to delineate specific parts and products before and after review, setting dollar thresholds for reserve requirements, and adding a tab for management review comments; and
•
Document discussions and proposed actions and follow-up at inventory demand forecast meetings.
As we continue to evaluate and work to improve our internal control over financial reporting, we may decide to take additional measures to address this identified deficiency or modify the remediation plans described above. We believe that these actions will remediate the material weakness, however, the weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management believes the foregoing plans will effectively remediate the deficiency constituting the material weakness and believes that the remediation of this material weakness (including necessary testing) will be completed during 2024. However, there is no assurance as to when such remediation will be completed. As the remediation plans are implemented, management may take additional measures or modify the remediation plan elements described above.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2023, that would have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting. However, the Company has initiated enhancements to its internal control over financial reporting to remediate the material weakness described above identified during the year-end financial reporting process of fiscal 2023.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Item 9B.
Other Information
10b5 - 1 Trading Plans
Certain of our executive officers have entered into trading plans pursuant to Rule 10b5 - 1 (c) of the Securities Exchange Act of 1934, as amended. A trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of our common stock, including the sale of shares acquired pursuant to the 2004 ESPP and the Amended 2004 ESPP, and upon vesting of RSUs. During the three months ended December 31, 2023 , no director or officer of the Company adopted, modified or terminated trading plans intended to satisfy the affirmative defense conditions of Rule 10b5 - 1 (c) as defined in Item 408 (a) of Regulation S-K. During the three months ended December 31, 2023, no pre-existing trading plans intended to satisfy the affirmative defense conditions of Rule 10b5 - 1 (c) were modified or terminated, and no other written trading arrangements that are not intended to qualify for the Rule 10b5 - 1 (c) affirmative defense were adopted, modified, or terminated.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Reference is made to the information regarding directors and nominees, code of ethics, corporate governance matters and disclosure relating to compliance with Section 16(a) of the Securities Exchange Act of 1934 appearing under the captions “Election of Directors” and “Delinquent Section 16(a) Reports” in the Company’s Proxy Statement for its 2024 Annual Meeting of Stockholders (the “2024 Annual Meeting”), which information is incorporated in this Annual Report on Form 10-K by reference. Information regarding executive officers is set forth under the caption “Information about Executive Officers” in Part I of this Annual Report on Form 10-K.
Item 11.
Executive Compensation
The information required by this item will be set forth under the caption “Executive Officer Compensation” in the Company’s Proxy Statement for the 2024 Annual Meeting, and is incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the Company’s Proxy Statement for the 2024 Annual Meeting, and is incorporated herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth under the captions “Certain Relationships and Related Transactions” and “Election of Directors” in the Company’s Proxy Statement for the 2024 Annual Meeting, and is incorporated herein by reference.
Item 14.
Principal Accountant Fees and Services
The information required by this item will be set forth under the caption “Audit and Other Fees” in the Company’s Proxy Statement for the 2024 Annual Meeting, and is incorporated herein by reference.
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PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a) Documents filed as part of this report
(1) All financial statements
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
42
Consolidated Balance Sheets
44
Consolidated Statements of Operations
45
Consolidated Statements of Comprehensive Income
46
Consolidated Statements of Stockholders’ Equity
47
Consolidated Statements of Cash Flows
48
Notes to Consolidated Financial Statements
49
(2) Financial Statement Schedules
All schedules have been omitted because they are not required, not applicable, or the information required is otherwise included in the consolidated financial statements or notes thereto.
(3) Exhibits
Exhibit
Number
Description
3.1 (1)
Amended and Restated Certificate of Incorporation.
3.2 (2)
Amended and Restated Bylaws of Monolithic Power Systems, Inc., effective April 26, 2022.
4.1 (3)
Description of the Registrant ’ s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
10.1+ (4)
Registrant ’ s 2004 Employee Stock Purchase Plan and form of subscription agreement.
10.2+ (5)
Form of Directors ’ and Officers ’ Indemnification Agreement.
10.3+ (6)
Employment Agreement with Michael Hsing , and Amendment thereof .
10.4+ (7)
Employment Agreement with Maurice Sciammas , and Amendment thereof .
10.5+ (8)
Employment Agreement with Jim Moyer.
10.6+(9)
Employment Agreement with Deming Xiao , and Amendment thereof .
10.7+(10)
Letter Agreement with Victor Lee.
10.8+(11)
Letter Agreement with Jeff Zhou.
10.9+(12)
Monolithic Power Systems, Inc. Master Cash Performance Bonus Plan.
10.10+(13)
Letter Agreement with Eugen Elmiger.
10.11+(14)
Monolithic Power Systems, Inc. 2004 Equity Incentive Plan, as Amended, and Form of Grant Agreement.
10.12+(15)
Monolithic Power Systems, Inc. 2014 Equity Incentive Plan, as Amended, and Form of Grant Agreement.
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10.13+(16)
Employment Agreement with Bernie Blegen.
10.14+(17)
Employment Agreement with Saria Tseng and Amendment thereof.
10.15+(18)
Monolithic Power Systems, Inc. Amended and Restated 2014 Equity Incentive Plan.
10.16+(19)
Form of Grant Agreement for grants of Performance Stock Units under the Monolithic Power Systems, Inc. Amended and Restated 2014 Equity Incentive Plan.
10.17+(20)
Letter Agreement with Carintia Martinez .
10.18+(21)
Indemnification Agreement with Carintia Martinez .
10.19+(22)
Letter Agreement with Eileen Wynne.
10.20+(23)
Indemnification Agreement with Eileen Wynne.
10.21+(24)
Monolithic Power Systems, Inc. 2004 Employee Stock Purchase Plan, Amended and Restated as of August 16, 2023.
21.1
Subsidiaries of Monolithic Power Systems, Inc.
23.1
Consent of Independent Registered Public Accounting Firm.
24.1
Power of Attorney (included on Signature page to this Form 10-K).
31.1
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1
Monolithic Power Systems, Inc. Compensation Clawback Policy
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+
Management contract or compensatory plan or arrangement.
*
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
(1)
Incorporated by reference to Exhibit 3.2 of the Registrant’s Registration Statement on Form S-1/A (Registration No. 333-117327), filed with the Securities and Exchange Commission on November 15, 2004.
(2)
Incorporated by reference to Exhibit 3.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on April 27, 2022.
(3)
Incorporated by reference to Exhibit 4.1 of the Registrant’s annual report on Form 10-K (File No. 000-51026), filed with the Securities and Exchange Commission on February 28, 2020.
(4)
Incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1/A (Registration No. 333-117327), filed with the Securities and Exchange Commission on November 15, 2004.
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(5)
Incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1/A (Registration No. 333-117327), filed with the Securities and Exchange Commission on November 15, 2004.
(6)
Incorporated by reference to Exhibit 10.7 of the Registrant’s annual report on Form 10-K (File No. 000-51026), filed with the Securities and Exchange Commission on March 11, 2008 and Exhibit 10.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on December 19, 2008.
(7)
Incorporated by reference to Exhibit 10.8 of the Registrant’s annual report on Form 10-K (File No. 000-51026), filed with the Securities and Exchange Commission on March 11, 2008 and Exhibit 10.3 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on December 19, 2008.
(8)
Incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-117327), filed with the Securities and Exchange Commission on July 13, 2004.
(9)
Incorporated by reference to Exhibit 10.10 of the Registrant’s annual report on Form 10-K (File No. 000-51026), filed with the Securities and Exchange Commission on March 11, 2008 and Exhibit 10.4 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on December 19, 2008.
(10)
Incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on September 14, 2006.
(11)
Incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on February 3, 2010.
(12)
Incorporated by reference to Annexure C of the Registrant’s Proxy Statement on Schedule 14A (File No. 000-51026), filed with the Securities and Exchange Commission on April 30, 2013.
(13)
Incorporated by reference to Exhibit 10.36 of the Registrant’s annual report on Form 10-K (File No. 000-51026), filed with the Securities and Exchange Commission on March 10, 2014.
(14)
Incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-199782), filed with the Securities and Exchange Commission on November 3, 2014.
(15)
Incorporated by reference to Exhibit 4.6 of the Registrant’s Registration Statement on Form S-8 (Registration No. 333-199782), filed with the Securities and Exchange Commission on November 3, 2014.
(16)
Incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on July 22, 2016.
(17)
Incorporated by reference to Exhibit 10.14 of the Registrant’s annual report on Form 10-K (File No. 000-51026), filed with the Securities and Exchange Commission on February 28, 2020.
(18)
Incorporated by reference to Annexure B of the Registrant’s Proxy Statement on Schedule 14A (File No. 000-51026), filed with the Securities and Exchange Commission on April 29, 2020.
(19)
Incorporated by reference to Exhibit 10.3 of the Registrant’s quarterly report on Form 10-Q (File No. 000-51026), filed with the Securities and Exchange Commission on May 5, 2023.
(20)
Incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on May 28, 2021.
(21)
Incorporated by reference to Exhibit 10.2 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on May 28, 2021.
(22)
Incorporated by reference to Exhibit 10.1 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on February 8, 2023.
(23)
Incorporated by reference to Exhibit 10.2 of the Registrant’s current report on Form 8-K (File No. 000-51026), filed with the Securities and Exchange Commission on February 8, 2023.
(24)
Incorporated by reference to Exhibit 10.1 of the Registrant’s quarterly report on Form 10-Q (File No. 000-51026), filed with the Securities and Exchange Commission on August 4, 2023.
Item 16.
Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MONOLITHIC POWER SYSTEMS, INC.
Date: February 29, 2024
By:
/s/ Michael Hsing
Michael Hsing
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael Hsing and T. Bernie Blegen, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this report, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 29, 2024 by the following persons on behalf of the registrant and in the capacities indicated:
/s/ Michael Hsing
President, Chief Executive Officer, and Director (Principal Executive Officer)
MICHAEL HSING
/s/ T. Bernie Blegen
Chief Financial Officer (Principal Financial and Accounting Officer)
T. BERNIE BLEGEN
/s/ Herbert Chang
Director
HERBERT CHANG
/s/ Eugen Elmiger
Director
EUGEN ELMIGER
/s/ Victor K. Lee
Director
VICTOR K. LEE
/s/ Carintia Martinez
Director
CARINTIA MARTINEZ
/s/ James C. Moyer
Director
JAMES C. MOYER
/s/ Eileen Wynne
Director
EILEEN WYNNE
/s/ Jeff Zhou
Director
JEFF ZHOU
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