What changed in this filing

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Item 1. Financial Statements

2020-08-12 compared with 2020-05-08 · 121 added, 89 removed, 271 unchanged (44% of the section changed)

9 unchanged sentences

Property and equipment, net

Right-of-use lease asset

Right-of-use lease asset, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

3 unchanged sentences

Short-term lease liability

PPP note payable, current

Accrued expenses and other

1 unchanged sentence

Convertible notes payable

PPP note payable

Total liabilities

6 unchanged sentences

120,000 shares authorized;

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

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

December 31, 2019, respectively

4 unchanged sentences

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

Three Months Ended

Six Months Ended

Royalty and other

5 unchanged sentences

Total operating expenses

Income (loss) from operations

Loss from operations

Interest expense

Other income, net

Income (loss) before income tax provision

Income tax provision

Net income (loss)

Net income (loss) per share

Shares used in computing net income (loss) per share

Share and per share amounts for the three months ended March 31, 2019 have been adjusted to reflect the impact of a 1-for-20 reverse stock split effected in August 2019, as discussed in Note 1.

Deemed dividend for warrant exercise price adjustment

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders

Basic and diluted

Shares used in computing net loss per share

Basic and diluted

Other comprehensive income, net of tax:

Net unrealized gains on available-for-sale securities

Comprehensive loss

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

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

1 unchanged sentence

(In thousands)

Comprehensive

Balance as of December 31, 2019

3 unchanged sentences

Balance as of March 31, 2020

Issuance of common stock for release of awards

Sale of common stock, net of financing costs

Deemed dividend for warrant exercise price adjustment

Stock-based compensation

Balance as of June 30, 2020

Comprehensive

Balance as of December 31, 2018

2 unchanged sentences

Balance as of March 31, 2019

Share and per share amounts for the three months ended March 31, 2019 have been adjusted to reflect the impact of a 1-for-20 reverse stock split effected in August 2019, as discussed in Note 1.

Issuance of common stock for release of awards

Stock-based compensation

Unrealized gain on available-for-sale investments

Balance as of June 30, 2019

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSE D CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net income (loss)

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

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

Depreciation and amortization

6 unchanged sentences

Deferred revenue and other liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

4 unchanged sentences

Cash flows from financing activities:

Exercise of pre-funded warrants

Proceeds from PPP note

Proceeds from sale of common stock, net of financing costs

Net proceeds from exercise of pre-funded warrants

Taxes paid to net share settle equity awards

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

1 unchanged sentence

Supplemental disclosure:

Issuance of convertible notes in settlement of accrued interest

Issuance of convertible note in settlement of accrued interest

Fair value of warrant exercise price adjustment considered as deemed dividend

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

2 unchanged sentences

(the Company) was incorporated in California in September 1991 and reincorporated in September 2000 in Delaware.

The Company’s strategy and primary business objective is to be an IP-rich fabless semiconductor company focused on the development and sale of integrated circuit (IC) and related firmware products.

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

The Company’s strategy and primary business objective is to be an IP-rich fabless semiconductor company focused on the development and sale of integrated circuit (IC) and related software and firmware products.

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

3 unchanged sentences

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented.

The operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other future period.

The operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other future period.

Basis of Presentation

2 unchanged sentences

The Company’s fiscal year ends on December 31 of each calendar year.

Risks and Uncertainties

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

The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S.

government in March 2020.

This has negatively affected the U.S.

and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place” and created significant disruption of the financial markets.

The full extent of the COVID-19 impact on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by U.S.

and foreign government agencies to prevent disease spread, all of which are uncertain, out of the Company’s control, and cannot be predicted.

Reverse Stock Split

1 unchanged sentence

Such amendment and ratio were previously approved by the Company’s stockholders and board of directors, respectively.

As a result of the reverse stock split, which was effective August 28, 2019, every 20 shares of the Company’s pre-reverse split outstanding common stock were combined and reclassified into one share of common stock.

As a result of the reverse stock split, which was effective August 28, 2019, every 20 shares of the Company’s pre-reverse split outstanding com mon stock were combined and reclassified into one share of common stock.

Proportionate voting rights and other rights of common stock holders were not affected by the reverse stock split.

No fractional shares were issued in connection with the reverse stock split;

stockholders who would otherwise hold a fractional share of the Company’s common stock received cash in an amount equal to the product obtained by multiplying (i) the closing sale price of the common stock on the effective date of the reverse stock split as reported on The Nasdaq Stock Market, by (ii) the number of shares of the common stock held by the stockholder that would otherwise have been exchanged for the fractional share interest.

All stock options and restricted stock units outstanding and common stock reserved for issuance under the Company’s equity incentive plans and warrants outstanding and the conversion price of the convertible notes outstanding immediately prior to the reverse stock split were adjusted by dividing the number of affected shares of common stock by 20 and, as applicable, multiplying the exercise price by 20, as a result of the reverse stock split.

No fractional shares were issued in connection with the reverse stoc k split;

stockholders who would otherwise hold a fractional share of the Company’s common stock received cash in an amount equal to the product obtained by multiplying (i) the closing sale price of the common stock on the effective date of the reverse stoc k split as reported on The Nasdaq Stock Market, by (ii) the number of shares of the common stock held by the stockholder that would otherwise have been exchanged for the fractional share interest.

All stock options and restricted stock units outstanding an d common stock reserved for issuance under the Company’s equity incentive plans and warrants outstanding and the conversion price of the convertible notes outstanding immediately prior to the reverse stock split were adjusted by dividing the number of affe cted shares of common stock by 20 and, as applicable, multiplying the exercise price by 20, as a result of the reverse stock split.

Use of Estimates

10 unchanged sentences

The cost of securities sold is based on the specific identification method.

As of March 31, 2020 the Company did not have any short-term investments.

As of June 30, 2020 the Company did not have any short-term investments.

Fair Value Measurements

15 unchanged sentences

The Company grants credit only to customers deemed creditworthy in the judgment of management.

There was no allowance for doubtful accounts receivable at either March 31, 2020 or December 31, 2019.

There was no allowance for doubtful accounts receivable at either June 30, 2020 or December 31, 2019.

The Company values its inventories at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value.

3 unchanged sentences

Charges for obsolete and slow-moving inventories are recorded based upon an analysis of specific identification of obsolete inventory items and quantification of slow moving inventory items.

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

The Company recorded a $0.1 million write down of inventory during the six months ended June 30, 2020 and recorded no material inventory write-downs during the six months ended June 30, 2019.

Revenue Recognition

12 unchanged sentences

The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically less than 60 days.

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

Royalty and other

5 unchanged sentences

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

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

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

See Note 5 for disaggregation of revenue by geography.

2 unchanged sentences

Maintenance and support typically include engineering support to assist in the commencement of production of a licensee’s products.

As of March 31, 2020, the Company had the following warrants outstanding to purchase its common stock:

(share amounts in thousands)

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

Number of Shares

4 unchanged sentences

Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of stock options, vesting of stock awards and shares issuable in conjunction with the outstanding convertible notes.

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

Three months ended

Net income (loss)

weighted-average common shares outstanding

Total shares:

weighted-average unvested restricted stock units

weighted-average shares issuable on conversion of warrants

Total shares:

Net income (loss) per share:

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

1 unchanged sentence

Unvested restricted common stock units

Convertible debt

Convertible notes

Fair Value of Financial Instruments

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

March 31, 2020

June 30, 2020

Cash and cash equivalents

3 unchanged sentences

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

March 31, 2020

June 30, 2020

Money market funds

2 unchanged sentences

Corporate notes and commercial paper

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

There were no transfers in or out of Level 1 and Level 2 securities during the six months ended June 30, 2020 or 2019.

Balance Sheet Detail

7 unchanged sentences

The Company has also entered into indemnification agreements with its officers and directors.

No material amounts were reflected in the Company’s condensed consolidated financial statements for the three months ended March 31, 2020 or 2019 related to these indemnifications.

No material amounts were reflected in the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2020 or 2019 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement.

To date, the Company has not made any mate rial payments related to these indemnification agreements.

To date, the Company has not made any material payments related to these indemnification agreements.

Legal Matters

7 unchanged sentences

Three Months Ended

Six Months Ended

North America

3 unchanged sentences

Three Months Ended

Six Months Ended

Represents less than 10%

Three customers accounted for 81% of accounts receivable as of March 31, 2020.

Four customers accounted for 99% of accounts receivable as of June 30, 2020.

Four customers accounted for 85% of accounts receivable as of December 31, 2019.

6 unchanged sentences

Returns filed in foreign jurisdictions may be subject to examination for the years 2010 to 2019.

As of March 31, 2020, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

As of June 30, 2020, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted on March 27, 2020 in the United States.

The CARES Act includes several significant provisions for corporations, including the usage of net operating losses and payroll benefits.

The Company is evaluating the impact, if any, the CARES Act and other economic stimulus measures will have on the Comp any’s financials and required disclosures.

As a result of the CARES Act, the Company was able to file for and collect a $0.1 million federal tax receivable for a prior-period alternative minimum tax credit.

Stock-Based Compensation

The expense relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value.

The unamortized compensation cost, as of March 31, 2020, was $0.2 million related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 2.1 years.

The unamortized compensation cost, as of June 30, 2020, was $0.2 million related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 1.9 years.

The expense related to restricted stock units (RSUs) is recognized over a three-to-five year vesting period and is based on the fair value of the underlying stock on the dates of grant.

The unamortized compensation cost, as of March 31, 2020, was $0.3 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 1.9 years.

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

The unamortized compensation cost, as of June 30, 2020, was $0.2 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 1.6 years.

For the three and six months ended June 30, 2020 and 2019, there were no excess tax benefits associated with the exercise of stock options due to the Company’s historical loss positions.

Valuation Assumptions

There were no awards granted during the three months ended March 31, 2020.

The fair value of the Company’s stock options granted during the three months ended March 31, 2019 was estimated on the grant dates using the Black-Scholes valuation option-pricing model with the following assumptions:

Three Months Ended

March 31, 2019

There were no awards granted during the six months ended June 30, 2020.

The fair value of the Company’s stock options granted during the six months ended June 30, 2019 was estimated on the grant dates using the Black-Scholes valuation option-pricing model with the following assumptions:

Six Months Ended

June 30, 2019

Risk-free interest rate

8 unchanged sentences

Common Stock Options and Restricted Stock

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

Options outstanding

Balance as of January 1, 2020

Balance as of March 31, 2020

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

Non-vested shares as of January 1, 2020

Non-vested shares as of March 31, 2020

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

In August 2019, the Company’s stockholders approved the 2019 Stock Incentive Plan (the 2019 Plan), and, as a result, the 2010 Plan was automatically terminated.

No future grants of awards will be made under the 2010 Plan, although it will continue to govern prior awards granted thereunder, until all such awards granted have been exercised, forfeited, canceled, expired or otherwise terminated in accordance with the terms of such grants.

In August 2019, the Company’s stockholders approved the 2019 Stock Incentive Plan (the 2019 Plan), and, as a result, the Amended and Restated 2010 Equity Incentive Plan (the 2010 Plan) was terminated.

The 2019 Plan authorizes the board of directors or the compensation committee of the board of directors to grant a broad range of awards including stock options, stock appreciation rights, restricted stock, performance-based awards, and restricted stock units.

4 unchanged sentences

In addition, the 2019 Plan provides for automatic acceleration of vesting for options granted to non-employee directors upon a change of control of the Company.

As of March 31, 2020, no awards had been granted under the 2019 Plan.

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

A summary of option activity under the 2010 Plan and the 2019 Plan is presented below (in thousands, except exercise price):

Options outstanding

Balance as of January 1, 2020

Balance as of June 30, 2020

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

Non-vested shares as of January 1, 2020

Non-vested shares as of March 31, 2020

Non-vested shares as of June 30, 2020

The total intrinsic value of the RSUs outstanding as of June 30, 2020 was $0.1 million.

The following table summarizes significant ranges of outstanding and exercisable options as of June 30, 2020 (in thousands, except contractual life and exercise price):

Options Outstanding

Options Exercisable

6 unchanged sentences

$1.57 - $924.00

There were no stock options exercised during the three months ended March 31, 2020 or 2019.

There were no stock options exercised during the six months ended June 30, 2020 or 2019.

Stockholders’ Equity

On April 21, 2020, the Company completed a registered direct offering of securities under an effective registration statement filed with the SEC pursuant to the Securities Act of 1933, as amended.

In the offering, the Company sold 1,218,000 shares of common stock at a price of $1.56 per share to institutional investors.

Net proceeds of the offering, after placement agent and other fees and expenses paid by the Company, were approximately $1.6 million.

As a result of the offering, the exercise price of the 1,845,540 outstanding common stock purchase warrants that were issued in October 2018 was reduced from $6.00 per share to $2.40 per share.

The Company accounted for the warrant exercise price adjustment in accordance with Accounting Standards Codification Topic 260 and determined that the change in the exercise price results in a deemed dividend of $392,000 that increased the net loss attributable to common stockholders at June 30, 2020.

Notes Payable

Convertible Notes

13 unchanged sentences

and, provided further, that in no event may the amount of indebtedness to which the security interest of the Note holder(s) is subordinated exceed the outstanding balance of accounts receivable less than 90 days old for which the Company has not recorded an allowance for doubtful accounts pledged under such credit facility.

The Notes define an event of default generally as any failure by the Company to pay an amount owed under the Notes when due (subject to cure periods), a default with respect to other indebtedness of the Company resulting in acceleration of such indebtedness, the commencement of bankruptcy or insolvency proceedings, or the cessation of business.

If an event of default occurs under the Notes, the holder(s) of a majority-in-interest of the outstanding principal amount of the Notes may declare the outstanding principal amount thereof to be immediately due and payable and pursue all available remedies, including taking possession of the assets of the Company and selling them to pay the amount of debt then due, plus expenses, in accordance with applicable laws and procedures.

The Notes define an event of default generally as any failure by th e Company to pay an amount owed under the Notes when due (subject to cure periods), a default with respect to other indebtedness of the Company resulting in acceleration of such indebtedness, the commencement of bankruptcy or insolvency proceedings, or the cessation of business.

If an event of default occurs under the Notes, the holder(s) of a majority-in-interest of the outstanding principal amount of the Notes may declare the outstanding principal amount thereof to be immediately due and payable and purs ue all available remedies, including taking possession of the assets of the Company and selling them to pay the amount of debt then due, plus expenses, in accordance with applicable laws and procedures.

In accordance with the October 2018 amendment to the Notes, the Company used $7.4 million of the proceeds from a public offering of securities effected in October 2018 to repay a portion of the Notes.

1 unchanged sentence

The Interest Notes have terms identical to the Notes.

As of March 31, 2020, the Notes and Interest Notes could be converted into a

maximum of 253,630 shares of common stock at $11.434 per share, excluding the effects of future payments of interest in-kind and a beneficial ownership ceiling of 9.9%.

As of June 30, 2020, the Notes and Interest Notes could be converted into a maximum of 262,375 shares of common stock at $11.434 per share, excluding the effects of future payments of interest in-kind and a beneficial ownership ceiling of 9.9%.

The $3.0 million of outstanding Notes are payable in full in 2023.

Effective January 1, 2019, the Company adopted ASU No.

On May 7, 2020, the Company entered into a Promissory Note with Wells Fargo Bank, N.A.

(the Lender) in an aggregate principal amount of $579,330 (the PPP Note), pursuant to the Paycheck Protection Program (the PPP) under the CARES Act.

The term of the PPP Note is two years.

Interest will accrue on the outstanding principal balance of the PPP Note at a fixed rate of 1.0%, which shall be deferred for the first six months of the term of the PPP Note.

Monthly payments will be due and payable beginning in November 2020 and continue each month thereafter until maturity of the PPP Note.

The Company may prepay principal of the PPP Note at any time in any amount without penalty.

The Agreement contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties or provisions of the PPP Note.

The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining judgment against the Company.

The Company may apply to the Lender for forgiveness of the PPP Note, under the terms of the PPP.

No assurance is provided that the Company will obtain forgiveness of the PPP Note in whole or in part, but the Company intends to use the proceeds in accordance with the PPP.

If the PPP Note is not forgiven, principal payments will be due:

$49,000 in 2020, $292,000 in 2021, $238,330 in 2022.

Effective January 1, 2019, the Company adopted Accounting Standards Update (ASU) No.

2016-02, as amended, using the alternative transition method, which allowed the Company to initially apply the new lease standard at the adoption date (the “effective date method”).

3 unchanged sentences

The adoption did not result in a cumulative-effect adjustment to the opening balance of accumulated deficit.

As a result of the adoption, the Company recorded an operating lease right-to-use asset of $0.4 million and corresponding short-term and long-term liabilities of $0.2 million and $0.2 million, respectively, as of January 1, 2019.

As a result of the adoption, the Company recorded an operating lease right-of-use asset of $0.4 million and corresponding short-term and long-term liabilities of $0.2 million and $0.2 million, respectively, as of January 1, 2019.

The adoption of ASU No.

1 unchanged sentence

The Company identified only one lease to be accounted for under ASU No.

2016-02, and this was the lease for its corporate facility, which expires in October 2020.

The right-to-use asset and corresponding liability for the facility lease have been measured at the present value of the future minimum lease payments.

The discount rate used to measure the lease asset and liability represents the interest rate on the Notes (8%).

Lease expense is recognized on a straight-line basis over the lease term, and operating lease expense was $0.1 million for the three months ended March 31, 2020.

2016-02 pertaining to the lease for its corporate facility, which expires in October 2020.

The right- of -use asset and corresponding liability for the facility lease have been measured at the present value of the future minimum lease payments.

The disc ount rate used to measure the lease asset and liability represents the interest rate on the Notes (8%).

Lease expense is recognized on a straight-line basis over the lease term, and operating lease expense was $0.

1 million for the six months ended June 30 , 20 20 .

The Company has an option to extend the lease for an additional 20.5 month period, but, as the renewal is not reasonably certain, it has not included this renewal option in its accounting for the lease .

Our future minimum payments under our facility operating lease as of March 31, 2020 are listed in the table below (in thousands).

Our future minimum payments under our facility operating lease as of June 30, 2020 are listed in the table below (in thousands):

Year ending December 31,

2 unchanged sentences

Supplemental cash flow information related to the operating lease was as follows (in thousands):

Three months ended

March 31, 2020

Six months ended

June 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for lease

Subsequent Event

On April 21, 2020, the Company completed a registered direct offering of securities registered under an effective registration statement filed with the SEC pursuant to the Securities Act of 1933, as amended.

In the offering, the Company sold 1,218,000 shares of common stock at a price of $1.56 per share to institutional investors.

Net proceeds of the offering, after placement agent and other fees and estimated expenses payable by the Company were approximately $1.6 million.

As a result of the offering, the exercise price of the 1,845,540 outstanding common stock purchase warrants that were issued in October 2018 was reduced from $6.00 per share to $2.40 per share.

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.

What changed 10-Q

Item 1. Financial Statements