What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-12 · 85 added, 67 removed, 325 unchanged (32% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

16 unchanged sentences

PPP note payable

Long-term lease liability

Total liabilities

6 unchanged sentences

120,000 shares authorized;

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

and 2,179 shares issued and outstanding at September 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 AND COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Royalty and other

4 unchanged sentences

Selling, general and administrative

Impairment of goodwill

Total operating expenses

1 unchanged sentence

Interest expense

Other income, net

Other income (expense), net

Deemed dividend for warrant exercise price adjustment

7 unchanged sentences

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.

12 unchanged sentences

Balance as of June 30, 2020

Issuance of common stock for release of awards

Stock-based compensation

Balance as of September 30, 2020

Comprehensive

7 unchanged sentences

Balance as of June 30, 2019

Issuance of common stock for release of awards

Stock-based compensation

Balance as of September 30, 2019

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

CONDENSE D CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation

Impairment of goodwill

Accrued interest

4 unchanged sentences

Deferred revenue and other liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

Cash flows from investing activities:

13 unchanged sentences

Supplemental disclosure:

Issuance of convertible note in settlement of accrued interest

Issuance of convertible notes in settlement of accrued interest

Fair value of warrant exercise price adjustment considered as deemed dividend

9 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 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.

The operating results for the three 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 for any other future period.

Basis of Presentation

10 unchanged sentences

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

Reverse Stock Split

On August 27, 2019, the Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a 1-for-20 reverse stock split of the Company’s shares of common stock.

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

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 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 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 June 30, 2020 or December 31, 2019.

There was no allowance for doubtful accounts receivable at either September 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 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.

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

Revenue Recognition

19 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 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.

During the nine months ended September 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 June 30, 2020, the Company had the following warrants outstanding to purchase its common stock (share amounts in thousands):

As of September 30, 2020, the Company had the following warrants outstanding (share amounts in thousands):

Number of Shares

2 unchanged sentences

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share gives effect to all potentially dilutive common shares outstanding during the period.

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

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

Diluted net income (loss) per share gives effect to all potentially dilutive shares of common stock outstanding during the period.

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

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

September 30,

Options outstanding to purchase common stock

3 unchanged sentences

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

June 30, 2020

September 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):

June 30, 2020

September 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 six months ended June 30, 2020 or 2019.

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

Balance Sheet Detail

September 30,

(in thousands)

6 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 and six months ended June 30, 2020 or 2019 related to these indemnifications.

No material amounts were reflected in the Company’s condensed consolidated financial statements for the nine months ended September 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.

9 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

North America

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Represents less than 10%

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

Four customers accounted for 79% of accounts receivable as of September 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 June 30, 2020, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

As of September 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.

3 unchanged sentences

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 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 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.

The unamortized compensation cost, as of September 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 1.7 years.

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

The unamortized compensation cost, as of September 30, 2020, was $0.3 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 0.8 years.

For the nine months ended September 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 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

There were no stock options granted during the nine months ended September 30, 2020.

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

Nine Months Ended

September 30, 2019

Risk-free interest rate

16 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.

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

The following table summarizes the activity in the shares available for grant under the 2019 Plan during the nine months ended September 30, 2020 (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):

Options cancelled

Balance as of September 30, 2020

A summary of RSU activity under the 2019 Plan and the 2010 Plan is presented below (in thousands, except for fair value):

Non-vested shares as of January 1, 2020

1 unchanged sentence

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):

Non-vested shares as of September 30, 2020

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

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

Options Outstanding

7 unchanged sentences

$1.57 - $924.00

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

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

Stockholders’ Equity

3 unchanged sentences

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.

During the quarter ended June 30, 2020, 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 resulted in a deemed dividend of $392,000 that increased the net loss attributable to common stockholders.

Notes Payable

14 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 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.

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.

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.

Semi-annual interest payments have been made in each of February 2019, August 2019 and February 2020 for approximately $78,000, $109,000 and $112,000, respectively, in-kind with the issue of additional notes (Interest Notes) to the Purchasers.

Semi-annual interest payments have been made in each of February 2019, August 2019, February 2020 and August 2020 for approximately $78,000,

$109,000 , $112,000 and $122,000 , respectively, in-kind with the issue of additional n otes (Interest Notes) to the Purchasers.

The Interest Notes have terms identical to the Notes.

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.

A t September 30 , 2020 , the Notes , Interest Notes and accrued interest could be converted into a maximum of 2 71,121 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%.

1 million of outstanding Notes are payable in full in 2023.

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

1 unchanged sentence

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.

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 ten months of the term of the PPP Note.

Monthly payments will be due and payable beginning in March 2021 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.

2 unchanged sentences

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.

No assurance is provided that the Company will obtain forgiveness of the PPP Note in whole or in part, but the Company believes it has used 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.

$244,000 in 2021, $292,000 in 2022, and $43,330 in 2023.

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

8 unchanged sentences

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

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

2016-02, which was the lease for its corporate facility that had an initial expiration date of October 31, 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 June 30, 2020 are listed in the table below (in thousands):

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 $0.2 million for the nine months ended September 30, 2020.

On September 30, 2020, the Company and the lessor extended the lease for an additional 20.5 month term commencing November 1, 2020.

The Company does not have an option to extend the lease term beyond the current extension.

The extension was accounted for as a lease modification at September 30, 2020.

The Company assessed the lease classification of the facility lease at the modification date and determined that the facility lease should be accounted for as an operating lease.

The right-of-use asset and corresponding operating lease liability have been remeasured based on the present value of remaining lease payments over the remaining extended lease term.

Non-lease components are not included in the right-of-use asset and liability and are reflected as expense in the period incurred.

Future minimum payments under the facility operating lease at September 30 , 20 20 are as follows (in thousands) :

Year ending December 31,

Total future lease payments

imputed interest

1 unchanged sentence

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

Six months ended

June 30, 2020

Nine Months Ended

September 30,

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

Operating cash flows for lease

Non-cash activity:

Recognition of additional right-of-use asset and liability upon lease modification

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