What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-10 · 90 added, 145 removed, 265 unchanged (47% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

1 unchanged sentence

Short-term investments

Accounts receivable

Accounts receivable, net

Prepaid expenses and other

21 unchanged sentences

120,000 shares authorized;

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

and 3,554 shares issued and outstanding at March 31, 2021 and

December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

5 unchanged sentences

Three 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 (expense), net

Deemed dividend for warrant exercise price adjustment

Net loss attributable to common stockholders

Net loss per share attributable to common stockholders

Other income, net

Other comprehensive loss, net of tax:

Net unrealized loss on available-for-sale securities

Comprehensive loss

Net loss per share

Basic and diluted

1 unchanged sentence

Basic and diluted

Other comprehensive income, net of tax:

Net unrealized gains on available-for-sale securities

Comprehensive loss

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

3 unchanged sentences

Balance as of December 31, 2020

Issuance of common stock for release of awards

Exercise of pre-funded warrants

Issuance of common stock under stock plan, net

Exercise of warrants

Issuance of common stock for payment of accrued interest

Sale of common stock, net of placement costs

Stock-based compensation

Unrealized loss on available-for-sale investments

Balance as of March 31, 2021

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

Issuance of common stock for release of awards

Stock-based compensation

Balance as of September 30, 2020

Comprehensive

1 unchanged sentence

Issuance of common stock for release of awards

Exercise of pre-funded warrants

Stock-based compensation

Balance as of March 31, 2020

Issuance of common stock for release of awards

Stock-based compensation

Unrealized gain on available-for-sale investments

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.

1 unchanged sentence

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation

Impairment of goodwill

Accrued interest

Amortization of lease right-of-use asset

Change in operating lease liability

Gain on settlement of convertible notes payable and accrued interest, net

Changes in assets and liabilities:

10 unchanged sentences

Cash flows from financing activities:

Proceeds from PPP note

Proceeds from sale of common stock, net of financing costs

Net proceeds from exercise of pre-funded warrants

Proceeds from sale of common stock, net

Proceeds from exercise of common stock warrants

Repayment of convertible notes payable

Taxes paid to net share settle equity awards

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

3 unchanged sentences

Issuance of convertible notes in settlement of accrued interest

Fair value of warrant exercise price adjustment considered as deemed dividend

Settlement of accrued interest through issuance of common shares

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

1 unchanged sentence

The Company and Summary of Significant Accounting Policies

(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 software and firmware products.

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

The Company provides both integrated circuits (ICs) and intellectual property (IP) solutions that enable fast, intelligent data access and decision making for a wide range of markets.

The Company’s primary product line is marketed under the Accelerator Engine name and includes the Bandwidth Engine IC products, which integrate the Company’s proprietary, 1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction access performance.

In 2020, the Company began offering for license the first of its Virtual Accelerator Engine products which consist of software, firmware and related IP.

This new product line will include multiple function accelerator platform products, which target specific application functions and will use a common software interface to allow performance scalability over multiple hardware environments.

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 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.

The operating results 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 for any other future period.

Basis of Presentation

11 unchanged sentences

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period.

the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period.

Actual results could differ from those estimates.

Cash Equivalents and Investments

The Company invests its excess cash in money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

The Company has invested its excess cash in money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments.

22 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 September 30, 2020 or December 31, 2019.

The allowance for doubtful accounts was $41,000 at March 31, 2021 and December 31, 2020.

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.

2 unchanged sentences

If actual market conditions are less favorable than those expected by management, additional adjustment to inventory valuation may be required.

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

The Company recorded 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.

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 write-downs of inventory during the three months ended March 3 1 , 202 1 and recorded write-downs of $ 0.1 m illion for the year ended December 31, 2020 .

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 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.

During the three months ended March 31, 2021, the Company recognized no revenue that had been included in deferred revenue as of December 31, 2020.

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

As of March 31, 2021, the Company had the following warrants outstanding (share amounts in thousands):

Number of Shares

3 unchanged sentences

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):

September 30, 2020

March 31, 2021

Cash and cash equivalents

Short-term investments

December 31, 2020

Cash and cash equivalents

Short-term investments

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

September 30, 2020

March 31, 2021

Money market funds

Corporate notes and commercial paper

December 31, 2020

Money market funds

Corporate notes and commercial paper

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

There were no transfers in or out of Level 1 and Level 2 securities during the three months ended March 31, 2021 or 2020.

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 nine months ended September 30, 2020 or 2019 related to these indemnifications.

No material amounts were reflected in the Company’s condensed consolidated financial statements for the three months ended March 31, 2021 or 2020 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

Nine Months Ended

September 30,

North America

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Represents less than 10%

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.

Three customers accounted for 74% of accounts receivable as of March 31, 2021.

Three customers accounted for 86% of accounts receivable as of December 31, 2020.

Income Tax Provision

5 unchanged sentences

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

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.

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

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.

As of March 31, 2021, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

Stock-Based Compensation

Common Stock Equity Plans

In 2010, the Company adopted the 2010 Equity Incentive Plan and later amended it in 2014, 2017 and 2018 (the Amended 2010 Plan).

The Amended 2010 Plan was terminated in August 2019 and remains in effect as to outstanding equity awards granted prior to the date of expiration.

As of March 31, 2021, no new awards may be made under the Amended 2010 Plan, and equity awards for approximately 57,858 shares were outstanding.

In August 2019, the Company’s stockholders approved the 2019 Stock Incentive Plan (the 2019 Plan), and it replaced the Amended 2010 Plan.

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

Under the 2019 Plan, 182,500 shares have been reserved for issuance.

The 2019 Plan provides for annual option grants or other awards to the Company’s non-employee directors to acquire up to 2,000 shares and for a one-time grant of an option or other award to a non-employee director to acquire up to 6,000 shares upon his or her initial appointment or election to the board of directors.

Under the 2019 Plan, the term of all incentive stock options granted to a person who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of the Company’s stock may not exceed five years.

The exercise price of stock options granted under the 2019 Plan must be at least equal to the fair market value of the shares on the date of grant.

Generally, awards under the 2019 Plan will vest over a three to four-year period, and options will have a term of 10 years from the date of grant.

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

The Amended 2010 Plan and the 2019 Plan are referred to collectively as the “Plans.”

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 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.

The unamortized compensation cost, as of March 31, 2021, was $0.1 million related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 1.25 years.

The expense related to restricted stock units (RSUs) is generally recognized over a three-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 3 1 , 202 1 , was $ 0.

2 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 0 .

For the three months ended March 31, 2021 and 2020, 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 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

Expected life (years)

Dividend yield

The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates, as published by the U.S.

Department of the Treasury as of the grant date for terms equal to the expected terms of the options.

The expected volatility was based on the historical volatility of the Company’s stock price over the expected term of the options.

The expected term of options granted was derived from historical data based on employee exercises and post‑vesting employment termination behavior.

A dividend yield of zero is applied because the Company has never paid dividends and has no intention to pay dividends in the near future.

The Company accounts for forfeitures as they occur.

There were no stock options granted during the three months ended March 31, 2021 and 2020.

Common Stock Options and Restricted Stock

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.

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 their terms.

Under the 2019 Plan, 182,500 shares have been reserved for issuance.

The term of all incentive stock options granted to a person who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of the Company’s stock may not exceed five years.

2 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.

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):

The following table summarizes the activity in the shares available for grant under the Plans during the three months ended March 31, 2021 (in thousands, except exercise price):

Options outstanding

Balance as of January 1, 2021

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):

Balance as of March 31, 2021

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

Non-vested shares as of January 1, 2021

Non-vested shares as of March 31, 2021

Non-vested shares as of June 30, 2020

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):

The fair value of the RSU granted during the three months ended March 31, 2021 was $32,500.

The total intrinsic value of the RSUs outstanding as of March 31, 2021 was $0.2 million.

The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2021 (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 nine months ended September 30, 2020 or 2019.

There were no stock options exercised during the three months ended March 31, 2021 or 2020.

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 February 2021, 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 1,487,601 shares of common stock at a price of $5.00 per share to institutional investors.

Net proceeds of the offering, after placement agent and other fees and expenses paid by the Company, were approximately $6.8 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.

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.

During the three months ended March 31, 2021, the Company received a total of $2,478,461 of proceeds from the exercise of 1,032,692 warrants to purchase shares of common stock at a price of $2.40 per share.

Notes Payable

2 unchanged sentences

Pursuant to amendments to the Notes and related documents in February and October 2018, the interest rate was reduced to 8%, the maturity date of the Notes was extended to August 15, 2023, and the optional conversion price was reduced from $170.00 of Note principal per share of common stock to $11.434 of Note principal per share of common stock.

The conversion price is subject to adjustment upon certain events, such as stock splits, reverse stock splits, stock dividends and similar kinds of transactions, as set forth in the Purchase Agreement.

Pursuant to a security agreement, the Notes are secured by a security interest in all of the assets of the Company.

Accrued interest is payable semi-annually in cash or in kind through the issuance of identical new Notes, or with a combination of the two, at the Company’s option.

The Notes are noncallable and nonredeemable by the Company.

The Notes are redeemable at the election of the holders if the Company experiences a fundamental change (as defined in the Notes), which generally would occur in the event (i) any person acquires beneficial ownership of shares of common stock of the Company entitling such person to exercise at least 40% of the total voting power of all of the shares of capital stock of the Company entitled to vote generally in elections of directors, (ii) an acquisition of the Company by another person through a merger or consolidation, or the sale, transfer or lease of all or substantially all of the Company’s assets, or (iii) the Company’s current directors cease to constitute a majority of the board of directors of the Company within a 12-month period, disregarding for this purpose any director who voluntarily resigns as a director or dies while serving as a director.

Effective February 2018, pursuant to one amendment to the Notes, the redemption price was reduced from 120% to 100% of the principal amount of the Note to be repurchased plus accrued and unpaid interest as of the redemption date.

No Note holder shall be entitled to convert such holder’s Note if effective upon the applicable conversion date (i) the holder would have beneficial ownership of more than 19.9% of the voting capital stock of the Company as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, (with exceptions specified in the Purchase Agreement), or (ii) if the shares are being acquired or held with a purpose or effect of changing or influencing control of the Company, or in connection with or as a participant in any transaction having that purpose or effect, as determined in the sole discretion of the board of directors of the Company.

There is no required sinking fund for the Notes.

The Notes have not been registered for resale, and the holder(s) do not have registration rights.

The Notes restrict the ability of the Company to incur any indebtedness for borrowed money, unless such indebtedness by its terms is expressly subordinated to the Notes in right of payment and to the security interest of the Note holder(s) in respect to the priority and enforcement of any security interest in property of the Company securing such new debt;

provided that the Note holder(s) security interest and cash payment rights under the Notes shall be subordinate to a maximum of $5,000,000 of indebtedness for a secured accounts receivable line of credit facility provided to the Company by a bank or institutional lender;

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.

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, 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.

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 notes (Interest Notes) to the Purchasers.

The Interest Notes have terms identical to the Notes.

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.

The Company issued 42,672 shares of its common stock valued at $139,964 to the Note holder in settlement of the accrued interest for the six month period ended February 15, 2021.

The Company recorded a loss of $16,898 on this payment, which was recorded in other income in the condensed consolidated statements of operation.

In January and February 2021, a holder of warrants, who was also the holder of the Notes, exercised warrants to purchase 613,791 shares of the Company’s common stock at an exercise price of $2.40 per share for total proceeds of $1,473,098.

The proceeds from the exercise of these warrants were used to repay a portion of the principal amount of the Notes.

In March 2021, the Company made a repayment of $1,554,173 in settlement of the outstanding principal amount of the Notes, and the Note holder’s security interest was terminated.

The Company recorded a gain of $64,757 on the Note settlement, and the gain was recorded in other income in the condensed consolidated statements of operations.

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

6 unchanged sentences

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.

The Company applied 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 believes it has used the proceeds in accordance with the PPP.

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

$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.

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”).

Under the effective date method, comparative periods are presented under previous GAAP, Accounting Standards Codification 840, and do not include any retrospective adjustments to reflect the adoption of ASU No.

As an accounting policy, the Company has elected not to apply the recognition requirements to short-term leases and not to separate non-lease components from lease components.

The Company also has elected the package of transition provisions available for existing contracts, which allowed the Company to carryforward its historical assessments of (i) whether contracts are or contain leases, (ii) lease classification and (iii) initial direct costs.

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-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.

2016-02 did not have a material impact on the Company’s condensed consolidated statement of operations and comprehensive income or cash flows as of the adoption date.

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

2016-02, which was the lease for its corporate facility that had an initial expiration date of October 31, 2020.

$217,250 in 2021 and $362,080 in 2022.

The Company has one lease, which is the lease for its corporate facility that expires in July 2022, that it accounts for under Accounting Standards Update 2016-02.

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 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.

Lease expense is recognized on a straight-line basis over the lease term, and operating lease expense was approximately $53,000 for the three months ended March 31, 2021.

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) :

Future minimum payments under the facility operating lease at March 31, 2021 are as follows (in thousands):

Year ending December 31,

3 unchanged sentences

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

Nine Months Ended

September 30,

Three Months Ended

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