What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-12 · 92 added, 39 removed, 333 unchanged (28% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

26 unchanged sentences

120,000 shares authorized;

and 3,554 shares issued and outstanding at June 30, 2021 and

and 3,554 shares issued and outstanding at September 30, 2021 and

December 31, 2020, respectively

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Royalty and other

7 unchanged sentences

Interest expense

Other income, net

Other income (expense), net

Deemed dividend for warrant exercise price adjustment

Net loss attributable to common stockholders

Other comprehensive loss, net of tax:

Net unrealized loss on available-for-sale securities

Comprehensive loss

Net loss per share attributable to common stockholders

2 unchanged sentences

Basic and diluted

Other comprehensive loss, net of tax:

Net unrealized loss on available-for-sale securities

Comprehensive loss

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

16 unchanged sentences

Balance as of June 30, 2021

Issuance of common stock under stock plan, net

Exercise of warrants

Stock-based compensation

Unrealized loss on available-for-sale investments

Balance as of September 30, 2021

Comprehensive

9 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

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

1 unchanged sentence

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

38 unchanged sentences

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.

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

The Company’s VAE IP solutions will include multiple function accelerator platform products, which target specific application functions, such as packet classifications, and 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 six months ended June 30, 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.

The operating results for the three and nine months ended September 30, 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

40 unchanged sentences

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

The allowance for doubtful accounts was $ 41,000 at June 30, 2021 and December 31, 2020.

There was no allowance for doubtful accounts at either September 30, 2021 or 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.

4 unchanged sentences

quantification of slow moving inventory items.

The Company recorded no material write-downs of inventory during the six months ended June 3 0 , 202 1 and recorded write-downs of $ 0.1 m illion for the year ended December 31, 2020 .

The Company recorded no material write-downs of inventory during the nine months ended September 3 0 , 202 1 and recorded write-downs of $ 0.1 m illion for the nine months ended September 30 , 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 six months ended June 30, 2021, the Company recognized no revenue that had been included in deferred revenue as of December 31, 2020.

During the nine months ended September 30, 2021, the Company recognized no revenue that had been included in deferred revenue as of December 31, 2020.

See Note 6 for disaggregation of revenue by geography.

1 unchanged sentence

Cost of net revenue consists primarily of direct and indirect costs of IC product sales and engineering personnel costs directly related to maintenance and support services specified in licensing agreements.

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

As of June 30, 2021, the Company had the following warrants outstanding (share amounts in thousands):

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

As of September 30, 2021, the Company had the following warrants outstanding (share amounts in thousands):

Number of Shares

5 unchanged sentences

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

1 unchanged sentence

Convertible notes

Proposed Arrangement with Peraso Technologies Inc.

On September 14, 2021, the Company and its newly formed subsidiaries, 2864552 Ontario Inc.

(Callco) and 2864555 Ontario Inc.

(Canco), both corporations existing under the laws of the province of Ontario, entered into an Arrangement Agreement (the Agreement) with Peraso Technologies Inc., a corporation existing under the laws of the province of Ontario (Peraso).

Under the Agreement, the Company, indirectly through Canco, is to acquire all of the issued and outstanding common shares of Peraso (Peraso Shares), including those Peraso Shares to be issued in connection with the conversion or exchange of secured convertible debentures of Peraso and common share purchase warrants of Peraso, as applicable, by way of a statutory plan of arrangement (the Arrangement) under the Business Corporations Act (Ontario) (the OBCA), on and subject to the terms and conditions of the Agreement.

The Agreement provides that the Peraso stockholders may elect to receive either shares of the Company’s common stock or shares of the capital stock of Canco (the Exchangeable Shares) in exchange for such holder’s Peraso Shares, in each case based on an exchange ratio (the Exchange Ratio) to be determined based on the number of Peraso Shares and Company’s common stock outstanding as of immediately prior to the effective time of the Arrangement (the “Effective Time”).

Pursuant to the terms of the Agreement, at the Effective Time, the Company shall hold an aggregate of 1,815,445 Exchangeable Shares and its common stock (collectively, the Earnout Shares).

Such Earnout Shares shall be escrowed pursuant to the terms of an escrow agreement on a pro rata basis from the aggregate consideration to be received by the Peraso stockholders, subject to the offset by the Company for any losses in accordance with the Agreement.

Such Earnout Shares shall be released, subject to any offset claim, upon the satisfaction of the earlier of:

(a) any date following the first anniversary of the Effective Time and prior to the third anniversary of the Effective Time where the volume weighted average price of the Common Stock for any 20 trading days within a period of 30 consecutive trading days is at least $ 8.57 per share, subject to adjustment for stock splits or other similar transaction;

(b) the date of any sale of all or substantially all of the assets or shares of the Company;

or (c) the date of any bankruptcy, insolvency, restructuring, receivership, administration, wind-up, liquidation, dissolution, or similar event involving the Company.

Following the Effective Time, each Exchangeable Share will be exchangeable by the holder for one share of Common Stock (subject to customary adjustments for stock splits or other reorganizations).

In addition, the Company may require all outstanding Exchangeable Shares to be exchanged upon the occurrence of certain events and at any time following the seventh anniversary of the closing of the Arrangement.

While outstanding, holders of Exchangeable Shares will be entitled to cast votes on matters for which holders of Common Stock are entitled to vote and will be entitled to receive dividends economically equivalent to the dividends declared by the Company with respect to the Common Stock.

Eligibility to receive Exchangeable Shares will be subject to certain Canadian residency restrictions and tax statuses.

The Agreement also provides that Peraso stock options, which are exercisable for Peraso Shares, will be replaced with an option to acquire Common Stock to be issued by the Company in consideration for cancellation of the Peraso

options and exercisable for shares of Common Stock after the Effective Time, in each case with adjustments based on the Exchange Ratio.

The exact number of shares of Common Stock that will be issued pursuant to the Arrangement will be determined at the Effective Time in accordance with the Exchange Ratio.

Immediately following the Effective Time, based on the Exchange Ratio, the former stockholders of Peraso are anticipated to own approximately 61 % of the economic and voting interest of the combined company with the Company’s current stockholders holding the remaining 39 % economic and voting interest, as calculated on a fully-diluted basis and including the Earnout Shares.

The consummation of the Arrangement is subject to certain closing conditions precedent, including both the Company’s and Peraso’s stockholders approval of the Agreement and transactions contemplated therein;

the order of the Ontario Superior Court of Justice (Commercial List) granted pursuant to Section 182(5) of the Business Corporations Act (Ontario);

all regulatory approvals;

the continuing listing of the Common Stock on Nasdaq;

and other customary closing conditions.

The transaction is expected to close in the fourth calendar quarter of 2021 and to be implemented by way of an arrangement under the OBCA.

The Agreement provides for customary representations, warranties and covenants, including covenants of each party to (i) subject to certain exceptions, carry on its business in the ordinary course of business consistent with past practice during the period between the execution of the Agreement and the Effective Time and (ii) not solicit any alternate transactions or, subject to certain exceptions, to engage in any discussions or negotiations with respect thereto.

Subject to certain terms and conditions, the Agreement may be terminated if the Effective Time does not occur on or before November 30, 2021, subject to certain automatic extensions.

The Agreement may also be terminated by either party, if the respective stockholders’ approval is not obtained, in the event of material adverse effect, or a superior proposal in connection with an alternative acquisition.

The Agreement subjects the parties to certain termination payment obligations.

If the Agreement is terminated because of the failure to obtain stockholders’ approval, the party that failed to obtain such approval will be obligated to pay a fee of $ 750,000 to the other party.

If the Agreement is terminated by either party as a result of obtaining a superior proposal from a third party, breach of non-solicitation covenants of the Agreement, or because either party’s board of directors fails to unanimously recommend to proceed with the Arrangement or withdraws its recommendation, the breaching party will be required to pay a termination fee of $ 3,500,000 .

Fair Value of Financial Instruments

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

June 30, 2021

September 30, 2021

Cash and cash equivalents

4 unchanged sentences

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

June 30, 2021

September 30, 2021

Money market funds

3 unchanged sentences

(1) Includes $ 0.5 million in cash and cash equivalents on the accompanying condensed consolidated balance sheet due to original maturities of less than three months.

There were no transfers in or out of Level 1 and Level 2 securities during the six months ended June 30, 2021 or 2020.

There were no transfers in or out of Level 1 and Level 2 securities during the nine months ended September 30, 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 six months ended June 30, 2021 or 2020 related to these indemnifications.

No material amounts were reflected in the Company’s condensed consolidated financial statements for the nine months ended September 30, 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

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 95 % of accounts receivable as of June 30, 2021.

Four customers accounted for 88 % of accounts receivable as of September 30, 2021.

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

6 unchanged sentences

Returns filed in foreign jurisdictions may be subject to examination for the years 2011 to 2020.

As of June 30, 2021, the Company has no t recorded any liability for unrecognized tax benefits related to uncertain tax positions.

As of September 30, 2021, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

Stock-Based Compensation

2 unchanged sentences

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 June 30, 2021, no new awards may be made under the Amended 2010 Plan, and equity awards for approximately 115,358 shares were outstanding.

As of September 30, 2021, no new awards may be made under the Amended 2010 Plan, and equity awards for approximately 94,224 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.

8 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, 2021, was $ 0.1 million related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 1.04 years.

The unamortized compensation cost, as of September 30, 2021, was $ 0.1 million related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 0.9 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 June 30 , 202 1 , was $ 0.5 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 0.9 years .

For the three and six months ended June 30, 2021 and 2020, 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, 2021, was $ 0.4 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 0.7 years.

For the three and nine months ended September 30, 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 six months ended June 30, 2021 and 2020.

There were no stock options granted during the nine months ended September 30, 2021 and 2020.

Common Stock Options and Restricted Stock

3 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 Plans during the six months ended June 30, 2021 (in thousands, except exercise price):

The following table summarizes the activity in the shares available for grant under the Plans during the nine months ended September 30, 2021 (in thousands, except exercise price):

Options outstanding

2 unchanged sentences

Balance as of June 30, 2021

Balance as of September 30, 2021

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

2 unchanged sentences

Non-vested shares as of June 30, 2021

The fair value of the RSU granted during the six months ended June 30, 2021 was $ 0.4 million.

The following table summarizes significant ranges of outstanding and exercisable options as of June 30, 2021 (in thousands, except contractual life and exercise price):

Non-vested shares as of September 30, 2021

The fair value of the RSUs granted during the nine months ended September 30, 2021 was $ 0.5 million.

The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2021 (in thousands, except contractual life and exercise price):

Options Outstanding

7 unchanged sentences

$1.57 - $924.00

There was no stock options exercised during the six months ended June 30, 2021 and 2020.

There was no stock options exercised during the nine months ended September 30, 2021 and 2020.

Stockholders’ Equity

5 unchanged sentences

Net proceeds of the offering, after placement agent and other fees and expenses paid by the Company, were approximately $ 12.0 million.

During the six months ended June 30, 2021, the Company received a total of $ 4,174,018 of proceeds from the exercise of 1,739,174 warrants to purchase shares of common stock at a price of $ 2.40 per share.

During the nine months ended September 30, 2021, the Company received a total of $ 4,189,000 of proceeds from the exercise of 1,744,769 warrants to purchase shares of common stock at a price of $ 2.40 per share.

Notes Payable

5 unchanged sentences

The Interest Notes have terms identical to the Notes.

The Company issued 42,672 shares of its common stock valued at $ 139,964 to the Note holder in settlement of the accrued interest of $ 123,066 for the six month period ended February 15, 2021.

During the nine months ended September 30, 2021 the Company issued 42,672 shares of its common stock valued at $ 139,964 to the Note holder in settlement of accrued interest of $ 123,066 .

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 .

$ 1,473,098 .

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

7 unchanged sentences

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 approximately $ 0.1 million and $ 0.1 million for the six months ended June 30, 2021 and 2020, respectively.

Lease expense is recognized on a straight-line basis over the lease term, and operating lease expense was approximately $ 0.2 million and $ 0.2 million for the nine months ended September 30, 2021 and 2020, respectively.

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

Future minimum payments under the facility operating lease at June 30, 2021 were as follows (in thousands):

Future minimum payments under the facility operating lease at September 30, 2021 were 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):

Six Months Ended

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