Attached files
| file | filename |
|---|---|
| EX-99.3 - EXHIBIT 99.3 - INPHI Corp | ex99-3.htm |
| EX-99.1 - EXHIBIT 99.1 - INPHI Corp | ex99-1.htm |
| EX-23.1 - EXHIBIT 23.1 - INPHI Corp | ex23-1.htm |
| 8-K/A - FORM 8-K/A - INPHI Corp | iphi20170224_8ka.htm |
Exhibit 99.2
ClariPhy Communications, Inc.
Consolidated Financial Statements (unaudited)
September 30, 2016 and 2015
ClariPhy Communications, Inc.
Index
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Page(s) |
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Consolidated Financial Statements (unaudited) |
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Consolidated Balance Sheets |
1 |
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Consolidated Statements of Operations |
2 |
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Consolidated Statements of Cash Flows |
3 |
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| Notes to Consolidated Financial Statements | 4-8 |
ClariPhy Communications, Inc.
Consolidated Balance Sheets (unaudited)
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September 30, 2016 |
December 31, 2015 |
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Assets |
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Current assets |
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Cash and cash equivalents |
$ | 7,305,000 | $ | 6,811,000 | ||||
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Short-term investments |
568,000 | 498,000 | ||||||
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Accounts receivable (net of allowance for doubtful accounts of $425,000 and $1,625,000 for the September 30, 2016 and December 31, 2015, respectively) |
7,106,000 | 5,265,000 | ||||||
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Inventory |
2,385,000 | 1,064,000 | ||||||
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Prepaid expenses and other current assets |
1,340,000 | 876,000 | ||||||
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Total current assets |
18,704,000 | 14,514,000 | ||||||
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Property and equipment, net |
1,571,000 | 1,527,000 | ||||||
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Property under capital lease, net |
2,725,000 | 2,216,000 | ||||||
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Deferred tax asset, net |
98,000 | 77,000 | ||||||
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Other assets |
184,000 | 185,000 | ||||||
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Total assets |
$ | 23,282,000 | $ | 18,519,000 | ||||
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Liabilities, Convertible Preferred Stock and Stockholders’ Deficit |
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Current liabilities |
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Accounts payable |
$ | 1,796,000 | $ | 1,256,000 | ||||
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Accrued liabilities |
2,429,000 | 3,097,000 | ||||||
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Note payable, current portion |
3,299,000 | 1,739,000 | ||||||
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Obligations under capital lease, current portion |
819,000 | 646,000 | ||||||
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Deferred revenue |
117,000 | 1,074,000 | ||||||
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Other current liabilities |
272,000 | 124,000 | ||||||
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Total current liabilities |
8,732,000 | 7,936,000 | ||||||
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Note payable, less current portion (net of $64,000 and $89,000 debt discount at September 30, 2016 and December 31, 2015, respectively) |
11,341,000 | 5,173,000 | ||||||
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Obligations under capital lease, less current portion |
1,732,000 | 947,000 | ||||||
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Warrant liabilities |
132,000 | 132,000 | ||||||
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Other liabilities |
745,000 | 585,000 | ||||||
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Total liabilities |
22,682,000 | 14,773,000 | ||||||
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Commitments (Note 6) |
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Series A through C convertible preferred stock; $0.0001 par value; 270,160,150 shares authorized; 228,261,721 issued and outstanding (Liquidation value $115,052,000) |
114,232,000 | 114,232,000 | ||||||
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Total convertible preferred stock |
114,232,000 | 114,232,000 | ||||||
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ClariPhy Communications, Inc. stockholders’ deficit |
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Common stock; $0.0001 par value; 360,000,000 shares authorized; 42,096,650 and 40,343,596 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively |
4,000 | 4,000 | ||||||
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Additional paid-in capital |
10,009,000 | 9,513,000 | ||||||
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Accumulated deficit |
(123,597,000 | ) | (119,906,000 | ) | ||||
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Accumulated other comprehensive loss |
(919,000 | ) | (811,000 | ) | ||||
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Total ClariPhy Communications, Inc. stockholders' deficit |
(114,503,000 | ) | (111,200,000 | ) | ||||
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Noncontrolling interest |
871,000 | 714,000 | ||||||
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Total stockholders' deficit |
(113,632,000 | ) | (110,486,000 | ) | ||||
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Total liabilities, convertible preferred stock and stockholders' deficit |
$ | 23,282,000 | $ | 18,519,000 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
ClariPhy Communications, Inc.
Consolidated Statements of Operations (unaudited)
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Nine Months Ended September 30, |
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2016 |
2015 |
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Product revenue |
$ | 22,555,000 | $ | 21,016,000 | ||||
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Service and other revenue |
9,007,000 | 804,000 | ||||||
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Royalty revenue |
1,338,000 | 3,017,000 | ||||||
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Gross revenue |
32,900,000 | 24,837,000 | ||||||
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Operating expenses |
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Cost of product revenue |
3,816,000 | 2,421,000 | ||||||
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Research and development |
26,419,000 | 25,179,000 | ||||||
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Sales and marketing |
2,287,000 | 2,073,000 | ||||||
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General and administrative |
3,177,000 | 3,035,000 | ||||||
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Total operating expenses |
35,699,000 | 32,708,000 | ||||||
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Loss from operations |
(2,799,000 | ) | (7,871,000 | ) | ||||
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Interest and other income |
175,000 | 108,000 | ||||||
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Interest and other expense, net |
(743,000 | ) | (346,000 | ) | ||||
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Loss before provision for income taxes |
(3,367,000 | ) | (8,109,000 | ) | ||||
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Provision for income taxes |
167,000 | 127,000 | ||||||
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Net loss |
(3,534,000 | ) | (8,236,000 | ) | ||||
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Less: Net income attributable to the noncontrolling interest |
157,000 | 81,000 | ||||||
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Net loss attributable to ClariPhy Communications, Inc. |
(3,691,000 | ) | (8,317,000 | ) | ||||
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Other comprehensive loss |
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Translation adjustment |
(108,000 | ) | (56,000 | ) | ||||
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Total comprehensive loss |
$ | (3,799,000 | ) | $ | (8,373,000 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
ClariPhy Communications, Inc.
Notes to Consolidated Financial Statements (unaudited)
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Nine Months Ended September 30, |
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2016 |
2015 |
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Cash flows from operating activities |
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Net loss |
$ | (3,534,000 | ) | $ | (8,236,000 | ) | ||
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Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation and amortization |
1,202,000 | 958,000 | ||||||
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Provision for bad debts |
391,000 | 471,000 | ||||||
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Amortization of debt discount |
26,000 | 8,000 | ||||||
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Loss on disposal of assets |
8,000 | 5,000 | ||||||
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Stock-based compensation |
356,000 | 450,000 | ||||||
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Issuance of common stock for rent |
38,000 | 14,000 | ||||||
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Deferred tax assets |
(35,000 | ) | (32,000 | ) | ||||
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Changes in operating assets and liabilities |
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Accounts receivable |
(2,232,000 | ) | (2,143,000 | ) | ||||
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Inventory |
(1,321,000 | ) | (27,000 | ) | ||||
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Other current assets |
(490,000 | ) | 535,000 | |||||
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Other assets |
97,000 | 9,000 | ||||||
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Accounts payable |
879,000 | (451,000 | ) | |||||
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Accrued liabilities |
(461,000 | ) | 230,000 | |||||
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Deferred revenue |
(957,000 | ) | (255,000 | ) | ||||
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Deferred rent |
(42,000 | ) | 72,000 | |||||
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Income taxes payable |
- | 80,000 | ||||||
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Other liabilities |
465,000 | 90,000 | ||||||
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Net cash used in operating activities |
(5,610,000 | ) | (8,222,000 | ) | ||||
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Cash flows from investing activities |
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Purchases of short-term investments |
(155,000 | ) | (61,000 | ) | ||||
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Acquisition of property and equipment |
(516,000 | ) | (333,000 | ) | ||||
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Net cash used in investing activities |
(671,000 | ) | (394,000 | ) | ||||
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Cash flows from financing activities |
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Proceeds from issuance of common stock |
102,000 | 172,000 | ||||||
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Proceeds from bank borrowings, net of issuance costs |
14,910,000 | 7,650,000 | ||||||
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Payments on note payable |
(6,598,000 | ) | (6,200,000 | ) | ||||
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Investment in noncontrolling interest |
(100,000 | ) | (100,000 | ) | ||||
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Payments on obligations under capital lease |
(790,000 | ) | (604,000 | ) | ||||
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Net cash (used in) provided by financing activities |
7,524,000 | 918,000 | ||||||
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Effect of foreign currency rate changes on cash |
(749,000 | ) | (70,000 | ) | ||||
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Net increase (decrease) in cash and cash equivalents |
494,000 | (7,768,000 | ) | |||||
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Cash and cash equivalents, beginning of period |
6,811,000 | 17,512,000 | ||||||
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Cash and cash equivalents, end of period |
$ | 7,305,000 | $ | 9,744,000 | ||||
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Supplemental disclosure of cash flow information |
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Cash paid for interest |
$ | 188,000 | $ | 197,000 | ||||
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Supplemental disclosure of noncash investing activities |
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Additions to property, plant and equipment acquired under capital lease |
$ | 1,138,000 | $ | 1,230,000 | ||||
ClariPhy Communications, Inc.
Notes to Consolidated Financial Statements (unaudited)
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1. |
The Company |
ClariPhy Communications, Inc. (the “Company”), was incorporated in the state of Delaware on September 19, 2002. The Company is in the business of designing, developing and selling high-speed communications integrated circuits targeting telecom and enterprise optical networking applications.
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2. |
Liquidity and Capital Resources |
Since inception, the Company has incurred recurring losses and negative cash flows from operations. To date, the Company has funded its operational and capital needs primarily through the net proceeds received from the sale of its common and preferred stock, issuance of debt, and to a lesser extent, from cash flow generated from the sales of its products and services. Management plans to increase revenue through increasing demand and awareness of its currently available products and services as well as to successfully develop commercially viable products and services, or raise additional capital. However, there can be no assurance that the Company will be successful in increasing revenues or that any additional financing will be available on acceptable terms, if at all. If the Company is not successful in increasing revenues or raising additional capital, it could have a material adverse effect on the Company.
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3. |
Property and Equipment |
Property and equipment consist of the following:
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September 30, |
December 31, |
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2016 |
2015 |
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Computer equipment |
$ | 961,000 | $ | 927,000 | ||||
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Laboratory equipment |
4,902,000 | 4,609,000 | ||||||
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Furniture and fixtures |
110,000 | 85,000 | ||||||
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Leasehold improvements |
419,000 | 289,000 | ||||||
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Purchased software |
249,000 | 249,000 | ||||||
| 6,641,000 | 6,159,000 | |||||||
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Less: Accumulated depreciation and amortization |
(5,070,000 | ) | (4,632,000 | ) | ||||
| $ | 1,571,000 | $ | 1,527,000 | |||||
Depreciation and amortization expense was $581,000 and $588,000 for the nine months ended September 30, 2016 and September 30, 2015, respectively.
ClariPhy Communications, Inc.
Notes to Consolidated Financial Statements (unaudited)
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4. |
Property Under Capital Lease |
The Company has entered into capital lease arrangements with various lessors for lease terms of 24 – 60 months for the purchase of capital equipment. Property under capital lease consist of the following:
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September 30, |
December 31, |
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2016 |
2015 |
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Computer equipment |
$ | 769,000 | $ | 532,000 | ||||
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Laboratory equipment |
3,651,000 | 2,760,000 | ||||||
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Less: Accumulated depreciation and amortization |
(1,695,000 | ) | (1,076,000 | ) | ||||
| $ | 2,725,000 | $ | 2,216,000 | |||||
Depreciation expense was $621,000 and $370,000 for the nine months ended September 30, 2016 and September 30, 2015, respectively.
Minimum lease payments under capital leases as of September 30, 2016 are as follows:
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2016 (remaining) |
$ | 282,000 | ||
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2017 |
975,000 | |||
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2018 |
738,000 | |||
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2019 |
563,000 | |||
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2020 and thereafter |
516,000 | |||
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Total minimum lease payments |
3,074,000 | |||
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Less: Amount representing interest |
523,000 | |||
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Minimum lease payments, net of interest |
$ | 2,551,000 |
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5. |
Accrued and other liabilities |
Accrued and other liabilities consist of the following:
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September 30, |
December 31, |
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2016 |
2015 |
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Professional services |
$ | 1,169,000 | $ | 1,694,000 | ||||
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Salaries and employee benefits |
1,147,000 | 1,257,000 | ||||||
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Contingency reserve |
672,000 | 855,000 | ||||||
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Other |
458,000 | - | ||||||
| $ | 3,446,000 | $ | 3,806,000 | |||||
ClariPhy Communications, Inc.
Notes to Consolidated Financial Statements (unaudited)
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6. |
Commitments |
At September 30, 2016, the minimum lease payments under all operating leases are as follows:
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2016 (remaining) |
$ | 241,000 | ||
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2017 |
688,000 | |||
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2018 |
734,000 | |||
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2019 |
487,000 | |||
| $ | 2,150,000 |
In addition, annual rental payments on the Company’s Los Altos, California facility may be made in cash or stock. In February 2016, 321,200 shares were issued to pay for 2015 rent. In October 2016, 381,771 shares were issued to pay for 2016 rent.
The Company has entered into software license agreements with various Electronic Design Automation (EDA) vendors. Payments under these agreements are as follows:
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2016 (remaining) |
$ | 2,046,000 | ||
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2017 |
5,230,000 | |||
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2018 |
5,719,000 | |||
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2019 |
1,750,000 | |||
| $ | 14,745,000 |
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7. |
Notes Payable |
At September 30, 2016, future principal payments on notes payable are as follows:
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2016 (remaining) |
$ | 1,942,000 | ||
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2017 |
1,820,000 | |||
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2018 |
10,942,000 | |||
| $ | 14,704,000 |
ClariPhy Communications, Inc.
Notes to Consolidated Financial Statements (unaudited)
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8. |
Stock-based compensation |
Stock-based compensation expense included in the statement of operations is as follows:
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Nine Months Ended September 30, |
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2016 |
2015 |
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Research and development |
$ | 272,000 | $ | 340,000 | ||||
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Sales and marketing |
28,000 | 41,000 | ||||||
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General and administrative |
56,000 | 69,000 | ||||||
| $ | 356,000 | $ | 450,000 | |||||
The following table presents the weighted average assumptions used for employee stock options for the nine months ended September 30, 2016 and 2015:
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Nine Months Ended September 30, |
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2016 |
2015 |
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Expected term (years) |
6.01 | 6.02 | ||||||
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Expected volatility |
60.9 | % | 105.6 | % | ||||
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Risk-free interest rate |
1.29 | % | 1.65 | % | ||||
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Dividend yield |
0 | % | 0 | % | ||||
The weighted average fair value per share of employee stock options granted was $0.06 for the nine months ended September 30, 2016. As of September 30, 2016, the Company has reserved 106,226,076 shares of common stock to satisfy the requirements of the Company’s 2003 Stock Plan and has 11,683,281 shares available for grant.
Stock option activity for the nine months ended September 30, 2016 is as follows:
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Outstanding Options |
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Weighted- |
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Average |
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Number |
Exercise |
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of Shares |
Price |
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Balances at December 31, 2015 |
63,364,903 | $ | 0.07 | |||||
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Options granted |
8,499,947 | $ | 0.10 | |||||
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Options exercised |
(1,549,979 | ) | $ | 0.07 | ||||
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Options forfeited |
(4,263,210 | ) | $ | 0.07 | ||||
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Balances at September 30, 2016 |
66,051,661 | $ | 0.08 | |||||
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Expected to vest at September 30, 2016 |
64,769,771 | $ | 0.08 | |||||
ClariPhy Communications, Inc.
Notes to Consolidated Financial Statements (unaudited)
Restricted stock award activity for the nine months ended September 30, 2016 is as follows:
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Outstanding Awards |
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Weighted- |
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Average |
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Number |
Fair Value |
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of Shares |
Per Share |
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Balances at December 31, 2015 |
1,337,812 | $ | 0.05 | |||||
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Awards vested |
(666,562 | ) | $ | 0.05 | ||||
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Balances at September 30, 2016 |
671,250 | $ | 0.06 | |||||
At September 30, 2016, stock options outstanding and vested by exercise price are as follows:
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Options Outstanding |
Options Vested |
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Weighted |
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Average |
Number |
Weighted |
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Range of |
Remaining |
Vested |
Average |
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Exercise |
Number |
Contractual |
and |
Exercise |
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Prices |
Outstanding |
Life (Years) |
Exercisable |
Price |
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| $0.05 | - | 0.10 | 66,051,661 | 6.92 | 40,413,803 | $ | 0.08 | |||||||||||||
Total unrecognized compensation costs were $1,070,000 related to stock options and $36,000 related to restricted stock. These costs are expected to be recognized over a period of approximately 2.92 and 1.42 years for options and restricted stock, respectively. The aggregate intrinsic value of options vested and outstanding as of September 30, 2016 was $916,000.
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9. |
Income Taxes |
The income tax provisions for the nine months ended September 30, 2016 and September 30, 2015 reflect effective tax rates of 5% and 2%, respectively. The effective tax rates differ from the statutory rate of 34% primarily due to the valuation allowance.
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10. |
Related Parties |
During the nine months ended September 30, 2016, the Company generated $14,022,000, and $809,000 in revenues from two customers who have equity ownership in the Company. During the nine months ended September 30, 2015, the Company generated $10,184,000, $1,157,022, $701,500 and $689,000 in revenues from four customers who have equity ownership in the Company. At September 30, 2016, accounts receivable from a customer with equity ownership in the Company totaled $2,580,000.
8