You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes to the consolidated financial statements included later in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in "Risk Factors" and "Special Note Regarding Forward-Looking Statements."
Overview
We are a late-stage development company that develops technology for the RF front-end market. Our focus is on continuing to create innovative technology, engage new customers, expand the number of license contracts for filter designs and build the necessary infrastructure to support anticipated growth.
We plan to continue to develop IP associated with high frequency/high-wide bandwidth filters (XBAR®-based filters), to expand our IP and trade secret libraries, and further the development of our WaveX™ multi-physics EDA platform. During the third quarter of 2019, we completed an investment and commercial agreement with Murata Manufacturing Co., Ltd., the first collaboration agreement leveraging our XBAR® IP. During 2020 we continued the development of filters under the commercial agreement, resulting in completion of the second milestone ahead of schedule in October. This milestone is significant as it recognizes achieving predetermined target performance, packaging and initial reliability. We expanded our relationship further by entering into agreements with Murata Manufacturing Co., Ltd., for the development of additional 5G XBAR® RF filters. In all licensing arrangements with our customers we intend to retain ownership of our technology, software, designs and related improvements. Our goal is to establish and leverage alliances with new and existing customers, who will help grow the market for our designs by integrating them with their own proprietary technology and products, or by using our software products for their own designs, thus combining their own particular strengths with ours to provide an extensive array of solutions. We continue to expand our foundry program, which allows fabless companies to enter into the filter business quickly and efficiently. It is through this foundry program that we expect to engage OEM's and Independent Design House's (IDH's) directly to provide a significant cost and time to market advantage.
Our costs include employee salaries and benefits, compensation paid to consultants, capital costs for research and other equipment, costs associated with development activities including travel and administration, legal expenses, sales and marketing costs, general and administration expenses, and other costs associated with a late-stage development, publicly-traded technology company. We continue to add employees, as needed, to support the development of our WaveX™ platform, applications and system test, research and development, as well as sales, marketing and administration functions, to support our efforts.
The amounts that we actually spend for any specific purpose may vary significantly and will depend on a number of factors including, but not limited to, our expected cash resources, the pace of progress of our commercialization and development efforts, actual needs with respect to product testing, research and development, market conditions, and changes in or revisions to our marketing strategies. In addition, we may invest in complementary products, technologies or businesses.
Merger Agreement
On
Pursuant to the terms and subject to the conditions set forth in the Merger
Agreement, on
30
--------------------------------------------------------------------------------
Table of Contents
The initial expiration date of the Offer is the time that is one minute
following
The Merger Agreement contemplates that the Merger will be effected pursuant to Section 251(h) of the DGCL, which permits completion of the Merger upon the collective ownership by Murata, Purchaser and any other subsidiary of Murata of one share more than 50% of the number of Shares that are then issued and outstanding, and if the Merger is so effected pursuant to Section 251(h) of the DGCL, no stockholder vote will be required to consummate the Merger.
The Merger Agreement places limitations on Resonant's ability to engage in certain types of transactions without Murata's consent during the period between the signing of the Merger Agreement and the Effective Time. During this period, Resonant may not raise additional capital through the sale of securities or incur debt. Further, other than in transactions in the ordinary course of business or within specified dollar limits and certain other limited exceptions, Resonant generally may not acquire other businesses, make investments in other persons, or sell, lease, or encumber our assets.
The Merger Agreement contains certain termination rights for each of us and
Murata. Among such rights, and subject to certain limitations, either Resonant
or Murata may terminate the Merger Agreement if the Offer is not completed by
The COVID-19 Pandemic
The ongoing COVID-19 pandemic has negatively impacted
If restrictions continue for an extended period of time, we may, among other issues, experience delays in product development, a decreased ability to support our customers, further disruptions in sales and marketing activities and an overall lack of productivity. Similarly, significant outbreaks, continued travel restrictions, stay-at-home or work remote conditions, or other restrictions may impact our customers' ability to manufacture or deliver raw materials or provide key components or services, which could result in delays in the demand from our customers to produce designs. The pandemic may also impact the expansion of current and/or the roll out of new services which could impact our customers' demand for their products, which could reduce their demand for our products or services. While we don't know and cannot quantify specific impacts, we expect we may be negatively affected if we encounter delays in our product development efforts, reductions in demand due to disruptions in the operations of our customers or their end customers, disruptions in local and global economies, volatility in the global financial markets, overall reductions in demand, or other COVID-19 ramifications.
We will continue to consider the potential impact of the COVID-19 pandemic on our business operations. Although no material impairment or other effects have been identified to date related to the COVID-19 pandemic, there is substantial uncertainty in the nature and degree of its continued effects over time. That uncertainty affects management's accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions as additional events and information become known.
Results of Operations
Comparison of the Years Ended
31
--------------------------------------------------------------------------------
Table of Contents
Revenues. Revenues consist primarily of the recognized portion of the
transaction price associated with our contracts from customers recognized over
time as the obligations under the terms of the contract are satisfied.
Generally, the transaction price includes both upfront and milestone payments
which we expect to receive in exchange for providing services. Revenues also
include royalties from shipments of our licensed designs. For the years ended
Research and Development. These expenses relate to direct engineering and other costs associated with the development and commercialization of our technology, including the development of filter designs for our customers, and consist primarily of the compensation costs of employees and consultants, including stock-based compensation, and to a lesser extent development related costs for facilities, equipment, software and supplies. We also include the costs for our intellectual property development program under research and development. This program focuses on patent strategy and invention extraction.
Research and development expenses increased
Sales, Marketing and Administration Expenses. These expenses relate to our sales and marketing efforts and our back-office support and include compensation costs of employees and consultants, including stock-based compensation. They also include expenses for facilities, travel expenses, telecommunications, investor relations, insurance and professional fees.
Sales, marketing and administration expenses increased
Interest and Investment Income. Interest and investment income decreased from
Income Taxes. We have earned minimal revenues and are currently operating at a
loss. In addition to minimum taxes in the states where we conduct business, we
are also responsible for income taxes in
Liquidity and Capital Resources
Financing Activities
We have earned minimal revenues since inception. Our operations have been funded with initial capital contributions and proceeds from the sale of equity securities and debt.
As of
We had current assets of
As of
32
--------------------------------------------------------------------------------
Table of Contents
believe these cash resources, along with anticipated cash generated from
existing customer contracts, will provide sufficient funding into the third
quarter of 2022. We are subject to the risks and uncertainties associated with a
new business. Our continuance as a going concern is dependent on future
profitability. We are actively pursuing expanding our technology portfolio,
increasing our revenue opportunities by completing deliverables under current
customer contracts and entering into new customer contracts, and efficiently
managing operations and exploring cost saving opportunities. We may not be
successful in these efforts. As further described above, on
The Merger Agreement for our proposed acquisition by Murata, described in the introduction to this management's discussion and analysis, places certain limitations on our use of cash and on our ability to raise capital through the sale of equity securities or incurrence of debt.
Cash Flow Analysis
Operating activities used cash of
Investing activities used cash of
Financing activities provided cash of
Off-Balance Sheet Transactions
We do not have any off-balance sheet arrangements.
Contractual Obligations and Known Future Cash Requirements
Indemnification Agreements
In the ordinary course of business, we may enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. In addition, we have entered into indemnification agreements with directors and certain officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. No demands have been made upon us to provide indemnification under such agreements and there are no claims that we are aware of that could have a material effect on our consolidated balance sheets, consolidated statements of comprehensive loss, consolidated statements of stockholders' equity or consolidated statements of cash flows.
Our material cash requirements include the following contractual and other obligations.
Purchasing Commitments
We have non-cancelable purchasing commitments that we incur in the ordinary
course of business. The purchase commitments covered by these agreements are for
less than one year and aggregate to
Operating Lease Commitments
33
--------------------------------------------------------------------------------
Table of Contents
We lease various office facilities, including our corporate headquarters in
Finance Lease Commitments
We have one finance lease for lab equipment. As of
Critical Accounting Policies and Estimates
Our critical accounting estimates are included in our significant accounting
policies as described in Note 2 of the consolidated financial statements
included in Item 8, Financial Statements and Supplemental Data, of this Annual
Report on Form 10-K. Those consolidated financial statements were prepared in
accordance with accounting principles generally accepted in
Revenue Recognition-We recognize revenue in accordance with
Revenue is recognized upon the transfer of control of promised goods or services
to the customers in an amount that reflects the consideration we expect to
receive in exchange for those products or services. We are required to use
estimates to determine the transaction price in the contract as well as the time
over which we will satisfy the performance obligations. The determination of the
transaction price may include estimates of amounts we expect to receive,
including milestones that we may achieve which would result in additional
payments upon achievement. These estimates are used for recognition of our
revenue primarily related to upfront non-refundable fees received in connection
with filter design projects with customers. Our performance obligation is to
design a licensable filter in accordance with customer specifications. For the
years ended
Recently Issued and Adopted Accounting Pronouncements
Recent accounting pronouncements are detailed in Note 2 of the consolidated financial statements included in Item 8, Financial Statements and Supplemental Data, of this Annual Report on Form 10-K.
© Edgar Online, source