RESONANT: Management’s Discussion and Analysis of Financial Position and Results of Operations (Form 10-Q)
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe”, “may”, “will” , “Potentially”, “estimate”, “continue”, “anticipate”, “intend to”, “could”, “could”, “plan”, “plan”, “” ” are intended to identify forward-looking statements.
These forward-looking statements speak only as of the date of this Form 10-Q and are subject to uncertainties, assumptions and business and economic risks. As such, our actual results could differ materially from those stated in forward-looking statements due to the factors referenced in the subsection “Risk Factors” set forth in Part II, Article 1A of this report and Part I, Article 1A of our annual report, and similar discussions in our other reports filed with the
We are an advanced stage development company developing technology for the RF front end market. Our goal is to continue to create innovative technology, engage new customers, increase the number of license agreements for filter designs, and build the necessary infrastructure to support expected growth.
We plan to continue to develop the intellectual property associated with high frequency / wide bandwidth filters (XBAR® based filters), expand our intellectual property and trade secrets libraries, and further develop our EDA platform. multi-physics WaveX ™. While we remain a filter design licensing company, we are also investigating the possibility of licensing some or all of our WaveX ™ software design suite and certain patents to potential customers in the RFFE industry. During the third quarter of 2019, we entered into an investment and commercial agreement with Murata Manufacturing Co., Ltd., the first collaborative arrangement to leverage our XBAR® intellectual property. In all license agreements with our customers, we intend to retain ownership of our technology, software, designs and related improvements. Our goal is to establish and operate alliances with new and existing customers, who will help develop the market for our designs by integrating them with their own technologies and proprietary products, or by using our software products for their own designs, thus combining their own strengths with ours to provide a wide range of solutions. We continue to expand our foundry program, which allows millless companies to enter the filter industry quickly and efficiently. It is through this foundry program that we plan to engage directly with OEMs and Independent Design Houses (IDHs) to provide a significant cost and time-to-market advantage.
Our costs include salaries and employee benefits, compensation paid to consultants, investment costs for research and other equipment, costs associated with development activities, including travel and administration, fees legal, sales and marketing costs, general and administrative costs and other costs associated with an advanced, publicly traded technology company. We continue to add employees as needed to support the development of our WaveX ™ platform, application and system testing, research and development, as well as sales, marketing and marketing functions. administration, 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. Recent Developments COVID-19-- The ongoing COVID-19 pandemic has negatively impacted
the United States, Asiaand Europe, the major markets in which we operate. Although we have seen improvements in the United States, the major markets in which we operate continue to experience COVID-19 cases and recurring shutdowns. The pandemic's ultimate impact on our operations and financial performance depends in part on many factors not within our control and that vary by region, including, without limitation: restrictive governmental and business actions that continue to be taken in response (including travel restrictions and other workforce limitations); economic stimulus, funding and relief programs and other governmental economic responses; the effectiveness of governmental actions; economic uncertainty in key global markets; levels of economic contraction or growth; the impact of the pandemic on health and safety; the emergence of new strains of the virus; the impact of vaccine efforts; the 18
Table of Contents pace of recovery if and when the pandemic ultimately subsides; and how significantly the number of cases increases as economies reopen and restrictive governmental and business actions are relaxed. Restrictions on travel and the imposition of stay-at-home or work remote conditions have impacted our operations and those of our clients. While we have not experienced major disruptions, clients have requested engagement deferrals and our employees' ability to deliver our products and services has been impacted. We continue to actively communicate with and listen to our customers to best ensure that we are responding to their needs in the current environment with innovative solutions that will not only be beneficial now but also over the long-term. However, our ability to interact with customers has been impacted by the current environment. For example, we believe that our inability to meet in-person with current or prospective customers, as well as the cancellation or postponement of Company-sponsored events or third-party events at which our products are featured, may have a negative impact on our business. 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. Results of Operations Comparison of the Three and Six Months Ended
June 30, 2021and 2020 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 each of the three months ended June 30, 2021and 2020, we recognized a total of $0.6 millionof revenue. For the six months ended June 30, 2021and 2020, we recognized a total of $1.2 millionand $1.1 million, respectively, of revenue. Overall revenue remained flat over the periods as we continue to work on our current contracts, primarily our collaboration and license agreement with Murata Manufacturing Co., Ltd., a major Tier 1 RF filter manufacturer. We derive a substantial majority of our revenues from a single customer. Additionally, during 2021, there have been nominal increases in our sales-based royalty revenue. We have recorded $0.8 millionof deferred revenue as of June 30, 2021, which we expect to recognize over the remainder of the contracts. 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 $1.1 millionfrom $4.8 millionin the second quarter of 2020 to $5.9 millionin the second quarter of 2021 and increased $0.9 million, from $10.3 millionin the first half of 2020 to $11.2 millionin the first half of 2021. The increases in the three and six month periods were primarily a result of increased costs related to development of our WaveX™ and XBAR® technology, increases in stock based compensation and increased costs associated with expanding our patent portfolio. For the remainder of the year we expect research and development expenses to increase due to higher development costs and additional headcount. 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 were $3.8 millionfor the second quarter of 2021 compared to $3.0 millionin the second quarter of 2020, and $7.9 millionin the first half of 2021 compared to $6.1 millionin the first half of 2020. The increase in the three month period is primarily related to increased compensation expenses for employees and consultants of $0.5 million, increased travel expenses of $0.1 millionand other increased expenses of $0.1 million. The increase for the six month period was primarily related to increased compensation expenses for employee and consultants of $1.0 million, costs related to the filing of our universal shelf registration statement of $0.1 millionand other increased operating 19
Table of Contents expenses, including insurance, legal, accounting and marketing of
$0.6 million. We anticipate that our sales, marketing and administration expenses will remain consistent with the current quarter. Interest and Investment Income (Expense). Interest and investment expense for the three and six months ended June 30, 2021was $3,000and $6,000, respectively. Interest and investment income for the three and six months ended June 30, 2020was $7,000and $64,000, respectively. The income in 2020 represented interest income on our cash and investment balances while the expense in 2021 represented interest expense recorded in connection with a finance lease for equipment.
Income taxes. We have earned minimal income and are currently operating at a loss. In the past three and six months
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
June 30, 2021, we have raised aggregate gross proceeds of $149.6 millionthrough the use of loans and convertible debt, and sales of equity pursuant to our initial public offering, secondary underwritten offerings, an at-the-market equity program, private placement financings, and the exercise of stock options and warrants. We had current assets of $23.4 millionand current liabilities of $5.5 millionat June 30, 2021, resulting in working capital of $17.9 million. This compares to working capital of $19.1 millionat June 30, 2020and $19.8 millionat December 31, 2020. The change in working capital is primarily the result of cash used in our normal business operations, offset by proceeds from the issuance of equity securities.
Operating activities used cash of
Fundraising activities provided liquidity of
in the first six months of 2020 due to the net proceeds from the guaranteed sale of equity securities concluded in
We do not have off-balance sheet arrangements. Critical accounting policies and estimates Our discussion and analysis of the financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in
A description of our critical accounting policies which represent the most significant judgments and estimates used in the preparation of our financial statements has been provided in the section Management’s Discussion and Analysis of Financial Condition and Results of Operations of our annual report on form. 10-K for the year ended
Quantitative and Qualitative Disclosures About Market Risk Not Applicable 21
© Edgar online, source