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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021 

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Commission File Number 000-27115

 

PCTEL, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

77-0364943

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification Number)

 

 

 

471 Brighton Drive,

 

 

Bloomingdale, IL

 

60108

(Address of Principal Executive Office)

 

(Zip Code)

 

Registrant's Telephone Number, Including Area Code: (630) 372-6800

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

 

Common Stock

 

PCTI

 

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes      No   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definition of “large accelerated filer,” "accelerated filer,” “smaller reporting company," and “emerging growth company” in Rule 12b-2 of the Exchange Act: 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes     No   

 

As of May 4, 2021, the registrant had 18,566,700 shares of common stock, $0.001 par value per share, outstanding.

2


PCTEL, INC.

Form 10-Q

For the Quarterly Period Ended March 31, 2021

TABLE OF CONTENTS

 

PART I

 

FINANCIAL INFORMATION

 

Page

Item 1

 

Financial Statements (unaudited)

 

4

 

 

Condensed Consolidated Balance Sheets

 

4

 

 

Condensed Consolidated Statements of Operations

 

5

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

6

 

 

Condensed Consolidated Statements of Stockholders' Equity

 

7

 

 

Condensed Consolidated Statements of Cash Flows

 

8

 

 

Notes to the Condensed Consolidated Financial Statements

 

9

Item 2

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

26

Item 3

 

Quantitative and Qualitative Disclosures about Market Risk

 

32

Item 4

 

Controls and Procedures

 

32

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

33

Item 1

 

Legal Proceedings

 

33

Item 1A

 

Risk Factors

 

33

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

33

Item 3

 

Defaults Upon Senior Securities

 

33

Item 4

 

Mine Safety Disclosures

 

34

Item 5

 

Other Information

 

34

Item 6

 

Exhibits

 

34

Signatures

 

 

 

35

 

 

3


 

PART I – FINANCIAL INFORMATION

Item 1: Financial Statements (unaudited)

PCTEL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,796

 

 

$

5,761

 

Short-term investment securities

 

 

24,805

 

 

 

30,582

 

Accounts receivable, net of allowances of $90 and $113 at March 31, 2021 and

 

 

 

 

 

 

 

 

December 31, 2020, respectively

 

 

14,610

 

 

 

16,601

 

Inventories, net

 

 

9,719

 

 

 

9,984

 

Prepaid expenses and other assets

 

 

1,543

 

 

 

1,685

 

Total current assets

 

 

63,473

 

 

 

64,613

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

12,056

 

 

 

12,505

 

Long-term investment securities

 

 

2,963

 

 

 

4,640

 

Goodwill

 

 

3,332

 

 

 

3,332

 

Other noncurrent assets

 

 

2,425

 

 

 

2,441

 

TOTAL ASSETS

 

$

84,249

 

 

$

87,531

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,297

 

 

$

4,430

 

Accrued liabilities

 

 

8,045

 

 

 

7,316

 

Total current liabilities

 

 

10,342

 

 

 

11,746

 

Long-term liabilities

 

 

4,262

 

 

 

4,387

 

Total liabilities

 

 

14,604

 

 

 

16,133

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 50,000,000 shares authorized at

 

 

 

 

 

 

 

 

March 31, 2021 and December 31, 2020, respectively, and 18,518,515 and 18,429,350

 

 

 

 

 

 

 

 

shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

19

 

 

 

18

 

Additional paid-in capital

 

 

127,174

 

 

 

128,250

 

Accumulated deficit

 

 

(57,550

)

 

 

(56,888

)

Accumulated other comprehensive income

 

 

2

 

 

 

18

 

Total stockholders’ equity

 

 

69,645

 

 

 

71,398

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

84,249

 

 

$

87,531

 

 

 

 

 

 

 

 

 

 

 

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

 

4


 

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

$

17,707

 

 

$

17,506

 

 

COST OF REVENUES

 

 

9,369

 

 

 

9,291

 

 

GROSS PROFIT

 

 

8,338

 

 

 

8,215

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,194

 

 

 

3,029

 

 

Sales and marketing

 

 

2,763

 

 

 

3,142

 

 

General and administrative

 

 

3,076

 

 

 

2,802

 

 

Amortization of intangible assets

 

 

0

 

 

 

33

 

 

Restructuring expenses

 

 

0

 

 

 

87

 

 

Total operating expenses

 

 

9,033

 

 

 

9,093

 

 

OPERATING LOSS

 

 

(695

)

 

 

(878

)

 

Other income, net

 

 

39

 

 

 

198

 

 

LOSS BEFORE INCOME TAXES

 

 

(656

)

 

 

(680

)

 

Expense for income taxes

 

 

6

 

 

 

8

 

 

NET LOSS

 

$

(662

)

 

$

(688

)

 

 

 

 

 

 

 

 

 

 

 

Net loss per Share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

(0.04

)

 

Diluted

 

$

(0.04

)

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares:

 

 

 

 

 

 

 

 

 

Basic

 

 

18,070

 

 

 

18,207

 

 

Diluted

 

 

18,070

 

 

 

18,207

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividend per share

 

$

0.055

 

 

$

0.055

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

5


 

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(662

)

 

$

(688

)

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE LOSS:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(16

)

 

 

(89

)

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

$

(678

)

 

$

(777

)

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

6


 

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Total

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Stockholders'

 

 

 

Common

 

 

Paid-In

 

 

Retained

 

 

Comprehensive

 

 

Equity of

 

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

PCTEL, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE at DECEMBER 31, 2020

 

$

18

 

 

$

128,250

 

 

$

(56,888

)

 

$

18

 

 

$

71,398

 

Stock-based compensation expense

 

 

1

 

 

 

617

 

 

 

0

 

 

 

0

 

 

 

618

 

Issuance of shares for stock purchase plans and stock options

 

 

0

 

 

 

8

 

 

 

0

 

 

 

0

 

 

 

8

 

Cancellation of shares for payment of withholding tax

 

 

0

 

 

 

(659

)

 

 

0

 

 

 

0

 

 

 

(659

)

Repurchase of common stock

 

 

0

 

 

 

(31

)

 

 

0

 

 

 

0

 

 

 

(31

)

Dividends paid ($0.055 per share)

 

 

0

 

 

 

(1,011

)

 

 

0

 

 

 

0

 

 

 

(1,011

)

Net loss

 

 

0

 

 

 

0

 

 

 

(662

)

 

 

0

 

 

 

(662

)

Change in cumulative translation adjustment, net

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(16

)

 

 

(16

)

BALANCE at MARCH 31, 2021

 

$

19

 

 

$

127,174

 

 

$

(57,550

)

 

$

2

 

 

$

69,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE at DECEMBER 31, 2019

 

$

19

 

 

$

133,954

 

 

$

(60,305

)

 

$

(318

)

 

$

73,350

 

Stock-based compensation expense

 

 

0

 

 

 

562

 

 

 

0

 

 

 

0

 

 

 

562

 

Issuance of shares for stock purchase plans and stock options

 

 

0

 

 

 

59

 

 

 

0

 

 

 

0

 

 

 

59

 

Cancellation of shares for payment of withholding tax

 

 

0

 

 

 

(1,106

)

 

 

0

 

 

 

0

 

 

 

(1,106

)

Repurchase of common stock

 

 

(1

)

 

 

(1,999

)

 

 

0

 

 

 

0

 

 

 

(2,000

)

Dividends paid ($0.055 per share)

 

 

0

 

 

 

(1,032

)

 

 

0

 

 

 

0

 

 

 

(1,032

)

Net loss

 

 

0

 

 

 

0

 

 

 

(688

)

 

 

0

 

 

 

(688

)

Change in cumulative translation adjustment, net

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(89

)

 

 

(89

)

BALANCE at MARCH 31, 2020

 

$

18

 

 

$

130,438

 

 

$

(60,993

)

 

$

(407

)

 

$

69,056

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

7


 

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Operating Activities:

 

 

 

 

 

 

 

 

Net Loss

 

$

(662

)

 

$

(688

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

742

 

 

 

748

 

Intangible asset amortization

 

 

0

 

 

 

144

 

Stock-based compensation

 

 

618

 

 

 

562

 

Loss on disposal of property and equipment

 

 

3

 

 

 

7

 

Restructuring costs

 

 

(15

)

 

 

63

 

Bad debt provision

 

 

(11

)

 

 

18

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,999

 

 

 

3,432

 

Inventories

 

 

259

 

 

 

760

 

Prepaid expenses and other assets

 

 

215

 

 

 

470

 

Accounts payable

 

 

(2,061

)

 

 

737

 

Income taxes payable

 

 

6

 

 

 

8

 

Other accrued liabilities

 

 

554

 

 

 

(2,011

)

Deferred revenue

 

 

7

 

 

 

39

 

Net cash provided by operating activities

 

 

1,654

 

 

 

4,289

 

Investing Activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(354

)

 

 

(1,516

)

Purchases of investments

 

 

(5,953

)

 

 

(9,918

)

Redemptions/maturities of short-term investments

 

 

13,407

 

 

 

13,866

 

Net cash provided by in investing activities

 

 

7,100

 

 

 

2,432

 

Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

8

 

 

 

59

 

Payment of withholding tax on stock-based compensation

 

 

(659

)

 

 

(1,106

)

Principle payments on finance leases

 

 

(16

)

 

 

(20

)

Purchase of common stock from repurchase program

 

 

(31

)

 

 

(2,000

)

Cash dividends

 

 

(1,011

)

 

 

(1,032

)

Net cash used in financing activities

 

 

(1,709

)

 

 

(4,099

)

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

7,045

 

 

 

2,622

 

Effect of exchange rate changes on cash

 

 

(10

)

 

 

(54

)

Cash and cash equivalents, beginning of period

 

 

5,761

 

 

 

7,094

 

Cash and Cash Equivalents, End of Period

 

$

12,796

 

 

$

9,662

 

 

 

 

 

 

 

 

 

 

 

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

 

8


 

PCTEL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands except share and per share data and as otherwise noted)

 

 

1. Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments of a normal, recurring nature that are considered necessary for a fair presentation have been included.  For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

Throughout this Quarterly Report on Form 10-Q, including under Part 1, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we disclose certain measures that the Company has taken in response to the macroeconomic impacts of the novel coronavirus (“COVID-19”).  The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that remain highly uncertain at this time.

Nature of Operations

PCTEL, Inc. (the “Company”) was incorporated in California in 1994 and reincorporated in Delaware in 1998. The Company is a

leading global provider of wireless technology, including purpose-built Industrial Internet of Things (“IoT”) devices, antenna systems,

and test and measurement solutions. The Company solves complex wireless challenges to help organizations stay connected, transform, and grow, and the Company has expertise in radio frequency (“RF”), digital and mechanical engineering. The Company has two businesses (antennas & Industrial IoT devices and test & measurement products) that address three market segments: Enterprise Wireless, Intelligent Transportation, and Industrial IoT.

 

The Company’s principal executive offices are located at 471 Brighton Drive, Bloomingdale, Illinois 60108. The telephone number at

that address is (630) 372-6800 and the website is www.pctel.com. Additional information about the Company can be obtained on the Company’s website; however, the information within, or that can be accessed through, the Company’s website, is not part of this Quarterly Report on Form 10-Q. 

Basis of Consolidation

The unaudited interim condensed consolidated financial statements of the Company include the condensed consolidated balance sheets for the period ended March 31, 2021 and December 31, 2020, and the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss, the condensed consolidated statements of stockholders’ equity and condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020, respectively. The interim condensed consolidated financial statements are unaudited and reflect all adjustments of a normal recurring nature that are, in the opinion of management, necessary for a fair presentation of the interim period financial statements.  The condensed consolidated balance sheet as of December 31, 2020 is derived from the audited financial statements as of December 31, 2020.  

The unaudited interim condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.  The significant accounting policies followed by the Company are set forth in the 2020 Form 10-K.  There were no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021.  In addition, the Company reaffirms the use of estimates in the preparation of the financial statements as set forth in the 2020 Form 10-K.  These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the 2020 Form 10-K.  The results of operations for the period ended March 31, 2021 may not be indicative of the results for the period ending December 31, 2021.

Foreign Operations

Cross-border transactions, both with external parties and in our internal operations, result in exposure to foreign exchange rate fluctuations. We are exposed to currency risk with the Chinese Yuan due to our operations in China and with other foreign currencies related to employees outside the U.S. Fluctuations could have an adverse effect on our results of operations and cash flows. We manage certain operating activities at the local level with revenues, costs, assets, and liabilities generally being denominated in local currencies. However, our results of operations and assets and liabilities are reported in U.S. dollars and thus will fluctuate with

9


changes in exchange rates between such local currencies and the U.S. dollar.  Gains and losses resulting from transactions originally in foreign currencies and then translated into U.S. dollars are included in the condensed consolidated statements of operations.  For the three months ended March 31, 2021, approximately 2% of revenues and 14% of expenses were transacted in foreign currencies as compared to 3% and 17% for the three months ended March 31, 2020.  Net foreign exchange gains resulting from foreign currency transactions included in other income, net was $8 and $37 for the three months ended March 31, 2021 and 2020, respectively.          

Recent Accounting Pronouncement

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-14).  This new guidance eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge.  Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value.  The changes are effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted.  The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“Topic 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This update provides optional expedients and exceptions for applying generally accepted accounting principles to certain contract modifications and hedging relationships that reference London Inter-bank Offered Rate (LIBOR) or another reference rate expected to be discontinued. Topic 848 is effective upon issuance and generally can be applied through December 31, 2022.  The Company is currently evaluating the impact of Topic 848 on the consolidated financial statements.

 

2. Fair Value of Financial Instruments

The Company follows accounting guidance for fair value measurements and disclosures, which establishes a fair value hierarchy that requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.

Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash equivalents are measured at fair value and investments are recognized at amortized cost in the Company’s financial statements.  Accounts receivable is a financial asset with a carrying value that approximates fair value due to the short-term nature of these assets.  Accounts payable is a financial liability with a carrying value that approximates fair value due to the short-term nature of these liabilities.

 

10


 

3. Income per Share

The following table is the computation of basic and diluted income per share:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Basic Income Per Share computation:

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(662

)

 

$

(688

)

Denominator:

 

 

 

 

 

 

 

 

Weighted shares outstanding - basic

 

 

18,069,836

 

 

 

18,207,165

 

Net income per common share - basic

 

 

 

 

 

 

 

 

Net loss

 

$

(0.04

)

 

$

(0.04

)

Diluted Income Per Share computation:

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Weighted shares outstanding - basic

 

 

18,069,836

 

 

 

18,207,165

 

Restricted shares subject to vesting

 

 

0

 

 

 

0

 

Common stock option grants

 

 

0

 

 

 

0

 

Weighted shares outstanding - diluted

 

 

18,069,836

 

 

 

18,207,165

 

Net income per common share - diluted

 

 

 

 

 

 

 

 

Net loss

 

$

(0.04

)

 

$

(0.04

)

 

 

4. Cash, Cash Equivalents and Investments

The Company’s cash, cash equivalents, and investments consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Cash

 

$

3,761

 

 

$

4,740

 

Cash equivalents

 

 

9,035

 

 

 

1,021

 

Short-term investments

 

 

24,805

 

 

 

30,582

 

Long-term investments

 

 

2,963

 

 

 

4,640

 

Total

 

$

40,564

 

 

$

40,983

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

At March 31, 2021 and December 31, 2020, cash and cash equivalents included bank balances and investments with original maturities of less than 90 days.  At March 31, 2021 and December 31, 2020, the Company’s cash equivalents were invested in highly liquid AAA rated money market funds that are required to comply with Rule 2a-7 of the Investment Company Act of 1940.  Such funds utilize the amortized cost method of accounting, seek to maintain a constant $1.00 per share price, and are redeemable upon demand.  The Company restricts its investments in AAA money market funds to those invested 100% in either short-term U.S. government agency securities or bank repurchase agreements collateralized by these same securities.  The fair values of these money market funds are established through quoted prices in active markets for identical assets (Level 1 inputs).  The Company’s cash in U.S. banks is insured by the Federal Deposit Insurance Corporation up to the insurable limit of $250.

The Company had $2.1 million of cash and cash equivalents in bank accounts in China at March 31, 2021 and December 31, 2020.  The Company’s cash in its China bank accounts is not insured.  At March 31, 2021, $1.0 million of the cash and cash equivalents in China was invested in a 90-day deposit account classified as cash equivalents and $1.1 million was in cash accounts. As of March 31, 2021, the Company has no intentions of repatriating the cash in its foreign bank accounts in China.  If the Company decides to repatriate the cash in these China bank accounts, it may have trouble doing so in a timely manner.  The Company may also be exposed to foreign currency fluctuations and taxes if it repatriates these funds.   

Investments

At March 31, 2021 and December 31, 2020, the Company’s investments consisted of corporate bonds with ratings at the purchase date of A or higher and certificates of deposit. All the investments at March 31, 2021 and December 31, 2020 were classified as held-to-maturity.  The bonds and certificates of deposit classified as short-term investments have original maturities greater than 90 days and mature within one year and the bonds and certificates of deposit classified as long-term investments have maturities greater than one year but less than two years.  The Company’s bond investments are recorded at the purchase price and carried at amortized cost.  

11


Effective January 1, 2020, the Company adopted ASU 2016-13.  This ASU replaces the incurred loss impairment model with an expected loss impairment model for financial instruments, including short-term investments.  The amendment requires entities to consider forward-looking information to estimate expected credit losses.  Under ASU 2016-13, the Company classifies its held-to-maturity investment portfolio by the investment type and further classifies the corporate bonds by the bond ratings.  For estimating potential credit losses, the Company considers the historical loss data, the bond ratings, as well as and current and future economic conditions.

Cash equivalents and investments were as follows at March 31, 2021 and December 31, 2020:

 

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 

0

 

 

 

0

 

 

 

0

 

 

 

300