UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended
OR
For the transition period from to
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(Exact Name of Registrant as Specified in Its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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:
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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, 2023, the registrant had
2
PCTEL, INC.
Form 10-Q
For the Quarterly Period Ended March 31, 2023
TABLE OF CONTENTS
PART I |
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Item 1 |
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Item 2 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3 |
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Item 4 |
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PART II |
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31 |
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Item 1 |
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Item 1A |
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Item 2 |
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Item 3 |
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Item 4 |
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Item 5 |
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Item 6 |
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3
PART I – FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
PCTEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except share data)
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March 31, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investment securities |
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Accounts receivable, net of allowances of $ |
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December 31, 2022, respectively |
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Inventories, net |
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Prepaid expenses and other assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Other noncurrent assets |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Total current liabilities |
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Long-term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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March 31, 2023 and December 31, 2022, and |
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shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
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$ |
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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)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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REVENUES |
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$ |
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$ |
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COST OF REVENUES |
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GROSS PROFIT |
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OPERATING EXPENSES: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Amortization of intangible assets |
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Restructuring expenses |
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Total operating expenses |
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OPERATING INCOME (LOSS) |
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Other income, net |
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INCOME (LOSS) BEFORE INCOME TAXES |
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Expense for income taxes |
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NET INCOME (LOSS) |
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$ |
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$ |
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Net Income (Loss) per Share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted Average Shares: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
PCTEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(in thousands)
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Three Months Ended March 31, |
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2023 |
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2022 |
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NET INCOME (LOSS) |
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$ |
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$ |
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OTHER COMPREHENSIVE INCOME (LOSS): |
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Foreign currency translation adjustments |
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COMPREHENSIVE INCOME (LOSS) |
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$ |
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$ |
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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)
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Accumulated |
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Total |
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Additional |
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Other |
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Stockholders' |
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Common |
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Paid-In |
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Accumulated |
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Comprehensive |
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Equity of |
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Stock |
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Capital |
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Deficit |
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Loss |
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PCTEL, Inc. |
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BALANCE at DECEMBER 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation expense |
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Cancellation of shares for payment of withholding tax |
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Dividends paid ($ |
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Net income |
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Change in cumulative translation adjustment, net |
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BALANCE at MARCH 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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BALANCE at DECEMBER 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation expense |
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Cancellation of shares for payment of withholding tax |
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Dividends paid ($ |
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Net loss |
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Change in cumulative translation adjustment, net |
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BALANCE at MARCH 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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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)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Operating Activities: |
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Net income (loss) |
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$ |
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$ |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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Intangible asset amortization |
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Stock-based compensation |
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Loss on disposal of property and equipment |
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Restructuring costs |
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Bad debt provision |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other assets |
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Deferred tax assets |
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Accounts payable |
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Income taxes payable |
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Other accrued liabilities |
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Deferred revenue |
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Net cash provided by (used in) operating activities |
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Investing Activities: |
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Capital expenditures |
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Purchase of short-term investments |
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Redemptions/maturities of short-term investments |
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Net cash provided by (used in) investing activities |
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Financing Activities: |
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Payment of withholding tax on stock-based compensation |
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Principal payments on finance leases |
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Cash dividends |
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Net cash used in financing activities |
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Net increase (decrease) in cash and cash equivalents |
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Effect of exchange rate changes on cash |
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Cash and cash equivalents, beginning of period |
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Cash and Cash Equivalents, End of Period |
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$ |
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$ |
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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, the unaudited interim condensed consolidated financial statements reflect all adjustments, which include only normal, recurring adjustments that are considered necessary for the fair presentation of the Company's financial position as of March 31, 2023. For further information, please refer to the audited consolidated financial statements and footnotes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 by PCTEL, Inc. (the “2022 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 macroeconomic impacts of the ongoing coronavirus (“COVID-19”) pandemic and the ensuing supply chain disruption. 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. (“PCTEL” or 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 IoT ("Industrial IoT") devices, antenna systems, and test & measurement solutions. PCTEL strives to solve complex wireless challenges to help organizations stay connected, transform, and grow and it has expertise in radio frequency ("RF"), digital, and mechanical engineering. The Company has two product lines (antennas & Industrial IoT devices and test & measurement products).
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 assessed 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 as of March 31, 2023 and December 31, 2022, and the condensed consolidated statements of cash flows, the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income (loss), and the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2023 and 2022. The interim condensed consolidated financial statements are unaudited but 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, 2022 is derived from the audited financial statements as of December 31, 2022.
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 (the “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 2022 Form 10-K. There were no material changes in the Company’s significant accounting policies during the three months ended March 31, 2023. Additionally, the Company reaffirms the use of estimates in the preparation of the financial statements as set forth in the 2022 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 2022 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full period or any other interim period.
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 by having foreign locations, suppliers and 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 changes in exchange rates between such local currencies and the U.S. dollar.
9
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, 2023, approximately
Recent Accounting Pronouncements
In June 2022, FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This update clarifies the guidance in Topic 820 on the fair value measurement of an equity security that is subject to contractual restrictions that prohibit the sale of the equity security. This update also requires specific disclosures related to such equity securities including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. This ASU is effective for all public business entities in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this ASU on our consolidated financial statements and related disclosures.
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 a 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, accrued employee compensation and certain operating liabilities are financial liabilities with a carrying value that approximates fair value due to the short-term nature of these liabilities.
3. Income (Loss) per Share
The following table is the computation of basic and diluted income per share:
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Three Months Ended March 31, |
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2023 |
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2022 |
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Basic Income Per Share computation: |
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Numerator: |
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Net income (loss) |
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$ |
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$ |
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Denominator: |
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Weighted shares outstanding - basic |
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Net income (loss) per common share - basic |
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$ |
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Diluted Income Per Share computation: |
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Denominator: |
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Weighted shares outstanding - basic |
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Restricted shares subject to vesting |
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Common stock option grants |
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|
||
Weighted shares outstanding - diluted |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net income (loss) per common share - diluted |
|
$ |
|
|
$ |
( |
) |
|
10
4. Cash, Cash Equivalents and Investments
The Company’s cash, cash equivalents, and investments consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Cash |
|
$ |
|
|
$ |
|
||
Cash equivalents |
|
|
|
|
|
|
||
Short-term investments |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Cash and Cash Equivalents
At March 31, 2023 and December 31, 2022, cash and cash equivalents included bank balances and investments with original maturities of less than
The cash in foreign accounts was as follows:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
China |
|
$ |
|
|
$ |
|
||
Sweden |
|
|
|
|
|
|
||