dspg20210331

dspg20210331_10q.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

☐	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 1-35256

___________

DSP GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-2683643
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)
2055 Gateway Place, Suite 480, San Jose, California	95110


(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 986-4300

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, $.001 per share	DSPG	The NASDAQ Stock Market LLC

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 Data 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. (Check one).

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 of 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 Exchange Act). Yes ☐ No ☒

As of May 3, 2021, there were 24,226,782 shares of Common Stock ($.001 par value per share) outstanding.

INDEX

DSP GROUP, INC.

		Page No.
*PART I. FINANCIAL INFORMATION*

Item 1.	Financial Statements (Unaudited)
	Condensed consolidated balance sheets—March 31, 2021 and December 31, 2020	2
	Condensed consolidated statements of operations—Three months ended March 31, 2021 and 2020	4
	Condensed consolidated statements of cash flows—Three months ended March 31, 2021 and 2020	6
	Condensed consolidated statements of stockholders’ equity—Three months ended March 31, 2021 and 2020	8
	Notes to condensed consolidated financial statements—March 31, 2021	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

*PART II. OTHER INFORMATION*

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosure	49
Item 5.	Other Information	49
Item 6.	Exhibits	49

SIGNATURES		50

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DSP GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share data)

	March 31, 2021		December 31, 2020
	Unaudited		Audited
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	20,018	$	16,936
Restricted deposit		565		548
Marketable securities and short-term deposits		53,267		50,615
Trade receivables		11,226		11,003
Other accounts receivable and prepaid expenses		3,674		3,460
Inventories		7,929		9,061

TOTAL CURRENT ASSETS		96,679		91,623

PROPERTY AND EQUIPMENT, NET		6,628		6,574

NON-CURRENT ASSETS:
Long-term marketable securities		55,201		60,454
Operating leases right of use		10,876		11,102
Long-term prepaid expenses and lease deposits		2,687		2,888
Deferred income taxes		6,572		6,893
Severance pay fund		15,512		16,285
Intangible assets, net		7,136		7,549
Goodwill		12,908		13,105

		110,892		118,276
TOTAL NON-CURRENT ASSETS

TOTAL ASSETS	$	214,199	$	216,473

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

DSP GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share data)

	March 31, 2021			December 31, 2020
	Unaudited			Audited
LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Trade payables	$	9,575		$	10,708
Operating lease liability		2,883			2,974
Accrued compensation and benefits		7,468			8,728
Income tax accruals and payables		3,483			3,620
Accrued expenses and other accounts payable		2,361			2,993
Short-term bank loans		-			211
Deferred income		153			172

TOTAL CURRENT LIABILITIES		25,923			29,406

NON-CURRENT LIABILITIES:
Deferred income taxes		1,011			1,073
Accrued severance pay		15,883			16,647
Operating lease liability		9,489			10,075
Earn-out liability		1,945			1,945
Accrued pensions		1,042			1,089

TOTAL NON-CURRENT LIABILITIES		29,370			30,829


STOCKHOLDERS’ EQUITY:
Capital stock:

Common stock, $ 0.001 par value -
Authorized shares: 50,000,000 shares at March 31, 2021 (unaudited) and December 31, 2020;
Issued and outstanding shares: 24,226,782 and 23,709,924 shares at March 31, 2021 (unaudited) and December 31, 2020, respectively		24			24
Additional paid-in capital		398,916			396,335
Treasury stock at cost		(103,300	)		(108,509	)
Accumulated other comprehensive loss		(886	)		(637	)
Accumulated deficit		(135,848	)		(130,975	)

TOTAL STOCKHOLDERS’ EQUITY		158,906			156,238

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	214,199		$	216,473

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(U.S. dollars in thousands, except per share amounts)

	Three months ended
	March 31,
	2021			2020

Revenues	$	32,647		$	28,239
Cost of revenues (1)		15,666			13,858

Gross profit		16,981			14,381
Operating expenses:
Research and development, net (2)		10,480			10,354
Sales and marketing (3)		5,202			5,011
General and administrative (4)		2,653			2,348
Intangible assets amortization		419			104
Total operating expenses		18,754			17,817
Operating loss		(1,773	)		(3,436	)
Financial income, net		641			903
Loss before income tax benefit		(1,132	)		(2,533	)
Income tax expenses (benefit)		211			(68	)

Net loss	$	(1,343	)	$	(2,465	)
Net loss per share:
Basic and diluted	$	(0.06	)	$	(0.11	)

Weighted average number of shares used in per share computations of net loss
Basic and diluted		24,058			23,342

(1)	Includes equity-based compensation expense in the amount of $161 and $120 for the three months ended March 31, 2021 and 2020, respectively.

(2)	Includes equity-based compensation expense in the amount of $1,142 and $751 for the three months ended March 31, 2021 and 2020, respectively.

(3)	Includes equity-based compensation expense in the amount of $626 and $555 for the three months ended March 31, 2021 and 2020, respectively.

(4)	Includes equity-based compensation expense in the amount of $601 and $406 for the three months ended March 31, 2021 and 2020, respectively.

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED) (U.S. dollars in thousands)

	Three months ended March 31,
	2021			2020

Net loss:	$	(1,343	)	$	(2,465	)
Other comprehensive loss:
Available-for-sale securities:
Changes in unrealized losses		(304	)		(249	)
Reclassification adjustments for losses (gains) included in net loss		8			(7	)

Net change		(296	)		(256	)

Cash flow hedges:
Changes in unrealized gains		10			35
Reclassification adjustments for gains included in net loss		(4	)		-

Net change		6			35

Change in unrealized components of defined benefit plans:
Amortization of actuarial loss and prior service benefit		6			6

Net change		6			6

Foreign currency translation adjustments, net		35			(20	)

Other comprehensive loss		(249	)		(235	)

Comprehensive loss	$	(1,592	)	$	(2,700	)

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements.

DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollars in thousands)

	Three months ended March 31,
	2021			2020
Cash flows from operating activities:

Net loss	$	(1,343	)	$	(2,465	)
Adjustments required to reconcile net loss to net cash provided by operating activities:
Depreciation		412			396
Equity-based compensation expenses related to employees’ stock options, SARs and RSUs		2,530			1,832
Realized losses (gains) from sale of marketable securities, net		8			(7	)
Capital gain from sale and disposal of property and equipment		(3	)		(43	)
Change in operating lease right-of-use asset		697			727
Change in operating lease liability		(1,148	)		(1,145	)
Amortization of intangible assets		419			104
Accrued interest and amortization of premium on marketable securities and deposits		261			126
Change in operating assets and liabilities:
Deferred income tax assets and liabilities, net		250			(211	)
Trade receivables, net		(262	)		1,485
Other accounts receivable and prepaid expenses		(218	)		29
Inventories		1,132			(555	)
Long-term prepaid expenses and lease deposits		201			(113	)
Trade payables		(1,130	)		532
Accrued compensation and benefits		(285	)		(1,132	)
Income tax accruals		(79	)		328
Accrued expenses and other accounts payable		(634	)		938
Accrued severance pay, net		8			69
Accrued pensions		10			9

Net cash provided by operating activities		826			904

Cash flows from investing activities:

Purchase of marketable securities		(2,693	)		(11,336	)
Proceeds from maturity of marketable securities		3,054			16,684
Proceeds from sales of marketable securities		1,693			5,734
Purchase of short-term deposits		(2,000	)		(2,000	)
Proceeds from redemption of short-term deposits		2,000			-
Proceeds from sale of fixed assets		3			43
Purchases of property and equipment		(480	)		(290	)
Decrease (increase) in restricted deposits		(34	)		17
Other investing activities		172			-

Net cash provided by investing activities	$	1,715		$	8,852

	Three months ended March 31,
	2021			2020
Cash flows from financing activities:

Issuance of common stock and treasury stock upon exercise of stock options	$	774		$	172
Repayment of a short-term loan		(208	)		-
Purchase of treasury stock		-			(3,350	)

Net cash provided by (used in) financing activities		566			(3,178	)

Increase in cash and cash equivalents		3,107			6,578
Cash and cash equivalents at the beginning of the period		16,936			28,737
Erosion due to exchange rate differences		(25	)		(30	)

Cash and cash equivalents at the end of the period	$	20,018		$	35,285

DSP GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(U.S. dollars in thousands)

Three Months Ended March 31, 2020	Number of common stock			Common stock		Additional paid‑In capital		Treasury stock			Accumulated deficit			Accumulated other comprehensive income (loss)			Total stockholders’ equity
Balance at December 31, 2019		23,111		$	23	$	386,534	$	(113,862	)	$	(118,712	)	$	(889	)	$	153,094
Net loss		-			-		-		-			(2,465	)		-			(2,465	)
Purchase of treasury stock		(282	)		*) -		-		(3,443	)		-						(3,443	)
Change in accumulated other comprehensive loss		-			-		-		-			-			(235	)		(235	)
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		104			*) -		-		1,052			(28	)		-			1,024
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		272			*) -		21		2,721			(2,570	)		-			172
Equity-based compensation		-			-		1,832		-			-			-			1,832
Balance at March 31, 2020		23,205		$	23	$	388,387	$	(113,532	)	$	(123,775	)	$	(1,124	)	$	149,979
Three Months Ended March 31, 2021
Balance at December 31, 2020		23,710		$	24	$	396,335	$	(108,509	)	$	(130,975	)	$	(637	)	$	156,238
Net loss		-			-		-		-			(1,343	)		-			(1,343	)

Change in accumulated other comprehensive loss		-			-		-		-			-			(249	)		(249	)
Issuance of treasury stock upon purchase of common stock under employee stock purchase plan		95			*) -		2		960			(6	)		-			956
Issuance of treasury stock upon exercise of stock options, stock appreciation rights and vesting of restricted stock units by employees and directors		422			*) -		49		4,249			(3,524	)		-			774
Equity-based compensation		-			-		2,530

SEC Form 10-Q filed by DSP Group, Inc.