x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
¨ |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
California
|
94-2848099
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
Page No.
|
PART
I. FINANCIAL INFORMATION
|
|
Item 1.
Financial Statements:
|
|
Condensed
Consolidated Balance Sheets (Unaudited) - May 5, 2007 and February
3,
2007
|
4
|
Condensed
Consolidated Statements of Operations (Unaudited) — Three months ended May
5, 2007 and April 29, 2006 (Restated)
|
5
|
Condensed
Consolidated Statements of Cash Flows (Unaudited) — Three months ended May
5, 2007 and April 29, 2006 (Restated)
|
6
|
Notes
to Condensed Consolidated Financial Statements
|
8
|
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
|
20
|
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
|
29
|
Item 4.
Controls and Procedures
|
30
|
PART
II. OTHER INFORMATION
|
|
Item 1.
Legal Proceedings
|
32
|
Item 1A.
Risk Factors
|
33
|
Item 4.
Submission of Matters to a Vote of Security Holders
|
40
|
Item 5.
Other Information
|
40
|
Item 6.
Exhibits
|
40
|
Signatures
|
42
|
Exhibit
index
|
43
|
|
May
5,
2007
|
February
3,
2007
|
|||||
|
|
(Restated)
|
|||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
25,685
|
$
|
24,413
|
|||
Short-term
investments
|
8,625
|
8,791
|
|||||
Accounts
receivable, net
|
12,753
|
11,231
|
|||||
Inventories
|
15,560
|
16,003
|
|||||
Prepaid
expenses and other current assets
|
992
|
1,095
|
|||||
Total
current assets
|
63,615
|
61,533
|
|||||
Equipment
and leasehold improvements, net
|
3,497
|
3,364
|
|||||
Long-term
investments
|
263
|
263
|
|||||
Goodwill
|
5,020
|
5,020
|
|||||
Other
intangible assets, net
|
5,221
|
5,527
|
|||||
Other
non-current assets
|
393
|
377
|
|||||
Total
Assets
|
$
|
78,009
|
$
|
76,084
|
|||
|
|||||||
Liabilities
and Shareholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
7,454
|
$
|
13,723
|
|||
Accrued
liabilities
|
8,796
|
8,800
|
|||||
Current
portion of bank term loan
|
188
|
226
|
|||||
Total
current liabilities
|
16,438
|
22,749
|
|||||
Bank
term loan
|
−
|
15
|
|||||
Other
long-term liabilities
|
240
|
348
|
|||||
Total
liabilities
|
16,678
|
23,112
|
|||||
Commitments
and contingencies
|
|||||||
Shareholders’
equity:
|
|||||||
Common
stock
|
122,203
|
119,301
|
|||||
Shareholder
notes receivable
|
(29
|
)
|
(58
|
)
|
|||
Accumulated
other comprehensive income
|
412
|
351
|
|||||
Accumulated
deficit
|
(61,255
|
)
|
(66,622
|
)
|
|||
Total
shareholders’ equity
|
61,331
|
52,972
|
|||||
Total
Liabilities and Shareholders’ Equity
|
$
|
78,009
|
$
|
76,084
|
Three
Months Ended
|
|||||||
May
5,
2007
|
April 29,
2006
|
||||||
(Restated)
|
|||||||
Net
revenues
|
$
|
36,016
|
$
|
14,799
|
|||
Cost
of revenues
|
18,206
|
7,369
|
|||||
Gross
profit
|
17,810
|
7,430
|
|||||
Operating
expenses:
|
|||||||
Research
and development
|
6,089
|
5,227
|
|||||
Sales
and marketing
|
2,232
|
1,779
|
|||||
General
and administrative
|
4,249
|
1,954
|
|||||
Total
operating expenses
|
12,570
|
8,960
|
|||||
Income
(loss) from operations
|
5,240
|
(1,530
|
)
|
||||
Interest
and other income, net
|
320
|
176
|
|||||
Income
(loss) before income taxes
|
5,560
|
(1,354
|
)
|
||||
Provision
for income taxes
|
191
|
2
|
|||||
Net
income (loss)
|
$
|
5,369
|
$
|
(1,356
|
)
|
||
Basic
net income (loss) per share
|
$
|
0.23
|
$
|
(0.06
|
)
|
||
Shares
used in computing per share amount
|
22,979
|
22,423
|
|||||
Diluted
net income (loss) per share
|
$
|
0.20
|
$
|
(0.06
|
)
|
||
Shares
used in computing per share amount
|
26,825
|
22,423
|
|
Three
Months Ended
|
||||||
|
May
5,
2007
|
April
29,
2006
|
|||||
|
|
(Restated)
|
|||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income (loss)
|
$
|
5,369
|
$
|
(1,356
|
)
|
||
Adjustments
to reconcile net income (loss) to net cash used for operating
activities:
|
|||||||
Depreciation
and amortization
|
761
|
475
|
|||||
Stock-based
compensation expense
|
1,326
|
1,191
|
|||||
Provision
for inventory valuation
|
183
|
12
|
|||||
Provision
for bad debts and sales returns
|
236
|
123
|
|||||
Long-term
investment gain
|
(31
|
)
|
−
|
||||
Accretion
of contributed leasehold improvements
|
(29
|
)
|
(20
|
)
|
|||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(1,758
|
)
|
(4,542
|
)
|
|||
Inventories
|
260
|
(4,194
|
)
|
||||
Prepaid
expenses and other current assets
|
103
|
223
|
|||||
Other
non-current assets
|
(16
|
)
|
4
|
||||
Accounts
payable
|
(6,281
|
)
|
4,610
|
||||
Accrued
liabilities and others
|
(336
|
)
|
1,145
|
||||
Other
non-current liabilities
|
(108
|
)
|
−
|
||||
Net
cash used in operating activities
|
(321
|
)
|
(2,329
|
)
|
|||
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Purchase
of short-term investments
|
(10,558
|
)
|
(8,035
|
)
|
|||
Sale
of short-term investments
|
10,725
|
6,206
|
|||||
Purchase
of equipment
|
(215
|
)
|
(575
|
)
|
|||
Recovery
of long-term investment loss
|
31
|
−
|
|||||
Cash
received in business acquisition, net of cash paid
|
−
|
146
|
|||||
Net
cash used for investing activities
|
(17
|
)
|
(2,258
|
)
|
|||
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Shareholder
note receivables
|
29
|
−
|
|||||
Net
proceeds from sale of common stock
|
1,574
|
438
|
|||||
Repayment
of bank line of credit
|
(53
|
)
|
(49
|
)
|
|||
Net
cash provided by financing activities
|
1,550
|
389
|
|||||
Effect
of foreign exchange rates changes on cash
|
60
|
41
|
|||||
|
|||||||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
1,272
|
(4,157
|
)
|
||||
CASH
AND CASH EQUIVALENTS:
|
|||||||
Beginning
of period
|
24,413
|
16,827
|
|||||
End
of period
|
$
|
25,685
|
$
|
12,670
|
|
Three
Months Ended
|
||||||
|
May
5,
2007
|
April 29,
2006
|
|||||
|
|
(Restated)
|
|||||
Supplemental
disclosure of cash flow information:
|
|||||||
Common
stock issued and stock options assumed for Blue7
Acquisition
|
$
|
−
|
$
|
11,414
|
|||
Cash
paid for interest
|
$
|
5
|
$
|
8
|
|||
Cash
paid for income taxes
|
$
|
6
|
$
|
5
|
|
Three Months Ended
May
5, 2007
|
Three months Ended
April
29, 2006
|
|||||
Stock-based
compensation by type of award:
|
|||||||
Stock
options
|
$
|
1,158
|
$
|
1,085
|
|||
Employee
stock purchase plan
|
57
|
51
|
|||||
Total
stock-based compensation
|
1,215
|
1,136
|
|||||
Tax
effect on stock-based compensation
|
(42
|
)
|
−
|
||||
Net
effect on net income
|
$
|
1,173
|
$
|
1,136
|
|||
Effect
on income per share:
|
|||||||
Basic
|
$
|
0.05
|
$
|
0.05
|
|||
Diluted
|
$
|
0.04
|
$
|
0.05
|
|
Three Months Ended
May
5, 2007
|
Three
months Ended
April
29, 2006
|
|||||||||||
|
Stock Options
|
Employee Stock
Purchase
Plan
|
Stock Options
|
Employee Stock
Purchase
Plan
|
|||||||||
Expected
volatility
|
68.33%
|
|
62.91%
|
|
73.39%
|
|
49.60%
|
|
|||||
Risk
free interest rate
|
4.57%
|
|
5.11%
|
|
4.63%
|
|
4.40%
|
|
|||||
Expected
term of options and purchase rights (in years)
|
6.10
|
.50
|
5.32
|
.50
|
|||||||||
Dividend
yield
|
None
|
None
|
None
|
None
|
|
Shares
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term
(Years)
|
Aggregate
Intrinsic Value
|
|||||||||
Options
outstanding at February 3, 2007
|
5,492,738
|
$
|
5.92
|
||||||||||
Options
granted
|
176,000
|
$
|
26.81
|
||||||||||
Options
forfeited
|
(33,829
|
)
|
$
|
12.53
|
|||||||||
Options
exercised
|
(648,816
|
)
|
$
|
2.42
|
|||||||||
|
|||||||||||||
Options
outstanding at May 5, 2007
|
4,986,093
|
$
|
7.06
|
6.20
|
$
|
103,547,263
|
|||||||
Options
vested and expected to vest May 5, 2007
|
4,790,919
|
$
|
6.86
|
6.12
|
$
|
100,448,608
|
|||||||
Options
exercisable at May 5, 2007
|
2,781,023
|
$
|
3.95
|
4.88
|
$
|
66,415,552
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||||||
Range
of Exercise Prices
|
Number
Outstanding at May 5, 2007
|
Weighted
Average Remaining Life
|
Weighted
Average Exercise Price
|
Number
Exercisable at May 5, 2007
|
Weighted
Average Exercise Price
|
|||||||||||||||
$
|
0.95
|
$
|
1.69
|
869,676
|
4.86
|
$
|
1.42
|
812,893
|
$
|
1.41
|
||||||||||
$
|
1.71
|
$
|
3.22
|
517,445
|
3.39
|
$
|
2.79
|
443,659
|
$
|
2.76
|
||||||||||
$
|
3.40
|
$
|
3.50
|
554,313
|
4.42
|
$
|
3.45
|
505,138
|
$
|
3.46
|
||||||||||
$
|
4.25
|
$
|
5.38
|
164,608
|
3.38
|
$
|
4.40
|
155,758
|
$
|
4.34
|
||||||||||
$
|
5.43
|
$
|
5.43
|
650,954
|
7.17
|
$
|
5.43
|
330,027
|
$
|
5.43
|
||||||||||
$
|
5.60
|
$
|
9.57
|
466,181
|
5.70
|
$
|
6.57
|
297,201
|
$
|
6.26
|
||||||||||
$
|
9.89
|
$
|
9.89
|
706,216
|
8.46
|
$
|
9.89
|
199,073
|
$
|
9.89
|
||||||||||
$
|
11.06
|
$
|
11.06
|
601,000
|
9.31
|
$
|
11.06
|
-
|
$
|
-
|
||||||||||
$
|
12.54
|
$
|
26.34
|
399,700
|
6.20
|
$
|
20.30
|
37,274
|
$
|
15.33
|
||||||||||
$
|
27.83
|
$
|
27.83
|
56,000
|
10.00
|
$
|
27.83
|
-
|
$
|
-
|
||||||||||
$
|
0.95
|
$
|
27.83
|
4,986,093
|
6.20
|
$
|
7.06
|
2,781,023
|
$
|
3.95
|
|
Three Months Ended
|
||||||
May
5, 2007
|
April
29, 2006
|
||||||
Expected
volatility
|
68%
|
|
90%
|
|
|||
Risk
free interest rate
|
4.57%
|
|
4.91%
|
|
|||
Expected
term of options and purchase rights (in years)
|
6.29
|
6.66
|
|||||
Dividend
yield
|
None
|
None
|
|
May
5,
2007
|
February
3,
2007
|
|||||
Raw
materials
|
$
|
7,608
|
$
|
7,696
|
|||
Work
in process
|
2,866
|
1,680
|
|||||
Finished
goods
|
5,086
|
6,627
|
|||||
|
$
|
15,560
|
$
|
16,003
|
Maturities
|
Loan Payment
|
|||
Less
than one year
|
$
|
188
|
||
One
year or more
|
−
|
|||
Total
|
$
|
188
|
Three
Months Ended
|
|||||||
|
May
5,
2007
|
April 29,
2006
|
|||||
|
|
(Restated)
|
|||||
Numerator:
|
|||||||
Net
income (loss), as reported
|
$
|
5,369
|
$
|
(1,356
|
)
|
||
Denominator:
|
|||||||
Weighted
average common shares outstanding
|
23,010
|
22,502
|
|||||
Escrowed
shares related to Blue7 acquisition
|
(31
|
)
|
(79
|
)
|
|||
Shares
used in computation, basic
|
22,979
|
22,423
|
|||||
Effect
of dilutive securities:
|
|||||||
Escrowed
shares related to Blue7 acquisition
|
31
|
-
|
|||||
Stock
options
|
3,815
|
-
|
|||||
Shares
used in computation, diluted
|
$
|
26,825
|
$
|
22,423
|
|||
|
|||||||
Net
income (loss) per share:
|
|||||||
Basic
|
$
|
0.23
|
$
|
(0.06
|
)
|
||
Diluted
|
$
|
0.20
|
$
|
(0.06
|
)
|
|
Three months ended
|
||||||
|
May
5,
2007
|
April 29,
2006
|
|||||
Stock
options
|
245
|
4,991
|
|
Three
months ended
|
||||||
|
May
5,
2007
|
April 29,
2006
|
|||||
|
|
(Restated)
|
|||||
Net
income (loss)
|
$
|
5,369
|
$
|
(1,356
|
)
|
||
Other
comprehensive income:
|
|||||||
Unrealized
gain on available-for-sale securities
|
1
|
26
|
|||||
Cumulative
foreign currency translation adjustment
|
59
|
40
|
|||||
Total
comprehensive income (loss)
|
$
|
5,429
|
$
|
(1,290
|
) |
Value
of Sigma stock issued
|
$
|
8,190
|
||
Fair
value of vested stock options assumed
|
1,091
|
|||
Retirement
of note receivables
|
400
|
|||
Retirement
of interest receivable
|
25
|
|||
Investment
in Blue7 prior to the acquisition
|
1,000
|
|||
Note
receivable converted to Blue7 preferred shares prior to the
acquisition
|
500
|
|||
Cash
acquired from Blue7 acquisition
|
(147
|
)
|
||
Direct
costs
|
804
|
|||
Total
purchase price
|
$
|
11,863
|
|
Amount
(in thousand)
|
Estimated
useful Life
|
|||||
Net
tangible assets
|
$
|
104
|
|||||
Identifiable
intangible assets:
|
|||||||
Licensing
agreements
|
39
|
6
to 15 months
|
|||||
Developed
technology
|
5,300
|
7
years
|
|||||
Noncompete
agreements
|
1,400
|
3
years
|
|||||
Goodwill
|
5,020
|
||||||
Total
purchase price
|
$
|
11,863
|
Expected
term (in years)
|
3.33
years
|
|||
Volatility
|
56%
|
|
||
Risk
free interest rate
|
4.44%
|
|
|
Cost
|
Accumulated
Amortization
|
Net
|
|||||||
Developed
technology
|
$
|
5,300
|
$
|
(915
|
)
|
$
|
4,385
|
|||
Noncompete
agreements
|
1,400
|
(564
|
)
|
836
|
||||||
Total
acquired intangible assets
|
$
|
6,700
|
$
|
(1,479
|
)
|
$
|
5,221
|
|
Cost
|
Accumulated
Amortization
|
Net
|
|||||||
Developed
technology
|
$
|
5,300
|
$
|
(726
|
)
|
$
|
4,574
|
|||
Noncompete
agreements
|
1,400
|
(447
|
)
|
953
|
||||||
Total
acquired intangible assets
|
$
|
6,700
|
$
|
(1,173
|
)
|
$
|
5,527
|
Fiscal year
|
Developed
Technology
|
Noncompete
Agreements
|
Total
|
|||||||
Remainder
of fiscal year 2008
|
$
|
567
|
$
|
350
|
$
|
917
|
||||
2009
|
757
|
467
|
1,224
|
|||||||
2010
|
757
|
19
|
776
|
|||||||
2011
|
757
|
—
|
757
|
|||||||
2012
|
757
|
—
|
757
|
|||||||
Thereafter
|
790
|
—
|
790
|
|||||||
|
$
|
4,385
|
$
|
836
|
$
|
5,221
|
Three
months ended
|
||||||||||
Customers
|
Region
|
May
5,
2007
|
April 29,
2006
|
|||||||
Uniquest
|
Asia
|
22%
|
|
24%
|
|
|||||
Scientific
Atlanta
|
Europe
|
15%
|
|
*
|
||||||
Freebox
|
Europe
|
12%
|
|
15%
|
|
Customers
|
Region
|
May
5,
2007
|
February
3,
2007
|
|||||||
Uniquest
|
Asia
|
15%
|
|
15%
|
|
|||||
Freebox
|
Europe
|
15%
|
|
24%
|
|
|||||
MTC
Singapore
|
Asia
|
*
|
12%
|
|
||||||
Scientific
Atlanta
|
Europe
|
*
|
18%
|
|
|
Balance
Beginning of
Period
|
Additions
|
Deductions
|
Balance
End
of
Period
|
|||||||||
Accrued
Warranty Three Months
|
|||||||||||||
ended
May 5, 2007
|
$
|
556
|
$
|
79
|
$
|
(116
|
)
|
$
|
519
|
||||
ended
April 29, 2006
|
289
|
94
|
(108
|
)
|
275
|
Fiscal
Years
|
Operating
Leases
|
|||
2008
|
$
|
535
|
||
2009
|
609
|
|||
2010
|
636
|
|||
2011
|
675
|
|||
2012
|
715
|
|||
Thereafter
|
448
|
|||
TOTAL
MINIMUM LEASE PAYMENTS
|
$
|
3,618
|
|
Three
Months Ended
|
||||||
|
May
5,
2007
|
April
29,
2006
|
|||||
(Restated)
|
|||||||
Net
revenues
|
$
|
36,016
|
$
|
14,799
|
|||
Cost
of revenue
|
18,206
|
7,369
|
|||||
Gross
profit
|
17,810
|
7,430
|
|||||
Operating
expenses:
|
|||||||
Research
and development
|
6,089
|
5,227
|
|||||
Sales
and marketing
|
2,232
|
1,779
|
|||||
General
and administrative
|
4,249
|
1,954
|
|||||
Interest
income (expense) and other income (loss), net
|
320
|
176
|
|||||
Provision
for income taxes
|
191
|
2
|
|||||
Net
Income (loss)
|
$
|
5,369
|
$
|
(1,356
|
)
|
|
Three
Months Ended
|
||||||
|
May
5,
2007
|
April 29,
2006
|
|||||
(Restated)
|
|||||||
Net
revenues
|
100%
|
|
100%
|
|
|||
Cost
of revenue
|
51%
|
|
50%
|
|
|||
Gross
margin
|
49%
|
|
50%
|
|
|||
Operating
expenses:
|
|||||||
Research
and development
|
17%
|
|
35%
|
|
|||
Sales
and marketing
|
6%
|
|
12%
|
|
|||
General
and administrative
|
12%
|
|
13%
|
|
|||
Interest
income and other income, net
|
1%
|
|
1%
|
|
|||
Provision
for income taxes
|
—
|
—
|
|||||
Net
Income (loss)
|
15%
|
|
(9)%
|
|
Three
months ended
|
||||||||||||
|
May
5,
|
%
of net
|
April
29,
|
%
of net
|
|||||||||
|
2007
|
revenues
|
2006
|
revenues
|
|||||||||
Chipsets
|
$
|
34,392
|
95%
|
|
$
|
13,482
|
91%
|
|
|||||
Boards
|
475
|
1%
|
|
864
|
6%
|
|
|||||||
Other
|
1,149
|
4%
|
|
453
|
3%
|
|
|||||||
Total
net revenues
|
$
|
36,016
|
100%
|
|
$
|
14,799
|
100%
|
|
Three
months ended
|
|||||||||||||
|
May
5,
2007
|
%
of net
revenues
|
April 29,
2006
|
%
of net
revenues
|
|||||||||
IP
video technology market
|
$
|
27,918
|
78%
|
|
$
|
7,933
|
54%
|
|
|||||
Connected
media player market
|
7,053
|
20%
|
|
5,791
|
39%
|
|
|||||||
HDTV
product market
|
511
|
1%
|
|
273
|
2%
|
|
|||||||
PC
add-in and other markets
|
534
|
1%
|
|
802
|
5%
|
|
|||||||
Total
net revenues
|
$
|
36,016
|
100%
|
|
$
|
14,799
|
100%
|
|
|
Three
months ended
|
||||||||||||
|
May
5,
2007
|
% of total
net revenues
|
April 29,
2006
|
% of total
net revenues
|
|||||||||
Asia
|
$
|
21,787
|
60%
|
|
$
|
8,962
|
61%
|
|
|||||
North
America
|
3,300
|
9%
|
|
2,426
|
16%
|
|
|||||||
Europe
|
10,876
|
30%
|
|
3,395
|
23%
|
|
|||||||
Other
regions
|
53
|
−%
|
|
16
|
−%
|
|
|||||||
Total
net revenues
|
$
|
36,016
|
100%
|
|
$
|
14,799
|
100%
|
|
|
Three
months ended
|
||||||
|
May
5,
2007
|
April
29,
2006
|
|||||
Korea
|
22%
|
|
24%
|
|
|||
China
|
9%
|
|
9%
|
|
|||
Japan
|
8%
|
|
9%
|
|
|||
Taiwan
|
10%
|
|
11%
|
|
Three
months ended
|
||||||||||
Customers
|
Region
|
May
5,
2007
|
April 29,
2006
|
|||||||
Uniquest
|
Asia
|
22%
|
|
24%
|
|
|||||
Scientific
Atlanta
|
Europe
|
15%
|
|
*
|
||||||
Freebox
|
Europe
|
12%
|
|
15%
|
|
Customers
|
Region
|
May
5,
2007
|
February
3,
2007
|
|||||||
Uniquest
|
Asia
|
15%
|
|
15%
|
|
|||||
Freebox
|
Europe
|
15%
|
|
24%
|
|
|||||
MTC
Singapore
|
Asia
|
*
|
12%
|
|
||||||
Scientific
Atlanta
|
Europe
|
*
|
18%
|
|
|
Three
months ended
|
||||||||||||
|
May
5,
2007
|
% of total
net revenues
|
April 29,
2006
|
% of total
net revenues
|
|||||||||
Research and
development expenses
|
$
|
6,089
|
17%
|
|
$
|
5,227
|
35%
|
|
|||||
Sales
and marketing expenses
|
2,232
|
6%
|
|
1,779
|
12%
|
|
|||||||
General
and administrative expenses
|
4,249
|
12%
|
|
1,954
|
13%
|
|
|||||||
|
$
|
12,570
|
35%
|
|
$
|
8,960
|
61%
|
|
|
Three
Months Ended
|
||||||
|
May
5,
2007
|
April 29,
2006
|
|||||
(Restated)
|
|||||||
Cost
of revenues
|
$
|
88
|
$
|
94
|
|||
Research and
development expenses
|
685
|
595
|
|||||
Sales
and marketing expenses
|
208
|
202
|
|||||
General and
administrative expenses
|
345
|
300
|
|||||
Total
stock-based compensation
|
$
|
1,326
|
$
|
1,191
|
Contractual
Obligations:
|
Payments
Due by Period
|
|||||||||||||||
1
year
or
less
|
1
- 3
years
|
3
- 5
years
|
5 years
or more
|
Total
|
||||||||||||
Operating
Leases
|
$
|
910
|
$
|
1,285
|
$
|
1,423
|
$
|
—
|
$
|
3,618
|
||||||
Term
Loan
|
188
|
—
|
—
|
—
|
188
|
|||||||||||
Non-cancelable
purchase orders
|
3,670
|
—
|
—
|
—
|
3,670
|
|||||||||||
$
|
4,768
|
$
|
1,285
|
$
|
1,423
|
$
|
—
|
$
|
7,476
|
|
•
|
|
Our
control environment did not sufficiently promote effective internal
control over financial reporting throughout our organizational structure,
and this material weakness was a contributing factor to the other
material
weaknesses described below;
|
|
•
|
|
We
had inadequate risk assessment controls, including inadequate mechanisms
for anticipating and identifying financial reporting risks; and for
reacting to changes in the operating environment that could have
a
material effect on financial reporting;
|
|
•
|
|
There
was inadequate communication from management to employees regarding
the
general importance of controls and employees duties and control
responsibilities;
|
|
•
|
|
We
had inadequate monitoring controls, including inadequate staffing
and
procedures to ensure periodic evaluations of internal controls to
ensure
that appropriate personnel regularly obtain evidence that controls
are
functioning effectively and that identified control deficiencies
are
remediated timely;
|
|
•
|
|
We
had an inadequate number of trained finance and accounting personnel
with
appropriate expertise in U.S. generally accepted accounting
principles. Accordingly, in certain circumstances, an effective
secondary review of technical accounting matters was not performed;
|
|
•
|
|
We
had inadequate controls over our management information systems related
to
program changes, segregation of duties, and access controls; and
|
|
•
|
|
We
had inadequate access and change controls over end-user computing
spreadsheets. Specifically, our controls over the completeness,
accuracy, validity and restricted access and review of certain
spreadsheets used in the period-end financial statement preparation
and
reporting process were not designed appropriately or did not operate
as
designed.
|
|
•
|
|
As
discussed in Note 2 in Notes to the Consolidated Financial Statements
of
the 2007 Form 10-K, during 2006, an internal review related to our
historical stock option granting practices was carried out by our
Audit
Committee. As a result of the review, we reached a conclusion that
incorrect measurement dates were used for financial accounting purposes
for certain stock option grants made in prior periods. Therefore, we
recorded in prior fiscal years additional non-cash stock-based
compensation expense and related tax effects with regard to past
stock
option grants, substantially all of which relate to options granted
between February 1, 1997 and July 29, 2006;
and
|
|
•
|
|
As
discussed in Note 2 in Notes to the Consolidated Financial Statements
of
the 2007 Form 10-K, during our fiscal 2007 audit, we determined that
incorrect measurement dates were used to value stock options
exchanged with the previously Blue7 employees upon the acquisition
of
Blue7. As a result, we restated our financial results for the first
quarter of fiscal 2007 to record an increase to the purchase price
and
related deferred stock-based compensation expense.
|
|
•
|
|
We
had inadequate procedures and controls to ensure proper segregation
of
duties within our purchasing and disbursements processes and accounting
systems;
|
|
•
|
|
We
had inadequate procedures and controls to ensure proper authorization
of
purchase orders; and
|
|
•
|
|
We
had inadequate approvals for payment of invoices and wire transfers.
|
|
•
|
|
Hire
additional qualified personnel and other resources to strengthen
the
accounting, finance, and information technology organizations, and
develop
a plan to procure and then commence implementation of an enterprise
resource planning system to replace our current system, to include
appropriate information technology control;
|
|
•
|
|
Adopt
administration, supervision, and review controls over stock based
compensation;
|
|
•
|
|
Implement
controls to ensure the periodic review of and changes to our end-user
computing spreadsheets used in the period-end financial statement
preparation and reporting process; and
|
|
•
|
|
Review
and implement appropriate vendor, purchasing, and disbursements
segregation of duties controls.
|
• |
new
product introductions by us and our competitors;
|
• |
changes
in our pricing models and product sales mix;
|
• |
unexpected
reductions in unit sales, average selling prices and gross margins,
particularly if they occur precipitously;
|
• |
expenses
related to our remediation efforts and compliance with Section 404 of
the Sarbanes-Oxley Act of 2002;
|
• |
expenses
related to implementing and maintaining a new enterprise resource
management system and other information technologies;
|
• |
the
level of acceptance of our products by our OEM customers, and acceptance
of our OEM customers’ products by their end user customers;
|
• |
shifts
in demand for the technology embodied in our products and those of
our
competitors;
|
• |
the
loss of one or more significant customers;
|
• |
the
timing of, and potential unexpected delays in, our customer orders
and
product shipments;
|
• |
inventory
obsolescence;
|
• |
write-downs
of accounts receivable;
|
• |
an
interrupted or inadequate supply of semiconductor chips or other
materials
included in our products;
|
• |
technical
problems in the development, ramp up, and manufacturing of products,
which
could cause shipping delays;
|
• |
availability
of third-party manufacturing capacity for production of certain products;
|
• |
the
impact of potential economic instability in the Asia-Pacific region;
and
|
• |
continuing
impact and expenses related to our stock option review and its resolution
|
• |
potential
disruption of our ongoing business;
|
• |
unexpected
costs or incurring unknown liabilities;
|
• |
diversion
of management resources from other business concerns;
|
• |
inability
to retain employees of the acquired businesses;
|
• |
difficulties
relating to integrating the operations and personnel of the acquired
businesses;
|
• |
adverse
effects on the existing customer relationships of acquired companies;
|
• |
adverse
effects associated with entering into markets and acquiring technologies
in areas in which we have little experience; and
|
• |
acquired
intangible assets becoming impaired as a result of technological
advancements, or worse-than-expected performance of the acquired
company.
|
• |
market
acceptance of our products;
|
• |
the
need to adapt to changing technologies and technical requirements;
|
• |
the
existence of opportunities for expansion; and
|
• |
access
to and availability of sufficient management, technical, marketing
and
financial personnel.
|
10.1
|
Offer
letter dated May 16, 2007 between the Company and Thomas E. Gay
III.
|
31.1
|
Certification
of the President and Chief Executive Officer pursuant to Exchange
Act Rule
13a-14(a) or 15d-14(a), as adopted pursuant to Section 302(a) of
the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
of the Chief Financial Officer and Secretary pursuant to Exchange
Act Rule
13a-14(a) or 15d-14(a), as adopted pursuant to Section 302(a) of
the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certificate
of President and Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002. (1)
|
32.2
|
Certificate
of Chief Financial Officer and Secretary pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002. (1)
|
(1) |
The
certificates contained in Exhibits 32.1 and 32.2 are not deemed “file” for
purposes of Section 18 of the Securities and Exchange Act of 1934 and
are not to be incorporated by reference into any filing of the registrant
under the Securities Act of 1933 or the Securities Exchange Act of
1934,
whether made before or after the date hereof irrespective of any
general
incorporation by reference language contained in any such filing,
except
to the extent that the registration specifically incorporates it
by
reference.
|
|
SIGMA
DESIGNS, INC.
|
|
Date:
June 14, 2007
|
|
|
|
By:
|
/s/
Thinh Q. Tran
|
|
|
Thinh
Q. Tran
|
|
|
Chairman
of the Board, President and Chief Executive Officer
(Principal
Executive Officer)
|
|
By:
|
/s/
Thomas E. Gay III
|
Thomas
E. Gay III
|
||
|
|
Chief
Financial Officer and Secretary
(Principal
Financial and Accounting
Officer)
|
10.1
|
Offer
letter dated May 16, 2007 between the Company and Thomas E. Gay
III.
|
31.1
|
Certification
of the President and Chief Executive Officer pursuant to Exchange
Act Rule
13a-14(a) or 15d-14(a), as adopted pursuant to Section 302(a) of
the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
of the Chief Financial Officer and Secretary pursuant to Exchange
Act Rule
13a-14(a) or 15d-14(a), as adopted pursuant to Section 302(a) of
the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certificate
of President and Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002. (1)
|
32.2
|
Certificate
of Chief Financial Officer and Secretary pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of
2002. (1)
|
(1) |
The
certificates contained in Exhibits 32.1 and 32.2 are not deemed “file” for
purposes of Section 18 of the Securities and Exchange Act of 1934 and
are not to be incorporated by reference into any filing of the registrant
under the Securities Act of 1933 or the Securities Exchange Act of
1934,
whether made before or after the date hereof irrespective of any
general
incorporation by reference language contained in any such filing,
except
to the extent that the registration specifically incorporates it
by
reference.
|