Form 424B3 indie Semiconductor,

May 23, 2022 8:07 AM EDT

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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-257629

 

PROSPECTUS SUPPLEMENT NO. 8

(to Prospectus dated July 13, 2021)

 

INDIE SEMICONDUCTOR, INC.

 

Primary Offering of

27,400,000 shares of Class A Common Stock

Issuable Upon Exercise of Warrants

 

Secondary Offering of

70,846,446 shares of Class A Common Stock and

10,150,000 Warrants to Purchase Class A Common Stock

 

This prospectus supplement no. 8 amends and supplements the prospectus dated July 13, 2021 (as supplemented or amended from time to time, the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (No. 333-257629). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in (i) our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on May 12, 2022 (the “Current Report”) and (ii) our Quarterly Report on Form 10-Q filed with the SEC on May 13, 2022 (the “Quarterly Report”). Accordingly, we have attached the Current Report and Quarterly Report to this prospectus supplement.

 

The Prospectus relates to the issuance by us of up to 27,400,000 shares of our Class A common stock, par value $0.0001 per share (“Class A common stock”). Of these shares:

 

  17,250,000 shares are issuable upon the exercise of warrants (the “public warrants”) initially issued as part of the units issued in the initial public offering of Thunder Bridge Acquisition II, Ltd. (“Thunder Bridge II”);
  8,650,000 shares are issuable upon the exercise of warrants (the “private placement warrants”) initially issued to Thunder Bridge Acquisition II LLC (the “Sponsor”) in a private placement that occurred simultaneously with the initial public offering of Thunder Bridge II; and
  1,500,000 shares are issuable upon the exercise of warrants issued to an affiliate of the Sponsor in connection with loans it made to Thunder Bridge II prior to the closing of the Business Combination (as defined below) (the “sponsor warrants” and collectively with the public warrants and the private placement warrants, the “warrants”).

 

Each warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share. We will receive the proceeds from the exercise of the warrants, but not from the sale of the underlying shares of Class A common stock.

 

In addition, the Selling Securityholders identified in the Prospectus may, from time to time in one or more offerings, offer and sell up to 70,846,446 shares of our Class A common stock, of which:

 

  8,625,000 shares were exchanged in our Business Combination for shares of Class A common stock issued to the Sponsor in a private placement prior to Thunder Bridge II’s initial public offering (the “sponsor shares”);
  37,071,446 shares are issuable upon the exchange of an equal number of units (the “LLC Units”) representing limited liability company interests in Ay Dee Kay LLC, d/b/a indie Semiconductor (“ADK LLC”), our direct subsidiary;
  15,000,000 shares were issued in private placements in connection with our business combination with ADK LLC, which we completed on June 10, 2021 (the “Business Combination”);
  8,650,000 shares are issuable upon the exercise of private placement warrants; and
  1,500,000 shares are issuable upon the exercise of sponsor warrants.

  

The Selling Securityholders may also, from time to time in one or more offerings, offer and sell up to 8,650,000 private placement warrants and 1,500,000 sponsor warrants.

 

We will not receive any proceeds from the sale of our Class A common stock or the sale of the private placement warrants or sponsor warrants by Selling Securityholders, but we are required to pay certain offering fees and expenses in connection with the registration of the Selling Securityholders’ securities and to indemnify certain Selling Securityholders against certain liabilities.

 

The Selling Securityholders may offer and sell our Class A common stock, private placement warrants and sponsor warrants to or through one or more underwriters, dealers and agents, or directly to purchasers, on a continuous or delayed basis. In addition, certain Selling Securityholders may offer and sell these securities from time to time, together or separately. If the Selling Securityholders use underwriters, dealers or agents to sell such securities, we will name them and describe their compensation in a prospectus supplement. The price to the public of those securities and the net proceeds any Selling Securityholders expect to receive from that sale will also be set forth in a prospectus supplement.

 

Our Class A common stock and our public warrants are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbols “INDI” and “INDIW,” respectively. On May 20, 2022, the closing price of our Class A common stock was $6.84 and the closing price for our public warrants was $1.35.

 

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

 

Investing in our securities involves risks that are described in the “Risk Factors” section beginning on page 36 of the Prospectus.

 

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus supplement is May 23, 2022.

 

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): May 12, 2022

 

INDIE SEMICONDUCTOR, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   001-40481   87-0913788
(State or other jurisdiction
of incorporation)
  (Commission File Number)   (IRS Employer
Identification No.)

 

32 Journey
Aliso Viejo, California 
  92656
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (949) 608-0854

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on
which registered
Class A common stock, par value $0.0001 per share   INDI   The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Class A common stock for $11.50 per share   INDIW   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

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.

 

 

 

 

 

 

Item 2.02. Results of Operations and Financial Condition

 

The information set forth in Exhibit 99.1 of this Current Report is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information set forth in Exhibit 99.1 of this Current Report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

On May 12, 2022, indie Semiconductor, Inc. (“indie”) issued a press release announcing its financial results for the first quarter ended March 31, 2022. A copy of the press release is attached as Exhibit 99.1.

 

A conference call with simultaneous webcast to discuss the financial results for the first quarter ended March 31, 2022 will be held today, May 12, 2022 at 5:00 p.m. Eastern Time. After the live webcast of the conference call, an audio replay will remain available until May 26, 2022 in the Investor Relations section of indie’s website at www.indiesemi.com.

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No.   Description
     
99.1   Press release of the Registrant dated May 12, 2022 announcing its results of operations for the first quarter ended March 31, 2022.
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  INDIE SEMICONDUCTOR, INC.
       
May 12, 2022 By: /s/ Thomas Schiller
    Name: Thomas Schiller
    Title: Chief Financial Officer & EVP of Strategy
(Principal Financial Officer)

 

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Exhibit 99.1

 

 

indie Semiconductor Achieves High End of

Revenue Guidance Range in Q1 2022

 

Delivers 171% Year-over-Year and 16% Sequential Revenue Growth to a Record $22.0M

 

Expands Non-GAAP Gross Margin to 47.4%, up 710 Basis Points Year-over-Year and 110 Basis Points Sequentially

 

Guides Q2 2022 to a ≥ $100M Annualized Revenue Run-rate with Further Non-GAAP Gross Margin Expansion

 

ALISO VIEJO, Calif. - May 12, 2022 - indie Semiconductor, Inc. (Nasdaq: INDI), an Autotech solutions innovator, today announced first quarter results for the period ended March 31, 2022. First quarter revenue was up 171 percent from the same period a year ago and 16 percent sequentially to a record $22.0 million, at the high end of the Company’s prior guidance range and exceeding analyst consensus estimates. Non-GAAP gross margin expanded 710 basis points year-over-year and 110 basis points sequentially to 47.4 percent, better than indie’s 47.0 percent guidance for the quarter. On a GAAP basis, first quarter 2022 operating loss was $34.3 million compared to $8.1 million in the year ago timeframe. Non-GAAP operating loss for the first quarter of 2022 was $16.5 million versus $7.6 million during the same period last year, reflecting increasing customer-driven R&D and marketing investments as well as incremental public company infrastructure costs.

 

“indie is off to a great start in 2022, delivering record first quarter revenue fueled by growing demand for our highly innovative Autotech solutions,” said Donald McClymont, indie’s chief executive officer. “Our outperformance versus the industry in the face of continued supply chain headwinds reflects indie’s differentiated product portfolio and our team’s ability to obtain committed volumes from our strategic supply partners. At a higher level, we are well positioned to capitalize on several powerful automotive megatrends, including ADAS, enhanced user experience and electrification. We believe our deeper R&D investments coupled with successful acquisition integrations will leverage the indie platform to accelerate growth, enable us to become the leading provider of edge sensors across all key modalities and, in turn, create shareholder value.”

 

Q1 Business Highlights

 

Commenced sampling of Surya™, a highly integrated LiDAR SoC, augmented by TeraXion’s world class lasers and sensors

 

Expanded design win pipeline for wired and wireless charging automotive solutions

 

Captured user experience content at one of the leading US automotive OEMs

 

Extended global reach with the opening of sales and technical support centers of excellence in Japan and South Korea

 

Closed carve-out of Analog Devices’ Symeo radar product development team and 140 related patents and applications

 

Q2 2022 Outlook

 

We provide earnings guidance on a non-GAAP basis only because certain information necessary to reconcile such guidance to GAAP is difficult to estimate and dependent on future events outside of our control. Please refer to the attached Discussion Regarding the Use of Non-GAAP Financial Measures in this press release for a further discussion of our use of non-GAAP measures, including quantification of known expected adjustment items.

 

Given strong order visibility, set customer ramps and new product launches, we plan to sustainably outpace indie’s addressable markets over the forecast horizon,” said Thomas Schiller, indie’s chief financial officer and executive vice president of strategy. “Specifically, for the second quarter of 2022, we anticipate accelerating top-line growth on the order of 172 to 183 percent year-over-year with non-GAAP gross margin expansion into the 48 percent range. At the mid-point of our revenue guidance, indie will be on a greater than $100 million annualized run-rate. Further, based on our design win momentum and planned operating leverage, we remain on track to achieve profitability in the second half of next year, representing another key milestone toward our target model of 60 percent gross and 30 percent operating margins.”

 

 

 

 

indie’s Q1 2022 Conference Call

 

indie Semiconductor will host a conference call with analysts to discuss its first quarter 2022 results and business outlook today at 5:00 p.m. Eastern time. To listen to the conference call via the Internet, please go to the Financials tab on the Investors page of indie’s website. To listen to the conference call via telephone, please call (877) 451-6152 (domestic) or (201) 389-0879 (international), Conference ID: 13728667.

 

A replay of the conference call will be available beginning at 9:00 p.m. Eastern time on May 12, 2022 until 9:00 p.m. Eastern time on May 26, 2022 under the Financials tab on the Investors page of indie’s website, or by calling (844) 512-2921 (domestic) or (412) 317-6671 (international), Conference ID: 13728667.

 

About indie

 

indie is empowering the Autotech revolution with next generation automotive semiconductors and software platforms. We focus on edge sensors spanning multiple modalities including LiDAR, radar, ultrasound and vision for Advanced Driver Assistance Systems (ADAS), autonomous vehicles, connected car, user experience and electrification applications. These technologies represent the core underpinnings of both electric and autonomous vehicles, while the advanced user interfaces transform the in-cabin experience to mirror and seamlessly connect to the mobile platforms we rely on every day. We are an approved vendor to Tier 1 partners and our solutions can be found in marquee automotive OEMs around the world. Headquartered in Aliso Viejo, CA, indie has design centers and sales offices in Austin, TX; Boston, MA; Detroit, MI; San Francisco and San Jose, CA; Budapest, Hungary; Dresden and Munich, Germany; Edinburgh, Scotland; Haifa, Israel; Quebec City, Canada; Tokyo, Japan; Seoul, South Korea and several locations throughout China.

 

Please visit us at www.indiesemi.com to learn more.

 

Safe Harbor Statement

 

This communication contains “forward-looking statements” (including within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended). Such statements include, but are not limited to, statements regarding our future business and financial performance and prospects, other statements identified by words such as “will likely result,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “plan,” “project,” “outlook,” “should,” “could,” “may” or words of similar meaning, our ability to substantially outpace our addressable markets and drive further gross margin expansion, our guidance regarding top line growth and non-GAAP gross margin, our belief that our deeper investments and targeted acquisitions are setting the stage for accelerating growth in 2022 and positioning indie to become the leading provider of edge sensors spanning LiDAR, radar, ultrasound and vision applications and our belief we are well positioned to capitalize on several powerful automotive megatrends, including ADAS, enhanced user experience and electrification. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. The preliminary unaudited financial results for our first quarter 2022 included in this press release represent the most current information available to management. Our actual results when disclosed in the Form 10-Q may differ from these preliminary results as a result of the completion of our financial closing procedures; final adjustments; completion of the review by our independent registered accounting firm; and other developments that may arise between now and the disclosure of the final results. In addition to the factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on April 11, 2022 and in our other public reports filed with the SEC (including those identified under “Risk Factors” therein), the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the impact of the COVID-19 pandemic; the impact of Russia’s invasion of Ukraine; our reliance on contract manufacturing and outsourced supply chain and the availability of semiconductors and manufacturing capacity; competitive products and pricing pressures; our ability to win competitive bid selection processes and achieve additional design wins; the impact of any acquisitions we may make, including our ability to successfully integrate acquired businesses and risks that the anticipated benefits of any acquisitions may not be fully realized or take longer to realize than expected; our ability to develop, market and gain acceptance for new and enhanced products and expand into new technologies and markets; trade restrictions and trade tensions; and political or economic instability in our target markets. All forward-looking statements in this press release are expressly qualified in their entirety by the foregoing cautionary statements.

 

Investors are cautioned not to place undue reliance on the forward-looking statements in this press release, which information set forth herein speaks only as of the date hereof. We do not undertake, and we expressly disclaim, any intention or obligation to update any forward-looking statements made in this announcement or in our other public filings, whether as a result of new information, future events or otherwise, except as required by law.

 

Media Inquiries

[email protected]

 

Investor Relations

[email protected]

 

#indieSemi_Earnings

 

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INDIE SEMICONDUCTOR, INC.

PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

   Three Months Ended
March 31,
 
   2022   2021 
         
Revenue:        
Product revenue  $18,086   $7,483 
Contract revenue   3,913    631 
Total revenue   21,999    8,114 
Operating expenses:          
Cost of goods sold   14,192    4,848 
Research and development   29,499    8,677 
Selling, general, and administrative   12,642    2,695 
Total operating expenses   56,333    16,220 
Loss from operations   (34,334)   (8,106)
Other income (expense), net:          
Interest income   33    7 
Interest expense   (58)   (620)
Gain (loss) from change in fair value of SAFEs   -    19,100 
Gain (loss) from change in fair value of warrants   47,353    - 
Gain (loss) from change in fair value of earn-out liabilities   83    - 
           
Other expense   (30)   (7)
Total other income, net   47,381    18,480 
Net income before income taxes   13,047    10,374 
Income tax benefit (provision)   659    (13)
Net income   13,706    10,361 
Less: Net income (loss) attributable to noncontrolling interest   2,873    (454)
Net income attributable to indie Semiconductor, Inc.  $10,833   $10,815 
           
Net income attributable to common shares - basic  $10,833   $5,443 
Net income (loss) attributable to common shares - diluted  $10,833   $(13,657)
           
Net income per share attributable to common shares - basic  $0.10   $0.17 
Net income (loss) per share attributable to common shares - diluted  $0.07   $(0.35)
           
Weighted average common shares outstanding - basic (1)   111,189,340    32,284,863 
Weighted average common shares outstanding - diluted (1)   147,396,772    39,218,016 

 

(1) - Retroactively restated to give effect to reverse recapitalization.

 

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INDIE SEMICONDUCTOR, INC.

PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands)

(Unaudited)

 

   March 31,
2022
   December 31,
2021
 
Assets        
Current assets:        
Cash and cash equivalents  $192,979   $219,081 
Restricted cash   383    383 
Accounts receivable, net   16,064    13,842 
Inventory, net   10,835    9,080 
Prepaid expenses and other current assets   6,821    5,648 
Total current assets   227,082    248,034 
Property and equipment, net   12,093    11,090 
Intangible assets, net   104,785    96,285 
Goodwill   131,147    115,206 
Operating lease right-of-use assets   12,553    - 
Other assets and deposits   297    270 
Total assets  $487,957   $470,885 
           
Liabilities and stockholders’ equity          
Accounts payable  $6,770   $5,441 
Accrued payroll liabilities   4,700    4,021 
Accrued expenses and other current liabilities   24,718    14,622 
Intangible asset contract liability   5,705    5,516 
Deferred revenue   2,845    1,840 
Current debt obligations   12,262    2,275 
Total current liabilities   57,000    33,715 
Long-term debt, net of current portion   5,306    5,618 
Warrant liability   53,114    100,467 
           
Intangible asset contract liability, net of current portion   11,306    12,452 
Deferred tax liabilities, non-current   24,907    21,164 
Operating lease liability, non-current   10,527    - 
Other long-term liabilities   8,537    5,612 
Total liabilities  $170,697   $179,028 
Commitments and contingencies          
Stockholders’ equity          
Preferred stock  $-   $- 
Class A common stock   11    11 
Class V common stock   3    3 
Additional paid-in capital   523,972    514,891 
Accumulated deficit   (189,583)   (200,416)
Accumulated other comprehensive loss   (580)   (1,443)
indie’s stockholders’ equity   333,823    313,046 
Noncontrolling interest   (16,563)   (21,189)
Total stockholders’ equity   317,260    291,857 
Total liabilities and stockholders’ equity  $487,957   $470,885 

 

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INDIE SEMICONDUCTOR, INC.

RECONCILIATION OF PRELIMINARY NON-GAAP MEASURES TO GAAP

(Unaudited)

 

GAAP refers to financial information presented in accordance with U.S. Generally Accepted Accounting Principles. This announcement includes historical non-GAAP financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission. We believe that our presentation of historical non-GAAP financial measures provides useful supplementary information to investors. The presentation of historical non-GAAP financial measures is not meant to be considered in isolation from or as a substitute for results prepared in accordance with GAAP.

 

The reconciliations of our preliminary GAAP basis financial data to non-GAAP measures are as follows (in thousands, except share and per share amounts):

 

   Three Months Ended
March 31,
 
   2022   2021 
Computation of non-GAAP gross margin:        
GAAP revenue  $21,999   $8,114 
GAAP cost of goods sold   14,192    4,848 
Acquisition-related expenses   (2,622)   - 
Non-GAAP gross profit  $10,429   $3,266 
Non-GAAP gross margin   47.4%   40.3%

 

   Three Months Ended
March 31,
 
   2022   2021 
Computation of non-GAAP operating loss:        
GAAP loss from operations  $(34,334)  $(8,106)
Acquisition-related expenses   5,451    526 
Share-based compensation   12,415    - 
Non-GAAP operating loss  $(16,468)  $(7,580)

 

   Three Months Ended
March 31,
 
   2022   2021 
Computation of non-GAAP net loss:        
GAAP Net income  $13,706   $10,361 
Acquisition-related expenses   5,451    579 
Share-based compensation   12,415    - 
(Gain) loss from change in fair value of SAFEs   -    (19,100)
(Gain) loss from change in fair value of warrants   (47,353)   - 
(Gain) loss from change in fair value of earn-out liabilities   (83)   - 
           
Other expense   30    7 
Non-cash interest expense   -    48 
Income taxes (benefits) provision   (659)   13 
Non-GAAP net loss  $(16,493)  $(8,092)

 

   Three Months
Ended
March 31,
2022
 
Computation of non-GAAP share count:    
Issued and outstanding Class A common stock   114,977,679 
Escrow Shares   1,725,000 
TeraXion Unexercised Options   1,299,292 
      
ADK Minority Holders interests   30,119,812 
Non-GAAP share count   148,121,783 
      
Non-GAAP net loss  $(16,493)
Non-GAAP net loss per share  $(0.11)

 

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Discussion Regarding the Use of Non-GAAP Financial Measures

 

Our earnings release contains some or all of the following financial measures that have not been calculated in accordance with United States Generally Accepted Accounting Principles (“GAAP”): (i) non-GAAP gross profit and gross margin, (ii) non-GAAP operating loss, (iii) non-GAAP net income (loss), (iv) non-GAAP share count and (v) non-GAAP net loss per share. As set forth in the “Unaudited Reconciliations of Non-GAAP Financial Measures” table, we derive such non-GAAP financial measures by excluding certain expenses and other items from the respective GAAP financial measure that is most directly comparable to each non-GAAP financial measure. Management may use these non-GAAP financial measures to, amongst other things, evaluate operating performance and compare it against past periods or against peer companies, make operating decisions, forecast for future periods and to determine payments under compensation programs. These non-GAAP financial measures provide management with additional means to understand and evaluate the operating results and trends in our ongoing business by eliminating certain expenses and other items that management believes might otherwise make comparisons of our ongoing business with prior periods and competitors more difficult, obscure trends in ongoing operations or improve management’s ability to forecast future periods.

 

We provide investors with non-GAAP gross profit and gross margin, non-GAAP operating loss, non-GAAP net income (loss) and non-GAAP net income (loss) per share because we believe it is important for investors to be able to closely monitor and understand changes in our ability to generate income from ongoing business operations. We believe these non-GAAP financial measures give investors an additional method to evaluate historical operating performance and identify trends, an additional means of evaluating period-over-period operating performance and a method to facilitate certain comparisons of our operating results to those of our peer companies. We further believe these non-GAAP financial measures allow investors to assess the overall financial performance of our ongoing operations by eliminating the impact of (i) acquisition-related expenses (including acquisition-related professional fees and legal expenses, deemed compensation expense, amortization of acquisition-related intangibles and expenses recognized in relation to changes in contingent consideration obligations), (ii) gains or losses recognized in relation to changes in the fair value of the simple agreements for future equity (“SAFEs”), warrants and contingent considerations issued by indie, and unrealized gains or losses from currency hedging contracts (iii) non-cash interest expenses related to the amortization of debt discounts and issuance costs, (iv) share-based compensation, (v) gains and losses from extinguishment of debt and (vi) non-cash tax expenses. We believe that disclosing these non-GAAP financial measures contributes to enhanced financial reporting transparency and provides investors with added clarity about complex financial performance measures.

 

We do not report a GAAP measure of gross profit or gross margin because certain costs related to contract revenues are expensed as incurred and included in research and development expenses, and not in cost of sales, as it is not practicable for us to bifurcate these expenses. We derive and reconcile non-GAAP gross profit from the most relevant GAAP financial measures by subtracting cost of sales, adjusted for acquisition-related expenses, from revenue. We calculate non-GAAP operating loss by excluding from GAAP operating loss, any (i) acquisition-related expenses (including acquisition-related professional fees and legal expenses, deemed compensation expense, amortization of acquisition-related intangibles and expenses recognized in relation to changes in contingent consideration obligations) and share-based compensation. We calculate non-GAAP net income (loss) by excluding from GAAP net income (loss), any (i) acquisition-related expenses (including acquisition-related professional fees and legal expenses, deemed compensation expense, and amortization of acquisition-related intangibles and expenses recognized in relation to changes in contingent consideration obligations), (ii) gains or losses recognized in relation to change in the fair value of the simple agreements for future equity (“SAFEs”), warrants and contingent considerations issued by indie, (iii) non-cash interest expenses related to the amortization of debt discounts and issuance costs, (iv) share-based compensation, (v) gains and losses from the extinguishment of debt, and (vi) non-cash tax expenses. We calculate non-GAAP share count by adding to GAAP weighted average common shares outstanding: (i) Escrow Shares and (ii) ADK Minority Holders interest, which represents all shares issuable to vested minority equity interests held in Ay Dee Kay LLC upon exchange for indie Class A shares as described in the Form 10-Q. Non-GAAP net income (loss) per share is calculated by non-GAAP income (loss) divided by non-GAAP share count.

 

6

 

 

We exclude the items identified above from the respective non-GAAP financial measure referenced above for the reasons set forth with respect to each such excluded item below:

 

Acquisition-related expenses - including such items as, when applicable, amortization of acquired intangible assets, fair value adjustments to contingent consideration, fair value charges incurred upon the sale of acquired inventory, and acquisition-related professional fees and legal expenses because they are not considered by management in making operating decisions and we believe that such expenses do not have a direct correlation to our future business operations and thereby including such charges do not necessarily reflect the performance of our ongoing operations for the period in which such charges or reversals are incurred.

 

Share-based compensation - related to the non-cash compensation expense associated with equity awards granted to our employees. These expenses are not considered by management in making operating decisions and such expenses do not have a direct correlation to our future business operations.

 

Gain (loss) from change in fair values - because these adjustments (1) are not considered by management in making operating decisions, (2) are not directly controlled by management, (3) do not necessarily reflect the performance of our ongoing operations for the period in which such charges are recognized and (4) can make comparisons between peer company performance less reliable.

 

Non-cash interest expense - related to the amortization of debt discounts, warrants, and issuance costs because (1) these expenses are not considered by management in making decision with respect to financing decisions, and (2) these generally reflect non-cash costs.

 

Gain from extinguishment of debt - related to the gain from the PPP loan forgiveness and partially offset by the one-time debt termination fees and the acceleration of unamortized debt discounts and issuance costs as a result of the payoff of debt obligations. This net gain is not reflective of management’s operation decisions and are not expected to recur.

 

Other income (expense) - primarily related to an unrealized gain (loss) that represented the change in exchange rate between contract issuance date and period-end for a currency forward contract.

 

Income tax benefits (provisions) - because such benefits (charges) do not result in a current period tax refunds (payments).

 

The non-GAAP financial measures presented should not be considered in isolation and are not an alternative for the respective GAAP financial measure that is most directly comparable to each such non-GAAP financial measure. Investors are cautioned against placing undue reliance on these non-GAAP financial measures and are urged to review and consider carefully the adjustments made by management to the most directly comparable GAAP financial measures to arrive at these non-GAAP financial measures. Non-GAAP financial measures may have limited value as analytical tools because they may exclude certain expenses that some investors consider important in evaluating our operating performance or ongoing business performance. Further, non-GAAP financial measures are likely to have limited value for purposes of drawing comparisons between companies as a result of different companies potentially calculating similarly titled non-GAAP financial measures in different ways because non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

 

To the extent our disclosures contain forward-looking estimates of non-GAAP financial measures, these measures are provided to investors on a prospective basis for the same reasons (set forth above) we provide them to investors on a historical basis. We are generally unable to provide a reconciliation of our forward-looking non-GAAP measures because certain information needed to make a reasonable forward-looking estimate of such non-GAAP measures are difficult to predict and estimate and is often dependent on future events that may be uncertain or outside of our control. Such events may include unanticipated changes in our GAAP effective tax rate, unanticipated one-time charges related to asset impairments (fixed assets, inventory, intangibles, or goodwill), unanticipated acquisition-related expenses, unanticipated settlements, gains, losses and impairments and other unanticipated items not reflective of ongoing operations. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.

 

7

 

 

 

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, 2022

 

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 001-40481

___________________________________________________________________

 

INDIE SEMICONDUCTOR, INC.

___________________________________________________________________

 

(Exact name of registrant as specified in its charter)

 

Delaware   87-0913788
(State or other jurisdiction
of incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

32 Journey

Aliso Viejo, California

  92656
(Address of Principal Executive Offices)   (Zip Code)

 

(949) 608-0854

Registrant’s telephone number, including area code

___________________________________________________________________

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on
which registered
Class A common stock, par value $0.0001 per share   INDI   The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Class A common stock for $11.50 per share   INDIW   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 the definitions 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 ☒ 

 

The number of shares outstanding of the registrant’s Class A and Class V common stock as of May 9, 2022 was 116,522,473 (excluding 1,725,000 Class A shares held in escrow and 1,005,666 Class A shares subject to restricted stock awards) and 33,119,808, respectively.

 

 

 

 

 

 

INDIE SEMICONDUCTOR, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

Table of Contents

 

    Page
     
Part I. Financial Information 1
Item 1. Condensed Consolidated Financial Statements as of March 31, 2022 and December 31, 2021 and for the three months ended March 31, 2022 and 2021 (Unaudited) 1
  Condensed Consolidated Balance Sheets 1
  Condensed Consolidated Statements of Operations 2
  Condensed Consolidated Statements of Comprehensive Income 3
  Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) and Noncontrolling Interest 4
  Condensed Consolidated Statements of Cash Flows 6
  Notes to Unaudited Condensed Consolidated Financial Statements 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28
Item 3. Quantitative and Qualitative Disclosures About Market Risk 33
Item 4. Controls and Procedures 33
     
Part II. Other Information 36
Item 1. Legal Proceedings 36
Item 1A. Risk Factors 36
Item 5 Other Information 36
Item 6. Exhibits 36
Signatures 38

 

i

 

 

FORWARD-LOOKING STATEMENTS

 

This report contains “forward-looking statements” (within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended). Such statements include, but are not limited to, statements regarding the Company’s future business and financial performance and prospects, and other statements identified by words such as “will likely result,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “plan,” “project,” “outlook,” “should,” “could,” “may” or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of the Company’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results and the timing of events may differ materially from the results included in such forward-looking statements. In addition to the factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (“SEC”) on April 11, 2022, in the Company’s other public reports filed with the SEC (including those identified under “Risk Factors” therein), the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the impact of the COVID-19 pandemic; the impact of Russia’s invasion of Ukraine; the Company’s reliance on contract manufacturing and outsourced supply chain and the availability of semiconductors and manufacturing capacity; competitive products and pricing pressures; the Company’s ability to win competitive bid selection processes and achieve additional design wins; the impact of any acquisitions the Company may make, including its ability to successfully integrate acquired businesses and risks that the anticipated benefits of any acquisitions may not be fully realized or take longer to realize than expected; management’s ability to develop, market and gain acceptance for new and enhanced products and expand into new technologies and markets; trade restrictions and trade tensions; and political or economic instability in the Company’s target markets. indie cautions that the foregoing list of factors is not exclusive.

 

All information set forth herein speaks only as of the date hereof, and the Company disclaims any intention or obligation to update any forward-looking statements made in this report or in its other public filings, whether as a result of new information, future events or otherwise, except as required by law.

 

ii

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

INDIE SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

   March 31,
2022
   December 31,
2021
 
Assets        
Current assets:        
Cash and cash equivalents  $192,979   $219,081 
Restricted cash   383    383 
Accounts receivable, net of allowance for doubtful accounts of $51 as of March 31, 2022 and $27 as of December 31, 2021   16,064    13,842 
Inventory, net   10,835    9,080 
Prepaid expenses and other current assets   6,821    5,648 
Total current assets   227,082    248,034 
Property and equipment, net   12,093    11,090 
Intangible assets, net   104,785    96,285 
Goodwill   130,416    115,206 
Operating lease right-of-use assets   12,553    - 
Other assets and deposits   297    270 
Total assets  $487,226   $470,885 
           
Liabilities and stockholders’ equity          
Accounts payable  $6,770   $5,441 
Accrued payroll liabilities   4,700    4,021 
Accrued expenses and other current liabilities   24,718    14,622 
Intangible asset contract liability   5,705    5,516 
Deferred revenue   2,845    1,840 
Current debt obligations   12,262    2,275 
Total current liabilities   57,000    33,715 
Long-term debt, net of current portion   5,306    5,618 
Warrant liability   53,114    100,467 
           
Intangible asset contract liability, net of current portion   11,306    12,452 
Deferred tax liabilities, non-current   24,176    21,164 
Operating lease liability, non-current   10,527    - 
Other long-term liabilities   8,537    5,612 
Total liabilities   169,966    179,028 
Commitments and contingencies (Note 17)          
Stockholders’ equity          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued or outstanding   -    - 
Class A common stock, $0.0001 par value, 250,000,000 shares authorized, 117,764,495 and 111,260,962 shares issued, 114,977,679 and 108,181,781 shares outstanding as of March 31, 2022 and December 31, 2021, respectively.   11    11 
Class V common stock, $0.0001 par value, 40,000,000 shares authorized, 30,119,812 and 30,448,081 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.   3    3 
Additional paid-in capital   523,972    514,891 
Accumulated deficit   (189,583)   (200,416)
Accumulated other comprehensive loss   (580)   (1,443)
indie’s stockholders’ equity   333,823    313,046 
Noncontrolling interest   (16,563)   (21,189)
Total stockholders’ equity   317,260    291,857 
Total liabilities and stockholders’ equity  $487,226   $470,885 

 

See accompanying notes to the condensed consolidated financial statements.

 

1

 

 

INDIE SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

   Three Months Ended
March 31,
 
   2022   2021 
         
Revenue:        
Product revenue  $18,086   $7,483 
Contract revenue   3,913    631 
Total revenue   21,999    8,114 
Operating expenses:          
Cost of goods sold   14,192    4,848 
Research and development   29,499    8,677 
Selling, general, and administrative   12,642    2,695 
Total operating expenses   56,333    16,220 
Loss from operations   (34,334)   (8,106)
Other income (expense), net:          
Interest income   33    7 
Interest expense   (58)   (620)
Gain (loss) from change in fair value of SAFEs   -    19,100 
Gain (loss) from change in fair value of warrants   47,353    - 
Gain (loss) from change in fair value of earn-out liabilities   83    - 
Other expense   (30)   (7)
Total other income, net   47,381    18,480 
Net income before income taxes   13,047    10,374 
Income tax benefit (expense)   659    (13)
Net income   13,706    10,361 
Less: Net income (loss) attributable to noncontrolling interest   2,873    (454)
Net income attributable to indie Semiconductor, Inc.  $10,833   $10,815 
           
Net income attributable to common shares - basic  $10,833   $5,443 
Net income (loss) attributable to common shares - diluted  $10,833   $(13,657)
           
Net income per share attributable to common shares - basic  $0.10   $0.17 
Net income (loss) per share attributable to common shares - diluted  $0.07   $(0.35)
           
Weighted average common shares outstanding - basic (1)   111,189,340    32,284,863 
Weighted average common shares outstanding - diluted (1)   147,396,772    39,218,016 

 

(1) Retroactively restated to give effect to the reverse recapitalization.

 

See accompanying notes to the condensed consolidated financial statements.

 

2

 

 

INDIE SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

   Three Months Ended
March 31,
 
   2022   2021 
         
Net income  $13,706   $10,361 
Other comprehensive income (loss):          
Foreign currency translation adjustments   884    (88)
Comprehensive income   14,590    10,273 
           
Less: Comprehensive income (loss) attributable to noncontrolling interest   2,894    (418)
Comprehensive income attributable to indie Semiconductor, Inc.  $11,696   $10,691 

 

See accompanying notes to the condensed consolidated financial statements.

 

3

 

 

INDIE SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
AND NONCONTROLLING INTEREST

(Amounts in thousands, except unit and share amounts)

(Unaudited)

 

   Common Stock
Class A
   Common Stock
Class V
   Additional
Paid-in
   Accumulated   Accumulated
Other
Comprehensive
   Total
Stockholders’
Equity
(Deficit)
Attributable
to indie
Semiconductor,
   Noncontrolling   Total
Stockholders’
Equity
 
   Shares (1)   Amount   Shares (1)   Amount   Capital   Deficit   Loss   Inc.   Interest   (Deficit) 
Balance as of December 31, 2020   34,413,634   $          3    33,373,294   $         3   $43,155   $(153,264)  $(209)  $(110,312)  $8,820   $(101,492)
                                                   
Vesting of equity awards   631,121    -    -    -    -    -    -    -    -    - 
Net income   -    -    -    -    -    10,815    -    10,815    (454)   10,361 
Foreign currency translation adjustment   -    -    -    -    -    -    (88)   (88)   36    (52)
                                                   
Balance as of March 31, 2021   35,044,755   $3    33,373,294   $3   $43,155   $(142,449)  $(297)  $(99,585)  $8,402   $(91,183)

 

(1) Retroactively restated to give effect to the reverse recapitalization.

 

4

 

 

INDIE SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
AND NONCONTROLLING INTEREST

(Amounts in thousands, except unit and share amounts)

(Unaudited)

 

   Common Stock
Class A
   Common Stock
Class V
   Additional
Paid-in
   Accumulated   Accumulated
Other
Comprehensive
   Total
Stockholders’
Equity
Attributable
to indie
Semiconductor,
   Noncontrolling   Total
Stockholders’
 
   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Inc.   Interest   Equity 
Balance as of December 31, 2021   108,181,781   $11    30,448,081   $3   $514,891   $(200,416)  $(1,443)  $313,046   $(21,189)  $291,857 
Vesting of equity awards   250,378    -    -    -    -    -    -    -    -    - 
Issuance per settlement of equity awards and cash exercise of stock options   1,250,878    -    -    -    (188)   -    -    (188)   259-    71 
Issuance per Exchange of Class V to Class A   2,224,148    -    (2,224,148)   -    (2,345)   -    -    (2,345)   2,345    - 
Issuance on earn out awards   3,070,494    -    1,895,879    -    872    -    -    872    (872)   - 
Share-based compensation   -    -    -    -    10,742    -    -    10,742    -    10,742 
Net income   -    -    -    -    -    10,833    -    10,833    2,873    13,706 
Foreign currency translation adjustment                                 863    863    21    884 
                                                   
Balance as of March 31, 2022   114,977,679   $11    30,119,812   $3   $523,972   $(189,583)  $(580)  $333,823   $(16,563)  $317,260 

 

See accompanying notes to the condensed consolidated financial statements.

 

5

 

 

INDIE SEMICONDUCTOR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

   Three Months Ended
March 31,
 
   2022   2021 
Cash flows from operating activities:        
Net income  $13,706   $10,361 
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   5,435    643 
Inventory impairment charges   503    8 
Share-based compensation   12,415    - 
Amortization of discount and cost of issuance of debt   -    72 
Bad debts   24    49 
Non-cash interest expense   -    202 
(Gain) loss from change in fair value remeasurement of SAFEs   -    (19,100)
(Gain) loss from change in fair value of warrants   (47,353)   - 
(Gain) loss from change in fair value of contingent consideration and earn-out liability   (83)   - 
Accrued contingent consideration related to acquisition   -    60 
Deferred City Semi compensation   125    125 
Amortization of right-of-use assets   469    - 
Unrealized foreign currency transaction (gain) loss   (14)   - 
Changes in operating assets and liabilities:          
Accounts receivable   (1,796)   (1,163)
Inventory   (235)   (746)
Accounts payable   1,271    536 
Accrued expenses and other current liabilities   1,037    266 
Accrued payroll liabilities   (1,820)   166 
Deferred revenue   1,792    (564)
Prepaid and other current assets   (789)   (6)
Operating lease liabilities   (144)   - 
Other long-term liabilities   (257)   - 
Net cash used in operating activities   (15,714)   (9,091)
Cash flows from investing activities:          
Purchases of property and equipment   (565)   (140)
Purchases of intangible assets   -    (21)
Business combinations, net of cash   (8,705)   - 
Net cash used in investing activities   (9,270)   (161)
Cash flows from financing activities:          
Proceeds from issuance of debt obligations   315    - 
Payments on debt obligations   (383)   - 
Payments on financed software   (704)   (300)
Payments on deferred financing costs   -    (332)
Proceeds from exercise of stock options   52    - 
Net cash used in financing activities   (720)   (632)
Effect of exchange rate changes on cash and cash equivalents   (398)   59 
Net increase in cash and cash equivalents   (26,102)   (9,825)
Cash, cash equivalents and restricted cash at beginning of period   219,464    18,698 
Cash, cash equivalents and restricted cash at end of period  $193,362   $8,873 
Supplemental disclosure of cash flow information:        
Cash paid for interest  $58   $340 
Supplemental disclosure of non-cash investing and financing activities:          
Purchases of property and equipment, accrued but not paid  $39   $56 
Deferred financing costs incurred  $-   $491 
Contingent consideration for business combination  $8,204   $- 
Accrual for purchase consideration for business combination  $9,674   $- 

 

See accompanying notes to the condensed consolidated financial statements.

 

6

 

 

INDIE SEMICONDUCTOR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except unit and share amounts and per unit and per share amounts)

(Unaudited)

 

1. Nature of the Business and Basis of Presentation

 

indie Semiconductor, Inc. (“indie”) and its predecessor for accounting purposes, Ay Dee Kay, LLC, a California limited liability company (“ADK LLC”) and its subsidiaries are collectively referred to herein as the “Company.” The Company offers highly innovative automotive semiconductors and software solutions for Advanced Driver Assistance Systems (“ADAS”), autonomous vehicle, connected car, user experience and electrification applications. The Company focuses on edge sensors across multiple modalities spanning LiDAR, radar, ultrasound and vision. These functions represent the core underpinnings of both electric and autonomous vehicles, while the advanced user interfaces are transforming the in-cabin experience to mirror and seamlessly connect to the mobile platforms people rely on every day. indie is an approved vendor to Tier 1 automotive suppliers and its platforms can be found in marquee automotive manufacturers around the world. Headquartered in Aliso Viejo, California, indie has design centers and sales offices in Austin, Texas; Boston, Massachusetts; Detroit, Michigan; San Francisco and San Jose, California; Budapest, Hungary; Dresden and Munich, Germany; Edinburgh, Scotland; Haifa, Israel; Quebec City, Canada; Tokyo, Japan; Seoul, South Korea and several locations throughout China. The Company engages subcontractors to manufacture its products. The majority of these subcontractors are located in Asia.

 

Recent Acquisitions

 

On October 21, 2021, indie entered into a definitive agreement with Analog Devices (“ADI”) to acquire Symeo GmbH (“Symeo”). The acquisition was approved by the German government on January 4, 2022 and closed on the same day. The total consideration paid for this acquisition consisted of (i) $8,705 in cash at closing, net of cash acquired; (ii) a $10,000 promissory note payable in January 2023 with a fair market value of $9,674 on January 4, 2022; and (iii) an equity-based earn-out of up to 858,369 shares of indie Class A common stock based on future revenue growth. The fair market value of this equity-based earn-out was $8,204 on January 4, 2022.

 

See Note 2 - Business Combinations for additional description of this acquisition.

 

Reverse Recapitalization with Thunder Bridge Acquisition II

 

On June 10, 2021, Thunder Bridge Acquisition II, Ltd. (“TB2”), consummated a business combination (the “Transaction”) pursuant to the Master Transactions Agreement dated December 14, 2020, as amended on May 3, 2021 (the “MTA”). In connection with the Transaction, Thunder Bridge II Surviving Pubco, Inc, a Delaware corporation (“Surviving Pubco”), was formed to be the successor public company to TB2, TB2 was domesticated into a Delaware corporation and merged with and into and a merger subsidiary of Surviving Pubco. On the same day, Surviving Pubco changed its name to indie Semiconductor, Inc., and listed our shares of Class A common stock, par value $0.0001 per share on The Nasdaq Stock Market LLC under the symbol “INDI.”

 

Impact of COVID-19

 

The COVID-19 pandemic and the resulting economic downturn has affected business conditions in our industry. The duration, severity, and future impact of the pandemic, including as a result of more contagious variants of the virus that causes COVID-19, continue to be highly uncertain and could still result in significant disruptions to our business operations, as well as negative impacts to our financial condition. Like many companies in the semiconductor industry, we are experiencing various supply constraints due to the pandemic. While we are working with our global supply chain partners to mitigate this risk, the duration and extent of the supply chain disruptions remain uncertain. Refer to Part I, Item 1A of our 2021 Annual Report on Form 10-K for the fiscal year ended December 31, 2021 under the heading “Risk Factors” for more information.

 

Basis of Presentation

 

The condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and the Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The condensed consolidated financial statements include the consolidated accounts of the Company’s majority-owned subsidiary, ADK LLC, of which 79% was owned by indie as of March 31, 2022. ADK LLC’s consolidated financial statements include its wholly-owned subsidiaries Indie Services Corporation, indie LLC and Indie City LLC, all California entities, Ay Dee Kay Limited, a private limited company incorporated under the laws of Scotland, indie GmbH, a private limited liability company incorporated under the laws of Germany, indie Kft, a limited liability company incorporated under the laws of Hungary, TeraXion Inc., a company incorporated under the laws of Canada, indie Semiconductor Israel Ltd., a private limited company incorporated under the laws of Israel, Wuxi indie Microelectronics (“Wuxi”), a Chinese entity 64% controlled by the Company as of March 31, 2022 and Wuxi’s wholly-owned subsidiaries, indie Semiconductor Japan, indie Semiconductor HK, Ltd and Shanghai Ziying Microelectronics Co., Ltd.

 

7

 

 

All significant intercompany accounts and transactions of the subsidiaries have been eliminated in consolidation. The noncontrolling interest attributable to the Company’s less-than-wholly-owned subsidiary is presented as a separate component from stockholders’ equity (deficit) in the consolidated balance sheets, and a noncontrolling interest in the consolidated statements of operations and consolidated statements of stockholders’ equity (deficit) and noncontrolling interest.

 

Unaudited Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for interim financial reporting. Certain information and footnote disclosures, normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to those rules and regulations. However, in management’s opinion, the financial information reflects all adjustments, including those of a normal recurring nature, necessary to present fairly the results of operations, financial position, and cash flows of the Company for the periods presented. The results of operations, financial position, and cash flows for the Company during the interim periods are not necessarily indicative of those expected for the full year. This information should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on April 11, 2022.

 

Emerging Growth Company

 

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. indie is an “emerging growth company” as defined in Section 2(a) of the Securities Act, and have elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. Following the consummation of the Transaction, our Post-Combination Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we achieve total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we issue more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2024. The Company expects to continue to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. This may make it difficult or impossible to compare the Company’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used.

 

Significant Accounting Policies

 

The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021. Other than the accounting policies discussed in Note 16, Leases, related to the adoption of ASC 842, Leases, there has been no material change to the Company’s significant accounting policies during the three months ended March 31, 2022.

 

Recent Accounting Pronouncements

 

Recently Issued Accounting Pronouncements Not Yet Adopted

 

In June 2016, the FASB amended guidance related to impairment of financial instruments as part of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology with an expected credit loss model for which a company recognizes an allowance based on the estimate of expected credit loss. This ASU requires entities to measure the impairment of certain financial instruments, including accounts receivable, based on expected losses rather than incurred losses. This ASU is effective for fiscal years beginning after December 15, 2022, with early adoption permitted, and will be effective for the Company beginning in 2023. The Company is currently evaluating the impact of the new standard on the Company’s condensed consolidated financial statements and related disclosures.

 

8

 

 

Recently Adopted Accounting Pronouncements

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), whereby lessees will be required to recognize for all leases at the commencement date a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. A modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the consolidated financial statements must be applied. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. The FASB issued ASU 2019-10-Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates in November 2019 and ASU 2020-05-Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities in June 2020. The ASUs change some effective dates for ASU 2016-02 on leasing. After applying ASU 2019-10 and 2020-05, ASU 2016-02 is effective for annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2021.

 

The Company applied the transition requirements on the adoption date of January 1, 2022, rather than at the beginning of the earliest comparative period presented. This approach allows for a cumulative effect adjustment in the period of adoption, and prior periods will not be restated. In addition, the Company elected the package of practical expedients permitted under the transition guidance, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. The Company also elected to use the hindsight practical expedient to consider any facts or circumstances that have changed through the January 1, 2022 adoption date that may affect the lease term due to renewal options and assess the impairment of the right-of-use asset. As an accounting policy election, the Company also excluded short-term leases (term of 12 months or less) from the balance sheet presentation and accounted for non-lease and lease components in a contract as a single lease component for certain asset classes. Effective January 1, 2022, the Company recorded the impact on its condensed consolidated balance sheet from the recognition of ROU asset and lease liability of $10,344 and $10,344, respectively. However, the impact to its condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows is not material. See Note 16, Leases, for additional details.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles of ASC 740, Income Taxes. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 (and December 15, 2021 for nonpublic companies) and early adoption is permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective, or prospective basis. The Company adopted ASU 2019-12 as of January 1, 2022 on a prospective basis. The standard had no material impact on its condensed consolidated financial statements and related disclosures.

 

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. The provisions of ASU 2020-06 are applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company early adopted this update on January 1, 2022 using the modified retrospective method of transition and the impact to its condensed consolidated financial statements was not material.

 

9

 

 

2. Business Combinations

 

The Company acquired TeraXion, Inc. (“TeraXion”) and ON Design Israel Ltd. (“ON Design Israel”) in October 2021 and Symeo GmbH (“Symeo”) in January 2022. These acquisitions were recorded by allocating the purchase consideration to the net assets acquired based on their estimated fair values at the acquisition date. The excess of the purchase consideration for the acquisition over the fair value of the net assets acquired is recorded as goodwill. The fair values were based on management’s analysis, including work performed by third-party valuation specialists. The following presents the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed for TeraXion, ON Design Israel, and Symeo as of March 31, 2022:

 

   Symeo
GmbH
   TeraXion   ON Design
Israel
 
Purchase price - cash consideration  $10,000   $74,050   $6,107 
Purchase price - cash consideration (Accrual)   9,674    -    7,500 
Add: debt paid at closing   -    6,857    - 
Less: cash acquired   (1,295)   (5,625)   (1,133)
Net cash paid   18,379    75,282    12,474 
                
Purchase price - equity consideration               
Common stock   -    65,192    - 
Options   -    17,249    - 
Total equity consideration   -    82,441    - 
                
Earn out shares   8,204    -    - 
Contingent consideration   -    -    4,000 
Net consideration  $26,583   $157,723   $16,474 
                
Fair value of net assets and liabilities assumed:               
Current assets other than cash   2,857    7,627    119 
Property and equipment   1,039    6,009    1,315 
                
Developed technology   6,631    43,594    5,077 
In-progress research & development   2,170    10,304    1,562 
Customer relationships   2,411    12,682    - 
Backlog   603    2,378    - 
Trade name   965    6,125    - 
Other non-current assets   36    -    66 
Current liabilities   (1,461)   (5,840)   (859)
Deferred revenue   -    (1,025)   - 
Deferred tax liabilities, non-current   (2,935)   (20,272)   (1,578)
                
Long-term debt   -    (7,580)   - 
Total fair value of net assets acquired   12,316    54,002    5,702 
                
Goodwill  $14,267   $103,721   $10,772 

 

Any changes in the estimated fair values of the net assets recorded for the business combination of TeraXion, ON Design Israel or Symeo upon the finalization of more detailed analyses of the facts and circumstances that existed at the date of the transaction will change the allocation of the purchase price. Any subsequent changes to the purchase allocation during the measurement period that are material will be recorded in the reporting period in which the adjustment amounts are determined.

 

Trade receivables and payables, as well as other current and non-current assets and liabilities, were valued at the existing carrying value as they represented the fair value of those items at the acquisition date, based on management’s judgments and estimates.

 

10

 

 

Due to the fact that the acquisitions related to TeraXion, ON Design Israel and Symeo have just recently occurred, the magnitude of the transactions, and the significant information to be obtained and analyzed, some of which resides in foreign jurisdictions, the Company’s fair value estimates for the purchase price allocation are preliminary and may change during the allowable measurement period, which is up to the point the Company obtains and analyzes the information that existed as of the date of the acquisition necessary to determine the fair values of the assets acquired and liabilities assumed, but in no case to exceed more than one year from the date of acquisition. As of May 13, 2022, the Company had not finalized the determination of fair values allocated to various assets and liabilities, including, but not limited to, property, plant and equipment, identifiable intangible assets, other assets, deferred taxes, goodwill, tax uncertainties, income taxes payable, and other liabilities. Specifically for the valuation of intangibles assets acquired, the Company used publicly available benchmarking information, as well as a variety of other assumptions, including market participant assumptions to determine the preliminary values. Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in material adjustments to goodwill.

 

Acquisition of TERAXION INC

 

On August 27, 2021, indie entered into a Share Purchase Agreement (the “Purchase Agreement”), pursuant to which indie’s wholly-owned Canadian subsidiary (“Purchaser”) agreed to purchase all of the outstanding capital stock of TeraXion from the existing stockholders. The transaction was completed on October 12, 2021 and TeraXion became a wholly-owned subsidiary of ADK, LLC as a result of this acquisition.

 

The aggregate purchase price of this acquisition is CAD$200,000 (the “Purchase Price”), which is payable 50% in cash and 50% in indie’s shares of Class A common stock, subject to various purchase price adjustments. Upon completion of the transaction, the total consideration paid for this acquisition consisted of (i) approximately $75,282 in cash (including debt paid at closing and net of cash acquired); (ii) the issuance by indie of 5,805,144 shares of indie Class A common stock with a fair value of $65,192 based on the market value of $11.23 per share; and (iii) the assumption by indie of TeraXion options, which became exercisable to purchase 1,542,332 shares of indie Class A common stock with a fair value of $17,249.

 

TeraXion is a market leader in the design and manufacture of innovative photonic components. The Company paid a premium (i.e. goodwill) over the fair value of the net tangible and identified intangible assets acquired as this acquisition accelerates indie’s vision of becoming a semiconductor and software level solutions provider for multiple sensor modalities spanning advanced driver-assistance systems (“ADAS”) and autonomous vehicles. The goodwill is not expected to be deductible for tax purposes.

 

As of March 31, 2021, indie incurred approximately $1,649 of acquisition-related costs, which were primarily legal expense and recorded as part of the Selling, General and Administrative expenses.

 

There are no amounts of revenue and earnings of TeraXion included in the Company’s condensed consolidated statement of operations for the three months ended March 31, 2021.

 

The unaudited pro forma financial information shown below summarizes the combined results of operations for the Company and TeraXion as if the closing of the acquisition had occurred on January 1, 2021:

 

   Three months
ended
 
   March 31,
2021
 
Combined revenue  $14,044 
Combined net loss before income taxes   8,567 

 

The unaudited pro forma financial information includes adjustments that are directly attributable to the business combination and are factually supportable. Pro forma information reflects adjustments that are expected to have a continuing impact on the Company’s results of operations and are directly attributable to the acquisition. The unaudited pro forma results include adjustments to reflect, among other things, direct transaction costs relating to the acquisition, the incremental intangible asset amortization to be incurred based on the preliminary values of each identifiable intangible asset, and to eliminate a portion of the interest expense related to legacy TeraXion’s former loans, which were repaid upon completion of the acquisition. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been realized if the acquisition had taken place on January 1, 2021.

 

11

 

 

Acquisition of ON Design Israel Ltd.

 

On October 1, 2021, indie entered into a definitive agreement and completed its acquisition of ON Design Israel Ltd. for $4,974 in cash paid upon close (net of cash acquired), $7,500 will be paid in 2022 and is reflected in Other current liabilities, and up to $7,500 will be paid upon achievement of certain milestones and is reflected in Other long-term liabilities. Upon completion of the acquisition, ON Design Israel was renamed to indie Semiconductor Design Israel Ltd and became a wholly-owned subsidiary of the Company.

 

The Company paid a premium (i.e. goodwill) over the fair value of the net tangible and identified intangible assets acquired as this acquisition brings the Company an engineering development team with broad experience in radar system implementation, which will accelerate indie’s entry into the radar market and enable the Company to capture strategic opportunities among Tier 1 customers. The goodwill is not expected to be deductible for tax purposes.

 

As of March 31, 2022, indie incurred approximately $390 of acquisition-related costs, which were primarily legal expense and recorded as part of the Selling, General and Administrative expenses.

 

Total purchase considerations transferred at closing also included contingent consideration that had a fair value of $4,000 as of the acquisition date. The maximum contingent consideration payable in connection with the acquisition is $7,500. The acquisition date fair value of the contingent considerations was determined based on the Company’s assessment of the probability of achieving the performance targets that ultimately obligate the Company to transfer additional consideration to the seller. The contingent consideration is comprised of two tranches. The first tranche (“Tapeout”) is payable, up to a maximum of $2,500, upon the achievement of tapeout of the product design within 30 months of the acquisition. The second tranche (“Design Win”) is payable, up to a maximum of $5,000, upon indie’s achievement of a design win within 36 months of the acquisition. The fair value of any outstanding contingent consideration liabilities will be remeasured as of the end of each reporting period with any resulting remeasurement gains or losses recognized in the consolidated statement of operations. The fair value of Tapeout and Design Win contingent consideration liabilities was $1,771 and $2,148, respectively, as of March 31, 2022. Both the fair value of Tapeout and Design Win contingent consideration liability as of March 31, 2022 are reflected in reflected in Other long-term liabilities in the condensed consolidated balance sheet.

 

Pro forma financial information for the three months ended March 31, 2022 for ON Design Israel is not disclosed as the results are not material to the Company’s condensed consolidated financial statements.

 

Acquisition of Symeo GmbH

 

On October 21, 2021, indie entered into a definitive agreement with ADI to acquire Symeo. The acquisition was approved by the German government on January 4, 2022 and closed on the same day. The total consideration paid for this acquisition consisted of (i) $8,705 in cash at closing, net of cash acquired; (ii) a $10,000 promissory note payable in January 2023 with a fair market value of $9,674; and (iii) an equity-based earn-out of up to 858,369 shares of indie Class A common stock based on future revenue growth. The fair market value of this equity-based earn-out was $8,204 on January 4, 2022. The acquisition date fair value of the equity-based earn-out was determined based on the Company’s assessment of the probability of achieving the performance targets that ultimately obligate the Company to transfer additional consideration to the seller. This earn-out has two tranches. Both tranches are payable upon Symeo achieving $5,000 of revenue threshold by March 31, 2023, another $6,000 of revenue threshold by March 31, 2024 and annual gross margin of Symeo for each period being greater than 65%. The fair value of any outstanding contingent consideration liabilities will be remeasured as of the end of each reporting period with any resulting remeasurement gains or losses recognized in the consolidated statement of operations. The fair value of these contingent consideration liabilities was $4,235 and $3,985, respectively, as of March 31, 2022. The first tranche of this earn-out liability is reflected in Accrued expense and other current liabilities and the second tranche is reflected in reflected in Other long-term liabilities in the condensed consolidated balance sheet as of March 31, 2022.

 

indie incurred various acquisition-related costs, which were primarily legal expense and recorded as part of the Selling, General and Administrative expenses. Total costs incurred is de minimis as of March 31, 2022.

 

Pro forma financial information for the three months ended March 31, 2022 for Symeo is not disclosed as the results are not material to the Company’s condensed consolidated financial statements.

 

12

 

 

3. Inventory, Net

 

Inventory, net consists of the following:

 

   March 31,
2022
   December 31,
2021
 
Raw materials  $3,824   $2,380 
Work-in-process   5,084    6,301 
Finished goods   4,225    2,151 
Inventory, gross   13,133    10,832 
Less: Inventory reserves   2,298    1,752 
Inventory, net  $10,835   $9,080 

 

During the three months ended March 31, 2022 and 2021, the Company recognized write-downs in the value of inventory of $503 and $8, respectively.

 

4. Property and Equipment, Net

 

Property and equipment, net consists of the following:

 

   Useful life
(in years)
   March 31,
2022
   December 31,
2021
 
Production tooling   4   $10,661   $10,158 
Lab equipment   4    4,654    4,489 
Office equipment   3 - 7    3,096    1,893 
Leasehold improvements   *    543    395 
Construction in progress        -    256 
Property and equipment, gross        18,954    17,191 
Less: Accumulated depreciation        6,861    6,101 
Property and equipment, net       $12,093   $11,090 

 

*Leasehold improvements are amortized over the shorter of the remaining lease term or estimated useful life of the leasehold improvement.

 

The Company recognized depreciation expense of $760 and $210 for the three months ended March 31, 2022 and 2021, respectively.

 

Fixed assets not yet in service consist primarily of capitalized internal-use software and certain tooling and other equipment that have not been placed into service.

 

13

 

 

5. Intangible Assets, Net

 

Intangible assets, net consist of the following:

 

   March 31, 2022   December 31, 2021 
   Weighted
Average
Remaining
Useful Life
   Gross
Carrying
Amount
   Accumulated
Amortization
   Net
Carrying
Amount
   Weighted
Average
Remaining
Useful Life
   Gross
Carrying
Amount
   Accumulated
Amortization
   Net
Carrying
Amount
 
Developed technology   6.5   $55,671   $(3,623)  $52,048    6.7   $49,035   $(1,374)  $47,661 
Software licenses   2.2    23,305    (7,477)   15,828    2.5    23,302    (6,286)   17,016 
Customer relationships   6.6    15,093    (935)   14,158    6.7    12,682    (365)   12,317 
Intellectual property licenses   1.3    1,757    (1,697)   60    1.5    1,736    (1,687)   49 
Trade names   6.6    7,089    (444)   6,645    6.7    6,125    (182)   5,943 
Backlog   1.6    2,980    (632)   2,348    1.8    2,378    (239)   2,139 
Effect of exchange rate on gross carrying        (289)   -    (289)        (631)   -    (631)
Intangible assets with finite lives        105,606    (14,808)   90,798         94,627    (10,133)   84,494 
                                         
IPR&D        14,036    -    14,036         11,866    -    11,866 
Effect of exchange rate on gross carrying        (49)   -    (49)        (75)   -    (75)
Total intangible assets with indefinite lives        13,987    -    13,987         11,791    -    11,791 
                                         
Total intangible assets       $119,593   $(14,808)  $104,785        $106,418   $(10,133)  $96,285 

 

The Company obtained software licenses which it uses for its research and development efforts related to its products. In fiscal 2022 and 2021, the Company obtained additional software licenses. Further, the Company has acquired developed technology, customer relationships, trade names, backlog, and IPR&D as a result of the business combinations. See Note 2 - Business Combinations for additional information.

 

Intangible assets with finite lives are amortized on a straight-line basis over the expected period to be benefited by future cash flows. The Company monitors and assesses these assets for impairment on a periodic basis. As of March 31, 2022, the Company determined that there was no impairment of intangible assets.

 

Amortization of intangible assets for the three months ended March 31, 2022 and 2021 was $4,675 and $432, respectively. Amortization of intangible assets is included within Cost of goods sold, Research and development expenses, and Selling, general and administrative expenses based their respective nature, in the condensed consolidated statements of operations, respectively.

 

Based on the amount of definite-lived intangible assets subject to amortization as of March 31, 2022, amortization expense for each of the next five fiscal years is expected to be as follows:

 

2022 (remaining 9 months)  $13,504 
2023   19,637 
2024   15,557 
2025   11,083 
2026   11,083 
Thereafter   19,934 
   $90,798 

 

14

 

 

6. Goodwill

 

The following table sets forth the carrying amount and activity of goodwill as of March 31, 2022:

 

   Amount 
Balance as of December 31, 2021  $115,206 
Acquisitions (Note 2)   14,373 
Effect of exchange rate on goodwill   837 
Balance as of March 31, 2022  $130,416 

 

Goodwill increased by $14,373 during the three months ended March 31, 2022 due to an acquisition completed during the period. See Note 2 for a detailed discussion of goodwill acquired.

 

The Company tests its goodwill for impairment annually as of the first day of its fourth fiscal quarter and in interim periods if certain events occur indicating the carrying value of goodwill may be impaired. There were no indicators of impairment noted during the three months ended March 31, 2022.

 

7. Debt

 

The following table sets forth the components of debt as of March 31, 2022 and December 31, 2021:

 

   March 31, 2022   December 31, 2021 
   Principal
Outstanding
   Unamortized
Discount
and
Issuance
Cost
   Carrying
Amount
   Principal
Outstanding
   Unamortized
Discount
and
Issuance
Cost
   Carrying
Amount
 
Short term loans, due 2023  $1,107   $-   $1,107   $810   $        -   $810 
Promissory note, due 2023   10,000    (326)   9,674    -    -    - 
CIBC loan, due 2026   6,810    (23)   6,787    7,102    (19)   7,083 
Total debt  $17,917   $(349)  $17,568   $7,912   $(19)  $7,893 

 

The outstanding debt as of March 31, 2022 and December 31, 2021 is classified in the condensed consolidated balance sheets as follows:

 

   March 31,
2022
   December 31,
2021
 
Current liabilities - Current debt obligations  $12,262   $2,275 
Noncurrent liabilities - Long-term debt, net of current maturities   5,306    5,618 
Total debt  $17,568   $7,893 

 

PacWest Revolving Line of Credit

 

The Company entered into a loan and security agreement with Pacific Western Bank (“PacWest”, formerly Square 1 Bank) in January 2015, that provided a term loan of up to $10,000 with a maturity date of September 2020. The term loan bore interest equal to the greater of one percent above the prime rate in effect, or 4.5% on outstanding borrowings. In addition, the loan and security agreement provided for a revolving line of credit. The revolving line of credit bore interest equal to the greater of seventy-five basis points above the prime rate in effect, or 4.25% on outstanding borrowings. The terms of the loan and security agreement have been amended from time to time, and in with the most recent amendment dated November 5, 2021 as described below. The amendments have, among other things, extended the maturity date of the loan and adjusted the financial covenants’ borrowing limits. During 2020, the outstanding balance on the term loan was transferred to the revolving line of credit.

 

On November 5, 2021, the Company entered into an amendment to the PacWest loan agreement that (i) increased the maximum borrowing capacity under the revolving line of credit to $20,000, (ii) limited the security interests of the bank to the cash collateral set at 102.5% of the drawn amount of the loan, (iii) removed various reporting and restrictive covenants, (iv) extended the maturity date to November 4, 2022 and (iv) reduced the interest rate to 2.1% per annum. In addition, the amendment requires the Company to collateralize a cash balance equal to the total outstanding balance in a cash security account with PacWest. Upon execution of the amendment, the Company repaid the outstanding balance of $1,675 under the original line of credit to this new arrangement.

 

15

 

 

As of March 31, 2022 and December 31, 2021, there was no outstanding balance on the revolving line of credit. The Company’s borrowings under the revolving line of credit were subject to an aggregate borrowing limit of $20,000 as of March 31, 2022 and December 31, 2021. Total borrowings at any given time under the revolving line of credit are limited to a percentage of domestic accounts receivables less than 90 days past due and other factors.

 

The revolving line of credit is subject to debt covenants which, if violated, could result in the outstanding balance becoming immediately due. The Company has complied with or obtained waivers for all such covenants as of the date these financial statements were issued.

 

TeraXion Revolving Credit

 

In connection with the acquisition of TeraXion on October 12, 2021, the Company assumed a revolving credit with the Canadian Imperial Bank of Commerce with a credit limit of CAD9,440 bearing interest at prime rate plus 0.25%, repayable in monthly installments of CAD155 plus interest, maturing in October 2026. The repayment of monthly installments reduces the credit limit over time. As of March 31, 2022 and December 31, 2021 the outstanding principal balance and credit limit of the loan was $6,805 and $7,102, or CAD8,512 and CAD8,976, respectively. This loan is secured with an authorized credit facility of CAD7,000 from the bank, bearing interest at prime rate plus 0.25%. This line of credit was unused at December 31, 2021 and March 31, 2022.

 

Short Term Loans

 

Wuxi

 

On November 13, 2019, Wuxi entered into a short-term loan agreement with CITIC Group Corporation Ltd. with aggregate principal balance of CNY2,000, or approximately $285, and bearing interest of 4.785% per annum. The principal balance is denominated in Chinese Yuan and the outstanding balance is adjusted for changes in foreign currency exchange rates at each reporting period. On November 13, 2020, the terms of the agreement were extended for twelve months, and the principal and interest were due on November 15, 2021. On November 19, 2021, the total outstanding balance with CITIC Group Corporation was fully paid off. On January 19, 2022, Wuxi entered into a short-term loan agreement with CITIC Group Corporation Ltd. with aggregate principal balance of CNY2,000, or approximately $315, and bearing interest of 3.90% per annum. The principal balance is denominated in Chinese Yuan and the outstanding balance is adjusted for changes in foreign currency exchange rates at each reporting period. As of March 31, 2022, the total outstanding short-term loan with CITIC Group Corporation Ltd. was CNY2,000, or approximately $315.

 

On October 15, 2020, Wuxi entered into a short-term loan agreement with Bank of Ningbo (“NBCB”) with aggregate principal balance of CNY1,000 or approximately $151 and bearing interest of 4.785%. On April 29, 2021, Wuxi increased its short-term loan principal with NBCB by CNY1,000 or approximately $155 to a total principal balance of CNY4,000. On October 14, 2021, the borrowing from October 15, 2020 was fully paid off. On October 18, 2021, Wuxi re-entered into a short-term loan agreement with NBCB for CNY1,000, or approximately $150 and bearing interest of 4.785%. As of March 31, 2022, the total outstanding short-term loan with NBCB was CNY2,000, or $315. As of December 31, 2021, the total outstanding short-term loan with NBCB was CNY2,000 or $315.

 

On November 18, 2021, Wuxi also entered into a short-term loan agreement Bank of Nanjing with aggregate principal balance of CNY3,000, or approximately $453 and bearing interest of 4.00%. As of March 31, 2022, the total outstanding short-term loan with Bank of Nanjing was CNY3,000 or $472. As of December 31, 2021, the total outstanding short-term loan with Bank of Nanjing was CNY3,000 or $472.

 

TeraXion

 

In connection with the TeraXion acquisition, on October 12, 2021, the Company assumed a short-term loan with Canada Economic Development. This loan bears an interest rate of 8.00% and is payable monthly with a maturity date of April 1, 2022. As of March 31, 2022 and December 31, 2021, the aggregate outstanding principal balance was $5 and $23, respectively. As of April 1, 2022 this loan has been repaid in full.

 

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Symeo Promissory Note

 

In connection with the Symeo acquisition on January 4, 2022, the Company issued a short-term interest-free promissory note of $10,000, payable upon its maturity of January 31, 2023. As of March 31, 2022, the outstanding principal balance was $10,000 and the carrying value was $9,674.

 

The table below sets forth the components of interest expense for the three months ended March 31, 2022 and March 31, 2021:

 

   Three Months Ended
March 31,
 
   2022   2021 
Interest expense on Trinity Term Loan:        
Contractual interest  $-   $395 
Amortization of discount and issuance cost   -    72 
    -    467 
Interest expense on other debt obligations:          
Contractual interest   58    123 
Amortization of discount and issuance cost   -    30 
    58    153 
Total interest expense  $58   $620 

 

8. Warrant Liability

 

In connection with the June 10, 2021 Transaction, holders of TB2 Class A ordinary shares automatically received Class A common stock of indie, and holders of TB2 warrants automatically received 17,250,000 warrants of indie with substantively identical terms (“Public Warrants”). At the Closing, 8,625,000 Class B ordinary shares of TB2 owned by the Sponsor, automatically converted into 8,625,000 shares of indie Class A common stock, and 8,650,000 private placement warrants held by the sponsor, each exercisable for one Class A ordinary share of TB2 at $11.50 per share, automatically converted into warrants to purchase one share of indie Class A common stock at $11.50 per share with substantively identical terms (“the “Private Placement Warrants”). Also at the Closing, TB2 issued 1,500,000 working capital warrants to an affiliate of the Sponsor in satisfaction of a working capital promissory note of $1,500 (the “Working Capital Warrants” and, together with the Private Placement Warrants, the “Private Warrants”). These Working Capital Warrants have substantially identical terms to the Private Placement Warrants.

 

The warrants may be exercised only during the period commencing on July 10, 2021 (30 days after the closing of the Transaction) through June 10, 2026. The Company may redeem the Public Warrants at a price of $0.01 per warrant upon 30 days’ notice, only in the event that the last sale price of the Class A common stock is at least $18.00 per share for any 20 trading days within a 30-trading day period ending on the third day prior to the date on which notice of redemption is given, provided there is an effective registration statement and current prospectus in effect with respect to the Class A common stock underlying such warrants during the 30 day redemption period. If the Company redeems the warrants as described above, management will have the option to require all holders to exercise warrants on a “cashless basis.”

 

In accordance with the warrant agreement relating to the Public Warrants, the Company is required to use its best efforts to maintain the effectiveness of the registration statement covering the warrants. If a registration statement is not effective within 90 days following the consummation of a business combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. In the event that a registration statement is not effective at the time of exercise or no exemption is available for a cashless exercise, the holder of such warrant shall not be entitled to exercise such warrant for cash and in no event (whether in the case of a registration statement being effective or otherwise) will the Company be required to net cash settle the warrant exercise.

 

The terms of the Private Warrants are identical to the Public Warrants as described above, except that the Private Warrants are not redeemable so long as they are held by the sponsor or its permitted transferees.

 

The Company has reviewed the terms of warrants to purchase its Class A common stock to determine whether warrants should be classified as liabilities or stockholders’ equity in its consolidated balance sheet. In order for a warrant to be classified in stockholders’ equity, the warrant must be (a) indexed to the Company’s equity and (b) meet the conditions for equity classification in ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Equity. If a warrant does not meet the conditions for equity classification, it is carried on the consolidated balance sheet as a warrant liability measured at fair value, with subsequent changes in the fair value of the warrant recorded in the statement of operations as change in fair value of warrants in Other income (expense), net. The Company determined that all warrants are required to be carried as a liability in the condensed consolidated balance sheet at fair value, with changes in fair value recorded in the condensed consolidated statement of operations (see Note 10). At the closing of the Transaction on June 10, 2021, the warrants had an initial fair value of $74,408, which was recorded as liability and a reduction to additional paid in capital in the condensed consolidated balance sheet.

 

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The following table is a summary of the number of shares of the Company’s Class A common stock issuable upon exercise of warrants outstanding at June 10, 2021:

 

   Number of
Shares
   Exercise
Price
   Redemption
Price
   Expiration
Date
  Classification  Initial Fair
Value
 
Public Warrants   17,250,000   $11.50   $18.00   June 10, 2026   Liability   $42,435 
Private Warrants   10,150,000   $11.50    N/A    June 10, 2026   Liability   $31,973 

 

As of March 31, 2022, there have been no exercises of the warrants and the fair value was $53,114.

 

9. Contingent and Earn-Out Liabilities

 

Earn-Out Milestones

 

Certain of indie’s stockholders are entitled to receive up to 10,000,000 earn-out shares of the Company’s Class A common stock if the earn-out milestones are met. The earn-out milestones represent two independent criteria, which each entitles the eligible stockholders to 5,000,000 earn-out shares per milestone met. Each earn-out milestone is considered met if at any time following the Transaction and prior to December 31, 2027, the volume weighted average price of indie’s Class A common stock is greater than or equal to $12.50 or $15.00 for any twenty trading days within any thirty-trading day period, respectively. Further, the earn-out milestones are also considered to be met if indie undergoes a Sale. A Sale is defined as the occurrence of any of the following for indie: (i) engage in a “going private” transaction pursuant to Rule 13e-3 under the Exchange Act or otherwise cease to be subject to reporting obligations under Sections 13 or 15(d) of the Exchange Act; (ii) Class A common stock ceases to be listed on a national security exchange, other than for the failure to satisfy minimum listing requirements under applicable stock exchange rules; or (iii) change of ownership (including a merger or consolidation) or approval of a plan for complete liquidation or dissolution.

 

Escrow Shares

 

3,450,000 Class A common shares of indie were placed in escrow for the potential future release to the sponsors of TB2 in the event the earn-out milestones are met. The earn-out milestones for the Escrow Shares are identical to those of the earn-out shares. Achievement of each milestone entitles the shareholders to 50% of the total Escrow Shares. The Escrow Shares have been accounted for as a liability and remeasured to fair value each reporting period.

 

As of November 9, 2021, the first earn-out milestone was achieved while the second Earn-Out Milestone remains unachieved. The achievement of the first earn-out milestone eliminated the variability in the arrangement that previously prevented this instrument to be equity-classified. As a result, the earn-out liabilities associated with the first Earn-Out Milestone were recorded to Additional paid-in capital in the consolidated balance sheet at its fair value. At the same time, the unearned liabilities associated with the second Earn-Out Milestones were also remeasured to its fair value and reclassified per ASC 815-40 to Additional paid-in capital in the consolidated balance sheet.

 

As of December 31, 2021, there was no liability remaining on the balance sheet.

 

Contingent Considerations

 

On May 13, 2020, in connection with the acquisition of City Semiconductor, Inc. (City Semi), the company recorded contingent consideration as a long-term liability at a fair value of $1,180. The contingent consideration is comprised of two tranches. The first tranche is payable, up to a maximum of $500, upon the achievement of cash collection targets within twelve months of the acquisition, and $456 was achieved in May 2021. The second tranche is payable, up to a maximum of $1,500, upon the shipment of a product incorporating the acquired developed technology. In September 2021, the Company paid off the first tranche of the contingent consideration. The fair value of the second tranche contingent consideration liabilities was $1,000 as of March 31, 2022.

 

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On October 1, 2021, in connection with the acquisition of ON Design Israel, the company recorded contingent consideration as a long-term liability at a fair value of $4,000. The contingent consideration is comprised of two tranches. The first tranche is payable, up to a maximum of $2,500, upon the achievement of tapeout within 30 months of the acquisition. The second tranche is payable, up to a maximum of $5,000, upon indie’s achievement of a design win within 36 months of the acquisition. The fair value of the first and second tranche contingent consideration liabilities was $1,771 and $2,148, respectively, and are recorded in Other long-term liabilities in the consolidated balance sheet as of March 31, 2022. The change in fair value since the acquisition date is recorded in Other income (expense), net in the consolidated statement of operations for the three months ended March 31, 2022.

 

On January 4, 2022, in connection with the acquisition of Symeo, the company recorded contingent considerations as a current and a long-term liability at a fair value of $4,212 and $3,992, respectively. The contingent consideration is comprised of two tranches. The first tranche is payable upon the achievement of revenue threshold of $5,000 by December 31, 2022. The second tranche is payable upon Symeo’s achievement of revenue threshold of $6,000 by December 31, 2023. The fair value of the first and second tranche contingent consideration liabilities as of March 31, 2022 was $4,235 and $3,985, respectively. The change in fair value since the acquisition date is recorded in Other income (expense), net in the consolidated statement of operations for the three months ended March 31, 2022. 

 

10. Fair Value Measurements

 

The Company’s debt instruments are recorded at their carrying values in its condensed consolidated balance sheets, which may differ from their respective fair values. The fair values of the Company’s term loans generally approximated their carrying values. The fair value of the promissory note in relation with the Symeo acquisition was determined using valuation inputs categorized as Level 3.

 

At March 31, 2022, the Company held currency forward contracts of $3,025 to sell United States dollars and to buy Canadian dollars at a forward rate. Any changes in the fair value of these contracts are reflected in the consolidated statement of operations. The fair value of the currency forward contracts was determined using valuation inputs categorized as Level 2. The change in fair value at March 31, 2022 was de minimis.

 

The following table presents the Company’s fair value hierarchy for financial assets and liabilities:

 

   Fair Value Measurements as of March 31, 2022 
   Level 1   Level 2   Level 3   Total 
Liabilities:                
Warrant Liability  $            -   $          -   $53,114   $53,114 
ON Design Israel Contingent Consideration - Tapeout  $-   $-   $1,771   $1,771 
ON Design Israel Contingent Consideration - Design Win  $-   $-   $2,148   $2,148 
City Semi Contingent Consideration - Second Tranche  $-   $-   $1,000   $1,000 
Symeo Contingent Consideration - First Tranche  $-   $-   $4,235   $4,235 
Symeo Contingent Consideration - Second Tranche  $-   $-   $3,985   $3,985 
Symeo Promissory Note  $-   $-   $9,674   $9,674 

 

   Fair Value Measurements as of December 31, 2021 
   Level 1   Level 2   Level 3   Total 
Liabilities:                
Warrant Liability  $          -   $         -   $100,467   $100,467 
ON Design Israel Contingent Consideration - Tapeout  $-   $-   $1,817   $1,817 
ON Design Israel Contingent Consideration - Design Win  $-   $-   $2,222   $2,222 
City Semi Contingent Consideration - Second Tranche  $-   $-   $980   $980 

 

As of March 31, 2022 and December 31, 2021, the Company’s cash and cash equivalents were all held in cash or Level 1 instruments where the fair values approximates the carrying values.

 

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Level 3 Disclosures

 

Warrants

 

Warrants were valued using the Black-Scholes-Merton formula and a Monte Carlo Simulations analysis. Calculating the fair value of warrants requires the input of subjective assumptions. Other reasonable assumptions could provide differing results. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated value.

 

Contingent Considerations

 

Contingent considerations were valued using a Monte Carlo analysis in order to simulate the future path of the Company’s stock price over the earn-out period. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated value.

 

The following table presents the significant unobservable inputs assumed for each of the fair value measurements:

 

   March 31,
2022
   December 31,
2021
 
   Input   Input 
Liabilities:        
Warrants        
Expected volatility   43.70%   36.00%
City Semi Contingent Consideration - Second Tranche          
Discount rate   10.80%   10.80%
ON Design Israel Contingent Consideration - Tapeout          
Discount rate   6.25%   4.37%
ON Design Israel Contingent Consideration - Design Win          
Discount rate   6.25%   4.37%
Symeo Contingent Consideration - First Tranche          
Discount Rate   6.25%   N/A 
Symeo Contingent Consideration - Second Tranche          
Discount Rate   6.25%   N/A 
Symeo Promissory Note          
Discount rate   3.13%   N/A 

 

11. Noncontrolling Interest

 

In connection with the closing of the Transaction on June 10, 2021, certain members of ADK LLC (the “ADK Minority Holders”) retained approximately 26% membership interest in ADK LLC. The ADK Minority Holders may from time to time, after December 10, 2021, exchange with indie, such holders’ units in ADK LLC for an equal number of shares of indie’s Class A common stock. As a result, indie’s ownership interest in ADK LLC will increase. The ADK Minority Holders’ ownership interests are accounted for as noncontrolling interests in the Company’s condensed consolidated financial statements. The Company’s ownership of ADK LLC, was approximately 79% as of March 31, 2022.

 

In connection with the Transaction, the Company issued to certain members of ADK LLC an aggregate of 33,827,371 shares of Class V common stock of indie (the “Class V Holders”). The shares of Class V common stock provides no economic rights in indie to the holder thereof; however, each Class V Holder is entitled to vote with the holders of Class A common stock of indie, with each share of Class V common stock entitling the holder to one (1) vote per share of Class V common stock at the time of such vote (subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications). As of March 31, 2022, the Company had an aggregate of 30,119,812 shares of Class V common stock issued and outstanding.

 

ADK LLC held 64% and 50% voting control in Wuxi as of March 31, 2022 and December 31, 2021, respectively. From time to time, Wuxi has sold equity ownership and the transactions have reduced ADK LLC’s controlling interest in Wuxi on the consolidated balance sheets. As of March 31, 2022, ADK LLC maintained its controlling ownership in Wuxi. Accordingly, Wuxi’s financial statements are consolidated with those of ADK LLC and its other wholly-owned subsidiaries. Minority interests held in Wuxi are accounted for as non-controlling interests in the Company’s condensed consolidated financial statements.

 

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12. Revenue

 

Disaggregation of Revenue

 

The Company disaggregates revenue from contracts with customers by geographic region, as the Company’s management believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

 

The following tables present revenue disaggregated by geography of the customer’s shipping location for the three months ended March 31, 2022 and 2021:

 

   Three Months Ended
March 31,
 
   2022   2021 
United States  $6,630   $494 
Greater China   9,108    6,322 
Latin America   1,461    301 
South America   412    - 
Rest of Asia Pacific   325    - 
Rest of North America   -    390 
Europe   4,063    607 
Total revenue  $21,999   $8,114 

 

Contract Balances

 

Certain assets or liabilities are recorded depending on the timing of revenue recognition, billings and cash collections on a contract-by-contract basis. Contract liabilities primarily relate to deferred revenue, including advance consideration received from customers for contracts prior to the transfer of control to the customer, and therefore revenue is recognized upon delivery of products and services or as the services are performed. The Company recorded unbilled revenue of $600 and $402 at March 31, 2022 and December 31, 2021, respectively, as part of its Prepaid expenses and other current assets in the accompanying consolidated balance sheets. 

 

The following table presents the liabilities associated with the engineering services contracts as of March 31, 2022 and December 31, 2021:

 

   March 31,
2022
   December 31,
2021
 
Deferred revenue  $2,845   $1,840 

 

As of March 31, 2022 and December 31, 2021, contract liabilities were included as Deferred revenue and classified as current liabilities in the condensed consolidated balance sheets.

 

During the three months ended March 31, 2022 and 2021, the Company recognized $346 and $631, respectively, of revenue related to amounts that were previously included in deferred revenue at the beginning of the period. Deferred revenue fluctuates over time due to changes in the timing of payments received from customers and revenue recognized for services provided.

 

Revenue related to remaining performance obligations represents the amount of contracted development arrangements that has not been recognized, which includes deferred revenue on the consolidated balance sheet and unbilled amounts that will be recognized as revenue in future periods. As of March 31, 2022, the amount of performance obligations that have not been recognized as revenue was $48,181, of which approximately 45% is expected to be recognized as revenue over the next twelve months and the remainder thereafter. This amount excludes the value of remaining performance obligations for contracts with an original expected length of one year or less. Variable consideration that has been constrained is excluded from the amount of performance obligations that have not been recognized.

 

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Concentrations

 

As identified below, some of our customers accounted for more than 10% of the Company’s total revenue for the three months ended March 31, 2022 and 2021:

 

   Three Months Ended
March 31,
 
   2022   2021 
Customer A   36.0%   61.3%
Customer B   -%   12.4%

 

The loss of these customers would have a material impact on the Company’s condensed consolidated financial results.

 

The one largest customer represented 41% of accounts receivable as of March 31, 2022 and the one largest customer represented 31% of accounts receivable as of December 31, 2021. No other individual customer represented more than 10% of accounts receivable at either March 31, 2022 or December 31, 2021.

 

13. Share-Based Compensation

 

Stock compensation expense is recorded in research and development and general and administrative expenses based on the classification of the work performed by the grantees.

 

The following table sets forth the share-based compensation for the periods presented:

 

   Three Months Ended
March 31,
 
   2022   2021 
Research and development   8,650          - 
Selling, general, and administrative   3,765    - 
Total  $12,415   $- 

 

Stock compensation expense for the three months ended March 31, 2022 included $1,674, which represents liability classified awards for the Company’s 2022 annual incentive plan accrual.

 

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14. Net Income (Loss) per Common Share

 

Basic and diluted net loss per common share was calculated as follows:

 

   Three Months Ended
March 31,
 
   2022   2021 
Numerator:        
Net income  $13,706   $10,361 
Less: Net income (loss) attributable to noncontrolling interest   2,873    (454)
Net income attributable to indie Semiconductor, Inc.  $10,833   $10,815 
Less: Earning attributable to participating securities   -    5,372 
Net income attributable to common stockholders - basic  $10,833   $5,443 
           
Less: Change in fair value of SAFEs   -    19,100 
Net loss attributable to common shareholders - dilutive  $10,833   $(13,657)
           
Denominator:          
Weighted average shares outstanding - basic   111,189,340    32,284,863 
           
Effect of conversion of SAFEs   -    6,933,153 
Effect of potentially dilutive Phantom Units   1,083,749    - 
Effect of potentially dilutive Class V common stock   29,386,392    - 
Effect of potentially dilutive unvested Class B units   4,391,072    - 
Effect of potentially dilutive unexercised options   1,346,219    - 
Weighted average common shares outstanding-diluted   147,396,772    39,218,016 
           
Net income per share attributable to common shares- basic  $0.10   $0.17 
Net income (loss) per share attributable to common shares- diluted  $0.07   $(0.35)

 

On June 10, 2021, the Company completed a series of business transactions with TB2 pursuant to the MTA. The Transaction materially impacted the number of shares outstanding. Weighted average shares outstanding for the three months ended March 31, 2021 in the table above have been retroactively restated to give effect to the reverse recapitalization.

 

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The Company’s potentially dilutive securities, which include unvested Class B units, preferred units, warrants for Class A units, warrants for Class G units, unexercised options, earn-out shares and escrow shares, have been excluded from the computation of diluted net income (loss) per share as the effect would be to reduce the net income (loss) per share. The Company excluded the following potential shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to shareholders for the periods indicated because including them would have had an antidilutive effect:

 

   Three Months Ended
March 31,
 
   2022   2021 
         
Unvested Class B units   -    3,210,705 
Convertible preferred units   -    31,860,395 
Warrants to purchase Class G units   -    319,202 
Convertible debt into Class A and preferred units   -    285,000 
Public warrants for the purchase of Class A common shares   17,250,000    - 
Private warrants for the purchase of Class A common shares   10,150,000    - 
Unexercised options   313,050    - 
Earn-out Shares   5,000,000    - 
Escrow Shares   1,725,000    - 
    34,438,050    35,675,302 

 

15. Income Taxes 

 

We are subject to U.S. federal and state taxes with respect to our allocable share of any taxable income or loss of ADK, LLC, as well as any stand-alone income or loss we generate. ADK, LLC is treated as a partnership for U.S. income tax purposes and for most applicable state and local income tax purposes and generally does not pay income taxes in most jurisdictions. Instead, ADK, LLC’s taxable income or loss is passed through to its members, including us. Despite its status as a partnership in the United States, ADK, LLC’s foreign subsidiaries are taxable entities operating in foreign jurisdictions. As such, these foreign subsidiaries record a tax expense or benefit in jurisdictions where a valuation allowance has not been recorded.

 

Our effective tax rate in 2022 will differ from the U.S. federal statutory rate primarily due to changes in valuation allowance, tax expense or benefit in foreign jurisdictions taxed at different tax rates and foreign research and development tax credits and incentive.

 

Based primarily on our limited operating history and ADK LLC’s historical domestic losses, we believe there is a significant uncertainty as to when we will be able to use our domestic, federal and state, deferred tax assets (“DTAs”). Therefore, we have recorded a valuation allowance against these DTAs for which we have concluded that it is not more likely than not that these will be realized.

 

As part of reverse capitalization, the Company entered into Tax Receivable Agreements (“TRAs”) with certain shareholders that will represent approximately 85% of the calculated tax savings based on the portion of basis adjustments on future exchanges of ADK, LLC units and other carryforward attributes assumed that we anticipate to be able to utilize in future years. Through March 31, 2022, there have been exchanges of units that would generate a DTA; however, as there is a full valuation allowance on the related DTA, we have not recorded a liability under the TRAs.

 

The Company recorded a benefit (provision) for income taxes of $659 and $(13) for the three months ended March 31, 2022 and 2021, respectively. Income tax expense and benefits are primarily related to the Company’s operations in Canada and Europe.

 

Recent Change in U.S. Tax Law 

 

Prior to 2022, IRC Section 174 allowed taxpayers to deduct “research or experimental” (“R&E”) expenditures in the year in which they were incurred.

 

The 2017 tax reform act amended Section 174, effective for amounts paid or incurred in tax years beginning after December 31, 2021, to require taxpayers to charge their R&E expenditures to a capital account. Capitalized costs are required to be amortized over five years (15 years for expenditures attributable to foreign research).

 

Due to the Company’s significant R&E expenses the impact of this law change will mean that a significant portion of our total operating expenses will be taken as a deduction over a 5-year period rather than be currently deductible. We do not expect to pay cash taxes as a result of this change as our remaining operating expenses after excluding R&E expenses are significant and we expect to continue to generate losses for tax purposes in the near future.

 

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16. Leases

 

The Company’s lease arrangements consist primarily of corporate and manufacturing facility agreements. The leases expire at various dates through 2028, some of which include options to extend the lease term. The options with the longest potential total lease term consist of options for extension of up to five years following expiration of the original lease term. All of the leases are operating leases. The Company is headquartered in Aliso Viejo, California and has various research and design centers, sales support offices, and manufacturing facilities throughout the world. The key lease terms for the principal locations are summarized below:

 

In July 2015, the Company entered into a five-year operating lease for its 14,881 square foot headquarters in Aliso Viejo, California, which is payable monthly with periodic rent adjustments over the lease term. The lease requires a security deposit of $30, which is recorded in other assets on the Company’s condensed consolidated balance sheets as well as a tiered, time-based letter of credit that has now reached its lowest tier of $200. Subsequently, the rentable area was expanded to 18,000 square feet and the lease was extended through the end of June 2023. Rent expense is approximately $38 per month.

 

In October 2015, the Company entered into a five-year operating lease for its Scotland Design Center in Edinburgh, Scotland, which is payable monthly with periodic rent adjustments over the lease term. The lease expired in October 2020. During 2019, the Company entered into a sub-lease agreement with a third party for the Scotland Design Center facility. Separately, effective January 2020, the Company entered into a lease for a property in Scotland. The lease agreement has a term through June 2024 and monthly rent of approximately $16 per month.

 

In October 2017, the Company entered into a 26-month operating lease for its Wuxi sales and design center. Rent for the associated office is payable monthly with periodic rent adjustments over the lease term. The lease was subsequently extended through December 2022. Rent expense is approximately $8 per month.

 

In May 2021, the Company entered into a seven-year operating lease for a location in Detroit, Michigan, which is payable monthly with periodic rent adjustments over the lease term. The lease will expire in 2028 with an initial monthly rent of approximately $22 per month.

 

In October 2021, the Company entered into a five-year operating lease for its design center in Austin, Texas. Rent for the associated office is payable monthly with periodic rent adjustments over the lease term, which expires in October 2026. Rent expense is approximately $13 per month.

 

In October 2021, the Company acquired TeraXion and assumed its existing operating lease for an office building and a warehouse in Quebec City, Canada. Rent for the associated office is payable at approximately $38 per month. The lease will expire on May 31, 2028. Rent for the associate warehouse is at approximately $3 per month. This lease will expire on November 30, 2023.

 

In February 2022, the Company entered into a two-year operating lease for its design center in Boston, Massachusetts, which is payable monthly with periodic rent adjustments over the lease term. The lease will expire March 31, 2024.

 

The total monthly rent for the remainder locations of the Company around the world is not material.

 

ASC 842 Adoption

 

The Company adopted ASC 842 using the modified retrospective method on January 1, 2022. The Company determines if an arrangement is a lease at its inception. Right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date. The lease term includes renewal options when it is reasonably certain that the option will be exercised, and excludes termination options. To the extent that the Company’s agreements have variable lease payments, the Company includes variable lease payments that depend on an index or a rate and excludes those that depend on facts or circumstances occurring after the commencement date, other than the passage of time. Lease expense for these leases is recognized on a straight-line basis over the lease term. The Company has elected the package of practical expedients permitted under the transition guidance, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an accounting policy election, the Company also excluded short-term leases (term of 12 months or less) from the balance sheet presentation and accounted for non-lease and lease components in a contract as a single lease component for certain asset classes. Effective January 1, 2022, the Company recorded the impact on its condensed consolidated balance sheet from the recognition of ROU asset and lease liability of $10,344 and $10,344, respectively.

 

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The Company’s facility leases have remaining lease terms ranging from less than one year to six years, some of which include options to extend the lease term for up to six years.

 

The table below represents lease-related assets and liabilities recorded on the condensed consolidated balance sheet:

 

   Balance Sheet Classification  March 31, 2022 
Assets       
Operating lease right-of-use assets  Operating lease right-of-use assets  $12,553 
         
Liabilities        
Operating lease liabilities (current)  Other current liabilities  $2,136 
Operating lease liabilities (noncurrent)  Operating lease liabilities   10,527 
Total lease liabilities     $12,663 

 

Lease Costs

 

The following lease costs were included in the condensed consolidated statements for the three months ended March 31, 2022:

 

   Three Months
Ended
March 31,
2022
 
Operating lease cost  $615 
Short-term lease cost   74 
Variable lease cost   52 
Total lease cost  $741 

 

Supplemental Information

 

The table below presents supplemental information related to operating leases as of March 31, 2022:

 

Cash paid for amounts included in the measurement of operating lease liabilities  $470 
Right-of-use assets obtained in exchange for new operating lease liabilities  $2,696 
Weighted average remaining lease term   6.93 years 
Weighted average discount rate   4.59%

 

Undiscounted Cash Flows

 

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the condensed consolidated balance sheet as March 31, 2022:

 

2022 (remaining nine months)  $1,987 
2023   2,594 
2024   2,086 
2025   1,955 
2026   1,391 
Thereafter   4,921 
Total minimum lease payments   14,934 
Less imputed interest   (2,271)
Present value of future minimum lease payments   12,663 
Less current obligations under leases   (2,136)
Long-term lease obligations  $10,527 

 

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Disclosures related to Periods Prior to Adoption of New Lease Standard

 

Minimum lease payments under operating leases with non-cancelable terms in excess of one year as of December 31, 2021, were as follows:

 

2022  $1,869 
2023   1,674 
2024   1,303 
2025   1,177 
2026   1,201 
Thereafter   1,686 
Total minimum lease payments  $8,910 

 

17. Commitments and Contingencies

 

Litigation

 

The Company may be a party to routine claims or litigation incidental to its business. The Company does not believe that it is a party to any pending legal proceeding that is likely to have a material adverse effect on its business, financial condition, results of operations or cash flows.

 

Royalty Agreement

 

The Company has entered into license agreements to use certain technology within its design and manufacture of its products. The agreements require royalty fees for each semiconductor sold using the licensed technology. Total royalty expense incurred in connection with these contracts during the three months ended March 31, 2022 and 2021 was $242 and $386, respectively, which is included in cost of goods sold in the consolidated statements of operations. Accrued royalties of $2,569 and $264 are included in accrued expenses in the Company’s consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively.

 

Tax Distributions

 

To the extent the Company has funds legally available, the board of directors will approve distributions to each member of ADK LLC, prior to March 15 of each year, in an amount per unit that, when added to all other distributions made to such member with respect to the previous calendar year, equals the estimated federal and state income tax liabilities applicable to such member as the result of its, his or her ownership of the units and the associated net taxable income allocated with respect to such units for the previous calendar year. There were no distributions approved by the board of directors or paid by the Company during the three months ended March 31, 2022 and 2021.

 

18. Supplemental Financial Information

 

Accrued expenses and other current liabilities consist of the following:

 

   As of 
   March 31,
2022
   December 31,
2021
 
Accrued purchase consideration from business combinations  $7,500   $7,500 
City Semi deferred compensation   958    833 
Contingent consideration   5,235    - 
Operating lease liabilities, current   2,136    - 
Accrued royalties   2,569    360 
Other (1)   6,320    5,929 
Accrued expenses and other current liabilities  $24,718   $14,622 

  

(1) Amount represents accruals for various operating expenses such as professional fees, open purchase orders, current lease liabilities and other estimates that are expected to be paid within the next 12 months.

 

19. Subsequent Events 

 

For its condensed consolidated financial statements as of March 31, 2022 and the three months then ended, management reviewed and evaluated material subsequent events from the condensed consolidated balance sheet date of March 31, 2022 through May 13, 2022, the date the condensed consolidated financial statements were issued. 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF INDIE

 

Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us, or “our” refer to the business of indie and its subsidiaries prior to the consummation of the Transaction. Throughout this section, unless otherwise noted, “indie” refers to indie Semiconductor and its consolidated subsidiaries.

 

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. You should read this discussion and analysis in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Certain amounts may not foot due to rounding. This discussion and analysis contains forward-looking statements. See “Forward Looking Statements.” We urge you to consider the risks and uncertainties discussed in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2021, under the heading “Risk Factors” and in the other documents we have filed with the SEC in evaluating our forward-looking statements. We assume no obligation to update any of these forward-looking statements except as required by law. Actual results may differ materially from those contained in any forward-looking statements.

 

OUR COMPANY

 

indie Semiconductor offers highly innovative automotive semiconductors and software solutions for Advanced Driver Assistance Systems (“ADAS”), autonomous vehicle, connected car, user experience and electrification applications. We focus on edge sensors across multiple modalities spanning LiDAR, radar, ultrasound and vision. These functions represent the core underpinnings of both electric and autonomous vehicles, while the advanced user interfaces are transforming the in-cabin experience to mirror and seamlessly connect to the mobile platforms we rely on every day. We are an approved vendor to Tier 1 automotive suppliers and our platforms can be found in marquee automotive manufacturers around the world. Headquartered in Aliso Viejo, California, indie has design centers and sales offices in Austin, Texas; Boston, Massachusetts; Detroit, Michigan; San Francisco and San Jose, California; Budapest, Hungary; Dresden and Munich, Germany; Edinburgh, Scotland; Haifa, Israel; Quebec, Canada; Tokyo, Japan; Seoul, South Korea and several locations throughout China.

 

We maintain design centers for our semiconductor engineers and designers in the United States, Scotland, Germany, Israel and China. We engage subcontractors to manufacture our products. These subcontractors, as well as the majority of our customers’ locations, are primarily in Asia. For the three months ended March 31, 2022 and 2021, approximately 52% and 84%, respectively, of our product revenues were recognized for shipments to customer locations in Asia.

 

Recent Acquisitions

 

Symeo GmbH

 

On October 21, 2021, we entered into a definitive agreement with Analog Devices (“ADI”) to acquire Symeo GmbH (“Symeo”). The acquisition was approved by the German government on January 4, 2022 and closed on the same day. The total consideration paid for this acquisition consisted of (i) $8,705 in cash at closing, net of cash acquired; (ii) a $10,000 promissory note payable in January 2023 with a fair market value of $9,674; and (iii) an equity-based earn-out of up to 858,369 shares of indie Class A common stock based on future revenue growth. The fair market value of this equity-based earn-out was $8,204 on January 4, 2022.

 

See Note 2 - Business Combinations for additional description of this acquisition.

 

Impact of COVID-19

 

The COVID-19 pandemic and the resulting economic downturn has affected affecting business conditions in our industry. The duration, severity, and future impact of the pandemic, including as a result of more contagious variants of the virus that causes COVID-19, continue to be highly uncertain and could still result in significant disruptions to our business operations, as well as negative impacts to our financial condition. Like many companies in the semiconductor industry, we are experiencing various supply constraints due to the pandemic. While we are working with our global supply chain partners to mitigate this risk, the duration and extent of the supply chain disruptions remain uncertain.

 

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OPERATING RESULTS

 

Comparison of the Three Months Ended March 31, 2022 and 2021

 

Revenue

 

   Three Months Ended March 31,         
   2022   2021         
(in thousands)  $   % of Revenue   $   % of Revenue   $ Change   % Change 
Revenue:                        
Product revenue  $18,086    82%  $7,483    92%  $10,603    142%
Contract revenue   3,913    18%   631    8%   3,282    520%
Total revenue  $21,999    100%  $8,114    100%  $13,885    171%

 

Revenue for the three months ended March 31, 2022 was $22.0 million, compared to $8.1 million for the three months ended March 31, 2021, an increase of $13.9 million or 171%, which was primarily driven by a $10.6 million increase in product revenue as well as an increase in contract revenue. The increase in product revenue was due primarily to higher product volume (units sold) given the continued growth in demand from our customers globally. Change in product mix and increases in average selling price (“ASP”) also contributed to the increase in product revenue year-over-year. The increase in contract revenue was primarily due to commencing of a large non-recurring engineering project with a top customer in the current year.

 

Operating Expenses

 

   Three Months Ended March 31,         
   2022   2021         
(in thousands)  $   % of Revenue   $   % of Revenue   $ Change   %  Change 
Operating expenses:                        
Cost of goods sold  $14,192    65%  $4,848    60%  $9,344    193%
Research and development   29,499    134%   8,677    107%   20,822    240%
Selling, general, and administrative   12,642    57%   2,695    33%   9,947    369%
Total operating expenses  $56,333    256%  $16,220    200%  $40,113    247%

 

Cost of goods sold for the three months ended March 31, 2022 was $14.2 million, compared to $4.8 million for the three months ended March 31, 2021. The increase of $9.3 million or 193% was primarily due to a $3.4 million increase in product shipments given the increase in revenue above, a $1.7 million increase due to change in product mix and a $1.2 million increase in product cost. Total cost of goods sold for the three months ended March 31, 2022 also included $2.5 million in amortization related to acquired intangible assets as a result of the recent business combinations.

 

Research and development expense for the three months ended March 31, 2022 was $29.5 million, compared to $8.7 million for the three months ended March 31, 2021. The increase of $20.8 million or 240% was primarily due to a $6.2 million increase in personnel costs as we increased the number of employees working on product development, a $2.3 million increase in product development costs, $8.7 million share-based compensation expense, and a $1.6 million increase in amortization expense related to R&D project license and acquired intangible assets from business combinations. We started recognizing share-based compensation expense in the second quarter of the prior year as it required the consummation of the Transaction in June 2021 and implementation of the 2021 Omnibus Equity Plan in August 2021 to be recognized. We expect research and development expense to continue to increase as we continue to grow our headcount organically to support expanded product development activities.

 

Selling, general and administrative expense for the three months ended March 31, 2022 was $12.6 million, compared to $2.7 million for the three months ended March 31, 2021. The increase of $9.9 million or 369% was primarily due to a $2.8 million increase in outside professional fees, a $3.8 million increase in share-based compensation expense, a $1.3 million increase in personnel costs due to increase in headcounts, and a $1.4 million increase in intangible asset amortization from business combinations. We started recognizing share-based compensation expense in the second quarter of the prior year as it required the consummation of the Transaction in June 2021 and implementation of the 2021 Omnibus Equity Plan in August 2021 to be recognized. We expect selling, general, and administrative expense to continue to increase as we grow our headcount to support our global expansion and to fulfill our obligations as a publicly traded company.

 

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Other income (expense), net

 

   Three Months Ended
March 31,
         
   2022   2021         
(in thousands)  $   $   $ Change   %  Change 
Other income (expense), net:                
Interest income  $33   $7   $26    371%
Interest expense   (58)   (620)   562    (91)%
Gain (loss) from change in fair value of SAFEs   -    19,100    (19,100)   (100)%
Gain (loss) from change in fair value of warrants   47,353    -    47,353    100%
Gain (loss) from change in fair value of earn-out liabilities   83    -    83    100%
Other expense   (30)   (7)   (23)   329%
Total other income, net  $47,381   $18,480   $28,901    156%

 

Interest expense for the three months ended March 31, 2022 was $0.1 million, compared to $0.6 million for the three months ended March 31, 2021. Interest expense relates to the routine cash and non-cash interest expenses on outstanding debt obligations. All long-term debts historically held by indie before the Transaction were paid off as of June 30, 2021, which resulted in the decrease in total interest expense compared to the same period in the prior year.

 

During the three months ended March 31, 2021, we recognized an unrealized loss of $19.1 million from change in fair value of Simple agreements for future equity (“SAFEs”) as a result of changes in the valuation inputs in the period. Upon the closing of the Transaction on June 10, 2021, the SAFE holders converted their SAFEs to Class A common stock of indie. No changes in fair value of SAFEs were recorded after June 10, 2021.

 

During the three months ended March 31, 2022, we recognized an unrealized gain from change in fair value of our warrants of $47.4 million. The increase in fair value of our warrant liability of $47.4 million was primarily a result of the decrease of the closing price of our Class A common stock listed on the Nasdaq to $7.81 per share on March 31, 2022 from $11.99 per share on December 31, 2021.

 

Income Tax Benefits

 

We evaluate our estimated annual effective tax rate (“ETR”) on a quarterly basis based on current and forecasted operating results. The relationship between our income tax provision or benefit and our pretax book income or loss can vary significantly from period to period considering, among other factors, the overall level of pretax book income or loss and changes in the blend of jurisdictional income or loss that is taxed at different rates and changes in valuation allowances. Consequently, our ETR may fluctuate significantly period to period and may make quarterly comparisons less than meaningful.

 

Income tax benefits for the three months ended March 31, 2022 were results of foreign operations. Tax expense recorded for the same period last year was also the result of foreign operations.

 

JOBS Act

 

The JOBS Act permits an emerging growth company (“EGC”) such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use the extended transition period under the JOBS Act until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

 

We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date on which we are deemed to be a “large accelerated filer,” which would occur if the market value of our equity securities held by nonaffiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering, or December 31, 2024.

 

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We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for public companies.

 

Liquidity and Capital Resources

 

Historically, we derive liquidity primarily from debt and equity financing activities as we have historically had negative cash flows from operations. On June 10, 2021, we completed the Transaction, which resulted in approximately $341.3 million of net cash proceeds. On November 5, 2021, we also entered into an amendment to the PacWest loan agreement that (i) increased the maximum borrowing capacity under the revolving line of credit to $20 million, (ii) limited the security interests of the bank to the cash collateral set at 102.5% of the drawn amount of the loan, (iii) removed various reporting and restrictive covenants, (iv) extended the maturity date to November 4, 2022 and (iv) reduced the interest rate to 2.1% per annum. We currently do not have any outstanding balance under this revolving line of credit. As of March 31, 2022, our balance of cash and cash equivalents was $193.0 million.

 

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, working capital requirements related to inventory, accounts payable and accounts receivable, and general and administrative expenditures. In addition, from time to time, we use cash to fund our mergers and acquisitions as well as for purchases of various capital and software assets. Our immediate sources of liquidity are cash, cash equivalents and our revolving credit facility. We believe that our existing cash and cash equivalents, funds anticipated to be generated from our operations, and available borrowing on our revolving credit facility will be sufficient to meet our working capital needs for at least the next 12 months. Our future capital requirements may vary from those currently planned and will depend on many factors, including our rate of sales growth, the timing and extent of spending on various business initiatives, our international expansion, the timing of new product introductions, market acceptance of our solutions, and overall economic conditions including the potential impact of global supply imbalances and COVID-19 on the global financial markets. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing.

 

Acquisitions

 

In January, 2022 we completed the acquisition of Symeo GmbH, for which we made an initial cash payment of approximately $10.0 million. An additional $10.0 million will be due in 2023, as well as an equity based earn out of shares of indie Class A common stock based on future revenue growth. See “Recent Acquisitions” above for further information.

 

We expect to continue to incur net operating losses and negative cash flows from operations. We also expect our research and development expenses, general and administrative expenses and capital expenditures will to increase over time as we continue to expand our operations, product offerings and customer base.

 

The following table summarizes our consolidated cash flows for the three months ended March 31, 2022 and 2021:

 

   Three Months Ended
March 31,
   Change   Change 
   2022   2021   $   % 
Net cash used in operating activities  $(15,714)  $(9,091)  $(6,623)   73%
Net cash used in investing activities   (9,270)   (161)   (9,109)   5658%
Net cash used in financing activities   (720)   (632)   (88)   14%

 

Operating Activities

 

For the three months ended March 31, 2022, net cash used in the operating activities was $15.7 million, which included net income of $13.7 million and adjusted for certain non-cash items and changes in operating assets and liabilities. Non-cash decreases primarily consisted of $47.4 million of net gains resulting from a change in fair value for warrants. These non-cash decreases were partially offset by $12.4 million in share-based compensation expense and $5.4 million in depreciation and amortization. Changes in operating assets and liabilities from operations used $0.9 million of cash, primarily driven by an increase in deferred revenue, accounts payable, and accrued liabilities, partially offset by a decrease in accrued payroll liabilities and increases in accounts receivable and prepaid and other current assets.

 

Cash used in operating activities during the three months ended March 31, 2021 was $9.1 million, mostly consisting of net income of $10.4 million adjusted for certain non-cash items and changes in operating assets and liabilities. Non-cash charges primarily consisted of a $19.1 million gain from change in fair value of SAFEs partially offset by $0.6 million in depreciation and amortization. Changes in operating assets and liabilities from operations used $1.5 million of cash, primarily driven by a increase in accounts receivable and inventory, offset by a decrease in accounts payable and accrued expenses.

 

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Investing Activities

 

Net cash used in investing activities for the three months ended March 31, 2022 and 2021 was $9.3 million and $0.2 million, respectively. During the period ended March 31, 2022 the decrease in cash was primarily due to the acquisition of Symeo GmbH for $8.7 million, net of cash acquired, as well as an increase in cash used of $0.6 million for the purchase of capital expenditures. During the period ended March 31, 2021 our primary investing activities consisted of capital expenditures. We expect that we will make additional capital expenditures in the future, including licenses to various intangible assets, in order to support the future growth of our business.

 

Financing Activities

 

Net cash provided by financing activities for the three months ended March 31, 2022 was $0.7 million, which was primarily attributed to $0.7 million of payments on financed software.

 

Cash used in financing activities for the three months ended March 31, 2021 of $0.6 million was primarily the result of $0.3 million of payments of financed software and $0.3 million in deferred financing costs.

 

Future Material Cash Obligations

 

Following is a summary of our material cash requirements from known contractual and other obligations, including commitments for capital expenditures, as of March 31, 2022:

 

   Future Estimated Cash Payments Due by Period 
Contractual Obligations  Less than 1 year   1 - 3 years   3-5 years   >5 years   Total 
Debt obligations  $11,903   $3,276   $2,715   $-   $17,894 
Operating leases   1,987    4,680    3,346    4,921    14,934 
Total contractual obligations  $13,890   $7,956   $6,061   $4,921   $32,828 

 

Critical Accounting Estimates

 

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments in applying our most critical accounting policies that can have a significant impact on the results we report in our financial statements. The SEC has defined critical accounting estimates as those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on a registrant’s financial condition or results of operations. Based on this definition, our most critical accounting estimates include revenue recognition, which impacts the recording of net revenue; inventory valuation, which impacts the cost of goods sold and gross margin; business combinations, which impacts the fair value of acquired assets and assumed liabilities; goodwill and long-lived assets, which impacts the fair value of goodwill and intangible assets; warrants and earn-out liabilities valuations, which impacts the fair value of these financial instruments; and income taxes, which impacts the income tax provision. We have other significant accounting policies that do not generally require subjective estimates or judgments or would not have a material impact on our results of operations. The Company’s critical accounting policies and estimates are disclosed under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K filed for the year ended December 31, 2021.

 

Recently Issued and Adopted Accounting Pronouncements

 

We describe the recently issued and adopted accounting pronouncements that apply to us in Note 1 - Nature of Business and Basis to our Condensed Consolidated Financial Statements presented herein.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Foreign Currency Risk

 

We have international operations, giving rise to exposure to market risks from changes in currency exchange rates. A cumulative foreign currency translation loss of $580 related to our foreign subsidiaries is included in “Accumulated other comprehensive loss” within the Stockholders’ Equity section of the consolidated balance sheet at March 31, 2022. The aggregate foreign currency transaction exchange rate income (loss) included in determining loss before income taxes was $884 thousand and $(88) thousand for the three months ended March 31, 2022 and 2021, respectively.

 

As our international operations grow, our risks associated with fluctuation in foreign currency rates will become greater, and we will continue to reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. dollar could increase the costs of our international expansion and operation.

 

Investment and Interest Rate Risk

 

Our exposure to interest rate and general market risks relates principally to our investment portfolio, which consists of cash and cash equivalents (money market funds and marketable securities purchased with less than ninety days until maturity) that totals approximately $193.0 million as of March 31, 2022.

 

The main objectives of our investment activities are liquidity and preservation of capital. Our cash equivalent investments have short-term maturity periods that dampen the impact of market or interest rate risk. Credit risk associated with our investments is not material because our investments are diversified across securities with high credit ratings.

 

Given the current low interest rate environment, the objectives of our investment activities, and the relatively low interest income generated from our cash, cash equivalents, and other investments, we do not believe that investment or interest rate risks currently pose material exposures to our business or results of operations.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, including our Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2022 and based on this evaluation, have concluded that, as a result of the material weaknesses in internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of March 31, 2022.

 

Per Rule 13a-15(e), the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Material Weaknesses in Internal Control over Financial Reporting and Remediation Plan

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that:

 

i.Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

ii.Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

 

iii.Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

 

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an assessment of our internal control over financial reporting as of March 31, 2022, based on the framework in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 COSO Framework”). As a result of this evaluation, management identified the following material weaknesses in internal control, which continue to exist as of March 31, 2022:

 

a.Control Environment: The Company did not have a sufficient number of personnel with assigned responsibility and accountability for the design, operation and documentation of internal control over financial reporting in accordance with the 2013 COSO Framework.

 

a.Risk Assessment: The Company did not have an effective risk assessment process that defined clear financial reporting objectives and evaluated risks, including identifying and analyzing risks related to non-routine transactions such as mergers and acquisitions, at a sufficient level of detail to identify all relevant risks of material misstatement across the Company or within each acquired entity.

 

a.Information and Communication: The Company did not have effective information control processes, including those related to the use of manual spreadsheets, to ensure the reliability of information used in certain computations related to financial reporting

 

a.Monitoring Activities: The Company did not have effective monitoring activities to assess the operation of internal control over financial reporting, including the continued appropriateness of control design and level of documentation maintained to support control effectiveness.

 

a.Control Activities: As a consequence of the aforementioned deficiencies, the Company did not have effective control activities related to the design and operation of process-level controls across certain key financial reporting processes.

 

While these material weaknesses did not result in material misstatements of the Company’s financial statements as of and for the period ended March 31, 2022, these material weaknesses create a reasonable possibility that a material misstatement of account balances or disclosures in our consolidated financial statements may not be prevented or detected in a timely manner. Accordingly, the Company concluded that the deficiencies represent material weaknesses in its internal control over financial reporting and that internal control over financial reporting was not effective as of March 31, 2022.

 

This Quarterly Report does not include an attestation report of our independent registered public accounting firm, KPMG LLP, due to the established rules of the Securities and Exchange Commission.

 

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Management’s Remediation Plan

 

The Company’s remediation efforts are ongoing, and it will continue its initiatives to implement and document policies and procedures and strengthen the Company’s internal control environment. Remediation of the identified material weaknesses and strengthening the Company’s internal control environment will require a substantial effort throughout 2022 and, possibly, the first quarter of 2023. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. In addition, it is possible that certain controls the Company plans to implement in 2022 will not have operated for a sufficient period of time in 2022 to test their operating effectiveness as part of the Company’s evaluation of internal control over financial reporting as of December 31, 2022 and may extend to the following year.

 

To remediate the material weaknesses described above, the Company is pursuing the following remediation steps:

 

i.We will continue to seek, train and retain individuals that have appropriate skills and experience related to designing operating and documenting internal controls over financial reporting, coupled with the addition of finance staff to improve the current segregation of roles and responsibilities; and

 

ii.We have launched a company-wide initiative to implement a new enterprise resource planning (“ERP”) system capable of automating some of our manual financial reporting processes, enhancing our information technology control environment, and mitigating some of the internal control gaps and limitations that cannot be addressed by the current system; and

 

iii.We have engaged third party specialists to conduct a comprehensive review, update and enhancement of the design and documentation of key business processes to ensure the components of internal control over financial reporting are present and functioning in accordance with the 2013 COSO Framework; and

 

iv.We are in the process of establishing an internal audit function which will perform routine risk assessments and gap analysis of our control environment and report regularly to the audit committee on the progress and results of our remediation plan, including the identification, status, and resolution of internal control deficiencies.

 

We believe that our remediation plan will be sufficient to address the identified material weaknesses and strengthen our internal control over financial reporting. As we continue to evaluate, and work to improve our internal control over financial reporting, we may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. It cannot be assured, however, when we will remediate such material weaknesses, nor can we be certain whether additional actions will be required. Moreover, it cannot be assured that additional material weaknesses will not arise in the future.

 

Changes in Internal Control Over Financial Reporting

 

As described above under “Management’s Remediation Plan”, we are taking actions to remediate the material weaknesses in our internal control over financial reporting. Except as described above, there were no changes in internal control over financial reporting during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not party to any material legal proceedings. From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business. The outcome of litigation is inherently uncertain, and there can be no assurances that favorable outcomes will be obtained. In addition, regardless of the outcome, such proceedings or claims can have an adverse impact on us, which may be material because of defense and settlement costs, diversion of resources and other factors.

 

ITEM 1A. RISK FACTORS

 

The business, financial condition, and operating results of the Company can be affected by many factors, whether currently known or unknown, including but not limited to those described in Part 1, Item 1A in the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2021 under the heading “Risk Factors,” any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past or the anticipated future financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results, and stock price. There have been no material changes to the Company’s risk factors disclosed under the heading “Risk Factors” in Part 1, Item 1A in the Company’s Annual Report on Form 10-K for the Fiscal Year ended December 31, 2021 filed on April 11, 2022.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On various dates between February 28, 2022 and March 7, 2022, the Company issued an aggregate of 2,224,148 shares of its Class A common stock to two ADK Minority Holders in exchange for an equal number of their ADK LLC units. The shares of Class A common stock were issued to the two ADK Minority Holders in reliance on the exemption under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). In connection with such exchange, 2,224,148 shares of Class V common stock held by the ADK Minority Holders were cancelled.

 

In addition, on February 14, 2022, the Company issued 3,074,494 shares of Class A common stock and 1,895,879 shares of Class V common stock to certain indie shareholders for the achievement of the first earn-out milestone in connection with the Transaction. These shares of common stock were issued in reliance on the exemption from registration under Section 4(a)(2) of the Securities Act.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS.

 

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(d) Exhibits

 

Exhibit
Number
  Description of Exhibit
2.1   Master Transactions Agreement, dated effective December 14, 2020, by and among Surviving Pubco, Thunder Bridge II, the Merger Subs named therein, indie, the ADK Blocker Group, ADK Service Provider Holdco, and the indie Securityholder Representative named therein, and also included as Annex B-1 to the proxy statement/prospectus (previously filed as Exhibit 2.1 of Form 8-K filed by Thunder Bridge II with the SEC on December 15, 2020).
2.2   Amendment to Master Transactions Agreement, dated effective May 3, 2021, by and among Surviving Pubco, Thunder Bridge II, the Merger Subs named therein, indie, the ADK Blocker Group, ADK Service Provider Holdco, and the indie Securityholder Representative named therein (previously filed by Thunder Bridge II as Exhibit 2.2 of Form S-4/A filed with the SEC on May 4, 2021)
2.3   Share Purchase Agreement, dated as of August 27, 2021, by and among indie, TeraXion, Purchaser and certain stockholders of TeraXion and their ultimate beneficial owners (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed by the registrant with the SEC on September 2, 2021)
3.1   Amended and Restated Certificate of Incorporation of indie Semiconductor, Inc., filed with the Secretary of State of Delaware on June 10, 2021 (incorporated by reference to Exhibit 3.1 of the Form 8-K filed by the registrant with the SEC on June 16, 2021)
3.2   Amended and Restated Bylaws of indie Semiconductor, Inc. (incorporated by reference to Exhibit 3.2 of the Form 8-K filed by the registrant with the SEC on June 16, 2021)
31.1   Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH   Inline XBRL Taxonomy Extension Schema Document
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Definition Linkbase Document
101.LAB   Inline XBRLTaxonomy Extension Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)

 

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SIGNATURE

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

INDIE SEMICONDUCTOR, INC.
     
May 13, 2022 By: /s/ Thomas Schiller
  Name: Thomas Schiller
  Title: Chief Financial Officer & EVP of Strategy
    (Principal Financial Officer)

 

 

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