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Warrants | 9 Months Ended
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Sep. 28, 2018
Equity [Abstract] |
Warrants Disclosure | WARRANTS On September 26, 2016, the Company granted a warrant to purchase shares of common stock (the “Warrant”) to Comcast pursuant to which Comcast may, subject to certain vesting provisions, purchase up to 7,816,162 shares of the Company’s common stock subject to adjustment in accordance with the terms of the Warrant, for a per share exercise price of $4.76. Comcast may exercise the Warrant for cash or on a net share basis. The Warrant expires on September 26, 2023 or the prior consummation of a change of control of the Company. Comcast’s right to purchase 781,617 shares vested as of the issuance date as an incentive to enter into the software license product supply agreement. Comcast’s rights to purchase an additional 1,954,042 shares in specified tranches vest upon achievement of certain milestones that occur upon or prior to Comcast’s election for enterprise license pricing for certain of the Company’s software products. Such pricing would obligate Comcast to make certain total payments to the Company over the term of the product supply agreement. These tranches include the right to purchase 1,172,425 shares upon the acceptance and completion of field trials and 781,617 shares upon the election date, as defined in the Warrant. Comcast’s rights to purchase an additional 1,172,425 shares in specified tranches vest when Comcast exceeds specified cumulative purchase amounts from the Company under the product supply agreement. Comcast’s rights to purchase the remaining shares vest in specified tranches at the earlier of Comcast’s enterprise license pricing election (if completed by a certain date) or achievement of specified cumulative purchase amounts from the Company. The Warrant is considered an incentive for Comcast to purchase certain of the Company’s products. Therefore the value of the vested Warrant is recorded as an asset, which is recognized as a reduction in the Company’s net revenues in proportion to the pertinent sales to Comcast. The Warrant is considered indexed to the Company’s common stock and classified as stockholders’ equity based on its terms. Accordingly, the vested Warrant amounts are included in “Additional paid-in capital”. Because the Warrants contain performance criteria, which include cumulative purchase amounts Comcast must achieve for the Warrants to vest, the final measurement date for the Warrants is the date on which the Warrants vest. Prior to the final measurement, when achievement of the performance criteria has been deemed probable, the estimated fair value of Warrants is being recorded as a reduction to the Company’s net revenue based on the estimated number of Warrants expected to vest, the proportion of purchases by Comcast within the period relative to the cumulative purchase levels required for the Warrants to vest and the then-current fair value of the related Warrants. To the extent that estimate change in the future as to the number of Warrants that will vest, as well as changes in the fair market value of the Warrants, a cumulative catch-up adjustment will be recorded in the period in which the estimates change. The portion of the Warrant which vested on September 26, 2016 had a value of $1.6 million. The value of the Warrant is recorded as a reduction in the Company’s net revenues to the extent such value does not exceed net revenues from pertinent sales to Comcast. During the three and nine months ended September 28, 2018, the Company recorded $0.8 million and $1.2 million, respectively, as a reduction to net revenues in connection with amortization of the Warrant. During the three and nine months ended September 29, 2017, the Company recorded an increase to net revenues of $0.4 million and a reduction to net revenues of $38,000, respectively, in connection with amortization of the Warrant. On July 31, 2018, pursuant to the vesting provisions of the Warrant, a tranche of 1,172,425 shares subject to the Warrant vested and became exercisable upon the acceptance of completion of field trials by Comcast. The fair value of the Warrant on the date of vesting is estimated to be $2.3 million using the Black-Scholes option pricing model using the following assumptions: expected term of 5.2 years, volatility of 45%, risk-free interest rate of 2.9%, and expected dividends of 0.0%. The fair value of the Warrant was recorded as a component of “Other long term assets” with an equal offset to “Additional paid in capital” on the Company’s Condensed Consolidated Balance Sheets. The Company will amortize this asset as a reduction in the Company’s net revenues in proportion to the pertinent sales to Comcast.

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