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Commitments and Contingencies | 9 Months Ended
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Sep. 30, 2024
Commitments and Contingencies |
Commitments and Contingencies | 8. Commitments and Contingencies Litigations The Company is subject to various claims arising in the ordinary course of business. Although no assurance can be given, the Company believes that it is not a party to any litigation of which the outcome, if determined adversely, would individually, or in the aggregate, be reasonably expected to have a material adverse effect on the business, consolidated operating results, cash flows or financial position of the Company as of September 30, 2024. Third parties have from time to time claimed, and others may claim in the future, that the Company has infringed their past, current or future intellectual property rights. These claims, whether meritorious or not, could be time-consuming, result in costly litigation, require expensive changes in the Company’s methods of doing business or could require the Company to enter into costly royalty or licensing agreements, if available. As a result, these claims could harm the Company’s business, consolidated operating results, cash flows, and financial position. Purchase Commitments The Company has certain commitments for outstanding purchase orders related to the manufacture of certain wafers utilized by the Company and other services that, once the wafers are placed into production, are noncancelable. Otherwise, these production agreements are cancellable at any time with the Company required to pay all costs incurred through the cancellation date. However, the Company does not have a history of cancelling these agreements once production has started. As of September 30, 2024, the Company had outstanding noncancelable purchase commitments for these production agreements of $0.2 million. Samsung Agreement Liability Release In July 2020, the Company entered into a research and development agreement with Samsung Electronics Co., Ltd (“Samsung”). According to the agreement, the Company would design 5G chip products and Samsung would provide development and intellectual property support, mass production set up support including mask sets for manufacturing and engineering sample chip supply to the Company for a specific product. The total fee amount for the research and development (“R&D”) services pursuant to the agreement was $21.1 million. The Company bore the risk of R&D failure and was obligated to pay the $21.1 million total fee based on milestones defined in the agreement, of which $11.7 million was due based on development milestones and $9.4 million of additional NRE (“non-recurring engineering”) was to be paid within a maximum of 4 years after the planned product first shipment date. The Company recognized R&D expenses based on an estimate of the percentage completion of services provided by Samsung during the respective financial reporting period. In the first quarter of 2024, Samsung agreed to unconditionally release the Company from payment for work Samsung had completed to date because it had not met certain of the development milestones and due to a change in Samsung’s business strategy. As a result, the Company recognized a gain of $14.6 million upon such unconditional release of its liability to Samsung. During the period ended March 31, 2024, the parties mutually agreed that the agreement had expired and there were no remaining obligations of either party under the agreement. Alpha Foundry Product Development Agreement In February 2024, the Company and Alpha Holdings Co., Ltd. (“Alpha”) entered into a foundry product development agreement related to 5G chip development for a total fee of $7.6 million. The Company bears the risk of R&D failure and is obligated to pay the fee based on milestones defined in the agreement. The Company recognizes R&D expenses based on an estimate of the percentage completion of services provided by Alpha during the respective financial reporting period. For the three and nine months ended September 30, 2024, the Company recorded $1.2 million and $6.0 million in R&D expenses related to services provided by Alpha. The aggregate unpaid amount related to this agreement was $4.9 million as of September 30, 2024. Assets Pledged as Collateral The Company has provided collateral to Anapass, Inc., a related party (see Note 14), for borrowings from KEB Hana Bank, IBK Industrial Bank and Anapass, Inc. in the amount of $6.8 million, $7.0 million and $9.9 million, respectively, as of September 30, 2024, and $7.0 million, $7.1 million and $10.1 million, respectively, as of December 31, 2023 (see Note 7). The following table includes a summary of the carrying amounts related to collateral provided to Anapass, Inc. (in thousands):
|  | September 30, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Cash and cash equivalents |  | $ | 1,732 |  |  | $ | 254 |
Accounts receivable |  |  | 6,447 |  |  |  | 4,920 |
Inventory |  |  | 3,110 |  |  |  | 1,486 |
Property and equipment |  |  | 206 |  |  |  | 352 |
Intangible assets and others |  |  | 884 |  |  |  | 199 |

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