Arteris(AIP) - 2021 Q3 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (unaudited) This section presents Arteris, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of loss and comprehensive loss, and cash flows Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and stockholders' deficit at specific dates Total Assets | Date | Amount (in thousands) | | :----------- | :-------------------- | | Sep 30, 2021 | $40,599 | | Dec 31, 2020 | $42,736 | | Change | $(2,137) | | Change (%) | (5.0%) | Total Liabilities | Date | Amount (in thousands) | | :----------- | :-------------------- | | Sep 30, 2021 | $55,580 | | Dec 31, 2020 | $49,032 | | Change | $6,548 | | Change (%) | 13.4% | Stockholders' Deficit | Date | Amount (in thousands) | | :----------- | :-------------------- | | Sep 30, 2021 | $(20,693) | | Dec 31, 2020 | $(12,008) | | Change | $(8,685) | | Change (%) | (72.3%) | - Current Deferred Revenue increased from $17,894 thousand at Dec 31, 2020, to $23,707 thousand at Sep 30, 2021, contributing to the rise in total liabilities[10] Condensed Consolidated Statements of Loss and Comprehensive Loss Details the company's revenues, expenses, and net loss over specific reporting periods Total Revenue | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Three Months Ended Sep 30 | $8,959 | $6,429 | $2,530 | 39.4% | | Nine Months Ended Sep 30 | $26,430 | $17,366 | $9,064 | 52.2% | Net Loss | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Three Months Ended Sep 30 | $(4,968) | $(3,844) | $(1,124) | (29.2%) | | Nine Months Ended Sep 30 | $(15,594) | $(10,836) | $(4,758) | (43.9%) | Net Loss Per Share (Basic and Diluted) | Period | 2021 (per share) | 2020 (per share) | | :------------------------- | :--------------- | :--------------- | | Three Months Ended Sep 30 | $(0.24) | $(0.22) | | Nine Months Ended Sep 30 | $(0.79) | $(0.62) | Research and Development Expenses | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Three Months Ended Sep 30 | $7,609 | $4,011 | $3,598 | 89.7% | | Nine Months Ended Sep 30 | $20,572 | $11,842 | $8,730 | 73.7% | Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit Outlines changes in preferred stock and stockholders' deficit, reflecting equity transactions and net losses Total Stockholders' Deficit | Date | Amount (in thousands) | | :----------- | :-------------------- | | Sep 30, 2021 | $(20,693) | | Jun 30, 2021 | $(16,189) | | Change | $(4,504) | Common Stock Shares Outstanding | Date | Shares | | :----------- | :----------- | | Sep 30, 2021 | 20,607,851 | | Jun 30, 2021 | 20,525,254 | | Increase | 82,597 | - The net loss of $(4,968) thousand for the three months ended September 30, 2021, was the primary driver for the increase in accumulated deficit[16] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Net Cash Used in Operating Activities | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Nine Months Ended Sep 30 | $(4,006) | $(502) | $(3,504) | (698.0%) | Net Cash Provided by Financing Activities | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Nine Months Ended Sep 30 | $3,991 | $939 | $3,052 | 325.0% | - Proceeds from the issuance of common stock contributed $5,435 thousand to financing activities for the nine months ended September 30, 2021[24] Net Decrease in Cash | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Nine Months Ended Sep 30 | $(503) | $(86) | $(417) | (484.9%) | Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Description of Business Describes Arteris, Inc.'s core business, products, and recent significant corporate events - Arteris, Inc. develops, licenses, and supports on-chip interconnect fabric technology (NoC IP) for System-on-Chip (SoC) designs, along with software and services for efficient deployment[27] - The company completed its Initial Public Offering (IPO) in October 2021, issuing 5,750,000 shares at $14.00/share, generating $71.1 million in net proceeds, with all outstanding redeemable convertible preferred stock converting to 4,471,316 shares of common stock[30] - The full impact of the COVID-19 pandemic on future results of operations, financial condition, liquidity, and cash flows remains uncertain[29] Note 2. Basis of Presentation and Summary of Significant Accounting Policies Explains the financial statement preparation basis and key accounting principles applied by the company - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information, requiring management to make estimates, judgments, and assumptions[34][37] - Arteris adopted ASU 2019-12 (Income Taxes) on January 1, 2021, with no material impact on its financial statements[44] - The company is currently evaluating the impact of several recently issued accounting pronouncements not yet adopted, including those related to credit losses, retirement benefits, cloud computing implementation costs, and convertible instruments[45][47][48][49] Major Customers (Accounts Receivable) | | September 30, 2021 | December 31, 2020 | | :----------- | :----------------- | :---------------- | | Customer A | 15% | 31% | | Customer B | * | 20% | Major Customers (Revenue) | | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :----------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Customer A | 23% | 20% | 23% | 21% | | Customer C | * | 13% | * | 12% | | Customer D | * | * | * | 10% | Note 3. Revenue Details the company's revenue recognition policies and disaggregated revenue streams Disaggregated Revenue (in thousands) | Category | 3M Sep 30, 2021 | 3M Sep 30, 2020 | 9M Sep 30, 2021 | 9M Sep 30, 2020 | | :------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Licensing, support and maintenance | $8,136 | $5,211 | $24,353 | $14,005 | | Variable royalties | $739 | $832 | $1,913 | $2,679 | | Other | $84 | $386 | $164 | $682 | | Total Revenue | $8,959 | $6,429 | $26,430 | $17,366 | Revenue Recognized from Beginning Deferred Balance (in thousands) | Period | 2021 | 2020 | | :------------------------- | :---- | :---- | | Three Months Ended Sep 30 | $6,200 | $5,000 | | Nine Months Ended Sep 30 | $14,700 | $11,700 | - Contracted but unsatisfied performance obligations were $41.3 million as of September 30, 2021, with $23.4 million expected to be recognized in revenue over the next 12 months[56] Deferred Revenue Balance (Licensing, Support, Maintenance) | Date | Amount (in thousands) | | :----------- | :-------------------- | | Sep 30, 2021 | $38,248 | | Dec 31, 2020 | $32,908 | Amortization of Capitalized Sales Commissions (in thousands) | Period | 2021 | 2020 | | :------------------------- | :--- | :--- | | Three Months Ended Sep 30 | $600 | $300 | | Nine Months Ended Sep 30 | $1,500 | $1,200 | Note 4. Net Loss Per Share Explains the calculation of basic and diluted net loss per share and anti-dilutive securities Net Loss Per Share (Basic and Diluted) | Period | 2021 (per share) | 2020 (per share) | | :------------------------- | :--------------- | :--------------- | | Three Months Ended Sep 30 | $(0.24) | $(0.22) | | Nine Months Ended Sep 30 | $(0.79) | $(0.62) | - Diluted earnings per share equaled basic earnings per share due to the company being in a net loss position, rendering potentially dilutive securities anti-dilutive[64] Potentially Anti-Dilutive Securities | Category | September 30, 2021 | September 30, 2020 | | :----------------- | :----------------- | :----------------- | | Stock options | 5,964,043 | 6,775,313 | | Restricted stock units | 3,935,229 | 239,613 | | Preferred stock | 4,471,316 | 4,471,316 | | Total | 14,370,588 | 11,486,242 | Note 5. Fair Value Measurements Discusses the fair value hierarchy and measurement of financial instruments Aggregate Carrying Value of Term Loan and Vendor Financing Agreements (in thousands) | Date | Amount | | :----------- | :----- | | Sep 30, 2021 | $1,200 | | Dec 31, 2020 | $1,900 | - The estimated fair values of these financial instruments approximate their carrying values and are categorized as Level 2 within the fair value hierarchy[67][68] Note 6. Intangible Assets and Goodwill Provides information on the company's intangible assets, goodwill, and related amortization Total Intangible Assets, Net (in thousands) | Date | Amount | | :----------- | :----- | | Sep 30, 2021 | $3,052 | | Dec 31, 2020 | $3,409 | Amortization Expense of Intangible Assets (in thousands) | Period | 2021 | 2020 | | :------------------------- | :--- | :--- | | Three Months Ended Sep 30 | $100 | $0 | | Nine Months Ended Sep 30 | $400 | $0 | - Goodwill remained constant at $2.7 million as of September 30, 2021, and December 31, 2020, with no impairments recorded[71] Note 7. Leases Details the company's lease arrangements, lease costs, and lease liabilities Total Lease Cost (in thousands) | Period | 2021 | 2020 | | :------------------------- | :--- | :--- | | Three Months Ended Sep 30 | $358 | $189 | | Nine Months Ended Sep 30 | $884 | $551 | - The weighted-average remaining term of operating leases was 3.7 years as of September 30, 2021, down from 4.4 years as of December 31, 2020[73] - The present value of lease liabilities was $3,034 thousand as of September 30, 2021[76] Note 8. Borrowings Outlines the company's debt obligations, including term loans and vendor financing arrangements 2018 Term Loan Outstanding Balance (net of debt issuance costs, in thousands) | Date | Amount | | :----------- | :----- | | Sep 30, 2021 | $100 | | Dec 31, 2020 | $600 | - The 2018 Term Loan has a maturity date of November 2021, and the company was in compliance with all financial and non-financial covenants as of September 30, 2021[77][78] - A $2.0 million revolving line of credit matured in November 2021 and was not used or renewed[81] - Vendor financing arrangements had a present value of $1,104 thousand as of September 30, 2021[82] Note 9. Commitments and Contingencies Describes the company's contractual commitments and potential contingent liabilities - The company enters into indemnification agreements in the ordinary course of business, including for directors and officers, but has not incurred costs related to these agreements[83] - Arteris is not aware of any legal proceedings that may have a material adverse effect on its financial position, results of operations, or cash flows[84] Note 10. Redeemable Convertible Preferred Stock and Common Stock Details the rights and characteristics of preferred and common stock, including IPO conversion - Holders of Series A Preferred Stock have preferential rights regarding dividends and liquidation, with a cap of 2.5 times the original issue price on liquidation distributions before common stock participates[86][89] - All outstanding shares of Series A Preferred Stock automatically converted into common stock upon the completion of the IPO in October 2021[93] - Common stockholders are entitled to one vote per share and are subordinate to redeemable convertible preferred stock with respect to dividend and liquidation rights[96] - During the nine months ended September 30, 2021, 1,250,000 shares of common stock were sold to third-party investors for an aggregate of $5.4 million[96] Note 11. Stock-Based Compensation Explains the company's stock-based compensation plans and related expenses - The company operates under the 2016 Incentive Plan, which allows for the granting of incentive stock options, non-statutory stock options, restricted stock awards, and restricted stock unit awards[99][103][104][105] Shares Available for Future Grant under 2016 Plan | Date | Shares | | :----------- | :---------- | | Sep 30, 2021 | 1,546,715 | | Dec 31, 2020 | 650,170 | - As of September 30, 2021, there were 5,964,043 stock options outstanding with a weighted-average exercise price of $0.92, and the aggregate intrinsic value of options exercised during the nine months ended September 30, 2021, was $1.2 million[111] - As of September 30, 2021, there was $1.1 million of unamortized stock-based compensation cost related to unvested stock options, expected to be recognized over a weighted-average period of 2.8 years[112] - As of September 30, 2021, there were 3,935,229 unvested restricted stock units (RSUs) with a weighted-average grant fair value of $4.60, and unamortized stock-based compensation cost for unvested RSUs was $4.5 million, expected over 3.4 years[117][118] - For the nine months ended September 30, 2021, 2.7 million performance-based RSUs were granted, with $12.6 million in unamortized compensation expense not yet recorded as the IPO performance condition was not deemed probable until consummated[119] Total Stock-Based Compensation Expense (in thousands) | Period | 2021 | 2020 | | :------------------------- | :--- | :--- | | Three Months Ended Sep 30 | $433 | $111 | | Nine Months Ended Sep 30 | $1,144 | $281 | Note 12. Income Taxes Provides details on the company's income tax provision, effective tax rate, and deferred tax assets Effective Tax Rate (Nine Months Ended Sep 30) | Year | Rate | | :--- | :----- | | 2021 | (4.1)% | | 2020 | (53.8)%| Income Tax Provision (Nine Months Ended Sep 30, in thousands) | Year | Amount | | :--- | :----- | | 2021 | $612 | | 2020 | $3,793 | - The decrease in the income tax provision was primarily due to a decrease in forecasted annual foreign withholding tax and changes in the geographic mix of worldwide earnings[123] - A full valuation allowance is maintained against federal and state deferred tax assets due to uncertainty regarding their realization[124] - Gross liability for unrecognized tax benefits was $2.5 million as of September 30, 2021, up from $1.9 million in 2020[124] Note 13. Related Party Transactions Discloses transactions and balances with related parties Related Party Lease Payments (in thousands) | Period | Amount | | :------------------------- | :----- | | Three Months Ended Sep 30 | $100 | | Nine Months Ended Sep 30 | $200 | Note 14. Subsequent Events Reports significant events occurring after the balance sheet date, such as the IPO - In October 2021, the company completed its IPO, raising $71.1 million in net proceeds and converting all outstanding redeemable convertible preferred stock to common stock[129] - New stock incentive plans were adopted: the 2021 Incentive Award Plan (3,640,000 shares reserved) and the 2021 Employee Stock Purchase Plan (607,000 shares initially reserved)[130][131] - Upon the IPO's effectiveness, the company recognized $2.5 million in cumulative stock-based compensation expense for previously granted performance-based RSUs[133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Arteris, Inc.'s financial condition and results of operations for the three and nine months ended September 30, 2021 Overview Provides a high-level summary of Arteris, Inc.'s business, products, and key financial highlights - Arteris is a leading provider of interconnect and intellectual property (IP) technology that manages on-chip communications in System-on-Chip (SoC) semiconductor devices[138] - The company's products are used in sophisticated applications such as automated driving, artificial intelligence/machine learning (AI/ML), 5G and wireless communications, data centers, and consumer electronics[139] Financial Highlights (Q3 2021) | Metric | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :--------------- | :-------------------------- | :-------------------------- | | Revenue | $9.0 million | $26.4 million | | Net Loss | $5.0 million | $15.6 million | | Net Loss per Share | $0.24 | $0.79 | - As of September 30, 2021, Arteris had 218 full-time employees and offices in five countries[140] Initial Public Offering Details the key events and financial outcomes related to Arteris, Inc.'s Initial Public Offering - Arteris completed its IPO in October 2021, issuing and selling 5,750,000 shares of common stock at $14.00 per share, including the underwriters' option[142] - The company received net proceeds of $71.1 million after deducting underwriting discounts and estimated offering expenses[142] - In connection with the IPO, all outstanding redeemable convertible preferred stock automatically converted into 4,471,316 shares of common stock[142] Acquisition Summarizes the acquisition of Magillem Design Services S.A. and its strategic rationale - On November 30, 2020, Arteris acquired Magillem Design Services S.A. for a total consideration of $7.8 million[144] - The acquisition aimed to integrate technologies to accelerate and simplify the SoC assembly design flow and enhance innovation in IP integration software and configurable on-chip interconnect IP[144] Factors Affecting Our Business Discusses key external and internal factors influencing the company's operational and financial performance - Revenue generation from new license agreements is subject to lengthy development cycles (1-3 years) and customer acquisition processes (6-9 months), with royalty payments typically starting 1-5 years after product design completion[146] - Demand for interconnect IP solutions and associated royalty revenue is highly dependent on market conditions in end markets such as automotive, AI/ML, 5G communications, data centers, and consumer electronics[147] - Technological developments, such as the need for smaller die size and lower power consumption in complex SoCs, drive increased demand for commercial semiconductor design IP, positively impacting revenue and growth[149] - The semiconductor industry's cyclical nature, characterized by rapid technological change and fluctuations in supply and demand, can lead to periods of slower growth or industry contractions affecting sales[152] - Despite global economic disruption, the COVID-19 pandemic did not adversely impact Arteris's results of operations, cash flows, and financial condition for the three and nine months ended September 30, 2021, though future impacts remain uncertain[153][154] Key Performance Indicators Presents the primary metrics used by management to evaluate the company's business performance and growth Annual Contract Value (ACV) | Date | Amount (in millions) | | :----------- | :------------------- | | Sep 30, 2021 | $42.7 | | Sep 30, 2020 | $32.8 | | Change | $9.9 | | Change (%) | 30.2% | Active Customers | Date | Count | | :----------- | :---- | | Sep 30, 2021 | 179 | | Sep 30, 2020 | 104 | | Increase | 75| | Increase (%) | 72.1%| - The company added 38 Active Customers for its IP deployment solutions through the Magillem acquisition in November 2020[158] Design Starts (Nine Months Ended Sep 30) | Year | Count | | :--- | :---- | | 2021 | 65 | | 2020 | 43 | | Increase | 22| | Increase (%) | 51.2%| Remaining Performance Obligations (RPO) | Date | Amount (in millions) | | :----------- | :------------------- | | Sep 30, 2021 | $50.6 | | Sep 30, 2020 | $34.2 | | Change | $16.4 | | Change (%) | 47.9% | Components of Our Results of Operations Explains the various revenue and expense categories that constitute the company's financial results - Revenue is primarily derived from licensing intellectual property, licensing software, support and maintenance services, professional services, training services, and royalties[161] - Interconnect solutions include software licenses, services, software updates, and technical support, with application engineer support services (CAE and FAE) being integral to customer benefit[163][164][165] - Research and development (R&D) expenses are expected to increase in absolute terms and as a percentage of revenue in the short term due to investments in interconnect technology and new product development[171] - General and administrative (G&A) expenses are expected to increase following the IPO due to public company compliance costs but are anticipated to decrease as a percentage of revenue over the long term[173] - The company maintains a full valuation allowance against its U.S. federal and state deferred tax assets due to the uncertainty of their realization[174] Results of Operations Provides a detailed analysis of the company's financial performance, comparing results across different periods Comparison of the Three Months Ended September 30, 2021 and 2020 Compares the company's financial performance for the three-month periods ended September 30, 2021, and 2020 Total Revenue (Three Months Ended Sep 30) | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :----- | :------------------ | :------------------ | :-------------------- | :--------- | | Sep 30 | $8,959 | $6,429 | $2,530 | 39% | - Licensing, support, and maintenance revenue increased by $2.9 million (56%) to $8.1 million[180] - Cost of revenue increased by $0.7 million (289%) to $0.9 million, primarily due to increased employee-related costs[181] Operating Expenses (Three Months Ended Sep 30, in thousands) | Category | 2021 | 2020 | Change | Change (%) | | :------------------------- | :------ | :------ | :------ | :--------- | | Research and development | $7,609 | $4,011 | $3,598 | 90% | | Sales and marketing | $3,242 | $2,240 | $1,002 | 45% | | General and administrative | $1,742 | $2,570 | $(828) | (32%) | | Total Operating Expenses | $12,593 | $8,821 | $3,772 | 43% | - Interest and other expense, net, increased by $0.16 million (604%) to $(0.18) million, primarily due to foreign currency exchange[186] - Provision for income taxes decreased by $0.9 million (78%) to $0.3 million, driven by an increased forecasted pre-tax loss and decreased foreign withholding taxes[187] Comparison of the Nine Months Ended September 30, 2021 and 2020 Compares the company's financial performance for the nine-month periods ended September 30, 2021, and 2020 Total Revenue (Nine Months Ended Sep 30) | Period | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | Change (%) | | :----- | :------------------ | :------------------ | :-------------------- | :--------- | | Sep 30 | $26,430 | $17,366 | $9,064 | 52% | - Licensing, support, and maintenance revenue increased by $10.3 million (74%) to $24.4 million[191] - Variable royalty revenue decreased by $0.8 million (29%) to $1.9 million, primarily due to a decrease in sales volume of a significant customer affected by U.S. government trade restrictions[191] - Cost of revenue increased by $1.5 million (134%) to $2.6 million, primarily due to increased employee-related costs[192] Operating Expenses (Nine Months Ended Sep 30, in thousands) | Category | 2021 | 2020 | Change | Change (%) | | :------------------------- | :------ | :------ | :------- | :--------- | | Research and development | $20,572 | $11,842 | $8,730 | 74% | | Sales and marketing | $7,971 | $6,345 | $1,626 | 26% | | General and administrative | $9,754 | $4,993 | $4,761 | 95% | | Total Operating Expenses | $38,297 | $23,180 | $15,117 | 65% | - Interest and other expense, net, increased by $0.39 million (348%) to $(0.5) million, primarily due to foreign currency exchange[198] - Provision for income taxes decreased by $3.2 million (84%) to $0.6 million, due to an increased forecasted pre-tax loss and decreased foreign withholding taxes[199] Liquidity and Capital Resources Analyzes the company's ability to generate and manage cash to meet its financial obligations and fund operations - As of September 30, 2021, Arteris had $11.2 million in cash, which does not include $71.1 million in net proceeds received from the IPO in October 2021[200] - The company believes its cash, available borrowing capacity, and cash expected from operations will be sufficient to meet liquidity requirements for at least the next 12 months[204] Cash Flows Summary (Nine Months Ended Sep 30, in thousands) | Category | 2021 | 2020 | | :------------------------------- | :------ | :----- | | Net cash used in operating activities | $(4,006) | $(502) | | Net cash used in investing activities | $(488) | $(523) | | Net cash provided by financing activities | $3,991 | $939 | - Net cash used in operating activities increased significantly to $4.0 million for the nine months ended September 30, 2021, primarily due to the net loss and changes in operating assets and liabilities[209] - Net cash provided by financing activities increased to $4.0 million for the nine months ended September 30, 2021, primarily attributable to $5.4 million in proceeds from the issuance of common stock[212] - The company did not have any off-balance sheet financing arrangements during the periods presented[213] Critical Accounting Policies and Estimates Identifies and explains the accounting policies that require significant judgment and estimation by management - There have been no material changes to the company's critical accounting policies and estimates compared to those described in its Final Prospectus[216] Recently Issued and Adopted Accounting Pronouncements Provides an overview of new accounting standards and their impact on the company's financial statements - For more information regarding recently issued accounting pronouncements, refer to Note 2 to the unaudited condensed consolidated financial statements[217] JOBS Act Explains the company's status as an emerging growth company under the JOBS Act and its implications for reporting - Arteris is an 'emerging growth company' under the JOBS Act, which allows it to take advantage of certain exemptions from various reporting requirements[218] - The company has elected to use the extended transition period to comply with new or revised accounting standards, which may make financial statement comparisons with other public companies difficult[219][222] - The company will remain an emerging growth company until the earliest of reaching $1.07 billion in annual gross revenues, five years after its first common stock sale, issuing over $1.0 billion in non-convertible debt, or becoming a 'large accelerated filer'[220] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Arteris, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[223] Item 4. Controls and Procedures Management concluded that Arteris, Inc.'s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021[224] - No changes in internal control over financial reporting were identified that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the period[225] - Management acknowledges that control systems provide reasonable, not absolute, assurance and may not prevent or detect all errors and fraud due to inherent limitations[226] Part II. Other Information Item 1. Legal Proceedings Arteris, Inc. is not currently involved in any legal proceedings that, if determined adversely, would have a material adverse effect on its business, results of operations, financial condition, or cash flows - The company is not presently a party to any legal proceedings that would individually or collectively have a material adverse effect on its business, results of operations, financial condition, or cash flows[228] Item 1A. Risk Factors As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors previously disclosed in Arteris, Inc.'s final prospectus supplement for its Initial Public Offering filed on October 28, 2021 - There have been no material changes to the risk factors disclosed in the company's final prospectus supplement for its Initial Public Offering filed on October 28, 2021[229] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended September 30, 2021, Arteris, Inc. granted 1,169,167 restricted stock units (RSUs) under its 2016 Stock Plan, and its IPO generated net proceeds of $71.1 million - During the three months ended September 30, 2021, Arteris granted 1,169,167 RSUs to certain directors, officers, and employees under the 2016 Stock Plan[230] - The IPO, which closed on October 29, 2021, generated net proceeds of $71.1 million after deducting underwriting discounts and estimated offering costs[231] - There has been no material change in the planned use of proceeds from the IPO as described in the Final Prospectus[232] Item 3. Defaults Upon Senior Securities Arteris, Inc. reported no defaults upon senior securities during the period - There were no defaults upon senior securities[232] Item 4. Mine Safety Disclosures This item is not applicable to Arteris, Inc. - This item is not applicable to the company[233] Item 5. Other Information No other information is reported under this item - No other information is reported under this item[233] Item 6. Exhibits This section lists various exhibits filed with the Form 10-Q, including corporate governance documents, financing agreements, and stock plans - The exhibits include corporate governance documents (Amended and Restated Certificate of Incorporation and Bylaws), financing agreements, employment agreements, and various stock incentive plans (2013, 2016, 2021 Incentive Award Plan, 2021 Employee Stock Purchase Plan)[235] - Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included as Exhibits 31.2, 32.1, and 32.2[237][238]