UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2014
OR
¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number: 001-36171
Mavenir Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 61-1489105 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
1700 International Parkway, Suite 200
Richardson, TX 75081
(Address of principal executive offices)
Telephone Number (469) 916-4393
(Registrants telephone number, including area code)
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 (the Exchange Act) 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 x No ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 2, 2014, there were approximately 24,028,688 shares of the Registrants Common Stock outstanding.
Mavenir Systems, Inc.
FORM 10-Q
March 31, 2014
2
Mavenir Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
March 31, 2014 |
December 31, 2013 |
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(as adjusted, see Note 1) | ||||||||
Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 33,916 | $ | 38,930 | ||||
Accounts receivable, net of allowance of $458 and $587 at March 31, 2014 and December 31, 2013 respectively |
18,013 | 23,641 | ||||||
Unbilled revenue |
16,638 | 11,213 | ||||||
Inventories |
5,235 | 7,109 | ||||||
Prepaid expenses and other current assets |
3,455 | 3,614 | ||||||
Deferred contract costs |
6,309 | 9,313 | ||||||
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Total current assets |
83,566 | 93,820 | ||||||
Non-current assets: |
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Property and equipment, net |
4,825 | 5,054 | ||||||
Intangible assets, net |
5,041 | 5,202 | ||||||
Deposits and other assets |
1,376 | 1,657 | ||||||
Goodwill |
840 | 866 | ||||||
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Total assets |
$ | 95,648 | $ | 106,599 | ||||
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Liabilities and shareholders equity: |
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Current liabilities: |
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Trade accounts payable |
$ | 3,972 | $ | 7,152 | ||||
Accrued liabilities |
13,335 | 11,939 | ||||||
Deferred revenue |
12,675 | 15,785 | ||||||
Income tax payable |
597 | 765 | ||||||
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Total current liabilities |
30,579 | 35,641 | ||||||
Non-current liabilities: |
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Other long-term liabilities |
339 | 3,504 | ||||||
Long-term debt |
24,921 | 23,423 | ||||||
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Total liabilities |
55,839 | 62,568 | ||||||
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Commitments and contingencies |
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Shareholders equity: |
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Common stock, $0.001 par value. 300,000,000 shares authorized; 23,468,850 shares issued and outstanding at March 31, 2014, respectively; and 23,420,749 shares issued and outstanding at December 31, 2013, respectively |
23 | 23 | ||||||
Additional paid-in capital |
155,836 | 155,198 | ||||||
Accumulated deficit |
(116,232 | ) | (112,187 | ) | ||||
Accumulated other comprehensive income |
182 | 997 | ||||||
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Total shareholders equity |
39,809 | 44,031 | ||||||
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Total liabilities and shareholders equity |
$ | 95,648 | $ | 106,599 | ||||
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See Notes to Condensed Consolidated Financial Statements
3
Mavenir Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
Three months ended March 31, |
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2014 | 2013 | |||||||
Revenues |
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Software products |
$ | 23,037 | $ | 17,727 | ||||
Maintenance |
5,692 | 4,711 | ||||||
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28,729 | 22,438 | |||||||
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Cost of revenues |
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Software products |
9,953 | 6,651 | ||||||
Maintenance |
2,744 | 1,330 | ||||||
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12,697 | 7,981 | |||||||
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Gross profit |
16,032 | 14,457 | ||||||
Operating expenses: |
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Research and development |
6,133 | 6,122 | ||||||
Sales and marketing |
6,871 | 5,041 | ||||||
General and administrative |
5,250 | 4,991 | ||||||
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Total operating expenses |
18,254 | 16,154 | ||||||
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Operating loss |
(2,222 | ) | (1,697 | ) | ||||
Other expense (income): |
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Interest income |
(43 | ) | (5 | ) | ||||
Interest expense |
783 | 450 | ||||||
Loss on early extinguishment of debt |
1,783 | | ||||||
Foreign exchange (gain) loss |
(795 | ) | 1,732 | |||||
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Total other expense (income), net |
1,728 | 2,177 | ||||||
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Loss before income tax |
(3,950 | ) | (3,874 | ) | ||||
Income tax expense |
95 | 420 | ||||||
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Net loss |
$ | (4,045 | ) | $ | (4,294 | ) | ||
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Other comprehensive loss |
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Foreign currency translation adjustments |
(815 | ) | (32 | ) | ||||
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Total comprehensive loss |
$ | (4,860 | ) | $ | (4,326 | ) | ||
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Net loss per common share: |
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Basic |
$ | (0.17 | ) | $ | (3.21 | ) | ||
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Diluted |
$ | (0.17 | ) | $ | (3.21 | ) | ||
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Weighted average common shares outstanding: |
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Basic and diluted |
23,430 | 1,338 | ||||||
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See Notes to Condensed Consolidated Financial Statements
4
Mavenir Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three months ended March 31, |
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2014 | 2013 | |||||||
Operating activities: |
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Net loss |
$ | (4,045 | ) | $ | (4,294 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation of property and equipment |
894 | 492 | ||||||
Amortization of intangible assets |
470 | 354 | ||||||
Amortization of debt discount |
101 | 26 | ||||||
Net change in provision for doubtful accounts |
(134 | ) | 224 | |||||
Stock-based compensation expense |
617 | 165 | ||||||
Unrealized foreign currency gain |
(1,198 | ) | (41 | ) | ||||
Loss on early extinguishment of debt |
1,783 | | ||||||
Changes in operating assets and liabilities: |
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Accounts receivable |
5,659 | (4,105 | ) | |||||
Unbilled revenue |
(5,346 | ) | 109 | |||||
Deposits and other current assets |
(185 | ) | 439 | |||||
Inventories |
1,874 | 353 | ||||||
Prepaid expenses |
311 | (760 | ) | |||||
Deferred contract costs |
3,010 | (5,235 | ) | |||||
Deferred revenue |
(3,090 | ) | 6,205 | |||||
Accounts payable and accrued liabilities |
(5,180 | ) | 143 | |||||
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Net cash used in operating activities |
(4,459 | ) | (5,925 | ) | ||||
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Investing activities: |
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Purchases of property and equipment |
(984 | ) | (913 | ) | ||||
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Net cash used in investing activities |
(984 | ) | (913 | ) | ||||
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Financing activities: |
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Borrowing from long-term debt |
25,000 | | ||||||
Borrowing from line of credit |
| 9,500 | ||||||
Repayments of long-term debt |
(15,000 | ) | | |||||
Repayments of line of credit borrowing |
(10,000 | ) | | |||||
Exercise of options to purchase common stock |
21 | 4 | ||||||
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Net cash provided by financing activities |
21 | 9,504 | ||||||
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Effect of foreign currency exchange rate changes on cash and cash equivalents |
408 | 500 | ||||||
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Net (decrease) increase in cash and cash equivalents |
(5,014 | ) | 3,166 | |||||
Cash and cash equivalents at beginning of period |
38,930 | 7,402 | ||||||
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Cash and cash equivalents at end of period |
$ | 33,916 | $ | 10,568 | ||||
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Supplemental cash flow information: |
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Cash paid for interest |
$ | 817 | $ | 347 | ||||
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Income tax payments, net |
$ | 144 | $ | 92 | ||||
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See Notes to Condensed Consolidated Financial Statements
5
Mavenir Systems, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Description of the Business and Basis of Presentation
Throughout these condensed consolidated financial statements, Mavenir Systems, Inc. is referred to as Mavenir, the Company, we, us and our.
Description of Business
Mavenir was originally formed as a limited liability company on April 26, 2005. We were incorporated under the laws of Texas in August 2005, and subsequently incorporated under the laws of Delaware in March 2006.
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communication and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Suite (RCS)-based services, which enable enhanced mobile communications such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks as well as next generation 4G LTE networks. Our solutions also deliver voice services over Long Term Evolution (LTE) technology and wireless (Wi-Fi) networks known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). Mavenirs mOne® Convergence Platform has enabled a leading mobile service provider to introduce the industrys first live network deployment of VoLTE and the industrys first live deployment of next-generation RCS 5.
We are headquartered in Richardson, Texas and have research and development personnel located at our wholly-owned subsidiaries in China and India. Additionally, we have a sales and operations presence in Asia Pacific (APAC) and the Europe, Middle East and Africa region (EMEA).
Basis of Presentation and Consolidation
The unaudited interim financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our consolidated financial position as of March 31, 2014 and our results of operations and cash flows for the three months ended March 31, 2014 and 2013. We have omitted certain information and disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States (GAAP) pursuant to those rules and regulations, although we believe that the disclosures we have made are adequate to make the information presented not misleading. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other future annual or interim period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the Securities and Exchange Commission on February 21, 2014.
Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from managements estimates.
6
Revision of Prior Period Financial Statements and Out-Of-Period Adjustment
During our review of the three months ended March 31, 2014, we identified a non-cash error that originated in prior periods. The error related to performance-based warrants issued to a channel partner in 2008, earned in 2011 and exercised in April of 2014. The achievement of the performance milestone occurred in 2011 and would have resulted in a reduction to revenue of $1.3 million in 2011. We assessed the materiality of this error in accordance with the SEC guidance on considering the effects of prior period misstatements based on an analysis of quantitative and qualitative factors. Based on this analysis, we determined that the error was immaterial to the prior reporting periods affected and, therefore, amendments of reports previously filed with the SEC were not required. However, we have concluded that correcting the error in our 2014 financial statements would materially impact our results for the quarter ended March 31, 2014 and the year ending December 31, 2014. Accordingly, we have reflected the correction of this prior period error in the period in which it originated and revised our consolidated balance sheet as of December 31, 2013, as presented in this Quarterly Report on Form 10-Q. In addition, a reduction to accumulated deficit will be reflected as an adjustment to the beginning balance for the earliest year presented in the financial statements included in our Annual Report on Form 10-K for the year ending December 31, 2014.
The effect of the immaterial correction on the consolidated balance sheet as of December 31, 2013 is as follows (in thousands):
As Reported | Correction | As Revised | ||||||||||
Other shareholders equity |
$ | 1,020 | $ | | $ | 1,020 | ||||||
Additional paid-in capital |
153,878 | 1,320 | 155,198 | |||||||||
Accumulated deficit |
(110,867 | ) | (1,320 | ) | $ | (112,187 | ) | |||||
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Total shareholders equity |
$ | 44,031 | $ | | $ | 44,031 | ||||||
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2. Summary of Significant Accounting Policies
Significant Accounting Policies
Our significant accounting policies and others are presented in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 21, 2014. The policies include significant estimates made by management using information available at the time the estimates are made. However, these estimates could change materially if different information or assumptions were used.
3. Fair Value Measurements
The accounting guidance for fair value measurements establishes a three-tier fair value hierarchy, categorizing the inputs used to measure fair value.
The hierarchy can be described as follows:
Level 1Observable inputs, such as quoted prices in active markets,
Level 2Inputs other than the quoted prices in active markets that are observable either directly or indirectly, or
Level 3Unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.
7
This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. We evaluate transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between Level 1 and Level 2 during the three months ended March 31, 2014 and 2013 or for the year ended December 31, 2013.
Our financial instruments consist primarily of cash and cash equivalents, billed accounts receivable, accounts payable and debt. The carrying amounts of financial instruments, other than the debt instruments, are representative of their fair values due to their short maturities. Our debt agreements are considered level 2 instruments and bear interest at market rates and thus management believes their carrying amounts approximate fair value.
We do not have any other financial or non-financial assets or liabilities that would be characterized as Level 2 or Level 3 instruments.
4. Property and Equipment
Property and equipment consist of the following (in thousands):
Estimated Useful Life |
March 31, 2014 |
December 31, 2013 |
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Computer software |
3 years | $ | 5,056 | $ | 5,046 | |||||||
Computer and lab equipment |
3 years | 9,531 | 8,917 | |||||||||
Other equipment |
2-5 years | 1,534 | 1,468 | |||||||||
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Property and equipment, gross |
16,121 | 15,431 | ||||||||||
Less: accumulated depreciation |
(11,296 | ) | (10,377 | ) | ||||||||
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Property and equipment, net |
$ | 4,825 | $ | 5,054 | ||||||||
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Depreciation expense of property and equipment totaled $0.9 million for the three months ended March 31, 2014, compared to $0.5 million for the same period in 2013.
5. Long-term Debt
Long-term debt consists of the following (in thousands):
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
Silicon Valley Bank senior loan |
$ | 25,000 | $ | | ||||
Silicon Valley Bank subordinated loan |
| 10,000 | ||||||
Silver Lake Waterman subordinated loan |
| 15,000 | ||||||
Discount related to issuance of warrants |
(79 | ) | (1,577 | ) | ||||
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Long-term debt |
$ | 24,921 | $ | 23,423 | ||||
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Silicon Valley Bank Subordinated and Senior Loans
On October 18, 2012, we entered into loan agreements with Silicon Valley Bank (SVB). Under the agreements, we obtained two loans totaling $32.5 million (the Old SVB Loans). In February 2013, we amended the Old SVB Loans to join certain of our subsidiaries, including our non-U.S. subsidiaries, as co-borrowers. We also amended our
8
minimum tangible net worth covenant. The Old SVB Loans included a $22.5 million Senior Loan (Senior Loan) secured by substantially all of our assets, including intellectual property. The Senior Loan had a three-year term at a floating rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25%. Under the terms of the agreement, we could draw up to 80% of eligible trade receivables up to $15.0 million, with the remaining $7.5 million generally available for working capital and cash management purposes. We also obtained a $10.0 million Subordinated Loan, also secured by substantially all of our assets including intellectual property that had a three-year term at a fixed rate of 11%. The Old SVB Loans were replaced by an amended and restated loan and security agreement (Amended and Restated Agreement) that we entered into with SVB on March 6, 2014, as discussed below.
On March 6, 2014 we entered into an Amended and Restated Agreement with SVB to replace our $22.5 million Senior Loan facility with SVB. The Amended and Restated Agreement includes a five-year term loan of $25.0 million (Term Loan), a $15.0 million secured revolving line of credit (Revolver) and a $5 million secured line for letters of credit, foreign exchange and cash management services. The Term Loan has an initial floating interest rate of 2.75% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. At March 31, 2014, the interest rate was 6.0%. After the achievement of the one of the two performance triggers described in the following sentence, the interest rate will be reduced to 2.25% above the U.S. prime rate; after the achievement of the second performance trigger the interest rate will be further reduced to 1.75% above the U.S. prime rate. The performance triggers are the following: (i) our achievement, on a consolidated basis, of positive EBITDA (as defined in the loan agreement) for two consecutive fiscal quarters, and (ii) the completion of an equity offering resulting in net proceeds to the Company of at least $50 million. The Term Loan provides for monthly payments of interest only until April 1, 2015; thereafter we are required to repay the outstanding principal amount in 48 monthly installments. The Term Loan has a maturity of March 1, 2019. If we prepay the Term Loan within one year of the Amended and Restated Loan Agreement, we will have to pay a prepayment premium of $250,000; thereafter, the Term Loan may be prepaid without penalty.
Under the Revolver, we may draw up to 80% of eligible domestic trade receivables, 70% of eligible foreign trade receivables and 35% of eligible accrued but unbilled accounts up to a maximum of $15.0 million. The Revolver has a three-year term and bears interest at a floating interest rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. We are also required to pay an unused facility fee, monthly in arrears, of 0.25% per annum of the unused amount of the Revolver. The Revolver may be prepaid at any time without penalty. As of March 31, 2014, we had no borrowings outstanding on the Revolver.
As of March 5, 2014, we had approximately $0.3 million in deferred costs and $0.2 million in debt discount related to the Old SVB Loans on our condensed consolidated balance sheet. In accordance with Accounting Standards Codification 470, Debt (ASC 470), we recorded a $0.3 million loss on early extinguishment of debt related to the Amended and Restated Agreement.
The Amended and Restated Agreement contains certain restrictive covenants, and requires us to maintain a minimum liquidity ratio and other earnings related amounts as defined in the Amended and Restated Agreement. At March 31, 2014, we were in compliance with all covenants applicable to us under the Amended and Restated Agreement. The Amended and Restated Agreement also contains usual and customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreements becoming due and payable immediately, and they also impose an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing. As of March 31, 2014, we were in compliance with all covenants under the Amended and Restated Agreement.
Silver Lake Waterman Growth Capital Loan
On March 5, 2014, we paid off the entire balance of our $15.0 million subordinated term loan (Silver Lake Loan) with Silver Lake Waterman Fund (Silver Lake) using funds from our initial public offering.
As of March 5, 2014, we had approximately $0.2 million in deferred costs and $1.3 million in debt discount related to the Silver Lake Loan on our condensed consolidated balance sheet. The entire $1.5 million was recognized during the three months ended March 31, 2014, as a loss on early extinguishment of debt related to the payoff of the Silver Lake Loan on March 5, 2014.
9
6. Contingencies
Legal Proceedings
From time to time, we, our customers and our competitors are subject to various litigation and claims arising in the ordinary course of business. The software and communications infrastructure industries are characterized by frequent litigation and claims, including claims regarding patent and other intellectual property rights, claims for damages or indemnification for alleged breach under commercial supply or service contracts and claims regarding alleged improper hiring practices.
We are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.
7. Stockholders Equity
Stock Option Plan
We have two stock option plans: the Amended and Restated 2005 Stock Plan (the 2005 Plan), and the Amended and Restated 2013 Equity Incentive Plan (the 2013 Plan). In January 2013, we terminated the 2005 Plan and provided that no further stock awards were to be granted under the 2005 Plan and adopted the 2013 Plan as a continuation of and successor to the 2005 Plan. Upon our initial public offering (IPO), all shares that were reserved under the 2005 Plan but not issued were assumed by the 2013 Plan. All outstanding stock awards under the 2005 Plan continue to be governed by the existing terms. Under the 2013 Plan, we have the ability to issue incentive stock options (ISOs), nonstatutory stock options (NSOs), stock appreciation rights, restricted stock, restricted stock units, performance units and/or performance shares. Additionally, the 2013 Plan provides for the grant of performance cash awards to employees, directors and consultants. The ISOs and NSOs will be granted at a price per share not less than the fair value at date of grant. Options granted to date generally vest over a four-year period with 25% vesting at the end of one year and the remaining vest monthly thereafter. Options granted generally are exercisable up to 10 years from the date of grant.
Awards granted under the 2005 Plan may be immediately exercisable, but not vested, and are subject to a right of repurchase by us (at our option) at the lower of the original exercise price or fair market value for all unvested restricted shares at the termination of service. At March 31, 2014, options that were exercisable amounted to 2,183,282 shares with a weighted average exercise price of $1.85 and weighted average remaining contractual term of 5.9 years and intrinsic value of $35.0 million. At March 31, 2014, there were 1,211,943 common shares available for future grants under the 2013 Plan.
To determine the weighted average fair value of stock options granted, we used the Black-Scholes option-pricing model with the following weighted average assumptions during the periods presented:
Three months ended March 31, |
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2014 | 2013 | |||||||
Expected dividend yield |
0 | % | 0 | % | ||||
Risk-free interest rate (U.S. Treasury) |
2.0 | % | 2.0 | % | ||||
Expected term |
6.3 years | 6.3 years | ||||||
Expected volatility |
60.7 | % | 60.0 | % |
The fair value of all the awards granted is amortized to expense on a straight-line basis over the requisite service periods, which are generally the vesting periods. We granted stock options with a weighted-average grant date fair value during the three months ended March 31, 2014 of $9.60 per share.
10
The following table summarizes the stock option activity for the three months ended March 31, 2014:
Shares | Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term |
Aggregate Intrinsic Value |
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(in thousands) | ||||||||||||||||
Outstanding as of January 1, 2014 |
3,287,272 | $ | 3.86 | |||||||||||||
Granted |
1,016,692 | 16.49 | ||||||||||||||
Exercised |
(3,751 | ) | 5.65 | |||||||||||||
Forfeited or expired |
(58,960 | ) | 4.21 | |||||||||||||
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Outstanding as of March 31, 2014 |
4,241,253 | $ | 6.88 | 7.70 | $ | 46,733 | ||||||||||
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The following table presents our share-based compensation resulting from equity awards that we recorded in our condensed consolidated statements of operations and comprehensive loss (in thousands):
Three months ended March 31, |
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2014 | 2013 | |||||||
Cost of revenues |
$ | 78 | $ | | ||||
Research and development |
98 | | ||||||
Sales and marketing |
130 | | ||||||
General and administrative |
311 | 165 | ||||||
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Total |
$ | 617 | $ | 165 | ||||
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Warrant Exercise
In March of 2014, we issued 44,340 shares of our common stock to SVB upon the exercise in full of a warrant held by SVB. The warrant gave SVB the right to purchase up to 64,286 shares of our common stock at $5.11 per share. The warrant was exercised on a cashless basis pursuant to the terms of the agreement with SVB.
8. Net Loss Per Share
We calculate basic net (loss) per share by dividing net (loss) attributable for the period by the weighted average number of shares of common stock outstanding during the period. Diluted, net (loss) per share is computed by giving effect to all potential weighted average diluted common stock, including options and warrants, using the treasury stock method.
11
The computation of basic and diluted net (loss) per share is as follows (in thousands, except per share amounts):
Three months ended March 31, |
||||||||
2014 | 2013 | |||||||
Net loss |
$ | (4,045 | ) | $ | (4,294 | ) | ||
Basic common shares: |
||||||||
Weighted average number of shares outstanding |
23,430 | 1,338 | ||||||
Diluted common shares: |
||||||||
Weighted average shares used to compute diluted net loss per share |
23,430 | 1,338 | ||||||
Net loss per share attributable to common stockholders: |
||||||||
Basic |
$ | (0.17 | ) | $ | (3.21 | ) | ||
|
|
|
|
|||||
Diluted |
$ | (0.17 | ) | $ | (3.21 | ) | ||
|
|
|
|
We excluded certain shares from the computation of diluted net (loss) per share because the effect of these shares would have been anti-dilutive:
Three months ended March 31, |
||||||||
2014 | 2013 | |||||||
Convertible preferred stock |
| 16,452,467 | ||||||
Stock options |
1,487,155 | 2,546,204 | ||||||
Warrants |
1,168,491 | 1,235,633 |
9. Income Taxes
We base our provision for income taxes in our interim condensed consolidated financial statements on estimated annual effective tax rates in the tax jurisdictions where we operate. We monitor the assumptions used in estimating the annual effective tax rate and make adjustments, if required, throughout the year. If actual results differ from the assumptions used in estimating our annual effective income tax rate, future income tax expense could be materially affected. For the three months ended March 31, 2014, total income tax expense is approximately $0.1 million on a worldwide basis compared with total income tax expense of approximately $0.4 million for the three months ended March 31, 2013. The difference is due primarily to discrete items recognized in the current quarter related to foreign taxes.
We measure and recognize uncertain tax positions. To recognize such positions, we first determine if it is more likely than not that the position will be sustained on audit. We then measure the benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. We do not believe that it is reasonably possible that the estimates of unrecognized tax benefits will change significantly in the next twelve months. Tax positions for Mavenir and its subsidiaries are subject to income tax audits by multiple tax jurisdictions throughout the world. An adverse resolution of one or more uncertain tax positions in any period could have a material impact on the results of operations for that period.
Our net deferred tax asset is offset by a valuation allowance since such amounts are not considered realizable on a more-likely-than-not basis. We have not accrued a provision for income taxes on undistributed earnings of approximately $11.5 million of certain non-U.S. subsidiaries, as of March 31, 2014 since such earnings are likely to be reinvested indefinitely. If the earnings were distributed, we would be subject to U.S. federal income and foreign withholding taxes. Determination of an unrecognized deferred income tax liability with respect to such earnings is not practicable.
12
10. Segment and Geographic Information
Operating segments are defined as components of an enterprise in which separate financial information is available that is evaluated regularly by the chief operating decision makers, in deciding how to allocate resources and in assessing performance. Our chief operating decision-makers (i.e., our chief executive officer and his direct reports) review financial information presented on a condensed consolidated basis, accompanied by disaggregated information about revenues by geographic region for purposes of allocating resources and evaluating financial performance. We have concluded that we operate in one segment and have provided the required enterprise-wide disclosures.
For the three months ended March 31, 2014, four of our customers (AT&T, Deutsche Telekom, T-Mobile USA and Vodafone) together accounted for 62% of our total revenue. For the three months ended March 31, 2013, four of our customers (AT&T, Deutsche Telekom, T-Mobile USA and Vodafone) together accounted for 52% of our total revenue. No other customer accounted for more than 10% of our total revenues for the three months ended March 31, 2014 and 2013. Revenues by geographic area are based on the deployment site location of the end customers. The following tables present our revenues and long-lived assets by geographic region (in thousands):
Net revenue
Three months ended March 31, | ||||||||
2014 | 2013 | |||||||
North America |
$ | 13,635 | $ | 8,430 | ||||
EMEA |
12,422 | 7,539 | ||||||
APAC |
2,672 | 6,469 | ||||||
|
|
|
|
|||||
Consolidated Total |
$ | 28,729 | $ | 22,438 | ||||
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|
|
Long-Lived Assets
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
North America |
$ | 8,221 | $ | 8,475 | ||||
EMEA |
1,798 | 1,888 | ||||||
APAC |
687 | 759 | ||||||
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|
|
|
|||||
Consolidated Total |
$ | 10,706 | $ | 11,122 | ||||
|
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|
|
11. Subsequent Events
Warrant Exercise
In April of 2014, we issued 555,034 shares of our common stock to a wholly-owned subsidiary of Cisco Systems, Inc. (Cisco) upon the exercise in full of a warrant held by Cisco. The warrant gave Cisco the right to purchase up to 898,284 shares of our common stock at $6.6794 per share. The warrant was exercised on a cashless basis pursuant to the terms of the agreement with Cisco.
13
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2013 (which we refer to as our 2013 Form 10-K).
Throughout our Managements Discussion and Analysis (MD&A), we refer to Mavenir Systems, Inc. as Mavenir, the Company, we, us and our. Throughout our MD&A, where we provide discussion of the three months ended March 31, 2014, and we provide data for the same period in the prior year, we refer to the prior period as 2013.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are often identified by the use of words such as, but not limited to, anticipate, believe, can, continue, could, estimate, expect, intend, may, plan, project, seek, should, target, will, would and similar expressions or variations intended to identify forward-looking statements.
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Our forward-looking statements are based on the beliefs and assumptions of our management based on information currently available to management, and are not guarantees of future performance or development. All of our forward-looking statements are subject to risks, uncertainties and other important factors, some of which are outside our control, which could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled Risk Factors included under Part I, Item 1A of our 2013 Form 10-K and those risks discussed in other documents we file with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We are a leading provider of software-based telecommunications networking solutions that enable mobile service providers to deliver internet protocol (IP)-based voice, video, rich communications and enhanced messaging services to their subscribers globally. Our solutions deliver Rich Communication Services (RCS), which enable enhanced mobile communications, such as group text messaging, multi-party voice or video calling and live video streaming as well as the exchange of files or images, over existing 2G and 3G networks and next generation 4G Long Term Evolution (LTE) networks. Our solutions also deliver voice services over LTE technology and wireless (Wi-Fi) networks, known respectively as Voice over LTE (VoLTE) and Voice over Wi-Fi (VoWi-Fi). We enable mobile service providers to offer services that generate increased revenue and improve subscriber satisfaction and retention, while allowing them to improve time-to-market of new services and reduce network costs. Our mOne® Convergence Platform has enabled MetroPCS (now part of T-Mobile), a leading mobile service provider, to introduce the industrys first live network deployment of VoLTE and the industrys first live deployment of next-generation RCS 5.
We sell our solutions principally to wireless mobile service providers globally through our direct sales force or strategic third-party reseller partners. For the three months ended March 31, 2014 and 2013, 55% and 64% of our revenue came from outside of the United States.
Revenue from our solutions is generated from the sale of software products and maintenance and support. Software products revenues consist of software licenses, hardware and professional services fees from software customizations, feature development and training for customers. Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements.
14
GAAP financial highlights for the three months ended March 31, 2014 include:
| For the three months ended March 31, 2014, we generated revenues of $28.7 million, representing growth of 28.0% over the same period in 2013. |
| Revenues from our Voice and Video product group increased by 324.3% for the three months ended March 31, 2014 compared to the same period in 2013. |
| We experienced revenue growth of 61.7% in the Americas region and 64.8% in the Europe, Middle East and Africa region, compared with a revenue decrease of 58.7% in the Asia-Pacific region, for the three months ended March 31, 2014, compared to the same period in 2013. |
Non-GAAP financial highlights for the three months ended March 31, 2014 include:
| Non-GAAP gross profit increased in absolute dollars to $16.3 million, or 56.9% of revenue, compared to $14.6 million, or 64.9% of revenue, over the same period in 2013. |
| Non-GAAP operating loss decreased to $(0.2) million, compared to $(0.7) million over the same period in 2013. |
| Non-GAAP net loss decreased to $(1.1) million, compared to $(1.6) million over the same period in 2013. |
Critical Accounting Policies and Estimates
Our managements discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the assumptions and estimates associated with revenue recognition, income taxes and stock-based compensation have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. These policies are summarized in Managements Discussion and Analysis of Financial Condition and Results of Operations in our 2013 Form 10-K.
Key Operating and Financial Performance Metrics
We monitor and evaluate the key operating and financial performance metrics noted below to help us establish our budgets, measure our business operating performance, assess trends and evaluate our performance as compared to that of our competitors. We discuss revenue, gross profit margin and operating results below under Components of Operating Results. We discuss cash and cash equivalents and cash flows from operations below under Liquidity and Capital Resources.
15
Three months ended March 31, |
||||||||
2014 | 2013 | |||||||
Revenues |
$ | 28,729 | $ | 22,438 | ||||
Gross Profit Margin |
55.8 | % | 64.4 | % | ||||
Operating Loss |
(2,222 | ) | (1,697 | ) | ||||
Cash and Cash Equivalents |
33,916 | 10,568 | ||||||
Cash used in Operations |
(4,459 | ) | (5,925 | ) |
Components of Operating Results
Revenue
Revenue from our solutions is generated from the sale of software products and maintenance and support. Software products revenues consist of software licenses, hardware and professional services fees from software customizations, feature development and training for customers. Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements.
We report two classifications of revenue:
| Software products revenue includes revenue arrangements that consist of tangible products with essential software elements, perpetual right-to-use (RTU) software licenses and sales of industry standard hardware. Software products revenue is supported by customer contracts that generally outline terms and conditions, including those that relate to acceptance of the product. Software products revenue also includes software customizations and feature development for individual customers and training of customers. |
| Maintenance revenue includes support, annual software maintenance agreements and extended hardware warranty arrangements. Revenue from these services is recognized ratably over the service delivery period. |
Cost of Revenue
Our cost of software products revenue consists of payroll-related costs of service personnel, third-party hardware and third-party software licenses and the shipping and installation costs to any of our customers. The costs associated with our RTU software licenses are expensed as incurred in operating costs under research and development.
Our cost of maintenance revenue includes salaries, employee benefits, stock-based compensation and other related expenses. Additionally, hardware and third-party software licenses and services are included.
Gross Profit and Gross Profit Margin
Gross profit is the calculation of total revenue minus total cost of revenue. Our gross profit margin is our gross profit expressed as a percentage of revenue. Our gross profit margin has been and will continue to be affected by a variety of factors, including the mix of customers and types of revenue, cost fluctuations and reduction activities, including technological changes. Additionally, changes in foreign exchange rates may impact gross profit and gross profit margin.
16
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Salaries and personnel costs are the most significant component of each of these expense categories.
Research and Development Expenses. Research and development expenses primarily consist of salaries and personnel costs for research and development employees, including stock-based compensation and bonuses. Additional expenses include costs related to development, quality assurance and testing of new software and enhancement of existing software, consulting, travel and other related overhead such as facility costs.
Additionally, we supplement our own research and development resources with third-party international and domestic subcontractors for software development, documentation, quality assurance and software support. We believe continuing to invest in research and development efforts is essential to maintaining our competitive position. We expect research and development expenses to increase in the foreseeable future as we continue to broaden our product portfolio.
Sales and Marketing Expenses. Sales and marketing expenses consist primarily of salaries and personnel costs for our sales and marketing employees, including stock-based compensation, commissions and bonuses. Additional expenses include attendance at trade shows, marketing programs, consulting, travel and other related overhead. We expect our sales and marketing expenses to increase in the foreseeable future as we further increase the number of our sales and marketing professionals as we continue our geographic expansion and continue to grow our business.
General and Administrative Expenses. General and administrative expenses primarily consist of salary and personnel costs for administration, finance and accounting, legal, information systems and human resources employees, including stock-based compensation and bonuses. Additional expenses include consulting and professional fees, travel, insurance and other corporate expenses and gain or loss on disposal of assets. Expenses related to the acquisition of Airwide Solutions, including the amortization of intangible assets relating to customer relationships and technology, are included.
Operating Results
Operating results are the result of subtracting our total operating expenses from our gross profits. We use operating results to analyze the profitability of our operations without the effects of non-operating income and expenses.
Stock-Based Compensation
We include stock-based compensation as part of cost of revenue and operating expenses in connection with the grant or modification of stock options and other equity awards to our independent directors, employees and consultants. We apply the fair value method in accordance with authoritative guidance for determining the cost of stock-based compensation. The total cost of the grant or modification is measured based on the estimated fair value of the award at the date of grant.
17
The following table presents our stock-based compensation expense resulting from stock options that we recorded in our condensed consolidated statement of operations and comprehensive loss for the periods presented (in thousands):
Three months ended March 31, |
||||||||
2014 | 2013 | |||||||
Cost of revenues |
$ | 78 | $ | | ||||
Research and development |
98 | | ||||||
Sales and marketing |
130 | | ||||||
General and administrative |
311 | 165 | ||||||
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|
|
|
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Total |
$ | 617 | $ | 165 | ||||
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|
Net Interest Expense
Net interest expense consists of the difference between interest income and interest expense. Interest income represents interest received on our cash and cash equivalents. Interest expense is due to commercial loans. See Liquidity and Capital Resources elsewhere in this section.
Income Tax Expense
Income tax expense consists of U.S. federal, state and foreign income taxes. We are required to pay income taxes in certain states and foreign jurisdictions. Historically, we have not been required to pay U.S. federal income taxes due to our accumulated net operating losses. For the three months ended March 31, 2014, we have net operating loss carryforwards available to be utilized in the U.S against future taxable income.
Results of Operations
Three Months Ended March 31, 2014 and 2013
Revenues
Three Months Ended March 31, | Change | |||||||||||||||||||||||
2014 | % of Total Revenue |
2013 | % of Total Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Revenue by type: |
||||||||||||||||||||||||
Software products |
$ | 23,037 | 80.2 | % | $ | 17,727 | 79.0 | % | $ | 5,310 | 30.0 | % | ||||||||||||
Maintenance |
5,692 | 19.8 | % | 4,711 | 21.0 | % | 981 | 20.8 | % | |||||||||||||||
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|
|
|
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|
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Total revenues |
$ | 28,729 | 100.0 | % | $ | 22,438 | 100.0 | % | $ | 6,291 | 28.0 | % | ||||||||||||
Revenue by Geographic Area: |
||||||||||||||||||||||||
Americas |
$ | 13,635 | 47.5 | % | $ | 8,430 | 37.6 | % | $ | 5,205 | 61.7 | % | ||||||||||||
Europe, Middle East and Africa (EMEA) |
12,422 | 43.2 | % | 7,539 | 33.6 | % | 4,883 | 64.8 | % | |||||||||||||||
Asia-Pacific (APAC) |
2,672 | 9.3 | % | 6,469 | 28.8 | % | (3,797 | ) | (58.7 | %) | ||||||||||||||
|
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|
|
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|
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Total revenues |
$ | 28,729 | 100.0 | % | $ | 22,438 | 100.0 | % | $ | 6,291 | 28.0 | % | ||||||||||||
Revenue by Product Group: |
||||||||||||||||||||||||
Voice & Video |
$ | 22,611 | 78.7 | % | $ | 5,329 | 23.7 | % | $ | 17,282 | 324.3 | % | ||||||||||||
Enhanced Messaging |
6,118 | 21.3 | % | 17,109 | 76.3 | % | (10,991 | ) | (64.2 | %) | ||||||||||||||
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|
|
|
|
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|
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|
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Total revenues |
$ | 28,729 | 100.0 | % | $ | 22,438 | 100.0 | % | $ | 6,291 | 28.0 | % |
18
Revenues increased by 28.0%, or $6.3 million, for the three months ended March 31, 2014, compared to the same period in the prior year. Our revenue growth is from our expansion of existing customer relationships, in particular additional sales opportunities for our solutions generated by successful product launches. Software products revenue grew $5.3 million, or 30.0%, to $23.0 million in the three months ended March 31, 2014 from $17.7 million for the same period in 2013. The increased revenues were primarily from additional volume while our prices were stable. Maintenance revenues increased at a slower pace than our software products for the three months ended March 31, 2014, compared to the same period in the prior year, as growth in this revenue type lags behind the increase in software revenues.
Total revenue from the Americas region grew by $5.2 million, or 61.7%, to $13.6 million for the three months ended March 31, 2014 from $8.4 million for same period in 2013. Revenues in the EMEA region increased $4.9 million, or 64.8%, to $12.4 million for the three months ended March 31, 2014 from $7.5 million for same period in 2013. Revenues in the APAC region decreased $3.8 million, or (58.7%), to $2.7 million for the three months ended March 31, 2014 from $6.5 million for same period in 2013. Revenues in the EMEA and Americas regions increased due to strong sales of Voice and Video solutions in both markets. The decrease in the APAC region was primarily due to a large Enhanced Messaging contract recognized in the first quarter of 2013 that was not recurring in 2014.
Revenue from the Voice and Video product group grew by $17.3 million, or 324.3%, to $22.6 million for the three months ended March 31, 2014 from $5.3 million for same period in 2013. Revenues from Voice and Video products increased, as we generated additional sales opportunities for our next-generation solutions through successful product launches with existing customers and our existing customers rolled out our solutions to larger numbers of subscribers. Revenues from Enhanced Messaging products decreased by $11.0 million, or 64.2%, to $6.1 million for the three months ended March 31, 2014 from $17.1 million for same period in 2013. Revenues from Enhanced Messaging products decreased due to non-renewal of some of our legacy products and due to the timing of revenue recognition for a significant order made during the three months ended March 31, 2013 in our APAC region, as noted above.
Cost of Revenue and Gross Profit
Three Months Ended March 31, | Change | |||||||||||||||||||||||
2014 | % of Total Revenue |
2013 | % of Total Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Cost of Revenue |
||||||||||||||||||||||||
Software products |
$ | 9,953 | 78.4 | % | $ | 6,651 | 83.3 | % | $ | 3,302 | 49.6 | % | ||||||||||||
Maintenance |
2,744 | 21.6 | % | 1,330 | 16.7 | % | 1,414 | 106.3 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 12,697 | 100.0 | % | $ | 7,981 | 100.0 | % | $ | 4,716 | 59.1 | % | ||||||||||||
Gross Profit |
||||||||||||||||||||||||
Software products |
$ | 13,084 | 81.6 | % | $ | 11,076 | 76.6 | % | $ | 2,008 | 18.1 | % | ||||||||||||
Maintenance |
2,948 | 18.4 | % | 3,381 | 23.4 | % | (433 | ) | (12.8 | %) | ||||||||||||||
|
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|
|
|
|
|
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Total |
$ | 16,032 | 100.0 | % | $ | 14,457 | 100.0 | % | $ | 1,575 | 10.9 | % |
Our cost of revenue increased $4.7 million, or 59.1%, to $12.7 million for the three months ended March 31, 2014 from $8.0 million for the same period in 2013. Cost of revenue increased due to an increase in our sales volumes, as well as increased operations personnel costs to expand into new markets.
Total gross profit increased $1.6 million, or 10.9%, to $16.0 million for the three months ended March 31, 2014 from $14.5 million for same period in 2013. Gross profit margin decreased to 55.8% for the three months ended March 31, 2014 from 64.4% for same period in 2013. The decrease was primarily due to a greater mix of early phase deployments, which include hardware and lab equipment, which are generally lower margin.
19
Operating Expenses
Three Months Ended March 31, | Change | |||||||||||||||||||||||
2014 | % of Total Revenue |
2013 | % of Total Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Research and Development |
$ | 6,133 | 21.3 | % | $ | 6,122 | 27.3 | % | $ | 11 | 0.2 | % | ||||||||||||
Sales and Marketing |
6,871 | 23.9 | % | 5,041 | 22.5 | % | 1,830 | 36.3 | % | |||||||||||||||
General and Administrative |
5,250 | 18.3 | % | 4,991 | 22.2 | % | 259 | 5.2 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 18,254 | 63.5 | % | $ | 16,154 | 72.0 | % | $ | 2,100 | 13.0 | % |
Research and Development
Research and development expenses were essentially unchanged for the three months ended March 31, 2014, compared to the same period in the prior year.
Sales and Marketing
Sales and marketing costs increased by $1.8 million for the three months ended March 31, 2014, compared to the same period in the prior year. The growth in sales and marketing expense was primarily due to an increase in personnel costs and related expense to further enhance direct selling opportunities and to support sales growth into additional geographic areas.
General and Administrative
General and administrative expenses increased by $0.3 million for the three months ended March 31, 2014, compared to the same period in the prior year. The growth in general and administrative expense was primarily due to an increase in personnel costs and related expenses, driven by a headcount increase to support our growth.
Net Interest Expense
Three Months Ended March 31, | Change | |||||||||||||||||||||||
2014 | % of Total Revenue |
2013 | % of Total Revenue |
Amount | % | |||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Interest Income |
$ | (43 | ) | (0.1 | %) | $ | (5 | ) | 0.0 | % | $ | (38 | ) | 760.0 | % | |||||||||
Interest Expense |
783 | 2.7 | % | 450 | 2.0 | % | 333 | 74.0 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Net Interest Expense |
$ | 740 | 2.8 | % | $ | 445 | 2.0 | % | $ | 295 | 66.3 | % |
Net interest expense increased by $0.3 million for the three months ended March 31, 2014, compared to the same period in the prior year. The increase was attributable to a change in the mix of our debt to a higher average interest rate during the first quarter of 2014 compared to the same period in 2013.
Foreign Exchange
Foreign exchange gain increased by $2.5 million, to a $(0.8) million gain for the three months ended March 31, 2014 compared to a $1.7 million loss for the same period in 2013. This is due to changes in transactional currencies compared to the functional currencies during the respective periods.
20
Liquidity and Capital Resources
We have funded our operations from 2005 to March 31, 2014 primarily with net proceeds from issuances of preferred stock of approximately $105 million, net proceeds from our initial public offering (IPO) of approximately $44.8 million and, to a lesser extent, borrowings under credit facilities.
As of March 31, 2014, our capital resources consisted principally of cash and cash equivalents totaling $33.9 million. Our cash and cash equivalents are comprised primarily of money markets and time deposits.
We restructured our loan arrangement with Silicon Valley Bank during the first quarter of 2014 to reduce our financing costs. We also used a portion of our initial public offering proceeds to repay the $15 million outstanding principal amount under our subordinated loan agreement with Silver Lake Waterman in the first quarter of 2014. Each of these loan arrangements is described below.
Cash continues to be used in operations and we expect that our current loan agreement with Silicon Valley Bank (or refinancings thereof), cash generated from operations and the net proceeds of our IPO will provide cash sufficient to meet our currently anticipated cash requirements for at least the next twelve months.
Our cash flows were as follows:
Three Months Ended March 31, | ||||||||||||
2014 | 2013 | Change | ||||||||||
Cash Provided by (Used in) |
||||||||||||
Operating |
$ | (4,459 | ) | $ | (5,925 | ) | $ | 1,466 | ||||
Investing |
$ | (984 | ) | $ | (913 | ) | $ | (71 | ) | |||
Financing |
$ | 21 | $ | 9,504 | $ | (9,483 | ) |
Operating Activities
Cash flows from operating activities are an additional measure of our overall business performance, as it enables us to analyze our financial performance without the effects of certain non-cash items such as depreciation, amortization and stock-based compensation expense.
Cash flow used in operating activities during the three months ended March 31, 2014 primarily consisted of a net loss of $(4.0) million as well as working capital requirements and other activities of $(0.5) million as business activity accelerated. The decrease in cash used in operating activities during the three months ended March 31, 2014 compared to the same period in 2013 was primarily due to the $1.8 million non-cash loss on early extinguishment of debt from the refinancing of our debt during the first quarter of 2014.
Investing Activities
Our investing activities have consisted primarily of purchases of equipment, including software.
For the three months ended March 31, 2014, net cash used for investing activities was $1.0 million, compared to $0.9 million for the three months ended March 31, 2013. Capital expenditures increased by $0.1 million during the three months ended March 31, 2014 compared to the same period in the prior year.
21
Financing Activities
Our financing activities have consisted primarily of the incurrence and repayment of indebtedness under loan arrangements.
For the three months ended March 31, 2014, net cash provided by financing activities was immaterial and consisted of proceeds from option exercises. The decrease in cash provided by financing activities during the three months ended March 31, 2014 compared to the same period in 2013 was mainly due to a decrease in net borrowings compared to the same period in the prior year.
Operating and Capital Expenditure Requirements
In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our business activities, grow our customer base, implement and enhance our information technology and enterprise resource planning system and operate as a public company. As revenues increase, we expect our accounts receivable balance to increase. Any such increase in accounts receivable may not be completely offset by increases in accounts payable and accrued expenses, which would likely result in greater working capital requirements.
If our available cash balances are insufficient to satisfy our liquidity requirements, we may seek to sell equity or convertible debt securities or enter into additional credit facilities. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of convertible debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all.
Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the section Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on February 21, 2014. We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect.
Our short- and long-term capital requirements will depend on many factors, including the following:
| our development of new products; |
| market acceptance of our products and our competitive position in the marketplace; |
| our ability to generate cash from operations; |
| our ability to control our costs; |
| the emergence of competing or complementary technological developments; |
| the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights or participating in litigation-related activities; and |
| the acquisition of businesses, products and technologies. |
Silicon Valley Bank Loan
On March 6, 2014 we entered into an Amended and Restated Loan Agreement with SVB to replace our $22.5 million Senior Loan facility with SVB. The Amended and Restated Loan Agreement includes a five-year term loan of $25.0 million (Term Loan), a $15.0 million secured revolving line of credit (Revolver) and a $5 million secured line for letters of credit, foreign exchange and cash management services. The Term Loan has an initial floating interest rate of 2.75% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. At March 31, 2014, the interest rate was 6.0%. After the achievement of the one of the two performance triggers described in the following sentence, the interest rate will be reduced to 2.25% above the U.S. prime rate; after the achievement of the second performance trigger the interest rate will be further reduced to 1.75% above the U.S. prime rate. The performance triggers are the following: (i) our achievement, on a consolidated basis, of positive EBITDA (as defined in the loan agreement) for two consecutive fiscal quarters, and (ii) the completion of an equity offering resulting in net proceeds to the Company of at least $50 million. The Term Loan provides for monthly payments of interest only until April 1, 2015; thereafter we are required to repay the outstanding principal amount in 48 monthly installments. The Term Loan has a maturity of March 1, 2019. If we prepay the Term Loan within one year of the Amended and Restated Loan Agreement, we will have to pay a prepayment premium of $250,000; thereafter, the Term Loan may be prepaid without penalty.
22
Under the Revolver, we may draw up to 80% of eligible domestic trade receivables, 70% of eligible foreign trade receivables and 35% of eligible accrued but unbilled accounts up to a maximum of $15.0 million. The Revolver has a three-year term and bears interest at a floating interest rate of 1% above the U.S. prime rate, subject to a minimum interest rate of 4.25% and is secured by substantially all of our assets, including intellectual property. We are also required to pay an unused facility fee, monthly in arrears, of 0.25% per annum of the unused amount of the Revolver. The Revolver may be prepaid at any time without penalty. As of March 31, 2014, we had no borrowings outstanding on our Revolver.
The Amended and Restated Loan Agreement requires us to maintain compliance with the following financial covenants:
| A minimum liquidity ratio defined as the sum of our consolidated unrestricted cash and cash equivalents plus eligible net accounts receivable (as defined in the Amended and Restated Loan Agreement) divided by the amount of outstanding obligations to the lender of 1.35, as measured at the end of each calendar month; |
| A minimum two-quarter rolling EBITDA as follows: |
| $(10.0) million for the quarter ending March 31, 2014; |
| $(7.5) million for the quarters ending June 30, 2014 and September 30, 2014; |
| $(5.0) million for the quarter ending December 31, 2014; |
| $(2.5) million for the quarter ending March 31, 2015; |
| $(1.25) million for the quarter ending June 30, 2015; and |
| $0 for each quarter thereafter. |
EBITDA as defined in the Amended and Restated Loan Agreement is permitted to exclude non-cash stock compensation expense, non-cash foreign currency translation expense and other non-cash adjustments made in accordance with GAAP.
The Amended and Restated Loan Agreement contains certain restrictive covenants that limit our ability to, among other things, incur liens on the our assets or incur additional debt, pay dividends, make investments or engage in acquisitions, and that prevent dissolution, liquidation, merger or a sale of our assets without the prior consent of SVB. The agreement also contains usual and customary events of default, the occurrence of which may result in all outstanding amounts under the loan agreement becoming due and payable immediately, and also imposes an interest penalty of an additional 5% above the otherwise applicable interest rate at any time when an event of default is continuing. As of March 31, 2014, we were in compliance with all covenants under the Amended and Restated Agreement.
23
Contractual Obligations and Commercial Commitments
The following table discloses aggregate information about our contractual obligations and periods in which payments are due as of March 31, 2014:
Payments Due By Period | ||||||||||||||||||||
Total | Less Than 1 Year |
1-3 Years | 3-5 Years | More Than 5 Years |
||||||||||||||||
Operating leases |
$ | 6,165 | $ | 1,842 | $ | 2,788 | $ | 1,486 | $ | 49 | ||||||||||
Silicon Valley Bank term loan (1) |
25,000 | | 12,500 | 12,500 | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 31,165 | $ | 1,842 | $ | 15,288 | $ | 13,986 | $ | 49 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | The Silicon Valley Bank term loan matures in March 2019. The initial interest is payable at a floating rate of 2.75% above the U.S prime rate, subject to a minimum interest rate of 4.25%, which was 6.0% at March 31, 2014. We are required to make monthly interest-only payments through March 2015. |
Operating leases relate to our office leases for various locations across the globe. We have several office leases expiring at different times through 2019. Our principal office leases are in Richardson, Texas, Reading, UK, Bangalore, India and Shanghai, China.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Non-GAAP Financial Measures
In addition to our GAAP operating results, we use certain non-GAAP financial measures when planning, monitoring, and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax position, depreciation, amortization, stock-based compensation expense and certain other expenses. While we believe that these non-GAAP financial measures are useful in evaluating our business, this information should be considered as supplemental in nature and is not meant as a substitute for revenue recognized in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces its usefulness as a comparative measure. We believe that these non-GAAP measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.
The presentation of non-GAAP net loss, non-GAAP net loss per share, non-GAAP gross profit, non-GAAP operating loss and other non-GAAP financial measures in this report is not meant to be a substitute for net loss, net loss per share, gross profit, operating loss or other financial measures presented in accordance with GAAP, but rather should be evaluated in conjunction with such data. Our definition of non-GAAP net loss, non-GAAP net loss per share, non-GAAP gross profit, non-GAAP operating loss and other non-GAAP financial measures may differ from similarly titled non-GAAP measures used by other companies and may differ from period to period. In reporting non-GAAP measures in the future, we may make other adjustments for expenses and gains we do not consider reflective of core operating performance in a particular period and may modify non-GAAP net loss, non-GAAP net loss per share, non-GAAP gross profit, non-GAAP operating loss and such other non-GAAP measures by excluding these expenses and gains.
24
Non-GAAP gross profit, software products gross profit and maintenance gross profit. We define non-GAAP gross profit as gross profit plus stock-based compensation expense and amortization and depreciation expense. We consider non-GAAP gross profit to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses, allowing for a comparison of our sales margins over multiple periods.
Non-GAAP operating expenses, research and development expense, sales and marketing expense, and general and administrative expense. We define non-GAAP operating expenses as operating expense plus stock-based compensation expense and amortization and depreciation expense allocated to research and development, sales and marketing and general and administrative expenses. Similarly, we define non-GAAP research and development, sales and marketing and general and administrative expenses as the relevant GAAP measure plus stock-based compensation expense and amortization and depreciation expense allocated to the particular expense item.
Non-GAAP operating loss. We define non-GAAP operating loss as operating loss plus stock-based compensation expense and amortization and depreciation expense. We consider non-GAAP operating loss to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so management and investors can compare our core business operating results over multiple periods.
Non-GAAP net loss. We define non-GAAP net loss as non-GAAP operating loss after interest and taxes. We consider non-GAAP net loss to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses and foreign exchange gains and losses that are shown on the consolidated statement of operations and comprehensive loss. Excluding foreign exchange gains and losses helps management and investors compare our results to companies without such charges and over multiple periods, as foreign exchange gain or loss is difficult to predict and can vary greatly over multiple periods.
Non-GAAP net loss per share. We define non-GAAP net loss per share as non-GAAP net income divided by the non-GAAP weighted average common shares outstanding, which assumes the conversion of preferred shares at the beginning of the period.
25
Mavenir Systems, Inc. and Subsidiaries
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
(in thousands)
(unaudited)
Three Months Ended March 31, |
||||||||
2014 | 2013 | |||||||
Software Products |
||||||||
Revenue |
$ | 23,037 | $ | 17,727 | ||||
Cost of Revenue |
9,953 | 6,651 | ||||||
Amortization and Depreciation |
234 | 116 | ||||||
Stock Based Compensation |
78 | | ||||||
Gross Profit (GAAP) |
13,084 | 11,076 | ||||||
Gross Profit (Non-GAAP) |
13,396 | 11,192 | ||||||
Maintenance |
||||||||
Revenue |
5,692 | 4,711 | ||||||
Cost of Revenue |
2,744 | 1,330 | ||||||
Gross Profit (GAAP) |
2,948 | 3,381 | ||||||
Gross Profit (Non-GAAP) |
2,948 | 3,381 | ||||||
Total Revenue |
28,729 | 22,438 | ||||||
Total Gross Profit (GAAP) |
16,032 | 14,457 | ||||||
Gross Profit Margin % (GAAP) |
55.8 | % | 64.4 | % | ||||
Gross Profit (Non-GAAP) |
16,344 | 14,573 | ||||||
Gross Profit Margin % (Non-GAAP) |
56.9 | % | 64.9 | % | ||||
Operations Expenses |
||||||||
R&D (GAAP) |
6,133 | 6,122 | ||||||
Amortization and Depreciation |
574 | 233 | ||||||
Stock Based Compensation |
98 | | ||||||
|
|
|
|
|||||
R&D (Non-GAAP) |
5,461 | 5,889 | ||||||
S&M (GAAP) |
6,871 | 5,041 | ||||||
Amortization and Depreciation |
| | ||||||
Stock Based Compensation |
130 | | ||||||
|
|
|
|
|||||
S&M (Non-GAAP) |
6,741 | 5,041 | ||||||
G&A (GAAP) |
5,250 | 4,991 | ||||||
Amortization and Depreciation |
556 | 497 | ||||||
Stock Based Compensation |
311 | 165 | ||||||
|
|
|
|
|||||
G&A (Non-GAAP) |
4,383 | 4,329 | ||||||
Total Operating Expenses (GAAP) |
18,254 | 16,154 | ||||||
Operating Expenses (Non-GAAP) |
16,585 | 15,259 | ||||||
Operating Loss (GAAP) |
$ | (2,222 | ) | $ | (1,697 | ) | ||
Net Interest |
740 | 445 | ||||||
Loss on early extinguishment of debt |
1,783 | | ||||||
Foreign exchange (gain)/loss |
(795 | ) | 1,732 | |||||
Taxes |
95 | 420 | ||||||
|
|
|
|
|||||
Net Loss (GAAP) |
$ | (4,045 | ) | $ | (4,294 | ) | ||
Operating Loss (Non-GAAP) |
$ | (241 | ) | $ | (686 | ) | ||
Net Interest |
740 | 445 | ||||||
Taxes |
95 | 420 | ||||||
|
|
|
|
|||||
Net Loss (Non-GAAP) |
$ | (1,076 | ) | $ | (1,551 | ) |
26
Mavenir Systems, Inc. and Subsidiaries
Non-GAAP Net Loss Per Share
(all shares are weighted average outstanding for period presented)
(In thousands, except share and per share data)
(Unaudited)
Three months ended March 31, | ||||||||
2014 | 2013 | |||||||
GAAP weighted average common shares outstanding |
23,429,820 | 1,338,211 | ||||||
Conversion of preferred shares * |
| 16,452,467 | ||||||
|
|
|
|
|||||
Adjusted weighted average common shares outstanding |
23,429,820 | 17,790,678 | ||||||
Non-GAAP net loss |
$ | (1,076 | ) | $ | (1,551 | ) | ||
Non-GAAP net loss per share |
$ | (0.05 | ) | $ | (0.09 | ) |
* | Assumes conversion of preferred shares at beginning of period |
Implications of Being an Emerging Growth Company
As an emerging growth company, as defined under the Jumpstart Our Business Startups Act of 2012 (JOBS Act), we are subject to certain reduced reporting requirements as a public company. For example, until we are no longer an emerging growth company, we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act and we will be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the independent registered public accounting firms report on financial statements. We could remain an emerging growth company until as late as December 31, 2018 (the fiscal year-end following the fifth anniversary of our IPO).
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to inflation, changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into interest rate or exchange rate hedging arrangements to manage the risks described below.
Inflation Risk
We may be exposed to inflation risk in that some of our international operations, particularly in developing countries, may be subject to increased costs as a result of higher inflation. Because we compete with other solutions providers on a global basis, our customers would not expect, and may not be willing, to pay for any cost increases from inflation. Therefore, our future margins could be impacted. Where competitively possible we attempt to offset some of this risk with contracted price adjustments.
Interest Rate Risk
Cash held in our operating business units is generally available for local operations. Most of our cash is retained by our U.S. business. The majority of these funds are in low to zero interest bank accounts. Our borrowings under our senior loan with Silicon Valley Bank are at variable rates based on the U.S. prime rate and, as a result, increases in interest rates would generally result in increased interest expense on outstanding borrowings. A one-percent increase above the minimum floor calculation would increase our interest expense by as much as $0.2 million if the entire facility were drawn throughout the year.
27
Foreign Currency Exchange Risk
We have significant international operations with subsidiaries and operations in eight countries outside of the U.S. and as such we face exposure to adverse movements in foreign currency exchange rates. While these exposures may change over time as business practices evolve, adverse movements in foreign currency exchange rates may have a material adverse impact on our financial results. Our primary exposures have been related to non-U.S. dollar-denominated net operating income or net operating losses. As a consequence, our results of operations would generally be adversely affected by an increase in the value of the U.S. dollar relative to the currencies of the countries in which we are profitable and a decrease in the value of the U.S. dollar relative to the currencies of the countries in which we are not profitable. However, based on the locations of our international operations and the amount of our operating results denominated in foreign currencies, we would not expect a 10% change in the value of the U.S. dollar from rates as of March 31, 2014, to have a material effect on our financial position or results of operations. If and when our international business grows substantially, relative to our U.S. business, the net exposure is likely to increase as will the impact of foreign exchange rate movements.
The functional currency for each of our non-U.S. subsidiaries is the applicable local currency. Assets and liabilities of a non-U.S. subsidiary are translated to U.S. dollars at period end exchange rates. Income and expense items are translated at the rates of exchange prevailing during the year. The adjustments resulting from translating the financial statements of the non-U.S. subsidiary are reflected in comprehensive income or loss.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
We recorded a $0.8 million net transaction gain for the three months ended March 31, 2014, compared to a loss of $1.7 million for the same period in 2013.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information is accumulated and communicated to management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
As of March 31, 2014, management carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon the evaluation, and due to the presence of the material weaknesses in internal control over financial reporting described in our Annual Report on Form 10-K for the year ended December 31, 2013, our chief executive officer and chief financial officer concluded that, as of March 31, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level.
Previously Reported Material Weakness
Our management concluded that our internal control over financial reporting was ineffective as of December 31, 2013, because a material weakness existed in our internal control over financial reporting related to the period-end financial close and reporting process, which resulted in the failure to record certain entries and adjustments during the year-end closing and consolidation process. Specifically, this material weakness was the result of the following:
28
a) | the ineffective design and maintenance of controls for the review, supervision and monitoring of our accounting operations throughout the organization and for monitoring and evaluating the adequacy of our internal control over financial reporting; |
b) | ineffective controls over the preparation, review and approval of all financial statement account reconciliations; and |
c) | ineffective controls over the review, approval, documentation and recording of our journal entries. Specifically, effective controls were not designed and in place to ensure the existence, accuracy and completeness of the journal entries recorded, both, recurring and non-recurring. |
As a result of this material weakness, our control environment is ineffective to ensure that the design and execution of our controls have consistently resulted in effective and timely review of our financial statements and supervision by appropriate individuals.
Under standards established by the Public Company Accounting Oversight Board, 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 and corrected on a timely basis.
As part of ongoing efforts to improve the design and operating effectiveness of our internal control environment and remediate this material weakness over financial reporting, we have provided training on how to document reviews to a level of precision sufficient to reduce the risk of error to an acceptable level. We are currently implementing a system that will interface with our general ledger and allow us to set up automated rules to ensure all accounts that meet the criteria are reconciled and journal entries are reviewed and approved in accordance with our policy. We currently estimate the reconciliation module to be fully implemented and in place by June 30, 2014 and the journal entry module to be completed in the last half of 2014. Additionally, we have begun the documentation and initial testing of our internal control over financial reporting. Management expects remediation efforts to continue throughout 2014 to continue to improve our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we, our customers and our competitors are subject to various litigation and claims arising in the ordinary course of business. The software and communications infrastructure industries are characterized by frequent litigation and claims, including claims regarding patent and other intellectual property rights, claims for damages or indemnification for alleged breach under commercial supply or service contracts and claims regarding alleged improper hiring practices. From time to time we may be involved in various legal proceedings or claims but we are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition.
There have been no material changes in risk factors from those disclosed in Part 1, Item 1A, Risk Factors of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which was filed with the Securities and Exchange Commission, or SEC, on February 21, 2014.
29
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) Unregistered Sales of Equity Securities
During the three months ended March 31, 2014, we issued 44,340 shares of our common stock to Silicon Valley Bank (SVB) upon the exercise in full of a warrant held by SVB. The warrant gave SVB the right to purchase up to 64,286 shares of our common stock at $5.11 per share. The warrant was exercised on a cashless basis pursuant to the terms of the agreement with SVB. The warrant was exercised in full and is no longer outstanding.
The shares of common stock were issued pursuant to exemptions from registration under Section 3(a)(9) and Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act), as a transaction by an issuer involving an exchange of securities for no additional consideration and not involving any public offering. The shares of common stock issued to SVB upon the exercise of the warrant have not been registered under the Securities Act and may not be offered or sold in the United States in the absence of an effective registration statement or an exemption from the registration requirements under the Securities Act.
(b) Use of Proceeds from Public Offering of Common Stock
In November 2013, we closed our IPO, in which we sold 5,320,292 shares of common stock and certain selling stockholders sold 129,708 shares of common stock at a price to the public of $10.00 per share, before underwriting discounts and commissions. The aggregate offering price for shares sold in the offering was approximately $53.2 million. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-191563), which was declared effective by the SEC on November 5, 2013 and a registration statement on Form S-1 (File No. 333-192148), which became automatically effective on November 6, 2013 pursuant to Rule 462(b) under the Securities Act. The offering commenced as of November 6, 2013 and did not terminate before all of the securities registered under the registration statements were sold. Morgan Stanley, BofA, Merrill Lynch, Deutsche Bank Securities and Needham & Company acted as the underwriters.
We raised approximately $44.8 million in net proceeds after deducting underwriting discounts and commissions of approximately $3.8 million and other estimated offering expenses of approximately $6.1 million. We did not receive any proceeds from the sale of shares by the selling stockholders in the IPO. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on November 7, 2013 pursuant to Rule 424(b) of the Securities Act. We invested the funds received in money market funds.
On November 19, 2013, we repaid $10.0 million outstanding under our senior loan with SVB. On March 5, 2014, we repaid the full $15.0 million amount outstanding under our subordinated loan agreement with Silver Lake Waterman Fund (Silver Lake). Outside of this repayment to Silver Lake, there has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on November 7, 2013 pursuant to Rule 424(b).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
30
None.
(a) | The following exhibits are filed as a part of this report: |
Incorporated by Reference | ||||||||||||||||||||||
Exhibit Number |
Exhibit Description |
Form | File No. | Date of First Filing |
Exhibit Number |
Provided Herewith |
||||||||||||||||
10.1 |
Amended and Restated Executive Employment Agreement, dated December 18, 2012, between the Registrant and Ashok Khuntia. | X | ||||||||||||||||||||
10.2 |
Amended and Restated Loan and Security Agreement, dated March 6, 2014 by and among the Registrant, certain subsidiaries thereof and Silicon Valley Bank. | 8-K | 001-36171 | 3/10/2014 | 10.1 | |||||||||||||||||
10.3 |
Amended and Restated Employee Stock Purchase Plan. | X | ||||||||||||||||||||
31.1 |
Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | | | | | X | ||||||||||||||||
31.2 |
Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | | | | | X | ||||||||||||||||
32.1* |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | | | | | X | ||||||||||||||||
32.2* |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | | | | | X | ||||||||||||||||
101** |
Condensed Consolidated financial statements from the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2014, formatted in XBRL. | | | | | X |
* | This certification is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference. |
** | The following condensed consolidated financial statements from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014, formatted in XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. |
In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
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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 thereunto duly authorized.
Dated: May 7, 2014
Mavenir Systems, Inc. | ||
By | /s/ Terry Hungle | |
Terry Hungle | ||
Chief Financial Officer | ||
Principal financial officer and duly authorized signatory |
32
EXHIBIT INDEX
Incorporated by Reference | ||||||||||||||||||||||
Exhibit Number |
Exhibit Description |
Form | File No. | Date of First Filing |
Exhibit Number |
Provided Herewith |
||||||||||||||||
10.1 |
Amended and Restated Executive Employment Agreement, dated December 18, 2012, between the Registrant and Ashok Khuntia. | X | ||||||||||||||||||||
10.2 |
Amended and Restated Loan and Security Agreement, dated March 6, 2014 by and among the Registrant, certain subsidiaries thereof and Silicon Valley Bank. | 8-K | 001-36171 | 3/10/2014 | 10.1 | |||||||||||||||||
10.3 |
Amended and Restated Employee Stock Purchase Plan. | X | ||||||||||||||||||||
31.1 |
Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | | | | | X | ||||||||||||||||
31.2 |
Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a). | | | | | X | ||||||||||||||||
32.1* |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | | | | | X | ||||||||||||||||
32.2* |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b). | | | | | X | ||||||||||||||||
101** |
Condensed Consolidated financial statements from the Companys Quarterly Report on Form 10-Q for the three months ended March 31, 2014, formatted in XBRL. | | | | | X |
* | This certification is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference. |
** | The following condensed consolidated financial statements from the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014, formatted in XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Loss, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. |
In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
33
Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the Agreement) is made as of the 14th day of December, 2012 between Mavenir Systems, Inc., a Delaware corporation (the Company), and Ashok Khuntia, an individual resident of the State of Texas (Executive).
1. Employment; Duties; Full Time Employment. The Company hereby employs Executive, and Executive hereby accepts employment, as Vice President, Engineering and Operations Americas of the Company. In such capacity, Executive shall perform such executive duties and exercise such powers for the Company and its subsidiaries as the Chief Executive Officer and President of the Company may assign to or vest in Executive from time to time and, as such, from and after the date hereof shall report directly to and shall be subject to the direction of the Companys Chief Executive Officer and President. Executive covenants and agrees that, at all times during Executives employment, Executive shall devote Executives full business time and efforts to Executives duties as an employee of the Company and that Executive will not, directly or indirectly, engage or participate in any other business or professional activities during Executives employment, other than activities for non-profit organizations that do not interfere or conflict with Executives obligations hereunder and such other activities approved by the Board of Directors of the Company from time to time.
2. At Will Employment. The Company agrees to employ Executive, and Executive agrees to serve the Company, on an at will basis, which means that either the Company or Executive may terminate Executives employment with the Company at any time and for any or no reason, as provided in and subject to Sections 7 and 8 below.
3. Compensation. During Executives employment, the Company shall pay to Executive the following compensation:
(a) Base Salary. The Company shall pay Executive a base salary (Base Salary) at the rate of $15,833.33 per month (annualized to $190,000), less applicable withholding taxes, payable in accordance with the Companys normal payroll practices. The Base Salary may be increased by the Board of Directors, or a duly authorized committee thereof, in its sole discretion. In addition, the Board of Directors, or a duly authorized committee thereof, may decrease the Base Salary in the event that the Board or such committee determines that financial exigencies require such decrease, provided that the compensation of all executives of the Company is also reduced at the same time in a substantially commensurate manner. Any increase or decrease in Base Salary (together with the then existing Base Salary) shall serve as the Base Salary for future employment under this Agreement.
(b) Equity Compensation. Executive may be granted stock options, stock appreciation rights, restricted stock units, restricted stock or other stock- or performance-based equity awards (each, an Award), as determined from time to time in the discretion of the Companys Board of Directors or a duly authorized committee thereof, under the Companys Amended and Restated 2005 Stock Plan or any other equity incentive plan that may be adopted by the Companys Board of Directors (each, an Equity Plan). The terms of any such Award, including the vesting schedule, if any, will be set forth in an award agreement (an Award
Agreement) in the form determined by the Companys Board of Directors or a duly authorized committee thereof. The vesting schedule of any such Awards shall be subject to additional acceleration as described in Section 7 of this Agreement, unless otherwise set forth in the applicable Award Agreement.
4. Other Compensation and Benefits. In addition to the compensation specified in Section 3, the Company shall provide the following to Executive:
(a) Incentive Plan Participation. Executive shall be eligible to participate in the Companys management incentive plan, executive bonus plan or any other such incentive plan (each, a Performance Incentive Plan) to the extent determined by the Companys Board of Directors or a duly authorized committee thereof; provided however, that any such participation and payments shall be subject in all respects to the terms of such Performance Incentive Plan and the meeting of performance metrics as determined by the Companys Board of Directors or a duly authorized committee thereof.
(b) Benefits. During Executives employment, Executive shall be entitled to (i) vacation in accordance with the Companys vacation policy, to be taken in accordance with such policy, (ii) holidays and sick leave as made generally available to employees of the Company, and (iii) subject to eligibility therefor, the right to participate in any profit sharing plan, retirement plan, 401(k) plan, group life insurance plan and/or other insurance plan or medical expense plan or dental expense plan maintained by the Company for its senior executives generally and, if applicable, their family members.
(c) Directors and Officers Insurance. Executive shall be covered by the Companys Directors and Officers Insurance to the extent that the Company currently has or in the future obtains such insurance, for so long as Executive remains an executive officer or director of the Company.
5. Business Expenses. The Company shall reimburse Executive for all reasonable and necessary business and travel expenses incurred by Executive in the performance of Executives duties under this Agreement. The determination of reasonable and necessary shall be made in the sole discretion of the Board. Such expenses shall be reimbursed in accordance with the Companys business expense guidelines, limits and procedures and upon presentation of proper expense vouchers or receipts; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit.
6. Termination on Death or Disability. Executives employment will terminate automatically upon Executives death or, upon thirty (30) days prior written notice from the Company, in the event of Disability. For purposes of this Section 6, Disability means that Executive, at the time notice is given, has been unable to substantially perform Executives duties under this Agreement for not less than sixty (60) work days within a six (6) consecutive month period as a result of Executives incapacity due to a physical or mental condition and, if reasonable accommodation is required by law, after reasonable accommodation. Upon any termination for death or Disability, Executive shall be entitled to receive (i) Executives Base
Salary through the effective date of termination, (ii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iii) the right to exercise stock options, if any, subject to and in accordance with the terms of the respective options, (iv) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (v) no other severance or benefits of any kind.
7. Involuntary Termination Without Cause.
(a) Effect of Termination. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign, in each case at any time, subject to Section 8(b); provided, that if Executive is terminated by the Company involuntarily without Cause, then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned and unpaid under a Performance Incentive Plan through the date of termination, except and only to the extent that any such Performance Incentive Plan specifically provides otherwise;
(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards under an Equity Plan that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the six (6) month period following the date of such termination shall vest effective as of the date of termination, except and only to the extent that any Award Agreement specifically provides otherwise;
(iii) continuing severance pay at a rate equal to 100% of Executives Base Salary, as then in effect (less applicable withholding taxes), for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Companys normal payroll practices (subject to Sections 7(c) and 7(d));
(iv) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
(v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(vi) no other severance or benefits of any kind.
(b) Effect of Termination following Change of Control. The Company shall be entitled to terminate Executive with or without notice and with or without Cause (as defined below) and Executive shall be entitled to resign, in each case at any time subject to Section 8(b); provided, that if Executive is terminated by the Company involuntarily without Cause upon or after a Change of Control, then Executive shall be entitled to receive:
(i) the Base Salary through the date of termination and any compensation earned and unpaid under a Performance Incentive Plan through the date of termination, except and only to the extent that any such Performance Incentive Plan specifically provides otherwise;
(ii) accelerated vesting with respect to all Awards under an Equity Plan held by Executive, such that all Awards under an Equity Plan that would vest based solely on the passage of time (rather than vesting based on performance conditions) and that would vest within the twelve (12) month period following the date of termination shall vest effective as of the date of such termination, except and only to the extent that any Award Agreement specifically provides otherwise, provided, that if a particular Award Agreement has a definition of Change of Control or Change in Control that differs from the definition of Change of Control set forth in this Agreement, such other definition shall apply solely with respect to acceleration of vesting of such Award pursuant to this Section 7(b)(ii);
(iii) continuing severance pay at a rate equal to 100% of Executives Base Salary, as then in effect (less applicable withholding taxes), for a period of six (6) months from the date of such termination, to be paid periodically in accordance with the Companys normal payroll practices (subject to Sections 7(c) and 7(d));
(iv) reimbursement of the health and dental care continuation premiums for Executive and Executives dependents incurred by Executive to effect continuation of health and dental insurance coverage for Executive and Executives dependents on the same basis as active employees, for a period of six (6) months from the date of such termination, to the extent that Executive is eligible for and elects continuation coverage under COBRA; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit;
(v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed; provided however, in no event shall reimbursement of an eligible expense hereunder be made later than the last day of Executives taxable year following the taxable year in which the expense was incurred and the right to reimbursement hereunder may not be exchanged for any other benefit; and
(vi) no other severance or benefits of any kind.
(c) Section 409A. Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the Code), and the final regulations and any guidance promulgated thereunder (Section 409A) (together, the Deferred Payments) will be paid or otherwise provided until Executive has a separation from service within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a separation from service within the meaning of Section 409A. If Executive is a specified employee within the meaning of Section 409A at the time of Executives termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executives separation from service will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executives separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executives separation from service but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executives death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A. References in this Agreement to termination of Executives employment shall mean termination of Executives employment with the Company and all entities required to be aggregated with the Company and treated as one employer under Section 414(b) or (c) of the Code under circumstances that give rise to a separation from service within the meaning given to that term under Section 409A.
(d) Conditions Precedent. Any severance payments (other than payment of Base Salary pursuant to Section 7), vesting and/or benefits contemplated by Section 7 above are conditional on Executive (i) continuing to comply with all of the provisions of Section 9 below and the terms of the Confidentiality Agreement (as defined below), and (ii) signing and not revoking a separation agreement and release of claims providing for a release of all claims relating to Executives employment and/or this Agreement against the Company or its successor, its subsidiaries and parent company and their respective directors, officers and stockholders, excluding claims for payments and/or benefits the Company is required to pay to Executive that have not been made or delivered in accordance with terms of a written agreement between the Company and Executive or as required by law, in a form satisfactory to the Company, its parent company or its successor (the Release); provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date or such earlier date required by the Release (such deadline, the Release Deadline). If the Release does not become effective by the Release Deadline, Executive will forfeit any rights to severance or
benefits under this Section 7 or elsewhere in this Agreement. Any severance payments or other benefits under this Agreement that would be considered Deferred Payments (as defined in Section 7(c)) will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executives separation from service, or, if later, such time as required by Section 7(c). Except as required by Section 7(c), any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executives separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executives separation from service and the remaining payments will be made as provided in this Agreement, unless subject to the 6-month payment delay described herein. Any severance payments under this Agreement that would not be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the first payroll date that occurs on or after the date the Release becomes effective and any installment payments that would have been made to Executive during the period prior to the date the Release becomes effective following Executives separation from service but for the preceding sentence will be paid to Executive on the first payroll date that occurs on or after the date the Release becomes effective.
(e) Definitions.
(i) Cause. For purposes of this Agreement, Cause shall mean: (A) Executives continued failure to substantially perform the principal duties and obligations of Executives position with the Company (other than any such failure resulting from incapacity due to physical or mental illness), which failure is not remedied within ten (10) business days after receipt of written notice from the Company; (B) any willful act of personal dishonesty, fraud or misrepresentation taken by Executive which was intended to result in substantial gain or personal enrichment of Executive at the expense of the Company; (C) Executives willful violation of a federal or state law or regulation applicable to the Companys business which violation was or is reasonably likely to be materially and demonstrably injurious to the Company; (D) Executives conviction of a felony or a plea of nolo contendere to a felony charge under the laws of the United States or any State; or (E) Executives willful breach of the terms of Section 9 of this Agreement or Executives Confidentiality Agreement. For the purposes of this subsection 7(e)(i), no act or failure to act shall be considered willful unless done or omitted to be done in bad faith and without reasonable belief that the act or omission was in or not opposed to the best interests of the Company. The Board of Directors (excluding Executive if Executive is at such time a member of the Board) shall make all determinations relating to termination, including without limitation any determination regarding Cause, pursuant to this subsection 7(e)(i).
(ii) Change of Control. For the purposes of this Agreement, Change of Control shall mean a change in ownership or control of the Company effected through any of the following transactions:
(A) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended (the Exchange Act)
(other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(B) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(C) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the Exchange Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(D) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (x) have been Board members continuously since the beginning of such period or (y) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (x) who were still in office at the time the Board approved such election or nomination.
Notwithstanding the foregoing, solely with respect to any Award that is subject to Section 409A and payable upon a Change of Control, the term Change of Control shall mean an event described in one or more of the foregoing provisions of this definition, but only if it also constitutes a change of control event within the meaning of Treas. Reg. §1.409A-3(i)(5).
8. Involuntary Termination for Cause; Resignation.
(a) Effectiveness. Notwithstanding any other provision of this Agreement, the Company may terminate Executives employment at any time for Cause, and Executive may at any time voluntarily resign. Termination for Cause shall be effective on the date the Company gives notice to Executive of such termination in accordance with this Agreement unless otherwise agreed by the parties. Resignation by Executive shall be effective on the date Executive gives notice to the Company of such resignation in accordance with this Agreement unless otherwise agreed by the parties.
(b) Effect of Termination. In the case of the Companys termination of Executives employment for Cause or Executives resignation from Executives employment, Executive shall be entitled to receive (i) Base Salary through the effective date of termination of employment, (ii) any benefits payable in connection with such a termination under any standard severance program of the Company then in effect and published in writing, (iii) the right to continue health care benefits under COBRA, at Executives cost, to the extent required and available by law, (iv) the right to exercise any stock options subject to and in accordance with the terms of the respective options, (v) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 5 above, but for which Executive has not yet been reimbursed, and (vi) no other severance or benefits of any kind provided, however, in the event that Executive shall fail to give at least two (2) months notice to the Company prior to Executives resignation, Executive shall be deemed no longer a Service Provider under the amended and restated 2005 Stock Plan (or any similar term under a successor Equity Plan) and the vesting on Executives Awards shall be deemed to have ceased, on the date that is two (2) months prior to the effective date of his termination of employment.
9. Company Matters; Restrictive Covenants.
(a) Proprietary Information and Inventions. Executive has signed an Employee Proprietary Information Agreement (Confidentiality Agreement) in the form required to be executed by each employee of the Company.
(b) Confidential Information.
(i) Company Information. Executive agrees at all times during Executives employment and thereafter to hold in strictest confidence, and not to use, except for the benefit of the Company, any of the Companys Confidential Information; or disclose to any person, firm or corporation any of the Companys Confidential Information except as authorized in writing by the Companys Board of Directors or, if expressly authorized by the Companys management, pursuant to a written non-disclosure agreement that sufficiently protects the Confidential Information. Executive understands that Confidential Information means any information that relates to the Companys actual or anticipated business or research and development, technical data, trade secrets or know-how, including, but not limited to, research, product plans or other information regarding the Companys products or services and markets therefor, customer lists and customers (including, but not limited to, the Companys customers on whom Executive called or with whom Executive became acquainted during the term of Executives employment), software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances or other business information. Executive further understands that Confidential Information does not include any of the foregoing items that is or becomes publicly known through no wrongful act or omission of Executive or of others who were under confidentiality obligations as to the item or items involved or improvements or new versions thereof.
(ii) Provision of Confidential Information. Prior to the execution of this Agreement the Company has provided, and following the execution of this Agreement, the Company agrees to continue to provide, Executive with Confidential Information regarding the Company that enabled and will continue to enable Executive to optimize the performance of Executives duties to the Company.
(c) Ventures. If, during Executives employment, Executive is engaged in or associated with the planning or implementing of any project, program or venture involving the Company and any third parties, all rights in such project, program or venture shall belong to the Company (or the third party, to the extent provided in any agreement between the Company and the third party). Except as formally approved by the Company, Executive shall not be entitled to any interest in such project, program or venture or to any commission, finders fee or other compensation in connection therewith other than the salary or other compensation to be paid to Executive as provided in this Agreement.
(d) Non-Solicitation.
(i) Non-Solicitation of Employees. During employment and for a period of twelve (12) months following the end of employment, Executive will not (directly or indirectly, on behalf of Executive or any third party) hire any employee, contractor or consultant of the Company or solicit, induce, recruit or encourage any of the Companys employees, contractors or consultants to leave their employment or terminate their relationship with the Company.
(ii) Non-Solicitation of Clients and Prospective Clients. During employment and for a period of twelve (12) months following the end of employment for any reason, Executive agrees to abide by the following restrictions:
(A) Executive shall not interfere with existing client relationships of the Company (i.e., clients for which at least one project has been conducted in the last two years), and shall not solicit or attempt to take away any business of the Company that is either under way or about to begin at the termination of Executives employment.
(B) Executive shall not interfere or compete in any way with any proposal efforts of the Company already in progress (that is, a proposal sent to or being then currently developed for a specific client or clients, or contemplated to be submitted to a specific client or clients by the Company within twelve (12) months) at the end of employment.
(C) Executive shall not make use of any of Executives personal relationships or business contacts developed during the course of employment with the Company and utilized for business purposes within the two (2) years prior to termination, for the benefit of Executive or another, in a competitive manner with respect to the business of the Company.
(e) Covenant Not to Compete.
(i) Executive agrees that during the course of Executives employment and for a period of twelve (12) months immediately following the termination of Executives relationship with the Company for any reason, whether with or without Cause, at the option either of the Company or Executive, with or without notice, Executive will not, either directly or indirectly, (i) serve as an advisor, agent, consultant, director, employee, officer, partner, proprietor or otherwise of, (ii) have any ownership interest in (except for passive ownership of one percent (1%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended (the Securities Act), or Section 12 of the Exchange Act) or (iii) participate in the organization, financing, operation, management or control of, any business in competition with the Companys business as conducted by the Company during the course of Executives employment with the Company. The foregoing covenant shall cover Executives activities in every part of the Territory. Territory shall mean (i) all counties in the State of Texas, (ii) all other states of the United States of America and (iii) all other countries of the world; provided that, with respect to clauses (ii) and (iii), the Company maintains non-trivial operations, facilities, or customers in such geographic area prior to the date of the termination of Executives relationship with the Company.
(ii) Executive acknowledges that Executives fulfillment of the obligations contained in this Agreement and the Confidentiality Agreement, including, but not limited to, Executives obligation neither to use, except for the benefit of the Company, or to disclose the Companys Confidential Information and Executives obligation not to compete contained in subsection 9(e)(i) above is necessary to protect the Companys Confidential Information and to preserve the Companys value and goodwill. Executive further acknowledges the time, geographic and scope limitations of Executives obligations under subsection 9(e)(i) above are reasonable, especially in light of the Companys desire to protect its Confidential Information, and that Executive will not be precluded from gainful employment if Executive is obligated not to compete with the Company during the period and within the Territory as described above.
(iii) The covenants contained in subsection 9(e)(i) above shall be construed as a series of separate covenants, one for each city, county and state of any geographic area in the Territory. Except for geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in subsection 9(e)(i). If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event the provisions of subsection 9(e)(i) are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, then permitted by such law.
(f) Acknowledgements. Executive acknowledges that the non-solicitation and non-competition covenants Executive is providing in this Agreement are reasonable and necessary to protect the legitimate interests of the Company. Executive further acknowledges that Executives non-disclosure promises contained in this Agreement and the Confidentiality Agreement are in exchange for the Companys promises contained in this Agreement and the Confidentiality Agreement to provide Executive with confidential information and trade secrets of the Company.
(g) Other Obligations Upon Termination. On termination of Executives employment, Executive shall:
(i) immediately (and with contemporaneous effect) resign any directorships, offices or other positions that Executive may hold in the Company or any of its affiliates;
(ii) immediately deliver to the Company all documents, books, materials, records, correspondence, papers and information (on whatever media and wherever located) relating to the business or affairs of the Company or its business contacts, any keys and any other property of the Company, which is in Executives possession or under Executives control;
(iii) irretrievably delete any information relating to the business of the Company stored on any magnetic or optical disk or memory and all matter derived from such sources which is in Executives possession or under Executives control outside the premises of the Company; and
(iv) provide the Company with a signed statement that Executive has complied fully with Executives obligations under this Section 9(g).
(h) Notification of New Employer. In the event that Executive leaves the employ of the Company, Executive grants consent to notification by the Company to Executives new employer about Executives rights and obligations under this Agreement and the Confidentiality Agreement.
10. Tax. If any portion of the severance benefits, or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to restricted stock, stock options, warrants and other long-term incentives (in the aggregate, Total Payments) would be subject to the excise tax imposed by Section 4999 of the Code, as amended, or any similar tax that may hereafter be imposed (such excise tax together with any similar tax are hereinafter collectively referred to as the Excise Tax), then Executive shall be entitled to receive from the Company an additional payment (the Gross-up Payment) (i.e., in addition to such other severance benefits, or any other payments under this Agreement) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Executive, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments. Notwithstanding any other provision of this Section 10 to the contrary, to the extent permitted under Section 409A of the Code or any regulatory guidance issued thereunder by the Internal Revenue Service, the term Excise Tax, as defined above in this Section 10, shall include any interest or penalties imposed with respect to such Excise Tax. Subject to Section 7(c), any Gross-up Payment shall be made as soon as practicable after Executive remits the related taxes, but in all events the Gross-up Payment shall be made within thirty (30) days after Executive remits the related taxes to the taxing authority.
11. Clawback of Incentive Compensation. Executive acknowledges that to the extent required by applicable law or any written Company policy that may, in the discretion of the Board of Directors or a duly authorized committee thereof, be adopted to implement the requirements of such law (including without limitation Section 304 of the Sarbanes Oxley Act of 2002 and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010), compensation paid to Executive shall be subject to any required clawback, forfeiture, recoupment or similar requirement. Executive agrees that the terms and conditions of this Agreement shall be deemed automatically amended as may be necessary from time to time to ensure compliance by Executive, the Company and this Agreement with such policies or applicable law.
12. Miscellaneous.
(a) Withholding Taxes. The Company may withhold from all salary, bonus or other benefits payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
(b) Entire Agreement; Binding Effect. This Agreement and the Confidentiality Agreement (together with any Equity Plan and any Award Agreement issued as contemplated by Section 3(b) above) set forth the entire understanding between the parties as to the subject matter of this Agreement and supersede all prior agreements, commitments, representations, writings and discussions between them; and neither of the parties shall be bound by any obligations, conditions, warranties or representations with respect to the subject matter of this Agreement, the Confidentiality Agreement, any Equity Plan or any Award Agreement except as expressly provided herein or therein or as duly set forth on or subsequent to the date hereof in a written instrument signed by the proper and fully authorized representative of the party to be bound hereby. This Agreement is binding on Executive and on the Company and Executives and the Companys successors and assigns (whether by assignment, by operation of law or otherwise); provided that neither this Agreement nor any rights or obligations hereunder may be assigned by Executive or the Company without the prior written consent of the other party (except that the Company shall be entitled to assign this Agreement in connection with a Change of Control).
(c) Absence of Conflict. Executive represents and warrants that Executives employment by the Company as described herein will not conflict with and will not be constrained by any prior employment or consulting agreement or relationship. Executive further agrees that during Executives employment with the Company, Executive will not improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and that Executive will not bring onto the premises of the Company any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity.
(d) Arbitration.
(i) General. In consideration of Executives service to the Company, its promise to arbitrate all employment related disputes and Executives receipt of the compensation and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes (with the sole exception of those disputes that may arise from the Confidentiality Agreement, which shall be resolved in
accordance with the dispute resolution procedures set forth therein) with anyone (including the Company and any employee, officer, director, stockholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executives service to the Company under this Agreement or otherwise or the termination of Executives service with the Company, including any breach of this Agreement, shall be subject to binding arbitration under the Arbitration Rules set forth by the American Arbitration Association for the resolution of employment disputes (the Rules) and pursuant to Texas law. Disputes which Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal law. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.
(ii) Procedure. Any arbitration will be administered by the American Arbitration Association (AAA) and a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will be conducted in Richardson, Texas, and will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes. The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. The arbitrator shall issue a written decision including findings of fact and conclusions of law on the merits of its award. The arbitrator shall have the power to award any remedies, including attorneys fees and costs, available under applicable law. The Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive shall pay the first $125 of any filing and/or administration fees associated with any arbitration that Executive initiates. The arbitrator shall administer and conduct any arbitration in a manner consistent with the AAAs National Rules for the Resolution of Employment Disputes.
(iii) Remedy. Arbitration shall be the sole, exclusive and final remedy for any dispute (with the sole exception of those disputes that may arise from the Confidentiality Agreement and Section 9 of this Agreement) between Executive and the Company. Accordingly, except as otherwise provided herein, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not order or require the Company to adopt a policy not otherwise required by law, which the Company has not adopted.
(iv) Availability of Injunctive Relief. Any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement, including but not limited to a breach of the restrictive covenants in Section 9 above. In the event that either party seeks injunctive relief, no bond shall be required and the prevailing party shall be entitled to recover reasonable costs and attorneys fees.
(e) Voluntary Nature of Agreement; Legal Rights. Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive acknowledges that Executive has had the opportunity to consult with an attorney regarding the provisions of this Agreement and has either obtained such advice of counsel or knowingly waived the opportunity to seek such advice. Executive has carefully read this Agreement and has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executives right to a jury trial.
(f) Waivers. No party shall be deemed to have waived any right, power or privilege under this Agreement or any provisions hereof unless such waiver shall have been duly executed in writing and acknowledged by the party to be charged with such waiver. The failure of any party at any time to insist on performance of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof. No waiver of any breach of this Agreement shall be held to be a waiver of any other subsequent breach.
(g) Reformation. If any sentence, paragraph or clause of this Agreement, or combination of the same, is in violation of any applicable law or regulation, or is unenforceable or void for any reason, such sentence, paragraph, clause or combinations of same shall be modified to the extent necessary to accomplish the intention on such provision without violating applicable law or regulation. Notwithstanding, the remainder of the Agreement shall remain binding upon the parties.
(h) Notices. All notices, approvals, consents, requests or demands required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently given on the earlier of (i) actual receipt, (ii) three business days after being deposited in U.S. mail, registered or certified, postage prepaid, (iii) upon delivery, if delivered by hand (iv) one business day after transmission, if sent by facsimile (confirmation received) or (v) one business day after the business day of deposit with a reputable overnight courier for next business day delivery, freight prepaid. Notice in each case shall be addressed to the party entitled to receive such notice at the following address (or other such addresses as the parties may subsequently designate):
The Company: |
||
Mavenir Systems, Inc. | ||
1700 International Parkway | ||
Suite 200 | ||
Richardson, Texas 75081 | ||
Fax: 416.916.4397 | ||
Attn: Terry Hungle | ||
with a copy to: |
||
(which shall not alone constitute notice) | ||
Alan Bickerstaff | ||
Andrews Kurth LLP | ||
111 Congress Ave., Suite 1700 | ||
Austin, TX 78701 | ||
Fax: 512.542.5219 | ||
Executive: |
||
Ashok Khuntia | ||
| ||
| ||
|
(i) Governing Law; Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with, the employment laws and other laws of the State of Texas as they apply to contracts entered into and wholly to be performed therein by residents thereof. In addition, each party hereto irrevocably and unconditionally agrees that any suit, action or other legal proceeding arising out of this Agreement may be brought only in a state or federal court within Texas.
(j) Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable of void, this Agreement shall continue in full force and effect without said provision.
(k) Effect of Headings. The Section and subsection headings contained herein are for convenience only and shall not affect the construction hereof.
(l) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
IN WITNESS WHEREOF the parties have set their hands and seals as of the year and date first written above.
Mavenir Systems, Inc. | ||
By: |
/s/ Terry Hungle | |
Name: Terry Hungle Title: Chief Financial Officer | ||
Executive: | ||
/s/ Ashok Khuntia | ||
Ashok Khuntia |
Exhibit 10.3
MAVENIR SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
As amended and restated April 9, 2014
ARTICLE I.
PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests of Mavenir Systems, Inc., a Delaware corporation, by providing eligible employees with the opportunity to acquire a proprietary interest in the Company through participation in an employee stock purchase plan designed to qualify under Section 423 of the Code for one or more specified offerings made under such plan.
The Plan shall become effective on November 20, 2014 (the Effective Time).
Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix.
ARTICLE II.
ADMINISTRATION OF THE PLAN
2.1 The Plan Administrator shall have full authority to interpret and construe any provision of the Plan and to adopt such rules and regulations for administering the Plan as it may deem necessary in order to bring one or more offerings under the Plan into compliance with the requirements of Code Section 423.
2.2 The Plan Administer may authorize one or more offerings under the Plan that are not designed to comply with the requirements of Code Section 423 but with the requirements of the foreign jurisdictions in which those offerings are conducted. Such offerings shall be separate from any offerings designed to comply with the Code Section 423 requirements but may be conducted concurrently with those offerings.
2.3 Decisions of the Plan Administrator shall be final and binding on all parties having an interest in the Plan.
ARTICLE III.
STOCK SUBJECT TO PLAN
3.1 The stock purchasable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares of Common Stock purchased on the open market. The number of shares of Common Stock reserved for issuance over the term of the Plan shall initially be limited to 482,143 shares.
3.2 The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day in January each calendar year during the term of the Plan, beginning with the 2015 calendar year, by an amount equal to one percent (1%) of
the total number of shares of Common Stock outstanding on the last trading day in the immediately preceding calendar month, but in no event shall any such annual increase exceed 428,572 shares.
3.3 Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction or other change affecting the outstanding Common Stock as a class without the Companys receipt of consideration or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, then equitable adjustments shall be made by the Plan Administrator to (i) the maximum number and class of securities issuable under the Plan; (ii) the maximum number and class of securities by which the share reserve is to increase automatically each calendar year pursuant to the provisions of Section 3.2 of this Article III; (iii) the maximum number and class of securities purchasable per Participant on any one Purchase Date during an offering period; (iv) the maximum number and class of securities purchasable in total by all Participants under the Plan on any one Purchase Date; and (v) the number and class of securities and the price per share in effect under each outstanding purchase right. The adjustments shall be made in such manner as the Plan Administrator deems appropriate, and such adjustments shall be final, binding and conclusive.
ARTICLE IV.
OFFERING PERIODS
4.1 Shares of Common Stock shall be offered for purchase under the Plan through a series of successive offering periods until such time as (i) the maximum number of shares of Common Stock available for issuance under the Plan shall have been purchased or (ii) the Plan shall have been sooner terminated.
4.2 Each offering period shall be of such duration not to exceed twenty-four (24) months, as determined by the Plan Administrator prior to the start of the applicable offering period. Until such time as the Plan Administrator specifies otherwise, offering periods shall be of a duration of approximately six (6) months and shall commence on the first Trading Day in the in the six (6)-month period commencing on May 20 and November 20 each year and end on the last Trading Day of such six (6)-month period, respectively.
4.3 Each offering period shall be comprised of one or more Purchase Intervals. Until such time as the Plan Administrator specifies otherwise, each offering period shall be comprised of one Purchase Interval.
4.4 The terms and conditions of each offering period may vary, and two or more offerings periods may run concurrently under the Plan, each with its own terms and conditions. In addition, special offering periods may be established with respect to entities that are acquired by the Company (or any subsidiary of the Company) or under such other circumstances as the Plan Administrator deems appropriate. In no event, however, shall the terms and conditions of any offering period contravene the express limitations and restrictions of the Plan, and the participants in each separate offering period conducted by one or more Participating Companies in the United States shall have equal rights and privileges under that offering in accordance with the requirements of Section 423(b)(5) of the Code and the applicable Treasury Regulations thereunder.
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4.5 The following provision may, at the discretion of the Plan Administrator, apply with respect to offering periods comprised of two (2) or more Purchase Intervals. Should the Fair Market Value per share of Common Stock on any Purchase Date within such an offering period be less than the Fair Market Value per share of Common Stock on the start date of that offering period, then the individuals participating in that offering period shall, immediately after the purchase of shares of Common Stock on their behalf on such Purchase Date, be transferred from that offering period and automatically enrolled in the offering period commencing on the next business day following such Purchase Date, provided and only if the Fair Market Value per share of Common Stock on the start date of that new offering period is lower than the Fair Market Value per share of Common Stock on the start date of the offering period in which they were currently enrolled.
ARTICLE V.
ELIGIBILITY
5.1 Purchase rights may be granted under the Plan only to Employees of the Company or an Affiliate. Unless otherwise determined by the Plan Administrator for an offering, each individual who is an Eligible Employee on the start date of the offering period under the Plan may enter that offering period on such start date. However, an Eligible Employee may participate in only one offering period at a time.
5.2 The date an individual enters an offering period shall be designated his or her Entry Date for purposes of that offering period.
5.3 An Affiliate shall become a Participating Company when authorized by the Plan Administrator to extend the benefits of the Plan to its Eligible Employees.
5.4 Except as otherwise provided in Sections 4.5, the Eligible Employee must, in order to participate in the Plan for a particular offering period, complete the enrollment forms prescribed by the Plan Administrator (including a stock purchase agreement and a payroll deduction authorization or other authorization form for any other form of contribution permitted for that offering period) and file or submit such forms in accordance with procedures established by the Plan Administrator (or its designate) on or before his or her scheduled Entry Date. Unless otherwise specified by the Plan Administrator, once an Eligible Employee timely submits the properly completed enrollment forms, his or her enrollment in the Plan will automatically remain in effect from one offering period to the next in accordance with his or her payroll deduction authorization (including his or her designated rate of payroll deduction) unless and until such Eligible Employee withdraws from the Plan, changes the rate of his or her payroll deduction or his or her employment status changes.
ARTICLE VI.
PAYROLL DEDUCTIONS/OTHER FORMS OF CONTRIBUTION
6.1 For each offering period, the Plan Administrator may allow contributions to the Plan to be effected in the form of periodic payroll deductions or one or more other forms of
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permitted contribution specified by the Plan Administrator prior to the start date of the applicable offering period. However, all contributions, whether in the form of payroll deductions or other mode, shall be made solely on the basis of the Participants Cash Earnings for the offering period. Unless the Plan Administrator determines otherwise prior to the start of the applicable offering period:
(a) Participant contributions for each offering period shall be solely in the form of payroll deductions; and
(b) the payroll deductions or other form of permitted contribution that each Participant may authorize for purposes of acquiring shares of Common Stock during an offering period may be in any multiple of one percent (1%) of the Cash Earnings paid to that Participant during each Purchase Interval within such offering period, up to a maximum of fifteen percent (15%).
6.2 Payroll deductions or other permitted forms of contribution collected in a currency other than U.S. Dollars shall be converted into U.S. Dollars on the last day of the Purchase Interval in which collected, with such conversion to be based on an exchange rate determined by the Plan Administration in its sole discretion.
6.3 The rate of payroll deduction or other permitted form of contribution shall continue in effect throughout the offering period, except for changes effected in accordance with the following guidelines:
(a) The Participant may, at any time during the offering period, reduce the rate of his or her payroll deduction or other permitted form of contribution to become effective as soon as administratively possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such reduction per Purchase Interval.
(b) The Participant may, at any time during the offering period, increase the rate of his or her payroll deduction or other permitted form of contribution (up to the maximum percentage limit for that offering period) to become effective as soon as administratively possible after filing the appropriate form with the Plan Administrator. The Participant may not, however, effect more than one (1) such increase per Purchase Interval.
(c) The Participant may at any time reduce his or her rate of payroll deduction or other form of permitted contribution to 0%. Such reduction shall become effective as soon as administratively practicable following the filing of the appropriate form with the Plan Administrator. The Participants existing payroll deductions or other permitted form of contribution authorized for the Purchase Interval in which such reduction occurs shall be applied to the purchase of shares of Common Stock on the next scheduled Purchase Date.
6.4 Payroll deductions shall begin on the first pay day administratively feasible following the Participants Entry Date into the offering period and shall (unless sooner terminated by the Participant) continue through the pay day ending with or immediately prior to the last day of that offering period. To the extent the Plan Administrator permits other forms of contribution for an offering period, those permitted contributions at the level authorized by each affected Participant shall be collected in the manner specified by the Plan Administrator for that
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offering period. The payroll deductions or other permitted forms of contribution so collected shall be credited to the Participants book account under the Plan, but no interest shall be paid on the balance from time to time outstanding in such account, unless otherwise required by the terms of that offering period. Unless the Plan Administrator determines otherwise prior to the start of the applicable offering period, the amounts collected from the Participant shall not be required to be held in any segregated account or trust fund and may be commingled with the general assets of the Company and used for any corporate purpose.
6.5 Payroll deductions or other permitted form of contribution authorized by the Participant shall automatically cease upon the termination of the Participants purchase right in accordance with the provisions of the Plan.
6.6 The Participants acquisition of Common Stock under the Plan on any Purchase Date shall neither limit nor require the Participants acquisition of Common Stock on any subsequent Purchase Date, whether within the same or a different offering period.
ARTICLE VII.
PURCHASE RIGHTS
7.1 Grant of Purchase Right. A Participant shall be granted a separate purchase right for each offering period in which he or she participates. The purchase right shall be granted on the Participants Entry Date into the offering period. Unless the Plan Administrator determines otherwise prior to the start date of the applicable offering period and subject to the limitations of Article VIII below, each purchase right granted for an offering period shall provide the Participant with the right to purchase up to 1,000 shares of Common Stock on each Purchase Date within that offering period subject to (i) periodic adjustments in the event of certain changes in the Companys capitalization and/or (ii) adjustment by the Plan Administrator as provided in Section 7.4 of this Article VII. The Participant shall execute a stock purchase agreement embodying such terms and such other provisions (not inconsistent with the Plan) as the Plan Administrator may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan to any Eligible Employee if such individual would, immediately after the grant, own (within the meaning of Code Section 424(d)) or hold outstanding options or other rights to purchase, stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Affiliate.
7.2 Exercise of the Purchase Right. Each purchase right shall be automatically exercised in installments on each successive Purchase Date within the offering period, and shares of Common Stock shall accordingly be purchased on behalf of each Participant (other than Participants whose payroll deductions or other authorized contributions have previously been refunded pursuant to the Termination of Purchase Right provisions below) on each such Purchase Date. The purchase shall be effected by applying the Participants authorized payroll deductions or other form of permitted contribution for the Purchase Interval ending on such Purchase Date to the purchase of whole shares of Common Stock at the purchase price in effect for the Participant for that Purchase Date.
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7.3 Purchase Price. The purchase price per share at which Common Stock will be purchased on the Participants behalf on each Purchase Date within the offering period will be established by the Plan Administrator prior to the start of that offering period, but in no event shall such purchase price be less than eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of Common Stock on the Participants Entry Date into that offering period; or (ii) the Fair Market Value per share of Common Stock on that Purchase Date.
7.4 Number of Purchasable Shares. The number of shares of Common Stock purchasable by a Participant on each Purchase Date during the offering period shall be the number of whole shares obtained by dividing the amount collected from the Participant through his or her authorized payroll deductions or other permitted form of contribution during the Purchase Interval ending with that Purchase Date by the purchase price in effect for the Participant for that Purchase Date. However, the maximum number of shares of Common Stock purchasable per Participant on any one Purchase Date shall be governed by the limitation set forth in Section 7.1, as adjusted periodically in the event of certain changes in the Companys capitalization. In addition, the maximum number of shares of Common Stock purchasable in total by all Participants on any one Purchase Date shall not exceed 312,500 shares, subject to periodic adjustments in the event of certain changes in the Companys capitalization. However, the Plan Administrator shall have the discretionary authority, exercisable prior to the start of any offering period under the Plan, to increase or decrease the limitations to be in effect for the number of shares purchasable per Participant (and the corresponding maximum number of shares purchasable per Participant for that offering period) and in total by all Participants on each Purchase Date within that offering period.
7.5 Excess Payroll Deductions/Contributions. Any authorized payroll deductions or other permitted form of contribution not applied to the purchase of shares of Common Stock on any Purchase Date because they are not sufficient to purchase a whole share of Common Stock shall be held for the purchase of Common Stock on the next Purchase Date. However, any authorized payroll deductions or other permitted form of contribution not applied to the purchase of Common Stock by reason of the limitation on the maximum number of shares purchasable per Participant or in the aggregate on the Purchase Date shall be promptly refunded.
7.6 Suspension of Payroll Deductions/Contributions. In the event that a Participant is, by reason of the accrual limitations in Article VIII, precluded from purchasing additional shares of Common Stock on one or more Purchase Dates during the offering period in which he or she is enrolled, then no further payroll deductions or other permitted form of contribution authorized by the Participant for that offering period shall be collected from such Participant with respect to those Purchase Dates. The suspension of such deductions or contributions shall not terminate the Participants purchase right for the offering period in which he or she is enrolled, and the Participants authorized payroll deductions or other permitted form of contribution shall automatically resume on behalf of such Participant once he or she is again able to purchase shares during that offering period in compliance with the accrual limitations of Article VIII.
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7.7 Termination of Purchase Right. The following provisions shall govern the termination of outstanding purchase rights:
(a) A Participant may withdraw from the offering period in which he or she is enrolled by filing the appropriate form with the Plan Administrator (or its designate) at any time prior to the next scheduled Purchase Date in that offering period, and no further payroll deductions or other permitted form of contribution shall be collected from the Participant with respect to the offering period. Any payroll deductions or other permitted form of contribution authorized by the Participant and collected during the Purchase Interval in which such withdrawal occurs shall, at the Participants election, be immediately refunded or held for the purchase of shares on the next Purchase Date. If no such election is made at the time of such withdrawal, then the payroll deductions or other permitted form of contribution authorized by the Participant and collected with respect to the Purchase Interval in which such withdrawal occurs shall be refunded to the Participant as soon as possible.
(b) The Participants withdrawal from the offering period shall be irrevocable, and the Participant may not subsequently rejoin that offering period at a later date. In order to resume participation in any subsequent offering period, such individual must re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into that offering period.
(c) Should the Participant cease to remain an Eligible Employee for any reason (including death, disability or change in status) while his or her purchase right remains outstanding, then that purchase right shall immediately terminate, and all of the Participants authorized payroll deductions or other permitted contributions for the Purchase Interval in which the purchase right so terminates shall be immediately refunded. However, should the Participant cease to remain in active service by reason of an approved unpaid leave of absence, then the Participant shall have the right, exercisable up until the last business day of the Purchase Interval in which such leave commences, to (i) withdraw all the payroll deductions or other permitted contributions authorized by the Participant and collected to date on his or her behalf for that Purchase Interval or (ii) have such funds held for the purchase of shares on his or her behalf on the next scheduled Purchase Date. Unless otherwise determined by the Plan Administrator for one or more offerings, in no event, however, shall any further payroll deductions or other permitted form of contribution be collected on the Participants behalf during such leave. Upon the Participants return to active service (x) within three (3) months following the commencement of such leave; or (y) prior to the expiration of any longer period for which such Participant is provided with reemployment rights by statute or contract, his or her authorized payroll deductions or other permitted form of contribution under the Plan shall automatically resume at the rate in effect at the time the leave began, unless the Participant withdraws from the Plan prior to his or her return. Unless otherwise determined by the Plan Administrator for one or more offerings, an individual who returns to active employment following a leave of absence which exceeds in duration the applicable (x) or (y) time period above will be treated as a new Employee for purposes of subsequent participation in the Plan and must accordingly re-enroll in the Plan (by making a timely filing of the prescribed enrollment forms) on or before his or her scheduled Entry Date into the offering period.
7.8 Change in Control. Each outstanding purchase right shall automatically be exercised, immediately prior to the effective date of any Change in Control, by applying the authorized payroll deductions or other permitted contributions of each Participant for the Purchase Interval in which such Change in Control occurs to the purchase of whole shares of
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Common Stock at the purchase price per share in effect for that Purchase Interval pursuant to the Purchase Price provisions of Section 7.3 of this Article VII. However, the applicable limitation on the number of shares of Common Stock purchasable per Participant shall continue to apply to any such purchase, but not the limitation applicable to the maximum number of shares of Common Stock purchasable in total by all Participants.
The Company shall use reasonable efforts to provide at least ten (10)-days prior written notice of the occurrence of any Change in Control, and the Participants shall, following the receipt of such notice, have the right to terminate their outstanding purchase rights prior to the effective date of the Change in Control.
7.9 Proration of Purchase Rights. Should the total number of shares of Common Stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the Plan, the Plan Administrator shall make a pro-rata allocation of the available shares on a uniform and nondiscriminatory basis, and the authorized payroll deductions or other permitted form of contribution of each Participant, to the extent in excess of the aggregate purchase price payable for the Common Stock pro-rated to such individual, shall be refunded.
7.10 ESPP Broker Account. The shares purchased on behalf of each Participant shall be deposited directly into a brokerage account which the Company shall establish for the Participant at a Company-designated brokerage firm. The account will be known as the ESPP Broker Account. Except as otherwise provided below, the deposited shares may not be transferred (either electronically or in certificate form) from the ESPP Broker Account until the later of the following two periods: (i) the end of the two (2)-year period measured from the Participants Entry Date into the offering period in which the shares were purchased; and (ii) the end of the one (1)-year measured from the actual purchase date of those shares. Such limitation shall apply both to transfers to different accounts with the same ESPP broker and to transfers to other brokerage firms. Any shares held for the required holding period may thereafter be transferred (either electronically or in certificate form) to other accounts or to other brokerage firms.
The foregoing procedures shall not in any way limit when the Participant may sell his or her shares. Those procedures are designed solely to assure that any sale of shares prior to the satisfaction of the required holding period is made through the ESPP Broker Account. In addition, the Participant may request a stock certificate or share transfer from his or her ESPP Broker Account prior to the satisfaction of the required holding period should the Participant wish to make a gift of any shares held in that account. However, shares may not be transferred (either electronically or in certificate form) from the ESPP Broker Account for use as collateral for a loan, unless those shares have been held for the required holding period.
The foregoing procedures shall apply to all shares purchased by each Participant, whether or not that Participant continues in Employee status.
7.11 Assignability. The purchase right shall be exercisable only by the Participant and shall not be assignable or transferable by the Participant.
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7.12 Stockholder Rights. A Participant shall have no stockholder rights with respect to the shares subject to his or her outstanding purchase right until the shares are purchased on the Participants behalf in accordance with the provisions of the Plan and the Participant has become a holder of record of the purchased shares.
ARTICLE VIII.
ACCRUAL LIMITATIONS
8.1 No Participant shall be entitled to accrue rights to acquire Common Stock pursuant to any purchase right outstanding under the Plan if and to the extent such accrual, when aggregated with (i) rights to purchase Common Stock accrued under any other purchase right granted under the Plan; and (ii) similar rights accrued under other employee stock purchase plans (within the meaning of Code Section 423) of the Company or any Affiliate, would otherwise permit such Participant to purchase more than Twenty-Five Thousand Dollars ($25,000.00) worth of stock of the Company or any Affiliate (determined on the basis of the Fair Market Value per share on the date or dates such rights are granted) for each calendar year such rights are at any time outstanding.
8.2 For purposes of applying such accrual limitations to the purchase rights granted under the Plan, the following provisions shall be in effect:
(a) The right to acquire Common Stock under each outstanding purchase right shall accrue in a series of installments on each successive Purchase Date during the offering period on which such right remains outstanding.
(b) No right to acquire Common Stock under any outstanding purchase right shall accrue to the extent the Participant has already accrued in the same calendar year the right to acquire Common Stock under one or more other purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000.00) worth of Common Stock (determined on the basis of the Fair Market Value per share on the date or dates of grant) for each calendar year such rights were at any time outstanding.
8.3 If by reason of such accrual limitations, any purchase right of a Participant does not accrue for a particular Purchase Interval, then the authorized payroll deductions or other permitted form of contribution which the Participant made during that Purchase Interval with respect to such purchase right shall be promptly refunded.
8.4 In the event there is any conflict between the provisions of this Article VIII and one or more provisions of the Plan or any instrument issued thereunder, the provisions of this Article VIII shall be controlling.
ARTICLE IX.
EFFECTIVE DATE AND TERM OF THE PLAN
9.1 The Plan shall become effective for the offering period commencing at the Effective Time; provided, however, that (i) the Plan shall have been approved by the stockholders of the Company; and (ii) no purchase rights granted under the Plan shall be exercised, and no shares of Common Stock shall be issued hereunder, until the Company shall
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have complied with all applicable requirements of the 1933 Act (including the registration of the shares of Common Stock issuable under the Plan on a Form S-8 registration statement filed with the Securities and Exchange Commission), all applicable listing requirements of any Stock Exchange (or the Nasdaq Stock Market, if applicable) on which the Common Stock is listed for trading and all other applicable requirements established by law or regulation.
9.2 Unless sooner terminated by the Board, the Plan shall terminate upon the earliest of (i) November 19, 2024; (ii) the date on which all shares available for issuance under the Plan shall have been sold pursuant to purchase rights exercised under the Plan; or (iii) the date on which all purchase rights are exercised in connection with a Change in Control. No further purchase rights shall be granted or exercised, and no further payroll deductions or other forms of contribution shall be collected, under the Plan following such termination.
ARTICLE X.
AMENDMENT OF THE PLAN
10.1 The Board may alter or amend the Plan at any time to become effective as of the start date of the next offering period thereafter under the Plan. In addition, the Board may suspend or terminate the Plan at any time to become effective immediately following the close of any subsequent Purchase Interval.
10.2 In no event may the Board effect any of the following amendments or revisions to the Plan without the approval of the Companys stockholders: (i) increase the number of shares of Common Stock issuable under the Plan, except for permissible adjustments in the event of certain changes in the Companys capitalization or (ii) modify the eligibility requirements for participation in the Plan.
ARTICLE XI.
GENERAL PROVISIONS
11.1 All costs and expenses incurred in the administration of the Plan shall be paid by the Company; provided, however, each Plan Participant shall bear all costs and expenses incurred by such individual in the sale or other disposition of any shares purchased under the Plan.
11.2 Nothing in the Plan shall confer upon the Participant any right to continue in the employ of the Company or any Affiliate for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Affiliate employing such person) or of the Participant, which rights are hereby expressly reserved by each, to terminate such persons employment at any time for any reason, with or without cause.
11.3 The provisions of the Plan shall be governed by the laws of the State of Delaware without resort to that States conflict-of-laws rules.
-10-
Schedule A
Companies Participating in
the Mavenir Systems, Inc. 2013
Employee Stock Purchase Plan
As of the Effective Time
MAVENIR SYSTEMS, INC.
Schedule A-1
APPENDIX
The following definitions shall be in effect under the Plan:
1.1 Affiliate shall mean any parent or subsidiary corporation of the Company (as determined in accordance with Code Section 424), whether now existing or subsequently established.
1.2 Board shall mean the Companys Board of Directors.
1.3 Cash Earnings shall, unless otherwise specified by the Plan Administrator prior to the start of an offering period, mean (i) the regular base salary paid to such Participant by one or more Participating Companies during such individuals period of participation in one or more offering periods under the Plan; and (ii) any overtime payments, bonuses, commissions, profit-sharing distributions and other incentive-type payments received during such period. Cash Earnings shall be calculated before deduction of (A) any income or employment tax or other withholdings; or (B) any contributions made by the Participant to any Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit program now or hereafter established by the Company or any Affiliate. Cash Earnings shall not include any contributions made on the Participants behalf by the Company or any Affiliate to any employee benefit or welfare plan now or hereafter established (other than Code Section 401(k) or Code Section 125 contributions deducted from such Cash Earnings). The Plan Administrator may make modifications to the definition of Cash Earnings for one or more offerings as decided appropriate.
1.4 Change in Control shall mean a change in ownership of the Company pursuant to any of the following transactions:
(a) the closing of a merger, consolidation or other reorganization approved by the Companys stockholders in which a change in ownership or control of the Company is effected through the acquisition by any person or group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys outstanding securities (as measured in terms of the power to vote with respect to the election of Board members);
(b) the closing of a sale, transfer or other disposition of all or substantially all of the Companys assets;
(c) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a group within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Company or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Company) acquires directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) beneficial ownership (within the meaning of Rule 13d-3 of the
Appendix-1
1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Companys securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Company or the acquisition of outstanding securities held by one or more of the Companys existing stockholders; or
(d) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases by reason of one or more contested elections for Board membership to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.
1.5 Code shall mean the Internal Revenue Code of 1986, as amended.
1.6 Common Stock shall mean the Companys common stock.
1.7 Company shall mean Mavenir Systems, Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of Mavenir Systems, Inc. that shall assume the Plan.
1.8 Compensation Committee shall mean the Compensation Committee of the Board.
1.9 Effective Time shall mean November 20, 2014. Any Affiliate that becomes a Participating Company after such Effective Time shall have a subsequent Effective Time with respect to its employee-Participants that is determined in accordance with Section 5.3 of the Plan.
1.10 Eligible Employee shall mean any person who is employed by a Participating Company on a basis under which he or she is regularly expected to render more than twenty (20) hours of service per week for more than five (5) months per calendar year for earnings that are considered wages under Code Section 3401 (a); provided, however, that the Plan Administrator may, prior to the start of the applicable offering period, waive one or both of the twenty (20) hour and five (5) month service requirements.
1.11 Entry Date shall mean the date an Eligible Employee first commences participation in the offering period in effect under the Plan. The earliest Entry Date under the Plan shall be the Effective Time.
1.12 Fair Market Value per share of Common Stock on any relevant date shall be the closing price per share of Common Stock at the close of regular trading hours (i.e., before after-hours trading begins) on the date in question on the Stock Exchange serving as the primary market for the Common Stock, as such price is reported by the National Association of Securities Dealers (if primarily traded on the Nasdaq Global or Global Select Market) or as officially quoted in the composite tape of transactions on any other Stock Exchange on which the Common
Appendix-2
Stock is then primarily traded. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists.
1.13 1933 Act shall mean the Securities Act of 1933, as amended.
1.14 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
1.15 Participant shall mean any Eligible Employee of a Participating Company who is actively participating in the Plan.
1.16 Participating Company shall mean the Company and such Affiliate or Affiliates as may be authorized, in accordance with Section 5.3 of the Plan, to extend the benefits of the Plan to their Eligible Employees. The Participating Companies in the Plan as of the Effective Time are listed in attached Schedule A.
1.17 Plan shall mean the Mavenir Systems, Inc. 2013 Employee Stock Purchase Plan, as set forth in this document.
1.18 Plan Administrator means the particular entity, whether one or more Committees or the Board, which is authorized to administer the Plan with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under the Plan with respect to the persons under its jurisdiction. Unless otherwise determined by the Board, the Compensation Committee shall serve as the Plan Administrator.
1.19 Purchase Date shall mean the last business day of each Purchase Interval.
1.20 Purchase Interval shall mean each successive purchase interval within an offering period at the end of which there shall be purchased shares of Common Stock on behalf of each Participant.
1.21 Stock Exchange shall mean the Nasdaq Global Market, the Nasdaq Global Select Market, the Nasdaq Capital Market, the New York Stock Exchange or the NYSE MKT.
1.22 Trading Day shall mean a day on which the Stock Exchange on which the Common Stock is listed is open for trading.
Appendix-3
Exhibit 31.1
CERTIFICATION
I, Pardeep Kohli, certify that:
1 | I have reviewed this report on Form 10-Q of Mavenir Systems, Inc.; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b | [Intentionally omitted]; |
c | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: May 7, 2014
/s/ Pardeep Kohli |
Pardeep Kohli |
Chief Executive Officer and Director |
Exhibit 31.2
CERTIFICATION
I, Terry Hungle, certify that:
1 | I have reviewed this report on Form 10-Q of Mavenir Systems, Inc.; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b | [Intentionally omitted]; |
c | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5 | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls over financial reporting. |
Date: May 7, 2014
/s/ Terry Hungle |
Terry Hungle |
Chief Financial Officer |
Exhibit 32.1
Certification of Chief Executive Officer Pursuant to
18 U.S.C. Section 1350
and Securities Exchange Act Rule 13a-14(b)
In connection with the Quarterly Report of Mavenir Systems, Inc. (Mavenir) on Form 10-Q for the quarter ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Pardeep Kohli, Chief Executive Officer and Director of Mavenir, hereby certify, pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b), that to my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Mavenir. |
Dated: May 7, 2014
By | /s/ Pardeep Kohli | |
Pardeep Kohli | ||
Chief Executive Officer and Director |
This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed to be filed by Mavenir for purposes of Section 18 of the Securities Exchange Act of 1934. This certification is not to be incorporated by reference into any filing of Mavenir under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this report), except to the extent that the Company specifically incorporates it by reference, irrespective of any general incorporation language contained in such filing.
Exhibit 32.2
Certification of Chief Financial Officer Pursuant to
18 U.S.C. Section 1350
and Securities Exchange Act Rule 13a-14(b)
In connection with the Quarterly Report of Mavenir Systems, Inc. (Mavenir) on Form 10-Q for the quarter ended March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Terry Hungle, as Chief Financial Officer of Mavenir, hereby certify, pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b), that to my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Mavenir. |
Dated: May 7, 2014
By | /s/ Terry Hungle | |
Terry Hungle | ||
Chief Financial Officer |
This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed to be filed by Mavenir for purposes of Section 18 of the Securities Exchange Act of 1934. This certification is not to be incorporated by reference into any filing of Mavenir under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this report), except to the extent that the Company specifically incorporates it by reference, irrespective of any general incorporation language contained in such filing.
Segment and Geographic Information - Additional Information (Detail)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2014
Customer
|
Mar. 31, 2013
Customer
|
|
Revenue, Major Customer [Line Items] | ||
Number of operating segments | 1 | |
Revenues [Member]
|
||
Revenue, Major Customer [Line Items] | ||
Threshold percentage for determining concentration risk, description | Customer accounted for more than 10% of our total revenues | Customer accounted for more than 10% of our total revenues |
Percentage of revenue | 62.00% | 52.00% |
Number of customers that accounted for majority of revenue | 4 | 4 |
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