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Virage Logic Corp. Reports Operating Results (10-Q)

February 09, 2010 | About:
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10qk

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Virage Logic Corp. (VIRL) filed Quarterly Report for the period ended 2009-12-31.

Virage Logic Corp. has a market cap of $156.6 million; its shares were traded at around $5.9 with and P/S ratio of 3.3. VIRL is in the portfolios of Chuck Royce of ROYCE & ASSOCIATES, Chuck Royce of ROYCE & ASSOCIATES, Arnold Schneider of Schneider Capital Management.

Highlight of Business Operations:

On December 1, 2009 the Company entered into a loan and security agreement (the Loan Agreement) with Silicon Valley Bank. The proceeds under the Loan Agreement may be used for general corporate purposes. The Loan Agreement provides for a two year revolving credit facility of $15 million, including the issuances of letters of credit. Availability of the loan amount is subject to a borrowing base restriction. The Company may elect to convert $5 million of the revolving credit facility to a three-year term loan at any time prior to March 31, 2010, and any such term loan will be amortized in equal monthly installments. The Companys active domestic subsidiaries guaranty the obligations described in the Loan Agreement. The Company and the subsidiary guarantors grant the Silicon Valley Bank a security interest in substantially all of their assets, including accounts receivable, inventory, intellectual property and equipment. Interest under the Loan Agreement for the revolving credit facility will accrue, at the election of the Company, at LIBOR plus 4.00%, or the Prime Rate plus 1.50%. The interest rate under the Loan Agreement for the term loan will accrue, at the election of the Company, at LIBOR plus 4.50%, or the prime rate plus 2.00%. LIBOR is subject to a floor of 1.25% and the Prime Rate is subject to a floor of three month LIBOR plus 1.50%.

Sales to customers located outside North America accounted for 52% and 54% of our revenues for the three months ended December 31, 2009 and 2008. Substantially all of our direct sales representatives and field application engineers are located in North America and Europe and serve those regions. In Japan and the rest of Asia, we engage in indirect sales through distributors and direct sales through sales representatives. All revenues to date have been denominated in U.S. dollars.

Research and development expenses primarily include personnel expense, software license and maintenance fees and capital equipment depreciation expense. Research and development expenses as a percentage of total revenue for the three months ended December 31, 2009 decreased to 51.9% from 79.5% for the same period in fiscal 2009. Research and development expenses for the three months ended December 31, 2009 totaled $11.2 million, an increase of $2.2 million, or 24.6%, from $9.0 million for the three months ended December 31, 2008. The increase was primarily due to the additional research and development expenses as a result of hiring additional employees in connection with the recent acquisition of ARC and the transactions we entered into with NXP.

Sales and marketing expenses consist mainly of personnel expense, commissions, advertising and promotion-related costs. Sales and marketing expenses for the three months ended December 31, 2009 totaled $4.7 million, representing an increase of $2.0 million, or 75.5%, over the same period in fiscal 2009. Sales and marketing expenses as a percentage of revenue were 21.6% for the three months ended December 31, 2009, compared to 23.5% for the three months ended December 31, 2008. The increase in sales and marketing expenses for the three months ended December 31, 2009 was primarily attributable to the additional sales and marketing expenses as a result of hiring additional employees in connection with the recent acquisition of ARC and the transactions we entered into with NXP.

General and administrative expenses consist primarily of personnel, corporate governance and other costs associated with the management of our business. General and administrative expenses for the three months ended December 31, 2009 totaled $4.6 million, representing an increase of $2.5 million, or 115.6%, from the three months ended December 31, 2008. General and administrative expenses, as a percentage of total revenue were 21.1% for the three months ended December 31, 2009, compared to 18.7% for the same period in fiscal 2009. The increase in general and administrative expenses for the three months ended December 31, 2009 was mainly attributable to the acquisition of ARC and the transactions we entered into with NXP.

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