Note 6. Investments In and Notes Receivable from Privately Held Companies

3 Months Ended

May 04, 2013

Investment Holdings [Text Block]

6.             Investments in and notes receivable from privately held companies

The following table sets forth the value of investments in and notes receivable from privately-held companies (in thousands): 

Equity investments:	May 4, 2013		February 2, 2013
Issuer B	$	2,000	$	2,000
Issuer C		1,000		1,000
Issuer D		1,000		1,000
Issuer E		300		300
Issuer F		2,000		2,000
Issuer G		143		143
Total equity investments		6,443		6,443
Notes receivable:
Issuer B		500		750
Issuer H		2,500		2,500
Total notes receivable		3,000		3,250
Total equity investments and notes receivable	$	9,443	$	9,693

Equity investments

During fiscal 2009, we purchased shares of preferred stock in a privately-held venture capital funded technology company (“Issuer B”) at a total investment cost of $1.0 million. In the fourth quarter of fiscal 2010, we purchased additional shares of preferred stock in Issuer B at a cost of $1.0 million.

In the third quarter of fiscal 2011, we purchased shares of preferred stock in another privately-held technology company (“Issuer C”) at a total investment cost of $1.0 million.

In the fourth quarter of fiscal 2011, we purchased shares of preferred stock in another privately-held technology company (“Issuer D”) at a total investment cost of $1.0 million.

In the fourth quarter of fiscal 2011, we also purchased a convertible note from another privately-held technology company (“Issuer E”) with a face value equal to the cost of $0.3 million.

In the second quarter of fiscal 2012, we purchased shares of preferred stock in another privately-held technology company (“Issuer F”) at a total investment cost of $2.0 million.

In the third quarter of fiscal 2012, we made an equity investment of $0.1 million in a privately-held joint venture (“Issuer G”).

Notes receivable from privately-held companies

In November 2010, we loaned $1.0 million to Issuer B and received a secured promissory note. This promissory note is secured by the assets of Issuer B, bears interest at a rate of 5% per annum and is scheduled to be fully repaid by June 2013.

In January 2012, we loaned $2.5 million to a privately-held venture capital funded technology company (“Issuer H”), pursuant to a strategic agreement dated January 25, 2012. We made this loan in exchange for a secured promissory note, which is secured by the assets of Issuer H and bears interest at a rate of 3% per annum. The principal amount and accrued interest are due 36 months from the agreement date. On May 16, 2013, we entered into a Non-Exclusive License Agreement with Issuer H, under which we agreed to apply the loan balance of $2.5 million to offset the initial license fees under this license agreement, as further described in Note 18.

As of May 4, 2013 and February 2, 2013, our notes receivable from privately-held companies were valued at $3.0 million and $3.3 million, respectively, representing their cost. We made each of the above-described investments because we viewed the issuer as either having strategic technology or a business that would complement our technological capabilities or help create an opportunity for us to sell our chipset solutions. The Company analyzes each investment quarterly for evidence of impairment.

The Company’s President and Chief Executive Officer is a member of the Board of Directors of five of the seven companies we have invested in. Each of the aforementioned investment transactions is negotiated without the personal involvement of our Board members or, where applicable, the executive officer who may have a personal interest in the transaction.