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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-05-05 · 88 added, 112 removed, 137 unchanged (59% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements.

All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including statements of, about, concerning or regarding:

All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including without limitation statements of, about, concerning or regarding:

our plans, strategies and objectives for future operations, including with respect to growing our business and sustaining profitability;

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• the impact of tariffs, the adoption of trade restrictions affecting our products or suppliers, a United States withdrawal from or significant renegotiation of trade agreements, the occurrence of trade wars, the closing of border crossings, and other changes in trade regulations or relationships;

• our ability to implement our stock repurchase program or that it will enhance long-term stockholder value.

Other factors besides those listed here also could adversely affect us.

• our ability to meet financial covenant requirements which could impact, among other things, our liquidity;

• our ability to implement our stock repurchase program or the extent to which it enhances long-term stockholder value.

Other factors besides those listed here could also adversely affect us.

See “Item 1A.

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We anticipate growth in revenue in fiscal 2022.

We continue to have a backlog entering the final quarter of fiscal 2021 and we anticipate continuing our strong momentum across all verticals.

We continue to have a backlog entering the first quarter of fiscal 2022 and we anticipate continuing our strong momentum across all verticals.

We have made inroads into the U.S.

rural broadband and wireless internet service provider areas, and there is now further evidence of investment to support 5G deployments with our U.S.

service provider customers and we have returned to growth for international.

service provider customers.

We have also seen further growth for our international regions.

In March 2020, the World Health Organization characterized the current respiratory illness caused by novel coronavirus disease, known as COVID-19, as a pandemic.

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The COVID-19 pandemic has led to an increase in our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking or requiring.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with certainty, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, including the ongoing vaccination efforts and how quickly and to what extent normal economic and

operating activities can resume.

The extent to which the COVID-19 pandemic impacts our business, prospects and results of operations will depend on future developments, which are highly uncertain, including, but not limited

to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact, including the ongoing vaccination efforts, any new variant strains of the underlying virus, and how quickly and to what extent normal economic and operating activities can resume.

Management is actively monitoring the impact of the COVID-19 pandemic on our financial condition, liquidity, operations, suppliers, industry, and workforce.

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Our manufacturing sites remain operational, and we are maintaining social distancing and have enhanced cleaning protocols and usage of personal protective equipment, where appropriate.

The impact to our supply chain lead times and ability to fulfill orders was minimal for the three and nine months ended April 2, 2021.

However, depending on pandemic-related factors like the uncertain duration of temporary manufacturing restrictions as well as our ability to perform field services during shelter in place orders, we could experience constraints and delays in fulfilling customer orders in future periods.

Our gross margin in the current quarter was negatively impacted by inflationary pressures incurred to overcome supply chain and logistical bottlenecks.

These were partially offset by price increases and surcharges.

We are monitoring, assessing and adapting to the situation and preparing for possible implications to our business, supply chain and customer demand.

We expect the potential for these challenges to continue until business and economic activities return to more normal levels.

The financial results for the three and nine months ended April 2, 2021 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

The financial results for the three months ended October 1, 2021 reflect some of the reduced activity experienced during the period in various locations around the world and are not necessarily indicative of the results for the full year.

Operations Review

The market for mobile backhaul continued to be our primary addressable market segment globally in the first nine months of fiscal 2021.

The market for mobile backhaul continued to be our primary addressable market segment globally in the first three months of fiscal 2022.

In North America, we supported 5G and long-term evolution (“LTE”) deployments of our mobile operator customers, public safety network deployments for state and local governments, and private network implementations for utilities and other customers.

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We continue to find that our strength in turnkey and after-sale support services is a differentiating factor that wins business for us and enables us to expand our business with existing customers in all markets.

However, as disclosed above and in the “Risk Factors” section in Item 1A of our Annual Report on Form 10-K filed with the SEC on August 27, 2020, a number of factors could prevent us from achieving our objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that we service.

However, as disclosed above and in the “Risk Factors” section in Item 1A of our Annual Report on Form 10-K filed with the SEC on August 25, 2021, a number of factors could prevent us from achieving our objectives, including ongoing pricing pressures attributable to competition and macroeconomic conditions in the geographic markets that we serve.

We manage our sales activities primarily on a geographic basis in North America and three international geographic regions:

(1) Africa and the Middle East, (2) Europe and Russia, and (3) Latin America and Asia Pacific.

Revenue by region for the three and nine months April 2, 2021 and April 3, 2020 and the related changes were as follows:

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Revenue by region for the three months ended October 1, 2021 and October 2, 2020 and the related changes were as follows:

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

North America $ 50,937 $ 45,499 $ 5,438 12.0 %

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$ 73,158 $ 66,290 $ 6,868 10.4 %

Our revenue in North America increased by $4.8 million, or 12.8%, during the third quarter of fiscal 2021 compared with the same period of fiscal 2020.

Revenue in North America increased by $23.2 million, or 20.4%, during the first nine months of fiscal 2021 compared with the same period of fiscal 2020.

The increase in North America revenue during the three and nine months of fiscal 2021 was primarily due to an increase in the number of private network projects.

Our revenue in Africa and the Middle East increased by $0.7 million or 7.3% during the third quarter of fiscal 2021 compared with the same period of fiscal 2020.

Revenue in Africa and the Middle East increased by $2.5 million, or 8.6%, during the first nine months of fiscal 2021 compared with the same period of fiscal 2020.

This increase in revenue during the three and nine months of fiscal 2021 was primarily due to increased sales to mobile operators in the region.

Revenue in Europe and Russia increased by $1.4 million, or 72.4%, for the third quarter of fiscal 2021 compared with the same period of fiscal 2020.

Revenue in Europe and Russia decreased by $0.7 million, or 8.7%, during the first nine months of fiscal 2021 compared with the same period of fiscal 2020.

This increase and decrease during the three and nine months of fiscal 2021 was primarily due to level of sales to mobile operators in the region.

Revenue in Latin America and Asia Pacific decreased by $1.8 million, or 13.8%, during the third quarter of fiscal 2021 compared with the same period of fiscal 2020.

Revenue in Latin America and Asia Pacific increased by $2.3 million, or 8.7%, during the first nine months of fiscal 2021 compared with the same period of fiscal 2020.

The decrease in the third quarter was from lower sales to mobile operator customers.

The increase during the nine months of fiscal 2021 was primarily due to increased sales to mobile operators in the region during the first half of fiscal 2021.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Our revenue in North America increased by $5.4 million, or 12.0%, during the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

The increase in North America revenue during the first three months of fiscal 2022 was primarily due to an increase in revenue from private network projects and rural broadband sales.

Our revenue in Africa and the Middle East increased by $0.1 million or 1.2% during the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

This increase in revenue during the first three months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Revenue in Europe and Russia increased by $0.4 million, or 19.5%, for the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

This increase during the first three months of fiscal 2022 was primarily due to increased sales to private networks in the region.

Revenue in Latin America and Asia Pacific increased by $0.9 million, or 10.8%, during the first quarter of fiscal 2022 compared with the same period of fiscal 2021.

The increase during the first three months of fiscal 2022 was primarily due to increased sales to mobile operators in the region.

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Product sales $ 50,847 $ 44,464 $ 6,383 14.4 %

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$ 73,158 $ 66,290 $ 6,868 10.4 %

Our revenue from product sales increased by $4.3 million, or 10.5%, for the third quarter of fiscal 2021 compared with the same quarter of fiscal 2020.

Our services revenue increased by $0.7 million, or 3.5%, during the third quarter of fiscal 2021 compared with the same quarter of fiscal 2020.

Our revenue from product sales increased by $24.7 million, or 22.1%, for the first nine months of fiscal 2021 compared with the same period of fiscal 2020.

Our services revenue increased by $2.5 million, or 3.9%, during the first nine months of fiscal 2021 compared with the same period of fiscal 2020.

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Our revenue from product sales increased by $6.4 million, or 14.4%, for the first quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Our services revenue increased by $0.5 million, or 2.2%, during the first quarter of fiscal 2022 compared with the same quarter of fiscal 2021.

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Revenue $ 73,158 $ 66,290 $ 6,868 10.4 %

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32.1 % 35.3 %

Gross margin for the third quarter of fiscal 2021 increased by $3.6 million, or 16.5% compared with the same quarter of fiscal 2020.

Gross margin for the first nine months of fiscal 2021 increased by $13.9 million, or 22.1%.

For the three and nine months of fiscal 2021, gross margin improved over the same period in fiscal 2020 primarily due to higher volume of Private Network business and increased sales through Aviat Store which serves primarily the Rural Broadband space.

Both product and service margin as a percentage of product and service revenue increased in the third quarter of fiscal 2021 and in the first nine months of fiscal 2021 compared with the same period of fiscal 2020 primarily due to higher level of Private Network business and increased sales through Aviat Store.

Gross margin for the first quarter of fiscal 2022 increased by $1.8 million, or 7.6% compared with the same quarter of fiscal 2021.

Our gross margin in the current quarter was negatively impacted by inflationary pressures incurred to overcome supply chain and logistical bottlenecks.

These were partially offset by price increases and surcharges.

Product margin as a percentage of product revenue was flat compared to the same period in 2021.

While first quarter fiscal 2022 product sales volume increased in higher margin segments, increased supply chain costs offset those margin gains, holding margin rates even with the first quarter of fiscal 2021.

Service margin rates decreased in North America and in the international markets compared to the first quarter of fiscal 2021.

Research and Development Expenses

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Research and development $ 5,910 $ 4,847 $ 1,063 21.9 %

7.9 % 7.9 % 7.6 % 8.6 %

Our research and development expenses increased by $0.4 million and $0.5 million, or 8.2% and 3.1%, in the three and nine months, respectively of fiscal 2021 compared with the same periods of fiscal 2020 primarily due to increased product development activities.

Our research and development expenses increased by $1.1 million or 21.9% in the first three months of fiscal 2022 compared with the same periods of fiscal 2021 primarily due to increased product development activities.

Selling and Administrative Expenses

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Selling and administrative $ 12,698 $ 12,837 $ (139) (1.1) %

17.4 % 19.4 %

Our selling and administrative expenses decreased by $0.1 million, or 0.8%, in the third quarter of fiscal 2021 compared with the same period in fiscal 2020.

Our selling and administrative expenses decreased by $2.8 million, or 6.3%, for the nine months of fiscal 2021 compared with the same period in fiscal 2020.

The decreases for the three and nine months of fiscal 2021 compared to comparable periods of fiscal 2020 were primarily due to lower travel expenses and restructuring savings offset in part by higher sales-related expenses.

Our selling and administrative expenses decreased by $0.1 million, or 1.1%, in the first quarter of fiscal 2022 compared with the same period in fiscal 2021.

The decreases for the first three months of fiscal 2022 compared to comparable periods of fiscal 2021 were primarily due to restructuring savings.

Restructuring Charges

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Restructuring charges $ 659 $ — $ 659 100.0 %

In the third quarter and the first nine months of fiscal 2021, we recognized restructuring charges of $1.2 million primarily related to the restructuring plan (the “Fiscal 2021 Plan”) approved by our Board of Directors.

In the first quarter of fiscal 2022, we recognized restructuring charges of $0.7 million primarily related to the restructuring plan (the “Fiscal 2021 Plan”) approved by our Board of Directors in the third and fourth quarters of fiscal 2021.

The Fiscal 2021 Plan is anticipated to entail a reduction in force of approximately 30 employees to be implemented through the second quarter of fiscal year 2022, with a certain number of positions being consolidated and/or relocated.

Interest Income and Interest Expense

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Interest income $ 128 $ 112 $ 16 14.3 % $ 202 $ 318 $ (116) (36.5) %

Interest expense $ — $ (19) $ 19 (100.0) % $ (1) $ (23) $ 22 (95.7) %

Interest income reflected interest earned on our cash equivalents, which were comprised of money market funds and bank certificates of deposit.

Interest expense was primarily related to interest associated with borrowings from Silicon Valley Bank (“SVB Credit Facility”).

Three Months Ended Nine Months Ended

(In thousands, except percentages) April 2, 2021 April 3, 2020 $ Change % Change April 2, 2021 April 3, 2020 $ Change % Change

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Interest income, net $ 28 $ 35 $ (7) (20.0) %

Interest income, net reflect interest earned on our cash equivalents, which were comprised of money market funds and bank certificates of deposit.

Three Months Ended

(In thousands, except percentages) October 1, 2021 October 2, 2020 $ Change % Change

Income before income taxes $ 6,842 $ 6,600 $ 242 3.7 %

(Benefit from) provision for income taxes $ (90,568) $ 598 $ (91,166) (15,245.2) % $ (88,629) $ 2,439 $ (91,068) (3,733.8) %

Provision for income taxes $ 2,160 $ 664 $ 1,496 225.3 %

We estimate our annual effective tax rate at the end of each quarterly period, and we record the tax effect of certain discrete items in the interim period in which they occur, including changes in judgment about uncertain tax positions and deferred tax valuation allowances.

The tax benefit for the first nine months of fiscal 2021 was primarily due to the release of valuation allowance on U.S.

federal and state deferred tax assets.

The tax expense for the first nine months of fiscal 2020 was primarily related to profitable subsidiaries and a $0.4 million increase in our reserves for uncertain tax positions.

At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets on a more likely than not basis.

During the third quarter of fiscal 2021, we recorded a valuation allowance release of $92.2 million as a discrete item based on management’s reassessment of the

amount of its U.S.

federal and state deferred tax assets that are more likely than not to be realized, primarily as a result of increases in U.S.

profitability in the current period and expectations of continued profitability in future periods.

In performing our analysis, we used the most updated plans and estimates that we currently use to manage the underlying business and calculated the utilization of our deferred tax assets.

We continue to maintain a valuation allowance of $1.4 million on certain U.S.

federal and state deferred tax assets that we believe is not more likely than not to be realized in future periods.

During the third quarter of 2021, we received a tax refund of $3.5 million from the U.S.

Internal Revenue Service primarily related to our refundable alternative minimum tax credit claim and recorded minimal tax benefit related to interest as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the Financial Administration of the Republic of Slovenia for fiscal years 2016 to 2018 and recorded $0.4 million of tax expense related to the denial of research and development tax relief as a discrete item.

During the second quarter of 2021, we effectively settled a tax audit with the General Authority of Zakat and Tax in Saudi Arabia for fiscal years 2016 to 2018 and recorded minimal tax benefit related to the release of previously recorded ASC 740-10 reserve as a discrete item.

During the first quarter of 2021, we received a tax refund of $1.2 million from the Federal Revenue of Brazil related to our withholding tax refund claim and recorded minimal tax expense related to interest as a discrete item.

The tax benefit for the first quarter of fiscal 2022 was primarily due to the tax expense related to U.S.

profitable subsidiaries.

The tax expense for the first quarter of fiscal 2021 was primarily related to profitable subsidiaries.

Liquidity, Capital Resources, and Financial Strategies

Sources of Cash

As of April 2, 2021, our total cash and cash equivalents were $45.8 million.

As of October 1, 2021, our total cash and cash equivalents were $47.3 million.

Approximately $24.2 million, or 51.1%, was held in the United States.

The remaining balance of $23.2 million, or 48.9%, was held by entities outside the United States.

Of the amount of cash and cash equivalents held by our foreign subsidiaries on April 2, 2021, $19.1 million was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.

Of the amount of cash and cash equivalents held by our foreign subsidiaries on October 1, 2021, $20.9 million was held in jurisdictions where our undistributed earnings are indefinitely reinvested, and if repatriated, would be subject to foreign withholding taxes.

Operating Activities

Cash provided by or used in operating activities is presented as net income adjusted for non-cash items and changes in operating assets and liabilities.

Net cash provided by operating activities was $14.2 million for the first nine months of fiscal 2021, compared to $14.6 million for the first nine months of fiscal 2020;

this difference was primarily related to a net change in Accounts receivable and partially offset by the net change in Net income.

Net cash provided by noncash items was $(81.8) million for the first nine months of 2021.

The net changes in operating assets and liabilities resulted in a net use of cash of $11.3 million for the first nine months of fiscal 2021, compared to net cash provided by operating activities of $7.4 million for the same period in fiscal 2020.

Changes in operating assets and liabilities resulted in a net use of cash for the first nine months of fiscal 2021 primarily related to Accounts receivable that fluctuate from period to period, depending on the amount, timing of sales and billing activities and cash collections;

and an increase in certain levels of inventories primarily to mitigate supply chain constraints.

The use of cash from assets and liabilities was partially offset by customer Advance payments and unearned revenue;

and the timing of payments of Accounts payable.

Net cash provided by operating activities was $0.7 million for the first three months of fiscal 2022, compared to $4.2 million for the first three months of fiscal 2021;

this difference was primarily related to a net change in Accounts receivable and partially offset by the net change in Accounts payable.

Net cash provided by noncash items was $3.9 million for the first three months of 2022.

The net changes in operating assets and liabilities resulted in a net use of cash of $7.9 million for the first three months of fiscal 2022, compared to net use of cash $4.5 million for the same period in fiscal 2021.

Changes in operating assets and liabilities resulted in a net use of cash for the first three months of fiscal 2022 primarily related to the timing of payments of Accounts payable offset by the use of cash by Accounts receivable that fluctuate from period to period, depending on the amount, timing of sales and billing activities and cash collections.

Investing Activities

Net cash used in investing activities was $2.4 million and $3.9 million for the first nine months of fiscal 2021 and 2020, respectively, which consisted of capital expenditures.

During the fourth quarter of fiscal year 2021, we expect to spend approximately $1 million to $2 million for capital expenditures, primarily on equipment for development and manufacturing of new products and IT infrastructure.

Net cash used in investing activities was $0.3 million and $1.0 million for the first three months of fiscal 2022 and 2021, respectively, which consisted of capital expenditures.

During the remainder of fiscal year 2022, we expect to spend approximately $1 million to $2 million for capital expenditures, primarily on equipment for development and manufacturing of new products and IT infrastructure.

Financing Activities

Financing cash flows consist primarily of proceeds from and repayments of short-term debt, repurchase of stock and proceeds from the sale of shares of common stock through employee equity plans.

Net cash used in financing activities was $7.7 million for the first nine months of fiscal 2021, primarily due to $9.0 million repayment of short-term debt partially offset by cash proceeds from the issuance of common stock under employee stock plans of $1.9 million.

Net cash used in

financing activities was $2.5 million for the first nine months of fiscal 2020, primarily due to repurchases of common stock of $1.8 million and the payments for taxes related to net settlement of equity awards of $0.8 million.

As of April 2, 2021, our principal sources of liquidity consisted of $45.8 million in cash and cash equivalents;

$23.5 million of available credit under our $25.0 million SVB Credit Facility, which matures on June 28, 2021, and future collections of receivables from customers.

Net cash used in financing activities was $0.8 million for the first three months of fiscal 2022, primarily due to the purchase of treasury stock of $0.7 million.

As of October 1, 2021, our principal sources of liquidity consisted of $47.3 million in cash and cash equivalents and $22.5 million of available credit under our $25.0 million SVB Credit Facility, which matures on June 28, 2024, and future collections of receivables from customers.

We regularly require letters of credit from certain customers, and, from time to time, these letters of credit are discounted without recourse shortly after shipment occurs in order to meet immediate liquidity requirements and to reduce our credit and sovereign risk.

Historically, our primary sources of liquidity have been cash flows from operations and credit facilities.

We believe that our existing cash and cash equivalents, the available line of credit under the SVB Credit Facility and future cash collections from customers will be sufficient to provide for our anticipated requirements for working capital and capital expenditures for at least the next 12 months.

Additionally, we have an effective shelf registration statement on Form S-3 allowing us to offer and sell, either individually or in combination, in one or more offerings, up to a total dollar amount of $200 million of any combination of the securities described in the shelf registration statement or a related prospectus supplement.

We believe that our existing cash and cash equivalents, the available line of credit under the SVB Credit Facility, potential issuances of debt or equity securities and future cash collections from customers will be sufficient to provide for our anticipated requirements for working capital and capital expenditures for at least the next 12 months.

On May 17, 2021, we entered into Amendment No.

3 to Third Amended and Restated Loan and Security Agreement which extended the maturity date of the SVB Credit Facility to June 28, 2021.

While we intend to continue to renew the SVB Credit Facility annually, there can be no assurance that the SVB Credit Facility will be renewed.

In addition, there can be no assurance that our business will generate cash flow from operations, that we will be in compliance with the quarterly financial covenants contained in the SVB Credit Facility, or that we will have a sufficient borrowing base under such facility.

If we are not in compliance with the financial covenants or do not have sufficient eligible accounts receivable to support our borrowing base, borrowings under the SVB Credit Facility may not be available or our borrowing base may be diminished.

Over the longer term, if we are unable to maintain cash balances or generate sufficient cash flow from operations to service our obligations that may arise in the future, we may be required to sell assets, reduce capital expenditures, or obtain financing.

If we need to obtain additional financing, we cannot be assured that it will be available on favorable terms, or at all.

Our ability to make scheduled principal payments or pay interest on or refinance any future indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the microwave communications market and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.

As of April 2, 2021, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility and there was no amount outstanding under the SVB Credit Facility.

4 to Third Amended and Restated Loan and Security Agreement to extend the maturity date to June 28, 2024.

The SVB Credit Facility provides for a $25.0 million accounts receivable formula-based revolving credit facility that can be borrowed by the U.S.

company, with a $25.0 million sub-limit that can be borrowed by our U.S.

and Singapore entities.

Loans may be advanced under the SVB Credit Facility based on a borrowing base equal to a specified percentage of the value of eligible accounts of all borrowers under the SVB Credit Facility.

The borrowing base is subject to certain eligibility criteria.

Availability under the accounts receivable formula-based revolving credit facility can also be utilized to issue letters of credit with a $12.0 million sub-limit.

We may prepay loans under the SVB Credit Facility in whole or in part at any time without premium or penalty.

As of October 1, 2021, available credit under the SVB Credit Facility was $22.5 million reflecting the calculated borrowing base of $25.0 million less outstanding letters of credit of $2.5 million.

did not borrow against the SVB Credit Facility during the first quarter of fiscal 2022 and there was no borrowing outstanding as of October 1, 2021 or July 2, 2021.

As of October 1, 2021, we were in compliance with the quarterly financial covenants, as amended, contained in the SVB Credit Facility and there was no amount outstanding under the SVB Credit Facility.

In addition, we have an uncommitted short-term line of credit of $0.4 million from a bank in New Zealand to support the operations of our subsidiary located there.

This line of credit provides for $0.3 million in short-term advances at various interest rates, all of which was available as of April 2, 2021 and July 3, 2020.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $0.1 million was outstanding as of April 2, 2021 and July 3, 2020.

This line of credit provides for $0.3 million in short-term advances at various interest rates, all of which was available as of October 1, 2021 and July 2, 2021.

The line of credit also provides for the issuance of standby letters of credit and company credit cards, of which $0.1 million was outstanding as of October 1, 2021 and July 2, 2021.

This facility may be terminated upon notice, is reviewed annually for renewal or modification, and is supported by a corporate guarantee.

On April 13, 2021, we filed a registration statement on Form S-3 with the SEC using a “shelf” registration process.

Once the shelf registration statement is declared effective by the SEC, we will be able to, from time to time, offer and sell, either individually or in combination, in one or more offerings, up to a total dollar amount of $200 million of any combination of the securities described in the shelf registration statement or a related prospectus supplement.

Restructuring Payments

We had liabilities for restructuring activities totaling $2.0 million as of April 2, 2021, which were classified as current liabilities and expected to be paid out in cash over the next 12 months.

We had liabilities for restructuring activities totaling $3.0 million as of October 1, 2021, which were classified as current liabilities and expected to be paid out in cash over the next 12 months.

We expect to fund these future payments with available cash and cash provided by operations.

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The amounts disclosed in our fiscal 2021 Annual Report on Form 10-K filed with the SEC on August 25, 2021 include our commercial commitments and contractual obligations.

During the first nine months of fiscal 2021, no material changes occurred in our contractual obligations to purchase goods and services or to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees, and other arrangements as disclosed in our fiscal 2020 Annual Report on Form 10-K.

During the first three months of fiscal 2022, no material changes occurred in our contractual obligations to purchase goods and services or to make payments under operating leases or our contingent liabilities on outstanding letters of credit, guarantees, and other arrangements as disclosed in our fiscal 2021 Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

In accordance with the definition under SEC rules (Item 303(a)(4)(ii) of Regulation S-K), any of the following qualify as off-balance sheet arrangements:

We consider the following items to qualify as off-balance sheet arrangements:

• any obligation under certain guarantee contracts;

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Currently we are not participating in transactions that generate relationships with unconsolidated entities or financial partnerships, including variable interest entities, and we do not have any material retained or contingent interest in assets as defined above.

As of April 2, 2021, we did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect liquidity.

As of October 1, 2021, we did not have material financial guarantees or other contractual commitments that are reasonably likely to adversely affect our current or future financial condition.

In addition, we are not currently a party to any related party transactions that materially affect our results of operations, cash flows or financial condition.

As of April 2, 2021, we had commercial commitments of $57.8 million.

As of October 1, 2021, we had commercial commitments of $64.0 million.

Please refer to “Note 12 Commitments and Contingencies” of the Notes to unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for Contractual Obligations and Off-Balance Sheet Arrangements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis