What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-31 · 204 added, 239 removed, 199 unchanged (69% of the section changed)

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costs for their country.

cash and cash equivalents balance on December 31, 2021 was $12.6 million compared to $772 thousand on December 31, 2020.

31, 2021, we had $5.1 million of outstanding borrowings on our asset-based credit line with availability of $445 thousand and working

capital of $27.8 million.

August 2021, we completed a public offering raise of $22.7 million and issued an aggregate of 10,000,000 shares at a purchase price of

$2.50 per share.

Other major changes in cash and cash equivalents during fiscal 2021 was a decrease of approximately $4.3 million in

accounts receivable, an increase of $16.1 million in inventories, an increase of $862 thousand in accounts payable and a decrease

of $2.3 million in accrued expenses.

In fiscal 2021, the Company also had a net loss of $3.6 million, which contributed

to a decrease in cash and cash equivalents.

The Company’s ability

to maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand, increasing SaaS sales, and

collect related receivables.

to July 2020, almost all of our products were produced in China and were subject to a tariff on our cost of goods at the time of entry

into the U.S.

Beginning in July 2020, a majority of our products were produced in Vietnam while a small portion of our products continued

to be produced in China.

The China related tariff is 25%.

These tariffs have a significant impact on our cost of inventory and profitability.

These tariffs may not be reduced and may even be increased.

Although we have significantly reduced tariff costs with the transition to

Vietnam production, it is not possible to predict the impact of tariffs in the future, which could have a material adverse impact on

our net income and cash position and we may continue to experience losses.

the Company has recently experienced losses, it has continued to experience sales growth.

We have experienced six consecutive years with

double-digit sales growth.

In the years ended December 31, 2021 and 2020, we generated net sales of $55.4 million and $48.0 million,

respectively.

are subject to risks and uncertainties as a result of the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic on our

business is highly uncertain and difficult to predict, particularly as variants of the coronavirus continue to spread around the world.

In March 2020, we instituted office closures, travel restrictions and a work-from-anywhere policy for substantially all our employees

due to shelter-in-place mandates.

In June 2021, we opened our U.S.

offices to employees, who choose to work in the office, and we lifted

certain travel restrictions.

The COVID-19 pandemic has had a prolonged impact on our supply chain operations due to restrictions, reduced

capacity, and limited availability from suppliers on whom we rely for sourcing components and materials and from third-party partners

on whom we rely for manufacturing, warehousing and logistics services.

Although demand for our products has increased relative to pre-pandemic

levels as consumers and businesses seek flexible networking solution for their day-to-day needs, customers’ purchasing decisions

over the long-term may be impacted by the pandemic and its impact on the economy, which could in turn impact our revenue and results

of operations.

Furthermore, our supply chain continues to face constraints primarily due to challenges in sourcing components and materials

and managing global logistics and transport services for our products due to shortages and delays.

The prolonged impact of COVID-19 could

exacerbate these constraints or cause further supply chain disruptions.

In 2021, we experienced increases in costs of

materials and components for our products.

We expect these costs to remain elevated for the foreseeable future.

cash and cash equivalents balance on December 31, 2022 was $530 thousand compared to $12.6 million on December 31, 2021.

31, 2022, we had $4.8 million of outstanding borrowings on our asset-based credit line with availability of $38 thousand and $1.0 million

outstanding on the Bridge Loan.

Our working capital was $15.7 million as of December 31, 2022.

major changes in cash and cash equivalents during fiscal 2022 was a decrease of approximately $2.2 million in accounts receivables, a

decrease of $6.7 million in inventory, a decrease of $9.6 million in accounts payable, and a decrease of $839 thousand in accrued expenses.

In fiscal 2022, the Company also had a net loss of $15.5 million, which contributed to a decrease in cash and cash equivalents.

The Company’s ability to

maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand, increasing SaaS sales, and collecting

related receivables.

The Company will be required to refinance its debt in 2023 given the SVB Loan Agreement expires in January 2024.

In the first quarter of 2023, the Company has implemented cost reduction plans to align its cost structure to its sales and increase its

The Company will continue to monitor its cost in relation to its sales and adjust its cost structure accordingly.

the years ended December 31, 2022 and 2021, we generated net sales of $50.6 million and $55.4 million, respectively.

COVID-19 pandemic continued to impact our supply chain operations due to restrictions, reduced capacity, and limited availability from

suppliers on whom we rely for sourcing components and materials and from third-party partners on whom we rely for manufacturing, warehousing,

and logistics services.

In 2022, we experienced increases in costs of materials, components for our products, and freight costs.

in the third quarter of 2022, we began seeing reduction in transportation costs and transport availability.

We will not realize the gross

margin benefits from the transportation cost reductions until mid-2023 as we continue to work through inventory obtained when freight

costs were elevated.

If disruptions in our supply chain operations or any increases to costs associated with supply chain operations

brought on by COVID-19 occur again, we could experience a negative impact on our revenue and operating margin performance.

demand for our products has increased relative to pre-pandemic levels as consumers and businesses seek flexible networking solutions

for their day-to-day needs, customers’ purchasing decisions over the long-term may be impacted by the pandemic and its impact on

the economy, which could in turn impact our revenue and results of operations.

Accounting Standards

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wireless routers, MoCA adapters and mesh home networking devices.

We also sell the Minim subscription service that

enables and secures a better connected home using the Minim AI-driven smart home WiFi management and security platform.

SaaS is offered over a defined contract period, generally one year, and are sold to ISPs, who then promote the services to their

These services are available as an on-demand application over the defined term.

The agreements include service offerings,

which deliver applications and technologies via cloud-based deployment models that we develop functionality for, provide unspecified

updates and enhancements for, and host, manage, provide upgrades and support for the customers’ access by entering into solution

agreements for a stated period.

The monthly fees charged to the customers are based on the number of subscribers utilizing the services

each month, and the revenue recognized generally corresponds to the monthly billing amounts as the services are delivered.

do not have the contractual right or ability to take possession of the hosted software.

We also sell the Minim subscription service that enables and secures

a better connected home using the Minim AI-driven smart home WiFi management and security platform.

SaaS is offered over a defined contract period, generally one year.

These services are available as an on-demand application over the

defined term.

The agreements include service offerings, which deliver applications and technologies via cloud-based deployment models

that we develop functionality for, provide unspecified updates and enhancements for, and host, manage, provide upgrades and support for

the customers’ access by entering into solution agreements for a stated period.

The monthly fees charged to the customers are based

on the number of subscribers utilizing the services each month, and the revenue recognized generally corresponds to the monthly billing

amounts as the services are delivered.

Customers do not have the contractual right or ability to take possession of the hosted software.

consider each product and each service contract to be a distinct performance obligation.

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and services are considered distinct performance obligations that should be accounted for separately versus together may require significant

Judgment is also required to determine the stand-alone selling price (“SSP”) for each distinct performance

Judgment is also required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation.

We use an observable price to estimate SSP for items that are sold separately.

In instances where SSP is not directly observable,

such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions

and other observable inputs.

Product Returns .

Products are returned by retail stores and distributors for inventory balancing, contractual stock rotation privileges, and warranty

repair or replacements.

Analyses of actual returned product are compared to analyses of the product return estimates.

concluded that the current process of estimating the return reserve represents a fair measure with which to adjust revenue.

goods are variable and under ASC Topic 606, Revenue from Contracts with Customers, are estimated and recognized as a

reduction of revenue as performance obligations are satisfied (e.g., upon shipment of goods).

Under ASC Topic 606, the

Company monitors pending authorized returns of goods and, if deemed appropriate, record the right of return asset accordingly.

In instances where SSP is not directly observable, such

as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and

other observable inputs.

Products are returned by retail stores and distributors for inventory balancing and warranty repair or replacements.

of actual returned product are compared to analyses of the product return estimates.

We have concluded that the current process of estimating

the return reserve represents a fair measure with which to adjust revenue.

Returned goods are variable and under ASC Topic 606, Revenue

from Contracts with Customers, are estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g.,

upon shipment of goods).

Under ASC Topic 606, the Company monitors pending authorized returns of goods and, if deemed appropriate, record

the right of return asset accordingly.

Valuation and Cost of Goods Sold.

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net realizable value.

We review inventories for obsolete and slow-moving products each quarter and make provisions based on our estimate

of the probability that the material will not be consumed or that it will be sold below cost.

Additionally, material product certification

costs on new products are capitalized and amortized over the expected period of value of the respective products.

We review inventories for obsolete and slow-moving products and make provisions based on our estimate of the probability

that the material will not be consumed or that it will be sold below cost.

Additionally, material product certification costs on new

products are capitalized and amortized over the expected period of value of the respective products.

of Deferred Tax Assets.

As part of the process of preparing our financial statements, we estimate our income tax expense and deferred

income tax position.

This process involves the estimation of our actual current tax exposure together with assessing temporary differences

resulting from differing treatment of items for tax and accounting purposes.

These differences result in deferred tax assets and liabilities,

which are included in our balance sheet.

We then assess the likelihood that our deferred tax assets will be recovered from future taxable

To the extent we believe that recovery is not likely, we establish a valuation allowance.

Changes in the valuation allowance

are reflected in the statement of operations.

We estimate our income tax expense and deferred income tax position.

This process involves the estimation

of our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax

and accounting purposes.

These differences result in deferred tax assets and liabilities, which are included in our balance sheet.

then assess the likelihood that our deferred tax assets will be recovered from future taxable income.

To the extent we believe that recovery

is not likely, we establish a valuation allowance.

Changes in the valuation allowance are reflected in the statement of operations.

management judgment is required in determining our provision for income taxes and any valuation allowances.

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If we establish a record of continuing profitability, at some point we will be required to reduce the valuation allowance and

recognize an equal income tax benefit which will increase net income in that period(s).

recognize an equal income tax benefit which will increase net income in that period.

of Operations

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31, 2022 and 2021 presented in absolute dollars and as a percentage of net sales, with dollars and percentage change year over year.

Years ended December 31,

Cost of goods sold

ended December 31,

$ (4,800,383 )

of goods sold

and marketing

and administrative

and development

of Trademark, net

operating expenses

Selling and marketing

General and administrative

Research and development

Sale of Trademark, net

Total operating expenses

Operating loss

Total other income (expense)

Loss before income taxes

Income tax provision

(15,045,040 )

other income (expense)

before income taxes

(15,436,896 )

tax provision

$ (15,549,244 )

$ (2,198,667 )

$ (13,350,577 )

of Fiscal Years 2022 and 2021

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Cable Modems & gateways

$ (5,317,742 )

Other networking products

Software as a Service

following table sets forth our revenues by geographic area and the changes in revenues for fiscal year ended December 31, 2021, as compared

to fiscal year ended December 31, 2020:

Years ended December 31,

North America

Outside North America

are attributed to geographies based on the location of the customer.

total net sales increased year-over-year by $7.4 million or 15.5%.

The growth in net sales is directly attributable to increased sales

of Motorola branded cable modems and gateways, including intelligent networking products that include the Minim software.

$ (4,800,383 )

total net sales decreased year-over-year by $4.8 million or 8.7%.

The decline in net sales is directly attributable to decreased sales

of Motorola branded cable modems and gateways, including intelligent networking products that include the Minim SaaS offering.

2022 and 2021, we primarily generated our sales by selling cable modems and gateways.

Sales related to SaaS offerings were $912 thousand

and $0 in the years ended December 31, 2021 and 2020, respectively.

The decrease in other category of $2.4 million in 2021 compared to

2020 is primarily due to a reduction in DSL products and a refocus on new products with growth potential outside North America as well

as within new product introductions.

Generally, our lower sales outside North America reflect the fact that cable modems are sold successfully

through retailers in the U.S.

but not in most countries outside the U.S., due primarily to variations in government regulations.

and $525 thousand in the years ended December 31, 2022 and 2021, respectively.

The increase in other networking products of $131 thousand

in 2022 compared to 2021 is primarily due to a reduction in MoCA products and a refocus on new products introductions.

of Goods Sold and Gross Margin

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the cost of finished products from our third-party manufacturers;

costs, including purchasing, product planning, inventory control, warehousing and distribution logistics;

third-party software licensing

overhead costs,

including purchasing, product planning, inventory control, warehousing and distribution logistics;

third-party software licensing fees;

inbound freight;

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and costs attributable to the provision of service offerings.

increase in gross profit was attributable to sales growth of Motorola branded cable modems and gateways.

We outsource our manufacturing,

warehousing and distribution logistics.

We believe this outsourcing strategy allows us to better manage our product costs and gross margin.

Our gross margin can be affected by a number of factors, including fluctuation in foreign exchange rates, sales returns, changes in average

selling prices, end-user customer rebates and other channel sales incentives, changes in our cost of goods sold due to fluctuations and

increases in prices paid for components, overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or

obsolete inventory.

following table presents net sales and gross margin, for the periods indicated:

decrease in gross profit was attributable to sales decline of Motorola branded cable modems and gateways, an inventory reserve on a single

product, and increased freight and component costs.

We outsource our manufacturing, warehousing, and distribution logistics.

this outsourcing strategy allows us to better manage our product costs and gross margin.

Our gross margin can be affected by a number

of factors, including fluctuation in foreign exchange rates, sales returns, changes in average selling prices, end-user customer rebates

and other channel sales incentives, changes in our cost of goods sold due to fluctuations and increases in prices paid for components,

overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or obsolete inventory.

following table presents net sales, cost of goods sold, and gross margin, for the periods indicated:

Years ended December 31,

profit and gross margin increased in fiscal 2021 compared to the prior fiscal year, primarily due to higher net sales and reductions

in tariffs and air freight expense of approximately $4.2 million.

expect fiscal 2022 gross margin to be subject to similar variabilities experienced in fiscal 2021.

$ (4,800,383 )

Cost of goods sold

profit and gross margin decreased in fiscal 2022 compared to the prior fiscal year, primarily due to the decline in net sales and an

inventory reserve on a single product of approximately $1.9 million.

expect fiscal 2023 gross margins to increase.

In 2023, we do not anticipate significant inventory reserves.

In 2022, we experienced meaningful

increase in costs for sea freight transportation as well as costs of materials and components for our products.

We expect these costs

to remain elevated for the foreseeable future.

We continue to experience disruptions from the pandemic, with manufacturing partners being

affected by factory uptime, scarcity of materials and components and limited capacity to transport cargo via sea and air.

These disruptions

have increased the length of time taken between order to production and transportation of inventory.

If such disruptions become more

widespread, they could significantly affect our ability to fulfill the demand for our products.

Forecasting gross margin percentages

is difficult, and there are several risks related to our ability to maintain or improve our current gross margin levels.

goods sold as a percentage of net sales can vary significantly based upon factors such as:

uncertainties surrounding revenue volumes,

including future pricing and/or potential discounts as a result of the economy, competition, the timing of sales, and related production

level variances;

increases in costs of freight, materials, and components for our products.

Although freight and certain component costs have reduced

beginning in the third quarter of 2022, we will not realize improvements to margins until mid-2023 as we continue to work through inventory

obtained when freight and component costs were elevated.

We may continue to experience disruptions from the pandemic, with manufacturing

partners being affected by factory uptime and scarcity of materials and components.

These disruptions could increase the length of time

taken between order to production and transportation of inventory.

If such disruptions become widespread, they could significantly affect

our ability to fulfill the demand for our products.

Forecasting gross margin percentages is difficult, and there are several risks related

to our ability to maintain or improve our current gross margin levels.

Our cost of goods sold as a percentage of net sales can vary significantly

based upon factors such as:

uncertainties surrounding revenue volumes, including future pricing and/or potential discounts as a result

of the economy, competition, the timing of sales, and related production level variances;

import customs duties and imposed tariffs;

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changes in product mix;

expenses associated with writing

off excessive or obsolete inventory;

fluctuations in freight costs;

expenses associated with writing off excessive or obsolete inventory;

fluctuations in

freight costs;

manufacturing and purchase price variances;

and changes in prices

on commodity components.

and changes in prices on commodity components.

and Marketing

and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product

marketing expenses, outbound freight costs, amortization of certain intangibles, personnel expenses for sales and marketing staff, technical

support expenses, and facility allocations.

marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff, technical support expenses, and facility

The following table presents sales and marketing expenses, for the periods indicated:

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Selling and marketing

and marketing expenses increased in fiscal 2021, as compared to the prior year, primarily due to an increase in Motorola royalty fees

of $1.2 million, personnel expenses of $2.0 million and marketing program campaigns of $1.4 million.

expect our selling and marketing expenses as a percentage of net sales in fiscal 2022 to be similar to fiscal 2021 levels.

fluctuate depending on sales levels achieved as certain expenses, such as commissions, are determined based upon the net sales achieved.

and marketing expenses increased in fiscal 2022, as compared to the prior year, primarily due to an increase in marketing program campaigns

of $1.0 million and Motorola royalty fees of $0.3 million.

expect our selling and marketing expenses as a percentage of net sales in fiscal 2023 to decrease compared to fiscal 2022 levels.

may fluctuate depending on sales levels achieved as certain expenses, such as commissions, are determined based upon the net sales achieved.

Forecasting selling and marketing expenses is highly dependent on expected net sales levels and could vary significantly depending on

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General and administrative

and administrative expenses decreased $0.6 million primarily due to a $0.9 million reduction in professional services, of which $1.6

million was attributable to the professional services related to the merger with Zoom Connectivity incurred in 2020, and a $0.4 million

reduction in personnel expenses, partially offset by $0.4 million in legal settlements, and an increase of $0.2 million

in provisions for bad debt.

and administrative expenses increased $1.2 million primarily due to an increase of $1.2 million in personnel costs, including $0.2 million

in severance costs and $0.3 million in stock compensation expense, and $0.6 million in software licenses, partially offset by a decrease

of $0.5 million in professional services fees.

general and administrative expense increases or decreases in absolute dollars are difficult to predict due to the lack of visibility

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Research and development

increase of $2.3 million was primarily due to personnel expenses of $1.5 million and increased contract labor, professional fees,

product testing, certification and software development costs of $0.8 million.

decrease of $339 thousand was primarily due to certification costs of $0.4 million, offset by $0.1 million in software licenses.

believe that innovation and technological leadership is critical to our future success, and we are committed to continuing a significant

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We expect research and development

expenses as a percentage of net sales in fiscal 2022 to be in line with or slightly above fiscal 2021 levels.

expenses as a percentage of net sales in fiscal 2023 to be in line with or slightly below fiscal 2022 levels.

Research and development

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On August 12, 2021, the Company entered into an agreement with Zoom Video Communications, Inc.

to sell all of the

Company’s right, title and interest in the ZOOM® trademark for cash consideration in the amount of $4.0 million, net of

legal costs incurred of $44 thousand.

The Company did not have a carrying basis in the trademark that was subject to the agreement

and recorded income of approximately $4.0 million, which is recorded in income from continuing operations pursuant to ASC 360-10,

Impairment or Disposal of Long-Lived Assets.

to sell all of the Company’s

right, title and interest in the ZOOM® trademark for cash consideration in the amount of $4.0 million, net of legal costs incurred

of $44 thousand.

The Company did not have a carrying basis in the trademark that was subject to the agreement and recorded income of

approximately $4.0 million, which is recorded in income from continuing operations pursuant to ASC 360-10, Impairment or Disposal of

Long-Lived Assets.

Income (Expense)

Years ended December 31,

Other income (expense)

$ (1,194,652 )

income (expense), net was an expense of $206 thousand in fiscal 2021 and income of $1.0 million in fiscal 2020, primarily due to a $1.1

million forgiveness in 2020 on loans received under the Paycheck Protection Plan of the Coronavirus Aid, Relief and Economic Security

Act (the “CARES Act”).

Of the $1.1 million forgiveness, $545 thousand related to loan proceeds received by Zoom Connectivity

prior to the Zoom Connectivity merger but forgiven after the Zoom Connectivity merger.

Refer to Note 4 of the Consolidated Financial

ended December 31,

income (expense)

income (expense), net was an expense of $392 thousand in fiscal 2022 and expense of $206 thousand in fiscal 2021, primarily due to increased

borrowing interest rates related to the SVB Loan Agreement.

Tax Expense (Benefit).

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Years ended December 31,

Pro Forma Information

following unaudited pro forma financial information summarizes the combined results of operations for the Company and Zoom Connectivity,

as if the merger of Zoom Connectivity, Inc.

had been completed on January 1, 2020.

The pro forma results have been prepared

for comparative purposes only, and do not necessarily represent what the net sales or results of operations would have been had the merger

been completed on January 1, 2020.

In addition, these results are not intended to be a projection of future operating results.

The unaudited pro forma information includes adjustments to eliminate intercompany transactions and align accounting policies.

forma results for the year ended December 31, 2020 also includes the non-recurring transaction costs totaling $1.6 million.

Pro forma revenue

Pro forma net loss

$ (6,582,873 )

Pro forma net loss per share, basic and diluted

and Capital Resources

principal sources of liquidity are cash and cash equivalents and borrowings under our SVB line-of-credit.

As of December 31, 2021, we

had cash and cash equivalents of $12.6 million as compared to $772 thousand on December 31, 2020.

On December 31, 2021, we had $5.1 million

of borrowings outstanding and $445 thousand available on our $25.0 million SVB line-of-credit and working capital of $27.8 million.

We have funded our operations and investing activities primarily through borrowings on our line of credit, the sale of assets and the

sale of our common stock.

principal sources of liquidity are cash and cash equivalents, sales of inventory, borrowing under our line-of credit and a bridge loan

at December 31, 2022.

As of December 31, 2022, we had cash and cash equivalents of $530 thousand and $500 thousand in restricted cash

as compared to $12.6 million in cash and cash equivalents and $500 thousand in restricted cash on December 31, 2021.

On December 31,

2022, we had $4.8 million of borrowings outstanding and $38 thousand available on our $10.0 million SVB line-of-credit and working capital

of $15.7 million.

We have funded our operations and investing activities primarily through borrowings on our line of credit, the sale

of assets and the sale of our common stock.

historical cash outflows have primarily been associated with:

(1) cash used for operating activities such as the purchase and growth

of inventory, expansion of our sales and marketing and research and development infrastructure and other working capital needs;

(2) expenditures

related to increasing our manufacturing capacity and improving our manufacturing efficiency;

of inventory, expansion of our sales and marketing and research and development and other working capital needs;

(2) capital expenditures related to the

acquisition of equipment;

(4) cash used to repay our debt obligations and related interest expense;

and (5) cash used for acquisitions.

Fluctuations in our working capital due to timing differences of our cash receipts and cash disbursements also impact our cash inflows

and outflows.

August 12, 2021, we entered into an agreement with Zoom Video Communications, Inc.

to sell, and sold, all of our rights, title and interest

in the ZOOM® trademark for cash consideration in the amount of $4.0 million, net of legal costs incurred of $44 thousand.

August 2, 2021, we completed a public offering of 10 million shares of our common stock for $22.7 million in net proceeds after deducting

underwriter’s discounts and commissions and other offering expenses.

and (4) cash used to repay our debt obligations and related interest expense.

Fluctuations in our working capital

due to timing differences of our cash receipts and cash disbursements also impact our cash inflows and outflows.

consolidated financial statements as of December 31, 2022 were prepared under the assumption that we will continue as a going concern.

The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

However, substantial doubt exists about our ability to continue as a going concern, and we will require additional liquidity to

continue operations beyond the next 12 months.

Our consolidated

financial statements as of December 31, 2022, do not include any adjustments to the carrying amounts and classification of

assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.

If we are unable to

continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried

on our financial statements, and it is likely that investors will lose all or part of their investment.

following table presents our cash flows for the periods presented:

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Cash provided by financing activities

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

$ (12,040,335 )

Flows from Operating Activities.

used in operating activities of $12.2 million for 2022 reflected our net loss of $15.5 million, adjusted for non-cash expenses, consisting

primarily of $0.8 million of depreciation and amortization, $1.2 million of stock-based compensation expense, and a $0.1 million write-off

of goodwill and intangible assets.

Uses of cash included a reduction in accounts payable of $9.6 million and a decrease in accrued expenses

$0.8 million.

Sources of cash included a decrease of accounts receivable of $2.2 million, a decrease in inventory of $6.7 million, and

increase in deferred revenue of $671 thousand.

used in operating activities of $14.3 million for 2021 reflected our net loss of $2.2 million, adjusted for non-cash expenses, consisting

primarily of $1.0 million of depreciation and amortization and $1.0 million of stock-based compensation expense.

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accounts receivable of $4.3 million and increases in accounts payable of $862 thousand and deferred revenue of $662 thousand.

used in operating activities of $7.1 million for 2020 reflected our net loss of $3.9 million, adjusted for non-cash expenses, consisting

primarily of loan forgiveness of $1.1 million.

Uses of cash included an increase in accounts receivable of $5.0 million due to increased

sales and increased inventories of $8.9 million.

Sources of cash include increases in accounts payable of $6.7 million and accrued expenses

of $4.7 million.

Flows from Investing Activities.

In 2021, $593 thousand was used to purchase equipment and $89 thousand was used for certification

2020, cash acquired in merger was a source of cash of $502 thousand.

Cash was used for certification costs ($461 thousand), capitalized

software costs ($317 thousand), and the purchase of equipment ($303 thousand).

2022, $277 thousand was used to purchase equipment and $418 thousand was used for certification costs.

2021, $593 thousand was used to purchase equipment and $89 thousand was used for certification costs.

Flows from Financing Activities.

Cash provided by financing activities in 2021 consisted of a source of cash of $22.7 million

from a public offering, $5.2 million from borrowings under our SVB line-of-credit, and $1.2 million in proceeds from the exercises of

common stock options.

Uses of cash include the repayment of the Rosenthal & Rosenthal, Inc.

Cash provided by financing activities in 2022 consisted of proceeds from a bridge loan of $1

million, proceeds from stock option exercises of $0.2 million.

Uses of cash in 2022 included $0.4 million in borrowing reductions under

our SVB line-of-credit.

provided by financing activities in 2021 consisted of a source of cash of $22.7 million from a public offering, $5.2 million from borrowings

under our SVB line-of-credit, and $1.2 million in proceeds from the exercises of common stock options.

Uses of cash include the repayment

of the Rosenthal & Rosenthal, Inc.

line-of-credit of $2.4 million.

provided by financing activities in 2020 consisted primarily of net proceeds from a private placement offering of $3.2 million, $2.4

million in borrowings under our line-of-credit with Rosenthal & Rosenthal, Inc., and $1.2 million from stock option exercises.

Liquidity Needs

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continued advancement of research and development activities.

we will need to refinance the SVB Loan Agreement and the Bridge Loan by January 2024, which is when the respective agreements terminate.

capital expenditures are largely discretionary and within our control.

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as well as the status of each of our product development programs, will significantly impact our cash management decisions.

December 31, 2021, we believe our current cash and cash equivalents will be sufficient to fund working capital requirements, capital

December 31, 2022, we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital

expenditures and operations during the next twelve months.

We intend to retain any future earnings to support operations and to

finance the growth and development of our business, and we do not anticipate paying any dividends in the foreseeable future.

Our ability to continue as a going concern will depend on our ability to obtain

additional equity or debt financing, attain further operating efficiencies, reduce or contain expenditures and increase revenue s.

Based on these factors, management determined that there is substantial doubt regarding our ability to continue as a going concern.

In the first quarter of 2023, the Company has implemented cost reduction plans to align

its cost structure to its sales and increase its liquidity.

The Company will continue to monitor its costs in relation to its sales and

adjust its cost structure accordingly.

future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of any future operating

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regulatory clearances and approvals, our sales and marketing programs, our need for infrastructure to support our sales growth, the continuing

acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment and cash that

may be required to settle our foreign currency hedges.

acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment.

ability to fund our longer-term cash needs is subject to various risks, many of which are beyond our control—See “Risk Factors—We

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that such funding will be available in needed quantities or on terms favorable to us, if at all.

December 31, 2021, we have Federal and state net operating loss carry forwards of approximately $65.0 million and $22.1

million, respectively, available to reduce future taxable income.

A valuation allowance has been established for the full amount

of deferred income tax assets as management has concluded that it is more-likely than-not that the benefits from such assets will not

a description of our bank credit line, refer to Note 8 and for a description of our operating leases, license agreement and purchase

commitments, refer to Note 9 in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

December 31, 2022, we have Federal and state net operating loss carry forwards of approximately $60.6 million and $29.8 million, respectively,

available to reduce future taxable income.

A valuation allowance has been established for the full amount of deferred income tax assets

as management has concluded that it is more-likely than-not that the benefits from such assets will not be realized.

a description of our operating leases, refer to Note 8 and for a description of our bank credit line and bridge loan agreement, license

agreement and purchase commitments, refer to Note 9 in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this

Annual Report on Form 10-K.

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-K

Item 7. Management’s Discussion and Analysis