What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-01-08 compared with 2023-11-13 · 163 added, 116 removed, 227 unchanged (55% of the section changed)

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costs for their country.

cash and cash equivalents balance on March 31, 2023 was $0.8 million compared to $0.5 million on December 31, 2022.

On March 31, 2023,

we had $3.8 million of outstanding borrowings on our asset-based credit line with availability of $395 thousand and working capital of

$12.1 million.

cash and cash equivalents balance on September 30, 2023 was $0.5 million compared to $0.5 million on December 31, 2022.

30, 2023, we had $0.9 million of outstanding borrowings on our asset-based credit line with availability of $0 thousand and working capital

of $(0.3) million.

Company’s ability to maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand, increasing

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Company continues to experience losses, which in part is due to declining revenues.

In the three months ended March 31, 2023 and 2022,

we generated net sales of $10.8 million and $13.3 million, respectively.

reported in Form 8-K filed with the SEC on August 28, 2023, t he Company has continued to experience

material liquidity pressures as it has attempted to manage its negative cash-flow position due to supply disruptions from its principal

manufacturing partners as a result of the Company’s inability to pay past expenses, which has severely impacted revenue and its

cash position.

The Company has conducted two reductions in force and made other changes to lower operating expenses.

However, these reductions

did not fully offset the Company’s lack of continual revenue from normal operations.

As such, substantial doubt exists about our

ability to continue as a going concern, and we will require additional liquidity to continue operations.

In the three and nine months ended September 30,

2023 and 2022, we generated net sales of $6.7 million and $13.8 million, respectively, and $24.6 million and $40.0 million, respectively.

reported in Form 8-K filed with the SEC on August 28, 2023, the Company has continued to experience material liquidity pressures as it

has attempted to manage its negative cash-flow position due to supply disruptions from its principal manufacturing partners as a result

of the Company’s inability to pay past expenses, which has severely impacted revenue and its cash position.

The Company has conducted

two reductions in force and made other changes to lower operating expenses.

However, these reductions did not fully offset the Company’s

lack of continual revenue from normal operations.

As such, substantial doubt exists about our ability to continue as a going concern,

and we will require additional liquidity to continue operations.

most recent Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 31, 2023 provides additional

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ended December 31, 2022.

For the three months ended March 31, 2023, there have been no significant changes in our critical accounting

For the nine months ended September 30, 2023, there have been no significant changes in our critical accounting

policies and estimates.

of Operations

following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three months

ended March 31, 2023 and 2022 presented in absolute dollars and as a percentage of net sales, with dollars and percentage change period

Three Months ended March 31,

following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three and

nine months ended September 30, 2023 and 2022 presented in absolute dollars and as a percentage of net sales, with dollars and percentage

change period over period:

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Cost of goods sold

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Total other expense

Total other income (expense)

Loss before income taxes

Income tax provision

of the three months ended March 31, 2023 to the three months ended March 31, 2022

following table sets forth our revenues by product and the changes in revenues for the three months ended March 31, 2023, as compared

to the three months ended March 31, 2022:

Income taxes (benefit)

of the three months ended September 30, 2023 to the three months September 30, 2022

following table sets forth our revenues by product and the changes in revenues for the three and nine months ended September 30, 2023,

as compared to the three months ended September 30, 2022:

Three Months Ended

March 31, 2023

March 31, 2022

Nine Months Ended

September 30,

(In thousands, except percentage data)

Cable modems & gateways

Other networking products

majority of the Company’s revenues by geographic area are earned in North America for the three months ended March 31, 2023 and

total net sales decreased year-over-year by $2.5 million or 19%.

The decrease in net sales is directly attributable to decreased sales

of Motorola branded cable modems and gateways.

Other network products

majority of the Company’s revenues by geographic area are earned in North America for the three and nine months ended September

30, 2023 and 2022.

total net sales decreased year-over-year by $7.1 million or 51.6% in the three months ended September 30, 2023 and by $15.4 million or

38.4% in the nine months ended September 30, 2023.

The decrease in net sales is directly attributable to decreased sales of Motorola

branded cable modems and gateways.

In both 2023 and 2022, we primarily generated our sales by selling cable modems and gateways.

Sales related to SaaS offerings were $86 thousand and $144 in the three months ended March 31, 2023 and 2022, respectively.

in other category of $180 thousand in 2023 compared to 2022 is primarily due to a reduction in DSL and MoCA products due to a refocus

related to SaaS offerings decreased by $233 thousand or 98.4% in the three months ended September 30, 2023 and decreased by $361 thousand

or 68.9% during the nine months ended September 30, 2023.

The increase and decrease in the other category of $10 thousand and $441 thousand

in the three and nine months ended 2023 compared to 2022 is primarily due to a reduction in DSL products and MoCA products due to a refocus

on new product introductions.

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

Three Months ended March 31,

profit and gross margin decreased in the three months ended March 31, 2023, compared to the three months ended in the prior fiscal year

period, primarily due to insufficient sales levels necessary to cover fixed costs and certain variable costs.

the remainder of fiscal 2023, we expect gross margin to be subject to similar variabilities experienced in the first quarter of 2023

We experienced meaningful increases in costs of freight, materials, and components

for our products.

Although freight and certain component costs have reduced, we will not realize improvements to margins until we are

able 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;

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

profit and gross margin decreased in the three months ended September 30, 2023, compared to the three months ended in the prior fiscal

year period, primarily due to insufficient sales levels necessary to cover fixed costs and certain variable costs.

the remainder of fiscal 2023, we expect gross margin to be subject to similar variabilities experienced in the first half of 2023 and

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

Although freight and certain

component costs have reduced, we will not realize improvements to margins until we are able 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;

changes in technology;

in technology;

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

manufacturing and purchase price variances;

and changes in prices on commodity

and changes in prices on commodity components.

and Marketing

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

Three Months ended March 31,

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Selling and marketing

and marketing expenses were flat in the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, primarily

due to reductions in personnel expenses by $193 thousand and subscription fees of $54 thousand, which were offset by increases in allowance

for bad debt of $72 thousand, Motorola royalty fees of $63 thousand, and $148 thousand in marketing campaigns and other sales support

and marketing expenses decreased in the three months ended September 30, 2023, as compared to the three months ended September 30, 2022,

primarily due to decreases in personnel expenses of $0.4 million and marketing program campaigns of $1.3 million, partially offset by

increases in Motorola royalty fees of $63 thousand.

Selling and marketing expenses decreased in the nine months ended September 30, 2023,

as compared to the nine months ended September 30, 2022, primarily due to a decrease in personnel expenses of $0.9 million, marketing

program campaigns of $1.1 million, professional fees of $0.1 million, partially offset by increases in Motorola royalty fees of $0.2

the remainder of fiscal 2023, we expect our selling and marketing expenses as a percentage of net sales in fiscal 2023 to be similar

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The following table presents general and administrative expenses, for the periods

Three Months ended March 31,

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

General and administrative

and administrative expenses decreased $125 thousand primarily due to a decrease in professional fees of $222 thousand, partially offset

by an increase in personnel expenses of $63 thousand and software subscriptions of $17 thousand.

and administrative expenses decreased in the three months ended September 30, 2023, as compared to the three months ended September 30,

2022, primarily due to decreases in personnel expenses of $0.6 million, professional fees of $0.1 million, and director fees of $0.3

General and administrative expenses decreased in the nine months ended September 30, 2023, as compared to the nine months ended

September 30, 2022 primarily due to decreases in personnel expenses of $0.8 million, professional fees of $0.4 million, and director

fees of $0.3 million.

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

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for the periods indicated:

Three Months ended March 31,

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Research and development

decrease of $58 thousand was primarily due to decreases in personnel expenses of $102 thousand, contract labor of $39 thousand, and software

subscriptions of $14 thousand, partially offset by an increase in certification costs of $95 thousand.

and development expenses decreased in the three months ended September 30, 2023, as compared to the three months ended September 30,

2022, primarily due to personnel expenses of $0.5 million and professional fees of $0.1 million.

Research and development expenses decreased

in the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due to personnel expenses

of $0.7 million and professional fees of $0.1 million.

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

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

As of March 31, 2023, we had

cash and cash equivalents of $0.8 million as compared to $0.5 million on December 31, 2022.

On March 31, 2023, we had $3.8 million of

borrowings outstanding and $395 thousand available on our $10.0 million SVB line-of-credit and working capital of $12.1 million.

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.

As of September 30, 2023, we

had cash and cash equivalents of $0.5 million as compared to $0.5 million on December 31, 2022.

On September 30, 2023, we had $0.9 million

of borrowings outstanding and $0 thousand available on our $10.0 million SVB line-of-credit and working capital of $(0.3) million.

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:

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and outflows.

consolidated financial statements as of March 31, 2023 were prepared under the assumption that we will continue as a going concern.

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

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.

consolidated financial statements as of March 31, 2023, 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

consolidated financial statements as of September 30, 2023 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.

consolidated financial statements as of September 30, 2023, 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:

Three Months ended March 31,

Nine Months ended September 30,

Cash provided by (used in) operating activities

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Flows from Operating Activities.

Cash provided by operating activities of $1.3 million during the three months ended March 31,

2023 reflected our net loss of $4.0 million, adjusted for non-cash expenses, consisting primarily of $124 thousand of stock-based compensation

expense, $229 thousand in depreciation and amortization expense, and $72 thousand in accounts receivable reserve allowance.

included an increase in accounts receivable of $0.5 million and prepaid expenses of $81 thousand.

Sources of cash included primarily

a decrease of inventories of $2.6 million, increase in accounts payable of $2.5 million, increase in accrued expenses of $0.3 million,

and increase in deferred revenue of $0.1 million.

used in operating activities of $4.3 million during the three months ended March 31, 2022 reflected our net loss of $2.5 million, adjusted

for non-cash expenses, consisting primarily of $563 thousand of stock-based compensation expense.

Uses of cash included a decrease in

accounts payable of $4.2 million and a decrease in accrued expenses $600 thousand.

Sources of cash included primarily a decrease of inventories

of $2.5 million.

Cash provided by operating activities of $3.7 million during the nine months ended September

30, 2023 reflected our net loss of $16.5 million, adjusted for non-cash expenses, consisting primarily of $0.3 million of stock-based

compensation expense and $0.4 million in depreciation and amortization expense.

Uses of cash included a decrease in accounts receivable

of $0.1 million and accrued expenses of $3.0 million.

Sources of cash included primarily a decrease of inventories of $14.9 million,

increase in accounts payable of $7.4 million, increase in prepaid expenses of $0.2 million, and increase in deferred revenue of $0.2

used in operating activities of $11.5 million for 2022 reflected our net loss of $11.0 million, adjusted for non-cash expenses, consisting

primarily of $0.6 million of depreciation and amortization and $1.0 million of stock-based compensation expense.

Uses of cash includes

an increase of accounts receivables of $1.4 million and a decrease in accounts payable of $5.5 million.

Sources of cash included a decrease

of inventories of $2.7 million, decrease of other assets of $0.3 million, increase in accrued expenses of $0.3 million, and increases

in deferred revenue of $0.5 thousand.

Flows from Investing Activities.

During the three months ended March 31, 2023, $6 thousand was used to purchase equipment and

$122 thousand was used for certification costs.

the three months ended March 31, 2022, $115 thousand was used to purchase equipment and $156 thousand was used for certification costs.

During the nine months ended September 30, 2023, $162 thousand was used to purchase equipment

and $220 thousand was used for certification costs.

the nine months ended September 30, 2022, $0.3 million was used to purchase equipment and $0.3 million was used for certification costs.

Flows from Financing Activities.

Cash used in financing activities during the three months ended March 31, 2023 consisted of

repayment of $945 thousand on the borrowings under our SVB line-of-credit.

provided by financing activities in during the three months ended March 31, 2022 consisted of a source of cash of $2.0 million from borrowings

under our SVB line-of-credit, and $99 thousand in proceeds from the exercise of common stock options.

Cash used in financing activities during the nine months ended September 30, 2023 consisted

of repayment of $3.9 million on the borrowings under our SVB line-of-credit.

provided by financing activities in during the three months ended September 30, 2022 consisted of a source of cash of $0.7 million from

borrowings under our SVB line-of-credit, and $0.2 million in proceeds from the exercise of common stock options.

Liquidity Needs

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

March 31, 2023, we believe our current cash and cash equivalents, other working capital and borrowings under our SVB line-of-credit will

not be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months.

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.

September 30, 2023, we believe our current cash and cash equivalents, other working capital and borrowings under our SVB line-of-credit

will not be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months.

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 revenues.

Based on these factors, management determined that there is substantial doubt regarding

our ability to continue as a going concern.

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

March 31, 2023, we have Federal and state net operating loss carry forwards of approximately $57.9 million and $31.6 million, respectively,

September 30, 2023, we have Federal and state net operating loss carry forwards of approximately $62.0 million and $37.3 million, respectively,

available to reduce future taxable income.

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

As a result, as of March 31, 2023 and December 31, 2022, we recorded a full valuation allowance against our net deferred

As a result, as of September 30, 2023 and December 31, 2022, we recorded a full valuation allowance against our net deferred

and Contractual Obligations

the three months ended March 31, 2023, except as otherwise disclosed in this Form 10-Q, there were no material changes to our capital

the nine months ended September 30, 2023, except as otherwise disclosed in this Form 10-Q, there were no material changes to our capital

commitments and contractual obligations from those disclosed in our Form 10-K for the year ended December 31, 2022.

Sheet Arrangements

did not have any material off-balance sheet arrangements as of March 31, 2023.

did not have any material off-balance sheet arrangements as of September 30, 2023.

See Note 7 to the accompanying consolidated financial

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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