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Item 2. Management’s Discussion and Analysis

2022-08-17 compared with 2022-05-18 · 157 added, 90 removed, 134 unchanged (65% of the section changed)

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Forward-Looking Statements

The following Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in “Risk Factors”

in Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q, contain “forward-looking statements”

within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in “

Risk Factors ”

in Part II, Item  

1A and elsewhere in this Quarterly Report on Form  

10-Q, contain “

forward-looking statements ”

within the meaning of Section  

27A of the Securities Act of 1933, as amended, and Section  

21E of the Securities Exchange Act of 1934, as amended.

We intend that these forward-looking statements be subject to the safe harbor created by those provisions.

Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,”

“may,”

“should,”

“forecast,”

“could,”

“expect,”

“suggest,”

“believe,”

“anticipate,”

“intend,”

“plan,”

"future," "potential," "target," "seek," "continue," "if" or other similar words.

The forward-looking statements contained in the Quarterly Report include statements regarding our strategies as well as (1) our revenue levels, including the commercial success of our solutions and new products, (2) the conversion of our design opportunities into revenue, (3) our liquidity, (4) our gross profit and breakeven revenue level and factors that affect gross profit and the break-even revenue level, (5) our level of operating expenses, (6) our research and development efforts, (7) our partners and suppliers, (8) industry and market trends, (9) our manufacturing and product development strategies and (10) our competitive position.

The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited consolidated financial statements and notes thereto for the fiscal year ended January 2, 2022, found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 22, 2022.

Forward-looking statements are generally written in the future tense and/or are preceded by words such as “

will, ”

may, ”

should, ”

forecast, ”

could, ”

expect, ”

suggest, ”

believe, ”

anticipate, ”

intend, ”

plan, ”

"future," "potential," "target," "seek," "continue," "if"  

or other similar words.

the conversion of our design opportunities into revenue, (3)  

our liquidity,  

(4) our gross profit and breakeven revenue level and factors that affect gross profit and the break-even revenue level, (5)  

our level of operating expenses, (6) our research and development efforts, (7)  

our partners and suppliers, (8)  

industry and market trends, (9) our manufacturing and product development strategies and (10) our competitive position.

10-K filed with the Securities and Exchange Commission ( “

) on March 22, 2022.

Although we believe that the assumptions underlying the forward-looking statements contained in this Quarterly Report are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate.

The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors”

Risk Factors ”

in Part II, Item 1A hereto and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements.

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Through the acquisition of SensiML, we now have an IoT AI software platform that includes SaaS subscriptions for development, per unit license fees when deployed in production, and proof-of-concept services –

all of which are also included in the new product revenue category.  Inclusive of one pending, patent application disclosed in our fiscal 2021 annual report, at the end of  the first quarter of fiscal 2022 we had a total of five patent applications pending. 

all of which are also included in the new product revenue category.

Inclusive of one pending, patent application disclosed in our fiscal 2021 annual report, at the end of the second quarter of fiscal 2022 we had a total of five patent applications pending. 

Our semiconductor solutions typically fall into one of three categories:

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While winning large volume sales opportunities will increase our revenue, we believe these opportunities may decrease our gross profit as a percentage of revenue.

During the first quarter of 2022, we generated total revenue of $4.1 million, which represents an increase of 11% compared to the prior quarter and an increase of 83% compared to the same quarter last year.

Our new product revenue in the first quarter of 2022 was $3.5 million, an increase of 29% from the prior quarter and an increase of 221% from the first quarter of 2021.

Our mature product revenue was $0.6 million in the first quarter of 2022, which was a decrease of 38% compared to the prior quarter and a decrease of 45% compared to the first quarter of 2021.

During the second quarter of 2022, we generated total revenue of $4.5 million, an increase of 11% compared to the prior quarter, and an increase of 58% compared to the same quarter last year. Our new product revenue in the second quarter was $3.1 million, a decrease of 9% from the prior quarter and an increase of 148% from the second quarter of 2021.

The increase in new product revenue was primarily driven by professional services revenue of $1.6 million in the current quarter.

Our mature product revenue was $1.4 million in the second quarter of 2022, an increase of 118% compared to the prior quarter, and a decrease of 13% compared to the second quarter of 2021.

We expect our mature product revenue to continue to fluctuate over time.

We devote substantially all of our development, sales and marketing efforts to our new sensor processing solutions using our EOS TM S3 platforms, derivative products based on software-driven features, development of additional new products and solution platforms, our new eFPGA IP licensing and QuickAI initiatives.

Overall, we reported a net loss of $1.2 million for the first quarter of 2022, a decrease of 26% compared with the prior quarter and a decrease of 31% compared with the first quarter of 2021. 

We have experienced net losses in the recent years and expect losses to continu e throug h at least fiscal year 2022 as we continue to develop new products, applications and technologies.

Overall, we reported a net loss of $0.5 million for the second quarter of 2022, a decrease of 55% compared with the prior quarter, and a decrease of 75% compared with the second quarter of 2021.

We have experienced net losses in the recent years and expect losses to continue through at least fiscal year 2022 as we continue to develop new products, applications and technologies.

Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted.

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We believe that we apply judgments and estimates in a consistent manner and that this consistent application results in our consolidated financial statements and accompanying notes that fairly represent all periods presented.

However, any factual errors or errors in these judgments and estimates may have a material impact on our financial statements.

During the three months ended April 3, 2022, there were no changes in our critical accounting policies from our disclosure in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022, filed with the SEC on March 22, 2022.

However, any factual errors or errors in these judgments and estimates may have a material impact on our financial statements. During the three and six months ended July 3, 2022, there were no changes in our critical accounting policies from our disclosure in our Annual Report on Form 10-K for the fiscal year ended January 2, 2022, filed with the SEC on March 22, 2022.

Results of Operations

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Three Months Ended

April 3, 2022

April 4, 2021

Six Months Ended

Cost of revenue

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Loss before income taxes

(Benefit from) provision for income taxes

Three Months Ended April 3, 2022 Compared to Three Months Ended April 4, 2021

The table below sets forth the changes in revenue for the three months ended April 3, 2022, as compared to the three months ended April 4, 2021 (in thousands, except percentage data): 

Provision for income taxes

Three Months Ended July 3, 2022 Compared to Three Months Ended July 4, 2021

The table below sets forth the changes in revenue in the three months ended July 3, 2022 compared to the three months ended July 4, 2021 (in thousands, except percentage data):

Three Months Ended

April 3, 2022

April 4, 2021

Mature products

Total revenue

For all periods presented, New products include all products and related revenues manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license, professional services, QuickAI and SensiML AI software as a service (SaaS) revenues.

For all periods presented, New products include hardware products and related revenues manufactured on 180 nanometer or smaller semiconductor processes, intellectual property license, professional services, QuickAI and SensiML AI software as a service (SaaS) revenues.

Mature products include all products produced on semiconductor processes larger than 180 nanometer.

Product rev enue for the first quarter of 2022 compared to the first quarter of 2021  increased by 

$1.9  million.

New product revenue  

increased  

$ 2.4 million  

primarily due to $ 1.6  million increase in professional engineering services revenue related to eFPGA IP and a $0.8 million increase i n  smart 

connectivity and display product revenue .

Mature product revenue decreased 45%  co mpared to the first quarter of 2021 .

The decrease in mature product revenue was primarily due  to a reduction in  

QPCID, other products, a nd royalty revenue, partially offset by a increases in PASIC 3 and QuickRAM.

The table below sets forth the changes in gross profit for the three months ended April 3, 2022 as compared to the three months ended April 4, 2021 (in thousands, except percentage data):

Product revenue for the second quarter of 2022 compared to the second quarter of 2021 increased $1.7 million.

The $1.9 million increase in new products revenue was partially offset by a 13% net decrease in mature product revenue from a reduction in QECL and Eclipse Plus products, partially offset by an increase in PASIC4 products. 

New Product Revenue

The table below sets forth the changes in new product revenue in the three months ended July 3, 2022 compared to the three months ended July 4, 2021 (in thousands, except percentage data):  

Three Months Ended

April 3, 2022

April 4, 2021

Hardware products

Total new product revenue

The $0.4 million increase in new hardware product revenue was primarily comprised of a $0.8 million increase smart connectivity products partially offset by a $0.4 million decrease in sensor revenue.

eFPGA IP revenue increased $1.5 million, or 993%, as compared to the same quarter in the prior year.

The increase in eFPGA IP revenue was primarily driven by an increase in professional services revenue of $1.5 million partially offset by a 2% decrease in IP revenue.

The table below sets forth the changes in gross profit for the three months ended July 3, 2022 compared to the three month ended July 4, 2021 (in thousands, except percentage data):

Three Months Ended

Cost of revenue

In the first quarter of 2022, gross profit increased $1.3 million or 115% as compared to the same quarter in the prior year.

This was primarily due to an increase in revenue of 83%, which was comprised of $2.4 million in new product revenue, of which $1.6 million was related to higher margin eFPGA IP professional engineering services, and $0.8 million related to smart connectivity and display product revenue.

The increase in gross profit from new product revenue was partially offset by a $0.5 million decrease in mature product revenue.

In the second quarter of 2022, gross profit increased $1.1 million, or 74%, as compared to the same quarter in the prior year.

The increase in gross profit reflects a 58% increased in revenue, primarily composed of an increase of $0.4 million in new product hardware revenue and an increase of $1.5 million in eFPGA IP revenue, partially offset by a $0.2 million decrease in mature product revenue.

The net increase in revenue was partially offset by a $0.6 million increase in cost of revenues, primarily comprised of $0.8 million in costs related to eFPGA IP, and partially offset by a $0.2 million decrease in product cost standards.

eFPGA IP revenue and costs related to eFPGA IP revenue were c omprised eFPGA intellectual property license revenue and costs, respectively, and professional services revenue and costs, respectively.

Our semiconductor products have historically had long product life cycles and obsolescence has not been a significant factor in the valuation of inventories.

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Operating Expenses

The table below sets forth the changes in operating expenses for the three months ended April 3, 2022, as compared to the three months ended April 4, 2021 (in thousands, except percentage data):

The table below sets forth the changes in operating expenses for the three months ended July 3, 2022, compared to the three months ended July 4, 2021 (in thousands, except percentage data):

Three Months Ended

April 3, 2022

April 4, 2021

Total operating expenses

Research and Development

Our R&D expenses consist primarily of personnel, overhead and other costs associated with System on Chip (SoC) and software development, programmable logic design, AI and eFPGA development.

The $0.6 million decrease in R&D expenses in the first quarter of 2022, as compared to the first quarter of 2021, was primarily attributable to a decrease in allocable expense, consulting costs, and stock-based compensation, partially offset by increases in salary and related expenses.

Our R&D expense s consist primarily of personnel, overhead and other costs associated with System on Chip (SoC) and software development, programmable logic design, AI and eFPGA development.

The $0.5 million  

decrease  in R&D expenses in the second quarter of 2022 , as compared to the second quarter of 2021 , was primarily attributable to R&D costs allocable to cost of revenue 

related to eFPGA IP revenue , a reduction in amortization and depreciation, and in expensed software.

These were partially offset by increases in salary and related expenses, higher recruiting expenses, increased printing expenses, consulting and other outside services. R&D costs allocable to cost of revenue related to 

eFPGA IP revenue included costs related to eFPGA intellectual property license revenue and professional services revenue.

Selling, General and Administrative

Our selling, general and administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management. The $0.2 million increase in SG&A expenses in the first quarter of 2022, as compared to the first quarter of 2021 was primarily due to an increase in stock-based compensation, accounting costs, and other outside service expenses, partially offset by a reduction in consulting costs.

Our selling, general an d administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management. The $0.2 millionincrease in SG&A expenses in the second quarter of 2022 , as compared to the second quarter of 2021 was primarily attributable to increases in salary and related expenses, stock-based compensation expenses, legal expenses and occupancy costs, and accounting and audit expenses, partially offset by a decrease in selling expenses and consulting costs.

Interest Expense and Interest Income and Other Income (Expense), Net

The table below sets forth the changes in interest expense and interest income and other income (expense), net, for the three months ended April 3, 2022 as compared to the three months ended April 4, 2021 (in thousands, except percentage data):

The table below sets forth the changes in interest expense and interest income and other income (expense), net, for the three months ended July 3, 2022, compared to the three months ended July 4, 2021 (in thousands, except percentage data):

Three Months Ended

Interest expense

Gain on forgiveness of debt

Interest income and other income (expense), net

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Interest expense relates primarily to our revolving line of credit facility.

The gain on forgiveness of debt relates to the gain related to the forgiveness of the PPP loan of $1.2 million for the three months ended April 4, 2021. For the three months ended April 3, 2022 interest income and other income (expense), net, was an expense of approximately $0.1 million as compared to $7 thousand for the three months ended April 4, 2021 and, reflecting an increase in net foreign exchange losses and other expenses.

(Benefit from) provision for Income Taxes

The table below sets forth the changes in the provisions for income tax for the three months ended April 3, 2022 as compared to the three months ended April 4, 2021 (in thousands, except percentage data):

Interest income and other income (expense), net, relates to the interest earned on our money market accounts and foreign exchange gain or losses recorded. Changes in interest expense related for our revolving loan relate to the variability and timing of our outstanding loan balance. Interest expense for the second quarter of this year as compared to the same period in the prior year decreased approximately $10 thousand, which reflected a reduction in interest expense from finance lease liabilities partially offset by an increase in interest rates on our revolving line of credit loan.

Interest income and other income (expense), net, was a net income of approximately $0.1 million and a net expense of approximately $77 thousand for the three months ended July 3, 2022 and July 4, 2021, respectively.

The increase in total interest income and other income (expense), net reflected an increase in net foreign exchange gains and in other income and a reduction in interest expense over the prior period presented.

Provision for Income Taxes

The table below sets forth the changes in the provisions for income taxes in the three months ended July 3, 2022, compared to the three months ended July 4, 2021 (in thousands, except percentage data):

Three Months Ended

(Benefit from) provision for income taxes

The income tax benefit for the first quarter ended April 3, 2022 

relates primarily to tax benefits from foreign income tax returns related to the Company's foreign subsidiaries, which are cost-plus entities, partially offset by state minimum income taxes.

The majority of income tax expense for the quarter ended April 4, 2021 relates to taxes from our foreign subsidiaries.

We are subject to U.S.

federal income tax as well as income taxes in many U.S.

states and foreign jurisdictions in which we operate.

tax years from 1999 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits. 

Provision for income taxes

The majority of the income tax expense for the three months ended July 3, 2022 and July 4, 2021 related to our foreign subsidiaries, which are cost-plus entities.

Six Months Ended July 3, 2022 Compared to Six Months Ended July 4, 2021

The table below sets forth the changes in revenue for the six months ended July 3, 2022, compared to the six months ended July 4, 2021 (in thousands, except percentage data):

Six Months Ended

Mature products

Total revenue

Mature products include all products produced on semiconductor processes larger than 180 nanometer.

Product revenue for the six months ended July 3, 2022, as compared to the six months ended July 4, 2021 increased $3.5 million. The increase in product revenue was comprised of a $4.2 million increase in new product revenue partially offset by a 26% decrease in mature product revenue.

New Product Revenue

The table below sets forth the changes in new product revenue in the six months ended July 3, 2022 compared to the six months ended July 4, 2021 (in thousands, except percentage data):  

Six Months Ended

Hardware products

Total new product revenue

The $1.2 million increase in new hardware product revenue was primarily comprised of $1.0 million in higher connectivity product revenue, $1.0 million in higher display product revenue, partially offset by decrease a $0.7 million decrease in sensor product revenue. eFPGA IP revenue increased $3.0 million, or 2054%, as compared to the same period in the prior year, primarily driven by an increase in professional services.

eFPGA IP revenue was comprised of eFPGA intellectual property license revenue and professional services revenue.

The table below sets forth the changes in gross profit for the six months ended July 3, 2022, compared to the six months ended July 4, 2021 (in thousands, except percentage data):

Six Months Ended

Cost of revenue

Gross profit for the six months ended July 3, 2022, as compared to the six months ended July 4, 2021, increased $2.4 million, or 92%. The increase was primarily due to an increase revenue of $3.5 million or 69%.

The increase in revenue was primarily composed of an increase of $1.2 million in new product revenue and an increase in eFPGA IP revenue of $3.1 million was partially offset a decrease of $0.7 million in mature product revenue.

The increase in revenue was partially offset by an increase of $1.2 million in eFPGA IP cost of revenue, partially offset by a reduction in product cost of revenue due to the mix of products sold.

Our semiconductor products have historically had long product life cycles and obsolescence has not been a significant factor in the valuation of inventories.

However, as we continue to pursue opportunities in the mobile market and develop new solutions and products, our product life cycle will be shorter and the risk of obsolescence will increase. In general, our standard manufacturing lead times are longer than the binding forecasts we receive from customers.

Operating Expenses

The table below sets forth the changes in operating expenses for the six months ended July 3, 2022, compared to the six months ended July 4, 2021 (in thousands, except percentage data):

Six Months Ended

Total operating expenses

Research and Development

Our research and development (R&D) expenses consist primarily of personnel, overhead and other costs associated with System on Chip (SoC) and software development, programmable logic design, AI and eFPGA development.

R&D expenses in the six months ended July 3, 2022, as compared to the six months ended July 4, 2021, decreased $1 million. The decrease in R&D expenses was 

primarily attributable to R&D costs allocable to cost of revenue in support of 

eFPGA IP 

and decreases in stock-based compensation costs and consulting services, partially offset increases in salary and related expenses, and amortization expense. 

R&D costs allocable to cost of revenues in support of eFGPA IP 

included costs related to eFPGA intellectual property license revenue and professional services revenue.

Selling, General and Administrative

SG&A expenses in the six months ended July 3, 2022, as compared to the six months ended July 4, 2021, increased $0.4 million.

The increase was primarily attributable to higher stock-based compensation expenses, legal fees and accounting and audit expenses, outside services expenses, insurance costs, dues and subscriptions and director service fees, partially offset by reductions in consulting expenses.

Interest Expense and Interest Income and Other Income (Expense), Net

The table below sets forth the changes in interest expense and interest income and other income (expense), net, for the six months ended July 3, 2022, compared to the six months ended July 4, 2021 (in thousands, except percentage data):

Six Months Ended

Interest expense

Gain on forgiveness of debt

Interest income and other expense, net

Interest expense relates primarily to our line of credit facility.

Interest expense for the six months ended July 3, 2022 compared to the same period in the previous year declined $9 thousand, which reflected a decrease in interest expense from finance lease liabilities partially offset by an increase in interest rates on our revolving line of credit loan. Interest income and other expense, net, for the six months ended July 3, 2022 compared to the same period in the previous year, increased $71 thousand, which primarily reflected an increase in net foreign exchange gains.

Interest expense and interest income and other income (expense), net, for the six months ended July 4, 2021 was $1.1 million and which included a gain on forgiveness of debt relates to the gain related to the forgiveness of the PPP loan of $1.2 million.

Provision for Income Taxes

The table below sets forth the changes in provision for income taxes for the six months ended July 3, 2022, compared to the six months ended July 4, 2021 (in thousands, except percentage data):

Six Months Ended

Provision for income taxes

The majority of the income tax expense for the six months ended July 3, 2022 and July 4, 2021 relates to our foreign subsidiaries, which are cost-plus entities.

Included in the provision for the six months ended July 4, 2021 was a $125,000 deferred tax provision related to a one-time repatriation of funds from our India entity.

Liquidity and Capital Resources 

We have financed our operations and capital investments through sales of common stock, finance and operating leases, a revolving line of credit and cash flows used in operations.

In addition to the Company's cash, cash equivalents and restricted cash of $20.1 million as of April 3, 2022, other sources of liquidity included a $15.0 million drawn down from our revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce (“Heritage Bank”), and $1.5 million in net proceeds from the Company's sale of common stock in February 2022.

We have financed our operations and capital investments through public and private offerings of our common stock, finance and operating leases, and borrowing under a revolving line of credit and cash flows used in operations, partially offset by cash used in operations.

In addition to the Company's cash, cash equivalents and restricted cash of $18.5 million, as of July 3, 2022 other sources of liquidity included a $15.0 million drawn down from our revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce (“Heritage Bank”), and $1.6 million in net proceeds from the Company's sale of common stock, of which $1.5 million represented a registered direct offering in February 2022.

On February 9, 2022, the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 310,000 shares of common stock, par value $0.001 in a registered direct offering.

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The Company currently intends to use the net proceeds from the financing for working capital, the development of next generation eFPGA-based products, including AI and open-source hardware or software, and general corporate purposes

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of April 3, 2022.

As of April 3, 2022, we had $15.0 million of outstanding Revolving Facility with an interest rate of 4.00%.

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of July 3, 2022.

As of July 3, 2022, we had $15.0 million of outstanding on the Revolving Facility with an interest rate of 5.25%.

We currently use our cash to fund our working capital to accelerate the development of next generation products and for general corporate purposes.

Based on past performance and current expectations, we believe that its existing cash and cash equivalents, together with available financial resources from the Revolving Facility with Heritage Bank, will be sufficient to fund its operations and capital expenditures and provide adequate working capital for the next twelve months.

Various factors affect the Company’s liquidity, including, among others:

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The inability of the Company to generate sufficient sales from its new product offerings and/or raise additional capital if needed could have a material adverse effect on the Company’s operations and financial condition, including its ability to maintain compliance with its lender’s financial covenants.

As of April 3, 2022, most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank.

As of April 3, 2022, our interest-bearing debt consisted of $0.6 million outstanding under finance leases and $15.0 million outstanding under our Revolving Facility. See Note 5, Debt Obligations, to the unaudited condensed consolidated financial statements for more details.

Cash balances held at our foreign subsidiaries was approximately $0.4 million as of April 3, 2022 and January 2, 2022.

Earnings from our foreign subsidiaries are currently deemed to be indefinitely reinvested.

As of July 3, 2022, most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank.

As of July 3, 2022, our interest-bearing debt consisted of $0.5 million outstanding under finance leases and $15.0 million outstanding under our Revolving Facility. See Note 5, Debt Obligations, to the unaudited condensed consolidated financial statements for more details.

Cash balances held at our foreign subsidiarie s was approximately $0.1 million and $0.4 million  as of July 3, 2022 and January 2, 2022, respectively. Earnings from our foreign subsidiaries are currently deemed to be indefinitely reinvested.

We do not expect such reinvestment to affect our liquidity and capital resources, and we continually evaluate our liquidity needs and ability to meet global cash requirements as a part of our overall capital deployment strategy.

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In summary, our cash flows were as follows (in thousands):

Three Months Ended

Six Months Ended

Net cash used in operating activities

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Net cash used in operating activities

For the three months ended April 3, 2022, net cash used in operating activities was $0.7 million, which was primarily comprised of the net loss of $1.2 million, adjusted for net non-cash charges of $0.5 million comprised of $0.4 million of stock-based compensation, $0.2 million of depreciation and amortization expenses, partially offset by non-cash inventory reclassifications of $26 thousand and outflows from changes in operating assets and liabilities.

The outflows from changes in operating assets and liabilities were approximately $0.1 million due increases in accounts receivable related to higher revenue, partially offset by an increase in accrued liabilities and trade payables, and a decrease in deferred revenue.

For the three months ended April 4, 2021, net cash used in operating activities was $1.0 million, which was primarily due to the net loss of $1.7 million, adjusted for non-cash charges of $0.6 million including the gain recognized from the forgiveness of the PPP loan of $1.2 million.

Other non-cash charges consisted primarily of $0.4 million of stock-based compensation and depreciation and amortization expenses of $0.2 million.

Cash inflows from changes in operating assets and liabilities were $1.3 million, primarily due to a decrease in trade receivables from our collection efforts and an increase in accrued liabilities subject to the variability of the timing of payments, partially offset by an increase in other assets.

For the six months ended July 3, 2022, net cash used in operating activities was $2.1 million, which was primarily due to the net loss of $1.7 million, adjusted for net non-cash charges of $1.2 million, which included $0.9 million of stock-based compensation, depreciation and amortization expenses of $0.3 million, an inventory write-downs of $54 thousand, partially offset by a gain on disposal of equipment of $76 thousand.

Cash outflows from changes in operating assets and liabilities were approximately $1.5 million and were primarily due to an increases in accounts receivable, reflecting the increase in revenues during the period, a decrease in deferred revenue, and an increase in inventory.

This was partially offset by an increase in trade payables, which are subject to variability of the timing of payments.

For the six months ended July 4, 2021, net cash used in operating activities was $2.8 million, which was primarily due to the net loss of $3.8 million, adjusted for net non-cash charges of $38 thousand including the gain recognized from the forgiveness of the PPP loan of $1.2 million.

Other non-cash charges consisted primarily of $0.6 million of stock-based compensation, depreciation and amortization expenses of $0.3 million, and inventory write-downs of $0.2 million.

Cash inflows from changes in operating assets and liabilities were approximately $1.0 million, primarily due to a decrease in inventory, and increases in accounts payable and accrued liabilities subject to the variability of the timing of payments, partially offset by an increase in trade receivables due to the increase in revenue during the second quarter.

Net cash used in investing activities

Cash used in investing activities was $0.1 million and 0.3 million for the three months ended April 3, 2022 and April 4, 2021 , respectively.

Cash used in investing activities was primarily attributable to the capitalized internal-use software and capital expenditure relating to computer equipment.

For the six months ended July 3, 2022, cash used in investing activities was $0.4 million, which was primarily attributable to the capitalized internal-use software and capital expenditures relating to licensed software and computer equipment.

For the six months ended July 4, 2021, cash used in investing activities was $0.4 million, which was primarily attributable to the capitalized internal-use software and capital expenditure relating to leasehold improvements and computer equipment.

Net cash provided by (used in) financing activities

For the three months ended April 3, 2022, cash provided by financing activities was $1.4 million, which was primarily derived from the proceeds from the sale of common stock, offset by payments of finance lease obligations.

For the three months ended April 4, 2021 cash used in financing activities was $0.5 million, which was primarily attributable to taxes paid relating to stock-based compensation equity awards.

Cash flows from financing activities includes the draw-downs and repayments of our line of credit. For the quarter ended of 2021 and 2020, these draw-downs and repayments netted to zero.

For the six months ended July 3, 2022, cash provided by financing activities was $1.4 million, which was primarily derived from the net proceeds of $1.6 million from the stock issuances. We continue to use and repay our revolving line of credit as our cash needs require.

For the six months ended July 4, 2021 cash used in financing activities was $0.5 million and was primarily attributable to taxes paid relating to stock-based compensation equity awards.

Financial Information (continued)

Off-Balance Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis