What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-17 compared with 2022-11-16 · 98 added, 152 removed, 165 unchanged (60% of the section changed)

56 unchanged sentences

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:

Sensor Processing, Display and Smart Connectivity.

We currently have a total of five patent applications pending. 

Our semiconductor solutions typically fall into one of four categories:

Sensor Processing, Hardware products consisting of Sensor Processing, Display Smart Connectivity, and eFPGA intellectual property and its associated tools.

Our solutions include a unique combination of our silicon platforms, IP cores, software drivers, and in some cases, firmware, and application software.

9 unchanged sentences

In addition to working directly with our customers, we partner with other companies that are experts in certain technologies to develop additional IP, reference platforms and system software to provide application solutions, particularly in the area of hardware acceleration for AI-type applications.

We also work with mobile processor and communications semiconductor device manufacturers and companies that supply sensor, algorithms, and applications.

We also work with mobile processor and communications semiconductor device manufacturers and companies that supply sensors, algorithms, and applications.

For our sensor processing solutions, we collaborate with sensor manufacturers to ensure interface compatibility.

We also collaborate with sensor and voice/audio software companies, helping them optimize their software technology on our silicon platforms in terms of performance, power consumption and user experience.

Our ArcticPro eFPGA IP are currently developed on 65nm, 40nm and 22nm process nodes.

The licensable IP is generated by a compiler tool that enables licensees to create an eFPGA block that they can integrate into their SoC without significant involvement by QuickLogic.

We believe this flow enables a scalable support model for QuickLogic.

For our eFPGA strategy, we work with semiconductor manufacturing partners to ensure our eFPGA IP is proven for a given foundry and process node before it is licensed to a SoC company.

Our eFPGA IP are currently developed on 250nm, 130nm, 90nm, 65nm, 40nm, 28nm and 22nm process nodes.

The licensable IP is generated by an automated compiler tool, called Australis TM , that enables our engineers to create an eFPGA IP for our licensees that they can then integrate into their SoC without significant involvement by QuickLogic.

We believe this flow enables a scalable development and support model for QuickLogic.

For our eFPGA strategy, we typically work with semiconductor manufacturing partners prior to this IP being licensed to a SoC company.

In order to grow our revenue from its current level, we depend upon increased revenue from our new products including existing new product platforms, eFPGA IP and platforms currently in development.

5 unchanged sentences

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 third quarter of 2022, we generated total revenue of $3.5 million, a decrease of 24% compared to the prior quarter, and a decrease of 10% compared to the same quarter last year. Our new product revenue in the third quarter was $2.3 million, a decrease of 28% from the prior quarter and a decrease of 18% from the third quarter of 2021.

The decrease in new product revenue was primarily driven by a $1.4 million reduction in hardware product revenue, partially offset by increases of $0.7 million in eFPGA IP revenue and $0.2 million in SaaS & Other revenue in the current quarter.

Our mature product revenue was $1.2 million in the third quarter of 2022, a decrease of 14% compared to the prior quarter, and an increase of 10% compared to the third quarter of 2021.

During the first quarter of 2023, we generated total revenue of 

$4.1 million , an increase  of 

1%  compared to the prior quarter, and 

an increase  of 

1%  compared to the same quarter last year. Our new product revenue in the first quarter was 

$3.1 million , 

an increase  of 

7%  from the prior quarter and 

a decrease  of 

11%  from the first quarter of 

decrease  in new product revenue was primarily driven by a $1.7 million reduction in hardware product revenue, partially offset by an increase of $1.2 million in eFPGA IP revenue.

Our mature product revenue was $1.1 million  in the first quarter of 

2023 , a decrease  of 

13%  compared to the prior quarter, and an increase  of 

67%  compared to the first quarter of 2022 .

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 FPGA  IP l icensin g and SensiML initiatives.

Overall, we reported a net loss of $1.3 million for the third quarter of 2022, an increase of 157% compared with the prior quarter, and an increase of 5% compared with the third 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.

We devote substantially all of our development, sales and marketing efforts to our new eFPGA  IP l icensin g and SensiML initiatives.

Overall, we reported a net loss of $1.2 million  for the first quarter of 2023 , 

a decrease of 

0%  compared with the prior quarter, and 

an increase  of 

5%  compared with the first quarter of 2022 .

We have experienced net losses in recent years and expect losses to continue through at least fiscal year  2023 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.

2 unchanged sentences

Our most recent Annual Report on Form 10-K for the year ended January 1, 2023 as filed with the SEC on March 28, 2023, provides additional information about our business and operations.

As of April 2, 2023, there have not been any material developments concerning the Cyber-Incident previously reported on our Form 10-K for the year ended January 1, 2023, which was filed with the Securities and Exchange Commission ("SEC") on March 28, 2023.

The Company's investigation and assessment of the incident's impact is ongoing.

Critical Accounting Policies and Estimates

1 unchanged sentence

The SEC has defined critical accounting policies as those that are most important to the portrayal of our financial condition and results of operations and require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

Based on this definition, our critical policies include revenue recognition, and determination of the Stand-Alone Selling Price ("SSP") for certain distinct performance obligations (such as for IP licensing and professional services contracts), goodwill and intangible assets, valuation of inventories including identification of excess quantities and product obsolescence, allowance for doubtful accounts, valuation of long-lived assets, leases, measurement of stock-based compensation, and accounting for income taxes.

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 and nine months ended October 2, 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 months ended April 2, 2023, 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 1, 2023, filed with the SEC on March 28, 2023.

Results of Operations

1 unchanged sentence

Three Months Ended

Nine Months Ended

October 2, 2022

October 3, 2021

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Cost of revenue

4 unchanged sentences

Interest expense

Gain on forgiveness of debt

Interest income and other income (expense), net

Loss before income taxes

Provision for (benefit from) income taxes

Three Months Ended October 2, 2022 Compared to Three Months Ended October 3, 2021

The table below sets forth the changes in revenue in the three months ended October 2, 2022 compared to the three months ended October 3, 2021 (in thousands, except percentage data):

Provision for (benefit from) income tax

Three Months Ended April 2, 2023 Compared to Three Months Ended April 3, 2022

The table below sets forth the changes in revenue in the three months ended April 2, 2023 compared to the three months ended April 3, 2022 (in thousands, except percentage data):

Three Months Ended

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Mature products

Total revenue

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 revenue for the third quarter of 2022 compared to the third quarter of 2021 decreased $0.4 million.

The decrease was comprised of a $0.5 million 

decrease in new products revenue, partially offset by a $0.1 million increase in mature product revenue.

Product revenue for the first quarter of 2023 compared to the first quarter of 2022 increased $37 thousand.

The increase resulted primarily from increases in eFPGA professional services offset by decreases in revenue from devices.

New Product Revenue

The table below sets forth the changes in new product revenue in the three months ended October 2, 2022 compared to the three months ended October 3, 2021 (in thousands, except percentage data):  

The table below sets forth the changes in new product revenue in the three months ended April 2, 2023 compared to the three months ended April 3, 2022 (in thousands, except percentage data):  

Three Months Ended

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Hardware products

eFPGA IP and professional services

Total new product revenue

The $1.4 million decrease in new hardware product revenue was primarily comprised of a $0.9 million from smart connectivity products revenue and $0.5 million from sensor revenue.

eFPGA IP revenue increased $0.7 million, or 70%, as compared to the same quarter in the prior year.

The increase in eFPGA IP revenue was primarily driven by an increase in eFPGA-related professional services revenue of $1.7 million partially offset by $1.0 million decrease in eFPGA IP revenue.

The increase in SaaS & Other was primarily driven by an increase in software-related professional services revenue.

The table below sets forth the changes in gross profit for the three months ended October 2, 2022 compared to the three months ended October 3, 2021 (in thousands, except percentage data):

eFPGA revenue for the three months ended April 2, 2023 was $2.8 million which was comprised of approximately $2.6 professional services revenue and $0.2 million in eFPGA intellectual property license revenue.

eFPGA revenue for the three months ended April 3, 2022 was $1.6 million which was primarily professional services revenue.

Contract assets related to professional services were $2.3 million and $2.0 million at April 2, 2023 and April 3, 2022, respectively.

Contract liabilities related to professional services revenue were $0.3 million for both the three months ended April 2, 2023 and April 3, 2022, respectively.

The table below sets forth the changes in gross profit for the three months ended April 2, 2023 compared to the three months ended April 3, 2022 (in thousands, except percentage data):

Three Months Ended

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Cost of revenue

In the third quarter of 2022, gross profit decreased $1.1 million, or 39%, as compared to the same quarter in the prior year.

The decrease in gross profit reflects a 10% decrease in revenue, primarily composed of a decrease of $1.4 million in new product hardware revenue partially offset by increases of $0.7 million and $0.2 million in eFPGA IP and SaaS and other revenues, respectively and $0.1 million in mature product revenue.

The $0.7 million increase in cost of revenues was primarily comprised of $0.9 million increase in costs related to eFPGA IP, and partially offset by a $0.3 million decrease in hardware product costs.

The increase in eFPGA IP costs are primarily attributable to R&D costs allocable to cost of revenue related to eFPGA IP revenue and higher tooling costs on revenue projects, and the decrease in hardware product costs reflected the reduction in volume of products sold, partially offset by higher outside cost and material price variances.

In addition, revenue in the third quarter of 2021 was partially comprised of $1.0 million in eFPGA IP license revenue with minimal associated costs.

In the first quarter of 2023 , gross profit , 

decreased  

$71 thousand , or 3% , as compared to the same quarter in the prior year.

The decrease in gross profit reflects a 7%  

increase in cost of revenue.

The $0.1 million increase in cost of revenues was due to the increase in eFPGA IP costs primarily attributable to higher tooling costs on revenue projects, and the decrease in hardware product costs reflected the reduction in volume of products sold, partially offset by higher outside cost and material price variances.

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

1 unchanged sentence

Operating Expenses

The table below sets forth the changes in operating expenses for the three months ended October 2, 2022, compared to the three months ended October 3, 2021 (in thousands, except percentage data):

The table below sets forth the changes in operating expenses for the three months ended April 2, 2023, compared to the three months ended April 3, 2022 (in thousands, except percentage data):

Three Months Ended

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Total operating expenses

2 unchanged sentences

The $0.3 million  

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

related to eFPGA IP revenue , a reduction in stock-based compensation expense, and in salary and related expenses, partially offset by an increase in tooling costs .

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

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

increase  in R&D expenses in the first quarter of 2023 , as compared to the first quarter of 2022 , was primarily attributable to decreased R&D costs allocated to Cost of Goods Sold related to eFPGA professional services revenue and increases in stock-based compensation and related salary expenses in addition to increased software costs, partially offset by a decrease in consulting and web services.

Selling, General and Administrative

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 $0.3 milliondecrease in SG&A expenses in the third quarter of 2022 , as compared to the third quarter of 2021 was primarily attributable to decreases in consulting costs and stock-based compensation expenses.

These were partially offset by increases in salary and related expenses, legal expenses and insurance costs, utilities, accounting and audit expenses.

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 $0.3 milliondecrease in SG&A expenses in the first quarter of 2023 , as compared to the first quarter of 2022 was primarily attributable to decreases in consulting costs, salary expenses, and in accounting and audit expenses.

These were partially offset by increases in stock-based compensation, insurance costs, and sales commissions.

Interest Expense, 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 October 2, 2022, compared to the three months ended October 3, 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 April 2, 2023, compared to the three months ended April 3, 2022 (in thousands, except percentage data):

Three Months Ended

Interest expense

Interest income and other expense, net

Interest income and other income (expense), net

Total interest expense, interest income and other income (expense), net

Interest expense relates primarily to our revolving line of credit facility and finance leases liabilities.

Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned on our money market accounts. Changes in interest expense related to our revolving loan's interest rate variability and the timing of our outstanding loan balance. Interest expense for the third quarter of this year as compared to the same period in the prior year increased approximately $9 thousand which was comprised of a $29 thousand increase in interest expense in finance lease liabilities partially offset by a $20 thousand decrease in interest rates on our revolving line of credit loan.

The change in interest income and other income (expense), net reflected increased foreign exchange losses over the prior period.

Total interest income and other income (expense), net, was a net expense of approximately $0.1 million and $42 thousand for the three months ended October 2, 2022 and October 3, 2021, respectively.

Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned in our money market accounts. Changes in interest expense is related to our revolving loan's interest rate variability and the timing of our outstanding loan balance. Interest expense for the first quarter of this year as compared to the same period in the prior year increased approximately $25 thousand which was comprised of a $17 thousand increase related to software lease, and $8 thousand increase in 

interest expense related to our revolving line of credit facility.

The change in interest income and other income (expense), net reflected decreased foreign exchange losses over the prior period.

Provision for (Benefit From) Income Taxes

The table below sets forth the changes in the provisions for income taxes in the three months ended October 2, 2022, compared to the three months ended October 3, 2021 (in thousands, except percentage data):

The table below sets forth the changes in the provisions for income taxes in the three months ended April 2, 2023, compared to the three months ended April 3, 2022 (in thousands, except percentage data):

Three Months Ended

Provision for (benefit from) income taxes

The majority of the income tax expense for the three months ended October 2, 2022 and October 3, 2021 related to our foreign subsidiaries, which are cost-plus entities.

Nine Months Ended October 2, 2022 Compared to Nine Months Ended October 3, 2021

The table below sets forth the changes in revenue for the nine months ended October 2, 2022, compared to the nine months ended October 3, 2021 (in thousands, except percentage data):

Nine Months Ended

October 2, 2022

October 3, 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.

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

Product revenue for the nine months ended October 2, 2022, as compared to the nine months ended October 3, 2021 increased $3.1 million. The increase in product revenue was comprised of a $3.7 million 

increase in new product revenue partially offset by a $0.6 million 

decrease in mature product revenue.

New Product Revenue

The table below sets forth the changes in new product revenue in the nine months ended October 2, 2022 compared to the nine months ended October 3, 2021 (in thousands, except percentage data):  

Nine Months Ended

October 2, 2022

October 3, 2021

Hardware products

Total new product revenue

The $0.2 million decrease in new hardware product revenue was primarily comprised of a reduction of $1.2 million in sensor product revenue, partially offset by increases of $1.0 million in higher display product revenue and $0.2 million in connectivity product revenue.

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

eFPGA IP revenue increased $3.8 million, or 327%, as compared to the same period in the prior year, primarily driven by a $4.7 million increase in professional services revenue, partially offset by a $1.0 million decrease in IP product revenue.

SaaS & Other revenue increased $0.2 million primarily driven by increased software-related professional services revenue.

The table below sets forth the changes in gross profit for the nine months ended October 2, 2022, compared to the nine months ended October 3, 2021 (in thousands, except percentage data):

Nine Months Ended

October 2, 2022

October 3, 2021

Cost of revenue

Gross profit for the nine months ended October 2, 2022, as compared to the nine months ended October 3, 2021, increased $1.3 million, or 25%. The increase was primarily due to an increase in revenue of $3.1 million or 35%, partially offset by an increase in cost of revenue of $1.8 million, or 49%.

The increase in revenue was primarily comprised of an increase of $3.8 million in eFPGA IP revenue, a $0.2 million increase in SaaS & Other revenue, partially offset decreases of $0.2 million in new hardware product revenue and $0.6 million in mature product revenue.

The increase in revenue was partially offset by an increase of $1.8 million increase in cost of revenue comprised primarily of $1.7 million in engineering labor and tooling costs on eFPGA revenue projects costs, partially offset by a reduction in hardware product costs due to lower volume and the mix of products sold.The increase in eFPGA IP engineering labor costs are primarily attributable to R&D costs allocable to cost of revenue related to eFPGA IP revenue and higher tooling costs on revenue projects. In addition, revenue in the nine months ended October 3, 2021 was partially comprised of $1.1 million in eFPGA IP license revenue with minimal associated costs.

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

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 nine months ended October 2, 2022, compared to the nine months ended October 3, 2021 (in thousands, except percentage data):

Nine Months Ended

October 2, 2022

October 3, 2021

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 nine months ended October 2, 2022, as compared to the nine months ended October 3, 2021, decreased $1.8 million. The decrease in R&D expense 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, tooling and outside services. 

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

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

Selling, General and Administrative

SG&A expenses in the nine months ended October 2, 2022, as compared to the nine months ended October 3, 2021, increased $0.1 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, 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 nine months ended October 2, 2022, compared to the nine months ended October 3, 2021 (in thousands, except percentage data):

Nine Months Ended

Interest expense

Gain on forgiveness of debt

Interest income and other expense, net

Total interest expense, interest income and other income (expense), net

Interest expense relates primarily to our line of credit facility and finance lease liabilities.

Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned on our money market accounts.

Changes in interest expense related to our revolving loan's interest rate variability and timing of our outstanding loan balance.

Interest expense for the nine months ended October 2, 2022 compared to the same period in the previous year decreased $1 thousand, which reflected a $27 thousand decrease in interest expense on our revolving line of credit loan, partially offset by increased interest expense from finance lease liabilities. Interest income and other expense, net, for the nine months ended October 2, 2022 compared to the same period in the previous year, decreased $17 thousand, primarily due to a reduction in foreign exchange losses over the previous year.

Total interest expense and interest income and other income (expense), net, for the nine months ended October 3, 2021 was $1 million 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 nine months ended October 2, 2022, compared to the nine months ended October 3, 2021 (in thousands, except percentage data):

Nine Months Ended

Provision for income taxes

The majority of the income tax expense for the nine months ended October 2, 2022 and October 3, 2021 relates to our foreign subsidiaries, which are cost-plus entities.

Included in the provision for the nine months ended October 3, 2021 was a $125,000 deferred tax provision related to a one-time repatriation of funds from our India entity.

Provision for (benefit from) income tax

The majority of the income tax expenses for the three months ended April 2, 2023 and April 3, 2022 are related to our foreign subsidiaries, which are cost-plus entities.

Liquidity and Capital Resources 

We have financed our operations and capital investments through public and private offerings of our common stock, finance and operating leases, and borrowings 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 $20.0 million, as of October 2, 2022, other sources of liquidity included a $45.0 million drawn down from our revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce (“Heritage Bank”), and $4.8 million in net proceeds from the Company's sale of common stock, of which $4.7 million represented the net proceeds from registered direct offerings.

In addition to the Company's cash, cash equivalents and restricted cash of $20.9 million, as of April 2, 2023, 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 $2.3 million in net proceeds from the Company's sale of common stock on March 21, 2023.

Costs related to the offering were immaterial.

On September 14, 2022 and February 9, 2022, the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 487,279 and 310,000 shares of common stock, respectively, par value $0.001, in registered direct offerings, resulting in net cash proceeds of approximately $3.2 million and $1.5 million, respectively.

Issuance costs related to September 14, 2022 and the February 9, 2022 offering were immaterial.

The purchase price for each share of common stock in the September 14, 2022 and in the February 9, 2022 placements were $6.57 and $4.78, respectively.

The Company currently intends to use the net proceeds from financings for working capital, the development of next generation eFPGA-based products, including AI and open source hardware or software, and general corporate purposes, and may also use a portion of the net proceeds to acquire and/or license technologies and acquire and/or invest in businesses when the opportunity arises;

however, the Company currently has no commitments or agreements and is not involved in any negotiations with respect to any such transactions. 

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of October 2, 2022.

As of October 2, 2022, we had $15.0 million of outstanding on the Revolving Facility with an interest rate of 6.75%.

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. 

The purchase price for each share of common stock in the September 14, 2022 and in the February 9, 2022 placements were $6.57 and $4.78, respectively. 

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of April 2, 2023.

As of April 2, 2023, we had $15.0 million outstanding on the Revolving Facility with an interest rate of 8.5%.

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:

22 unchanged sentences

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 October 2, 2022, most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank.

As of October 2, 2022, our interest-bearing debt consisted of $0.4 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 $0.2 million and $0.4 million  as of October 2, 2022 and January 2, 2022, respectively. Earnings from our foreign subsidiaries are currently deemed to be indefinitely reinvested.

As of April 2, 2023 , most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank.

April 2, 2023 , our interest-bearing debt consisted of $1.2 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 were approximately $0.2 million and $0.2 million  as of April 2, 2023 and January 1, 2023, 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.

1 unchanged sentence

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

Nine Months Ended

Three Months Ended

Net cash used in operating activities

2 unchanged sentences

Net cash used in operating activities

For the nine months ended October 2, 2022, net cash used in operating activities was $3.4 million, which was primarily due to the net loss of $3 million and a $27 thousand loss on the disposal of equipment, adjusted for net non-cash charges of $1.9 million, which included $1.3 million of stock-based compensation, depreciation and amortization expenses of $0.5 million, and an inventory write-downs of $72 thousand. Cash outflows from changes in operating assets and liabilities were approximately $2.3 million and were primarily due to an increase in accounts receivable, reflecting an increase in revenues during the period, increases in inventory and other assets and a decrease in deferred revenue, partially offset by an increase in trade payables, which are subject to variability of the timing of payments.

For the nine months ended October 3, 2021, net cash used in operating activities was $3.1 million, which was primarily due to the net loss of $5.0 million, adjusted for net non-cash charges of $1.0 million including $1.5 million of stock-based compensation, depreciation and amortization expenses of $471,000, and inventory write-downs of $225,000 partially offset by the gain recognized from the forgiveness of debt of $1.2 million related to the PPP loan which was forgiven in the first quarter of fiscal 2021.

Cash inflows from changes in operating assets and liabilities were approximately $1.0 million, primarily due to a decrease in inventory, and increases in trade payables 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 third quarter.

For the three months ended April 2, 2023, net cash used in  operating acti vities was $0.3 million, whic h was primarily due to the net loss of $1.2 million, adjus ted for net non-cash charges of $1.1 million, which included $0.7 million of stock-based compensation, and $0.2 depreciation and amortization expenses.

Cash inflow from changes in operating assets and liabilities were approximately $65 thousand and were primarily due to a decrease in accounts receivable, increases in accrued liabilities and lease liabilities, partially offset by an increase in contract assets, increase in prepaid expenses and other current assets and decrease in trade payables.

Net cash used in investing activities

For the nine months ended October 2, 2022, and October 3, 2021 cash used in investing activities was $0.6 million, which was primarily attributable to the capitalized internal-use software and capital expenditures relating to licensed software and computer equipment.

For the three months ended April 2, 2023, and April 3, 2022 cash used in  investing activities was 

$0.2 million , which was primarily attributable to the capitalized internal-use software and capital expenditures relating to licensed software and computer equipment.

Net cash provided by financing activities

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 nine months ended October 2, 2022, cash provided by financing activities was $4.5 million, which was primarily derived from the net proceeds of $4.8 million from the stock issuances, partially offset by finance lease obligation payments. We continue to use and repay our revolving line of credit as our cash needs require.

For the nine months ended October 3, 2021, cash provided by financing activities was $0.5 million and was primarily derived from the net proceeds of $1.0 million from the stock issuances, partially offset by taxes paid relating to stock-based compensation equity awards.

Cash flows from financing activities include the draw-downs and repayments of our line of credit.

 For the quarter ended 2023 and 2022, these draw-downs and repayments netted to zero.

For the three months ended April 2, 2023, 

provided by  financing activities was 

$2.2 million , which was primarily derived from the net proceeds of $2.3 million from the stock issuances, partially offset by finance lease obligation payments. We continue to use and repay our revolving line of credit as our cash needs requi re.

For the three months ended April 3, 2022, cash 

provided by financing activities was 

$1.4 million  and was primarily derived from the net proceeds of $1.5 million from the stock issuances, partially offset by finance lease obligation payments.

Financial Information (continued)

4 unchanged sentences

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