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Item 2. Management’s Discussion and Analysis

2024-05-15 compared with 2023-11-15 · 168 added, 267 removed, 79 unchanged (85% of the section changed)

1 unchanged sentence

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 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 1, 2023, found in our Annual Report on Form  

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

) on March 28, 2023.

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 December 31, 2023, found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ( “ SEC ” ) on March 27, 2024.

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 ”

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.

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 ” 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.

All forward-looking statements included in this document are based on information available to us as of the date hereof.

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We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, that may arise after the date of this Quarterly Report on Form 10-Q.

We develop low power, multi-core semiconductor platforms and IP for AI, voice, and sensor processing.

The solutions include an eFPGA for hardware acceleration and pre-processing, and heterogeneous multi-core SoCs that integrate eFPGA with other processors and peripherals.

The SensiML Analytics Toolkit from our wholly owned subsidiary, SensiML completes the “full stack”

end-to-end solution with accurate sensor algorithms using AI technology. The full range of platforms, software tools and eFPGA IP enables the practical and efficient adoption of AI, voice, and sensor processing across Consumer/Industrial IoT, Consumer electronics, Military, Aerospace and Defense applications. 

Our new products include our EOS™, QuickAI™, SensiML Analytics Studio, ArcticLink®

III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products (which together comprise our new product category).

Our mature products include primarily FPGA families named pASIC®3 and QuickRAM®

as well as programming hardware and design software.

In addition to delivering our own semiconductor solutions, we have an IP business that licenses our eFPGA technology for use in other semiconductor companies' SoCs.

We began delivering our eFPGA IP product ArcticPro™

in 2017, which is included in the new product revenue category.

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.

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.

All of our silicon platforms are standard devices and must be programmed to be effective in a system.

Our IP that enables always-on context-aware sensor applications includes our Flexible Fusion Engine, our Sensor Manager and Communications Manager technologies as well as IP that (i) improves multimedia content, such as our Visual Enhancement Engine, ("VEE"), technology, and Display Power Optimizer, ("DPO"), technology;

and (ii) implements commonly used mobile system interfaces, such as Low Voltage Differential Signaling, ("LVDS"), Mobile Industry Processor Interface, ("MIPI"), and Secure Digital Input Output, ("SDIO").

Through the acquisition of SensiML, our core IP also includes the SensiML AI Toolkit that enables OEMs to develop AI software for a broad array of resource-constrained time-series sensor endpoint applications.

These include a wide range of consumer and industrial sensing applications.

We also work with processor manufacturers, sensor manufacturers, and voice recognition, sensor fusion and context awareness algorithm developers in the development of reference designs.

Through reference designs that incorporate our solutions, we believe mobile processor manufacturers, sensor manufacturers, and sensor and voice algorithm companies can expand the available market for their respective products.

Furthermore, should a solution developed for a processor manufacturer or sensor and/or sensor algorithm company be applicable to a set of common OEMs or Original Design Manufacturers, ("ODMs"), we can amortize our Research and Development, ("R&D"), investment over that set of OEMs or ODMs.

There may also be cases when platform providers that intend to use always-on voice recognition will dictate certain performance requirements for the combined software/hardware solution before the platform provider certifies and/or qualifies our product for use by end customers.

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 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 eFPGA IP are currently developed on 12nm, 16nm, 22nm, 28nm, 40nm, 65nm, 90nm, 130nm, and 250nm 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.

QuickLogic Corporation was founded in 1988 and reincorporated in Delaware in 1999.

We provide innovative, programmable silicon and software platforms to enable our customers to develop custom hardware products in a fast time-to-market and cost-effective way.

Specifically, we are a fabless semiconductor company with a variety of products:

embedded FPGA ("eFPGA") intellectual property ("IP"), low power, multi-core semiconductor system-on-chips ("SoCs"), discrete FPGAs, and AI software.

Our customers can use our eFPGA IP for hardware acceleration and pre-processing in their Application Specific Integrated Circuit (ASIC) products, our SoCs to run our customers' software and build their hardware around, and our discrete FPGAs to implement their custom functionality.

The Analytics Toolkit from SensiML Corporation ("SensiML"), our wholly-owned subsidiary, provides an end-to-end Artificial Intelligence / Machine Learning solution with accurate sensor algorithms using AI technology.

The full range of platforms, software tools, and eFPGA IP enables the practical and efficient adoption of AI, voice, and sensor processing across Aerospace and Defense, Consumer/Industrial IoT, and Consumer Electronics markets.

Our new products include the following:

eFPGA IP Licensing business and associated professional services, consisting of development and integration of eFPGA technology into custom semiconductor solutions and our silicon products consisting of EOS™, QuickAI™, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products.

In addition to delivering our own semiconductor solutions, our new products category includes our AI/ML Software Platform from our wholly-owned subsidiary company, SensiML, which includes Software as a Service (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 products revenue category.

Our mature products include primarily FPGA families named PASIC®3 and QuickRAM®, as well as programming hardware and design software.

We currently have a total of three patent applications pending.

For our IP and silicon platforms, we collaborate with multiple partners on co-marketing and/or co-selling initiatives.

These partners could have primary business lines in semiconductor IP, Design Services, semiconductor foundry, semiconductor assembly and test, and others.

For our AI/ML Software, SensiML collaborates with several microcontroller and sensor manufacturers to integrate the microcontroller and/or sensor manufacturers’ development kits with SensiML’s Analytics Toolkit in order to showcase combined solutions for AI/ML applications.

Currently, these collaborations include Infineon Technologies, On Semiconductor Corp., Microchip Technology Inc., Silicon Laboratories, Inc., STMicroelectronics N.V., Arduino, NXP Semiconductors N.V., Raspberry Pi, and Nordic Semiconductor.

Our eFPGA IP is currently developed on 12nm, 16nm, 22nm, 28nm, 40nm, 65nm, 90nm, 130nm, and 250nm process nodes with a roadmap to more advanced nodes.

The licensable IP is generated by our automated compiler tool called Australis™, which 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.

We expect our business growth to be driven mainly by our silicon solutions, eFPGA IP and SensiML AI Software.

Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sales and marketing of our new solution platforms, IP, and software.

We are expecting revenue growth primarily from eFPGA IP licensing and professional services in Q4 2023 and FY2024.

We continue to seek to expand our revenue, including pursuing high-volume sales opportunities in our target market segments, by providing solutions incorporating IP, or industry standard interfaces.

Our industry is characterized by intense price competition and by lower margins as order volumes increase.

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 2023, we generated total revenue of 

$6.7 million , an increase  of 

128%  compared to the prior quarter, and 

an increase  of 

93%  compared to the same quarter last year. Our new product revenue in the third quarter was 

$6.1 million , 

an increase  of 

173%  from the prior quarter and 

an increase  of 

171%  from the third quarter of 

increase  in new product revenue from the prior quarter was primarily driven by a $3.97 million increase in eFPGA professional services revenue, partially offset by a decrease of $119 thousand in hardware product revenue.

Our mature product revenue was $0.6 million  in the third quarter of 

2023 , a decrease  of 

17%  compared to the prior quarter, and a decrease  of 

53%  compared to the third quarter of 2022 .

We have changed our manufacturing strategies to reduce the cost of our silicon solution platforms to enable their use in a range of unique products ranging from low to high volume.

Our EOS S3, EOS S3AI, QuickAI, and ArcticLink III silicon platforms combine mixed signal physical functions and hard-wired logic alongside our field programmable logic.

Our EOS S3, EOS S3AI, and ArcticLink III solution platforms are manufactured on process nodes where we can benefit from smaller die sizes and lower power consumption.

We typically implement sophisticated logic blocks and mixed signal functions in hard-wired logic because it is very cost-effective and energy efficient.

We use small form factor packages, which are less expensive to manufacture and include smaller pin counts.

Reduced pin counts result in lower costs for our customers' printed circuit board space and routing.

Furthermore, our SRAM reprogrammable silicon platforms can be programmed in-system by our customers, and therefore, we do not incur programming costs, lowering the overall cost of ownership to our customers.

We expect to continue to invest in silicon solution platforms and manufacturing technologies that make us competitive for the variety of markets and applications that programmable logic serves.

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

We expect our business growth to be driven mainly by eFPGA IP and our silicon solutions, with additional contributions from SensiML AI Software.

Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sale, and marketing of our new solution platforms, IP, and software.

We market our programmable logic (FPGAs and eFPGA IP) solutions primarily to Defense Industrial Base contractors, U.S.

Government entities, System OEMs, and fabless semiconductor companies.

These customers may value one or more of our product categories.

A solution can be based on our programmable technology, which enables customized designs, low power, flexibility, rapid time-to-market, longer time-in-market, and lower total cost of ownership.

We are capable of providing complete solutions because of our investment in developing the low power IP and software required to implement specific functions, along with sensor software algorithms optimized for our architecture.

In some cases, we develop the IPs and either software or firmware ourselves and, in other cases, we utilize third parties to develop the mixed signal physical layers, logic, and/or software.

We market our SoC and SensiML solutions to OEMs and ODMs offering differentiated Consumer/IoT products, to processor vendors wishing to expand their served available market, and to sensor manufacturers and sensor processing software companies wishing to expand their ecosystems.

Our target markets for our SoC and SensiML products include Consumer/Industrial IoT and Consumer Electronics.

By using our silicon platforms, our IPs, our software, and our in-depth architecture knowledge, we can deliver energy efficient custom solutions that blend the benefits of traditional ASSPs with the flexibility, product proliferation, differentiation, and low total cost of ownership advantages of programmable logic.

We monetize our technology through hardware product sales and eFPGA IP licenses, with any necessary corresponding work delivered via professional engineering services, SensiML Analytics Toolkit subscriptions, and per unit royalties.

We specialize in enhancing the user experience in leading edge IoT hardware products.

For our customers, we enable hardware and sensor algorithmic differentiation quickly, cost-effectively, and at low power.

For our partners, we expand their reach into new segments and new use cases, thereby expanding the served available market for their existing hardware products.

Our embedded FPGA technology gives ASIC and SoC developers the benefit of flexibility to make design changes post-manufacturing changes at very fast time-to-and time-in-market, while keeping power consumption low.

Our multi-core sensor processing products such as ArcticLink 3 S1, ArcticLink 3 S2, EOS 3, EOS S3 LV, and EOS S3AI provide an extremely power-efficient approach for real-time multi-modal (vision, motion, voice, location, biometric, and environmental) sensor processing independently of the cloud.

Our SensiML Analytics Toolkit is cutting-edge software that enables ultra-low power IoT endpoints that implement AI to transform raw sensor data into meaningful insight at the device itself.

The toolkit also provides an end-to-end development platform spanning data collection, labeling, algorithm and firmware auto generation, and testing.

We recognize that our markets require a range of solutions, and we intend to work with market-leading companies to combine silicon solution platforms, packaging technology, FPGA User Tools, sensor software algorithms, software drivers and firmware, to meet the product proliferation, high bandwidth, time-to-market, time-in-market, and form factor requirements of our customers.

We intend to continue to define and implement compelling solutions for our target customers and partners.

We believe our solutions are resonating with our target customers who value lower power consumption, platform design flexibility, rapid time-to-market, longer time-in-market, and low total cost of ownership available through the use of our solutions.

We sell our products through a network of sales managers in North America, Europe, and Asia.

In addition to our corporate headquarters in San Jose, California, we have international sales operations in Japan and the United Kingdom.

Our sales personnel and independent sales representatives are responsible for sales and application support for a given region, focusing on major strategic accounts, and managing our channel sales partners such as distributors.

Customers typically order our products through our distributors.

Currently, we have ten active distributors in North America and a network of fifteen active distributors and sales representatives throughout Europe and Asia to support our international business.

eFPGA IP customers and SensiML SaaS subscribers typically enter into licensing agreements directly with QuickLogic and SensiML, respectively.

We also have an Aerospace and Defense, industrial, and IoT product customer base that purchases our mature silicon products.

We expect to continue to offer silicon hardware products to these customers, as well as new eFPGA IP for when these customers choose to implement their own silicon platform solution.

During the first quarter of 2024, we generated total revenue of $6.0 million, a decrease of 20% compared to the prior quarter, and an increase of 45% compared to the same quarter last year.

Our new product revenue in the first quarter was $4.9 million, a decrease of 29% from the prior quarter and an increase of 60% from the first quarter of 2023.

Our mature product revenue was $1.1 million in the first quarter of 2024, an increase of 73% compared to the prior quarter, and an increase of 5% compared to the first quarter of 2023.

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 eFPGA  IP l icensin g and professional services and SensiML initiatives.

Overall, we reported net income of $1.2 million  for the third quarter of 2023 , as compared to a net loss of $2.3 million in the prior quarter and a net loss of $1.3 million for the third 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.

Unless such cash flow levels are achieved in addition to the proceeds we received from our recent sale of our equity securities, we may need to borrow additional funds or sell debt or equity securities, or some combination thereof, to provide funding for our operations, and such additional funding may not be available on commercially reasonable terms, or at all.

There have been no material changes due to the impact of the Covid-19 pandemic on our business from that disclosed in our most recently filed Annual Report.

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 October 1, 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 is complete and there was no impact on the Company's financial systems.

The Company believes the incident has not had nor will have a material impact on its business operations, ability to serve its customers, or financial results.

See Note 1, The Company and Basis of Presentation.

As of October 1, 2023, the Company had one operating lease with a remaining lease term of 0.5 years.

The operating lease relates to the Company's headquarters in San Jose, CA.

On October 24, 2023, the Company renewed its lease at its current location for an additional three years.

The amended lease term will expire on April 14, 2027 with no change in terms.

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

Overall, we reported net income of $0.1 million for the first quarter of 2024, as compared to a net income of $2.0 million in the prior quarter and a net loss of $1.2 million for the first quarter of 2023.

As of March 31, 2024, we had one operating lease with a remaining lease term of 3.00 years.

The operating lease relates to our company headquarters in San Jose, CA.

Critical Accounting Policies and Estimates

The methodologies, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our unaudited condensed consolidated financial statements.

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), and the assessment of excess, obsolete, and unsaleable inventories.

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 1, 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.

The methodologies, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.

The SEC has defined critical accounting policies as those that are most important to the portrayal of the company's financial condition and results of operations and requires us to make our most 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 accounting policies include revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets.

We believe that we apply judgments and estimates in a consistent manner and that such consistent application results in 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 March 31, 2024, 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 December 31, 2023, which was filed with the SEC on March 27, 2024.

Results of Operations

1 unchanged sentence

Three Months Ended

Nine Months Ended

October 1, 2023

October 2, 2022

October 1, 2023

October 2, 2022

March 31, 2024

April 2, 2023

Cost of revenue

6 unchanged sentences

Income (loss) before income taxes

Provision for income taxes

(Benefit from) provision for income taxes

Net income (loss)

Three Months Ended October 1, 2023 Compared to Three Months Ended October 2, 2022

The table below sets forth the changes in revenue in the three months ended October 1, 2023 compared to the three months ended October 2, 2022 (in thousands, except percentage data):

Three Months Ended March 31, 2024 Compared to Three Months Ended April 2, 2023

The table below sets forth the changes in revenue in the three months ended March 31, 2024 compared to the three months ended April 2, 2023 (in thousands, except percentage data):

Three Months Ended

October 1, 2023

October 2, 2022

March 31, 2024

April 2, 2023

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) 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) revenue.

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

Product revenue for the third quarter of 2023 compared to the third quarter of 2022 increased $3.2 million.

The increase resulted primarily from increases in professional services eFPGA revenues, partially offset by a decrease in revenue from devices.

Product revenue for the first quarter of 2024 compared to the first quarter of 2023 increased $1.9 million.

The increase resulted primarily from increases in professional services eFPGA revenues and revenue from devices.

New Product Revenue

The table below sets forth the changes in new product revenue in the three months ended October 1, 2023 compared to the three months ended October 2, 2022 (in thousands, except percentage data):  

The table below sets forth the changes in new product revenue in the three months ended March 31, 2024 compared to the three months ended April 2, 2023 (in thousands, except percentage data):

Three Months Ended

October 1, 2023

October 2, 2022

March 31, 2024

April 2, 2023

Hardware products

1 unchanged sentence

Total new product revenue

eFPGA IP revenue for the three months ended October 1, 2023 and October 2, 2022 was $5.8 million and $1.7 million, respectively, which were primarily professional services revenue.

The table below sets forth the changes in gross profit for the three months ended October 1, 2023 compared to the three months ended October 2, 2022 (in thousands, except percentage data):

eFPGA IP revenue for the three months ended March 31, 2024 and April 2, 2023 was $4.0 million and $2.8 million, respectively, which were primarily professional services revenue.

The table below sets forth the changes in gross profit for the three months ended March 31, 2024 compared to the three months ended April 2, 2023 (in thousands, except percentage data):

Three Months Ended

October 1, 2023

October 2, 2022

March 31, 2024

April 2, 2023

Cost of revenue

In the third quarter of 2023 , gross profit increased  

$3.5 million , or 206% , compared to the same quarter in the prior year.

The increase in gross profit reflects a 93%increase in revenues combined with a 14% net decrease in cost of revenue.

While there was a decrease in product costs resulting from lower devices volumes, the timing of certain professional services cost into the fourth quarter of 2023 had a favorable impact on third-quarter 2023 margins.

We expect the impact from the timing of these costs will result in higher costs of revenue in subsequent quarters in 2023 and 2024, with a commensurate decrease in gross margins for those quarters.

Additionally, certain tooling costs for the Company's eFPGA professional services projects were determined to qualify for capitalization.

As a result, the Company capitalized $2.1 million related to tooling to be utilized under its long-term professional services contracts.

The tooling will be depreciated over an estimated useful life of seven years.

The capitalization of this tooling also contributed to a reduced cost of revenues for the current period as compared with prior periods, resulting in a favorable impact on gross profit for the third quarter of 2023.

In the first quarter of 2024, gross profit increased $1.6 million, or 67%, compared to the same quarter in the prior year.

The increase in gross profit reflects a 45% increase in revenues, offset by a 16% net increase in cost of revenue.

Revenue increased from the same quarter in the prior year due to revenues associated with Department of Defense contracts, as well as increases in device sale revenues.

The increase in cost of revenues was primarily due to the increased activity commensurate with the professional services revenue contracts.

Labor, semiconductor tooling, and increased depreciation expenses substantially comprised this increase.

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.

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 three months ended October 1, 2023, compared to the three months ended October 2, 2022 (in thousands, except percentage data):

The table below sets forth the changes in operating expenses for the three months ended March 31, 2024 compared to the three months ended April 2, 2023 (in thousands, except percentage data):

Three Months Ended

October 1, 2023

October 2, 2022

March 31, 2024

April 2, 2023

Total operating expenses

1 unchanged sentence

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 $0.9 million increase in R&D expenses in the third quarter of 2023, as compared to the third quarter of 2022, was attributable to increases in time and effort spent by engineering personnel on internal R&D projects in the current quarter.

The $0.2 million decrease in R&D expenses in the first quarter of 2024, as compared to the first quarter of 2023, was primarily due to allocations to cost of revenue resulting from labor and tooling costs attributable to professional services revenue contracts.

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 Company had a net, immaterial increases in S&GA expenses in the third quarter of 2023, as compared to the third quarter of 2022.

This is primarily attributable to some increases in compensation costs offset with decreases in legal and accounting and audit expenses.

The $0.5 million increase in SG&A expenses in the first quarter of 2024, as compared to the first quarter of 2023, was attributable to increases in consulting and outside services.

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 1, 2023, compared to the three months ended October 2, 2022 (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 March 31, 2024 compared to the three months ended April 2, 2023 (in thousands, except percentage data):

Three Months Ended

2 unchanged sentences

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 in our money market accounts. Changes in interest expense are related to our revolving loan's interest rate variability. Interest expense for the third quarter of this year as compared to the same period in the prior year increased approximately $4 thousand which was comprised of a $10 thousand increase in interest expense related to software leases, a $8 thousand decrease in interest expense related to our revolving line of credit facility, and a $2 thousand increase in interest expense related to IT hardware financing costs.

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

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

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 are related to our revolving loan's interest rate variability.

Interest expense for the first quarter of this year as compared to the same period in the prior year increased approximately $11 thousand, which was comprised of a $8 thousand increase in interest expense related to notes payable, a $9 thousand increase in interest expense related to our revolving line of credit facility, and a $6 thousand decrease in interest expense related to IT hardware financing costs.

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

Provision for Income Taxes

The table below sets forth the changes in the provisions for income taxes in the three months ended October 1, 2023, compared to the three months ended October 2, 2022 (in thousands, except percentage data):

The table below sets forth the changes in the provisions for income taxes in the three months ended March 31, 2024, compared to the three months ended April 2, 2023 (in thousands, except percentage data):

Three Months Ended

Provision for income taxes

The majority of the income tax expense for the three months ended October 1, 2023 and October 2, 2022 are related to our foreign subsidiaries, which are cost-plus entities.

Nine Months Ended October 1, 2023 Compared to Nine Months Ended October 2, 2022

The table below sets forth the changes in revenue in the nine months ended October 1, 2023 compared to the nine months ended October 2, 2022 (in thousands, except percentage data):

Nine Months Ended

October 1, 2023

October 2, 2022

Mature products

Total revenue

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

Product revenue for the nine months ending October 1, 2023 compared to the nine months ending October 2, 2022 increased $1.6 million.

The increase resulted primarily from increases in eFPGA revenues, partially offset by a decrease in revenue from devices.

New Product Revenue

The table below sets forth the changes in new product revenue in the nine months ended October 1, 2023 compared to the nine months ended October 2, 2022 (in thousands, except percentage data):  

Nine Months Ended

October 1, 2023

October 2, 2022

Hardware products

eFPGA IP and professional services

Total new product revenue

eFPGA revenue for the nine months ended October 1, 2023 was $10.5 million which was comprised of approximately $10.3 million in professional services revenue and $0.2 million in eFPGA intellectual property license revenue.

eFPGA revenue for the nine months ended October 2, 2022 was $4.9 million, which was comprised of approximately $4.8 million in professional services revenue and $0.1 million in eFPGA intellectual property license revenue.

The table below sets forth the changes in gross profit for the nine months ended October 1, 2023 compared to the nine months ended October 2, 2022 (in thousands, except percentage data):

Nine Months Ended

October 1, 2023

October 2, 2022

Cost of revenue

In the nine months ended October 1, 2023 , gross profit increased  

$2.04 million , or 30% , as compared to the same period in the prior year.

The increase in gross profit reflects an 13% increase in revenues combined with an 8% net decrease in cost of revenue.

We expect the impact from the timing of these costs will result in higher costs of revenue in subsequent quarters in 2023 and 2024, with a commensurate decrease in gross margins for those quarters.

Additionally, certain tooling costs for the Company's eFPGA professional services projects were determined to qualify for capitalization.

As a result, the Company capitalized $3.86 million related to tooling to be utilized under its long-term professional services contracts.

The tooling will be depreciated over an estimated useful life of seven years.

The capitalization of this tooling also contributed to a reduced cost of revenues for the current year-to-date period as compared with prior periods, resulting in a favorable impact on gross profit for the nine months ended October 1, 2023.

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

Operating Expenses

The table below sets forth the changes in operating expenses for the nine months ended October 1, 2023, compared to the nine months ended October 2, 2022 (in thousands, except percentage data):

Nine Months Ended

October 1, 2023

October 2, 2022

Total operating expenses

Research and Development

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

The $1.5 million  

increase  in R&D expenses in the nine months ending October 1, 2023 , as compared to the same period in the prior year, was attributable to increases in time and effort spent by engineering personnel on internal R&D projects in the current year.

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 $0.3 million decrease in SG&A expenses in the nine months ending October 1, 2023, as compared to the same period in the prior year, was primarily attributable to decreases in legal, insurance, and accounting and audit expenses.

These were partially offset by increases in compensation.

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 1, 2023, compared to the nine months ended October 2, 2022 (in thousands, except percentage data):

Nine Months Ended

Interest expense

Interest income and other 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 lease liabilities.

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 are related to our revolving loan's interest rate variability. Interest expense for the nine months ending October 1, 2023 , as compared to the same period in the prior year , increased approximately $58 thousand, which was comprised of a $36 thousand increase in interest expense related to software leases, a $18 thousand increase in interest expense related to our revolving line of credit facility, and a $7 thousand increase in interest expense related to IT hardware financing costs.

This was partially offset by a $3 thousand decrease in the annual facility fee associated with the revolving line of credit.

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

Provision for Income Taxes

The table below sets forth the changes in the provisions for income taxes in the nine months ended October 1, 2023, compared to the nine months ended October 2, 2022 (in thousands, except percentage data):

Nine Months Ended

Provision for income taxes

The majority of the income tax expenses for the nine months ended October 2, 2022 are related to our foreign subsidiaries, which are cost-plus entities.

(Benefit from) provision for income taxes

There was no change in the income tax expense for the three months ended March 31, 2024 and April 2, 2023.

The projected annual effective tax rate before certain discrete items as of the first quarter of 2024 is 0.80%, as compared to the projected annual effective tax rate of (3.95)% for the same period in the prior year.

Balance Sheet Activities

Balance sheet amounts at October 1, 2023 compared to January 1, 2023 resulted from typical and usual activities in the normal course of business.  

Total assets increased by approximately $4.0 million primarily due to the capitalization of $3.86 million in semiconductor tooling, an increase of $2.0 million in contract assets (due to the $14.9 million professional services contract signed later in the quarter), a $2.0 million decrease in accounts receivable due to an offsetting reclassification of $1.2 million in trade accounts receivable to a note receivable in other current assets with the remainder $0.8 million decrease due to collections activity, a $0.6 million decrease in cash, a decrease in device inventories of $0.4 million due to write-downs, and amortization of ROU assets in the amount of $0.3 million.

Liabilities increased by approximately $1.8 million due to an increase of $1.5 million in trade payables resulting from fulfilling revenue contracts with customers, and similarly for the $0.5 million increase in accrued liabilities offset by a net collective decrease of $0.2 million in lease liabilities and other non-current liabilities.

Equity increased $2.1 million due to a $4.4 million increase in additional paid in capital arising from the sale of shares of common stock and recognition of stock-based compensation, offset by $2.3 million increase in its accumulated deficit from recurring losses.

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 $18.6 million, as of October 1, 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.

Balance sheet amounts at March 31, 2024 compared to December 31, 2023 resulted from typical and usual activities in the normal course of business.

Total assets increased by approximately $4.1 million primarily due to the capitalization of $3.96 million in semiconductor tooling, reduced by $0.8 million in depreciation and amortization expense, an increase of $2.8 million in cash and cash equivalents due to net proceeds received from our stock offerings, and an increase of $0.6 million in other current assets.

This was partially offset by a $2.5 million reduction in contract assets due to billings.

Liabilities decreased by approximately $1.3 million due to payment of accrued liabilities of $1.2 million and the recognition of deferred revenue of $0.3 million.

This was partially offset by an increase in trade payables of $0.2 million resulting from fulfilling revenue contracts with customers.

Equity increased $5.5 million due to a $5.2 million increase in additional paid in capital arising from the sale of shares of common stock and recognition of stock-based compensation and a $0.2 million net income for the three months ended March 31, 2024.

Liquidity and Capital Resources

We have financed our operations and capital investments through public and private offerings of our common stock, financing arrangements, operating leases, borrowings under a revolving line of credit, and cash flows from operations.

In addition to our cash, cash equivalents and restricted cash of $27.4 million, as of March 31, 2024, other sources of liquidity included a $20.0 million drawn down from our revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce (“Heritage Bank”), and $3.5 million in net proceeds from the sale of our common stock on March 13, 2024.

Costs related to the offering were immaterial.

The Company's restricted cash balance as of October 1, 2023 was $0.1 million and relates to amounts pledged as cash security for the use of credit cards.

On April 28, 2023, the Company converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Note").

Our restricted cash balance as of March 31, 2024 was $0.1 million and relates to amounts pledged as cash security for the use of credit cards.

On April 28, 2023, we converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Note").

At the time, the Note bore an interest rate of 3.00% compounded monthly.

On June 28, 2023, the Company cancelled the original note and entered into a revised promissory note with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.8% effective annual interest rate, accruing from the date of the prior note.

If not prepaid prior to the Note maturity date of June 28, 2024, the principal and all accrued and unpaid interest will be due and payable to the Company.

On June 28, 2023, we cancelled the original note and entered into a revised promissory note with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.80% effective annual interest rate, accruing from the date of the prior note.

If not prepaid prior to the Note maturity date of June 28, 2024, the principal and all accrued and unpaid interest will be due and payable to us.

If an event of default occurs, the interest rate will increase to 10.00%.

All other terms of the Note remained the same.

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 the September 14, 2022 and the February 9, 2022 offerings 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. 

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of October 1, 2023.

As of October 1, 2023, we had $15.0 million outstanding on the Revolving Facility with an interest rate of 9.00%.

As of March 31, 2024, the related note receivable balance was $1.21 million, including $54 thousand in accrued interest.

On March 13, 2024, we entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 223 thousand shares of common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $3.5 million.

Issuance costs related to the offering were negligible.

The purchase price for each share of common stock was $16.00.

See Note 9 for additional information.

On March 21, 2023, we entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450 thousand shares of common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $2.3 million.

Issuance costs related to the offering were immaterial.

The purchase price for each share of common stock in the Share Placement was $5.14.

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of March 31, 2024.

As of March 31, 2024, we had $20.0 million outstanding on the Revolving Facility with an interest rate of 9.00%.

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:

Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with $3.5 million gross cash proceeds from the March 13, 2024 financing, our revenues from operations, and the available financial resources from the Revolving Facility with Heritage Bank will be sufficient to fund our operations and capital expenditures and provide adequate working capital for the next twelve months.

Various factors affect our liquidity, including, among others:

the level of revenue and gross profit as a result of the cyclicality of the semiconductor industry;

the conversion of design opportunities into revenue;

market acceptance of existing and new products including solutions based on its eFPGA IP, ArcticLink® and PolarPro® platforms, eFPGA, EOS S3 SoC, Quick AI solution, and SensiML software;

market acceptance of existing and new products including solutions based on our ArcticLink® and PolarPro® platforms, ArcticPro™, EOS S3 SoC, Quick AI solution, QuickAI™, SensiML Analytics Toolkit, Eclipse II products, and eFPGA IP license and professional services;

fluctuations in revenue as a result of product end-of-life;

fluctuations in revenue as a result of the stage in the product life cycle of its customers’

fluctuations in revenue as a result of the stage in the product life cycle of our customers’ products;

costs of securing access to and availability of adequate manufacturing capacity;

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sales and marketing efforts;

the value and liquidity of its investment portfolio;

the value and liquidity of our investment portfolio;

changes in operating assets and liabilities;

1 unchanged sentence

the ability to raise funds from the sale of equity in the company;

the issuance and exercise of stock options and participation in the Company’s employee stock purchase plan;

the issuance and exercise of stock options and participation in our employee stock purchase plan;

and other factors related to the uncertainties of the industry and global economics.

Over the longer term, the Company anticipates that sales generated from its new product offerings, existing cash and cash equivalents, together with financial resources from its Revolving Facility with Heritage Bank, assuming renewal of the Revolving Facility or the Company entering into a new debt agreement with an alternative lender prior to the expiration of the revolving line of credit in December 2024, and its ability to raise additional capital in the public capital markets will be sufficient to satisfy its operations and capital expenditures.

However, the Company cannot provide any assurance that it will be able to raise additional capital, if required, or that such capital will be available on terms acceptable to the Company.

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 1, 2023 , most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank.

October 1, 2023 , our interest-bearing debt consisted of $0.9 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 $0.15 million and $0.2 million  as of October 1, 2023 and January 1, 2023, respectively. Earnings from our foreign subsidiaries are currently deemed to be indefinitely reinvested.

Over the longer term, we anticipate that sales generated from our new product offerings, existing cash and cash equivalents, together with financial resources from our Revolving Facility with Heritage Bank, assuming renewal of the Revolving Facility or us entering into a new debt agreement with an alternative lender prior to the expiration of the revolving line of credit in December 2025, and our ability to raise additional capital in the public capital markets will be sufficient to satisfy our operations and capital expenditures.

However, we cannot provide any assurance that we will be able to raise additional capital, if required, or that such capital will be available on terms acceptable to us.

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

As of March 31, 2024 , most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank.

As of March 31, 2024 , our interest-bearing debt consisted of $1.4 million outstanding under notes payable and $20.0 million outstanding under our Revolving Facility.

See Note 7, Debt Obligations, to the unaudited condensed consolidated financial statements for more details.

Cash balances held at our foreign subsidiarie s were approximately $0.1 million as of March 31, 2024 and December 31, 2023.

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):

Nine Months Ended

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash used in operating activities

For the nine months ended October 1, 2023, net cash used in  operating acti vities was $0.1 million, whic h was primarily due to the net loss of $2.3 million, adjus ted for net non-cash charges of $4 million, which included $1.9 million of stock-based compensation, $0.7 million in depreciation and amortization expenses, $0.8 million in ROU asset amortization expenses, and $0.6 million in write-downs of inventories.

Cash outflow from changes in operating assets and liabilities was approximately $1.0 million and was primarily due to a reclassification of a trade payable to a note payable, increases in contract assets, offset by increases in accrued liabilities and trade payables.

For the nine months ended October 2, 2022, net cash used in operating activities was $3.4 million, was was primarily due to the net loss of $3.0 million and a $27 thousand loss on the disposal of equipment, adjusted for net non-cash charges of $2.5 million, which included $1.3 million of stock-based compensation, $0.6 million in ROU asset amortization expenses, $0.5 million in depreciation and amortization expenses, and $0.1 million in write-downs of inventories.

Cash outflow from changes in operating assets and liabilities was approximately $2.9 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.

Net cash used in investing activities

For the nine months ended October 1, 2023, and October 2, 2022 cash used in  investing activities was 

$2.4 million and $0.6 million, respectively, which were primarily attributable to the capital expenditures relating to licensed software, capitalized internal-use software, and purchase of specialized semiconductor tooling.

Net cash provided by financing activities

Three Months Ended

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net cash provided by (used in) operating activities

For the three months ended March 31, 2024, net cash provided by operating activities was $0.1 million, which was primarily due to the net income of $0.2 million, adjusted for net non-cash charges of $2.4 million, which included $1.6 million of stock-based compensation, $0.8 million in depreciation and amortization expenses, and $0.1 million in ROU asset amortization expenses.

Cash outflow from changes in operating assets and liabilities was approximately $2.5 million and was primarily due to decreases in accounts payable and accrued liabilities, partially offset by a decrease in contract assets.

For the three months ended April 2, 2023, net cash used in operating activities was $0.4 million, which was primarily due to the net loss of $1.2 million, adjusted for net non-cash charges of $1.3 million, which included $0.7 million of stock-based compensation, $0.4 million in depreciation and amortization expenses, $0.2 million in write-downs of inventories, and $0.1 million in ROU asset amortization expenses.

Cash outflow from changes in operating assets and liabilities was approximately $0.5 million and was primarily due to increases in contract assets and inventory and decreases in accounts payable, partially offset by decreases in accounts receivable.

Net cash provided by (used in) investing activities

For the three months ended March 31, 2024 and April 2, 2023 cash used in investing activities was $0.6 million and $0.2 million, respectively, which were primarily attributable to the capital expenditures relating to licensed software, capitalized internal-use software, and purchase of specialized semiconductor tooling, which was capitalized.

Net cash provided by (used in) financing activities

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

 For the quarters ended October 1, 2023 and October 2, 2022, these draw-downs and repayments netted to zero.

For the nine months ended October 1, 2023, 

provided by  financing activities was 

$2 million , which was primarily derived from the net proceeds of $2.3 million from the stock issuance, 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 nine months ended October 2, 2022, cash 

provided by financing activities was 

$4.5 million  and was primarily derived from the net proceeds of $4.8 million from the stock issuances, partially offset by finance lease obligation payments.

For the quarters ended March 31, 2024 and April 2, 2023, these draw-downs and repayments netted to zero.

For the three months ended March 31, 2024, cash provided by financing activities was $3.3 million, which was primarily derived from the net proceeds of $3.5 million from the common stock issuance, partially offset by $0.2 million in payments related to financing arrangements.

For the three months ended April 2, 2023, cash provided by financing activities was $2.2 million and was primarily derived from the net proceeds of $2.3 million from the common stock issuances and borrowings of notes payable of $0.1 million, partially offset by $0.2 million in payments related to financing arrangements.

Financial Information (continued)

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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