QUICKLOGIC Corp 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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. We intend that these forward-looking statements be subject to the safe harbor created by those provisions. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “ will, ” “ may, ” “ should, ” “ forecast, ” “ could, ” “ expect, ” “ suggest, ” “ believe, ” “ anticipate, ” “ intend, ” “ plan, ” "future," "potential," "target," "seek," "continue," "if" or other similar words. The forward-looking statements contained in the Quarterly Report include statements regarding our strategies as well as (1) our revenue levels, including the commercial success of our solutions and new products, (2) the conversion of our design opportunities into revenue, (3) our liquidity, (4) our gross profit and breakeven revenue level and factors that affect gross profit and the break-even revenue level, (5) our level of operating expenses, (6) our research and development efforts, (7) our partners and suppliers, (8) industry and market trends, (9) our manufacturing and product development strategies, and (10) our competitive position. The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited consolidated financial statements and notes thereto for the fiscal year ended 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. All forward-looking statements included in this document are based on information available to us as of the date hereof. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements, or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. 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. Overview 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. 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. 16 Table of Contents 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 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 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. 17 Table of Contents Results of Operations The following table sets forth the percentage of revenue for certain items in our unaudited condensed consolidated statements of operations for the periods indicated: Three Months Ended March 31, 2024 April 2, 2023 Revenue 100 % 100 % Cost of revenue 34 % 42 % Gross profit 66 % 58 % Operating expenses: Research and development 24 % 39 % Selling, general and administrative 39 % 46 % Income (loss) from operations 3 % (27 )% Interest expense (1 )% (1 )% Interest income and other income (expense), net — % (2 )% Income (loss) before income taxes 2 % (30 )% (Benefit from) provision for income taxes — % — % Net income (loss) 2 % (30 )% Three Months Ended March 31, 2024 Compared to Three Months Ended April 2, 2023 Revenue 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 March 31, 2024 April 2, 2023 Change % of Total % of Total Amount Revenues Amount Revenues Amount Percentage New products $ 4,876 81 % $ 3,055 74 % $ 1,821 60 % Mature products 1,131 19 % 1,078 26 % 53 5 % Total revenue $ 6,007 100 % $ 4,133 100 % $ 1,874 45 % Note: 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 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 March 31, 2024 compared to the three months ended April 2, 2023 (in thousands, except percentage data): Three Months Ended March 31, 2024 April 2, 2023 Change % of Total % of Total Amount Revenues Amount Revenues Amount Percentage Hardware products $ 495 8 % $ 162 4 % $ 333 206 % eFPGA IP and professional services 4,043 67 % 2,810 68 % 1,233 44 % SaaS & Other 338 6 % 83 2 % 255 307 % Total new product revenue $ 4,876 81 % $ 3,055 74 % $ 1,821 60 % 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. 18 Table of Contents Gross Profit 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 March 31, 2024 April 2, 2023 Change % of Total % of Total Amount Revenues Amount Revenues Amount Percentage Revenue $ 6,007 100 % $ 4,133 100 % $ 1,874 45 % Cost of revenue 2,024 34 % 1,743 42 % 281 16 % Gross profit $ 3,983 66 % $ 2,390 58 % $ 1,593 67 % 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. Operating Expenses 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 March 31, 2024 April 2, 2023 Change % of Total % of Total Amount Revenues Amount Revenues Amount Percentage R&D expense $ 1,459 24 % $ 1,629 39 % $ (170 ) (10 )% SG&A expense 2,351 39 % 1,861 46 % 490 26 % Total operating expenses $ 3,810 63 % $ 3,490 85 % $ 320 9 % Research and Development Our R&D expenses consist primarily of personnel, overhead and other costs associated with System on Chip (SoC) and software development, programmable logic design, AI and eFPGA development. The $0.2 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 $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 March 31, 2024 compared to the three months ended April 2, 2023 (in thousands, except percentage data): Three Months Ended Change March 31, April 2, 2024 2023 Amount Percentage Interest expense $ (69 ) $ (58 ) $ 11 19 % Interest income and other income (expense), net 11 (63 ) (74 ) (117 )% Total interest (expense), interest income and other income (expense), net $ (58 ) $ (121 ) $ (63 ) (52 )% 19 Table of Contents 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 March 31, 2024, compared to the three months ended April 2, 2023 (in thousands, except percentage data): Three Months Ended Change March 31, April 2, 2024 2023 Amount Percentage (Benefit from) provision for income taxes $ 7 $ 7 $ — 0 % 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 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. 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, 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. 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 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. 20 Table of Contents 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 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 our customers’ products; costs of securing access to and availability of adequate manufacturing capacity; levels of inventories; wafer purchase commitments; customer credit terms; the amount and timing of research and development expenditures; the timing of new product introductions; production volumes; product quality; sales and marketing efforts; the value and liquidity of our investment portfolio; changes in operating assets and liabilities; the ability to obtain or renew debt financing and to remain in compliance with the terms of existing credit facilities; the ability to raise funds from the sale of equity in the company; 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, 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. Factors that affect our global capital deployment strategy include anticipated cash flows, the ability to repatriate cash in a tax-efficient manner, funding requirements for operations and investment activities, acquisitions and divestitures, and capital market conditions. In summary, our cash flows were as follows (in thousands): Three Months Ended March 31, April 2, 2024 2023 Net cash provided by (used in) operating activities $ 86 $ (359 ) Net cash provided by (used in) investing activities (590 ) (187 ) Net cash provided by (used in) financing activities 3,297 2,247 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 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. 21 Table of Contents Part I. Financial Information (continued) Off-Balance Sheet Arrangements We do not maintain any off-balance sheet partnerships, arrangements, or other relationships with unconsolidated entities or others, often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not Applicable.