The following discussion and analysis should be read in conjunction with our
unaudited condensed consolidated financial statements, and the notes thereto,
and other financial information appearing elsewhere in this Quarterly Report on
Form 10-Q and the audited consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the fiscal year ended
Cautionary Note Regarding Forward-Looking Statements
This report contains "forward-looking statements", as such term is used within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, among other things, statements regarding our liquidity,
plans on repaying outstanding debt obligations, expectations regarding the
effect of the pandemic and inflation on our business, as well as other
statements regarding our future operations, financial condition and prospects,
and business strategies. Forward-looking statements generally can be identified
by words such as "anticipates," "believes," "estimates," "expects," "intends,"
"plans," "predicts," "projects," "will be," "will continue," "will likely
result," and similar expressions. These forward-looking statements are based on
current expectations and assumptions that are subject to risks and
uncertainties, which could cause our actual results to differ materially and
adversely from those reflected in the forward-looking statements. These risks
include the inability to expand our customer base, loss of additional customers,
pricing pressures, lack of success of our sales people, failure to develop
products at a profit, failure to commercialize products that we develop,
continued supply chain issues, inability of our design division's customers to
pay for our services, unanticipated issues with our affiliated sourcing agent,
issues at Chinese factories that source our products as a result of the pandemic
or otherwise, and failure to obtain acceptance of our products. No assurance can
be given that the actual results will be consistent with the forward-looking
statements. Investors should read carefully the factors described in the "Risk
Factors" section of the Company's filings with the
Business Overview
Our design division provides hardware and software product design and
engineering services to customers predominantly located in the
The effects of the COVID-19 pandemic continue to impact our business with higher
historical costs for ocean freight and ground transportation, particularly from
the
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The effects of COVID-19 may further impact our business in ways we cannot predict, and such impacts could be significant. The current economic conditions may continue to negatively impact our results of operations, cash flows and financial position in future periods as well as that of our customers, including their ability to pay for our services and to choose to allocate their budgets to new or existing projects which may or may not require our services. The long-term financial impact on our business cannot be reasonably estimated at this time. As a result, the effects of COVID-19 may not be fully reflected in our financial results until future periods.
Until the effects of the pandemic and associated inflationary impact have fully receded, we expect business conditions to remain challenging. In response to these challenges, we will continue to focus on those factors that we can control: closely managing and controlling our expenses and inventory levels; aligning our design and development schedules with demand in a proactive manner to minimize our cash operating costs; pursuing further improvements in the productivity and effectiveness of our development, selling and administrative activities and, where appropriate, taking advantage of opportunities to enhance our business growth and strategy.
Variability of Revenues and Results of Operations
A significant portion of our revenue is concentrated with several large customers, some of which are the same and some of which change over time. Orders from some of these customers can be highly variable, with short lead times, which can cause our quarterly revenues, and consequently our results of operations, to vary over a relatively short period of time.
Critical Accounting Policies and Estimates
We discussed the material accounting policies that are critical in making the
estimates and judgments in our Annual Report on Form 10-K for the fiscal year
ended
Recent Accounting Pronouncements
For information on recent accounting pronouncements and impacts, see Note 2 to the unaudited condensed consolidated financial statements.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
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