Divestiture Agreement with Yuhan Optoelectronic Technology (Shanghai) Co., Ltd
Lowering our material costs. In some cases, we are able to negotiate more
favorable pricing from our raw material suppliers. Also, where feasible, we
are often able to develop internal production for certain materials that were
Enhancing the efficiency of our production process. We have been able to
automate many of our production processes, which often results in lower labor
costs and reduced scrap or rework rates, both of which lower our production
cost. In some cases, we have been able to redesign our products to make them
less complex to manufacture, and when possible during these redesigns we also
Introducing new products. In many cases, newly released products have more
features and often higher prices compared with older products. By regularly
introducing new products, we attempt to minimize the average price reduction
we experience. However, we often initially experience lower gross margins on
new products, as our pricing is based upon anticipated volume-driven cost
reductions over the life of the design win. Thus, if we are unable to realize
our expected cost reductions, we may experience declining gross margins on
In 2022, 2021 and 2020, our top ten customers represented 87.2%, 84.7%, and 84.3% of our revenue, respectively.
Cost of goods sold and gross margin
We have a global set of suppliers to help balance considerations related to product availability, quality and cost. Components of our cost of goods sold are denominated in U.S. or NT dollars or RMB, depending upon the manufacturing location.
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Personnel costs are the most significant component of operating expenses and include salaries, benefits, bonuses and share-based compensation. With regard to sales and marketing expense, personnel costs also include sales commissions.
Interest income consists of income earned on our cash, cash equivalents and short-term investments. Interest expense consists of amounts paid for interest on our short-term and long-term debt borrowings, and convertible senior notes.
See additional information regarding income taxes in Note O, included in Part II, Item 8 of this Form 10-K.
Our gross margin varies quarter to quarter and varies primarily due to the product mix in a particular quarter, as well as from the level of manufacturing efficiencies, production yields (particularly in the laser chip fabrication process) and overall supply costs.
The following table sets forth our results of operations for the periods presented as a percentage of our revenue for those periods. The period-to-period comparison of our financial results is not necessarily indicative of our financial results to be achieved in future periods.
Comparison of Years Ended December 31, 2022 and 2021
Cost of goods sold and gross margin
Cost of goods sold $ 189,191 84.91 % $ 173,850 82.17 % $ 15,341 8.8 % Gross margin
Sales and marketing expense decreased by $1.2 million, or 10.8%, from 2021 to 2022. These decreases were primarily due to the less sales from certain customers which include commission incentives, and partially offset by an increase in tradeshow expenses in 2022 due to the increase in number of tradeshows attended because of less COVID-19 restrictions.
Interest income increased by $0.1 million, or 80.0% from 2021 to 2022. The changes are similar to expected rates of fluctuation with the interest rates and cash balances.
Interest expense increased by $0.7 million, or 12.4% from 2021 to 2022. The increase was primarily due to the debt balance increase and the interest rate fluctuation during the year.
Other income decreased by $9.4 million, or 114.8% from 2021 to 2022.This decrease was primarily due to the $6.23 million government's PPP Loan forgiveness stimulus obtained in year 2021. The remaining decrease was mainly due to the foreign exchange loss.
Benefit (provision) for income taxes
Benefit (provision) for income taxes $ (1 ) $ (2 ) 1
Our income tax provision consists of U.S. income tax, state taxes, and Taiwan and China income tax recorded during the periods. Our effective tax rate is affected by recurring items, such as tax rates in state and foreign jurisdictions and the relative amounts of income we earn in those jurisdictions.
Shares Sold Net Proceeds Agent Raymond James & Associates, Inc. March 2021 9.0622 65,748 $ 584
Raymond James & Associates, Inc. June 2021 9.1115 34,686
Raymond James & Associates, Inc. July 2021 9.1061 6,740
Raymond James & Associates, Inc. September 2022 2.9045 94,491
Raymond James & Associates, Inc. October 2022 2.8947 313,333
As of December 31, 2022, the total gross sales were $2.2 million and thus remaining amount of common stock we have available to sell under the Second ATM Offering is $32.8 million.
Net cash used in operating activities $ (14,022 ) $ (11,644 ) $ (44,009 ) Net cash used in investing activities
Our investing activities consisted primarily of capital expenditures and purchases of intangible assets.
Our financing activities have historically consisted primarily of proceeds from the issuance of common stock and arrangements with various commercial lenders.
As of December 31, 2022 , we had $13.3 million of unused borrowing capacity.
On March 5, 2019, the Company issued $80.5 million of 5% convertible senior notes due 2024. The Notes will mature on March 15, 2024, unless earlier repurchased, redeemed or converted in accordance with their terms.
Critical Accounting Policies and Estimates
We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.
See additional information regarding income taxes in Note O of our Consolidated Financial Statements.
See Note B of our Consolidated Financial Statements for a description of recent accounting pronouncements.
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