Other income of $16,000 and $11,000 in the third quarters of 2018 and 2017, respectively,
and other income of $30,000 and $27,000 for the nine months ended September 29, 2018 and September 30, 2017, respectively, was from interest income.
We had a net loss of $2.2 million for the quarter ended September 29, 2018, compared to a net loss of $2.5 million in the third
quarter of 2017 and for the nine months ended September 29, 2018 our loss totaled $5.9 million compared to a net loss of $7.7 million for the nine months ended September 30, 2017. The net loss available to common stockholders
totaled $0.88 per common share in the quarter ended September 29, 2018, compared to a net loss of $2.34 per common share in the same period of 2017. The net loss available to common stockholders totaled $3.66 per common share in the first nine
months of 2018, compared to $7.34 per common share in the first nine months of 2017. For the three and nine months ended September 29, 2018, the decrease in net loss per common share available to common stockholders is due to the increase in
the number of common shares outstanding and increased government contract revenues.
Liquidity and Capital Resources
Cash Flow Analysis
As of
September 29, 2018, we had working capital of $7.0 million, including $7.6 million in cash and cash equivalents, compared to working capital of $2.6 million at December 31, 2017, which included $3.1 million in cash and
cash equivalents. We currently invest our excess cash in short-term, investment-grade, money-market instruments with maturities of three months or less.
Cash and cash equivalents increased by $4.5 million from $3.1 million at December 31, 2017 to $7.6 million at
September 29, 2018. In the first nine months of 2018, cash was used principally in operations.
Cash used in operations totaled
$5.0 million in the first nine months of 2018. We used $5.1 million to fund the cash portion of our net loss and $0.1 million was provided by changes in our working capital.
We used $189,000 for investing activities in the first nine months of 2018 for the purchase of equipment for our Conductus wire initiative.
In the first nine months of 2018, $9.7 million was provided by financing activities from the sale of common stock, common stock
equivalents, preferred stock and warrants. See below for more details.
Financing Activities
We have historically financed our operations through a combination of cash on hand, cash provided from operations, equipment lease financings,
available borrowings under bank lines of credit and both private and public equity offerings.
On July 30, 2018 we completed a public
offering of an aggregate of 2,571,429 shares of our common stock (or common stock equivalents) and warrants to purchase an aggregate of 2,571,429 shares of common stock with gross proceeds to us of $9.0 million. The net proceeds to us from the
offering, after deducting the placement agent fees and our estimated offering expenses, was $7.98 million. The offering was priced at $3.50 per share of common stock (or common stock equivalent), with each share of common stock (or common stock
equivalent) sold with one five-year warrant to purchase one share of common stock, at an exercise price of $3.50 per share.
In connection
with the offering, we issued 1,390,000 shares of our common stock at a price of $3.50 per share, with each share of common stock coupled with a five year warrant to purchase one share of common stock, at an exercise price of $3.50 (the
Warrants). These securities were offered in the form of a Class A Unit but were immediately separable and were issued separately at the closing.
For certain investors who would otherwise hold more than 4.99% (or at the election of a purchaser, 9.99%) of our common stock following the
registered offering, we issued to such investors an aggregate of 4,135.0015 Class B Units (equivalent to 1,181,429 shares of its common stock), consisting of shares of a new class of preferred stock designated Series E Convertible Preferred
Stock with a stated value of $1,000 and which are convertible into our common stock at a conversion price equal to $3.50 per share of common stock, together with an equivalent number of Warrants in the same form and economic terms based on the
related purchase price as the purchasers of the Class A Units (the Class B Units and together with the Class A Units, the Units). These securities offered in the form of a Class B Unit were
immediately separable and were issued separately at the closing. At September 29, 2018, 1,573.0015 Series E Convertible Preferred Stock had been converted into 449,429 shares of common stock and 2,562 Series E Convertible Preferred Stock,
convertible into 732,000 shares of common stock, remained unconverted. From September 29, 2018 through November 8, 2018, an additional 700 Series E Convertible Preferred Stock had been converted into 200,000 shares of common stock and
1,862 Series E Convertible Preferred Stock, convertible into 532,000 shares of common stock, remained unconverted.
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