What changed in this filing

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Item 1. Financial Statements

2021-05-19 compared with 2020-11-06 · 188 added, 428 removed, 367 unchanged (63% of the section changed)

3 unchanged sentences

(in thousands, except par value amount)

September 27,

Current assets:

20 unchanged sentences

Accrued liabilities

Paycheck protection program loan

Deferred revenue

4 unchanged sentences

Long-term liabilities:

Paycheck protection program loan, less current portion

Notes payable, non-current

Lease liabilities, non-current

Other long-term liabilities

Total liabilities

5 unchanged sentences

10,000 shares authorized;

no shares issued and outstanding

Common stock, $0.001 par value;

200,000 authorized;

11,068 and 8,331 shares issued and outstanding as of September 27, 2020 and Balance at December 29, 2019, respectively

11,448 and 11,094 shares issued and outstanding as of April 4, 2021 and January 3, 2021, respectively

Additional paid-in capital

14 unchanged sentences

Three Months Ended

Nine Months Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

$ 1,780  

$ 2,158  

$ 6,134  

$ 7,439  

Cost of revenue

4 unchanged sentences

Total operating expenses

11,045  

16,477  

Loss from operations

( 2,046 )  

( 4,193 )  

( 8,003 )  

Interest expense

( 36 )  

( 63 )  

( 299 )  

Interest income and other expense, net

Gain on forgiveness of debt

Interest income and other income (expense), net

Loss before income taxes

( 2,055 )  

( 4,201 )  

( 8,208 )  

Provision for (benefit from) income taxes

$ ( 2,065 )  

$ ( 4,271 )  

$ ( 8,209 )  

Provision for income taxes

Net loss per share:

Basic and diluted

$ ( 0.19 )  

$ ( 0.51 )  

$ ( 0.88 )  

Weighted average shares outstanding:

Basic and diluted

11,023  

Net loss equals to comprehensive loss for all periods presented.

(1) Net loss per share, and weighted average shares outstanding basic and diluted for the three and nine months ended September 29, 2019 are adjusted to reflect 1-for-14 reverse stock split effected on December 23, 2019 .

Net loss equals comprehensive loss for all periods presented.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 27,

September 29,

Three Months Ended

Cash flows from operating activities:

5 unchanged sentences

Write-off of equipment

Tax benefit from acquisition

Gain on forgiveness of debt

( 1,192 )  

Changes in operating assets and liabilities:

Accounts receivable

( 304 )  

Trade payables

1 unchanged sentence

Deferred revenue  

( 113 )  

Other long-term liabilities

6 unchanged sentences

( 139 )  

Cash received from business acquisition

Net cash (used in) investing activities

3 unchanged sentences

( 43 )  

Proceeds from paycheck protection program loan

Proceeds from line of credit

4 unchanged sentences

Proceeds from issuance of common stock, net of issuance costs

Taxes paid related to net settlement of equity awards

Taxes paid related to settlement of equity awards

( 484 )  

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Net cash (used in) financing activities

( 527 )  

Net decrease in cash, cash equivalents and restricted cash

( 1,813 )  

Cash, cash equivalents and restricted cash at beginning of period

9 unchanged sentences

Stockholders'

Balance at December 29, 2019

$ 297,073  

$ ( 283,258 )  

$ 13,823  

Common stock issued under stock plans and employee stock purchase plan

( 25 )  

Stock-based compensation

( 398 )  

( 3,165 )  

Balance at March 29, 2020

296,650  

( 286,423 )  

10,235  

Balance at January 3, 2021

Common stock issued under stock plans and employee stock purchase plan

( 31 )  

Common stock offering, net of issuance costs of $1,100

Stock-based compensation

( 2,979 )  

Balance at June 28, 2020

10,912  

305,013  

( 289,402 )  

15,622  

Common stock issued under stock plans and employee stock purchase plan  

( 13 )  

Common stock offering, net of issuance costs of $52  

Stock-based compensation  

Net loss  

( 2,065 )  

Balance at September 27, 2020  

11,068  

$ 305,703  

$ ( 291,467 )  

$ 14,247  

Common Stock (1)

Balance at April 4, 2021

Stockholders'

Balance at December 29, 2019

$ 285,062  

$ ( 267,814 )  

$ 17,255  

Common stock issued under stock plans and employee stock purchase plan

( 163 )  

Common stock issued for SensiML acquisition

Stock-based compensation

( 3,476 )  

Balance at March 29, 2020

286,753  

( 271,290 )  

15,470  

Common stock issued under stock plans and employee stock purchase plan

Common stock offering, net of issuance costs of $1,200

Stock-based compensation

( 4,634 )  

Balance at June 30, 2019

295,778  

( 275,924 )  

19,862  

Common stock issued under stock plans and employee stock purchase plan  

( 94 )  

Stock issuance costs  

Stock-based compensation  

Net loss  

( 4,271 )  

Balance at September 29, 2019  

$ 296,425  

$ ( 280,195 )  

$ 16,238  

Common stock shares and additional paid-in capital amounts as of December 31, 2018, and in the three-months ended March 31, 2019, June 30, 2019 and September 29, 2019 are adjusted to reflect 1-for-14 reverse stock split effected on December 23, 2019.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

11 unchanged sentences

GAAP”), and include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of results for the interim periods presented.

The Company recommends that these interim condensed consolidated financial statements be read in conjunction with the Company's Form 

10 -K for the year ended December 29, 2019 , which was filed with the Securities and Exchange Commission (“SEC”) on March 13, 2020.

Operating results for the three and nine months ended September 27, 2020 are not necessarily indicative of the results that may be expected for the full year.

The Company recommends that these interim Unaudited Condensed Consolidated Financial Statements be read in conjunction with the Company's Form 

10 -K for the year ended January 3, 2021 , which was filed with the Securities and Exchange Commission (“SEC”) on March 23, 2021.

Operating results for the three months ended April 4, 2021 are not necessarily indicative of the results that may be expected for the full year.

QuickLogic's fiscal year ends on the Sunday closest to December 

31 and each fiscal quarter ends on the Sunday closest to the end of each calendar quarter.

QuickLogic's third fiscal quarters for 2020 and for 2019 ended on September 27, 2020 and September 29, 2019 , respectively.

QuickLogic's first fiscal quarters for 2021 and 2020 ended on April 4, 2021 and March 29, 2020 , respectively.

COVID- 19 - Impact on Business

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As such, while COVID- 19  has had an impact on the Company's financial results on the 

three and 

nine  months ended September 27, 2020,  

the COVID- 19 pandemic and its potential effects on the Company’s business in its fiscal 2020 remain dynamic, and the broader implications for its business and future results of operations remain uncertain.

three months ended April 4, 2021 , the COVID- 19 pandemic and its potential effects on the Company’s business in its fiscal 2021 remain dynamic, and the broader implications for its business and future results of operations remain uncertain.

These implications could include further disruptions or restrictions on the Company’s ability to source, manufacture or distribute its products, including temporary disruptions to the facilities of its contract manufacturers in China, Taiwan, Philippines and Singapore, or the facilities of its suppliers and their contract manufacturers globally.

1 unchanged sentence

Delays in production or delivery of components or raw materials that are part of the Company’s global supply chain due to restrictions imposed to limit the spread of COVID- 19 could delay or inhibit its ability to obtain the supply of components and finished goods.

If COVID- 19 becomes more prevalent in the locations where the Company, its customers or suppliers conduct business, or the Company experiences more pronounced disruptions in its operations, the Company may experience constrained supply or curtailed demand that may materially adversely impact its business and results of operations.

In addition, any other widespread health crisis that could adversely affect global and regional economies, financial markets and overall demand environment for the Company's products could have a material adverse effect on the Company’s business, cash flows or results of operations.

1 unchanged sentence

The Company will continue to closely monitor the pandemic's associated effects on all aspects of the business.

Restructuring

In January 2020, the Company implemented a restructuring plan to lower annual operating expenses and strategically align resources around the Company's open source, AI SaaS and IP Leasing businesses.

The restructuring plan was approved by the Company’s Board of Directors on January 24, 2020.

Pursuant to the restructuring plan, the Company recorded $624,000 of restructuring charges during the nine -month period ended September 27, 2020, consisting primarily of employee severance related costs and facility costs. During the third quarter, the Company incurred additional restructuring expenses of $111,000 relating to the closure of the San Diego and India facilities.

Restructuring 

In January 2020, the Company implemented a restructuring plan to lower annual operating expenses. The restructuring plan was approved by the Company’s Board of Directors on January 24, 2020.

Pursuant to the restructuring plan, the Company recorded $ 479,000 restructuring costs during the first quarter of 2020, consisting primarily of employee severance related costs and facilities costs.

There were no restructuring charges incurred in the quarter ended April 4, 2021.

The Company has financed its operations and capital investments through sales of common stock, finance and operating leases, a revolving line of credit and cash flows from operations.

As of September 27, 2020 , the Company's principal sources of liquidity consisted of cash and cash equivalents and restricted cash of 

$ 24.7  

million, including $ 15.0  

million drawn down from its revolving line of credit (“Revolving Facility”) with Heritage Bank of Commerce (“Heritage Bank”), and 

$ 1.2  mi llion loan proceeds received under Paycheck Protection Program (“PPP”).

On November 6, 2019 the Company entered into a First Amendment to the Revolving Facility with Heritage Bank to extend the maturity date for one year through September 28, 2021.

Under this amendment the Revolving Facility advances shall bear interest, on the outstanding daily balance thereof, at a rate per annum equal to the greater of (i) one half of one percentage point ( 0.50% ) above the Prime Rate, or (ii) five and one half of one percentage points ( 5.50% ).

On May 6, 2020, the Company entered into a loan agreement with Heritage Bank for a loan of $ 1.2 million pursuant to the PPP under the CARES Act enacted on March 27, 2020.

See Note 6  to the Unaudited Condensed Consolidated Financial Statements for the details.

As of April 4, 2021 , the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $ 20.9  million, including $ 15.0  million drawn down from its revolving line of credit with Heritage Bank of Commerce (“Heritage Bank”) and $ 1.2  

million loan received under the Paycheck Protection Program (“PPP”) which was subsequently forgiven.

On September 28, 2018, the Company entered into a Loan and Security Agreement (the "Loan Agreement"), with Heritage Bank.

The Loan Agreement provided for, among other things, a revolving line of credit facility (the “Revolving Facility”) with aggregate commitments of $ 9.0 million.

On December 21, 2018, the Company entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan Agreement”) with Heritage Bank to replace in its entirety the Loan Agreement.

The Amended and Restated Loan Agreement increased the Revolving Facility from $ 9.0 million to $ 15.0 million. The Amended and Restated Loan Agreement requires the Company to maintain at least $ 3.0 million in unrestricted cash at Heritage Bank.

On November 6, 2019, the Company entered into a First Amendment to the Amended and Restated Loan Agreement with Heritage Bank to extend the maturity date for one year through September 28, 2021 ( the "First Amendment").

Under this First Amendment, the Revolving Facility advances shall bear interest, on the outstanding daily balance thereof, at a rate per annum equal to the greater of (i) one half of one percentage point ( 0.50 %) above the Prime Rate, or (ii) five and one half of one percentage points ( 5.50 %).

On December 11, 2020, the Company entered into a Second Amendment (the “Second Amendment”) to the Amended and Restated Loan Agreement with Heritage Bank.

The Second Amendment extended the loan maturity date for one year through September 28, 2022 and amended the interest to a rate per annum equal to one half of one percentage point ( 0.50 %) above the prime rate.

The Company was in compliance with all loan covenants as of April 4, 2021 .

As of April 4, 2021 , the Company had $ 15.0  million of outstanding revolving line of credit with an interest rate of 3.75 %.

On May 6, 2020, the Company entered into a loan agreement with Heritage Bank for a loan of $ 1.2 million pursuant to the PPP under the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020, or CARES Act.

On January 26, 2021, the Company received notice from Heritage Bank that amounts under the loan agreement had been forgiven. See Note 5 to these Unaudited Condensed Consolidated Financial Statements for the details.

On June 22, 2020, the Company closed an underwritten public offering of 2.5 million shares of common stock, $ 0.001 par value per share at a price of $ 3.50 per share.

The Company received total gross proceeds from the offering of approximately $ 9.3 million, including $ 0.5 million received from the overallotment under the terms of the Underwriting Agreement to purchase up to an additional 375,000 shares.

Underwriters partially exercised the option to purchase 141,733 additional shares of Common Stock.

The Company incurred approximately $1.2 million of stock issuance costs for this offering.

Total net proceeds received from this offering was $ 8.1 million after deducting underwriting discounts and other stock issuance costs.

See Note 8  to the Unaudited Condensed Consolidated Financial Statements for the details.

The Company received total gross proceeds from the offering of approximately $ 8.8  million, including and incurred stock issuance costs of approximately $ 1.1 million.

Under the terms of the Underwriting Agreement, the Company the underwriter a 30 -day option to purchase up to an additional 375,000 shares of common stock to cover overallotments.

On July 21, 2020, the underwriter's exercised the option to purchase 141,733 additional shares of common stock in connection with the offering, resulting in additional gross proceeds to the Company of approximately $ 0.5 million and incurred additional stock issuance costs of approximately $ 52,000 Total gross proceeds received from this offering was approximately $ 9.3 million and incurred total stock issuance costs of approximately $ 1.2 million.

Net proceeds received from this offering after deducting stock issuance costs was approximately $ 8.1 million.

The Company currently uses its cash to fund its working capital to accelerate the development of next generation products and for general corporate purposes.

Based on past performance and current expectations, the Company believes 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 can affect the Company’s 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 ArcticLink ®

the level of revenue and gross profit as a result of the cyclicality of the semiconductor industry, the conversion of design opportunities into revenue, the market acceptance of existing and new products including solutions based on its ArcticLink ®

, PolarPro ®

platforms, eFPGA, EOS S3 SoC, Quick AI solution, and SensiML software tools;

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’

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 its 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 ability to capitalize on synergies with our newly acquired subsidiary SensiML;

the issuance and exercise of stock options and participation in the Company’s 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 the 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 September 2021, and its ability to raise additional capital in the public capital markets will be sufficient to satisfy its operations and capital expenditures.

platforms, eFPGA, EOS S3 SoC, Quick AI solution, and SensiML software tools, the fluctuations in revenue as a result of product end-of-life, the fluctuations in revenue as a result of the stage in the product life cycle of its customers’

products, the costs of securing access to and availability of adequate manufacturing capacity, the levels of inventories and wafer purchase commitments, customer credit terms, the amount and timing of research and development expenditures, the timing of new product introductions, production volumes and product quality, sales and marketing efforts, the value and liquidity of its 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 ability to capitalize on synergies with our newly acquired subsidiary SensiML;

the issuance and exercise of stock options and participation in the Company’s 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 and existing cash and cash equivalents, with financial resources from its Revolving Facility with the Heritage Bank 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.

Reverse Stock Split

Effective on December 23, 2019, the Company enacted a 1 -for- 14  reverse stock split of its outstanding common stock, in which, every 14 issued and outstanding shares of common stock of the Company were automatically combined into one issued and outstanding share of common stock without any change in the par value per share.

Stockholders who would have otherwise been entitled to fractional shares of common stock as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares.

All share, equity awards, and per share amounts contained in this Form 10 -Q and the accompanying Unaudited Condensed Consolidated Financial Statements have been adjusted to reflect the reverse stock split for all prior periods presented.

Warrants issued in connection with the May 2018 stock issuance were also adjusted to reflect the reverse stock split for all periods presented.

Principles of Consolidation

8 unchanged sentences

dollars using the average exchange rates in effect during the period.

Gains and losses from the foreign currency transactions of these subsidiaries are recorded as interest income and other expense, net in the unaudited condensed consolidated statements of operations.

Gains and losses from the foreign currency transactions of these subsidiaries are recorded as interest income and other income (expense), net in the unaudited condensed consolidated statements of operations.

Uses of Estimates

The preparation of these consolidated financial statements in conformity with U.S.

The preparation of these Unaudited Condensed Consolidated Financial Statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities and the reported amounts of revenue and expenses during the period.

13 unchanged sentences

Significant Accounting Policies

During the nine -month period ended September 27, 2020 , there were no changes in the Company's significant accounting policies from its disclosures in the Annual Report on Form 10 -K for the year ended December 29, 2019 , except for the new accounting standards adopted during the nine months ended September 27, 2020 .

For a discussion of the significant accounting policies, please see the Annual Report on Form 10 -K for the fiscal year ended December 29, 2019 , filed with the SEC on March 

For a discussion of the new accounting standards adopted during the first nine months of 2020 , see “New Accounting Pronouncements”

During the three -month period ended April 4, 2021 , there were no changes in the Company's significant accounting policies from its disclosures in the Annual Report on Form 10 -K for the year ended January 3, 2021 , except for the new accounting standards adopted during the three months ended April 4, 2021 .

For a discussion of the significant accounting policies, please see the Annual Report on Form 10 -K for the fiscal year ended January 3, 2021 , filed with the SEC on March 

For a discussion of the new accounting standards adopted during the first three months of 2021 , see “New Accounting Pronouncements”

Fair Value Measurements

The Company’s cash, cash equivalents and restricted cash include money market account balance of $24.1  million and $20.9  million as of September 27, 2020 and December 29, 2019 , respectively.

The Company’s cash, cash equivalents and restricted cash include money market account balance of $ 20.9 million and $ 22.7  million as of April 4, 2021 and January 3, 2021 , respectively.

Fair value of the Company’s money market account balance with Heritage Bank equals to book value.

Restricted cash

Cash, cash equivalent and restricted cash includes an amount of $ 100,000 p ledged as cash security related to the use of credit cards as of September 27, 2020 and December 29, 2019 .

Cash, cash equivalent and restricted cash includes an amount of $ 100,000 p ledged as cash security related to the use of credit cards as of April 4, 2021 and January 3, 2021 .

New Accounting Pronouncements

Recently adopted accounting pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU"), No.

2018 - 13, Fair Value Measurement (Topic 820 ):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement .

This new standard modifies certain disclosure requirements on fair value measurements.

The Company adopted this standard prospectively effective December 30, 2019 with no impact on the Consolidated Financial Statements.

In August 2018, the FASB issued ASU No.

2018 - 15, Intangibles - Goodwill and Other –

Internal-Use Software (Subtopic 350 - 40 ):

Customer’s Accounting for Implementations Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.

Under the new standard, implementations costs related to a cloud computing arrangement will be deferred or expensed as incurred, in accordance with the existing internal-use software guidance for similar costs.

The new standard also prescribes the balance sheet, income statement and cash flow classification of the capitalized implementation costs and related amortizations expenses.

The effective date for public companies is for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

For all other entities, the effective date is fiscal years beginning after December 15, 2021.

The Company adopted this standard prospectively effective December 30, 2019 with no impact on the Consolidated Financial Statements.

In June 2016, FASB issued ASU No.

2016 - 13 (“ASU 2016 - 13”

) Financial Instruments-Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments , which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

ASU 2016 - 13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates.

It also eliminates the concept of other-than-temporary impairment and requires credit losses related to certain available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

These changes result in earlier recognition of credit losses.

The Company adopted ASU 2016 - 13 using the modified retrospective approach on December 30, 2019 with no impact on the Condensed Consolidated Financial Statements.

New accounting pronouncements not yet adopted:

In December 2019, the FASB issued ASU No.

2019 - 12, Simplifying the Accounting for Income Taxes , which removes certain exceptions to the general principles of ASC 740, in order to reduce the cost and complexity of its application.

This standard is effective for the fiscal years beginning after December 15, 2020.

The Company is currently evaluating the potential impact on its Consolidated Financial Statements.

These changes include elimination to the exceptions for ( 1 ) Intra-period tax allocation, ( 2 ) Deferred tax liabilities related to outside basis differences, and ( 3 ) Year-to-date losses in interim periods.  The Company adopted this standard prospectively effective January 4, 2021 with an insignificant impact to the Unaudited Condensed Consolidated Financial Statements.

New accounting pronouncements not yet adopted

In August 2020, the FASB issued ASU No.

2020 - 06, Debt—Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815 - 40 ):

2020 - 06, Debt —

Debt with Conversion and Other Options (Subtopic 470 - 20 ) and Derivatives and Hedging —

Contracts in Entity ’

s Own Equity (Subtopic 815 - 40 ):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity.

This amendment is effective for public business entities that meet the definition of a Securities and Exchange Commission ("SEC") filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is currently evaluating the potential impact on its Consolidated Financial Statements.

Net Loss Per Share

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In computing diluted net loss per share, the weighted average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants.

For the three and nine months ended September 27, 2020 and September 29, 2019 , 979,363 and 559,587  shares of common stock, respectively, associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding.

For the three months ended April 4, 2021 and March 29, 2020 ,  

304,000  and 699,000  shares of common stock, respectively, associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding.

These shares were not included in the computation of diluted net loss per share, as they were considered anti-dilutive due to the net losses the Company experienced during these periods.

Warrants to purchase up to 386,100 shares were issued in connection with May 29, 2018 stock offering were also not included in the diluted loss per share calculation of the three and nine months ended September 27, 2020 and September 29, 2019 as they were also considered anti-dilutive due to the net loss the Company experienced during these periods.

All shares, equity awards, and per share amounts have been adjusted to reflect the 1 -for- 14  reverse stock split of the Company’s outstanding common stock for all periods presented.

Warrants to purchase up to 386,000 shares were issued in connection with May 29, 2018 stock offering were not included in the diluted loss per share calculation of the three months ended April 4, 2021 and March 29, 2020 , as they were also considered anti-dilutive due to the net loss the Company experienced during these periods. 

Balance Sheet Components

The following table provides details relating to certain balance sheet line items as of September 27, 2020 , and December 29, 2019 (in thousands):

September 27,

The following table provides details relating to certain balance sheet line items as of April 4, 2021 , and January 3, 2021 (in thousands):

Raw materials

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$ 1,066  

$ 1,565  

Property and equipment, net:

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Capitalized internal-use software

Accumulated amortization

$ 1,305  

Accrued liabilities:

Employee related accruals

$ 1,166  

$ 1,368  

$ 1,133  

Note 5  —

Intangible Assets

The following table provides the details of the carrying value of intangible assets recorded from the acquisition of SensiML as of September 27, 2020 (in thousands):

September 27, 2020

Gross Carrying Amount

Accumulated amortization

Net Carrying Amount

Developed technology  

( 239 )  

Customer relationships  

$ 1,066  

Trade names and trademarks  

( 21 )  

Total acquired identifiable intangible assets

Accrued liabilities:

Employee related accruals

$ 1,546  

$ 1,340  

The following table provides the details of expected future annual amortization of intangible assets, based upon the current useful lives as of September 27, 2020 (in thousands):

Annual Fiscal Years

2020 (remaining period)  

Thereafter  

Note 5  —

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Revolving Line of credit

On September 28, 2018, the Company entered into a Loan and Security Agreement (“Loan Agreement”) with Heritage Bank.

The Loan Agreement provided for, among other things, the Revolving Facility with aggregate commitments of $9,000,000.

On December 21, 2018, the Company entered into an Amended and Restated Loan and Security Agreement (“Amended and Restated Loan Agreement”) with Heritage Bank to replace in its entirety the Loan Agreement.

The Amended and Restated Loan Agreement increased the Revolving Facility from $9,000,000 to $ 15,000,000 .

The Amended and Restated Loan Agreement requires the Company to maintain at least $3,000,000 in unrestricted cash at Heritage Bank.

On November 6, 2019 the Company entered into a First Amendment to the Amended and Restated Loan Agreement (“First Amendment”) to extend the maturity date of the Revolving Facility for one year through September 28, 2021.

Under this First Amendment, the Revolving Facility advances shall bear interest, on the outstanding daily balance thereof, at a rate per annum equal to the greater of (i) one half of one percentage point ( 0.50% ) above the Prime Rate, or (ii) five and one half of one percentage points ( 5.50% ).

As of September 27, 2020 and December 29, 2019 , the Company had $15.0 million of revolving debt outstanding with an interest rates of 5.5% per annum.

As of April 4, 2021 and January 3, 2021 , the Company had $ 15.0 million of revolving debt outstanding with an interest rates of 3.75 % per annum.

The Bank has a first priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the Amended and Restated Loan Agreement.

The Company was in compliance with all loan covenants under the Amended and Restated Loan Agreement as of the end of the current reporting period.

On September 

28, 2020, the Company repaid the $15.0 million loan.

Interest expense recognized were $ 32,000  and $ 80,000  for the quarters ended April 

4, 2021 and March 29, 2020, respectively. 

Payroll Protection Program Loan

On May 6, 2020, the Company entered into a loan agreement with Heritage Bank (“PPP Loan”) for a loan of $1.2 million pursuant to the PPP under the CARES Act, as implemented by the U.S.

Small Business Administration.

The PPP Loan is evidenced by a promissory note (“Note”) dated May 6, 2020, and matures two years from the disbursement date.

The Note bears interest at a rate of 1.00% per annum, with the first six months of interest deferred.

Principal and interest are payable monthly commencing six months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

The Note contains customary events of default relating to, among other things, payment defaults or breaches of the terms of the Note.

Upon the occurrence of an event of default, the lender may require immediate repayment of all amounts outstanding under the Note.

The principal and interest of the Loan are repayable in 18 monthly equal installments of $67,000 each starting in December 2020.

Interest accrued in the first six months is included in the monthly installments.

Installments must be paid by the fifth calendar day of each month.

On June 5, 2020, the Paycheck Protection Flexibility Act (“PPPFA”) was signed into law.

Among other changes, the PPPFA (i) reduced the amount of the loan required to be spent on payroll from 75% to 60%, (ii) extended the covered period to 24 weeks from 8 weeks, and (iii) extended the repayment term of PPP loan from 2 years to 5 years.

For the loans disbursed before June 5, 2020, the PPPFA provides the option to opt for 24 weeks for spending the loan instead of 8 weeks.

The Company has opted for 24 weeks to spend the PPP Loan.

As of September 27, 2020 , the Company fully utilized the loan proceeds in compliance with the PPPFA guidelines.

The Company expects to apply for the full loan forgiveness in the fourth quarter of 2020.

Forgiveness of this loan will only be recognized if/when legal release is received.

On May 6, 2020, the Company entered into a $ 1.2 million PPP loan agreement with Heritage Bank (“PPP Loan”) under the CARES Act as implemented by the U.S.

Small Business Administration. The PPP Loan was evidenced by a promissory note (“PPP Note”) dated May 6, 2020, and matured 

two years from the disbursement date.

The PPP Note bore interest of 1.00 % per annum, with the first six months of interest deferred.

Principal and interest were payable monthly commencing six months after the disbursement date.

The Company applied for loan forgiveness in the fourth quarter of fiscal 2020 in accordance with the terms of the CARES Act. 

On January 26, 2021, the Company received notice from Heritage Bank that amounts under the PPP Note had been forgiven. The gain related to the loan forgiveness of approximately $ 1.2 million is reported in other income as gain on forgiveness of debt on the Company’s Unaudited Condensed Statements of Operations for the quarter ended April 4, 2021 .

Note 6  —

The Company entered into operating leases for office space for its headquarter, domestic and foreign subsidiaries and sales offices.

The Company entered into operating leases for office space for its headquarters, for its domestic and foreign subsidiaries and for its sales offices.

Finance leases are primarily for engineering design software.

Operating leases generally have lease terms of 1 year to 5 years.

Finance leases are generally 2 years to 3 years.

As of September 27, 2020 , the balance of right-of-use assets was approximately $ 2.0  million and lease liability was approximately $ 2.0  million relating to the operating and finance leases signed for the premises of its headquarters in San Jose and its subsidiaries SensiML in Oregon and India.

Lease term of San Diego facility expired in July, 2020.

The Company did not renew the lease agreement as San Diego office was closed.

On July 10, 2020, Indian subsidiary leased a smaller office premises of approximately 1100 square feet for a period of eleven months to accommodate the reduced headcount.

Effective July 2020, the rental expense of the old office is expensed to restructuring charges.

Total rent expense for the three months ended September 27, 2020 and September 29, 2019 was approximately $ 150,000  and $ 192,000 , respectively.

Total rent expense for the nine months ended September 27, 2020 and September 29, 2019 was approximately $ 455,000 and $ 629,000 , respectively.

Operating leases generally have lease terms of one to five years.

Finance leases are generally two to 

As of April 4, 2021 , the balance of right-of-use assets was approximately $ 1.7  million and the lease liability was approximately $ 1.8  million for operating and finance leases for the headquarters in San Jose and for the operating subsidiaries SensiML in Oregon and SensiML in India.

The lease term of the San Diego facility expired in July 

2020  and the office was closed.

On July 10, 2020, the Indian subsidiary leased a smaller office premises of approximately 1,100 square feet for a period of eleven months to accommodate the reduced headcount.

Effective July 2020, the rental expense of the unused office in India is expensed to restructuring charges.

Total rent expense for the three months ended 

April 4, 2021 and March 29, 2020 was approximately $ 107,000 and $ 147,000 , respectively.

The following table provides the expenses related to operating and finance leases (in thousands):

Three Months Ended

Nine Months Ended

September 27, 2020

September 29, 2019

September 27, 2020

September 29, 2019

Operating lease costs:

2 unchanged sentences

The following table provides the details of supplemental cash flow information.

The right-of-use assets obtained in exchange for new finance and operating lease liabilities represent the new operating and finance leases entered into during the nine months ended September 27, 2020 and September 29, 2019 (in thousands):

Nine Months Ended

September 27,

September 29,

The right-of-use assets obtained in exchange for new finance and operating lease liabilities represent the new operating and finance leases entered into during the three months ended April 4, 2021 and March 29, 2020 (in thousands):

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Financing cash flows used for financing leases

Right-of-use assets obtained in exchange for obligations:

Operating leases

$ 1,920  

Finance leases

$ 2,170  

The following table provides the details of right-of-use assets and lease liabilities as of September 27, 2020 and December 29, 2019 (in thousands):

September 27, 2020

December 29, 2019

Right-of-use assets obtained in exchange for finance lease obligations

The following table provides the details of right-of-use assets and lease liabilities as of April 4, 2021 and January 3, 2021 (in thousands):

Right-of-use assets:

14 unchanged sentences

$ 1,882  

The following table provided the details of future lease payments for operating and finance leases as of September 27, 2020 (in thousands):

Annual Fiscal Years

The following table provided the details of future lease payments for operating and finance leases as of April 4, 2021 (in thousands):

Operating Leases

6 unchanged sentences

$ 1,128  

The following table provides the details of lease terms and discount rates as of September 27, 2020 and December 29, 2019 :

September 27, 2020

December 29, 2019

The following table provides the details of lease terms and discount rates as of April 4, 2021 and January 3, 2021 :

Right-of-use assets:

8 unchanged sentences

Note 7  —

Stockholders' Equity

Common and Preferred Stock

As of September 27, 2020 , the Company was authorized to issue 200 million shares of common stock and had 10 million shares of authorized but unissued undesignated preferred stock.

Without any further vote or action by the Company’s stockholders, the Board of Directors has the authority to determine the powers, preferences, rights, qualifications, limitations or restrictions granted to or imposed upon any wholly unissued shares of undesignated preferred stock.

Issuance of Common Stock

On March 15, 2019, the Company filed a shelf registration statement on Form S- 3, under which the Company may, from time to time, sell securities in one or more offerings up to a total amount of $ 75 million.

The Company’s shelf registration statement was declared effective on March 29, 2019.

On June 21, 2019, the Company closed an underwritten public offering of 1.3 million shares of common stock, $ 0.001 par value per share at a price of $ 7.00 per share, which included 171,429 shares issued pursuant to the underwriters’

full exercise of their over-allotment option.

The Company received net proceeds from the offering of approximately $ 8.0 million, net of underwriter’s commission and other offering expenses.

On June 22, 2020, the Company closed an underwritten public offering of 2.5 million shares of common stock, $ 0.001 par value per share at a price of $ 3.50 per share.

The Company received gross proceeds from the offering of approximately $ 8.8 million and incurred stock issuance costs of approximately $ 1.1 million.

Under the terms of the underwriting agreement, the Company granted the underwriter a 30 -day option to purchase up to an additional 375,000 shares of common stock to cover overallotments.

On July 21, 2020, the underwriter’s partially exercised the option to purchase 141,733 additional shares of common stock in connection with the offering, resulting in additional gross proceeds to the Company of approximately $ 0.5 million and incurred additional stock issuance costs of approximately $ 52,000 .

Total gross proceeds received from this offering was approximately $ 9.3  million and incurred total stock issuance costs of approximately $1.2

Net proceeds received from this offering after deducting stock issuance costs was approximately $ 8.1 million.

 As of September 27, 2020 , warrants exercisable for 386,100 shares of common stock at an exercise price of $ 19.32 per share remain outstanding.

Note 9  —

Employee Stock Plans

2019 Stock Plan

On April 24, 2019, the 2009 Stock Plan was replaced by the 2019 Stock Plan with an extended term of ten years through March 15, 2028.

The remaining balance of available shares under the 2009 Plan of 299,070 were cancelled as of April 24, 2019.

2019 Stock Plan

On April 24, 2019, the Company’s Board of Directors and shareholders approved the 2019 Stock Plan ( “2019 Plan”) to replace the 2009 Plan.

Under the 2019 Plan, 357,143 shares of common stock are available for grants, plus any shares subject to any outstanding options or other awards granted under the Company’s 2009 Plan that expire, are forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements, settled for cash or otherwise terminated without payment being made thereunder.

The 2019 Plan was amended and restated by the Board of Directors on March 5, 2020 and approved by the Company’s stockholders on April 22, 2020 to, among other things, reserved an additional 550,000 shares of common stock for issuance under the 2019 Plan.

As of September 27, 2020 , approximately 286,628  shares of the Company’s common stock were reserved for issuance under the 2019 Plan.

On April 24, 2019, the Company’s Board of Directors and shareholders approved the 2019 Stock Plan ( “2019 Plan”) to replace the 2009 Stock Plan.

Under the 2019 Plan, 357,143 shares of common stock were made available for grants, plus any shares subject to any outstanding options or other awards granted under the Company’s 2009 Stock Plan that expire, including the 299,070 shares then available, or which are forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements, settled for cash or otherwise terminated without payment being made thereunder.

The 2019 Plan was amended and restated by the Board of Directors on March 5, 2020 and approved by the Company’s stockholders on April 22, 2020 to, among other things, reserve an additional 550,000 shares of common stock for issuance under the 2019 Plan.

As of April 4, 2021 , approximately 538,000  shares of the Company’s common stock were reserved for issuance under the 2019 Plan.

2009 Employee Stock Purchase Plan

The 2009 Employee Stock Purchase Plan ( “2009 ESPP”) was adopted in March 

The 2009 ESPP was amended by the Board of Directors in January 2015 and in February 2017, and was approved by the Company's stockholders on April 23, 2015 and April 26, 2017, to reserve an additional 71,429 and 107,143 shares of common stock, respectively, for issuance under the 2009 ESPP.    

The 2009 ESPP was amended and restated by the Board of Directors on March 5, 2020, and approved by the Company’s stockholders on April 22, 2020 to, among other things, extend the term of the plan until March 5, 2029.

Further, the 2009 ESPP was amended and restated by the Board of Directors on March 5, 2020 and approved by the Company’s stockholders on April 22, 2020 to, among other things reserved an additional 300,000 shares of common stock for issuance under the 2009 ESPP.

As of September 27, 2020 , approximately 362,335  shares of the Company’s common stock were reserved for issuance under the 2009 ESPP.

2009 and amended by the Board of Directors in January 2015 and in February 2017, and approved by the Company's stockholders on April 23, 2015 and April 26, 2017, 

to reserve an additional 71,429 and 107,143 shares of common stock, respectively, for issuance under the 2009 ESPP. 

The 2009 ESPP was amended and restated by the Board of Directors on March 5, 2020 

and approved by the Company’s stockholders on April 22, 2020. 

The amendment, among other things, extend the term of the plan until March 5, 2029 and reserved an additional 300,000 shares of common stock for issuance under the 2009 ESPP.

As of April 4, 2021 , approximately 341,926  shares of the Company’s common stock were reserved for issuance under the 2009 ESPP.

Note 8  —

Stock-Based Compensation

Stock-based compensation expense included in the Company's consolidated financial statements for the three and nine months ended September 27, 2020 and September 29, 2019 was as follows (in thousands):

Stock-based compensation expense included in the Company's consolidated financial statements for the three months ended April 4, 2021 and March 29, 2020 was as follows (in thousands):

Three Months Ended

Nine Months Ended

September 27,

September 29,

September 27,

September 29,

Cost of revenue

1 unchanged sentence

Selling, general and administrative

$ 2,490  

During the nine months ended September 27, 2020 , the Company reversed stock-based compensation expense related to the cancellation of certain unvested performance based RSUs and restructuring-related terminations.

During the second  quarter of 2020 , the Company issued fully vested RSUs in lieu of cash for variable compensation to certain employees.

During the three months ended March 29, 2020, the Company reversed stock-based compensation expense related to the cancellation of certain unvested performance-based RSUs and restructuring-related terminations.

No stock-based compensation was capitalized during any period presented above.

No stock options were granted during the three and nine months ended September 27, 2020 and September 29, 2019 .

Stock-Based Compensation Award Activity

The following table summarizes the activity in the shares available for grant under the 2019 Plan during the nine months ended September 27, 2020 (in thousands):

The following table summarizes the activity in the shares available for grant under the 2019 Plan during the three months ended April 4, 2021 (in thousands):

Shares Available for Grants

Balance at December 29, 2019

Authorized shares  

Balance at January 3, 2021

RSUs granted  

PRSU's granted  

Options cancelled  

RSUs forfeited or expired  

PRSUs forfeited or expired  

Balance at September 27, 2020

Balance at April 4, 2021

Stock Options

The following table summarizes stock options outstanding and stock option activity under the 2009 Plan and the 2019 Plan, and the related weighted average exercise price, for the nine months ended September 27, 2020 :

(in thousands)

Balance outstanding at December 29, 2019

Balance outstanding at January 3, 2021

$ 28.46  

Forfeited or expired

( 50 )  

Balance outstanding at September 27, 2020

Balance outstanding at April 4, 2021

$ 28.46  

Exercisable at September 27, 2020

Exercisable at April 4, 2021

$ 28.46  

Vested and expected to vest at September 27, 2020

Vested and expected to vest at April 4, 2021

$ 28.46  

There was no intrinsic value for the stock options based on the Company’s closing stock price of $ 3.12  per share as of September 27, 2020 , which would have been received by the option holders had all option holders exercised their options as of that date.

There were no stock options exercises for the three and nine months ended September 27, 2020 .

The total intrinsic value of options exercised during the three and 

nine months ended September 27, 2020 was $ 0 .

Total cash received from employees as a result of employee stock option exercises during the 

nine months ended September 29, 2019 was $ 3,600 .

The Company settles employee stock option exercises with newly issued common shares.

In connection with these exercises, there was no tax benefit realized by the Company due to the Company's current loss position.

Total stock-based compensation related to stock options was approximately $ 11,000  and $ 24,000 for the three months ended September 27, 2020 and September 29, 2019 , respectively, and $ 39,000 and $ 73,000 for the nine months ended September 27, 2020 and September 29, 2019 , respectively.

As of September 27, 2020 , the fair value of unvested stock options, net of forfeitures, was $ 0 . 

There was no stock option activities for the quarters 

three months ended April 4, 2021 and March 29, 2020 .

Total stock-based compensation related to stock options was approximately $ 0  and $ 14,000  for the 

three months ended April 4, 2021 and March 29, 2020 , respectively.

As of April 4, 2021 , the fair value of unvested stock options, net of forfeitures, was $ 0 . 

Restricted Stock Units

2 unchanged sentences

In general, the Company's policy is to withhold shares in settlement of employee tax withholding obligations upon the vesting of RSUs.

The stock-based compensation related to RSUs was approximately $ 231,000 and $ 724,000 for the three months ended September 27, 2020 and September 29, 2019 and $ 538,000 and $ 2.4  million for the nine months ended September 27, 2020 and September 29, 2019 , respectively.

As of September 27, 2020 and September 29, 2019 , there was approximately $ 1.2  million and $ 2.7  million, respectively, in unrecognized compensation expense related to RSUs.

The remaining unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 0.59  year.

A summary of activity for the Company's RSUs for the nine months ended September 27, 2020 is as follows:

The stock-based compensation expense related to RSUs and PRSUs was approximately $ 338,000  for the 

three months ended April 4, 2021  and a reversal of stock-based compensation expense of $ 418,000  for the 

three months ended 

March 29, 2020 .

As of April 4, 2021 and March 29, 2020 , there was approximately $ 373,000  million and $ 2.4  million, respectively, in unrecognized compensation expense related to RSUs.

The remaining unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 1.65  years.

A summary of activity for the Company's RSUs and PRSUs for the three months ended April 4, 2021 is as follows:

RSUs & PRSUs Outstanding

(in thousands)

Nonvested at December 29, 2019

Nonvested at January 3, 2021

$ 4.99  

Granted  

$ 3.99  

Vested  

( 453 )  

$ 10.59  

Forfeited  

( 247 )  

Nonvested at September 27, 2020

Nonvested at April 4, 2021

$ 5.20  

Employee Stock Purchase Plan

As of September 27, 2020 , 

362,335  shares remained available for issuance under the 2009 ESPP.

For the three months ended September 27, 2020 and September 29, 2019 , the Company recorded stock-based compensation expense related to the 2009 ESPP of approximately $ 16,000 and $ 0 , respectively.

For the nine months ended September 27, 2020 and September 29, 2019 , the Company recorded stock-based compensation expense related to the 2009 ESPP of $ 24,000 and $ 60,000 , respectively.

The weighted average estimated fair value, as defined by the amended authoritative guidance, of rights issued pursuant to the Company's 2009 ESPP during the quarter ended September 27, 2020 and September 29, 2019 , was $ 1.83  and $ 0 , respectively, per right, respectively.

The fair value of rights issued pursuant to the Company's 2009 ESPP was estimated on the commencement date of each offering period using the following weighted average assumptions:

Three Months Ended

Nine Months Ended

September 27,

September 29,

September 27,

September 29,

Expected term (months)

Risk-free interest rate

0.15 %  

88.35 %  

Dividend yield

As of September 27, 2020 , there was $ 9,000 an unrecognized stock-based compensation expense relating to the Company's 2009 ESPP, which is expected to be recognized over a period of 1.7  months.  

11  —

The Company recorded a net income tax expense of approximately $ 10,000 and $ 70,000 for the three months ended September 27, 2020 and September 29, 2019 , respectively.

For the nine months ended September 27, 2020 and September 29, 2019 the Company recorded net income tax expense of $ 1,000 and benefit of $ 171,000 respectively.

A majority of the income tax expense for the third quarter of 2020 and 

2019 relates to the Company's foreign subsidiaries, which are cost-plus entities.

A majority of the income tax expense for the nine months ended September 27, 2020 relates to foreign subsidiaries and benefit for the nine months ended September 29, 2019 relates to the deferred tax benefit arising from Intangible assets acquired from the acquisition of SensiML, which was offset by the income taxes from the Company's foreign subsidiaries, which are cost-plus entities. 

Total stock-based compensation related to the Company's ESPP was approximately $ 30,000  and $ 0  for the 

three months ended April 4, 2021 and March 29, 2020 , respectively.

Note 9  —

The Company recorded a net income tax expense of $ 152,000  and $ 18,000  for the three months ended April 4, 2021 and March 29, 2020 , respectively.

A majority of the income tax expense for the first quarter of 2021  relates to the Company's foreign subsidiaries, which are cost-plus entities.

A tax expense resulting from the assessment and statutory closing of prior years’

foreign tax returns relates to the Company's foreign subsidiaries, which are cost-plus entities.

The Company believes it is more likely than not that federal and state net deferred tax assets will not be fully realized.

2 unchanged sentences

A valuation allowance is recorded for loss carryforwards and other deferred tax assets where it is more likely than not that such deferred tax assets will not be realized.

As of September 27, 2020 , the Company continues to maintain a full valuation allowance against net federal, state and certain foreign deferred tax assets until there is sufficient evidence to support recoverability of the Company’s deferred tax assets.

The Company had no unrecognized tax benefits as of September 27, 2020 and December 31, 2019, which would affect the Company's effective tax rate.

Accordingly, the Company continues to maintain a valuation allowance against all of U.S.

and certain foreign net deferred tax assets as of April 4, 2021 .

The Company continues to maintain a full valuation allowance against net federal, state and certain foreign deferred tax assets until there is sufficient evidence to support recoverability of the Company’s deferred tax assets.

The Company had no unrecognized tax benefits as of April 4, 2021  and January 3, 2021 which would affect the Company's effective tax rate.

The Company does not anticipate any material changes to its unrecognized tax benefits during the next 12 months.

3 unchanged sentences

states and foreign jurisdictions in which the Company operates.

tax years from 1999 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits.

tax years from 1999 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits.

Under the Tax Reform Act of 1986, the amount of and the benefit from net operating loss carryforwards and credit carryforwards may be impaired or limited in certain circumstances.

4 unchanged sentences

In the event the Company previously experienced an ownership change, or should experience an ownership change in the future, the amount of net operating losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security Act (“CARES ACT”) was signed into law and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enacted date.

The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The Company is currently analyzing the impact of these changes and therefore an estimate of the impact to income taxes is not yet available.

The Company will continue to make and refine the calculations as additional analysis is completed.

On June 29, 2020, California's Legislature passed Assembly Bill 85 ( "A.B.85" ), which includes a three -year suspension of the use of net operating losses for medium and large business and a three -year cap on the use of business incentive tax credits to offset no more than $5 million of tax per year.

Generally, A.B.85 suspends the use of net operating losses for taxable years 2020, 2021 and 2022 for tax payers with taxable income of $1 million or more and applies to any taxable year beginning on or after January 1, 2020, and before January 1, 2023.

Both sections of A.B.85 will not have a material impact to the company in 2020 as per the annual forecast.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) as a result of the Coronavirus pandemic.

The Act includes provisions relating to loan programs for small businesses ("Paycheck Protection Program" or "PPP"), refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications of the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The Company applied for and received $1.2M of the PPP loan in Q2 2020 and the amount was utilized on qualified business expenses under the guidance of PPP.

On December 27, 2020, the President signed the Consolidated Appropriations Act 2021 (the "Bill") into law.

The Bill confirms the business expenses paid out of PPP loans maybe deducted for federal income tax purposes and the borrower's tax basis and other attributes of the borrower's assets will not be reduced as a result of the loan forgiveness.

The Company applied for the loan forgiveness and the application was approved by the lender on January 26, 2021.

The loan was reclassified to cancellation of debt income in Q1 2021 for GAAP and is not taxable for federal purposes according to the CARES Act.

California has issued specific guidance regarding its conformity to the CARES Act.

No provisions are expected to have a material impact on the Company, except for the business expenses paid out of the PPP loan is not deductible for California tax purposes.

The Company will continue to monitor the guidance released by California and evaluate its impact.

On June 29, 2020, California Governor Gavin Newsom signed Assembly Bill 85 ("AB 85" ) into law, which temporarily suspends net operating loss deductions for most businesses and limits certain general business credits.

These provisions will be applied retroactively to tax years beginning on or after January 1, 2020 through December 31, 2022.

However, the law provides for a small business exemption for taxpayers with income subject to tax under $1 million.

The Company has evaluated the current legislation and does not anticipate AB 85 to have a material impact on its financial statements.

On December 18, 2019, the FASB issued new guidance ASU 2019 - 12 that simplifies the accounting for income taxes to reduce complexity in accounting standards which the Company adopted on January 4, 2021.

The majority of the key provisions of the ASU 2019 - 12 does not have a material impact on the Company's consolidated financial statements.

10  —

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 27,

September 29,

September 27,

September 29,

Revenue by product line (1):

$ 1,075  

$ 1,945  

$ 2,413  

Mature products

2 unchanged sentences

$ 2,158  

$ 6,134  

$ 7,439  

For all periods presented:

New products include all products manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license, Quick AI and SensiML AI software as a service (“SaaS”) revenues.

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

New products include all products manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license, Quick AI and SensiML AI software as a service (“SaaS”) revenues.

Mature products include all products produced on semiconductor processes larger than 180 nanometer and includes related royalty revenue.

The following is a breakdown of revenue by shipment destination (in thousands):

Three Months Ended

Nine Months Ended

September 27,

September 29,

September 27,

September 29,

Revenue by geography:

Asia Pacific (1)

$ 1,505  

$ 2,496  

North America (2)

2 unchanged sentences

$ 2,158  

$ 6,134  

$ 7,439  

Asia Pacific includes revenue from Japan of $ 271,000 , or 15 % of total revenue and $ 510,000 or 24 % of total revenue for the quarters ended September 27, 2020 and September 29, 2019 , respectively.

For the nine months ended September 27, 2020 and September 29, 2019 , revenue from Japan was $ 1.4  million, or 23 % of total revenue, and $ 1.3 million, or 17 % of total revenue, respectively.

North America includes revenue from the United States of $ 1.1  million, or 61 % of total revenue, and $ 1.4  million, or 67 % of total revenue, for the three months ended September 27, 2020 and September 29, 2019 , respectively.

For the nine months ended September 27, 2020 and September 29, 2019 revenue from the United States was $ 3.3  million, or 

54 % of total revenue, and $ 3.6  million, or 49 % of total revenue, respectively.

Asia Pacific includes revenue from Japan of $ 724,000 , or 32 % of total revenue, and $ 394,000  or 18 % of total revenue, for the three months ended April 4, 2021 and March 29, 2020 , respectively.

North America includes revenue from the United States of $ 1.2  million, or 56 % of total revenue, and $ 942,000 , or 44 % of total revenue, for the 

three months ended April 4, 2021 and March 29, 2020 , respectively.

The following distributors and customers accounted for 10% or more of the Company's revenue for the periods presented:

Three Months Ended

Nine Months Ended

September 27,

September 29,

September 27,

September 29,

Distributor "A"

1 unchanged sentence

Distributor "E"

Distributor "G"

Customer "K"  

Customer "N"  

Customer "E"  

Customer "L"  

Customer "M"  

* Represents less than 10% of revenue as of the dates presented.

The following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented:

September 27,

Distributor "A"

Distributor "C"

Distributor "E"

Distributor "J"

Represents less than 10% of revenue and accounts receivable as of the date presented.

As of September 27, 2020 , 6 % of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States.

Distributor "P"

Distributor "Q"  

Customer "N"  

* Represents less than 10% of accounts receivable as of the dates presented.

April 4, 2021 , 

3.6 % of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States.

11  —

1 unchanged sentence

The Company's manufacturing suppliers require the forecast of wafer starts several months in advance.

The Company is required to take delivery of and pay for a portion of forecasted wafer volume. As of September 27, 2020 , and December 29, 2019 , the Company had $ 141,000 and $ 57,000 , respectively, of outstanding commitments for the purchase of wafer and finished goods inventory.

The Company is required to take delivery of and pay for a portion of this forecasted wafer volume. As of April 4, 2021 , and January 3, 2021 , the Company had $ 262,000  and $ 60,000 , respectively, of outstanding commitments for the purchase of wafer and finished goods inventory.

The Company has purchase obligations with certain suppliers for the purchase of other goods and services entered into in the ordinary course of business.

As of September 27, 2020 , total outstanding purchase obligations for other goods and services were $ 469,000 , which are due within the next twelve months.

14  —

As of April 4, 2021 , total outstanding purchase obligations for other goods and services were $ 810,000 , all of which are due within the next twelve months.

From time to time, the Company may become involved in legal actions arising in the ordinary course of business including, but not limited to, intellectual property infringement and collection matters.

2 unchanged sentences

or without requiring royalty or other payments which may adversely impact gross profit.

As of September 27, 2020 , the Company was not involved in any litigation.

As of April 4, 2021 , the Company was not involved in any litigation.

India Transfer Pricing notice

On January 27, 2021, the Company received an order from the Income Tax Department of the Ministry of Finance in India (the "DRP, or "the Department") disputing the transfer pricing rate the company used for Assessment Years 

2017 - 18, the result of which may affect later years.

It is the intention of the Company to appeal such order as the rate requested by the government of India is not representative of the results of operations of the company, as well as other factors.

In addition, on April 30, 2021, the Company filed an appeal with the DRP, citing various issues with the Department's calculations and choice of comparable entities used to arrive at its initial assessment.

The Company does not expect a response to such appeal for six to nine months, or more due in part to the complete closure related to India's COVID- 19 pandemic. 

The Company is in the process of evaluating the effect such order may have on its foreign tax provision. Such effect if any would be to the tax provision and amounts owed under taxes to foreign jurisdictions only.

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 1. Financial Statements