What changed in this filing

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Item 1. Financial Statements

2023-05-17 compared with 2022-11-16 · 236 added, 279 removed, 329 unchanged (61% of the section changed)

7 unchanged sentences

$ 19,201  

Accounts receivable, net of allowance for doubtful accounts of $ 60 and $ 62 , respectively (1)

Other current assets

Accounts receivable, net of allowance for doubtful accounts of $ 8 and $ 18 , as of April 2, 2023 and January 1, 2023, respectively

Contract assets

Prepaid expenses and other current assets

Total current assets

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Capitalized internal-use software, net

Right of use assets

Intangible assets

Investment in privately-held non-affiliate

Right of use assets, net

Intangible assets, net

Non-marketable equity investment

$ 34,736  

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200,000 authorized;

13,110 and 11,863 shares issued and outstanding as of October 2, 2022 and January 2, 2022, respectively

13,686 and 13,202 shares issued and outstanding as of April 2, 2023 and January 1, 2023, respectively

Additional paid-in capital

5 unchanged sentences

13,675  

11,895  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

$ 32,586  

(1) Accounts receivables includes contract assets of $1,459 and $243, respectively  

See accompanying notes to unaudited condensed consolidated financial statements.

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Three Months Ended

Nine Months Ended

Cost of revenue

5 unchanged sentences

Interest expense

Gain on forgiveness of debt

Interest income and other expense, net

Loss before income taxes

Provision for (benefit from) income taxes

Provision for (benefit from) income tax

Net loss per share:

7 unchanged sentences

(in thousands)

Nine Months Ended

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Write-down of inventories and reclassifications

Gain on disposal of equipment

Gain on forgiveness of debt

Bad debt expense

Bad debt recovery

Changes in operating assets and liabilities:

Accounts receivable

Contract assets

Trade payables

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Repayment of line of credit

Proceeds from issuance of common stock, net

Taxes paid related to settlement of equity awards

Proceeds from issuance of common stock

Stock issuance cost

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental disclosures of cash flow information:

Interest paid

Income taxes paid

See accompanying notes to unaudited condensed consolidated financial statements.

6 unchanged sentences

Common stock issued under stock plans and employee stock purchase plans

Stock-based compensation

Balance at April 2, 2023

Common stock issued under stock plans and employee stock purchase plan

Stock-based compensation

Balance at July 3, 2022

Common stock issued under stock plans and employee stock purchase plan

Common stock offering, net of issuance costs

Stock-based compensation

Balance at October 2, 2022

Stockholders'

Balance at January 2, 2022

11,094  

$ 306,885  

$ ( 294,409 )  

$ 12,487  

Issuance of common stock under public stock offering, net of stock issuance cost

Common stock issued under stock plans and employee stock purchase plans

( 484 )  

Stock-based compensation

( 1,689 )  

Balance at April 3, 2022

11,448  

306,769  

( 296,098 )  

10,682  

Common stock issued under stock plans and employee stock purchase plan

Stock-based compensation

( 2,062 )  

Balance at July 4, 2021

11,512  

307,117  

( 298,160 )  

Common stock issued under stock plans and employee stock purchase plan

Common stock offering, net of issuance costs of $45

Stock-based compensation

( 1,282 )  

Balance at October 3, 2021

11,790  

$ 309,036  

$ ( 299,442 )  

$ 9,606  

See accompanying notes to unaudited condensed consolidated financial statements.

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The Company and Basis of Presentation

QuickLogic Corporation (“QuickLogic”

or “Company”) was founded in 1988 and reincorporated in Delaware in 1999.

The Company enables Original Equipment Manufacturers (“OEMs”) to maximize battery life for highly differentiated, immersive user experiences with smartphone, wearable, hearable, tablet, and internet-of-Things (“IoT devices”), military, aerospace and defense products.

QuickLogic delivers these benefits through industry leading ultra-low power customer programmable System on Chip (“SoC”) semiconductor solutions, embedded software, and algorithm solutions for always-on voice and sensor processing. The Company is a fabless semiconductor provider of comprehensive, flexible sensor processing solutions, ultra-low power display bridges, and ultra-low power Field Programmable Gate Arrays (“FPGAs”).

The Company’s wholly owned subsidiary, SensiML Corporation (“SensiML”) provides Analytics Toolkit, which is used in many of the applications where the Company’s ArcticPro™, eFPGA intellectual property (“IP”) plays a critical role.

QuickLogic Corporation ("QuickLogic" or, the "Company"), was founded in 

1988  and reincorporated in Delaware in 

 The Company enables Original Equipment Manufacturers "(OEMs"), to maximize battery life for highly differentiated, immersive user experiences with Smartphone, Wearable, Hearable, Tablet and Internet-of-Things or IoT hardware products, Military, Aerospace and Defense products.

QuickLogic delivers these benefits through industry leading ultra-low power customer programmable System on Chip or SoC semiconductor solutions, embedded software, and algorithm solutions for always-on voice and sensor processing. The Company is a fabless semiconductor provider of comprehensive, flexible sensor processing solutions, ultra-low power display bridges, and ultra-low power Field Programmable Gate Arrays"(FPGAs").

Starting in late 

2021, the Company increased its professional engineering services business related to its eFPGA products for both civilian and military applications.

The Company’s wholly owned subsidiary, SensiML Corp.("SensiML"), provides Analytics Toolkit, which is used in many of the applications where the Company’s ArcticPro™, eFPGA intellectual property "(IP") plays a critical role.

SensiML Analytics toolkit is an end-to-end software suite that provides OEMs a straightforward process for developing pattern matching sensor algorithms using machine learning technology that are optimized for ultra-low power consumption.

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10 -K for the year ended January 1, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on March 28, 2023.

Operating results for the three and nine months ended October 2, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year.

Operating results for the three months ended April 2, 2023 are not necessarily indicative of the results that may be expected for the full fiscal 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 quarter for 2022 and 2021 ended on October 2, 2022  and October 3, 2021 , respectively.

COVID- 19 - Impact on Business 

There have been 

no  material changes due to the impact of the Covid- 19  pandemic on our business from that disclosed in our most recently filed Annual Report.

Our most recent Annual Report on Form 

10 -K for the year ended 

January 2, 2022 

as filed with the SEC on 

March 22, 2022 

provides additional information about our business and operations.

QuickLogic's first fiscal quarter for 2023 and 2022 ended on April 2, 2023  and April 3, 2022 , respectively.

2023 Cybersecurity Incident

On January 20, 2023, the Company detected a ransomware infection affecting a limited number of IT systems, including systems that contained personal information of our employees. 

Upon detection of the incident, the Company promptly began an assessment of all Company IT system, notified law enforcement and engaged legal counsel and other incident response professionals.

Through counsel, the Company retained a leading cybersecurity forensics firm to review and investigate the incident.

The Company's investigation and assessment of the incident's impact is ongoing.

The Company continued its business operations during this incident and successfully restored all of its critical operational data.

The Company has also taken steps to further secure its IT systems.

Based on the ongoing investigation and information currently known at this time, the Company believes the incident has not had nor will have a material impact on its business operations, ability to serve its customers, or financial results.

The Company carries insurance, including cyber insurance, commensurate with its size and the nature of its operations.

Liquidity 

The Company has financed its operations and capital investments through public and private offerings of our common stock, finance and operating leases, and borrowing under a revolving line of credit with Heritage Bank (the "Revolving Facility"), partially offset by cash used in operations.

In addition to the Company's $ 20.0  million of cash, cash equivalents and restricted cash, as of 

October 2, 2022 other sources of liquidity included $ 45 million drawn down from the Revolving Facility and $ 4.8 million in net proceeds from the Company's sale of common stock in 

nine months ended October 2, 2022 .

The Company has financed its operations and capital investments through the sale of common stock, finance and operating leases, a revolving line of credit with Heritage Bank (the "Revolving Facility"), and cash flows from operations.

As of  

April 2, 2023 , the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $ 20.9  million, inclusive of a $ 15.0  million advance from its Revolving Facility, and $ 2.3 million in net proceeds from the Company's sale of common stock in the three months ended April 2, 2023 .

The Company was in compliance with all the Heritage Bank Revolving Facility loan covenants as of 

October 2, 2022 .

As of October 2, 2022 , the Company had $ 15.0  million outstanding on the Revolving Facility with an interest rate of 6.75 %.

On September 14, 2022 and February 9, 2022, 

the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 487,279 and 310,000  shares of common stock, respectively, par value $ 0.001 , in registered direct offerings, resulting in net cash proceeds of approximately $ 3.2 million and $1.5  million, respectively.

Issuance costs related to September 14, 2022 and the February 9, 2022 offering were immaterial.

The purchase price for each share of common stock in the September 14, 2022 and in the February 9, 2022 

placements were $ 6.57 and $ 4.78 , respectively.

The Company currently intends to use the net proceeds from financings for working capital, the development of next generation eFPGA-based products, including AI and open source hardware or software, and general corporate purposes, and 

may also use a portion of the net proceeds to acquire and/or license technologies and acquire and/or invest in businesses when the opportunity arises;

however, the Company currently has 

no commitments or agreements and is 

not involved in any negotiations with respect to any such transactions. 

April 2, 2023 .

As of April 2, 2023 , the Company had $ 15.0  million outstanding on the Revolving Facility with an interest rate of 8.5 %.

On March 21, 2023, 

the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450 thousand shares of common stock, par value $ 0.001 , in a registered direct offering, resulting in net cash proceeds of approximately $ 2.3  million.

Issuance costs related to the offering were negligible.

The purchase price for each share of common stock was $ 5.14 .

See Note 7  for additional information.

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, will be sufficient to fund its operations and capital expenditures and provide adequate working capital for the next twelve months. We continue to monitor our financial performance to ensure sufficient liquidity to fund operations and execute on our business plan.

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 eFPGA IP, ArcticLink ®

Based on past performance and current expectations, the Company believes that its existing cash and cash equivalents as of April 2, 2023, together with its revenues from operations, and the 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 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®

and PolarPro®

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

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 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 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, together with financial resources from its Revolving Facility, 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 Facility in December 2023, 

and its ability to raise additional capital in the public capital markets, will be sufficient to satisfy its operations and capital expenditures.

platforms, ArcticPro™, EOS 

S3  SoC, Quick AI solution, and ™, QuickAI™, SensiML Analytics Toolkit, Eclipse II products, eFPGA IP licenses 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 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 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 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 

December 2024, 

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. 

Principles of Consolidation

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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 expense, net in the unaudited condensed consolidated statements of operations, and are insignificant for all periods presented.

Uses of Estimates

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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.

Actual results could differ materially from those estimates, particularly in relation to revenue recognition, the allowance for doubtful accounts, sales returns, valuation of long-lived assets including mask sets, valuation of goodwill, capitalized internal-use software and related amortizable lives, fair value measurements, and intangibles related to the acquisition of SensiML, including the estimated useful lives of acquired intangible assets, valuation of inventories including identification of excess quantities, market value and obsolescence, measurement of stock-based compensation awards, accounting for income taxes and estimating accrued liabilities.

For additional information, please refer to the Company's most recent annual report which was filed with the SEC on 

Although these estimates are based on the Company’s knowledge of current events and actions it 

undertake in the future, actual results 

ultimately materially differ from these estimates and assumptions in regard to revenue recognition;

and the valuation of inventories including identification of excess quantities, market value and obsolescence.

The methods, 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 our financial condition and results of operations and require 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 and determination of the standalone selling price for certain distinct performance obligations (such as for IP licensing and professional services contracts) and valuation of inventories.

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 

have a material impact on our financial statements. For additional information, please refer to the Company's most recent Annual Report on Form 10 -K which was filed with the SEC on 

March 28, 2023.

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not  require collateral.

See Note 

9,  Information Concerning Product Lines, Geographic Information and Revenue Concentration, for information regarding concentrations associated with accounts receivable.

See Note 10,  Information Concerning Product Lines, Geographic Information and Revenue Concentration, for information regarding concentrations associated with accounts receivable.

As of April 2, 2023 and January 1, 2023, the Company had $ 15.0 million of revolving debt outstanding 

with Heritage Bank;

the revolving debt carried an interest rate of 8.5 % and 8.00 % per annum, respectively.

Heritage 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 agreement.

The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period. 

The maturity date for advances under the revolving debt agreement is December 31, 2024.

At April 2, 2023, the Company had utilized a significant portion of the revolving debt, and as a result, it maintains a substantial amount of cash deposits with Heritage Bank. 

The concentration of cash with one financial institution poses certain risks.

For instance, adverse developments affecting financial institutions, companies in the financial services industry or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely impact the stability of Heritage Bank, leading to additional financial risks for the Company.

Any material decline in available funding or our ability to access our cash, cash equivalents, and liquidity resources, inclusive of those at Heritage Bank, 

could adversely impact our ability to meet our operating expenses, financial and contractual obligations, or result in breaches of our contractual obligations.

Any of these impacts could have material adverse impacts on our operations and liquidity.

Significant Accounting Policies

During the 

three and nine months ended October 2, 2022  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 2, 2022 .

three months ended April 2, 2023  there were no changes to the Company's significant accounting policies from its disclosures in the Annual Report on Form 10 -K for the year ended January 1, 2023 .

For a discussion of the significant accounting policies, please see the Annual Report on Form 

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Recent Accounting Standards Adopted

In May 2021, the Financial Accounting Standards Board ("FASB") issued ASU No.

2021 - 04, Issuer ’

s Accounting for Certain Modifications of Exchanges of Freestanding Equity-Classified Written Call Options to clarify the accounting for modifications or exchanges of freestanding equity-classified written call options, such as warrants, that remain equity classified after modification or exchange.

This ASU became effective for the Company on January 3, 2022 and did not have a material impact on the Company's consolidated financial statements.

New Accounting Standards Not Yet Adopted

In June 2022, the FASB issued ASU No.

2022 - 03, Fair Value Measurement (Topic 820 ) Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify the measurement of the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and requires disclosures related to these types of equity securities.

2022 - 03 becomes effective for the Company on January 2, 2023 and is not expected to have an impact on the Company's consolidated financial statements or disclosures.

In August 2020, the FASB issued ASU No.

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The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. 

The ASU is not expected to have an impact on the Company's financial statements.

The Company early adopted ASU No.

2020 - 06 on January 2, 2023 and it had no  material impact on the Company's consolidated financial statements or related disclosures.

Recent Accounting Standards Not Yet Adopted

In June 2022, the FASB issued ASU No.

2022 - 03, Fair Value Measurement (Topic 820 ): 

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify the measurement of the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and requires disclosures related to these types of equity securities.

For public business entities, the amendments in this Update are effective for fiscal years beginning after 

December 15, 2023, 

and interim periods within those fiscal years.

Early adoption is permitted for both interim and annual financial statements that have 

not  yet been issued or made available for issuance.

The adoption of this ASU is 

not  expected to have an impact on the Company's consolidated financial statements or disclosures.

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 October 2, 2022  

October 3, 2021 , 398 thousand and 691 thousand shares of common stoc k, 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 2, 2023  

April 3, 2022 , 740 thousand and 578  thousand shares of common stoc k, 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 thousand shares were issued in connection with May 29, 2018, stock offering were not included in the diluted loss per share calculation of the periods presented as they were also considered anti-dilutive due to the net loss the Company experienced during these periods. The warrants are exercisable through May 29, 2023 at a price of $ 19.32 per share.

Warrants to purchase up to 386 thousand shares were issued in connection with May 29, 2018, stock offering was not included in the diluted loss per share calculation of the periods presented as they were also considered anti-dilutive due to the net loss the Company experienced during these periods. The warrants are exercisable through May 29, 2023 at a price of $ 19.32 per share.

Balance Sheet Components

The following table provides details relating to certain balance sheet line items as of October 2, 2022 , and January 2, 2022 (in thousands):

The following table provides details relating to certain balance sheet line items as of April 2, 2023 , and January 1, 2023 (in thousands):

Accounts receivable:

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Allowance for doubtful accounts

( 60 )  

Trade account receivables, net

Contract assets

$ 3,905  

$ 1,294  

Work-in-process

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$ 1,305  

$ 2,064  

$ 1,570  

Property and equipment, net:

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Revolving Line of Credit

As of October 2, 2022 and January 2, 2022 , the Company had $ 15.0 million of revolving debt outstanding with an interest rate of 6.75 % and 3.75 % per annum, respectively.

As of April 2, 2023 and January 1, 2023 , the Company had $ 15.0 million of revolving debt outstanding with an interest rate of 8.5 % a nd 8.00 % per annum, respectively.

Heritage 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 agreement.

The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period.

Interest expense recognized were $ 11 tho usand and $ 50 thousand for th e  

three and nine months ended October 2, 2022 , r espectively, an d $ 22 thousand and $ 68 thou sand for the 

three and nine months ended October 3, 2021 , respectively.

April 4, 2022, 

the Company entered into a Fifth Amendment (the "Amendment") to the 

December 21, 2018 

Amended and Restated Loan and Security Agreement (as amended, the "Agreement") with Heritage Bank.

The purpose of the Fifth Amendment was primarily to clarify certain terms of the Agreement as follows:

(i) added a definition of "Remaining Months Liquidity" to be defined as the Borrower's unrestricted cash maintained at Bank (including cash in the Pledged Account) minus the outstanding principal amount of the Advances, divided by the absolute value of the average trailing 

three  ( 3 ) month EBITDA;

and (ii) revised the minimum cash and remaining months liquidity financial covenants.

The minimum cash covenant was revised such that the balance of unrestricted cash in the pledged account shall at all times exceed the principal amount of all advances owed that are outstanding at any time.

The remaining months liquidity covenant specified that it should 

not  be less than 

nine  months.

The Company does 

not  believe that the clarifications of the terms in the Amendment will have a material impact on the Company's liquidity or utilization of the revolving loan under the Agreement.

Interest expenses recognized were $ 33 tho usand and $ 24  thousand for th e  

three months ended April 2, 2023 a nd April 3, 2022 , respectively.

Note 6  —

The Company entered into operating leases for office space for its headquarters.

The Company has elected the practical expedient to apply to recognition requirements to short-term leases for its domestic and foreign subsidiaries and for its sales offices and recognized rent payments on short-term leases on a straight-line basis over the lease term.

Finance leases are primarily for engineering design software.

Operating leases generally have lease terms of 

The Company's principal research and development and corporate facilities are leased office buildings located in the United States.

These lease facilities are classified as operating leases and have lease terms of 

one  to 

five  years.

Finance leases are generally 

The Company maintains sales offices out of which it conducts sales and marketing activities in various countries outside of the United States which are rented under short-term leases. The Company has elected the practical expedient to apply to recognition requirements to short-term leases and recognizes rent payments on short-term leases on a straight-line basis over the lease term.

Finance leases are primarily for engineering design software and have leases terms of generally 

two  to 

three  years.

October 2, 2022  and 

January 2, 2022 , the balance of right-of-use assets was approximately $ 0.9 million and $ 1.5 million, respectively, and the lease liability was approximately $ 1 million and $ 1.6 million, respectively, for operating and finance leases for the headquarters in San Jose and for the operating subsidiaries of SensiML in Oregon and the Company's subsidiary in India.

Total rent expense was $ 0.1 million and $ 0.3 million for the 

three and nine months ended October 2, 2022  and October 3, 2021 , respectively.

Total rent expenses were $ 0.1 million 

for each of t he 

three months ended April 2, 2023  and April 3, 2022 .

Right-of-use assets were approximately $ 1.6 million and $ 1.4 million as of April 2, 2023  and 

January 1, 2023 , respectively.

Lease liabilities were approximately $ 1.6 million and $ 1.4 million as of 

April 2, 2023  and 

January 1, 2023 , respectively.

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

Three Months Ended

Nine Months Ended

October 2, 2022

October 3, 2021

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Operating lease costs:

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Amortization of ROU asset

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

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 October 2, 2022  and the 

nine months ended October 3, 2021  were $ 0 and $ 0.4 million, respectively (in thousands):

Nine Months Ended

October 2, 2022  

October 3, 2021  

three months ended April 2, 2023  and  

April 3, 2022  was 

$ 445 thousand and $ 0 , respectively. 

The following table provides the details of supplemental cash flow information (in thousands):

Three Months Ended

April 2, 2023  

April 3, 2022  

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

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Financing cash flows used for finance leases

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 October 2, 2022 and January 2, 2022 (in thousands):

October 2, 2022  

Non-cash ROU assets included in the operating cash flows for the three months ended April 2, 2023 and April 3, 2022 were $ 155 thousand and $ 193 thousand, respectively.

The following table provides the details of right-of-use assets and lease liabilities as of April 2, 2023 and January 1, 2023 (in thousands):

April 2, 2023  

January 1, 2023  

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$ 1,592  

$ 1,397  

Lease liabilities:

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$ 1,601  

The following table provided the details of future lease payments for operating and finance leases as of October 2, 2022 (in thousands):

$ 1,394  

The following table provided the details of future lease payments for operating and finance leases as of April 2, 2023 (in thousands):

Operating Leases

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Present value of lease liabilities

The following table provides the details of lease terms and discount rates as of October 2, 2022 and January 2, 2022 :

October 2, 2022

$ 1,190  

The following table provides the details of lease terms and discount rates as of April 2, 2023 and January 1, 2023 :

April 2, 2023

January 1, 2023

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 Capital Stock

Employee Stock Plan

On May 10, 2022 

at the Company's Annual Meeting, Company stockholders approved increasing the reservation of the additional shares under the 2019 Stock Plan, as amended on May 10, 2022. 

The approval of an additional 900 thousand shares of common stock increased the total number of available shares to 1.4 million under the 2019 Stock Plan, as amended.

The number of shares available for future awards as of the date of the Annual Meeting are the sum of ( 1 ) 900 thousand, ( 2 ) the number of shares available for future awards under the plan immediately before such approval which were 522 thousand shares and ( 3 ) any shares subject to outstanding awards under the 2019 Plan or the 2009 Plan, that are terminated, canceled, surrendered, or forfeited as of May 10, 2022. 

On May 19, 2022, the Company filed a Registration Statement on Form S- 8  with the SEC to register an additional 

900 thousand shares of its common stock that may be issued under the Company’s 2019 Stock Plan, as amended.

Registration Statement

On August 17, 2022, the Company filed a Registration Statement on Form S- 3 with the SEC, under which we may sell, from time-to-time common stock, preferred stock, depositary shares, warrants, debt securities, and units, individually or as units comprised of one or more of the other securities or a combination thereof. The Company's registration statement became effective on August 26, 2022.

 Issuance of Common Stock

On March 21, 2023, 

the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450  thousand shares of common stock in registered direct offering direct offerings pursuant to our effective shelf registration statement on Form S- 3  (File 

333 - 266942 ), resulting in net cash proceeds of approximately $ 2.3 million.

Issuance costs related to the registered direct offering were insignificant.

The purchase price for each share of common stock was $ 5.14 .

On August 17, 2022, the Company filed a Registration Statement on Form S- 3 (File No.

333 - 266942 ) with the SEC, under which we may sell, from time-to-time common stock, preferred stock, depositary shares, warrants, debt securities, and units, individually or as units comprised of one or more of the other securities or a combination thereof. The Company's registration statement became effective on August 26, 2022.

Note 8  —

Stock-Based Compensation

Stock-based compensation expense included in the Company's consolidated financial statements for the three and 

nine months ended October 2, 2022  and October 3, 2021  was as follows (in thousands):

Stock-based compensation expense included in the Company's consolidated financial statements for the 

three months ended April 2, 2023  and April 3, 2022  was as follows (in thousands):

Three Months Ended

Nine Months Ended

October 2, 2022

October 3, 2021

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Cost of revenue

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Selling, general and administrative

$ 1,347  

$ 1,455  

There was 

no  stock -based compensation expense reversal related to the cancellation of certain unvested performance-based RSUs for the 

three and nine months ended October 2, 2022  and 

October 3, 2021 .

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

No stock options were granted during the three and nine months ended October 2, 2022  and 

October 3, 2021 .

The Company capitalized stock-based compensation amounts were $ 18 thousand and $ 0 for the  

three months ended April 2, 2023  and April 3, 2022 , respectively.

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 October 2, 2022  (in thousands):

three months ended April 2, 2023  (in thousands):

Shares Available for Grants

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RSUs forfeited or expired

Balance at October 2, 2022

Balance at April 2, 2023

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 October 2, 2022 :

three months ended April 2, 2023 :

(in thousands)

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$ 24.50  

( 13 )  

$ 42.90  

Balance outstanding at October 2, 2022 *

Balance outstanding, exercisable, and vested at April 2, 2023

$ 24.50  

*Exercisable and fully vested.

No stock options were granted, exercised, forfeited, or expired during the 

nine months ended October 2, 2022 and October 3, 2021 .

No stock options were granted, exercised, forfeited, or expired during the 

three months ended April 2, 2023 and April 3, 2022 .

Total stock-based compensation related to stock options was $ 0 during the 

nine months ended October 2, 2022 and October 3, 2021 . 

As of October 2, 2022 , the fair value of unvested stock options, net of forfeitures, was $ 0 . 

three months ended April 2, 2023 and April 3, 2022 . 

Restricted Stock Units

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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 expense related to RSUs and PRSUs was approximately $ 0.5 million and $ 1.3 million for the 

three and nine months ended October 2, 2022 , respectively, and approximately $ 0.9 million and $ 1.4 million for the 

three and nine months ended October 3, 2021 , respectively.

October 2, 2022 and October 3, 2021 , there was approximately $ 1.1 million  and $ 2.1 million , respectively, in unrecognized compensation expense related to RSUs. The remaining unrecognized stock-based compensation expense as of October 2, 2022  is expected to be recorded over a weighted average period of 1.51  years.

The stock-based compensation expense related to RSUs and PRSUs were approximately 

$ 0.7 million  and $ 0.4 million for the 

three months ended April 2, 2023 and April 3, 2022, respectively.

April 2, 2023 and April 3, 2022 , there was approximately $ 2.2 million  and $ 1.3 million , respectively, in unrecognized compensation expense related to RSUs. The remaining unrecognized stock-based compensation expense as of April 2, 2023  is expected to be recorded over a weighted average period of 1.38  years.

A summary of activity for the Company's RSUs and PRSUs for the 

nine months ended October 2, 2022  is as follows:

three months ended April 2, 2023  is as follows:

RSUs & PRSUs Outstanding

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Nonvested at January 1, 2023

( 423 )  

Vested and released

( 34 )  

Nonvested at October 2, 2022

Nonvested at April 2, 2023

Employee Stock Purchase Plan

Total stock-based compensation related to the Company's Employee Stock Purchase Plan was approximately $ 20 thousand and $ 54 thousand for the 

three and nine months ended October 2, 2022 , respectively, and $ 31 thousand and $ 97 thousand for the 

three and nine months ended October 3, 2021 , respectively.

Total stock-based compensation related to the Company's Employee Stock Purchase Plan was approximately $ 30 thousand and $ 23 thousand for the 

three months ended April 2, 2023 , and April 3, 2022, respectively.

Note 9 —

The Company recorded a net income tax expense of $ 3 thousand and $ 19 thousand for the 

three and nine months ended October 2, 2022 , respectively, and a net income tax benefit of $ 21 thousand and a net income tax expense of $ 0.1 million for the 

three and nine months ended October 3, 2021 , respectively.

A majority of the income tax expense for the three months ended 

October 2, 2022  was related to the Company's foreign subsidiaries, which are cost-plus entities, and state minimum income taxes. A majority of the income tax expense for the 

nine months ended October 2, 2022  was related to income tax expense of the Company's foreign subsidiaries and state minimum income taxes, partially offset by tax benefits from foreign income tax returns related to the Company's foreign subsidiaries.

The difference between the estimated annual effective income tax benefit rate of 1.2 % and the 21 % U.S.

federal statutory expense rate reflects state income taxes, foreign income taxes, the effect of certain permanent differences, and a full valuation allowance against net deferred tax assets.

The valuation allowance primarily resulted from 

not  having sufficient income from deferred tax liability reversals in the appropriate future periods to support the realization of certain deferred tax assets.

Based on the estimated reversal patterns of the Company’s deferred tax assets and liabilities, it is more likely than 

not  that the Company will 

not  realize the federal, state, and certain foreign deferred tax assets generated as there is insufficient projected income from reversals of deferred tax liabilities.

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

and certain foreign net deferred tax assets as of October 2, 2022 .

The Company had no unrecognized tax benefits as of October 2, 2022  and January 2, 2022 

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.

Accrued interest and penalties related to unrecognized tax benefits are recognized as part of the income tax provision in the condensed consolidated statements of operations.

The Company is subject to U.S.

federal income tax as well as income taxes in many U.S.

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.

The Company recorded a net income tax expense of $ 7 thousand for the 

three months ended April 2, 2023  and a net income tax benefit of $ 1 thousand for the 

three months ended April 3, 2022 .

The effective tax rate was ( 0.6 %) and 0.1 % for the three months ended March 31, 2022 and 2021, respectively.

The effective tax rates differ from the statutory tax rate of 21 %, primarily due to the Company's valuation allowance movement in each period presented.

It is more likely than not that the Company will not realize the federal, state, and certain foreign deferred tax assets as of April 2, 2023.

As such, the Company continues to maintain a full valuation allowance against all of its US and certain foreign net deferred tax assets as of April 2, 2023.

Note 10 —

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For all periods presented, the Company operated in a single reportable business segment.

We derive revenue from sales to customers located in North America, Europe and Asia Pacific.

The following is a breakdown of revenue by product family (in thousands):

Three Months Ended

Nine Months Ended

October 2, 2022

October 3, 2021

October 2, 2022

October 3, 2021

$ 2,252  

$ 2,758  

April 2, 2023

April 3, 2022

$ 3,055  

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$ 4,096  

$ 12,096  

$ 8,980  

New products revenue consists of revenues from the sale of hardware products manufactured on 

180  nanometer or smaller semiconductor processes, eFPGA intellectual property licenses, professional services, and QuickAI and SensiML AI software as a service (“SaaS”) revenue.

180  nanometer or smaller semiconductor processes, eFPGA IP license and eFPGA-related professional services, QuickAI and SensiML AI software as a service (SaaS) revenue.

Mature products include all products produced on semiconductor processes larger than 

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Three Months Ended

Nine Months Ended

October 2, 2022

October 3, 2021

October 2, 2022

October 3, 2021

April 2, 2023

April 3, 2022

Hardware products

$ 1,835  

$ 3,607  

$ 3,794  

eFPGA IP and professional services

New products revenue

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$ 3,450  

$ 8,833  

$ 5,095  

eFPGA IP revenue is comprised primarily of eFGPA intellectual property license revenue and eFGPA-related professional services revenue, eFPGA IP revenue was $ 1.7 million and $ 4.9 million for the 

three and nine months ended October 2, 2022 , respectively, and $ 1 million and $ 1.2 million for the 

three and nine months ended October 3, 2021 , respectively.

SaaS & Other revenue is comprised primarily of software as a service revenue and software-related professional services revenue.

SaaS & Other revenue was $ 0.2 million and $ 0.3 million for the three and nine months ended October 2, 2022 , respectively, and $ 38 thousand and $ 0.2 million for the 

three and nine months ended October 3, 2021 , respectively.

Contract liabilities related to professional services revenue of $ 0 and $ 0.3  million and were included in deferred revenue on the consolidated balance sheets as of October 2, 2022 and 

January 2, 2022, respectively. 

eFPGA IP revenue for the three months ended April 3, 2023 was $ 2.8 million which was comprised of approximately $ 2.6 professional services revenue and $ 0.2 million in eFPGA intellectual property license revenue.

eFPGA IP revenue for the three months ended April 3, 2022 of $ 1.6 million was primarily professional service revenue.

Contract assets related to professional services revenue were $ 2.3 million and $ 0.1 million for the three months ended April 2, 2023 and April 3, 2022, respectively.

Contract liabilities related to professional services revenue were $ 0.3 million and $ 0 for the three months ended April 2, 2023 and April 3, 2022, respectively.

The tables below present disaggregated revenues by geographical location.

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Substantially all revenues in North America were in the United States.

Revenue in the United States was $ 2.3 million, or 67 % of total revenue, and $ 7.8 million, or 64 % of total revenue for the 

three and nine months ended October 2, 2022 , respectively, and $ 2.6 million, or 67 % of total revenue, and $ 4.4 million, or 49 % of total revenue for the 

three and nine months ended October 3, 2021 , respectively. 

Revenue in the United States was $ 3.3 million, or 80 % of total revenue, for the 

three months ended April 2, 2023 , and $ 2.4 million, or 59 % of total revenue for the 

three months ended April 3, 2022 .

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

Three Months Ended

Nine Months Ended

October 2, 2022

October 3, 2021

October 2, 2022

October 3, 2021

$ 3,114  

April 2, 2023

April 3, 2022

$ 1,491  

3 unchanged sentences

$ 4,096  

$ 12,096  

$ 8,980  

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

Distributor "A"

Distributor "B"

Distributor "C"

Distributor "E"

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

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Distributor "A"

Distributor "B"

Distributor "C"

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

Commitments and Contingencies

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 this forecasted wafer volume. As of October 2, 2022 , the Company had $ 0.5 million of outstanding commitments for the purchase of wafer 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 October 2, 2022 , total outstanding purchase obligations for other goods and services were $ 0.8 million due within the next twelve months.

The Company's principal contractual commitments include purchase obligations, re-payments of draw downs from the revolving line of credit, and payments under operating and finance leases.

Purchase obligations are largely comprised of open purchase order commitments to suppliers and to subcontractors under professional services agreements.

Our risk associated with the purchase obligations under professional services agreements is limited to the termination liability provisions within those contracts, and as such, we do 

not  believe they represent a material liquidity risk to us.

Certain wafer manufacturers require the Company to forecast wafer starts several months in advance.

The Company is committed to take delivery of and to pay for a portion of forecasted wafer volume. As of April 2, 2023 , the Company had no significant outstanding commitments for the purchase of wafer inventory.

Purchase Obligations

Purchase obligations represent contractual agreements to purchase goods or services entered into in the ordinary course of business.

Purchase obligations are legally binding and amongst other things specify a minimum or a range of quantities, pricing and approximate timing of the transaction.

Purchase obligations include amounts that are recorded on the Company's consolidated balance sheets as well as amounts that are 

not  recorded on the Company's consolidated balance sheets.

As of April 2, 2023 , total outstanding purchase obligations for other goods and services were $ 1.3 million due within the next twelve months.

Contingencies

Contingent commitments are 

not  recorded on the Company’s consolidated balance sheets and represent significant contractual obligations on procurement contracts with determinable prices and quantities, but where the timing and probability of incurring the obligation is dependent on numerous variables which are 

not  reasonably predictable. These obligations require our suppliers to build and deliver certain products in sufficient time to meet the Company’s planning horizon. The actual amounts we pay to our suppliers and the timing of payments for these future obligations could differ materially from our current estimates.

As of April 2, 2023 , contingent commitments were approximately $ 3.8 million due within the next 

twelve  months and $ 8.7 million d ue within 

two  to 

three  years.

These amounts represent the Company’s best estimates for contingent commitments which are expected to be delivered at some time in the future but for which delivery is currently undefined. 

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.

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

12  —

Subsequent Events

On April 28, 2023, the Company converted accounts receivable for a customer in the amount of approximately $ 1.16 million to notes receivable (the "Note").

If not prepaid prior to the Note maturity date of April 28, 2024, the principal and all accrued and unpaid interest will be due and payable to the Company.

The Note will bear an interest rate of 3.0 % compounded monthly.

If an event of default occurs, the interest will increase to 10.0 %.

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