QUICKLOGIC Corp 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (Moss Adams LLP, San Francisco, CA, PCAOB ID: 659 ) 34 Consolidated Balance Sheets as of December 31, 2023 and January 1, 2023 36 Consolidated Statements of Operations for the Fiscal Years 2023, 2022, and 2021 37 Consolidated Statements of Cash Flows for the Fiscal Years 2023, 2022, and 2021 38 Consolidated Statements of Stockholders’ Equity for the Fiscal Years 2023, 2022, and 2021 39 Notes to Consolidated Financial Statements 40 33 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of QuickLogic Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of QuickLogic Corporation (the “Company”) as of December 31, 2023, and January 1, 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and schedules (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023, and January 1, 2023, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates. Write-downs of Excess and Obsolete Inventories As described in Notes 1 and 4 to the consolidated financial statements, the Company’s inventories balance was $2.0 million as of December 31, 2023. The Company values its inventories at lower of standard cost or net realizable value. Standard cost approximates actual cost on a first-in, first-out basis. The Company writes down inventory that has become obsolete, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected requirements. The estimate of excess and obsolete inventories is subjective and primarily dependent on the estimates of future demand for a particular product. Changes in assumptions of product demand could have a significant impact on the amount of write-down recorded. The determination of write-down of inventories requires management to make significant assumptions and subjective judgments about the future salability of the inventory and the value of obsolete and unmarketable inventory. These assumptions include the assessment of market conditions and trends, sales forecasts, historic usage, expected demand, anticipated sales price, the stage in the product life cycle of its customers’ products, new product development schedules, the effect new products might have on the sale of existing products, product obsolescence, customer design activity, customer concentrations, product merchantability and other factors. We identified the write-down of inventories, in particular the estimates for excess and obsolete inventories, as a critical audit matter, because of the significant assumptions and subjective judgments used by management, which involved significant audit effort and the use of especially challenging and subjective auditor judgment when performing audit procedures and evaluating the results of those procedures. 34 Table of Contents The primary procedures we performed to address this critical audit matter included: • Evaluating the appropriateness of management’s process for developing the estimates for excess and obsolete inventories by: • Evaluating the methodology utilized to calculate the estimate. • Performing inquiries with management as to the composition of the reserve for aged inventory items without recent sales. • Assessing the appropriateness of the formulaic calculation and management adjustments by product type. • Evaluating the reasonableness of the significant assumptions used by management including those related to future demand by: • Evaluating management’s ability to provide reasonable forecast of sales by comparing management’s prior period sales forecasts to actual results. • Performing inquiries with non-financial personnel, including sales and production employees, regarding obsolete or discontinued inventory items and other factors to corroborate management’s assertions regarding qualitative judgments about excess and obsolete inventories. • Testing the completeness, accuracy, and relevance of the underlying data used in management’s estimate. • Testing the calculations related to the application of the methodology to specific inventory categories by agreement to supporting documentation and recalculation. Revenue Recognition of Professional Services Contracts As described in Notes 1 and 14 to the consolidated financial statements, the Company’s eFPGA-related professional services revenue was approximately $16.6 million for the year ended December 31, 2023. The Company’s professional services revenue is generally recognized at a point in time when control of the asset is transferred to and accepted by the customer. However, at times, revenue is recognized over time when there is no alternative use for the contract asset and there is an enforceable right to payment for performance completed to date. We have identified the timing of when control is transferred to the customer as a critical audit matter. Auditing this element of revenue recognition involved especially challenging auditor judgment in the determination of distinct performance obligations and an increased extent of auditor effort due to; (i) the existence of and variability in the termination for convenience clause within the contract including the enforceable right to payment for performance completed to date and (ii) consideration of the alternative use of the asset. • Evaluating management's significant accounting policies related to these customer agreements for reasonableness. • Evaluating the appropriateness of management's evaluation of various terms and conditions in revenue contracts by: • Obtaining and reading contract source documents, including master agreements, and other related documents. • Assessing the terms of the contracts and evaluating the appropriateness of management's application of their accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions. • Testing management's identification and treatment of contract terms, including evaluating termination for convenience clauses and enforceable right to payment for performance completed to date, and assessing the evidence of alternative use for the contract asset. • Evaluating when the customer obtained control of each performance obligation and the timing of revenue recognized either over time or at a point in time. • Assessing the appropriateness of the timing of revenue recognition for a sample of revenue contracts through: • Testing the mathematical accuracy of management's calculations of revenue and the associated timing of revenue recognized in the financial statements. /s/ Moss Adams LLP San Francisco, California March 26, 2024 We have served as the Company’s auditor since 2016. 35 Table of Contents QUICKLOGIC CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except par value amount) December 31, January 1, 2023 2023 ASSETS Current assets: Cash and cash equivalents and restricted cash $ 24,606 $ 19,201 Accounts receivable, net of allowances for doubtful accounts of $ 34 and $ 18 , as of December 31, 2023 and January 1, 2023, respectively 1,625 2,689 Contract assets 3,609 1,987 Note receivable 1,200 — Inventories 2,029 2,493 Prepaid expenses and other current assets 1,561 1,570 Total current assets 34,630 27,940 Property and equipment, net 8,948 1,398 Capitalized internal-use software, net 2,069 1,514 Right of use assets, net 981 464 Intangible assets, net 537 645 Non-marketable equity investment 300 300 Goodwill 185 185 Other assets 142 140 TOTAL ASSETS $ 47,792 $ 32,586 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving line of credit $ 20,000 $ 15,000 Trade payables 4,657 2,391 Accrued liabilities 2,673 1,509 Deferred revenue 1,052 272 Notes payable, current 946 448 Lease liabilities, current 302 402 Total current liabilities 29,630 20,022 Long-term liabilities: Lease liabilities, non-current 681 105 Notes payable, non-current 461 439 Other long-term liabilities 125 125 Total liabilities 30,897 20,691 Commitments and contingencies (Note 14) Stockholders' equity: Preferred stock, $ 0.001 par value; 10,000 shares authorized; no shares issued or outstanding — — Common stock, $ 0.001 par value; 200,000 shares authorized; 14,118 and 13,202 shares issued and outstanding as of December 31, 2023 and January 1, 2023, respectively 14 13 Additional paid-in capital 322,436 317,174 Accumulated deficit ( 305,555 ) ( 305,292 ) Total stockholders' equity 16,895 11,895 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,792 $ 32,586 The accompanying notes form an integral part of these Consolidated Financial Statements. 36 Table of Contents QUICKLOGIC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Fiscal Years 2023 2022 2021 Statements of Operations: Revenue $ 21,198 $ 16,180 $ 12,685 Cost of revenue 6,711 7,378 5,266 Gross profit 14,487 8,802 7,419 Operating expenses: Research and development 6,448 5,001 6,927 Selling, general and administrative 7,969 7,601 8,008 Operating income (loss) 70 ( 3,800 ) ( 7,516 ) Interest expense ( 215 ) ( 148 ) ( 130 ) Gain on forgiveness of PPP Loan — — 1,192 Interest income and other (expense) income, net ( 116 ) ( 221 ) ( 43 ) Income (loss) before income taxes ( 261 ) ( 4,169 ) ( 6,497 ) Provision for income taxes 2 98 119 Net income (loss) $ ( 263 ) $ ( 4,267 ) $ ( 6,616 ) Net income (loss) per share: (1) Basic and diluted $ ( 0.02 ) $ ( 0.34 ) $ ( 0.57 ) Weighted average shares: (1) Basic and diluted 13,453 12,588 11,535 (1) Note: Net income (loss) equals comprehensive income (loss) for all years presented. The accompanying notes form an integral part of these Consolidated Financial Statements. 37 Table of Contents QUICKLOGIC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Fiscal Years 2023 2022 2021 Cash flows provided by (used in) operating activities: Net income (loss) $ ( 263 ) $ ( 4,267 ) $ ( 6,616 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,807 1,147 1,004 ROU asset amortization 348 345 325 Stock-based compensation 2,522 2,035 2,526 Write-down of inventories 606 224 225 Gain on forgiveness of PPP Loan — — ( 1,192 ) Other 16 ( 9 ) 57 Changes in operating assets and liabilities: Accounts receivable 1,048 ( 1,708 ) 627 Contract assets ( 1,622 ) (1,692 ) (295 ) Inventories ( 142 ) ( 639 ) 385 Other assets ( 958 ) ( 220 ) ( 444 ) Trade payables 91 1,455 ( 2 ) Accrued liabilities 1,003 ( 156 ) 325 Deferred revenue 780 ( 183 ) 403 Lease liabilities ( 389 ) ( 366 ) ( 339 ) Other long-term liabilities — ( 22 ) 147 Net cash provided by (used in) operating activities 4,847 ( 4,056 ) ( 2,864 ) Cash flows provided by (used in) investing activities: Capital expenditures for property and equipment ( 5,467 ) ( 142 ) ( 180 ) Capitalized internal-use software ( 872 ) ( 672 ) ( 533 ) Net cash provided by (used in) investing activities ( 6,339 ) ( 814 ) ( 713 ) Cash flows provided by (used in) financing activities: Payment of notes payable ( 701 ) ( 452 ) ( 378 ) Proceeds from notes payable 105 — — Proceeds from line of credit 65,000 60,000 60,000 Repayment of line of credit ( 60,000 ) ( 60,000 ) ( 60,000 ) Proceeds from issuance of common stock 200 253 263 Proceeds from issuance of common stock to investors 2,313 4,682 1,079 Stock issuance costs ( 20 ) ( 17 ) ( 45 ) Taxes paid related to net settlement of equity awards — — ( 485 ) Net cash provided by (used in) financing activities 6,897 4,466 434 Net increase (decrease) in cash, cash equivalents and restricted cash 5,405 ( 404 ) ( 3,143 ) Cash, cash equivalents and restricted cash at the beginning of the period 19,201 19,605 22,748 Cash, cash equivalents, and restricted cash at the end of the period $ 24,606 $ 19,201 $ 19,605 Supplemental disclosures of cash flow information: Interest paid $ 81 $ 86 $ 77 Income taxes paid $ 14 $ 16 $ 73 Supplemental schedule of non-cash investing and financing activities: Purchases of property and equipment with financing arrangements $ 1,116 $ 650 $ 690 Stock-based compensation capitalized as internal-use software $ 248 $ — $ — Purchases of property and equipment in accounts payable $ 2,101 $ 1 $ 1 The accompanying notes form an integral part of these Consolidated Financial Statements. 38 Table of Contents QUICKLOGIC CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands) Common Stock Par Value Additional Paid-In Accumulated Total Stockholders' Shares Amount Capital Deficit Equity Balance at January 3, 2021 11,094 $ 11 $ 306,885 $ ( 294,409 ) $ 12,487 Common stock issued under stock plans and employee stock purchase plans 571 — ( 222 ) — ( 222 ) Common stock offering, net of issuance costs of $ 45 thousand 198 1 1,033 — 1,034 Stock-based compensation — — 2,526 — 2,526 Net loss — — — ( 6,616 ) ( 6,616 ) Balance at January 2, 2022 11,863 12 310,222 ( 301,025 ) 9,209 Common stock issued under stock plans and employee stock purchase plans 542 — 253 — 253 Common stock offering, net of issuance costs 797 1 4,664 — 4,665 Stock-based compensation — — 2,035 — 2,035 Net loss — — — ( 4,267 ) ( 4,267 ) Balance at January 1, 2023 13,202 13 317,174 ( 305,292 ) 11,895 Common stock issued under stock plans and employee stock purchase plans 466 1 199 — 200 Common stock offering, net of issuance costs 450 — 2,293 — 2,293 Stock-based compensation — — 2,770 — 2,770 Net loss — — — ( 263 ) ( 263 ) Balance at December 31, 2023 14,118 $ 14 $ 322,436 $ ( 305,555 ) $ 16,895 The accompanying notes form an integral part of these Consolidated Financial Statements. 39 Table of Contents NOTE 1 — THE COMPANY AND BASIS OF PRESENTATION QuickLogic Corporation was founded in 1988 and reincorporated in Delaware in 1999. The Company provides innovative, programmable silicon and software platforms to enable its customers to develop custom hardware products in a fast time-to-market and cost-effective way. Specifically, QuickLogic is a fabless semiconductor company with a variety of products: embedded FPGA ("eFPGA") intellectual property ("IP"), low power, multi-core semiconductor system-on-chips ("SoCs"), discrete FPGAs, and AI software. QuickLogic's customers can use its eFPGA IP for hardware acceleration and pre-processing in their Application Specific Integrated Circuit (ASIC) products, the Company's SoCs to run its customers' software and build their hardware around, and the Company's discrete FPGAs to implement their custom functionality. The Analytics Toolkit from SensiML Corporation ("SensiML"), the Company's wholly-owned subsidiary, provides an end-to-end Artificial Intelligence / Machine Learning solution with accurate sensor algorithms using AI technology. The full range of platforms, software tools, and eFPGA IP enables the practical and efficient adoption of AI, voice, and sensor processing across Aerospace, and Defense, Consumer/Industrial IoT, and Consumer Electronics markets. QuickLogic’s Fiscal Year ends on the Sunday closest to December 31. Fiscal Years 2023 , 2022 , and 2021 ended on December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. The Company has one reportable business segment based on how its Chief Operating Decision Maker (CODM) manages the business and in a manner consistent with the internal reporting provided to the CODM. The CODM, the Company's Chief Executive Officer (CEO), reviews detailed income statements, balance sheets, and sales reports in order to assess performance of the Company. Sales and operating income are some of the key variables monitored by the CODM and management when determining the Company's financial condition and operating performance. Liquidity The Company has financed its operations and capital investments through the sale of common stock, financing arrangements, operating leases, a revolving line of credit, and cash flows from operations. As of December 31, 2023 , the Company’s principal sources of liquidity consisted of cash and cash equivalents of $ 24.6 million, inclusive of a $ 20 million advance from its Revolving Facility with Heritage Bank of Commerce ("Heritage Bank"). 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 arrangements. Purchase obligations are largely comprised of open purchase order commitments to suppliers. The Company's risk associated with the purchase obligations is limited to the termination liability provisions within those contracts and as such, the Company does not believe they represent a material liquidity risk. See Note 7 for additional information. 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 a loan agreement. See Note 7 for additional information. 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 its common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S- 3, resulting in net cash proceeds of approximately $ 2.3 million. Issuance costs related to the offering were immaterial. 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 thousand and 310 thousand shares of common stock, respectively, in registered direct offering direct offerings pursuant to an effective shelf registration statement on Form S- 3, resulting in net cash proceeds of approximately $ 3.2 million and $ 1.5 million, respectively. Issuance costs related to the September 14, 2022 and the February 9, 2022 offerings were immaterial. On September 22, 2021 , the Company entered into a share subscription agreement for the sale of 125 thousand of its common stock. On September 30, 2021 , the Company entered into a common stock purchase agreement for the sale of 74 thousand shares of its common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S- 3. The net proceeds to the Company in aggregate, after deducting equity issuance costs of approximately $ 45 thousand was approximately $ 1.0 million. See Note 11 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 $ 2.3 million gross cash proceeds from the March 21, 2023 financing, 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. 40 Table of Contents 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 the Company's ArcticLink® and PolarPro® platforms, ArcticPro™, EOS S3 SoC, Quick AI solution, QuickAI™, SensiML Analytics Toolkit, Eclipse II products, and eFPGA IP license 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’ 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 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 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 on December 31, 2025 , 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 The consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles, in the United States of America or ("US GAAP"), and the applicable rules and regulations of the Securities and Exchange Commission, ("SEC"), and include the accounts of QuickLogic and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. Critical Accounting Policies and Use of Estimates The preparation of these 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 and the disclosures of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The methods, estimates, and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results it reports in its consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of the Company's financial condition and results of operations and requires it to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. Areas where management uses subjective judgment include, but are not limited to, revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets. The Company believes that it applies 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 may have a material impact on the Company's financial statements. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification ("ASC") Topic 606 and related Accounting Standards Updates ("ASUs"). The Company earns revenue from principal activities by (i) delivering standard hardware products, (ii) delivering and providing eFPGA IP products and professional services, (iii) and providing software as a service to customers, as well as (iv) other miscellaneous revenue. In accordance with ASC 606, the Company applies a five -step model for recognizing revenue 1. Identification of the contract, or contracts, with a customer, 2. Identification of the performance obligations in the contract, 3. Determination of the transaction price. The Company estimates the transaction price based on the amount expected to be received for transferring the performance obligations in the contract, which may include both fixed consideration and variable consideration. The Company's contracts with customers containing variable consideration are generally sales-based royalties, which is fully constrained. 4. Allocation of the transaction price to the performance obligations in the contract, and 5. Recognition of revenue when, or as, the Company satisfies a performance obligation. When entering into a new contract, the Company evaluates certain factors including the customer’s ability to pay, or credit risk. 41 Table of Contents The following is a description of the Company's revenue recognition policy by principal activity: Hardware Product Revenue The Company generates revenue by supplying standard hardware products, which must be programmed before they can be used in an application. Standard hardware products may be programmed by the Company, distributors, end customers, or third parties. Contracts with customers for hardware products generally do not include other performance obligations such as services, extended warranties, or other material rights. The Company's promise to transfer hardware products is identified as a distinct performance obligation. The Company recognizes revenue on hardware products when it transfers control of the promised products to the customer. Transfer of control of hardware products occurs when its performance obligation is satisfied, which typically occurs upon shipment from the Company's manufacturing site or headquarters. The Company recognizes revenue in an amount that reflects the consideration it expects to receive in exchange for those products, which also represents the standalone selling price (SSP) of its performance obligation. Hardware product prices are fixed. The Company elected a practical expedient in which it does not assess whether a contract has a significant financing component since its standard payment terms are less than one year. The Company allocates the transaction price of customer contracts to each distinct product based on its relative SSP. The sale of hardware products does not typically involve significant judgment or estimates by management. However, the Company does record an allowance for hardware product sales returns, which requires some judgment by management. Hardware Product Sales Return Allowance While the terms and conditions of the sale of hardware products generally do not allow for refunds or product returns other than for warranty repairs, the Company does record an allowance for hardware product sales returns. The allowance for sales returns is based on a historical returns analysis of the prior four quarters that is performed on a quarterly basis. Amounts recorded for hardware product sales returns were $ 8 thousand, $ 2 thousand and a sales return reversal of $ 13 thousand for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively, on the Company's consolidated statements of operations. While hardware product sales returns have not been material to the Company in recent reporting periods, the Company notes there is an inherent uncertainty in estimating this allowance. In the case where actual results may significantly vary from management estimates, the Company may be required to make future adjustments to its revenues and operating results. eFPGA IP Revenue eFPGA IP revenue is comprised of eFPGA intellectual property revenue, eFPGA-related professional services revenue, and eFPGA-related support and maintenance revenue. The Company recognizes eFPGA intellectual property revenue from licensing its eFPGA intellectual property to customers and recognizes eFPGA-related professional services revenue from the fees associated with the custom development and integration of the Company's technology solutions into hardware products. The Company recognizes eFPGA revenue from support and maintenance services for post-implementation customer support ratably over the service term. Renewals of support and maintenance contracts create new performance obligations for which the Company recognizes as revenue ratably over the service term. The majority of the Company's revenue is derived from sales of eFPGA IP licenses and professional services. eFPGA IP contractual arrangements often include promises to transfer intellectual property licenses, to customize hardware products, and to provide professional services and technical support services. The Company must determine whether the promised goods and services are distinct performance obligations that should be accounted for separately or are a single, combined performance obligation and should be accounted for together. In accordance with ASC 606, the Company must evaluate whether the customer can benefit from each good or service on its own or together with other resources that are readily available to the customer and whether the transfer of each good or service can be separately identifiable. The Company also must evaluate when control of the performance obligation is transferred to and accepted by the customer. The Company notes these determinations, in addition to identifying contractual terms and conditions within the contract including termination for convenience clauses, enforceable rights to payment for performance completed-to-date, and consideration of the alternative use of the asset require significant judgment. In these judgments, the Company considers the context of the contract, historical experience with similar contracts, and the interdependency of the promised goods and services. Additionally, judgment is required by management to allocation the transaction price to the separately identifiable performance obligations in the contract. The Company allocates the transaction price of the contract to each performance obligation based on its relative SSP. The Company rarely sells eFPGA intellectual property licenses on a standalone basis. Generally, the Company will provide eFPGA-related professional services and support and maintenance services to customers in conjunction with eFPGA IP licenses based on unique contractual arrangement terms and conditions. As such, the Company is required to estimate the SSP for each performance obligation. In instances where the SSP is not directly observable because the Company does not sell the promised goods or services separately, the Company typically determines the SSP using either the adjusted market assessment approach or the expected cost plus a margin approach, depending on the characteristics and context of the deliverable. The selected method is applied by the Company consistently for similar arrangements and deliverables. The factors used to select the most appropriate estimation method, as well as select the most appropriate SSP include, but are not limited to, the extent of internal costs required to provide the promised performance obligation, margins achieved on standalone sales of similar products, profit objectives, cost structure, location-specific factors, and competition. In other instances, the Company may have more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, the Company may use information such as its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, customer type, customer tier, type of the technology used, customer demographics, and geographic locations, among other factors. The Company also provides eFPGA-related professional services on a time-and-material basis. Generally, the Company satisfies eFPGA-related contractual performance obligations over time as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as it performs, the Company's performance creates or enhances an asset that the customer controls as it is created or enhanced, or the Company’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. When the Company satisfies performance obligations over time, it recognizes revenue by applying an over-time methodology that faithfully depicts the Company’s performance toward satisfaction of the performance obligation. The Company’s over-time methodologies include, but are not limited to the following: • Revenue recognition model measured using an input method such as units of labor, • Revenue recognition model measured using an output method reflecting a generally consistent effort to satisfy performance obligations throughout the contractual arrangement term, • Revenue recognition model measured using an output method such as the specific deliverables produced, • Revenue recognition model measured using an input method such as time and material for professional engineering services. For revenue derived from time and material inputs, the Company estimates a fully-burdened overhead rate for the labor and any materials required. 42 Table of Contents Due to the nature of the work performed under contractual arrangements, the selection and application of an over-time methodology is complex and involves significant judgment. In the case of the selection of an input method, the key factors reviewed by management to estimate costs to complete each contract include, but are not limited to, the estimated labor days-effort necessary to complete the project, budgeted hours, hourly cost to the Company, profit margins, and engineering hours at cut-off when projects extend beyond a reporting period. In the case of the selection of an output method, key factors reviewed by management include, but are not limited to, the specific deliverables specified in the contracts with customers and the duration of performance, inclusive of delays. The Company has methods and controls in place for tracking labor-days incurred in completing eFPGA IP contracts, as well as quantifying changes in estimates used within the chosen methodology. Management considers labor-days to be a critical estimate as any significant variation of labor and time required to complete a contractual arrangement could cause a revenue claw-back from prior periods and deferral of revenue to future periods. When the expected consideration from a revenue contract with a customer is less than the expected costs of fulfilling the contract, the Company is required to first impair any capitalized costs associated with the contract. The Company is also required to recognize a provision for contract losses as a liability on its balance sheet. This would result in an unfavorable impact to income from operations. SaaS & Other Revenue SaaS & Other Revenue is comprised primarily of software as a service ("SaaS") revenue and software-related professional services revenue. SaaS revenue is generated when the Company licenses its software to customers and allows customers to access the software over a short-term subscription basis. The Company grants the customer the right to access and use software at the outset of the arrangement and throughout the entire term of the arrangement. The Company recognizes SaaS revenue ratably over the license term. The Company recognizes revenue from software-related professional services as services are provided to the customer. Other miscellaneous revenue is comprised primarily of royalties from licensing the Company’s technology. The Company recognizes royalty revenue on the later of (i) the subsequent sale or usage, or (ii) satisfaction of a performance obligation to which some or all of the sales-based royalty has been allocated. Practical Expedients, Elections, and Exemptions • Taxes collected from customers and remitted to government authorities and that are related to the sales of the Company's products are excluded from revenues. • Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general, and administrative expense in the consolidated statements of operations. • The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for the services performed. Valuation of Inventories Hardware product inventories are stated at the lower of standard cost or net realizable value. Standard cost approximates actual cost on a first -in, first -out basis. The Company routinely evaluates quantities and values of its inventories in light of current market conditions and trends and records reserves for quantities in excess of demand and for product obsolescence. The evaluation may take into consideration historic usage, expected demand, anticipated sales price, the stage in the product life cycle of the Company's customers’ products, new product development schedules, the effect new products might have on the sale of existing products, product obsolescence, customer design activity, customer concentrations, and product merchantability, among other factors. Actual consumption of inventories could differ from forecasted demand and this difference could have a material impact on the Company's gross margin and inventory balances based on additional provisions for excess or obsolete inventories or a benefit from inventories previously written down. The Company also regularly reviews the cost of inventories against estimated market value and records a lower of cost or market reserve for inventories that have a cost in excess of estimated market value, which could have a material impact on its hardware product gross margin and hardware product inventory balances based on additional write-downs to net realizable value or a benefit from inventories previously written down. Estimates of market value for the Company's products require subjective criteria such as anticipated demand and market acceptance for unique products. Differences between these estimates and actual results could result in gross margin volatilities from period to period. The Company's hardware products have historically had an unusually long product life cycle and obsolescence has not been a significant factor in the valuation of inventories. However, as the Company continues to develop new products, the Company believes its new product life cycle may be shorter, which could increase the potential for obsolescence. A significant decrease in demand could result in an increase in excess inventory on hand. Although the Company makes every effort to ensure the accuracy of its forecasts of future product demand, any significant unanticipated changes in demand or frequent new product developments could have a significant impact on the value of its inventory and its results of operations. Goodwill Goodwill represents the excess fair value of consideration transferred over the fair value of net assets acquired in a business combination. The carrying value of goodwill is not amortized but is annually tested for impairment during the Company's fourth fiscal quarter, and more often if there is an indicator of impairment. The Company either performs a qualitative assessment under ASC 350, including the consideration of factors such as macroeconomic conditions, industry and market considerations, and overall financial performance, or a quantitative assessment under ASU No. 2017 - 14, which involves comparing the carrying value of the reporting unit to its fair value. Subsequent to the Company's annual impairment testing in the fourth quarter of 2023 and 2022, there were no indicators of impairment that gave cause for additional impairment testing of goodwill. No impairment of goodwill has been recognized to date. Long-Lived and Intangible Assets The Company’s long-lived assets include property and equipment, software, tooling, furniture and fixtures, leasehold improvements, and internal-use software. These assets are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of long-lived assets is calculated on a straight-line basis over the estimated useful lives of the assets, generally one to ten years, with the amortization period of internal-use software being generally five years and the amortization period of leasehold improvements being the shorter of the lease term or the estimated useful lives of the assets, which is generally three to five years. The Company notes the estimation of the useful lives of its long-lived assets involves judgment and estimation by management. In the determination of an asset’s useful life, the Company considers the following factors: obsolescence, competition, historical product life cycles, and industry and market considerations, among others. Refer to Note 5 for additional information on the useful life ranges of the Company’s long-lived assets. The Company recognizes assets for pre-production design and development costs for which there is a contractual reimbursement by the customer. These assets are classified under 'tooling' within property and equipment and are depreciated over the estimated useful lives of the assets, generally seven years. Refer to Note 4 for additional information. 43 Table of Contents The Company capitalizes costs related to the development and enhancement of hosted services it provides to its customers and the development and enhancement of other internally used engineering software as internal-use software. Costs incurred in the application development phase are capitalized and amortized on a straight-line basis over their useful lives, which are generally five to seven years. Costs related to planning and other preliminary project activities and post-implementation activities are expensed as incurred. The Company also capitalizes costs related to internally used enterprise-level business and finance software in support of the Company’s operational needs as software. The Company reviews the recoverability of its long-lived assets annually and when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. The Company assesses possible impairment based on its ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations, as well as the useful lives applied to the assets. If these cash flows are less than the carrying value of the asset or asset group, an impairment loss is recognized for the difference between the estimated fair value and the carrying value, and the carrying value of the related assets is reduced by this difference. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets. In estimating future cash flows and the fair value of its long-lived assets, the Company considers changes in legal factors and the business climate, product and technology obsolescence, and competition. The Company performed an annual impairment assessment in the fourth quarter of 2023 and 2022 and deemed no impairment was necessary for the current or prior year. Subsequent to the Company's annual impairment testing in the fourth quarter of 2023 and 2022, there were no indicators of impairment that gave cause for additional impairment testing of the Company’s long-lived assets. Additionally, the Company did not recognize any gains or losses on the disposal of equipment in the year ended December 31, 2023 and recognized gains on disposal of equipment of $ 27 thousand in the year ended January 1, 2023 . Acquired intangible assets with finite useful lives are amortized on a straight-line basis over the periods benefited. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company's ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of these assets. In estimating future cash flows and the fair value of its intangible assets, the Company considers changes in legal factors and the business climate, product and technology obsolescence, and competition. The Company performed an annual impairment assessment in the fourth quarter of 2023 and 2022 and deemed no impairment was necessary for the current or prior year. Subsequent to the Company's annual impairment testing in the fourth quarter of 2023 and 2022, there were no indicators of impairment that gave cause for additional impairment testing of the Company’s intangible assets. No impairment of intangible assets has been recognized to date. NOTE 2 — OTHER RELEVANT ACCOUNTING POLICIES Cash Equivalents and Restricted Cash The Company considers all short-term, highly liquid investments with an original or a remaining maturity at purchase of ninety days or less to be cash equivalents. The Company’s investment portfolio included in cash equivalents is generally comprised of investments that meet high credit quality standards. The Company’s investment portfolio consists of money market accounts and funds. Restricted cash represents amounts pledged as cash security related to the use of credit cards. Allowance for Doubtful Accounts The Company estimates the amount of uncollectible accounts receivable at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, and communications with its customers. Amounts are written off only after considerable collection efforts have been made and the amounts are determined to be uncollectible. The Company provides an allowance for doubtful accounts based on both historical experience and a specific identification basis. As of December 31, 2023 and January 1, 2023 , the allowance for doubtful accounts was $ 34 thousand and $ 18 thousand, respectively, in its consolidated balance sheets. Bad debt expense for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 was $ 24 thousand, $ 16 thousand, and $ 62 thousand, respectively. Contract Balances Due to the terms in contractual agreements with customers, the timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in accounts receivables, contract assets, or contract liabilities on the Company’s consolidated balance sheets. The Company records a contract asset when revenue is recognized prior to invoicing if the Company does not have the unconditional right to invoice the customer. The Company records a contract liability (deferred revenue) when revenue is recognized subsequent to invoicing and also when consideration is received in advance of satisfying performance obligations. Balances in contract assets are transferred to accounts receivable when the Company has an unconditional right to invoice the customer. Balances in contract liabilities (deferred revenue) are recognized as revenue once the performance obligations are satisfied, as control of goods and services are transferred to the customer, all revenue recognition criteria have been met, and any constraints have been resolved. Payment terms and conditions vary by term of contracts with the customer. The Company's contracts do not include a significant financing component. The Company's invoicing terms provide customers with simplified and predictable ways of purchasing the Company's goods and services and not to facilitate financing arrangements. The timing between invoicing and when payment is due is not significant. The Company defers costs until related revenue is recognized. The Company had contract asset s associated with eFPGA-related professional services revenue of approximately $ 3.6 million, $ 2.0 million, and $ 0.3 million and contract liabilities (reflected as deferred revenue) associated with eFPGA-related professional services revenue of $ 1.1 million, $ 0.3 million, and $ 0.5 million on the consolidated balance sheets at December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. Assets Recognized from Costs to Obtain a Contract with a Customer The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has concluded that none of the costs it has incurred to obtain and fulfill its ASC 606 contracts during the years ended December 31, 2023 and January 1, 2023 met the capitalization criteria and as such, there are no costs deferred nor recognized as assets on the consolidated balance sheets at December 31, 2023 , and January 1, 2023 . 44 Table of Contents Current Expected Credit Losses The current expected credit loss ("CECL") reserve required under ASU 2016 - 13 "Financial Instruments - Credit Losses - Measurement of Credit Losses on Financial Instruments (Topic 326 )" ("ASU 2016 - 13" ), reflects the Company's current estimate of potential credit losses related to its financing receivables. As of January 1, 2023, the Company's CECL reserve was $ 0 . Subsequent changes to the CECL reserve are recognized through a provision for or reversal of current expected credit loss reserve on the Company's consolidated statement of operations. ASU 2016 - 13 specifies the reserve should be based on relevant information about past events, including historical loss experience, market conditions, and reasonable and supportable macroeconomic forecasts for the duration of each financing receivable. For each financing receivable, the Company performs an annual quantitative assessment of the impact of CECL using a probability-of-default method. This includes estimating the probability that the loan will default before its maturity (probability of default) and the amount of the loss if the loan defaults (loss given default). These two factors result in an expected loss percentage that is applied to the balance of each financing receivable to determine the expected credit loss. The Company adjusts these factors for current conditions, including the financial condition of the borrower, the probability that it will grant the borrower a concession through modification of the loan terms, and reasonable and supportable forecasts of future losses as necessary. Financing Arrangements & Correction of an Immaterial Error The Company previously classified certain licensed tooling software as leased assets and liabilities under ROU assets and financing lease liabilities pursuant to lease accounting under ASC 842, Leases. Upon further analysis, the Company determined these amounts are intangible assets subject to amortization in accordance with ASC 350, Intangibles, Goodwill, and Other and financed through financing arrangements. As a result, the Company corrected immaterial errors to revise its financial statements as of January 1, 2023, to present $933 thousand as property and equipment, net instead of a right of use asset, and to present $887 thousand as notes payable instead of finance leases. $616 thousand was incorporated into the Company's accumulated amortization for property and equipment balance as of January 1, 2023. The statements of cash flows have been revised to present non-cash investing and financing activities of $ 650 thousand and $ 690 thousand for property and equipment purchased through financing arrangements during the fiscal years ended January 1, 2023 and January 2, 2022, respectively, previously presented as finance lease obligations. Cash payments on notes payable during the fiscal years ended January 1, 2023 and January 2, 2022 were $ 452 thousand and $ 378 thousand, respectively, instead of presented as payments of finance lease obligations. Refer to Note 7 for additional information. The Company has determined the correction of this error did not have a material impact on the Company's financial statements for any of the periods presented. Leases The Company accounts for leases under ASC 842 and related ASUs. Under ASC 842, all significant lease arrangements are generally recognized at the lease commencement date. Right-of-use ("ROU") assets and lease liabilities are recorded in the Company's consolidated balance sheet. The Company determines if an arrangement is a lease at inception. When an arrangement is a lease, the Company determines if it is an operating lease or a finance lease. Lease liabilities represent the present value of the Company's future lease payments over the expected lease term, which includes options to extend or terminate the lease when it is reasonably certain those options will be exercised. The present value of a lease liability is determined using the Company's incremental collateralized borrowing rate at lease inception. ROU assets represent the Company's right to control the use of the leased asset during the lease and are recognized in an amount equal to the lease liability for leases with an initial term greater than 12 months. An ROU asset may also include lease payments related to initial direct costs and prepayments and excludes lease incentives. The Company does not apply lease recognition requirements to lease arrangements having terms of twelve months or less. Instead, it recognizes payments in the consolidated statement of operations as rental costs on a straight-line basis over the lease term. The Company has lease agreements which contain lease and non-lease components; non-lease components are generally accounted for separately. The Company’s ROU assets were approximately $ 1 million and $ 0.5 million and lease liabilities were approximately $ 1.0 million and $ 0.5 million on the Company’s consolidated balance sheets at December 31, 2023 and January 1, 2023 , respectively. See Note 8 for additional information. Fair Value of Financial Instruments Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three -tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value: • Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. • Level 3 - Unobservable inputs that are supported by little or no market activities. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The determination of fair value involves the use of appropriate valuation methods and relevant inputs into valuation models. The carrying value of cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to their relatively short maturities. The Company's financial assets consisting of an investment in non-marketable equity without a readily determinable fair value are measured under a measurement election alternative to the requirement to carry equity interests at fair value. In the Fiscal Year ended January 2, 2022, the Company recognized revenue from a contractual arrangement with an unaffiliated customer on the sale of eFPGA IP. The eFPGA IP included an eFPGA intellectual property license, know-how, and eFPGA-related professional services. Consideration in the contractual arrangement was comprised of cash and non-cash consideration. Non-cash consideration consisted of shares of common stock in the customer. The customer was, and continues to be, a privately-held company and its common stock is not publicly traded. The Company applied significant judgement to estimate the fair value of the shares as a portion of the total contractual consideration. The Company recognized a $ 0.3 million non-marketable equity investment on its consolidated balance sheet and a corresponding amount in deferred revenue. This deferred revenue was recognized as revenue during the year ended January 1, 2023. 45 Table of Contents In determining the fair value of the investment at acquisition of the common stock, the Company applied the Black-Scholes Option Pricing model using a back-solve technique and applied significant judgment to quantify inputs used in the model, in accordance with the AICPA Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation ( 2013 ) . The Company has neither significant influence nor control over the investee. Post-acquisition, the Company accounts for the non-marketable equity investment under a practical expedient under ASC 321, in which equity investments without a readily determinable fair value are measured to fair value at “cost minus impairment.” Under the “cost minus impairment” method, when the non-marketable equity investment is determined to be impaired on the basis of a qualitative assessment, the carrying value of the non-marketable equity security is adjusted to fair value and is measured at cost, less any impairment. The Company reviews its non-marketable equity investment for impairment periodically. The carrying value of non-marketable equity securities is classified within Level 3 of the fair value hierarchy. Any losses, should they occur, from impairments of non-marketable equity investments are recorded in the statements of operations within interest income and other (expense) income, net. The non-marketable equity investment is classified as a non-current asset on the consolidated balance sheets. There was no impairment assessed as of December 31, 2023 and January 1, 2023. See Note 9 for additional information. Cost of Revenues The Company records costs of revenue associated with hardware product revenues, eFPGA IP revenue, and SaaS revenue. Hardware product costs include the cost of materials, contract manufacturing fees, shipping costs, and quality assurance. Hardware product costs also include indirect costs such as warranty, excess and obsolete inventory charges, general overhead costs, and depreciation and amortization of certain capitalized software. eFPGA IP and SaaS costs include costs related to services under contractual agreements over the term of their respective agreements. These costs are primarily comprised of employee salary and benefits and other employee-related costs to perform work on revenue-generating contracts with customers, software tool utilization costs, and contract engineering costs. Hardware Product Warranty Costs The Company warrants product hardware against defects in material and workmanship under normal use for twelve months from the date of shipment. The Company’s liability is limited to the cost of repair or replacement of the defective part. The Company does not consider activities related to such warranties to be a separate performance obligation under ASC 606. The terms and conditions of sale generally do not allow for refunds or product returns other than for warranty repairs. The Company does not have significant product warranty-related costs or liabilities for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 . Foreign Currency Transactions All of the Company’s revenue transactions and inputs to its cost of revenue are denominated in U.S. dollars. The Company conducts sales and marketing activities in various countries outside of the United States. The Company's foreign operations' monetary assets and liabilities are translated into U.S. dollars at current period-end exchange rates and non-monetary assets and related elements of expense are translated using historical exchange rates. The Company's foreign operations' income and expenses are transacted in local foreign currency and translated to U.S. dollars using the average exchange rates in effect during the period. Gains and losses from the foreign currency transactions of the Company's foreign operations are recorded as interest income and other (expense) income, net in the consolidated statements of operations. The impact from foreign currencies was not significant for each of the Fiscal Years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 . Operating expenses denominated in foreign currencies represented approximately 8 %, 12 %, and 14 % o f t otal operating expenses for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. The Company incurred a majority of such foreign currency expenses in India, the United Kingdom, China, Taiwan, and Japan in the Fiscal Years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 . The Company does not use derivative financial instruments to hedge its exposure to fluctuations in foreign currency and therefore, is susceptible to fluctuations in foreign exchange gains or losses in its results of operations in future reporting periods. Advertising Advertising and promotion expenses are charged to “selling, general, and administrative” expense in the consolidated statements of operations as incurred. Advertising and promotion expense s were $ 44 thousand, $ 40 thousand, and $ 47 thousand for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. Stock-Based Compensation The Company grants stock-based compensation under its stock plan (the "Plan") to eligible employees and non-employee directors and grants stock-based compensation under an employee stock purchase plan ("ESPP") for all eligible employees. The Company accounts for stock-based compensation under the provisions of the amended authoritative guidance and related interpretations, which require the measurement and recognition of expense related to the fair value of stock-based compensation awards. The fair value of stock-based compensation awards is measured at the grant date and re-measured upon modification, as appropriate. The Company uses the Black-Scholes option pricing model to estimate the fair value of employee stock options and rights to purchase shares. The fair value of restricted stock awards, restricted stock units, and performance-based restricted stock units is based on the closing price of the Company’s common stock on the date of grant. Using the Black-Scholes pricing model requires the Company to develop highly subjective assumptions, including the expected term of awards, expected volatility of its stock, expected risk-free interest rate, and expected dividend rate over the term of the award. The expected term of awards is based primarily on the Company's historical experience with similar grants. The expected stock price volatility for both stock options and ESPP shares is based on the historic volatility of the Company's stock, using the daily average of the opening and closing prices, and measured using historical data appropriate for the expected term. The risk-free interest rate assumption approximates the risk-free interest rate of a Treasury Constant Maturity bond with a maturity appropriate for the expected term of stock awards under the Plan or the maturity appropriate for the term of the purchase period for the ESPP Plan. The dividend yield assumption is based on the Company's intent not to issue a dividend under its dividend policy. This fair value is expensed over the requisite service period of the award. Stock-based compensation expense is measured at the grant date based on the fair value of the award less expected forfeitures, over the requisite service period, which is typically the vesting period. Expected forfeitures are an estimate based on the historical pre-vest cancellation experience and is applied to all share-based awards. Equity compensation awards that contain a service condition are expensed using the straight-line attribution method over the req uisite service period. Performance-based awards are expected to vest based on the achievement of a performance goal and are expensed over the estimated vesting period, which is estimated by management. The Company regularly reviews the assumptions used to compute the fair value of its stock-based awards and it revises its assumptions as appropriate. See Notes 11 and 12 for additional information. 46 Table of Contents Interest Income The Company's interest income is comprised of interest earned on its money market accounts and financing receivables. As of December 31, 2023, the Company had one note receivable related to the conversion of accounts receivable for a customer. Interest is accrued as earned and is reflected as an increase in the balance of the note receivable, as well as recognized as interest income on the Company's consolidated statement of operations. All accrued and unpaid interest will be due and payable to the Company on the maturity date of the note receivable. Refer to Note 9 for additional information. Accounting for Income Taxes As part of the process of preparing the Company's financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process involves estimating the Company's actual current tax exposure together with assessing temporary differences resulting from different tax and accounting treatment of items, such as deferred revenue, allowance for doubtful accounts, the impact of equity awards, depreciation and amortization, and employee-related accruals. These differences result in deferred tax assets and liabilities, which are included on the Company's balance sheets. The Company must then assess the likelihood that its deferred tax assets will be recovered from future taxable income. To the extent the Company believes that recovery is not likely, it must establish a valuation allowance. To the extent the Company establishes a valuation allowance or increases this allowance in a period, it must include an expense within the tax provision in the statements of operations. The Company accounts for uncertainty in income taxes using a two -step approach for recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that it anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for (benefit from) income taxes. Accrued interest and penalties are included within the accrued liabilities in the consolidated balance sheets. Comprehensive Income (Loss) The net income (loss) in the consolidated statements of operations for each of the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 is the same as the consolidated comprehensive income (loss). Concentrations of Credit and Suppliers Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. Cash and cash equivalents are maintained with high-quality institutions. The Company’s accounts receivables are denominated in U.S. dollars and are derived primarily from sales to customers located in North America, Europe and Asia Pacific. The Company performs ongoing credit evaluations of its customers and generally does not require c ollateral. See Note 14 for information regarding concentrations assoc iated with accounts receivable. The Company depends on a limited number of contract manufacturers, subcontractors, and suppliers for wafer fabrication, assembly, programming and testing of its hardware products and for the supply of programming equipment. These services are typically provided by one supplier for each of the Company’s hardware products. The Company generally purchases these single or limited source services through standard purchase orders. Since the Company relies on independent subcontractors to perform these services, it cannot directly control its product delivery schedules, costs, or quality levels. The Company’s future success also depends on the financial viability of its independent subcontractors. Business Combinations When the Company acquires a business, it allocates the purchase price to the acquired tangible assets and assumed liabilities, including deferred revenue, liabilities associated with the fair value of contingent consideration, and acquired identifiable intangible assets with finite lives. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires the Company to make significant estimates in determining the fair values of these acquired assets and assumed liabilities, intangible assets with finite useful lives, and goodwill. These estimates are based on information obtained from management of the acquired companies, the Company's assessment of this information, and historical experience. These estimates can include, but are not limited to, the cash flows that an acquired business is expected to generate in the future, the cash flows that specific assets acquired with that business are expected to generate in the future, the appropriate weighted average cost of capital, and the cost savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable, and if different estimates were used, the purchase price for the acquisition could be allocated to the acquired assets and assumed liabilities differently from the allocation that the Company has made to the acquired assets and assumed liabilities. In addition, unanticipated events and circumstances may occur that may affect the accuracy or validity of such estimates, and if such events occur, the Company may be required to adjust the value allocated to acquired assets or assumed liabilities and may impact the useful life assigned to intangible assets with finite useful lives, which would impact amortization expense of intangible assets with finite useful lives and results of operations. 47 Table of Contents The Company recognizes assets acquired (including goodwill and identifiable intangible assets with finite useful lives) and liabilities assumed at fair value on the acquisition date. Subsequent changes to the fair value of such assets acquired and liabilities assumed are recognized in earnings, after the expiration of the measurement period, a period not to exceed 12 months from the acquisition date. Acquisition-related expenses and acquisition-related restructuring costs are recognized in earnings in the period in which they are incurred. New Accounting Pronouncements Pending Adoption In December 2023, the FASB issued ASU No. 2023 - 09, Income Taxes (Topic 740 ) Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures by providing information to better assess how an entity's operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. For public entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements or disclosures. In November 2023, the FASB issued ASU No. 2023 - 07, Segment Reporting (Topic 280 ) Improvements to Disclosures About Reportable Segments to enhance disclosures about significant segment expenses, among other interim disclosure requirements. For public entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements or disclosures. 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 a material impact on the Company's consolidated financial statements or disclosures. 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 ): 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. The amendments in this Update are 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. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than Fiscal Years beginning after December 15, 2020, including interim periods within those Fiscal Years. The adoption of ASU No. 2020 - 06 is not expected to have an impact on the Company's consolidated financial statements or related disclosures. NOTE 3 — NET INCOME (LOSS) PER SHARE Basic net income (loss) per share was computed by dividing net income (loss) available by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share was computed using the weighted average number of common shares outstanding during the period plus potentially dilutive common shares outstanding during the period under the treasury stock method. In computing diluted net income (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 periods in which the Company has reported a net loss, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders as dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. For periods in which the Company has reported a net income, diluted net income per share attributable to common stockholders is different from basic net income per share attributable to common stockholders as dilutive common shares would increase the amount of shares outstanding reduced by the amounts of treasury shares repurchased from the proceeds at the average market price for the period. Approximately 0.7 million, 0.8 million, and 0.7 million shares associated with equity awards outstanding and the estimated number of shares to be purchased under the current offering period of the ESPP Plan were not included in the calculation of diluted net loss per share, as they were considered antidilutive due to the net loss the Company experienced in the years ended December 31, 2023 , January 1, 2023 and January 2, 2022 , respectively. Warrants to purchase up to 0.4 million shares were issued in connection with the May 29, 2018 stock offering were also not included in the diluted loss per share calculation as they were also considered anti-dilutive due to the net loss the Company experienced in the years ended January 1, 2023 and January 2, 2022 . These warrants expired unexercised on May 29, 2023 . 48 Table of Contents NOTE 4 — BALANCE SHEET COMPONENTS December 31, January 1, 2023 2023 (in thousands) Inventories: Work-in-process $ 1,602 $ 1,826 Finished goods 427 667 $ 2,029 $ 2,493 Prepaid expenses and other current assets: Prepaid taxes $ 498 $ 510 Deferred charges 290 295 Other prepaid taxes, royalties, and other prepaid expenses 629 500 Other 144 265 $ 1,561 $ 1,570 Property and equipment: Equipment $ 10,503 $ 10,133 Tooling 9,248 1,549 Software 1,803 1,803 Furniture and fixtures 65 65 Leasehold improvements 580 466 22,199 14,016 Accumulated depreciation and amortization ( 13,251 ) ( 12,618 ) $ 8,948 $ 1,398 Capitalized internal-use software: Capitalized software held for internal use $ 3,491 $ 2,370 Accumulated amortization ( 1,422 ) ( 856 ) $ 2,069 $ 1,514 Accrued liabilities: Accrued compensation $ 1,910 $ 865 Accrued employee benefits 57 40 Accrued payroll tax 197 57 Other 509 547 $ 2,673 $ 1,509 The Company capitalized $ 7.09 million in pre-production design and development costs as tooling to be utilized under its long-term professional services contracts for the fiscal year ended December 31, 2023 . The capitalized assets recognized in the period are owned by the Company. No pre-production design and development costs were capitalized in the fiscal year ended January 1, 2023. The Company recorded depreciation and amortization expense of $ 1.8 million, $ 1.1 million, and $ 1 million for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively . No interest was capitalized for any period presented. D epreciation and amortization expense included approximately $ 0.6 million, $ 0.4 million, and $ 0.3 million in amortization expense of capitalized internal-use software for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. Accounts receivable, net of allowances for doubtful accounts of $ 0.1 million, was $ 1.0 million as of January 2, 2022 . NOTE 5 - — PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation begins at the time the asset is placed in service. Maintenance and repairs are charged to operations as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives of the assets: Useful Lives Equipment 1 - 10 years Tooling 7 years Software 1 - 7 years Furniture and fixtures 5 - 7 years Leasehold improvements 3 - 5 years The amortization period of leasehold improvements made at the inception of the lease is directly related to the initial lease term, while the amortization period for subsequent leasehold improvements is directly related to the initial lease term adjusted for extensions. 49 Table of Contents NOTE 6 - — INTANGIBLE ASSETS The following table provides the details of the carrying value of intangible assets recorded from the 2019 acquisition of SensiML at December 31, 2023 (in thousands): December 31, 2023 Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology 5 $ 959 $ ( 480 ) $ 479 Customer relationships — 81 ( 81 ) — Trade names and trademarks 5 116 ( 58 ) 58 Total acquired identifiable intangible assets $ 1,156 $ ( 619 ) $ 537 The following table provides the details of the carrying value of intangible assets recorded from the 2019 acquisition of SensiML at January 1, 2023 (in thousands): January 1, 2023 Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology 6 $ 959 $ ( 383 ) $ 576 Customer relationships — 81 ( 81 ) — Trade names and trademarks 6 116 ( 47 ) 69 Total acquired identifiable intangible assets $ 1,156 $ ( 511 ) $ 645 The following table provides the details of future annual amortization of intangible assets, based upon the current useful lives at December 31, 2023 (in thousands): Amount Annual Fiscal Years 2024 $ 107 2025 107 2026 107 2027 107 2028 109 Total $ 537 NOTE 7 — DEBT OBLIGATIONS Revolving Line of Credit On December 21, 2018 , the Company entered into a loan agreement, the QuickLogic Corporation Heritage Bank of Commerce Amended and Restated Loan and Security Agreement (as amended, the "Loan Agreement") with Heritage Bank which among other things, provided a revolving line of credit facility ("Revolving Facility") allowing the Company to draw advances up to $ 15.0 million. The Revolving Facility, as amended, includes a number of customary and restrictive financial covenants including maintaining certain minimum cash levels with the lender. On December 8, 2023, the Company entered into the Seventh Amendment to the Loan Agreement, which increased the line of credit to $ 20.0 million, extended the maturity date from December 31, 2024 to December 31, 2025 , and increased the annual facility fee to $ 60 thousand from $ 45 thousand, payable each December 31st. Advances under the Revolving Facility bear a variable annual interest rate equal to one half of one percentage point ( 0.50 %) above the prime rate. On December 31, 2023 , the Company had a $ 20.0 million outstanding balance on the Revolving Facility with an interest rate of 9.00 %. On January 1, 2023 , the Company had a $ 15.0 million outstanding balance on the Revolving Facility with an interest rate of 8.00 %. The Company was in compliance with all loan covenants under the Loan Agreement, as of the end of the current reporting period. 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 Loan Agreement. Paycheck 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 Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") as implemented by the U.S. Small Business Administration and enacted on March 27, 2020. The PPP Loan was evidenced by a promissory note (“Note”) dated May 6, 2020, maturing two years from the disbursement date. The Note bore interest at a rate 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. Principal and interest were allowed to be prepaid by the Company at any time prior to maturity with no prepayment penalties. The Note contained 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 Company applied for loan forgiveness in the fourth quarter of fiscal 2020, in accordance with the terms under the CARES Act. On January 26, 2021, the Company received a notice from Heritage Bank that amounts under the PPP Loan had been forgiven. The Company recorded the loan forgiveness under gain on forgiveness of PPP Loan on its consolidated statement of operations in the year ended January 2, 2022. 50 Table of Contents Financing Arrangements The Company previously classified certain licensed tooling software as leased assets and liabilities under ROU assets and financing lease liabilities. Upon further analysis, the Company determined it is more appropriate to classify these amounts as financing arrangements. The amount of fixed assets, net purchased through financing arrangements on the balance sheet were $ 1.4 million and $ 0.9 million as of December 31, 2023 and January 1, 2023, respectively. The corresponding note payable amount for these financing arrangements was $ 1.4 million and $ 0.9 million as of December 31, 2023 and January 1, 2023, respectively. Payments related to financing arrangements were $ 0.7 million, $ 0.5 million, and $ 0.4 million for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. The Company's outstanding financing arrangements as of December 31, 2023 have remaining terms of 0.91 years to 2.25 years, with a weighted average remaining term of 1.81 years. Stated interest rates for its financing arrangements outstanding as of December 31, 2023 range from 3.75 % to 9.89 %, with a weighted average interest rate of 8.34 %. The Company's outstanding financing arrangements as of January 1, 2023 had remaining terms of 1.67 years to 2.01 years, with a weighted average remaining term of 1.91 years. Stated interest rates for its financing arrangements outstanding as of January 1, 2023 ranged from 3.75 % to 6.75 %, with a weighted average interest rate of 5.95 %. Amounts due to be paid in Fiscal Years 2024 and 2025 are $ 1.0 million and $ 0.5 million, respectively, less amounts representing interest of $ 0.1 million results in the total notes payable amount of $ 1.4 million. NOTE 8 — LEASES 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. Operating leases generally have lease terms of 1 to 5 years. The Company's corporate facility is located at 2220 Lundy Avenue, San Jose, California, 95131, where the Company occupies approximately 24,164 square feet of space. The original five -year lease was entered into in February 2019 and on October 24, 2023, was extended to April 14, 2027 under similar terms. The Company's SensiML subsidiary in Beaverton, Oregon occupies approximately 925 square feet of space. The original four -year lease was entered into in April 2019 and on April 1, 2023, was extended to March 31, 2025 under similar terms. The Company maintains sales offices out of which it conducts sales and marketing activities in various countries outside of the United States. The sales offices are rented under short-term leases. Total rent expense was approximately $ 0.4 million for each of the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. The following table provides the activity related to operating leases (in thousands): December 31, 2023 January 1, 2023 Operating lease costs: Fixed $ 394 $ 409 Short term 18 11 Total $ 412 $ 420 Right-of-use assets obtained in exchange for obligations lease: Operating leases $ 865 $ — Total $ 865 $ — The following table provides the details of supplemental cash flow information (in thousands): December 31, 2023 January 1, 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases $ 421 $ 409 Total $ 421 $ 409 Non-cash ROU assets related to operating leases included in the operating cash flows for the fiscal year ended December 31, 2023 and January 1, 2023 were $ 348 thousand and $ 345 thousand, respectively. The following table provides the details of ROU assets and lease liabilities (in thousands): December 31, 2023 January 1, 2023 Right-of-use assets: Operating leases $ 981 $ 464 Total $ 981 $ 464 Lease liabilities: Operating leases $ 983 $ 507 Total $ 983 $ 507 The following table provides the details of future lease payments for operating leases as of December 31, 2023 and (in thousands): Annual Fiscal Years Operating 2024 $ 378 2025 340 2026 351 2027 64 Total lease payments 1,133 Less: Interest 150 Present value of lease liabilities $ 983 51 Table of Contents The following table provides the details of lease terms and discount rates: December 31, 2023 ROU assets: Weighted-average remaining lease term (years) Operating leases 3.25 Weighted-average discount rates: Operating leases 6.00 % NOTE 9 — FAIR VALUE MEASUREMENTS The Company's cash, cash equivalents and restricted cash balances were $ 24.6 million and $ 19.2 million, including amounts in money market funds, as of December 31, 2023 and January 1, 2023 , respectively. The money market funds are collateral for the company's credit card debt and had a balance of $ 0.1 million at December 31, 2023 and January 1, 2023 . Interest in these funds is earned at a 0.01 % annual percentage rate ( "APR"). Due to the short-term nature of the money market funds, the Company believes that carrying value approximates fair value. 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"). At the time, the Note bore an interest rate of 3.0 % compounded monthly. On June 28, 2023 , the Company cancelled the original note and entered into a revised promissory note with the customer, where the interest rate changed to 4.69 % compounded monthly, or a 4.8 % effective annual interest rate, accruing from the date of the prior note. If not prepaid prior to the Note maturity date of June 28, 2024 , the principal and all accrued and unpaid interest will be due and payable to the Company. If an event of default occurs, the interest rate will increase to 10.0 %. All other terms of the note remained the same. The Company evaluated the note receivable under the current expected credit loss ("CECL") model, which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The CECL model does not specify a threshold for the recognition of an impairment allowance. The Company utilized the probability-of-default method to determine the current expected credit loss for the note receivable. Using this method, the Company measured the current expected credit loss associated with the note receivable to be de minimis as of December 31, 2023. In the third quarter of 2021, in connection with a revenue contract with the same non-affiliated customer, the Company received shares of the customer's common stock. The full transaction price under the revenue contract was cash plus a non-cash consideration, which consisted of a certain amount of the customer's equity. The Company considered the non-cash consideration to be an investment in the customer. The full transaction price was the amount of consideration which the Company received under the contract in exchange for transferring the promised goods and services to the customer. Since the non-cash consideration was shares of common stock that were not publicly traded, the fair value was not readily determinable. The Company considered various valuation methods such as market multiples, guideline public company method, and the Black-Scholes Option Pricing model. Due to limited data for the valuation, the Company ultimately selected the Black-Scholes method using back-solve techniques as that was determined to be the most suitable with the available data. The Black-Scholes Option Pricing model is a valuation approach that can be used to determine the value of common shares for companies in which there are no, or infrequent, transactions involving common shares. The Company believed that its valuation method for the non-public equity under this arrangement fell under Level 3 in the fair value hierarchy because the value method relied on unobservable market inputs. The initial fair value of the non-cash consideration is listed below: Fair Value at Valuation Date Using: Total Quoted Prices in Active Markets for Identical Assets (Level I) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Non-marketable equity investment $ 300 $ — $ — $ 300 In arriving at the estimated value for the non-cash consideration, the Company utilized inputs relying on significant judgment in accordance with the AICPA Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation ( 2013 ). The key assumptions below were utilized:   • Discount for lack of marketability: 34 % - 41 %. • Expected Term: 4 - 5 Years. • Risk Free Interest Rate: 0.75 % - 0.92 %. • Dividend: 0.00 . • Volatility: 63 % - 78 %. Volatility was estimated by utilizing a selected peer group of companies within the customer's industry with a valuation date as of October 2021. After initial recognition fair value of the non-cash consideration, the Company elected to utilize the practical expedient under ASC 321 by which entities can elect to measure equity securities without readily determinable fair values at “cost minus impairment,” basis for periods subsequent to the acquisition date. Under the “cost minus impairment” methods, when the investment is determined to be impaired on the basis of a qualitative assessment or there is an observable price change in an orderly transaction, entities that have made the election in ASC 321 must remeasure such equity securities at fair value in accordance with ASC 820. ASC 321 indicates that the adjustments to the carrying value of an equity security without a readily determinable fair value should reflect the fair value of the security as of the date that the observable transaction for the similar security took place. Subsequent to the valuation date and through January 1, 2023 , there were no observable indicators of impairment for the non-marketable equity investment. During Fiscal 2023 , there were no observable indicators of impairment for the non-marketable equity investment. There was no change to the carrying value of the non-marketable equity investment of $ 0.3 million as of December 31, 2023 and January 1, 2023 . 52 Table of Contents NOTE 10 — INCOME TAXES The components of loss before provision of income taxes and the components for the provision for income taxes are as follows (in thousands): Fiscal Years 2023 2022 2021 Income (loss) before income taxes: U.S. $ ( 225 ) $ ( 4,116 ) $ ( 6,461 ) Foreign ( 36 ) ( 53 ) ( 36 ) Income (loss) before income taxes $ ( 261 ) $ ( 4,169 ) $ ( 6,497 ) Provision for income taxes: Current: State $ 9 $ 3 $ 3 Foreign ( 6 ) 36 22 Subtotal 3 39 25 Deferred: Foreign ( 1 ) 59 94 Subtotal ( 1 ) 59 94 Provision for income taxes $ 2 $ 98 $ 119 The difference between income taxes computed at the statutory federal income tax rate and the provision for income taxes is attributable to the following (in thousands): Fiscal Years 2023 2022 2021 Income tax benefit at statutory rate $ ( 55 ) $ ( 876 ) $ ( 1,364 ) State taxes 9 3 3 Foreign taxes — 106 124 Stock compensation and other permanent differences ( 740 ) 21 ( 155 ) PPP loan forgiveness — — ( 250 ) R&D tax credits ( 480 ) ( 318 ) ( 230 ) Expired tax attributes 1,290 3,563 3,303 Future benefit of deferred tax assets not recognized ( 22 ) ( 2,401 ) ( 1,312 ) Provision for income taxes $ 2 $ 98 $ 119 Based on the available objective evidence, management believes it is more likely than not that the U.S. net deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its U.S. federal and state deferred tax assets at December 31, 2023 . Any future release of the valuation allowance may be recorded as a tax benefit increasing net income. The Company believes it is more likely than not it will be able to realize its foreign deferred tax assets. Significant components of the Company's deferred tax balances are as follows (in thousands): December 31, 2023 January 1, 2023 Deferred tax assets: Net operating losses $ 42,220 $ 43,110 Accruals and reserves 1,569 1,284 Credits carryforward 6,730 6,004 Depreciation and amortization 5,841 6,488 Stock-based compensation 447 1 Operating lease liability 216 327 Gross deferred tax assets 57,023 57,214 Deferred tax liabilities: Right-of-use asset ( 215 ) ( 328 ) Withholding tax on future distribution ( 125 ) ( 125 ) Gross deferred tax liabilities ( 340 ) ( 453 ) Net deferred tax assets 56,683 56,761 Valuation allowance ( 56,783 ) ( 56,862 ) Total deferred tax liability $ ( 100 ) $ ( 101 ) 53 Table of Contents Beginning January 1, 2022, the Tax Cuts and Jobs Act (the "Tax Act”) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to Internal Revenue Code (“IRC”) Section 174. The capitalized expenses are amortized over a 5 -year period for domestic expenses and a 15 -year period for foreign expenses. As a result of this provision of the Tax Act, the Company capitalized $ 8.5 million of research expenses in fiscal year 2023 . As of December 31, 2023 , the Company had federal and state income tax net operating loss ("NOL") carryforwards of approximately $ 169.5 million and $ 94.2 million, respectively. Approximately $ 106.3 million in federal NOLs generated before January 1, 2018 expire beginning in 2024 through 2037. Federal NOLs of $ 63.2 million generated in years after January l, 2018 can be carried forward indefinitely. State NOLs will expire beginning in fiscal year 2028 through 2043. The Company had research credit carryforwards of approximately $ 4.6 million for federal and $ 5.5 million for state income tax purposes as of December 31, 2023 . If not utilized, the federal carryforwards will expire beginning in 2026 through 2043 . The California research credit carryforward can be carried forward indefinitely. Due to the Company's history of losses, it believes that it is more likely than not that the deferred tax assets and benefits from these federal and state NOL and credit carryforwards will not be realized as of December 31, 2023 . Accordingly, the Company established a valuation allowance of $ 56.8 million, tax-effected, as of the Fiscal Year ended December 31, 2023 due to uncertainties related to its ability to utilize its U.S. deferred tax assets before they expire. Events which may restrict utilization of a company’s net operating loss and credit carryforwards include, but are not limited to, certain ownership change limitations as defined in Internal Revenue Code Section 382 (a) ("Section 382" ) and similar state provisions. In the event the Company has had a change of ownership, utilization of carryforwards could be restricted to an annual limitation. The annual limitation may result in the expiration of net operating loss carryforwards and credit carryforwards before utilization. The Company performed a Section 382 Study related to ownership changes in fiscal year 2023, covering the period starting January 1, 2005 through December 31, 2023. Per the Section 382 Study, there were no Section 382 ownership changes during this period. As a result, the future utilization of the Company's NOL and R&D credit carryovers generated since 2005 are not subject to any limitations, assuming the Company does not experience an ownership change in the future. Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for on the undistributed earnings of certain foreign subsidiaries as of the end of fiscal 2023 . The Company intends to reinvest these earnings indefinitely in the Company’s foreign subsidiaries. The Company believes that future domestic cash generation will be sufficient to meet future domestic cash needs. In previous years, the Company recorded a deferred tax liability of approximately $ 0.1 million on the undistributed earnings of non-U.S. subsidiaries. During fiscal 2023 , there were no changes to this balance, and at December 31, 2023 , the balance for this deferred tax liability was approximately $ 0.1 million. The foreign withholding taxes are not expected to have a material impact on the Company’s financial position and results of operation. Uncertain Tax Positions Changes in gross unrecognized benefits are as follows (in thousands): Fiscal Years 2023 2022 2021 Beginning balance of unrecognized tax benefits $ 2,249 $ 2,118 $ 2,175 Additions (subtractions) for tax positions related to the prior year 2 — ( 7 ) Additions for tax positions related to the current year 262 185 128 Lapse of statutes of limitations — ( 54 ) ( 178 ) Ending balance of unrecognized tax benefits $ 2,513 $ 2,249 $ 2,118 Out of $ 2.5 million of unrecognized tax benefits, there are no unrecognized tax benefits that would result in a change in the Company's effective tax rate if recognized in future years. The accrued interest and penalties related to uncertain tax positions was not significant as of December 31, 2023 , January 1, 2023 , and January 2, 2022 . The Company is not currently under tax examination in the U.S. and the Company’s historical net operating loss and credit carryforwards may be adjusted by the Internal Revenue Service and other tax authorities until the statute closes on the year in which such tax attributes are utilized. The Company estimates that its unrecognized tax benefits will not change significantly within the next twelve months. 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. The U.S. tax years from 2004 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits. NOTE 11 — STOCKHOLDERS’ EQUITY Common and Preferred Stock As of December 31, 2023 , the Company is authorized to issue 200 million shares of common stock and has 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 21, 2023 , the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450 thousand shares of its common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S- 3, resulting in net cash proceeds of approximately $ 2.3 million. Issuance costs related to the offering were immaterial. The purchase price for each share of common stock in the Share Placement was $ 5.14 . 54 Table of Contents 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 thousand and 310 thousand shares of common stock, respectively, in registered direct offering direct offerings pursuant to an effective shelf registration statement on Form S- 3, resulting in net cash proceeds of approximately $ 3.2 million and $ 1.5 million, respectively. Issuance costs related to the September 14, 2022 and the February 9, 2022 offerings were immaterial. The purchase price for each share of common stock in the September 14, 2022 and February 9, 2022 placements were $ 6.57 and $ 4.78 , respectively. On August 17, 2022, the Company filed a new Registration Statement on Form S- 3 with the SEC to replace a previously expired Registration on Form S- 3, under which the Company 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. On September 22, 2021 , the Company entered into a share subscription agreement for the sale of 125 thousand shares of its common stock. On September 30, 2021 , the Company entered into a common stock purchase agreement for the sale of 74 thousand shares of its common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S- 3. The net proceeds to the Company in aggregate, after deducting equity issuance costs of approximately $ 45 thousand was approximately $ 1.0 million. The purchase price for each share of common stock in the Share Placements was $ 5.43 . At January 2, 2023 , warrants exercisable for 386 thousand shares of common stock at an exercise price of $ 19.32 per share remained outstanding. These warrants were issued on May 29, 2018 and were exercisable any time for a period of 60 months. The warrants expired unexercised on May 29, 2023 . NOTE 12 — EMPLOYEE STOCK PLANS 2009 Stock Plan On April 24, 2019, the QuickLogic Corporation 2009 Stock Plan ( "2009 Stock Plan") was replaced by the 2019 Stock Plan and the remaining balance of available shares under the 2009 Stock Plan were cancelled. 2019 Stock Plan On April 24, 2019, the Company’s Board of Directors and shareholders approved the QuickLogic Corporation 2019 Stock Plan ( "2019 Stock Plan"). The 2019 Stock Plan was extended ten years through March 15, 2028. Under the 2019 Stock Plan, 357 thousand shares of common stock were available for grants, plus any shares subject to any outstanding options or other awards granted under the 2009 Stock 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 Company's Board of Directors approved and on May 10, 2022, stockholders subsequently ratified an increase in the total number of shares available for future awards under the 2019 Stock Plan. The increase in the total number of shares available for future awards consisted of the sum of ( 1 ) 900 thousand, ( 2 ) 522 thousand shares which were available for future awards under the plan immediately before such approval, and ( 3 ) any shares subject to outstanding awards under the 2019 Stock Plan or the 2009 Stock 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 Securities and Exchange Commission to register an additional nine hundred thousand shares of its common stock that may be issued under the Company’s 2019 Stock Plan. As of December 31, 2023 , approximate ly 595 thousand shares of t he Company’s common stock were reserved for issuance under the 2019 Stock Plan. Options typically vest at a rate of 25 % one year after the vesting commencement date, and one forty - eighth for each month of service thereafter. RSUs typically vest at a rate of 25 % one year after the vesting commencement date, and one eighth every six months thereafter. The Company may implement different vesting schedules in the future with respect to any new equity awards. 2009 ESPP Stock Plan The QuickLogic Corporation 2009 Employee Stock Purchase Plan ( "2009 ESPP Stock Plan"), as amended on March 6, 2019, was adopted in March 2009. The 2009 ESPP Stock Plan extends ten years until March 5, 2029 and provides for six -month offering periods. Participants purchase shares through payroll deductions of up t o 20 % of an employee’s total compensation (maximum of 1,429 shares per offering period). The 2009 ESPP Stock Plan permits the Board of Directors to determine, prior to each offering period, whether participants purchase shares at: (i) 85% of the fair market value of the common stock at the end of the offering period; or (ii) 85% of the lower of the fair market value of the common stock at the beginning or the end of an offering period. The Board of Directors has determined that, until further notice, future offering periods will be made at 85 % of the lower of the fair market value of the common stock at the beginning or the end of an offering period. As of December 31, 2023 , approximate ly 161 thousand shares of t he Company’s common stock were reserved for issuance under the 2009 ESPP Stock Plan. 55 Table of Contents NOTE 13 — STOCK-BASED COMPENSATION The Company provides stock-based incentive compensation awards to eligible employees and non-employee directors. Awards that may be granted under the program include non-qualified and incentive stock options, restricted stock awards, restricted stock units ("RSU"), and performance-based restricted stock units ("PRSU") and are based on the closing price of the Company’s common stock on the date of grant. To date, awards granted under the program consist of stock options, RSUs and PRSUs. The majority of stock-based awards granted under the program vest over four years. Stock options granted under the program have a maximum contractual term of ten years. Stock-based compensation expense recognized in the Company’s consolidated statements of operations for the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively is as follows (in thousands): Fiscal Years Stock-based compensation expense included in: 2023 2022 2021 Cost of revenue $ 328 $ 272 $ 282 Research and development 595 652 843 Selling, general and administrative 1,599 1,111 1,401 Total costs and expenses $ 2,522 $ 2,035 $ 2,526 Fiscal Years Stock-based compensation expense by type of award: 2023 2022 2021 ESPP $ 127.00 $ 70.00 $ 110.00 RSU and PRSU 2,395 1,965 2,416 Total costs and expenses $ 2,522 $ 2,035 $ 2,526 The Company capitalized stock-based compensation amounts to capitalized internal-use software and tooling, net of $ 248 thousand for the year ended December 31, 2023 . No stock-based compensation was capitalized or included in inventories for the years ended January 1, 2023 and January 2, 2022 . Stock-Based Compensation Award Activity A roll forward of shares available for grant under the 2019 Plan (in thousands) is as follows: Shares Available for Grant Balance at January 2, 2022 594 Authorized 900 RSUs granted ( 584 ) Options forfeited or expired 18 RSUs forfeited 32 Balance at January 1, 2023 960 Options forfeited or expired 15 RSUs granted ( 400 ) RSUs forfeited 20 Balance at December 31, 2023 595 No stock options were granted during any of the periods presented. Stock Options A roll forward of stock options under the 2019 Plan is as follows: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Term Aggregate Intrinsic Value (in thousands) (in years) (in thousands) Balance outstanding at December 29, 2019 186 $ 32.09 Forfeited or expired ( 65 ) 38.83 Balance outstanding at January 3, 2021 121 28.46 Forfeited or expired ( 28 ) 31.68 Balance outstanding at January 2, 2022 93 27.49 Forfeited or expired ( 18 ) 39.72 Balance outstanding at January 1, 2023 75 24.50 Forfeited or expired ( 15 ) 45.22 Outstanding, exercisable, and vested at December 31, 2023 60 $ 19.45 2.27 $ 86 The intrinsic value for the stock options, based on the Company’s closing stock pri ce of $ 13.86 per share at December 29, 2023 , the last trading day of the Company’s current reporting period, was $ 0 which would have b een received by the option holders had all option holders exercised their options as of that date. 56 Table of Contents No options were exercised or granted during the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 . As of December 31, 2023 , there were no unvested stock options. Restricted Stock Units The Company grants RSUs to employees with various vesting terms. RSUs entitle the holder to receive, at no cost, one common share for each restricted stock unit on the date vested. The Company withholds shares in settlement of employee tax withholding obligations on the vesting of restricted stock units. As of December 31, 2023 , there was approximately $ 3.1 million in unrecognized stock-based compensation expense related to RSUs, inclusive of unrecognized stock-based compensation related to PRSUs of $ 43 thousand. The remaining unrecognized stock-based compensation expense as of December 31, 2023 is expected to be recorded over a weighted average period of 1.37 years. A roll forward summarizing RSU activity and related weighted average grant date fair values is as follows: RSUs Outstanding Number of Shares Weighted Average Grant Date Fair Value (in thousands) Nonvested at January 3, 2021 800 $ 4.99 Granted 619 5.81 Vested ( 586 ) 4.99 Forfeited ( 265 ) 5.00 Nonvested at January 2, 2022 568 5.86 Granted 584 6.11 Vested ( 490 ) 5.56 Forfeited ( 32 ) 5.35 Nonvested at January 1, 2023 630 6.05 Granted 400 8.12 Vested ( 421 ) 6.15 Forfeited ( 20 ) 6.92 Nonvested at December 31, 2023 589 $ 7.35 2009 ESPP Stock Plan The Company issued 45 thousand shares of common stock at an average price of $ 4.48 per share, 52 thousand shares of common stock at an average price of $ 4.82 per share, and 84 thousand shares of common stock at an average price of $ 3.14 per share to employees in the years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively . The weighted average grant date fair value and the weight-average assumptions used to estimate the fair value of ESPP option rights granted is as follows: Fiscal Years 2023 2022 2021 Expected life (months) 6.0 6.0 6.0 Risk-free interest rate 5.30 % 3.04 % 0.05 % Volatility 50 % 57 % 74 % Dividend yield — — — Weighted average fair value of ESPP options granted $ 2.14 $ 2.04 $ 2.18 NOTE 14 — INFORMATION CONCERNING PRODUCT LINES, GEOGRAPHIC INFORMATION, ACCOUNTS RECEIVABLE AND REVENUE CONCENTRATION The Company identifies its business segments based on business activities, management responsibility, and geographic location. For all periods presented, the Company operated in a single reportable business segment. The following is a breakdown of revenue by product family (in thousands): Fiscal Years 2023 2022 2021 New products $ 18,211 $ 11,675 $ 7,761 Mature products 2,987 4,505 4,924 Total revenue $ 21,198 $ 16,180 $ 12,685 New products revenue consists of revenues from the sale of hardware products manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license, professional services, QuickAI and SensiML AI software as a service (SaaS) revenues. Mature products include all products produced on semiconductor processes larger than 180 nanometer. 57 Table of Contents The following is a breakdown of new products revenue (in thousands): Fiscal Years 2023 2022 2021 Hardware products $ 1,230 $ 3,757 $ 4,903 eFPGA IP 16,839 7,545 2,674 SaaS & Other 142 373 184 Total new products revenue $ 18,211 $ 11,675 $ 7,761 eFPGA IP revenue is comprised primarily of eFPGA intellectual property license revenue, eFPGA-related professional services revenue, and eFPGA-related support and maintenance revenue. eFPGA-IP revenue related to professional services was approximately $ 16.6 million, $ 7.4 million, and $ 1.5 million in the Fiscal Years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. Contract assets were approximately $ 3.6 million, $ 2.0 million, and $ 0.3 million at December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively and were included under current assets on the Company's consolidated balance sheets. Contract liabilities of $ 1.1 million, $ 0.3 million, and $ 0.5 million were included in deferred revenue on the Company's consolidated balance sheets at December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. During the year ended January 1, 2023, the Company entered into a multiple-year agreement with a customer to provide professional services over multiple phases of which each phase has to be separately approved prior to commencement of work. Other contractual terms include a termination for convenience clause including the enforceable right to payment for performance completed to date. The Company assessed the agreement under ASC 606 noting the following judgments, estimates, and conclusions: • Each funded phase comprised a separate contract. • There were monthly performance obligations associated with stated milestones. • The application of the output method resulted in the allocation of the transaction price for the contract on a straight-line basis for the stated milestones. • Further, revenue for the contract is recognized at a point in time when control of the asset is transferred to and accepted by the customer. Associated with this agreement, the Company recognized professional services revenue amounting to $ 14.8 million and $ 3.3 million for the fiscal years ended December 31, 2023 and January 1, 2023, respectively. The Company derives revenue from sales to customers located in North America, Europe and Asia Pacific. North America includes revenue from the United States. Revenue from the Uni ted States was $ 18.6 million or 88 % of total revenue, $ 10.6 million or 67 % of total revenue, and $ 6.9 million or 54 % of total revenue in th e years ended December 31, 2023 , January 1, 2023 , and January 2, 2022 , respectively. The following is a breakdown of revenue by shipping destination (in thousands): Fiscal Years 2023 2022 2021 Asia Pacific $ 1,965 $ 3,558 $ 3,352 North America 18,644 10,912 6,885 Europe 589 1,710 2,448 Total revenue $ 21,198 $ 16,180 $ 12,685 The following distributors and customers accounted for 10 % or more of the Company's revenue for the periods presented. Distributor amounts represent revenue from the Company's goods and services sold to a distributor. Customer amounts represent revenues from both distributor and from the Company to an end customer. As such, revenue to a distributor may also include information related to customers. Fiscal Years 2023 2022 2021 Distributor "A" * 15 % 15 % Distributor "B" * 12 % 22 % Distributor "C" * * 11 % Customer "A" 70 % 20 % * Customer "C" * 16 % 16 % Customer "F" * 12 % 14 % Customer "H" * * 10 % * Represents less than 10% of revenue as of the date presented. 58 Table of Contents The following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented: December 31, January 1, 2023 2023 Distributor "A" * 14 % Customer "A" 86 % * Customer "C" * 22 % Customer "F" * 44 % % % * Represents less than 10% of trade accounts receivable, net, as of the date presented. Approxi mately 0.4 % and 1.2 % of the Compa ny’s long-lived assets, including property and equipment and other assets, were located outside the United States as of December 31, 2023 and January 1, 2023 , respectively. NOTE 15 — COMMITMENTS AND CONTINGENCIES Commitments The Company's principal contractual commitments include purchase obligations, re-payments of draw downs from the revolving line of credit, and payments under operating leases and financing arrangements. Purchase obligations are largely comprised of open purchase order commitments to suppliers and to subcontractors under professional services agreements. The Company's risk associated with the purchase obligations under professional services agreements is limited to the termination liability provisions within those contracts, and as such, it does not believe they represent a material liquidity risk to the company. 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 the forecasted wafer volume. The C ompany did not have any non-cancellable purchase commitments with various wafer foundries as of December 31, 2023 . 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. The Company had $ 11.1 million of recorded and unrecorded purchase obligations due within the next twelve months as of December 31, 2023 . The Company expects this commitment to be fulfilled over the next twelve months of Fiscal 2024 . Litigation 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. Absolute assurance cannot be given that any such third -party assertions will be resolved without costly litigation; in a manner that is not adverse to the Company’s financial position, results of operations, or cash flows; or without requiring royalty or other payments which may adversely impact gross profit. NOTE 16 — SUBSEQUENT EVENTS On March 13, 2024, QuickLogic Corporation (the “Company”) entered into Common Stock Purchase Agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 222,500 shares of common stock, par value $ 0.001 (the “Common Stock”), in a registered direct offering. These share placements resulted in gross proceeds of approximately $ 3.56 million (the “Financing”). The purchase price for each share of Common Stock in the Financing was $ 16.00 . The per share purchase price reflects a zero discount based upon the 10 -day volume weighted average price on the day pricing was agreed. Issuance costs related to the offering were immaterial. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.