QUICKLOGIC Corp 10-Q

Item 1. Financial Statements QUICKLOGIC CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value amount) March 31, December 31, 2024 2023 ASSETS Current assets: Cash, cash equivalents and restricted cash $ 27,399 $ 24,606 Accounts receivable, net of allowance for doubtful accounts of $ 24 and $ 34 , as of March 31, 2024 and December 31, 2023, respectively 1,560 1,625 Contract assets 1,085 3,609 Note receivable 1,214 1,200 Inventories 1,923 2,029 Prepaid expenses and other current assets 2,128 1,561 Total current assets 35,309 34,630 Property and equipment, net 12,420 8,948 Capitalized internal-use software, net 2,147 2,069 Right of use assets, net 916 981 Intangible assets, net 510 537 Non-marketable equity investment 300 300 Goodwill 185 185 Other assets 142 142 TOTAL ASSETS $ 51,929 $ 47,792 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Revolving line of credit $ 20,000 $ 20,000 Trade payables 4,892 4,657 Accrued liabilities 1,545 2,673 Deferred revenue 778 1,052 Notes payable, current 993 946 Lease liabilities, current 263 302 Total current liabilities 28,471 29,630 Long-term liabilities: Lease liabilities, non-current 636 681 Notes payable, non-current 450 461 Other liabilities, non-current 125 125 Total liabilities 29,682 30,897 Commitments and contingencies (see Note 11) Stockholders' equity: Preferred stock, $ 0.001 par value; 10,000 shares authorized; no shares issued and outstanding — — Common stock, $ 0.001 par value; 200,000 authorized; 14,422 and 14,118 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 14 14 Additional paid-in capital 327,680 322,436 Accumulated deficit ( 305,447 ) ( 305,555 ) Total stockholders' equity 22,247 16,895 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 51,929 $ 47,792 See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents QUICKLOGIC CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Three Months Ended March 31, April 2, 2024 2023 Revenue $ 6,007 $ 4,133 Cost of revenue 2,024 1,743 Gross profit 3,983 2,390 Operating expenses: Research and development 1,459 1,629 Selling, general and administrative 2,351 1,861 Total operating expenses 3,810 3,490 Operating income (loss) 173 ( 1,100 ) Interest expense ( 69 ) ( 58 ) Interest income and other income (expense), net 11 ( 63 ) Income (loss) before income taxes 115 ( 1,221 ) (Benefit from) provision for income taxes 7 7 Net income (loss) $ 108 $ ( 1,228 ) Net income (loss) per share: Basic $ 0.01 $ ( 0.09 ) Diluted $ 0.01 $ ( 0.09 ) Weighted average shares outstanding: Basic 14,177 13,215 Diluted 14,545 13,215 Note: Net income (loss) equals comprehensive income (loss) for all periods presented. See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents QUICKLOGIC CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended March 31, April 2, 2024 2023 Cash flows provided by (used in) operating activities: Net income (loss) $ 108 $ ( 1,228 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 760 358 ROU asset amortization 65 90 Stock-based compensation 1,562 715 Write-down of inventories and reclassifications ( 2 ) 171 Other ( 10 ) ( 10 ) Changes in operating assets and liabilities: Accounts receivable 75 609 Contract assets 2,524 (341 ) Inventories 108 ( 175 ) Other assets ( 106 ) ( 74 ) Trade payables ( 3,347 ) ( 325 ) Accrued liabilities ( 1,293 ) ( 80 ) Deferred revenue ( 274 ) 27 Lease liabilities ( 84 ) ( 96 ) Net cash provided by (used in) operating activities 86 ( 359 ) Cash flows provided by (used in) investing activities: Capital expenditures for property and equipment ( 94 ) ( 2 ) Capitalized internal-use software ( 496 ) ( 185 ) Net cash provided by (used in) investing activities ( 590 ) ( 187 ) Cash flows provided by (used in) financing activities: Payment of notes payable ( 239 ) ( 151 ) Proceeds from notes payable — 105 Proceeds from line of credit 20,000 15,000 Repayment of line of credit ( 20,000 ) ( 15,000 ) Proceeds from issuance of common stock to investors 3,560 2,313 Stock issuance cost ( 24 ) ( 20 ) Net cash provided by (used in) financing activities 3,297 2,247 Net increase (decrease) in cash, cash equivalents and restricted cash 2,793 1,701 Cash, cash equivalents and restricted cash at beginning of period 24,606 19,201 Cash, cash equivalents and restricted cash at end of period $ 27,399 $ 20,902 Supplemental disclosures of cash flow information: Interest paid $ 25 $ 56 Income taxes paid $ 22 $ 2 Supplemental disclosures of non-cash financing and investing items Purchases of fixed assets with financing arrangements $ — $ 446 Stock-based compensation capitalized as internal-use software $ 146 $ — Purchases of property and equipment in accounts payable $ 3,547 $ 22 See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents QUICKLOGIC CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (In thousands) Additional Total Common Stock Paid-In Accumulated Stockholders' Shares Amount Capital Deficit Equity Balance at December 31, 2023 14,118 $ 14 $ 322,436 $ ( 305,555 ) $ 16,895 Issuance of common stock from private placement, net of stock issuance cost 223 — 3,535 — 3,535 Common stock issued under stock plans and employee stock purchase plans 81 — — — — Stock-based compensation — — 1,709 — 1,709 Net income — — — 108 108 Balance at March 31, 2024 14,422 $ 14 $ 327,680 $ ( 305,447 ) $ 22,247 Additional Total Common Stock Paid-In Accumulated Stockholders' Shares Amount Capital Deficit Equity Balance at January 1, 2023 13,202 $ 13 $ 317,174 $ ( 305,292 ) $ 11,895 Issuance of common stock from private placement, net of stock issuance cost 450 1 2,292 — 2,293 Common stock issued under stock plans and employee stock purchase plans 34 — — — — Stock-based compensation — — 715 — 715 Net loss — — — ( 1,228 ) ( 1,228 ) Balance at April 2, 2023 13,686 $ 14 $ 320,181 $ ( 306,520 ) $ 13,675 See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents Notes to unaudited condensed consolidated financial statements 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. The accompanying interim condensed consolidated financial statements are unaudited. In the opinion of the Company’s management, these statements have been prepared in accordance with the United States generally accepted accounting principles (“U.S. GAAP”), and include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of results for the interim periods presented. The Company recommends that these interim unaudited condensed consolidated financial statements be read in conjunction with the Company's Form 10 -K for the year ended December 31, 2023 , which was filed with the Securities and Exchange Commission (“SEC”) on March 27, 2024 . Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year. QuickLogic's fiscal year ends on the Sunday closest to December 31 and each fiscal quarter ends on the Sunday closest to the end of each calendar quarter. QuickLogic's first fiscal quarter for 2024 and 2023 ended on March 31, 2024 and April 2, 2023 , 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 with Heritage Bank (the "Revolving Facility"), and cash flows from operations. As of March 31, 2024 , the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $ 27.4 million, inclusive of a $ 20.0 million advance from its Revolving Facility and $ 3.5 million in net proceeds from the Company's sale of common stock in the three months ended March 31, 2024 . The Company's restricted cash balance as of March 31, 2024 was $ 0.1 million and relates to amounts pledged as cash security for the use of credit cards. The Company was in compliance with all the Revolving Facility loan covenants as of March 31, 2024 . As of March 31, 2024 , the Company had $ 20.0 million outstanding on the Revolving Facility with an interest rate of 9.00 %. On March 13, 2024 , the Company entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 223 thousand shares of common stock, par value $ 0.001 , in a registered direct offering, resulting in net cash proceeds of approximately $ 3.5 million. Issuance costs related to the offering were negligible. The purchase price for each share of common stock was $ 16.00 . See Note 9 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. The purchase price for each share of common stock in the Share Placement was $ 5.14 . 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. As of March 31, 2024, the related note receivable balance was $ 1.21 million, including $ 54 thousand in accrued interest. 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 $ 3.5 million gross cash proceeds from the March 13, 2024 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. 7 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 unaudited condensed consolidated financial statements include the accounts of QuickLogic and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. Foreign Currency The functional currency of the Company's non-U.S. operations is the U.S. dollar. Accordingly, all monetary assets and liabilities of these foreign operations 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. Income and expense elements are translated to U.S. dollars using the average exchange rates in effect during the period. Gains and losses from the foreign currency transactions of these subsidiaries are recorded as interest income and other expense, net in the unaudited condensed consolidated statements of operations, and are insignificant for all periods presented. Uses of Estimates The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of 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. For additional information, please refer to the Company's most recent Annual Report on Form 10 -K, which was filed with the SEC on March 27, 2024 . Concentration of Risk The Company's accounts receivable and note receivable are denominated in U.S. dollars and are derived primarily from sales to customers located in North America, Asia Pacific, and Europe. The Company performs ongoing credit evaluations of its customers and does not require collateral. See Note 12, Information Concerning Product Lines, Geographic Information and Revenue Concentration, for information regarding concentrations associated with accounts receivable. As of March 31, 2024 and December 31, 2023 , the Company had $ 20.0 million of revolving debt outstanding with Heritage Bank; the revolving debt carried an interest rate of 9.00 % per annum. Heritage Bank has a first priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the agreement. The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period. The maturity date for advances under the revolving debt agreement is December 31, 2025 . At March 31, 2024 , the Company had utilized a significant portion of the revolving debt, and as a result, it maintains a substantial amount of cash deposits with Heritage Bank. The concentration of cash with one financial institution poses certain risks. 8 Table of Contents For instance, adverse developments affecting financial institutions, companies in the financial services industry, or the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance, could adversely impact the stability of Heritage Bank, leading to additional financial risks for the Company. Any material decline in available funding or the Company's ability to access its cash, cash equivalents, and liquidity resources, inclusive of those at Heritage Bank, could adversely impact its ability to meet its operating expenses, financial and contractual obligations, or result in breaches of its contractual obligations. Any of these impacts could have material adverse impacts on the Company's operations and liquidity. Note 2 — Significant Accounting Policies During the three months ended March 31, 2024 , there were no changes to the Company's significant accounting policies from its disclosures in the Annual Report on Form 10 -K for the year ended December 31, 2023 . For a discussion of the significant accounting policies, please see the Annual Report on Form 10 -K for the fiscal year ended December 31, 2023 , filed with the SEC on March 27, 2024 . In the three months ended March 31, 2024, there we no observable indicators of impairment for the non-marketable equity investment. Furthermore, utilizing the probability-of-default method to determine the current expected credit loss for the Company's note receivable, the Company determined the associated current expected credit loss to be de minimis as of March 31, 2024. Financing Arrangements, Non-Cash Activities, & Correction of an 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 statement of cash flows for the three months ended April 2, 2023 . Cash payments on notes payable during the three months ended April 2, 2023 were $ 0.2 million, instead of presented as payments of finance lease obligations. Proceeds from notes payable during the three months ended April 2, 2023 were $ 0.1 million, instead of increases in accrued liabilities and other long-term liabilities. Additionally, $ 0.2 million was added to the depreciation and amortization adjustment for amortization of software tools financed through financing arrangements for the three months ended April 2, 2023 . Additionally, non-cash activities of $ 0.9 million related to deferred charges and fixed assets in AP were removed from the statement of cash flows. Purchases of property and equipment with financing arrangements were $ 0.4 million for the three months ended April 2, 2023 . Purchases of property and equipment in accounts payable was $ 22 thousand for the three months ended April 2, 2023 . The Company has determined the correction of these errors did not have a material impact on the Company's financial statements, including net income and the balance of accumulated deficit as of and for the three months ended April 2, 2023 . Additional Classifications in the Statement of Cash Flows To conform with current quarter's classifications on the statement of cash flows, the Company has added the following classification lines: ROU asset amortization, Changes in lease liabilities, and Proceeds from issuance of common stock to investors. These reclassifications to the Statement of Cash Flows for the three months ended April 2, 2023 were not material. Recent Accounting Standards Adopted In June 2022, the FASB issued ASU No. 2022 - 03, Fair Value Measurement (Topic 820 ): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify the measurement of the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and requires disclosures related to these types of equity securities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company adopted ASU No. 2020 - 06 on January 1, 2024 and it had no material impact on the Company's consolidated financial statements or related disclosures. Recent Accounting Standards Not Yet Adopted 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. 9 Table of Contents 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. For the three months ended March 31, 2024 , 0.7 million shares of common stock associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding. Of these, a 0.4 million share equivalent was determined to be dilutive and included in the computation of diluted net income per share for the period. Estimated proceeds for the dilutive shares were determined to be $ 59 thousand, which resulted in a reduction of dilutive shares by 4,127 using the treasury stock method at an average market price of $ 14.39 . For the three months ended April 2, 2023 , 0.7 million shares of common stock associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding. These shares were not included in the computation of diluted net loss per share, as they were considered anti-dilutive due to the net losses the Company experienced during this period. Warrants to purchase up to 386 thousand shares that were issued in connection with the May 29, 2018 , stock offering were not included in the diluted loss per share calculation of the periods presented as they were also considered anti-dilutive due to the net loss the Company experienced during these periods. The warrants were exercisable through May 29, 2023 at a price of $ 19.32 per share. The warrants expired unexercised on May 29, 2023 . Note 4 — Balance Sheet Components The following table provides details relating to certain balance sheet line items as of March 31, 2024 , and December 31, 2023 (in thousands): March 31, December 31, 2024 2023 Inventories: Work-in-process $ 1,555 $ 1,602 Finished goods 368 427 $ 1,923 $ 2,029 Prepaid expenses and other current assets: Prepaid taxes $ 449 $ 498 Deferred charges 523 290 Other prepaid taxes, royalties, and other prepaid expenses 717 629 Other 439 144 $ 2,128 $ 1,561 Property and equipment, net: Equipment $ 10,510 $ 10,503 Software tools 1,364 2,163 Tooling 11,044 7,085 Software 1,803 1,803 Furniture and fixtures 65 65 Leasehold improvements 647 580 25,433 22,199 Less: Accumulated depreciation and amortization ( 13,013 ) ( 13,251 ) $ 12,420 $ 8,948 Capitalized internal-use software, net: Capitalized internal-use software $ 3,742 $ 3,491 Less: Accumulated amortization ( 1,595 ) ( 1,422 ) $ 2,147 $ 2,069 Intangible assets, net: Intangible assets $ 1,156 $ 1,156 Less: Accumulated amortization ( 646 ) ( 619 ) $ 510 $ 537 Accrued liabilities: Accrued compensation $ 570 $ 1,910 Accrued employee benefits 184 57 Accrued payroll tax 295 197 Other 496 509 $ 1,545 $ 2,673 10 Table of Contents The Company capitalized $ 3.96 million in pre-production design and development costs as tooling to be utilized under its long-term professional services contracts for the three months ended March 31, 2024 . No pre-production design and development costs were capitalized for the three months ended April 2, 2023 . The capitalized assets recognized in the period are owned by the Company. The Company recorded depreciation and amortization expense of $ 0.8 million and $ 0.4 million for the three months ended March 31, 2024 and April 2, 2023 , respectively. No interest was capitalized for any period presented. Depreciation and amortization expense included approximately $ 0.2 million and $ 0.1 million of amortization expense related to capitalized internal-use software for the three months ended March 31, 2024 and April 2, 2023 , respectively. 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 Software tools 1 - 2 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. 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 March 31, 2024 (in thousands): March 31, 2024 Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount Developed technology 4.75 $ 959 $ ( 503 ) $ 456 Customer relationships — 81 ( 81 ) — Trade names and trademarks 4.75 116 ( 62 ) 54 Total acquired identifiable intangible assets $ 1,156 $ ( 646 ) $ 510 The following table provides the details of future annual amortization of intangible assets, based upon the current useful lives at March 31, 2024 (in thousands): Amount Annual Fiscal Years 2024 (remaining period) $ 80 2025 107 2026 107 2027 107 2028 109 Total $ 510 Note 7 — Debt Obligations Revolving Line of Credit As of March 31, 2024 and December 31, 2023 , the Company had $ 20.0 million of revolving debt outstanding with an interest rate of 9.00 % per annum. Heritage Bank has a first priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the agreement. The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period. Related interest expenses and annual facility fees recognized were $ 41 thousand for the three months ended March 31, 2024 and $ 33 thousand for the three months ended April 2, 2023 . 11 Table of Contents Financing Arrangements The amount of assets purchased through financing arrangements on the balance sheet were $ 1.4 million and $ 1.2 million as of March 31, 2024 and April 2, 2023 , respectively. The corresponding note payable amount for these financing arrangements was $ 1.4 million and $ 1.3 million as of March 31, 2024 and April 2, 2023 , respectively. Payments related to financing arrangements were $ 0.2 million for the three months ended March 31, 2024 and April 2, 2023 . The Company's outstanding financing arrangements as of March 31, 2024 have remaining terms of 0.42 years to 1.99 years, with a weighted average remaining term of 1.60 years. Stated interest rates for its financing arrangements outstanding as of March 31, 2024 range from 3.75 % to 9.89 %, with a weighted average interest rate of 8.20 %. The Company's outstanding financing arrangements as of April 2, 2023 had remaining terms of 1.42 years to 2.95 years, with a weighted average remaining term of 2.16 years. Stated interest rates for its financing arrangements outstanding as of April 2, 2023 ranged from 3.75 % to 9.89 %, with a weighted average interest rate of 6.91 %. Remaining amounts due to be paid in Fiscal Years 2024 and 2025 as of March 31, 2024 are $ 0.9 million and $ 0.7 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 and have lease terms of one to five years. The Company maintains sales offices out of which it conducts sales and marketing activities in various countries outside of the United States which are rented under short-term leases. The Company has elected the practical expedient to apply to recognition requirements to short-term leases and recognizes rent payments on short-term leases on a straight-line basis over the lease term. Total rent expenses were $ 0.1 million for t he three months ended March 31, 2024 and April 2, 2023 . Right-of-use assets were approximately $ 0.9 million and $ 1.0 million as of March 31, 2024 and December 31, 2023 , respectively. Lease liabilities were approximately $ 0.9 million and $ 1.0 million as of March 31, 2024 and December 31, 2023 , respectively. The following table provides the expenses related to operating and finance leases (in thousands): Three Months Ended March 31, 2024 April 2, 2023 Operating lease costs: Fixed $ 91 $ 100 Short term 4 4 Total $ 95 $ 104 The following table provides the details of supplemental cash flow information (in thousands): Three Months Ended March 31, 2024 April 2, 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases $ 106 $ 103 Non-cash ROU assets related to operating leases included in the operating cash flows for the three months ended March 31, 2024 and April 2, 2023 were $ 65 thousand and $ 90 thousand, respectively. The following table provides the details of right-of-use assets and lease liabilities as of March 31, 2024 and December 31, 2023 (in thousands): March 31, 2024 December 31, 2023 Right-of-use assets: Operating leases $ 916 $ 981 Lease liabilities: Operating leases $ 899 $ 983 The following table provided the details of future lease payments for operating leases as of March 31, 2024 (in thousands): Operating Leases 2024 (remaining period) $ 272 2025 340 2026 351 2027 64 Total lease payments 1,027 Less: Interest ( 128 ) Present value of lease liabilities $ 899 The following table provides the details of lease terms and discount rates as of March 31, 2024 and December 31, 2023 : March 31, 2024 December 31, 2023 Right-of-use assets: Weighted-average remaining lease term (years) Operating leases (1) 3.00 3.25 Weighted-average discount rates: Operating leases 6.00 % 6.00 % ( 1 ) The operating lease relates to the Company's headquarters in San Jose, CA. The lease term expires on April 14, 2027 . 12 Table of Contents Note 9 — Capital Stock Issuance of Common Stock On March 13, 2024, 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 thousand shares of common stock, par value $ 0.001 , in a registered direct offering, resulting in net cash proceeds of approximately $ 3.5 million. The purchase price for each share of common stock was $ 16.00 . The per share purchase price reflects a zero discount based upon the 10 -day volume weighted average price on the day the pricing was agreed. Issuance costs related to the offering were immaterial. 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 . On August 17, 2022, the Company filed a Registration Statement on Form S- 3 (File No. 333 - 266942 ) with the SEC, under which it may sell, from time-to-time common stock, preferred stock, depositary shares, warrants, debt securities, and units, individually or as units comprised of one or more of the other securities or a combination thereof. The Company's registration statement became effective on August 26, 2022. Note 10 — Stock-Based Compensation Stock-based compensation expense included in the Company's consolidated financial statements for the three months ended March 31, 2024 and April 2, 2023 was as follows (in thousands): Three Months Ended March 31, 2024 April 2, 2023 Cost of revenue $ 237 $ 78 Research and development 357 184 Selling, general and administrative 969 453 Total $ 1,563 $ 715 The Company capitalized stock-based compensation amounts to capitalized internal-use software and tooling, net of $ 146 thousand and $ 18 thousand for the three months ended March 31, 2024 and April 2, 2023 , respectively. Stock-Based Compensation Award Activity The following table summarizes the activity in the shares available for grant under the 2019 Plan during the three months ended March 31, 2024 (in thousands): Shares Available for Grants Balance at December 31, 2023 595 Restricted stock units (RSUs) granted ( 114 ) RSUs forfeited or expired 1 Balance at March 31, 2024 482 Stock Options The following table summarizes stock options outstanding and stock option activity under the 2009 Plan and the 2019 Plan, and the related weighted average exercise price for the three months ended March 31, 2024 : Weighted Weighted Average Average Aggregate Number of Exercise Remaining Intrinsic Shares Price Term Value (in thousands) (in years) (in thousands) Balance outstanding at December 31, 2023 60 $ 19.45 Activity during period — $ — Balance outstanding, exercisable, and vested at March 31, 2024 60 $ 19.45 2.03 $ 190 No stock options were granted, exercised or forfeited during the three months ended March 31, 2024 and April 2, 2023 . Total stock-based compensation related to stock options was $ 0 during the three months ended March 31, 2024 and April 2, 2023 . Restricted Stock Units The Company grants restricted stock units (“RSUs”) and performance restricted stock units ("PRSUs") to employees and directors with various vesting terms. RSUs entitle the holder to receive, at no cost, one common share for each RSU as it vests. In general, the Company's policy is to withhold shares in settlement of employee tax withholding obligations upon the vesting of RSUs. The stock-based compensation expense related to RSUs and PRSUs were approximately $ 1.5 million and $ 0.7 million for the three months ended March 31, 2024 and April 2, 2023 , respectively. 13 Table of Contents As of March 31, 2024 and April 2, 2023 , there was approximately $ 3.1 million and $ 2.2 million , respectively, in unrecognized compensation expense related to RSUs. The remaining unrecognized stock-based compensation expense as of March 31, 2024 is expected to be recorded over a weighted average period of 0.81 years. A summary of activity for the Company's RSUs and PRSUs for the three months ended March 31, 2024 is as follows: RSUs & PRSUs Outstanding Weighted Average Number of Grant Date Shares Fair Value (in thousands) Nonvested at December 31, 2023 589 $ 7.35 Granted 114 14.17 Vested and released ( 70 ) 12.89 Forfeited ( 1 ) 6.10 Nonvested at March 31, 2024 632 $ 7.97 Employee Stock Purchase Plan Total stock-based compensation related to the Company's Employee Stock Purchase Plan was approximately $ 28 thousand and $ 30 thousand for the three months ended March 31, 2024 and April 2, 2023 , respectively. Note 11 — Income Taxes The Company recorded a net income tax expense of $ 7 thousand for the three months ended March 31, 2024 and April 2, 2023 . The difference between the estimated annual effective tax rate of 0.80 % and the U.S. federal statutory tax rate of 21 % is primarily due to the Company's valuation allowance movement in each period presented. It is more likely than not that the Company will not realize the federal, state, and certain foreign deferred tax assets as of March 31, 2024 . As such, the Company continues to maintain a full valuation allowance against all of its US and certain foreign net deferred tax assets as of March 31, 2024 . Note 12 — Information Concerning Product Lines, Geographic Information and Revenue Concentration The Company identifies its business segment 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): Three Months Ended March 31, 2024 April 2, 2023 New products $ 4,876 $ 3,055 Mature products 1,131 1,078 Total revenue $ 6,007 $ 4,133 New products revenue consists of revenues from the sale of hardware products manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license and eFPGA-related professional services, QuickAI and SensiML AI software as a service (SaaS) revenue. Mature products include all products produced on semiconductor processes larger than 180 nanometer. The following is a breakdown of new product revenue (in thousands): Three Months Ended March 31, 2024 April 2, 2023 Hardware products $ 495 $ 162 eFPGA IP and professional services 4,043 2,810 SaaS & Other 338 83 New products revenue $ 4,876 $ 3,055 eFPGA IP and professional services revenue for the three months ended March 31, 2024 and April 2, 2023 was $ 4.0 million and $ 2.8 million, respectively, which were primarily professional services revenue. Contract assets related to professional services revenue were $ 1.1 million and $ 2.3 million as of March 31, 2024 and April 2, 2023 , respectively. Contract liabilities related to professional services revenue were $ 0.7 million and $ 0.3 million as of March 31, 2024 and April 2, 2023 , respectively. The tables below present disaggregated revenues by geographical location. Revenue attributed to geographic location is based on the destination of the product or service. Substantially all revenues in North America were in the United States. Revenue in the United States was $ 4.9 million, or 82 % of total revenue, and $ 3.3 million, or 80 % of total revenue for the three months ended March 31, 2024 and April 2, 2023 , respectively. 14 Table of Contents The following is a breakdown of revenue by destination (in thousands): Three Months Ended March 31, 2024 April 2, 2023 Asia Pacific $ 728 $ 713 North America 5,043 3,318 Europe 236 102 Total revenue $ 6,007 $ 4,133 The following distributors and customers accounted for 10 % or more of the Company's revenue for the periods presented: Three Months Ended March 31, April 2, 2024 2023 Distributor "A" 10 % 16 % Customer "A" 62 % 54 % The following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented: March 31, December 31, 2024 2023 Distributor "A" 11 % * Customer "A" 41 % 86 % Customer "H" 12 % * Customer "J" 13 % * * Represents less than 10% of revenue as of the dates presented. Note 13 — 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 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 taking delivery of and paying for a portion of forecasted wafer volume. As of March 31, 2024 , the Company had $ 0.1 million in outstanding commitments for the purchase of wafer inventory. Purchase Obligations Purchase obligations represent contractual agreements to purchase goods or services entered into in the ordinary course of business. Purchase obligations are legally binding and amongst other things, specify a minimum or a range of quantities, pricing, and approximate timing of the transaction. Purchase obligations include amounts that are recorded on the Company's consolidated balance sheets, as well as amounts that are not recorded on the Company's consolidated balance sheets. As of March 31, 2024 , total outstanding purchase obligations for other goods and services were $ 2.9 million due within the next twelve months, not recorded on the Company's consolidated balance sheet. 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. 15 Table of Contents