What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-26 compared with 2024-03-27 · 73 added, 89 removed, 349 unchanged (32% of the section changed)

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The Analytics Toolkit from SensiML Corporation ("SensiML"), our 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 full range of products, software tools, and eFPGA IP enables the practical and efficient field programmability for our customers across Aerospace, and Defense, Consumer/Industrial IoT, and Consumer Electronics markets.

Our new products include the following:

eFPGA IP Licensing business, associated professional services, consisting of development and integration of eFPGA technology into custom semiconductor solutions, our silicon products consisting of EOS™, QuickAI™, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products.

eFPGA IP Licensing business, associated professional services, consisting of development and integration of eFPGA technology into custom semiconductor solutions, and our silicon products consisting of EOS™, QuickAI™, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products.

In addition to delivering our own semiconductor solutions, our new products category includes our AI/ML Software Platform from our wholly-owned subsidiary company, SensiML, which includes Software as a Service (SaaS) subscriptions for development, per unit license fees when deployed in production, and proof-of-concept services, all of which are also included in the new products revenue category.

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For our AI/ML Software, SensiML collaborates with several microcontroller and sensor manufacturers to integrate the microcontroller and/or sensor manufacturers’ development kits with SensiML’s Analytics Toolkit in order to showcase combined solutions for AI/ML applications.

Currently, these collaborations include Infineon Technologies, On Semiconductor Corp., Microchip Technology Inc., Silicon Laboratories, Inc., STMicroelectronics N.V., Arduino, NXP Semiconductors N.V., Raspberry Pi, and Nordic Semiconductor.

Our eFPGA IP is currently developed on 12nm, 16nm, 22nm, 28nm, 40nm, 65nm, 90nm, 130nm, and 250nm process nodes with a roadmap to more advanced nodes.

Currently, these collaborations include On Semiconductor Corp., Microchip Technology Inc., Silicon Laboratories, Inc., Arduino, NXP Semiconductors N.V., Raspberry Pi, and Nordic Semiconductor.

Our eFPGA IP is currently developed on 12nm, 16nm, 22nm, 28nm, 40nm, 65nm, 90nm, 130nm, and 250nm process nodes with a roadmap to more advanced, sub 10nm nodes.

The licensable IP is generated by our automated compiler tool called Australis™, which enables our engineers to create an eFPGA IP for our licensees that they can then integrate into their SoC without significant involvement by QuickLogic.

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In order to grow our revenue from its current level, we depend upon increased revenue from our new products, including existing new product platforms and platforms currently in development.

We expect our business growth to be driven mainly by eFPGA IP and our silicon solutions, with additional contributions from SensiML AI Software.

We expect our business growth to be driven mainly by eFPGA IP and our silicon solutions.

Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sale, and marketing of our new solution platforms, IP, and software.

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For our partners, we expand their reach into new segments and new use cases, thereby expanding the served available market for their existing hardware products.

Our embedded FPGA technology gives ASIC and SoC developers the benefit of flexibility to make design changes post-manufacturing changes at very fast time-to- and time-in-market, while keeping power consumption low.

Our embedded FPGA technology gives ASIC and SoC developers the benefit of flexibility to make post-manufacturing design changes at very fast time-to- and time-in-market, while keeping power consumption low.

Our multi-core sensor processing products such as ArcticLink 3 S1, ArcticLink 3 S2, EOS 3, EOS S3 LV, and EOS S3AI provide an extremely power-efficient approach for real-time multi-modal (vision, motion, voice, location, biometric, and environmental) sensor processing independently of the cloud.

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Customers typically order our products through our distributors.

Currently, we have eight active distributors in North America and a network of seventeen active distributors and sales representatives throughout Europe and Asia to support our international business.

Currently, we have fourteen active distributors in North America and a network of nineteen active distributors and sales representatives throughout Europe and Asia to support our international business.

eFPGA IP customers and SensiML SaaS subscribers typically enter into licensing agreements directly with QuickLogic and SensiML, respectively.

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We expect to continue to offer silicon hardware products to these customers, as well as new eFPGA IP for when these customers choose to implement their own silicon platform solution.

New products revenue for the Fiscal Year ended December 31, 2023 was $18.2 million, an increase of $6.5 million as compared to the Fiscal Year ended January 1, 2023 .

Of the $18.2 million in new products revenue, approximately $16.8 million was generated from eFPGA IP revenue, primarily eFPGA-related professional engineering services, as compared to approximately $7.5 million in the Fiscal Year ended January 1, 2023 .

Mature products revenue for the Fiscal Year ended December 31, 2023 was $3.0 million, a decrease of $1.5 million compared to the Fiscal Year ended January 1, 2023 .

New products revenue for the Fiscal Year ended December 29, 2024 was $16.1 million, a decrease of $2.1 million as compared to the Fiscal Year ended December 31, 2023 .

Of the $16.1 million in new products revenue, approximately $13.1 million was generated from eFPGA IP revenue, primarily eFPGA-related professional engineering services, as compared to approximately $16.8 million in the Fiscal Year ended December 31, 2023 .

Mature products revenue for the Fiscal Year ended December 29, 2024 was $4.0 million, an increase of $1.0 million compared to the Fiscal Year ended December 31, 2023 .

We shipped new products into multiple end market segments including Aerospace and Defense, Industrial, IoT, Consumer, and SaaS revenue from the new Artificial Intelligence ("AI") market beginning in the Fiscal Year ended December 29, 2024.

We reported a net loss of $0.3 million for the Fiscal Year ended December 31, 2023 compared to a net loss of $4.3 million in the Fiscal Year ended January 1, 2023 .

We reported a net loss of $3.8 million for the Fiscal Year ended December 29, 2024 compared to a net loss of $0.3 million in the Fiscal Year ended December 31, 2023 .

We have experienced net losses in the past years and expect to experience losses in at least some of the fiscal quarters during 2025 as we continue to develop new products, applications, and technologies.

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Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted, and our investment portfolio is subject to a degree of interest rate and liquidity risk.

Unless such cash flow levels are achieved, in addition to the $2.3 million and $3.5 million in proceeds that we received in March 2023and March 2024, respectively, fro m the sale of our equity securities, and the revolving line of credit we may be able to draw down from Heritage Bank of Commerce, we may need to obtain additional funds through strategic divestiture, or sell debt or equity securities, or some combination thereof, to provide fundin g for our operations.

Unless such cash flow levels are achieved, in addition to the $3.2 million, $3.5 million, and $2.3 million in net proceeds that we received in December 2024 , March 2024, and March 2023, respectively, fro m the sale of our equity securities, and the revolving line of credit we may be able to draw down from Heritage Bank of Commerce, we may need to obtain additional funds through strategic divestiture, or sell debt or equity securities, or some combination thereof, to provide fundin g for our operations.

Such additional funding may not be available on commercially reasonable terms, or at all.

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However, we do record an allowance for hardware product sales returns, which requires some judgment by management.

We recognized hardware product revenue of approxima tely $4.0 million, or 19% of total revenue, $8.1 million, or 50% of total revenue, and $9.6 million, or 76% of total revenue, in the Fiscal Years ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

We recognized hardware product revenue of approxima tely $6.1 million, or 30% of total revenue, $4.0 million, or 19% of total revenue, and $8.1 million, or 50% of total revenue, in the Fiscal Years ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

Hardware Product Sales Return Allowance

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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 our consolidated statements of operations.

Amounts recorded for hardware product sales returns were $1 thousand, $8 thousand, and $2 thousand for the years ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively, on our consolidated statements of operations.

While hardware product sales returns have not been material to the company in recent reporting periods, we note there is an inherent uncertainty in estimating this allowance.

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In these judgments, we consider 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.

Additionally, judgment is required by management to allocate the transaction price to the separately identifiable performance obligations in the contract.

We allocate the transaction price of the contract to each performance obligation based on its relative SSP.

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As such, we are required to estimate the SSP for each performance obligation.

In instances where the SSP is not directly observable because we do not sell the promised goods or services separately, we typically determine 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.

In instances where the SSP is not directly observable because we do not sell the promised goods or services separately, we typically determine the SSP using either the adjusted market assessment approach, residual approach, or the expected cost plus a margin approach, depending on the characteristics and context of the deliverable.

The selected method is applied by us consistently for similar arrangements and deliverables.

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This would result in an unfavorable impact to income from operations.

We recognized eFPGA IP revenue of approximately $16.8 million, or 79% of total revenue, $7.5 million, or 47% of total revenue, and $2.7 million, or 21% of total revenue, in the Fiscal Years ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

We recognized eFPGA IP revenue of approximately $13.1 million, or 65% of total revenue, $16.8 million, or 79% of total revenue, and $7.5 million, or 47% of total revenue, in the Fiscal Years ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

SaaS and Other Revenue

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We recognize 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.

We recognized SaaS and Other Revenue of approxim ately $0.4 million , or 2% of total revenue, $0.6 million, or 3% of total revenue, and $0.4 million, or 3% of total revenue, in the Fiscal Years ended December 31, 2023, January 1, 2023, and January 2, 2022, respectively.

We recognized SaaS and Other Revenue of approxim ately $0.9 million , or 4% of total revenue, $0.4 million, or 2% of total revenue, and $0.6 million, or 3% of total revenue, in the Fiscal Years ended December 29, 2024, December 31, 2023, and January 1, 2023, respectively.

Practical Expedients, Elections, and Exemptions

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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 our goodwill is not amortized but is annually tested for impairment during our fourth fiscal quarter, and more often if there is an indicator of impairment.

The carrying value of $0.2 million associated with our goodwill is not amortized but is annually tested for impairment during our fourth fiscal quarter, and more often if there is an indicator of impairment.

We either perform 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.

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We also capitalize costs related to internally used enterprise-level business and finance software in support of our operational needs as software.

Acquired intangible assets with finite useful lives are amortized on a straight-line basis over the periods benefited.

We review the recoverability of our 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.

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Subsequent to our annual impairment testing in the fourth quarters of 2024 and 2023, there were no indicators of impairment that gave cause for additional impairment testing of our long-lived assets.

Additionally, we 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.

We review the recoverability of our 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 our 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, we consider changes in legal factors and the business climate, product and technology obsolescence, and competition.

We performed an annual impairment assessment in the fourth quarters of 2023 and 2022 and deemed no impairment was necessary for the current or prior year.

Subsequent to our annual impairment testing in the fourth quarters of 2023 and 2022, there were no indicators of impairment that gave cause for additional impairment testing of our intangible assets.

No impairment of intangible assets has been recognized to date.

Additionally, we did not recognize any gains or losses on the disposal of equipment in the years ended December 29, 2024 or December 31, 2023.

Results of Operations

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Interest expense

Gain on forgiveness of PPP Loan

Interest income and other (expense) income, net

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Co mparison of Fiscal Years 2024 and 2023

The table below sets forth the changes in revenue for Fiscal Year ended December 31, 2023, compared to Fiscal Year ended January 1, 2023 (in thousands, except percentage data):

The table below sets forth the changes in revenue for Fiscal Year ended December 29, 2024, compared to Fiscal Year ended December 31, 2023 (in thousands, except percentage data):

Year-Over-Year Change

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

Total revenue increased approximately $5 million, or 31% in Fiscal Year ended December 31, 2023 as compared to the Fiscal Year ended January 1, 2023 .

The increase in total revenue was comprised of an increase of $6.5 million in new product revenue, partially offset by a decrease of $1.5 million in mature product revenue.

Total revenue decreased approximately $1.1 million, or (5)% in Fiscal Year ended December 29, 2024 as compared to the Fiscal Year ended December 31, 2023 .

The decrease in total revenue was comprised of a decrease of $2.1 million in new product revenue, partially offset by an increase of $1.0 million in mature product revenue.

New Products Revenue .

The table below sets forth the changes in new products revenue for Fiscal Year ended December 31, 2023 , compared to Fiscal Year ended January 1, 2023 (in thousands, except percentage data):

The table below sets forth the changes in new products revenue for Fiscal Year ended December 29, 2024 , compared to Fiscal Year ended December 31, 2023 (in thousands, except percentage data):

Year-Over-Year Change

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Total new products revenue

The increase in new product revenue was primarily driven by an increase in eFPGA IP revenue, partially offset by a decrease in new hardware product revenue and SaaS & Other revenue.

The decrease in new product revenue was primarily driven by a decrease in eFPGA IP revenue, partially offset by increases in new hardware product revenue and SaaS & Other revenue.

eFPGA IP revenue is comprised primarily of eFPGA intellectual property revenue, eFPGA-related professional services revenue, and eFPGA-related support and maintenance revenue.

eFPGA IP revenue increased approximately $9.3 million, or 123%, as compared to the Fiscal Year ended January 1, 2023 .

The increase in eFPGA IP revenue was primarily comprised of a $9.2 million increase in eFPGA-related professional services revenue.

SaaS & Other revenue decreased approximately $0.2 million, or (62)% as compared to the Fiscal Year ended January 1, 2023.

The decrease in SaaS & Other revenue was driven by a $0.1 million decrease each in both software-related professional services revenue and SaaS-related revenue.

New hardware revenue decreased by approximately $2.5 million, or (67)%, in the Fiscal Year ended December 31, 2023 compared to the Fiscal Year endedJanuary 1, 2023 .

The decrease in new hardware product revenue was primarily comprised of a reduction of $1.0 million in display product revenue, $0.9 million in connectivity product revenue, and $0.7 million in sensor product revenue.

Contract liabilities (deferred revenue) associated with eFPGA-related professional services revenue was $1.0 million and $0.2 million and were included in deferred revenue on the consolidated balance sheets as of December 31, 2023 and January 1, 2023, respectively.

Contract assets associated with eFPGA-related professional services revenue was $3.6 million and $2.0 million on the consolidated balance sheets as of December 31, 2023 and January 1, 2023, respectively.

eFPGA IP revenue decreased approximately $3.7 million, or (22)%, as compared to the Fiscal Year ended December 31, 2023 .

The decrease in eFPGA IP revenue was primarily comprised of a $3.5 million decrease in eFPGA-related professional services revenue.

SaaS & Other revenue increased approximately $0.3 million, or 225% as compared to the Fiscal Year ended December 31, 2023.

The increase in SaaS & Other revenue was driven by a $0.3 million increase in SaaS IP revenue.

New hardware revenue increased by approximately $1.3 million, or 107%, in the Fiscal Year ended December 29, 2024 compared to the Fiscal Year endedDecember 31, 2023 .

The increase in new hardware product revenue was primarily comprised of an increase of $1.1 million in connectivity product revenue and $0.2 million in display product revenue.

Contract liabilities (deferred revenue) associated with eFPGA-related professional services revenue was $0.4 million and $1.0 million and were included in deferred revenue on the consolidated balance sheets as of December 29, 2024 and December 31, 2023, respectively.

Contract assets associated with eFPGA-related professional services revenue was $2.7 million and $3.6 million on the consolidated balance sheets as of December 29, 2024 and December 31, 2023, respectively.

Gross Profit.

The table below sets forth the changes in gross profit for Fiscal Year ended December 31, 2023 , compared to Fiscal Year ended January 1, 2023 (in thousands, except percentage data):

The table below sets forth the changes in gross profit for Fiscal Year ended December 29, 2024 , compared to Fiscal Year ended December 31, 2023 (in thousands, except percentage data):

Year-Over-Year Change

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Cost of revenue

Gross profit in Fiscal Year 2023 compared to Fiscal Year 2022 increased approximately $5.7 million, or 65%.

The change in gross profit reflects an increase in revenue of $5.0 million, or 31%, accompanied by a decrease in cost of revenue of $0.7 million, or (9)%.

The increase in revenue was driven by a $6.5 million increase in new product revenue, primarily growth in eFPGA IP professional services revenue, partially offset by a $1.5 million decrease in mature product rev enue.

The $0.7 million decrease in cost of revenue was comprised of a decrease in product costs resulting from lower devices volumes and a decrease in R&D expense allocations to cost of revenues, partially offset by an increase in inventory reserves and contract manufacturer ("CM") costs.

Gross profit in Fiscal Year 2024 compared to Fiscal Year 2023 decreased approximately $2.6 million, or (18)%.

The change in gross profit reflects a decrease in revenue of $1.1 million, or (5)%, accompanied by an increase in cost of revenue of $1.5 million, or 23%.

The decrease in revenue was driven by a $2.1 million decrease in new product revenue, primarily due to reductions in eFPGA IP professional services revenue, partially offset by a $1.0 million increase in mature product rev enu e.

The $1.5 million increase in cost of revenue was primarily comprised of increases in labor, tooling, and tooling-related depreciation expense, offset by decreases in consulting costs, all collectively associated with performing for revenue contracts, including device production, and additionally further offset by changes in inventory reserves.

In Fiscal Years 2024 and 2023, we capitalized costs associated with internal-use software of approxima tely $1.1 million and $1.1 million, respectively.

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Operating Expenses.

The table below sets forth the changes in operating expenses for Fiscal Year ended December 31, 2023 compared to Fiscal Year ended January 1, 2023 (in thousands, except percentage data):

The table below sets forth the changes in operating expenses for Fiscal Year ended December 29, 2024 compared to Fiscal Year ended December 31, 2023 (in thousands, except percentage data):

Year-Over-Year Change

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Research and Development Expenses.

Our research and development expenses consist primarily of personnel, overhead and other costs associated with System on Chip ("SoC") and software development, programmable logic design, AI and eFPGA development.

Our research and development expenses consist primarily of personnel, overhead, and other costs associated with System on Chip ("SoC") and software development, programmable logic design, and AI and eFPGA development.

R&D expenses were $6.5 million and $6.4 million in Fiscal Years 2024 and 2023, respectively, which represented 32% and 30%, respectively, of revenue for those periods.

The $1.4 million increase in R&D expenses in Fiscal Year 2023 as compared to Fiscal Year 2022 was primarily attributable to increases in employee salary, software maintenance, and financing arrangement expenses and reductions in the allocation of R&D expenses to cost of revenues, partially offset by a decrease in consulting costs, stock-based compensation, and outside services.

The $0.1 million increase in R&D expenses in Fiscal Year 2024 as compared to Fiscal Year 2023 was primarily attributable to increases in employee salaries, financing arrangement expenses, and reductions in the allocation of R&D expenses to cost of revenues, partially offset by a decrease in consulting costs, software maintenance costs, and amortization expense associated with software tools.

R&D costs allocable to cost of revenues are included in cost of revenue in the consolidated statements of operations.

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SG&A expenses were $8.8 million and $8.0 million in Fiscal Years 2024 and 2023, respectively, which represented 44% and 38%, respectively, of revenue for those periods.

The $0.4 million increase in SG&A expenses in Fiscal Year 2023 as compared to Fiscal Year 2022 was primarily attributable to an increase in salaries and stock-based compensation costs, partially offset by a decrease in insurance and accounting and audit expenses.

The $0.8 million increase in SG&A expenses in Fiscal Year 2024 as compared to Fiscal Year 2023 was primarily attributable to an increase in salaries and stock-based compensation costs, partially offset by a decrease in incentive compensation.

Interest Expense and Interest Income and Other (Expense) Income, net.

The table below sets forth the changes in interest expense and interest income and other (expense) income, net, for the Fiscal Year ended December 31, 2023, as compared to Fiscal Year ended January 1, 2023 (in thousands, except percentage data):

The table below sets forth the changes in interest expense and interest income and other (expense) income, net, for the Fiscal Year ended December 29, 2024, as compared to Fiscal Year ended December 31, 2023 (in thousands, except percentage data):

Year-Over-Year Change

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Provision for Income Taxes.

The table below sets forth the changes in provision for income taxes in the Fiscal Year ended December 31, 2023 compared to the Fiscal Year ended January 1, 2023 (in thousands, except percentage data):

The table below sets forth the changes in provision for income taxes in the Fiscal Year ended December 29, 2024 compared to the Fiscal Year ended December 31, 2023 (in thousands, except percentage data):

Year-Over-Year Change

Provision for income taxes

Income tax expense for the Fiscal Year 2023 and 2022 relates primarily to foreign income tax provision for our India entity.

Income tax expense for the Fiscal Year 2024 and 2023 relates primarily to foreign income tax provisions.

As of the end of Fiscal Year 2024, our ability to utilize our U.S.

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Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Fiscal Year 2023 Form 10-K, which was originally filed with the SEC on March 27, 2024.

Key Performance Indicators

Sales, operating income, and net income are some of the key performance indicators that management uses to manage the business.

Management uses sales, operating income (loss), and net income (loss) to evaluate the company's financial condition and operating performance, as well as evaluate income generated in deciding whether to reinvest profits into the company or to use such profits for other purposes, such as for acquisitions or share repurchases.

These key performance indicators are also used to monitor budget versus actual results, as well as in competitive analyses by benchmarking to our competitors.

Liquidity and Capital Resources

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We also have the ability to draw advances from our revolving facility with Heritage Bank of Commerce ("Heritage Bank").

As of December 31, 2023, our principal sources of liquidity consisted of cash, cash equivalents, and restricted cash of $24.6 million, inclusive of $20 million in advances from our revolving facility.

As of December 29, 2024, our principal sources of liquidity consisted of cash, cash equivalents, and restricted cash of $21.9 million, inclusive of $18 million in advances from our $20 million revolving facility.

The revolving credit facility with Heritage Bank expires on December 31, 2025, and the Company fully expects to renew it before expiration.

Our principal contractual commitments include purchase obligations, re-payments of advances from our revolving facility, and payments under financing arrangements and operating leases.

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On December 8, 2023, we 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 percent (0.50%) above the prime rate.

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 29, 2024, we had an $18 million outstanding balance on the Revolving Facility with an interest rate of 8.00%.

On December 31, 2023, we had a $20 million outstanding balance on the Revolving Facility with an interest rate of 9.00%.

On January 1, 2023, we had a $15.0 million outstanding balance on the Revolving Facility with an interest rate of 8.00%.

We were in compliance with all loan covenants under the Loan Agreement, as of the end of the current reporting period.

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Common Stock Offerings

On March 6, 2025, we entered into common stock purchase agreements with certain institutional investors for the sale of an aggregate of 256 thousand shares of common stock in a registered direct offering pursuant to an effective shelf registration statement on Form S-3.

These share placements resulted in gross proceeds of approximately $1.5 million.

Issuance costs related to the offering are accounted for as a reduction in proceeds, and they were immaterial.

Refer to Note 16 to the consolidated financial statements for additional information.

On February 25, 2025, we entered into an At Market Issuance Sales Agreement with Needham & Company, LLC (the "Agent"), pursuant to which we may offer and sell, from time to time, through the Agent, as sales agent, shares of the Company's common stock, having an aggregate offering price of up to $20,000,000.

On December 5, 2024, we entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 424 thousand shares of 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 $3.2 million.

Issuance costs related to the offering were $27 thousand and are accounted for as a reduction in proceeds.

On March 13, 2024, we 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 in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $3.5 million.

Issuance costs related to the offering were immaterial.

Issuance costs related to the offering were $24 thousand.

On March 21, 2023, we entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450 thousand shares of our 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.

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On September 14, 2022 and February 9, 2022, we 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 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.

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

On August 17, 2022, we filed a new Registration Statement on Form S-3 with the SEC to replace a previously expired Registration on Form S-3, under which we may sell, from time-to-time common stock, preferred stock, depositary shares, warrants, debt securities, and units, individually or as units comprised of one or more of the other securities or a combination thereof.

Our registration statement became effective on August 26, 2022.

On September 22, 2021, we entered into a share subscription agreement for the sale of 125 thousand shares of our common stock.

On September 30, 2021, we entered into a common stock purchase agreement for the sale of 74 thousand shares of our 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.

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.

See N ote 11 to the consolid ated financial statements for additional information.

Paycheck Protection Program

On May 6, 2020, we entered into a loan agreement with Heritage Bank for a loan of $1.2 million pursuant to the Paycheck Protection Program ("PPP Loan") under the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 ("CARES Act").

On June 5, 2020, the President of the United States signed into law the Paycheck Protection Flexibility Act (“PPPFA”) to address many concerns expressed by the small business community.

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

We applied for the full loan forgiveness in the fourth quarter of 2020 and on January 26, 2021 we received a notice from Heritage Bank that principal and interest amounts under the PPP Loan had been forgiven.

See Note 7 to the consolidated financial statements for additional information.

As of December 29, 2024, most of our cash and cash equivalents were invested in a Heritage Bank money market account.

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Se e Note 7 t o the consolidated financial statements for additional information.

Cash balances held at our foreign subsidiaries were approximately $0.1 million and $0.2 million as of December 31, 2023 and January 1, 2023 , respectively.

Cash balances held at our foreign subsidiaries were approximately $0.1 million and $0.1 million as of December 29, 2024 and December 31, 2023 , respectively.

Earnings from our foreign subsidiaries are currently deemed to be indefinitely reinvested.

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Net Cash provided by (used in) Operating Activities

In Fiscal Year 2024, net cash provided by operating activities was $27 thousand, which was primarily due to non-cash charges of $8.6 million.

Non-cash charges primarily consisted of stock-based compensation expense of $4.6 million, depreciation and amortization of long-lived assets and certain definite-lived intangible assets of $3.9 million, and write-down of inventories of $0.1 million.

Non-cash charges were partially offset by a net loss of $3.8 million and changes in working capital of $4.7 million.

Changes in working capital consisted of a decrease in trades payable of $3.6 million, a decrease in accrued liabilities of $1.1 million, an increase in accounts receivable of $0.8 million, a decrease in deferred revenue of $0.6 million, and a decrease in lease liabilities of $0.3 million, partially offset by a decrease in contract assets of $0.9 million, a decrease in other assets of $0.6 million, and a decrease in inventories of $0.3 million.

Historically, our operating cash flows represented cash used in operating activities.

In Fiscal Year 2023, net cash provided by operating activities was $4.8 million, which was primarily due to non-cash charges of $5.3 million.

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Historically, our operating cash flows represented cash used in operating activities.

In Fiscal Year 2022, net cash used in operating activities was $4.1 million, which was primarily due to a net loss of $4.3 million and changes in working capital of $3.5 million, partially offset by non-cash charges of $3.7 million.

Changes in working capital consisted of an increase in accounts receivable of $1.7 million, an increase in contract assets of $1.7 million, an increase in inventories of $0.6 million, a decrease in lease liabilities of $0.4 million, an increase in other assets of $0.3 million, and a decrease in deferred revenue of $0.2 million, partially offset by an increase in trade payables of $1.5 million.

Non-cash charges primarily consisted of stock-based compensation expense of $2.0 million, depreciation and amortization of long-lived assets and certain definite-lived intangible assets of $1.5 million, and write-down of inventories of $0.2 million.

Net Cash provided by (used in) Investing Activities

Net cash used in investing activities in Fiscal Year 2023 was approximately $6.3 million, which was primarily attributable to capital expenditures related to property and equipment of $5.6 million and the capitalization of internal-use software in the amount of $1.0 million, partially offset by stock-based compensation capitalized to internal-use software in the amount of $0.2 million.

Net cash used in investing activities in Fiscal Year 2022 was approximately $0.8 million, which was primarily attributable to capital expenditures primarily related to property and equipment of $0.1 million and the capitalization of internal-use software in the amount of $0.7 million.

Net cash used in investing activities in Fiscal Year 2024 was approximately $6.5 million, which was primarily attributable to capital expenditures related to property and equipment of $5.4 million, $0.1 million in expenditures related to intangible assets, and the capitalization of internal-use software in the amount of $1.1 million, partially offset by stock-based compensation capitalized to property and equipment and internal-use software in the amount of $9 thousand and $149 thousand, respectively.

Net cash used in investing activities in Fiscal Year 2023 was approximately $6.3 million, which was primarily attributable to capital expenditures primarily related to property and equipment of $5.6 million and the capitalization of internal-use software in the amount of $1.0 million, partially offset by stock-based compensation capitalized to internal-use software in the amount of $0.2 million.

Net Cash provided by (used in) Financing Activities

In Fiscal Year 2023, net cash provided by financing activities was $6.9 million, primarily attributable to an increase in our revolving credit facility in the amount of $5 million and proceeds from the issuance of common stock in the amount of $2.5 million, partially offset by $0.7 million in payments related to financing arrangements.

In Fiscal Year 2022, net cash provided by financing activities was $4.5 million, primarily attributable to proceeds from the issuance of common stock in the amount of $4.9 million, partially offset by $0.5 million in payments related to finance arrangements.

In Fiscal Year 2024, net cash provided by financing activities was $3.7 million, primarily attributable to proceeds from the issuance of common stock in the amount of $7.1 million, partially offset by $1.4 million in payments related to financing arrangements primarily for tooling related to revenue contracts with customers and $2.0 million in greater payments than borrowings on the Company's revolving line of credit.

In Fiscal Year 2023, net cash provided by financing activities was $6.9 million, primarily attributable to an increase in our revolving credit facility in the amount of $5.0 million and proceeds from the issuance of common stock in the amount of $2.5 million, partially offset by $0.7 million in payments related to financing arrangements primarily for tooling related to revenue contracts with customers.

We require substantial cash to fund our business.

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Other purchase commitments

Liability of an estimated amount (3)

Total material cash requirements

The current maturity date on our Revolving Facility is December 31, 2025.

However, we include this amount in the less than 1 year category due to the revolving nature of the balance and our expected use of the line of credit.

See Note 7 to th e consolidated financial statements for additional information.

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We are committed to take delivery of and pay for a portion of forecasted wafer volume.

Contingent obligations are estimated significant future obligations on eFPGA IP procurement contracts.

See note 15 to the consolidated financial statements for additional information.

Concentration of Suppliers

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See Note 2 to the consolidated financial statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial condition and results of operations, which is incorporated by reference herein.

Changes from Prior Periodic Reports

In this Annual Report on Form 10-K, we have revised our disclosures to comply with SEC Release No.

33-10890 “Management’s Discussion and Analysis, Selected Financial Data, Supplementary Financial Information” which became fully effective on August 9, 2021.

This release was adopted to simplify and enhance certain financial disclosure requirements in Regulation S-K.

Specifically, the SEC eliminated the requirement for selected financial data, only requiring quarterly disclosure when there are retrospective changes affecting comprehensive income, and amending the matters required to be presented under Management’s Discussion and Analysis.

With our adoption of this release, we have eliminated from this document the items discussed above that are no longer required.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis