What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-22 · 190 added, 149 removed, 427 unchanged (44% of the section changed)

4 unchanged sentences

Current assets:

Cash and cash equivalents

Restricted cash

Cash, cash equivalents and restricted cash

Accounts receivable, net of allowances for doubtful accounts of $ 0

2 unchanged sentences

Property and equipment, net

Capitalized internal-use software

Capitalized internal-use software, net

Right of use assets

5 unchanged sentences

Accrued liabilities

Paycheck protection program loan

Deferred revenue

2 unchanged sentences

Long-term liabilities:

Paycheck protection program loan, less current portion

Lease liabilities-non-current

8 unchanged sentences

10,912 and 8,331

shares issued and outstanding as of March 29, 2020 and December 29, 2019, respectively

shares issued and outstanding as of June 28, 2020 and December 29, 2019, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

March 29, 2020

March 31, 2019

Six Months Ended

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 2019

Cost of revenue

8 unchanged sentences

Loss before income taxes

Provision for (benefit from) income taxes

(Benefit from) provision for income taxes

Net loss per share:

3 unchanged sentences

Net loss equals to comprehensive loss for all periods presented.

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

(1) Net loss per share, and weighted average shares outstanding basic and diluted for the three- and six-months ended June 30, 2019 are adjusted to reflect 1-for-14 reverse stock split effected on December 23, 2019 .

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

QUICK LOGIC CORPORATION

QUICKLOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

18 unchanged sentences

Payment of finance lease obligations

Proceeds from paycheck protection program loan

Proceeds from line of credit

Repayment of line of credit

Proceeds from issuance of common stock

Proceeds from issuance of common stock, net of issuance costs

Taxes paid related to net settlement of equity awards

Net cash used in financing activities

Net decrease in cash, cash equivalents and restricted cash

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

1 unchanged sentence

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

QUICK LOGIC CORPORATION

QUICKLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

For the three months ended March 29, 2020

Common Stock (1)

Stockholders'

4 unchanged sentences

Balance at March 29, 2020

For the three months ended March 31, 2019

Common stock issued under stock plans and employee

stock purchase plan

Common stock offering, net of issuance costs of $ 1.1 million

Stock-based compensation

Balance at June 28, 2020

Common Stock (1)

6 unchanged sentences

Balance at March 31, 2019

Common stock shares and additional paid-in capital amounts are adjusted to reflect 1-for-14 reverse stock split effected on December 23, 2019.

Common stock issued under stock plans and employee

stock purchase plan

Common stock offering, net of issuance costs of $ 1.2 million

Stock-based compensation

Balance at June 30, 2019

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

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

NOTES TO UNAUDITED CONDENSE D CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — The Company and Basis of Presentation

QuickLogic Corporation, or QuickLogic or the Company, was founded in 1988 and reincorporated in Delaware in 1999.

The Company enables Original Equipment Manufacturers, or OEMs to maximize battery life for highly differentiated, immersive user experiences with Smartphone, Wearable, Hearable, Tablet and Internet-of-Things, or IoT devices.

QuickLogic delivers these benefits through industry leading ultra-low power customer programmable System on Chip, or SoC, semiconductor solutions, embedded software, and algorithm solutions for always-on voice and sensor processing, and enhanced visual experiences.

The Company is a fabless semiconductor provider of comprehensive, flexible sensor processing solutions, ultra-low power display bridges, and ultra-low power Field Programmable Gate Arrays, or FPGAs.

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

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

The Company enables Original Equipment Manufacturers (“OEMs”) to maximize battery life for highly differentiated, immersive user experiences with Smartphone, Wearable, Hearable, Tablet and Internet-of-Things (“IoT devices”).

QuickLogic delivers these benefits through industry leading ultra-low power customer programmable System on Chip (“SoC”) semiconductor solutions, embedded software, and algorithm solutions for always-on voice and sensor processing, and enhanced visual experiences.

The Company is a fabless semiconductor provider of comprehensive, flexible sensor processing solutions, ultra-low power display bridges, and ultra-low power Field Programmable Gate Arrays (“FPGAs”).

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

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

The accompanying interim unaudited 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, or U.S.

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 condensed consolidated financial statements be read in conjunction with the Company's Form 10-K for the year ended December 29, 2019, which was filed with the Securities and Exchange Commission, or SEC, on March 13, 2020.

Operating results for the three months ended March 29, 2020 are not necessarily indicative of the results that may be expected for the full year.

Operating results for the three and six months ended June 28, 2020 are not necessarily indicative of the results that may be expected for the full year.

QuickLogic's fiscal year ends on the Sunday closest to December 31 and each fiscal quarter ends on the Sunday closest to the end of each calendar quarter.

QuickLogic's first fiscal quarters for 2020 and for 2019 ended on March 29, 2020 and March 31, 2019, respectively.

QuickLogic's second fiscal quarters for 2020 and for 2019 ended on June 28, 2020 and June 30, 2019, respectively.

COVID-19 Risks and Uncertainties

11 unchanged sentences

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

As of March 29, 2020, the Company's principal sources of liquidity consisted of cash and cash equivalents and restricted cash of $19.0 million, including $15.0 million drawn down from its revolving line of credit, or Revolving Facility with Heritage Bank of Commerce, or Heritage Bank.

As of June 28, 2020, the Company's principal sources of liquidity consisted of cash and cash equivalents and restricted cash of $ 26.4 million, including $ 15.0 million drawn down from its revolving line of credit (“Revolving Facility”) with Heritage Bank of Commerce (“Heritage Bank”), and $ 1.2 million loan proceeds received under Paycheck Protection Program (“PPP”).

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

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

On May 6, 2020 we entered into a loan agreement with Heritage Bank for a loan of $1.2 million pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act enacted on March 27, 2020 .

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

See Note 7 to the Unaudited Consolidated Financial Statements for the details.

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

The Company received net proceeds from the offering of approximately $ 7.9 million, net of underwriter’s commission and other offering expenses.

Under the terms of the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 375,000 shares of Common Stock to cover overallotments.

On July 21, 2020, the Underwriter’s partially exercised the option to purchase 141,733 additional shares of Common Stock in connection with the offering, resulting in additional net proceeds to the Company of approximately $ 461,000 after deduction of underwriting discounts.

Various factors can affect the Company’s liquidity, including, among others:

38 unchanged sentences

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

Gains and losses from the foreign

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

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

Uses of Estimates

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Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is required to determine the Stand-alone Selling Price, or SSP, for each distinct performance obligation.

Judgment is required to determine the Stand-alone Selling Price (“SSP”) for each distinct performance obligation.

The Company uses a range of amounts to estimate SSP when each of the products and services are sold separately and determines the discount to be allocated based on the relative SSP of the various products and services when products and services sold are bundled.

8 unchanged sentences

Note 2 — Significant Accounting Policies

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

During the six-month period ended June 28, 2020, there were no changes in the Company's significant accounting policies from its disclosures in the Annual Report on Form 10-K for the year ended December 29, 2019, except for the new accounting standards adopted during the six months ended June 28, 2020.

For a discussion of the significant accounting policies, please see the Annual Report on Form 10-K for the fiscal year ended December 29, 2019, filed with the SEC on March 13, 2020.

For a discussion of the new accounting standards adopted during the three months of 2020, see “New Accounting Pronouncements” below.

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

Revenue Recognition

10 unchanged sentences

For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.

In determining the transaction price, the price stated on the purchase order is typically fixed and r epresents the net consideration to which the Company expects to be entitled, and therefore there is no variable consideration.

In determining the transaction price, the price stated on the purchase order is typically fixed and represents the net consideration to which the Company expects to be entitled, and therefore there is no variable consideration.

As the Company’s standard payment terms are less than one year, the Company has elected, as a practical expedient, to not assess whether a contract has a significant financing component.

The Company allocates the transaction price to each distinct product based on its relative stand-alone selling price.

The product price as specified on the purchase order is considered the stand-alo ne selling price as it is an observable source that depicts the price as if sold to a similar customer in similar circumstances.

The Company applies Accounting Standards Update, or ASU, No.

The product price as specified on the purchase order is considered the stand-alone selling price as it is an observable source that depicts the price as if sold to a similar customer in similar circumstances.

The Company applies Accounting Standards Update (“ASU”) No.

2016-02, Leases (Topic 842) and related ASUs, which provide supplementary guidance and clarifications to account operating and finance leases .

Under Topic 842, all significant lease arrangements are generally recognized at lease commencement.

Operating lease right-of-use, or ROU, assets and lease liabilities are recognized at the commencement date.

Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date.

A ROU asset and corresponding lease liability is not recorded for leases with an initial term of 12 months or less (short term leases) and the Company recognizes lease expense for these leases as incurred over the lease term.

6 unchanged sentences

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately.

As of March 29, 2020, the Company’s right-of-use assets was approximately $2.4 million and lease liability was approximately $2.4 million as presented on the Company’s Consolidated Balance Sheet.

As of June 28, 2020, the Company’s right-of-use assets was approximately $ 2.2 million and lease liability was approximately $ 2.2 million as presented on the Company’s Consolidated Balance Sheet.

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

9 unchanged sentences

The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable.

The assessment of possible impairment is based on the Company's ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations.

The assessment of possible impairment is based on the

Company's ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations.

If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value.

2 unchanged sentences

Restricted cash

Restricted cash represents amounts pledged as cash security related to the use of credit cards.

Cash, cash equivalent and restricted cash includes an amount of $ 100,000 pledged as cash security related to the use of credit cards as of June 28, 2020 and December 29, 2019.

New Accounting Pronouncements

Recently adopted accounting pronouncements:

In August 2018, the Financial Accounting Standards Board, or FASB, issued ASU, No.

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

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

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In June 2016, FASB issued ASU No.

2016-13, or ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326):

2016-13 (“ASU 2016-13”) Financial Instruments-Credit Losses (Topic 326):

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

5 unchanged sentences

In December 2019, the FASB issued ASU No.

2019-2, Simplifying the Accounting for Income Taxes , which removes certain exceptions to the general principles of Accounting Standards Codification, or ASC 740, in order to reduce the cost and complexity of its application.

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

These changes include elimination to the exceptions for (1) Intra-period tax allocation, (2) Deferred tax liabilities related to outside basis differences, and (3) Year-to-date losses in interim periods.

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

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

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

3 unchanged sentences

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

For the three months ended March 29, 2020 and March 31, 2019, 699,000 and 597,000 shares of common stock, respectively, associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding.

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

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

For the three and six months ended June 28, 2020 and June 30, 2019, 626,178 and 571,970 shares of common stock, respectively, associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding.

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

Warrants to purchase up to 386,100 shares were issued in connection with May 29, 2018 stock offering were also not included in the diluted loss per share calculation of the three and six months ended June 2 8 , 2020 and June 30, 2019 as they were also considered anti-dilutive due to the net loss the Company experienced during these periods.

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

Note 4 — Balance Sheet Components

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

The following table provides details relating to certain balance sheet line items as of June 28, 2020, and December 29, 2019 (in thousands):

Raw materials

3 unchanged sentences

Prepaid taxes, royalties and other prepaid expenses

Property and equipment:

Property and equipment, net:

Furniture and fixtures

1 unchanged sentence

Accumulated depreciation and amortization

Capitalized internal-use software:

Capitalized during the period

Capitalized internal-use software, net:

Capitalized software

Accumulated amortization

2 unchanged sentences

Note 5— Business Acquisition

On January 3, 2019, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with SensiML for the purchase of all of its issued and outstanding common stock in exchange for the Company’s common stock.

On January 3, 2019, the Company entered into a stock purchase agreement with SensiML for the purchase of all of its issued and outstanding common stock in exchange for the Company’s common stock.

SensiML has a software toolkit enabling IoT developers to quickly and easily create smart devices, transforming rich sensors into actionable event detectors.

The consolidated results of operations for the Company for the three months ended March 29, 2020 and March 31, 2019 include operating activities of SensiML.

The consolidated results of operations for the Company for the three and six months ended June 28, 2020 and June 30, 2019 include operating activities of SensiML.

Note 6 — Intangible Assets

The following table provides the details of the carrying value of intangible assets recorded from the acquisition of SensiML as of March 29, 2020 (in thousands):

March 29, 2020

The following table provides the details of the carrying value of intangible assets recorded from the acquisition of SensiML as of June 28, 2020 (in thousands):

June 28, 2020

Gross Carrying Amount

5 unchanged sentences

Total acquired identifiable intangible assets

The following table provides the details of expected future annual amortization of intangible assets, based upon the current useful lives as of March 29, 2020 (in thousands):

The following table provides the details of expected future annual amortization of intangible assets, based upon the current useful lives as of June 28, 2020 (in thousands):

Annual Fiscal Years

2 unchanged sentences

Revolving Line of credit

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

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

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

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

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

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

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

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

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

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

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

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

As of June 28, 2020 and December 29, 2019, the Company had $ 15.0 million of revolving debt outstanding with an interest rates of 5.5 % per annum.

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

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

On June 29, 2020, the Company repaid the $ 15.0 million loan.

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

Payroll Protection Program Loan

On May 6, the Company entered into a loan agreement with Heritage Bank (“PPP Loan”) for a loan of $ 1,191,687.77 pursuant to the PPP under the CARES Act, as implemented by the U.S.

Small Business Administration.

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

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

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

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

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

The principal and interest of the Loan are repayable in 18 monthly equal installments of $ 67,065.21 each starting in December 2020.

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

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

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

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

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

The Company has opted for 24 weeks to spend the loan.

As of June 28, 2020, the unutilized loan proceeds were $ 89,322 , which is expected to be utilized in the third quarter.

The loan amount can be fully or partially forgiven if the funds are used as per revised guidelines under the PPPFA.

The Company intends to use the loan proceeds in compliance with the guidelines and will apply for the loan forgiveness, when the funds are fully utilized.

Note 8 — Leases

3 unchanged sentences

Finance leases are generally 2 years to 3 years.

As of March 29, 2020, the Company recognized right-of-use assets of approximately $2.4 million and lease liability of approximately $2.4 million relating to the operating and finance leases signed for the premises of its headquarters in San Jose, its San Diego office, and its subsidiaries SensiML in Oregon and India.

Total rent expense for the quarter ended March 29, 2020 and March 31, 2019 was approximately $147,000 and $170,000 respectively.

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

As of June 28, 2020, the Company recognized right-of-use assets of approximately $ 2.2 million and lease liability of approximately $ 2.2 million relating to the operating and finance leases signed for the premises of its headquarters in San Jose, its San Diego office, and its subsidiaries SensiML in Oregon and India.

Total rent expense for the three months ended June 28, 2020 and June 30, 2019 was approximately $ 158,000 and $ 268,000 , respectively.

Total rent expense for the six months ended June 28, 2020 and June 30, 2019 was approximately $ 305,000 and $ 438,000 , respectively.

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

Three Months Ended

Mach 29, 2020

March 31, 2019

Six Months Ended

June 28, 2020

June 30, 2019

June 28, 2020

June 30, 2019

Operating lease costs:

2 unchanged sentences

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

The right-of-use assets obtained in exchange for new finance and operating lease liabilities represent the new operating and finance leases entered into during the three months ended March 29, 2020 and March 31, 2019 (in thousands):

Three Months Ended

March 29, 2020

March 31, 2019

The right-of-use assets obtained in exchange for new finance and operating lease liabilities represent the new operating and finance leases entered into during the six months ended June 28, 2020 and June 30, 2019 (in thousands):

Six Months Ended

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

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Finance leases

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

March 29, 2020

The following table provides the details of right-of-use assets and lease liabilities as of June 28, 2020 and December 29, 2019 (in thousands):

June 28, 2020

December 29, 2019

5 unchanged sentences

Finance leases

The following table provided the details of future lease payments for operating and finance leases as of March 29, 2020 (in thousands):

The following table provided the details of future lease payments for operating and finance leases as of June 28, 2020 (in thousands):

Annual Fiscal Years

2 unchanged sentences

Present value of lease liabilities

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

March 29, 2020

The following table provides the details of lease terms and discount rates as of June 28, 2020 and December 29, 2019:

June 28, 2020

December 29, 2019

9 unchanged sentences

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.

The Company’s cash and cash equivalents include money market account balance of $18.4 million and $20.9 million as of March 29, 2020 and December 29, 2019, respectively.

The Company’s cash, cash equivalents and restricted cash include money market account balance of $ 25.9 million and $ 20.9 million as of June 28, 2020 and December 29, 2019, respectively.

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

1 unchanged sentence

Common and Preferred Stock

As of March 29, 2020, the Company was authorized to issue 200 million shares of common stock and has 10 million shares of authorized but unissued undesignated preferred stock.

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

As of June 28, 2020, the Company was authorized to issue 200 million shares of common stock and had 10 million shares of authorized but unissued undesignated preferred stock.

Without any further vote or action by the Company’s

stockholders, the Board of Directors has the authority to determine the powers, preferences, rights, qualifications, limitations or restrictions granted to or imposed upon any wholly unissued shares of undesignated preferred stock.

Issuance of Common Stock

3 unchanged sentences

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

As of March 29, 2020, warrants exercisable for 386,100 shares of common stock at a price of $19.32 per share remain outstanding.

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

The Company received net proceeds from the offering of approximately $ 7.9 million, net of underwriter’s commission and other offering expenses.

Under the terms of the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 375,000 shares of Common Stock to cover overallotments.

On July 21, 2020, the Underwriter’s partially exercised the option to purchase 141,733 additional shares of Common Stock in connection with the Offering, resulting in additional net proceeds to the Company of approximately $ 461,000 after deduction of underwriting discounts.

As of June 28, 2020, warrants exercisable for 386,100 shares of common stock at a price of $ 19.32 per share remain outstanding.

Note 11 — Employee Stock Plans

3 unchanged sentences

2019 Stock Plan

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

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

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

As of March 29, 2020, approximately 51,493 shares of the Company’s common stock were reserved for issuance under the 2019 Plan.

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

As of June 28, 2020, approximately 657,876 shares of the Company’s common stock were reserved for issuance under the 2019 Plan.

Employee Stock Purchase Plan

The 2009 Employee Stock Purchase Plan, or the 2009 ESPP, was adopted in March 2009.

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

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

As of March 29, 2020, approximately 62,335 shares of the Company’s common stock were reserved for issuance under the 2009 ESPP.

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

Further, 2009 ESPP was amended and restated by the Board of Directors on March 5, 2020 and approved by the Company’s stockholders on April 22, 2020 to, among other things reserved an additional 300,000 shares of common stock for issuance under 2019 ESPP.

issuance under 20 0 9 ESPP.

As of June 28, 2020 , approximately 362,335 shares of the Company’s common stock were reserved for issuance under the 2009 ESP P.

Note 12 — Stock-Based Compensation

Stock-based compensation expense included in the Company's consolidated financial statements for the three months ended March 29, 2020 and March 31, 2019 was as follows (in thousands):

Stock-based compensation expense included in the Company's consolidated financial statements for the three and six months ended June 28, 2020 and June 30, 2019 was as follows (in thousands):

Three Months Ended

Six Months Ended

Cost of revenue

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Total costs and expenses

During the quarter ended March 29, 2020, the Company reversed certain stock-based compensation previously recorded due to the cancellation of certain performance based RSUs as established goals required for vesting were not achieved and due to the cancellation of RSUs due to restructuring related terminations.

During the six months ended June 28, 2020, the Company reversed stock-based compensation expense related to the cancellation of certain unvested performance based RSUs and restructuring related terminations.

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

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

No stock options were granted during the three-month periods ended March 29, 2020 and March 31, 2019.

No stock options were granted during the three and six months ended June 28, 2020 and June 30, 2019.

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 29, 2020 (in thousands):

The following table summarizes the activity in the shares available for grant under the 2019 Plan during the six months ended June 28, 2020 (in thousands):

Shares Available for Grants

Balance at December 29, 2019

Authorized shares

PRSU's granted

Options cancelled

RSUs forfeited or expired

PRSUs forfeited or expired

Balance at March 29, 2020

Balance at June 28, 2020

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 29, 2020:

(in thousands)

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Forfeited or expired

Balance outstanding at March 29, 2020

Exercisable at March 29, 2020

Vested and expected to vest at March 29, 2020

* Shares expired were not material

There was no intrinsic value for the stock options based on the Company’s closing stock price of $3.04 per share as of March 29, 2020, which would have been received by the option holders had all option holders exercised their options as of that date.

The total intrinsic value of options exercised during the three months ended March 29, 2020 and March 31, 2019 was $0.

Total cash received from employees as a result of employee stock option exercises during the three months ended March 29, 2020 and March 31, 2019 was $0 and $3,600, respectively.

Balance outstanding at June 28, 2020

Exercisable at June 28, 2020

Vested and expected to vest at June 28, 2020

There was no intrinsic value for the stock options based on the Company’s closing stock price of $ 3.16 per share as of June 28, 2020, which would have been received by the option holders had all option holders exercised their options as of that date.

The total intrinsic value of options exercised during the six months ended June 28, 2020 and June 30, 2019 was $ 0 .

Total cash received from employees as a result of employee stock option exercises during the six months ended June 28, 2020 and June 30, 2019 was $ 0 and $ 3,600 , respectively.

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

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

Total stock-based compensation related to stock options was approximately $14,000 and $25,000 for the three months ended March 29, 2020 and March 31, 2019, respectively.

As of March 29, 2020, the fair value of unvested stock options, net of forfeitures, was approximately $24,000.

This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 0.45 year.

Total stock-based compensation related to stock options was approximately $ 14,000 and $ 24,000 for the three months ended June 28, 2020 and June 30, 2019, respectively, and $ 28,000 and $ 49,000 for the six months ended June 28, 2020 and June 30, 2018, respectively.

As of June 28, 2020, the fair value of unvested stock options, net of forfeitures, was approximately $ 11,000 .

This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 2.4 months.

Restricted Stock Units

The Company grants restricted stock units or RSUs, to employees and directors with various vesting terms.

The Company grants restricted stock units (“RSUs”) 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 related to RSUs was approximately $(418,000) and $877,000 for the three months ended March 29, 2020 and March 31, 2019, respectively.

Due to the cancellation of certain performance based RSUs and cancellations relating to restructuring, which was implemented in January 2020, the Company reversed stock-based compensation previously recorded resulting in a credit to the stock based compensation during the quarter ended March 29, 2020.

As of March 29, 2020 and March 31, 2019, there was approximately $2.4 million and $3.2 million, respectively, in unrecognized compensation expense

related to RSUs.

The remaining unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 1.24 years.

A summary of activity for the Company's RSUs for the three months ended March 29, 2020 is as follows:

The stock-based compensation related to RSUs was approximately $ 719,000 and $ 756,000 for the three months ended June 28, 2020 and June 30, 2019 and $ 306,000 and $ 1.6 million for the six months ended June 28, 2020 and June 30, 2019, respectively.

As of June 28, 2020 and June 30, 2019, there was approximately $ 1.7 million and $ 3.1 million, respectively, in unrecognized compensation expense related to RSUs.

The remaining unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 1.0 year.

A summary of activity for the Company's RSUs for the six months ended June 28, 2020 is as follows:

RSUs & PRSUs Outstanding

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Nonvested at December 29, 2019

Nonvested at March 29, 2020

Nonvested at June 28, 2020

Employee Stock Purchase Plan

As of March 29, 2020, 62,335 shares remained available for issuance under the 2009 ESPP.

For the three months ended March 29, 2020 and March 31, 2019, the Company recorded stock-based compensation expense related to the 2009 ESPP of approximately $0 and $49,000, respectively.

The weighted average estimated fair value, as defined by the amended authoritative guidance, of rights issued pursuant to the Company's 2009 ESPP during the first quarter ended March 29, 2020 and March 31, 2019, was $0 and $.0.31, respectively, per right, respectively.

As of June 28, 2020, 362,335 shares remained available for issuance under the 2009 ESPP.

For the three months ended June 28, 2020 and June 30, 2019, the Company recorded stock-based compensation expense related to the 2009 ESPP of approximately $ 8,000 and $ 11,000 , respectively.

For the six months ended June 28, 2020 and June 30, 2019, the Company recorded stock-based compensation expense related to the 2009 ESPP of $ 8,000 and $ 60,000 , respectively.

The weighted average estimated fair value, as defined by the amended authoritative guidance, of rights issued pursuant to the Company's 2009 ESPP during the quarter ended June 28, 2020 and June 30, 2019, was $ 1.83 and $.

0.31 , respectively, per right, respectively.

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

Three Months Ended

Six Months Ended

Expected term (months)

1 unchanged sentence

Dividend yield

As of March 29, 2020, there was no unrecognized stock-based compensation expense relating to the Company's 2009 ESPP.

ESPP grants were suspended until the extension of the term of 2009 ESPP was ratified by the shareholders in the annual general meeting on April 22, 2020.

As of June 28, 2020, there was $ 25,000 an unrecognized stock-based compensation expense relating to the Company's 2009 ESPP, which is expected to be recognized over a period of 4.7 months.

Note 13 — Income Taxes

The Company recorded a net income tax expense of approximately $18,000 and benefit of $268,000 for the three months ended March 29, 2020 and March 31, 2019, respectively.

A majority of the income tax expense for the first quarter of 2020 relates to the Company's foreign subsidiaries, which are cost-plus entities.

A majority of the income tax benefit for the quarter ended March 31, 2019 relates to the deferred tax benefit arising from Intangible assets acquired from the acquisition of SensiML, which was offset by the income taxes from the Company's foreign subsidiaries, which are cost-plus entities.

The Company recorded a net income tax benefit of approximately $ 27,000 and income tax expense of $ 27,000 for the three months ended June 28, 2020 and June 30, 2019, respectively.

For the six months ended June 28, 2020 and June 30, 2019 the Company recorded net income tax benefits of $ 9,000 and $ 241,000 respectively.

A majority of the income tax benefit for the second quarter of 2020 and expense for the second quarter of 2019 relates to the Company's foreign subsidiaries, which are cost-plus entities.

A majority of the income tax benefit for the six months ended June 28, 2020 relates to foreign subsidiaries and benefit for the six months ended June 30, 2019 relates to the deferred tax benefit arising from Intangible assets acquired from the acquisition of SensiML, which was offset by the income taxes from the Company's foreign subsidiaries, which are cost-plus entities.

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

3 unchanged sentences

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

and certain foreign net deferred tax assets as of March 29, 2020.

and certain foreign net deferred tax assets as of June 28, 2020.

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

The Company had no unrecognized tax benefits as of Marc h 29, 2020 and December 31, 2019, which would affect the Company's effective tax rate.

The Company had no unrecognized tax benefits as of June 28, 2020 and December 31, 2019, which would affect the Company's effective tax rate.

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

10 unchanged sentences

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

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

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

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

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

The CARES Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll

taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

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

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

4 unchanged sentences

Three Months Ended

Six Months Ended

Revenue by product line (1) :

6 unchanged sentences

Three Months Ended

Six Months Ended

Revenue by geography:

2 unchanged sentences

Total revenue

Asia Pacific includes revenue from Japan of $394,000, or 18% of total revenue and $434,000 or 14% of total revenue for the quarter ended March 29, 2020, and March 31, 2019, respectively.

North America includes revenue from the United States of $942,000, or 44% of total revenue, and $1.1 million, or 36% of total revenue, for the three months ended March 29, 2020 and March 31, 2019, respectively.

Asia Pacific includes revenue from Japan of $ 771,000 , or 35 % of total revenue and $ 330,000 or 16 % of total revenue for the quarters ended June 28, 2020, and June 30, 2019, respectively.

For the six months ended June 28, 2020 and June 30, 2019, revenue from Japan was $ 1.2 million, or 27 % of total revenue, and $ 764,000 , or 14 % of total revenue, respectively.

North America includes revenue from the United States of $ 1.3 million, or 58 % of total revenue, and $ 1.1 million, or 51 % of total revenue, for the three months ended June 28, 2020 and June 30, 2019, respectively.

For the six months ended June 28, 2020 and June 30, 2019 revenue from the United States was $ 2.2 million, or 51 % of total revenue, and $ 2.2 million, or 42 % of total revenue, respectively.

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

Three Months Ended

Six Months Ended

Distributor "A"

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Distributor "J"

Distributor "K"

_______________

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

As of March 29, 2020, 7% of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States.

As of June 28, 2020, 7 % of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States.

Note 15 — Commitments and Contingencies

1 unchanged sentence

The Company is required to take delivery of and pay for a portion of forecasted wafer volume.

As of March 29, 2020, and December 29,

20 19 , the Company had $51,000 and $57,000, respectively, of outstanding commitments for the purchase of wafer and finished goods inventory.

As of June 28, 2020, and December 29, 2019, the Company had $ 35,000 and $ 57,000 , respectively, of outstanding commitments for the purchase of wafer and finished goods inventory.

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

As of March 29, 2020, total outstanding purchase obligations for other goods and services were $795,000 of which $783,000 were due within the next twelve months.

As of June 28, 2020, total outstanding purchase obligations for other goods and services were $ 817,000 , which are due within the next twelve months.

Note 16 — Litigation

3 unchanged sentences

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

As of March 29, 2020, the Company was not involved in any litigation.

As of June 28, 2020, the Company was not involved in any litigation.

Note 17 — Restructuring

1 unchanged sentence

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

Pursuant to the restructuring plan, the Company recorded $479,000 of restructuring charges in the quarter ended March 29, 2020, consisting primarily of employee severance related costs.

The unpaid restructuring liabilities of $93,000 was included in the "Accrued Liabilities" in the consolidated balance sheet, which is expected to be paid in the second quarter of fiscal 2020.

The activities affecting the restructuring liabilities for the quarter ended March 29, 2020 are summarized as follows:

Restructuring Liabilities

Balance at December 30, 2019

Payments and adjustments relating to non-cash items

Balance at March 29, 2020

Pursuant to the restructuring plan, the Company recorded $ 513,000 of restructuring charges during the six-month period ended June 28, 2020, consisting primarily of employee severance related costs.

There are no accruals remaining as of June 28, 2020 as all amounts were disbursed during the six-month period ended June 28, 2020.

Note 18 – Subsequent Event

On May 6, the Company entered into a loan agreement with Heritage Bank (the “Loan”) for a loan of $1,191,687.77 pursuant to the PPP under the CARES Act, as implemented by the U.S.

Small Business Administration.

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

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

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

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

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

The principal and interest of the Loan are repayable in 18 monthly equal installments of $67,065.21 each.

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

Installments must be paid by the fifth calendar day.

On July 21, 2020, the Company completed the sale of 141,733 additional shares of common stock pursuant to the partial exercise of the underwriter’s option to purchase additional shares of common stock for the purpose of covering over-allotments in connection with the public offering closed on June 22, 2020, resulting in additional net proceeds to the Company of approximately $ 461,000 after deduction of underwriting discounts.

See Note 10 to the Unaudited Condensed Consolidated Financial Statements for more details.

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

What changed 10-Q

Item 1. Financial Statements