QUICKLOGIC Corp

Previous wording

Our new products include the following: eFPGA IP Licensing business and 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. Our mature products include primarily FPGA families named PASIC®3 and QuickRAM®, as well as programming hardware and design software. We currently have a total of three patent applications pending.

Current wording

Our new products include the following: eFPGA IP Licensing business and 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. Our mature products include primarily FPGA families named PASIC®3 and QuickRAM®, as well as programming hardware and design software. We currently have a total of four patent applications pending.

Previous wording

Customers typically order our products through our distributors. Currently, we have ten active distributors in North America and a network of fifteen 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.

Current wording

Customers typically order our products through our distributors. Currently, we have 11 active distributors in the United States and a network of 18 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.

Previous wording

During the second quarter of 2024, we generated total revenue of $4.1 million, a decrease of 31% compared to the prior quarter, and an increase of 41% compared to the same quarter last year. Our new product revenue in the second quarter was $3.1 million, a decrease of 37% from the prior quarter and an increase of 37% from the second quarter of 2023. Our mature product revenue was $1.1 million in the second quarter of 2024, a decrease of 5% compared to the prior quarter, and an increase of 56% compared to the second quarter of 2023. We expect our mature product revenue to continue to fluctuate over time.

Current wording

During the third quarter of 2024, we generated total revenue of $4.3 million, an increase of 4% compared to the prior quarter, and a decrease of 36% compared to the same quarter last year. Our new product revenue in the third quarter was $3.5 million, an increase of 16% from the prior quarter and a decrease of 42% from the third quarter of 2023. Our mature product revenue was $0.7 million in the third quarter of 2024, a decrease of 31% compared to the prior quarter, and an increase of 29% compared to the third quarter of 2023. We expect our mature product revenue to continue to fluctuate over time.

Previous wording

We devote substantially all of our development, sales, and marketing efforts to our neweFPGA IP licensing and professional services and SensiML initiatives. Overall, we reported a net loss of $1.6 million for the second quarter of 2024, as compared to a net income of $0.1 million in the prior quarter and a net loss of $2.3 million for the second quarter of 2023.

Current wording

We devote substantially all of our development, sales, and marketing efforts to our neweFPGA IP licensing and professional services and SensiML initiatives. Overall, we reported a net loss of $2.1 million for the third quarter of 2024, as compared to a net loss of $1.6 million in the prior quarter and a net income of $1.2 million for the third quarter of 2023.

Previous wording

As of June 30, 2024, we had one operating lease with a remaining lease term of 2.92 years. The operating lease relates to our company headquarters in San Jose, CA.

Current wording

As of September 29, 2024, we had one operating lease with a remaining lease term of 2.67 years. The operating lease relates to our company headquarters in San Jose, CA.

Previous wording

The methodologies, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of the company's financial condition and results of operations and requires us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical accounting policies include revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets. We believe that we apply judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented. However, any factual errors or errors in these judgments and estimates may have a material impact on our financial statements. During the three and six months ended June 30, 2024, there were no changes in our critical accounting policies from our disclosure in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 27, 2024.

Current wording

The methodologies, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of the company's financial condition and results of operations and requires us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical accounting policies include revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets. We believe that we apply judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented. However, any factual errors or errors in these judgments and estimates may have a material impact on our financial statements. During the three and nine months ended September 29, 2024, there were no changes in our critical accounting policies from our disclosure in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on March 27, 2024.

Previous wording

Product revenue for the second quarter of 2024 compared to the second quarter of 2023 increased $3.1 million. The increase resulted primarily from increases in professional services eFPGA revenues and revenue from devices and royalties.

Current wording

Product revenue for the third quarter of 2024 compared to the third quarter of 2023 decreased $2.4 million. The increase resulted primarily from decreases in professional services eFPGA revenues and revenues from sales of new devices, partially offset by increases in revenues from sales of mature devices.

Previous wording

eFPGA IP revenue for the three months ended June 30, 2024 and July 2, 2023 was $2.5 million and $1.9 million, respectively, which were primarily professional services revenue.

Current wording

eFPGA IP revenue for the three months ended September 29, 2024 and October 1, 2023 was $3.4 million and $5.8 million, respectively, which were primarily professional services revenue.

Previous wording

In the second quarter of 2024, gross profit increased $0.9 million, or 75%, compared to the same quarter in the prior year. The net increase in gross profit reflects a 41% increase in revenues, offset by a 18% net increase in cost of revenue. Revenue increased from the same quarter in the prior year due to revenues associated with Department of Defense contracts, as well as increases in device sale and royalty revenues. The net increase in cost of revenues was primarily due to the increased activity commensurate with the professional services revenue contracts. Labor, semiconductor tooling, and increased depreciation expenses substantially comprised this increase, with slight offsets from decreased consulting expenses.

Current wording

In the third quarter of 2024, gross profit decreased $2.7 million, or 53%, compared to the same quarter in the prior year. The net decrease in gross profit reflects a 36% decrease in revenues, combined with a 23% net increase in cost of revenue. Revenue decreased from the same quarter in the prior year due to the timing of Department of Defense contracts. The net increase in cost of revenues was primarily due to the increased activity commensurate with the professional services revenue contracts. Labor and increased depreciation expenses from capitalized tooling substantially comprised this increase, with slight offsets from decreased consulting and software expenses.

Previous wording

Our R&D 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. The $22 thousand increase in R&D expenses in the second quarter of 2024, as compared to the second quarter of 2023, was primarily due to net allocations to cost of revenue resulting from labor and tooling costs attributable to professional services revenue contracts, with slight offsets due to increases in net depreciation and amortization expense from notes payable related to equipment.

Current wording

Our R&D 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. R&D expenses for the third quarter of 2024 as compared to the same quarter in 2023 were essentially flat, reflecting continued allocation of R&D resources to COGS for revenue contracts with customers.

Previous wording

Our selling, general and administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources, and general management. The $0.7 million increase in SG&A expenses in the second quarter of 2024, as compared to the second quarter of 2023, was attributable to increases in equity compensation expenses.

Current wording

Our selling, general and administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources, and general management. The $0.4 million increase in SG&A expenses in the third quarter of 2024, as compared to the third quarter of 2023, was attributable primarily to increases in compensation.

Previous wording

Interest expense relates primarily to our revolving line of credit facility and notes payable. Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned in our money market accounts. Changes in interest expense are related to our revolving loan's interest rate variability. Interest expense for the second quarter of this year as compared to the same period in the prior year decreased approximately $10 thousand, which was comprised of a $5 thousand increase in interest expense related to notes payable, a $14 thousand decrease in interest expense and facility fees related to our revolving line of credit facility, and a $1 thousand decrease in interest expense related to IT hardware financing costs. The favorable change in interest income and other income (expense), net reflected decreased foreign exchange losses over the prior period.

Current wording

Interest expense relates primarily to our revolving line of credit facility and notes payable. Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned in our money market accounts. Changes in interest expense are related to our revolving loan's interest rate variability. Interest expense for the third quarter of this year as compared to the same period in the prior year increased approximately $138 thousand, which was comprised of a $21 thousand increase in interest expense related to notes payable, a $119 thousand increase in interest expense and facility fees related to our revolving line of credit facility, and a $1 thousand decrease in interest expense related to IT hardware financing costs. Interest income and other income (expense), which is mostly comprised of bank fees, net foreign exchange losses, and refunds, remained essentially flat.

Previous wording

The Company recorded a net income tax benefit of $6 thousand for the three months ended June 30, 2024 and a net income tax benefit of $7 thousand for the three months ended July 2, 2023. The effective tax rate for the second quarter ended June 30, 2024 was (0.37)% as compared to (0.29)% for the same period in the prior year.

Current wording

The Company recorded a net income tax expense of $13 thousand for the three months ended September 29, 2024 and a net income tax expense of $4 thousand for the three months ended October 1, 2023. The effective tax rate benefit for the third quarter ended September 29, 2024 was (0.60)% as compared to 0.20% for the same period in the prior year.

Previous wording

The table below sets forth the changes in revenue in the six months ended June 30, 2024 compared to the six months ended July 2, 2023 (in thousands, except percentage data):

Current wording

The table below sets forth the changes in revenue in the nine months ended September 29, 2024 compared to the nine months ended October 1, 2023 (in thousands, except percentage data):

Previous wording

Product revenue for the second quarter of 2024 compared to the second quarter of 2023 increased $1.2 million. The increase resulted primarily from increases in professional services eFPGA revenues and revenue from devices and royalties.

Current wording

Product revenue for the third quarter of 2024 compared to the third quarter of 2023 increased $0.7 million. The increase resulted primarily from increases in SaaS IP revenues and revenue from devices and royalties.

Previous wording

The table below sets forth the changes in new product revenue in the six months ended June 30, 2024 compared to the six months ended July 2, 2023 (in thousands, except percentage data):

Current wording

The table below sets forth the changes in new product revenue in the nine months ended September 29, 2024 compared to the nine months ended October 1, 2023 (in thousands, except percentage data):

Previous wording

eFPGA IP revenue for the six months ended June 30, 2024 and July 2, 2023 was $6.6 million and $4.7 million, respectively, which were primarily professional services revenue.

Current wording

eFPGA IP revenue for the nine months ended September 29, 2024 and October 1, 2023 was $10.0 million and $10.5 million, respectively, which were primarily professional services revenue.

Previous wording

The table below sets forth the changes in gross profit for the six months ended June 30, 2024 compared to the six months ended July 2, 2023 (in thousands, except percentage data):

Current wording

The table below sets forth the changes in gross profit for the nine months ended September 29, 2024 compared to the nine months ended October 1, 2023 (in thousands, except percentage data):

Previous wording

In the second quarter of 2024, gross profit increased $2.5 million, or 69%, compared to the same quarter in the prior year. The increase in gross profit reflects a 44% increase in revenues, offset by a 17% net increase in cost of revenue. Revenue increased from the same quarter in the prior year due to revenues associated with Department of Defense contracts, as well as increases in device sale and royalty revenues. The increase in cost of revenues was primarily due to the increased activity commensurate with the professional services revenue contracts. Labor, semiconductor tooling, and increased depreciation expenses, offset by decreases in consulting expenses, substantially comprised this increase.

Current wording

In the third quarter of 2024, gross profit decreased $0.2 million, or 3%, compared to the same quarter in the prior year. The decrease in gross profit reflects a 19% net increase in cost of revenue, partially offset by a 5% increase in revenues. Revenue increased from the same quarter in the prior year due to increases in SaaS IP revenues and revenue from devices and royalties. The increase in cost of revenues was primarily due to the increased activity commensurate with the professional services revenue contracts. Contract manufacturing and outside services related to revenue contracts with customers substantially comprised this increase.

Previous wording

The table below sets forth the changes in operating expenses for the six months ended June 30, 2024 compared to the six months ended July 2, 2023 (in thousands, except percentage data):

Current wording

The table below sets forth the changes in operating expenses for the nine months ended September 29, 2024 compared to the nine months ended October 1, 2023 (in thousands, except percentage data):

Previous wording

Our R&D 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. The $0.1 million decrease in R&D expenses in the second quarter of 2024, as compared to the second quarter of 2023, was primarily due to allocations to cost of revenue resulting from labor and tooling costs attributable to professional services revenue contracts.

Current wording

Our R&D 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. R&D expenses remained essentially flat in the nine months ending September 29, 2024 as compared to the same period in the prior year, which was primarily due to continued allocations of R&D resources to costs of revenues resulting from labor and tooling costs attributable to professional services revenue contracts with customers.

Previous wording

Our selling, general and administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources, and general management. The $0.2 million increase in SG&A expenses in the second quarter of 2024, as compared to the second quarter of 2023, was attributable to increases in compensation, offset by decreases in variable incentive compensation and outside services.

Current wording

Our selling, general and administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources, and general management. The $1.0 million increase in SG&A expenses in the nine months ending September 29, 2024 as compared to the same period in the prior year, was primarily attributable to increases in equity and compensation expenses.

Previous wording

The table below sets forth the changes in interest expense and interest income and other income (expense), net, for the six months ended June 30, 2024 compared to the six months ended July 2, 2023 (in thousands, except percentage data):

Current wording

The table below sets forth the changes in interest expense and interest income and other income (expense), net, for the nine months ended September 29, 2024 compared to the nine months ended October 1, 2023 (in thousands, except percentage data):

Previous wording

Interest expense relates primarily to our revolving line of credit facility and notes payable. Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned in our money market accounts. Changes in interest expense are related to our revolving loan's interest rate variability. Interest expense for the second quarter of this year as compared to the same period in the prior year increased approximately $1 thousand, which was comprised of an $8 thousand increase in interest expense related to notes payable, a $6 thousand decrease in interest expense related to our revolving line of credit facility, and a $1 thousand decrease in interest expense related to IT hardware financing costs. The favorable change in interest income and other income (expense), net reflected decreased foreign exchange losses over the prior period.

Current wording

Interest expense relates primarily to our revolving line of credit facility and notes payable. Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned in our money market accounts. Changes in interest expense are related to our revolving loan's interest rate variability. Interest expense for the second quarter of this year as compared to the same period in the prior year increased approximately $139 thousand, which was comprised of an $28 thousand increase in interest expense related to notes payable, a $113 thousand increase in interest expense related to our revolving line of credit facility, and a $2 thousand decrease in interest expense related to IT hardware financing costs. The favorable change in interest income and other income (expense), net reflects accrued interest receivable related to note receivables with offsets related to slight increase in foreign exchange losses.

Previous wording

The table below sets forth the changes in the provisions for income taxes in the six months ended June 30, 2024, compared to the six months ended July 2, 2023 (in thousands, except percentage data):

Current wording

The table below sets forth the changes in the provisions for income taxes in the nine months ended September 29, 2024, compared to the nine months ended October 1, 2023 (in thousands, except percentage data):

Previous wording

There was a slight change in the income tax expense for the six months ended June 30, 2024 as compared to the six months ended July 2, 2023. The computed tax rate for the six months ended June 30, 2024 was 0.10% as compared to 0.02% for the six months ended July 2, 2023. The difference between the estimated annual effective income expense of 0.10% and the U.S. federal statutory tax rate of 21% is primarily due to the Company's valuation allowance movement in each period presented. It is more likely than not that the Company will not realize the federal, state, and certain foreign deferred tax assets as of June 30, 2024. As such, the Company continues to maintain a full valuation allowance against all of its US and certain foreign net deferred tax assets as of June 30, 2024. The projected annual effective tax rate before certain discrete items as of the second quarter of 2024 is 6.38%, as compared to the projected annual effective tax rate of (3.04)% for the same period in the prior year.

Current wording

There was a slight increase in the income tax expense for the nine months ended September 29, 2024 as compared to the nine months ended October 1, 2023. The computed tax rate for the nine months ended September 29, 2024 was (0.40%) as compared to (0.13%) for the nine months ended October 1, 2023. The difference between the estimated annual effective income expense of 0% and the U.S. federal statutory tax rate of 21% is primarily due to the Company's valuation allowance movement in each period presented. It is more likely than not that the Company will not realize the federal, state, and certain foreign deferred tax assets as of September 29, 2024. As such, the Company continues to maintain a full valuation allowance against all of its US and certain foreign net deferred tax assets as of September 29, 2024. The projected annual effective tax rate before certain discrete items as of the third quarter of 2024 is 0%, as compared to the projected annual effective tax rate of 2.67% for the same period in the prior year.

Previous wording

Total assets decreased by approximately $0.3 million primarily due to a $2.1 million reduction in accounts receivable and contract assets due to the billing and collection of outstanding receivables, $1.7 million in depreciation and amortization expense, a $1.3 million reduction in cash and cash equivalents due to payment of trade payables, and a $0.4 million reduction in inventory and other assets. This was partially offset by the capitalization of $4.9 million in property, plant, and equipment and internal-use software assets and a $0.2 million increase in prepaid expenses and other receivables.

Current wording

Total assets increased by approximately $1.9 million, primarily due to the capitalization of $7.8 million in property, plant, and equipment and internal-use software assets and a $1.4 million increase in other current assets, partially offset by $2.6 million in depreciation and amortization expense, a $2.2 million reduction in cash and cash equivalents due to payment of trade payables, a $2.2 million reduction in accounts receivable and contract assets due to the billing and collection of outstanding receivables, and a $0.2 million reduction in inventory.

Previous wording

Liabilities decreased by approximately $5.3 million due to payment of trade payables of $3.2 million, accrued liabilities of $1.4 million, and debt and lease obligations of $0.4 million, as well as the recognition of deferred revenue of $0.3 million. Equity increased $4.9 million due to a $6.4 million increase in additional paid in capital arising from the sale of shares of common stock and recognition of stock-based compensation, partially offset by a $1.4 million net loss for the six months ended June 30, 2024.

Current wording

Liabilities decreased by approximately $2.1 million due to payment of trade payables of $1.8 million, accrued liabilities of $1.2 million, and debt and lease obligations of $1.1 million, as well as the recognition of deferred revenue of $0.6 million. This was partially offset by an increase of $2.6 million in notes payable due to the purchase of additional software assets through financing arrangements. Equity increased $4.0 million due to a $7.5 million increase in additional paid in capital arising from the sale of shares of common stock and recognition of stock-based compensation, partially offset by a $3.5 million net loss for the nine months ended September 29, 2024.

Previous wording

We have financed our operations and capital investments through public and private offerings of our common stock, financing arrangements, operating leases, borrowings under a revolving line of credit, and cash flows from operations. In addition to our cash, cash equivalents and restricted cash of $23.3 million, as of June 30, 2024, other sources of liquidity included a $20.0 million drawn down from our revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce (“Heritage Bank”), and $3.5 million in net proceeds from the sale of our common stock on March 13, 2024. Costs related to the offering were immaterial. Our restricted cash balance as of June 30, 2024 was $0.1 million and relates to amounts pledged as cash security for the use of credit cards.

Current wording

We have financed our operations and capital investments through public and private offerings of our common stock, financing arrangements, operating leases, borrowings under a revolving line of credit, and cash flows from operations. In addition to our cash, cash equivalents and restricted cash of $22.4 million, as of September 29, 2024, other sources of liquidity included a $20.0 million drawn down from our revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce (“Heritage Bank”), and $3.5 million in net proceeds from the sale of our common stock on March 13, 2024. Costs related to the offering were immaterial. Our restricted cash balance as of September 29, 2024 was $0.1 million and relates to amounts pledged as cash security for the use of credit cards.

Previous wording

On April 28, 2023, we converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Original Note"). At the time, the Original Note bore an interest rate of 3.0% compounded monthly. On June 28, 2023, we cancelled the Original Note and entered into a revised promissory note ("Second Revised Note") with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.8% effective annual interest rate, accruing from the date of the Original Note. On June 27, 2024, we cancelled the Second Revised Note and entered into a revised promissory note ("Current Note") with the customer, where the interest rate changed to 10.0% per annum. Accrued but unpaid interest will be compounded monthly, accruing from the date of the Current Note. Additionally, if not prepaid prior to the Current Note maturity date of the earlier of (i) 24 months from June 28, 2024 or (ii) the closing of the customer's Series B financing, the principal and all accrued and unpaid interest will be due and payable to us. If an event of default occurs, the interest rate will increase to 15.31%. All other terms of the Note remained the same. As of June 30, 2024, the related note receivable balance was $1.23 million, including $66 thousand in accrued interest.

Current wording

On April 28, 2023, we converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Original Note"). At the time, the Original Note bore an interest rate of 3.0% compounded monthly. On June 28, 2023, we cancelled the Original Note and entered into a revised promissory note ("Second Revised Note") with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.8% effective annual interest rate, accruing from the date of the Original Note. On June 27, 2024, we cancelled the Second Revised Note and entered into a revised promissory note ("Current Note") with the customer, where the interest rate changed to 10.0% per annum. Accrued but unpaid interest will be compounded monthly, accruing from the date of the Current Note. Additionally, if not prepaid prior to the Current Note maturity date of the earlier of (i) 24 months from June 28, 2024 or (ii) the closing of the customer's Series B financing, the principal and all accrued and unpaid interest will be due and payable to us. If an event of default occurs, the interest rate will increase to 15.31%. All other terms of the Note remained the same. As of September 29, 2024, the related note receivable balance was $1.26 million, including $97 thousand in accrued interest.

Previous wording

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of June 30, 2024. As of June 30, 2024, we had $20.0 million outstanding on the Revolving Facility with an interest rate of 9.00%.

Current wording

We were in compliance with all the Heritage Bank Revolving Facility loan covenants as of September 29, 2024. As of September 29, 2024, we had $20.0 million outstanding on the Revolving Facility with an interest rate of 8.50%.

Previous wording

Various factors affect our liquidity, including, among others: the level of revenue and gross profit as a result of the cyclicality of the semiconductor industry; the conversion of design opportunities into revenue; market acceptance of existing and new products including solutions based on our ArcticLink® and PolarPro® platforms, ArcticPro™, EOS S3 SoC, Quick AI solution, QuickAI™, SensiML Analytics Toolkit, Eclipse II products, and eFPGA IP license and professional services; fluctuations in revenue as a result of product end-of-life; fluctuations in revenue as a result of the stage in the product life cycle of our customers’ products; costs of securing access to and availability of adequate manufacturing capacity; levels of inventories; wafer purchase commitments; customer credit terms; the amount and timing of research and development expenditures; the timing of new product introductions; production volumes; product quality; sales and marketing efforts; the value and liquidity of our investment portfolio; changes in operating assets and liabilities; the ability to obtain or renew debt financing and to remain in compliance with the terms of existing credit facilities; the ability to raise funds from the sale of equity in the company; the issuance and exercise of stock options and participation in our employee stock purchase plan; and other factors related to the uncertainties of the industry and global economics.

Current wording

Various factors affect our liquidity, including, among others: the level of revenue and gross profit as a result of the cyclicality of the semiconductor industry; the conversion of design opportunities into revenue; market acceptance of existing and new products including solutions based on our ArcticLink® and PolarPro® platforms, ArcticPro™, EOS S3 SoC, Quick AI solution, QuickAI™, SensiML Analytics Toolkit, Eclipse II products, and eFPGA IP license and professional services; the timing, milestones, and payments related to our government contracts; fluctuations in revenue as a result of product end-of-life; fluctuations in revenue as a result of the stage in the product life cycle of our customers’ products; costs of securing access to and availability of adequate manufacturing capacity; levels of inventories; wafer purchase commitments; customer credit terms; the amount and timing of research and development expenditures; the timing of new product introductions; production volumes; product quality; sales and marketing efforts; the value and liquidity of our investment portfolio; changes in operating assets and liabilities; the ability to obtain or renew debt financing and to remain in compliance with the terms of existing credit facilities; the ability to raise funds from the sale of equity in the company; the issuance and exercise of stock options and participation in our employee stock purchase plan; and other factors related to the uncertainties of the industry and global economics.

Previous wording

As of June 30, 2024, most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank. As of June 30, 2024, our interest-bearing debt consisted of$1.2 million outstanding under notes payable and$20.0 million outstanding under our Revolving Facility. See Note 7, Debt Obligations, to the unaudited condensed consolidated financial statements for more details.

Current wording

As of September 29, 2024, most of our cash, cash equivalents and restricted cash were invested in a money market account at Heritage Bank. As of September 29, 2024, our interest-bearing debt consisted of$3.1 million outstanding under notes payable and$20.0 million outstanding under our Revolving Facility. See Note 7, Debt Obligations, to the unaudited condensed consolidated financial statements for more details.

Previous wording

For the six months ended June 30, 2024, net cash used in operating activities was $0.1 million, which was primarily due to the net loss of $1.4 million, adjusted for net non-cash charges of $4.3 million, which included $2.5 million of stock-based compensation, $1.7 million in depreciation and amortization expenses, and $0.1 million in ROU asset amortization expenses. Cash outflow from changes in operating assets and liabilities was approximately $2.9 million and was primarily due to decreases in accounts payable and accrued liabilities, partially offset by a decrease in contract assets and accounts receivable.

Current wording

For the nine months ended September 29, 2024, net cash used in operating activities was $0.1 million, which was primarily due to the net loss of $3.5 million, adjusted for net non-cash charges of $6.5 million, which included $3.7 million of stock-based compensation, $2.6 million in depreciation and amortization expenses, and $0.2 million in ROU asset amortization expenses. Cash outflow from changes in operating assets and liabilities was approximately $3.1 million and was primarily due to decreases in accounts payable, accrued liabilities, and deferred revenues, partially offset by a decrease in contract assets and accounts receivable.

Previous wording

For the six months ended July 2, 2023, net cash used in operating activities was $0.3 million, which was primarily due to the net loss of $3.5 million, adjusted for net non-cash charges of $2.4 million, which included $1.3 million of stock-based compensation, $0.7 million in depreciation and amortization expenses, $0.2 million in write-downs of inventories, and $0.2 million in ROU asset amortization expenses. Cash inflow from changes in operating assets and liabilities was approximately $0.7 million and was primarily due to increases in accounts receivable and decreases in contract assets, partially offset by decreases in accounts payable and other assets.

Current wording

For the nine months ended October 1, 2023, net cash used in operating activities was $0.2 million, which was primarily due to the net loss of $2.3 million, adjusted for net non-cash charges of $4.0 million, which included $1.9 million of stock-based compensation, $1.2 million in depreciation and amortization expenses, $0.6 million in write-downs of inventories, and $0.3 million in ROU asset amortization expenses. Cash outflow from changes in operating assets and liabilities was approximately $1.9 million and was primarily due to increases in contract assets and other assets and decreases in accounts payable and lease liabilities, partially offset by decreases in accounts receivable and increases in accrued liabilities.

Previous wording

For the six months ended June 30, 2024 and July 2, 2023 cash used in investing activities was $4.5 million and $0.5 million, respectively, which were primarily attributable to the capital expenditures relating to licensed software, capitalized internal-use software, and purchase of specialized semiconductor tooling, which was capitalized.

Current wording

For the nine months ended September 29, 2024 and October 1, 2023 cash used in investing activities was $5.0 million and $2.4 million, respectively, which were primarily attributable to the capital expenditures relating to licensed software, capitalized internal-use software, and purchase of specialized semiconductor tooling, which was capitalized.

Previous wording

For the six months ended June 30, 2024, cash provided by financing activities was $3.2 million, which was primarily derived from the net proceeds of $3.7 million from the common stock issuance, partially offset by $0.5 million in payments related to financing arrangements.

Current wording

For the nine months ended September 29, 2024, cash provided by financing activities was $2.8 million, which was primarily derived from the net proceeds of $3.7 million from the common stock issuance, partially offset by $0.9 million in payments related to financing arrangements.

Previous wording

For the six months ended July 2, 2023, cash provided by financing activities was $2.2 million and was primarily derived from the net proceeds of $2.4 million from the common stock issuances and borrowings of notes payable of $0.1 million, partially offset by $0.3 million in payments related to financing arrangements.

Current wording

For the nine months ended October 1, 2023, cash provided by financing activities was $2.1 million and was primarily derived from the net proceeds of $2.4 million from the common stock issuances and borrowings of notes payable of $0.1 million, partially offset by $0.5 million in payments related to financing arrangements.