QUICKLOGIC Corp

Note1 — The Company and Basis of Presentation

QuickLogic Corporation was founded in1988 and reincorporated in Delaware in1999. The Company provides innovative, programmable silicon and software platforms to enable its customers to develop custom hardware products in a fast time-to-market and cost-effective way. Specifically, QuickLogic is a fabless semiconductor company with a variety of products: embedded FPGA ("eFPGA") intellectual property ("IP"), low power, multi-core semiconductor system-on-chips ("SoCs"), discrete FPGAs, and AI software. QuickLogic's customers can use its eFPGA IP for hardware acceleration and pre-processing in their Application Specific Integrated Circuit ("ASIC") products, the Company's SoCs to run its customers' software and build their hardware around, and the Company's discrete FPGAs to implement their custom functionality. The Analytics Toolkit from SensiML Corporation ("SensiML"), the Company's wholly-owned subsidiary, provides an end-to-end Artificial Intelligence / Machine Learning solution with accurate sensor algorithms using AI technology. The full range of platforms, software tools, and eFPGA IP enables the practical and efficient adoption of AI, voice, and sensor processing across Aerospace and Defense, Consumer/Industrial IoT, and Consumer Electronics markets.

The accompanying interim condensed consolidated financial statements are unaudited. In the opinion of the Company’s management, these statements have been prepared in accordance with the United States generally accepted accounting principles (“U.S. GAAP”), and include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of results for the interim periods presented. The Company recommends that these interim unaudited condensed consolidated financial statements be read in conjunction with the Company's Form10-K for the year ended* December 31, 2023*, which was filed with the Securities and Exchange Commission (“SEC”) on* March 27, 2024*. Operating results for thethree andnine months ended* September 29, 2024* arenot necessarily indicative of the results that* may*be expected for the full fiscal year.

QuickLogic's fiscal year ends on the Sunday closest to* December**31* and each fiscal quarter ends on the Sunday closest to the end of each calendar quarter. QuickLogic'sthird fiscal quarter for2024 and2023 ended on* September 29, 2024* and* October 1, 2023*, respectively.

The Company hasone reportable business segment based on how its Chief Operating Decision Maker ("CODM") manages the business and in a manner consistent with the internal reporting provided to the CODM. The CODM, the Company's Chief Executive Officer ("CEO"), reviews detailed income statements, balance sheets, and sales reports in order to assess performance of the Company. Sales and operating income are some of the key variables monitored by the CODM and management when determining the Company's consolidated financial condition and operating performance.

Liquidity

The Company has financed its operations and capital investments through the sale of common stock, financing arrangements, operating leases, a revolving line of credit with Heritage Bank (the "Revolving Facility"), and cash flows from operations. As of* September 29, 2024*, the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $22.4 million, inclusive of a $20.0 million advance from its Revolving Facility and $3.5 million in net proceeds from the Company's sale of common stock in thenine months ended* September 29, 2024*. The Company's 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.

The Company was in compliance with all the Revolving Facility loan covenants as of* September 29, 2024*. As of* September 29, 2024*, the Company had $20.0 million outstanding on the Revolving Facility with an interest rate of 8.50%.

On* March 13, 2024*, the Company entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 223 thousand shares of common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $3.5 million. Issuance costs related to the offering were negligible. The purchase price for each share of common stock was $16.00. See Note9 for additional information.

On* March 21, 2023*, the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450 thousand shares of its common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $2.3 million. Issuance costs related to the offering were immaterial. The purchase price for each share of common stock in the Share Placement was $5.14.

On* April 28, 2023*, the Company converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Original Note"). At the time, the Original Note bore an interest rate of 3.0% compounded monthly. On* June 28, 2023*, the Company cancelled the Original Note and entered into a revised promissory note ("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*, the Company 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, ifnot prepaid prior to the Current Note maturity date of the earlier of (i)24 months from* June 28, 2024or (ii) the closing of the customer's Series B financing, the principal and all accrued and unpaid interest will be due and payable to the Company. If an event of default occurs, the interest rate will increase to 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.

The Company currently uses its cash to fund its working capital, to accelerate the development of next generation products, and for general corporate purposes. Based on past performance and current expectations, the Company believes that its existing cash and cash equivalents, together with $3.5 million gross cash proceeds from the* March 13, 2024* financing, its revenues from operations, and the available financial resources from the Revolving Facility with Heritage Bank will be sufficient to fund its operations and capital expenditures and provide adequate working capital for the nexttwelve months.

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Various factors affect the Company’s liquidity, including, among others: the level of revenue and gross profit as a result of the cyclicality of the semiconductor industry; the conversion of design opportunities into revenue; market acceptance of existing and new products including solutions based on the Company's ArcticLink® and PolarPro® platforms, ArcticPro™, EOSS3 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 its customers’ products; costs of securing access to and availability of adequate manufacturing capacity; levels of inventories; wafer purchase commitments; customer credit terms; the amount and timing of research and development expenditures; the timing of new product introductions; production volumes; product quality; sales and marketing efforts; the value and liquidity of its investment portfolio; changes in operating assets and liabilities; the ability to obtain or renew debt financing and to remain in compliance with the terms of existing credit facilities; the ability to raise funds from the sale of equity in the Company; the issuance and exercise of stock options and participation in the Company’s employee stock purchase plan; and other factors related to the uncertainties of the industry and global economics.

Over the longer term, the Company anticipates that sales generated from its new product offerings, existing cash and cash equivalents, together with financial resources from its Revolving Facility with Heritage Bank, assuming renewal of the Revolving Facility or the Company entering into a new debt agreement with an alternative lender prior to the expiration of the revolving line of credit on* December 31, 2025*, and its ability to raise additional capital in the public capital markets will be sufficient to satisfy its operations and capital expenditures. However, the Company cannot provide any assurance that it will be able to raise additional capital, if required, or that such capital will be available on terms acceptable to the Company. The inability of the Company to generate sufficient sales from its new product offerings and/or raise additional capital if needed could have a material adverse effect on the Company’s operations and financial condition, including its ability to maintain compliance with its lender’s financial covenants.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of QuickLogic and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Foreign Currency

The functional currency of the Company's non-U.S. operations is the U.S. dollar. Accordingly, all monetary assets and liabilities of these foreign operations are translated into U.S. dollars at current period-end exchange rates and non-monetary assets and related elements of expense are translated using historical exchange rates. Income and expense elements are translated to U.S. dollars using the average exchange rates in effect during the period. Gains and losses from the foreign currency transactions of these subsidiaries are recorded as interest income and other expense, net in the unaudited condensed consolidated statements of operations, and are insignificant for all periods presented.

Uses of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of commitments and contingencies at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods.

The methods, estimates, and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results it reports in its consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of the Company's financial condition and results of operations and requires it to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

Although these estimates are based on the Company’s knowledge of current events and actions it* mayundertake in the future, actual results mayultimately materially differ from these estimates and assumptions. Areas where management uses subjective judgment include, but arenot* limited to, revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets. The Company believes that it applies judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented. However, any factual errors or errors in these judgments and estimates* mayhave a material impact on the Company's consolidated financial statements. For additional information, please refer to the Company's most recent Annual Report on Form10*-K, which was filed with the SEC on* March 27, 2024*.

Concentration of Risk

The Company's accounts receivable and note receivable are denominated in U.S. dollars and are derived primarily from sales to customers located in North America, Asia Pacific, and Europe. The Company performs ongoing credit evaluations of its customers and doesnot require collateral. See Note12, Information Concerning Product Lines, Geographic Information and Revenue Concentration, for information regarding concentrations associated with accounts receivable.

As of* September 29, 2024* and* December 31, 2023*, the Company had $20.0 million of revolving debt outstanding with Heritage Bank; the revolving debt carried an interest rate of 8.50% per annum and 9.00% per annum, respectively. Heritage Bank has afirst priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the agreement. The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period. The maturity date for advances under the revolving debt agreement is* December 31, 2025*. At* September 29, 2024*, the Company had utilized a significant portion of the revolving debt, and as a result, it maintains a substantial amount of cash deposits with Heritage Bank. The concentration of cash withone financial institution poses certain risks.

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For instance, adverse developments affecting financial institutions, companies in the financial services industry, or the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance, could adversely impact the stability of Heritage Bank, leading to additional financial risks for the Company.

Any material decline in available funding or the Company's ability to access its cash, cash equivalents, and liquidity resources, inclusive of those at Heritage Bank, could adversely impact its ability to meet its operating expenses, financial and contractual obligations, or result in breaches of its contractual obligations. Any of these impacts could have material adverse impacts on the Company's operations and liquidity.

Note2 — Significant Accounting Policies

During thethree andnine months ended* September 29, 2024*, there wereno changes to the Company's significant accounting policies from its disclosures in the Annual Report on Form10-K for the year ended* December 31, 2023*. For a discussion of the significant accounting policies, please see the Annual Report on Form10-K for the fiscal year ended* December 31, 2023*, filed with the SEC on* March 27, 2024*.

Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to current period presentation. Further, certain prior period disclosures in the footnotes to the consolidated financial statements have been modified to conform with current period presentation.

In thenine months ended* September 29, 2024*, there weno observable indicators of impairment for the non-marketable equity investment. Furthermore, utilizing the probability-of-default method to determine the current expected credit loss for the Company's note receivable, the Company determined the associated current expected credit loss to be de minimis as of* September 29, 2024*.

Financing Arrangements, Non-Cash Activities, & Correction of an Error

The Company previously classified certain licensed tooling software as leased assets and liabilities under ROU assets and financing lease liabilities pursuant to lease accounting under ASC842, Leases. Upon further analysis, the Company determined these amounts are intangible assets subject to amortization in accordance with ASC350, Intangibles, Goodwill, and Other and financed through financing arrangements. As a result, the Company corrected immaterial errors to revise its consolidated statement of cash flows for thenine months ended* October 1, 2023*. Cash payments on notes payable during thenine months ended* October 1, 2023* were $0.5 million, instead of presented as payments of finance lease obligations. Proceeds from notes payable during thenine months ended* October 1, 2023* were $0.1 million, instead of increases in accrued liabilities and other long-term liabilities. Additionally, $0.5 million was added to the depreciation and amortization adjustment for amortization of software tools financed through financing arrangements for thenine months ended* October 1, 2023*.

Conforming the Company's consolidated statement of cash flows for thenine months ended* October 1, 2023to the Company's reclassification at fiscal year2023* year-end of certain assets from property and equipment to internal-use software resulted in the reclassification of investing cash outflows from capital expenditures to internal-use software in the amount of $0.3 million.

Additionally, non-cash activities of $0.3 million related to deferred charges were removed from the consolidated statement of cash flows. Purchases of assets with financing arrangements were $0.6 million for thenine months ended* October 1, 2023*.

The Company has determined the correction of these errors didnot have a material impact on the Company's financial statements, including net income and the balance of accumulated deficit as of and for thenine months ended* October 1, 2023*.

Recent Accounting Standards Adopted

In* June 2022,the FASB issued ASUNo.* 2022-03, Fair Value Measurement (Topic820*): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictionsto clarify the measurement of the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and requires disclosures related to these types of equity securities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023,and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that havenot* yet been issued or made available for issuance. The Company adopted ASUNo. 2020-06 on* January 1, 2024and it hadno* material impact on the Company's consolidated financial statements or related disclosures.

Recent Accounting StandardsNot Yet Adopted**

In* December 2023,the FASB issued ASUNo.* 2023-09, Income Taxes (Topic740*) Improvements to Income Tax Disclosures* to enhance the transparency and decision usefulness of income tax disclosures by providing information to better assess how an entity's operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. For public entities, the amendments in this Update are effective for fiscal years beginning after* December 15, 2024.Early adoption is permitted for annual financial statements that havenot* yet been issued or made available for issuance. The adoption of this ASU isnot expected to have a material impact on the Company's consolidated financial statements or disclosures.

In* November 2023,the FASB issued ASUNo.* 2023-07, Segment Reporting (Topic280*) Improvements to Disclosures About Reportable Segmentsto enhance disclosures about significant segment expenses, among other interim disclosure requirements. For public entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023,and interim periods beginning after December 15, 2024.Early adoption is permitted. The adoption of this ASU isnot* expected to have a material impact on the Company's consolidated financial statements or disclosures.

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Note3 — Net Income (Loss) Per Share

Basic net income (loss) per share was computed by dividing net income (loss) available by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share was computed using the weighted average number of common shares outstanding during the period plus potentially dilutive common shares outstanding during the period under the treasury stock method. In computing diluted net income (loss) per share, the weighted average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants. For periods in which the Company has reported a net loss, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders as dilutive common shares arenot assumed to have been issued if their effect is anti-dilutive. For periods in which the Company has reported a net income, diluted net income per share attributable to common stockholders is different from basic net income per share attributable to common stockholders as dilutive common shares would increase the amount of shares outstanding reduced by the amounts of treasury shares repurchased from the proceeds at the average market price for the period.

For thethree andnine months ended* September 29, 2024and thenine* months ended* October 1, 2023,892 thousand and 925 thousand shares of common stock, respectively, associated with equity awards and the estimated number of shares to be purchased under the current offering period of the2009* Employee Stock Purchase Plan were outstanding. These shares werenot included in the computation of diluted net loss per share, as they were considered anti-dilutive due to the net losses the Company experienced during this period. Warrants to purchase up to 386 thousand shares that were issued in connection with the* May 29, 2018*, stock offering werenot included in the diluted loss per share calculation of the periods presented as they were also considered anti-dilutive due to the net loss the Company experienced during these periods. The warrants were exercisable through* May 29, 2023* at a price of $19.32 per share. The warrants expired unexercised on* May 29, 2023*.

For thethree months ended* October 1, 2023,925 thousand shares of common stock associated with equity awards and the estimated number of shares to be purchased under the current offering period of the2009* Employee Stock Purchase Plan were outstanding. Of these, a 276 thousand share equivalent was determined to be dilutive and included in the computation of diluted net income per share for the period. Estimated proceeds for the dilutive shares were determined to be $147 thousand, which resulted in a reduction of dilutive shares by 4,672 using the treasury stock method at an average market price of $8.41.

Note4 — Balance Sheet Components

The following table provides details relating to certain balance sheet line items as of* September 29, 2024*, and* December 31, 2023* (in thousands):

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As of* September 29, 2024and December 31, 2023,*work-in-process ("WIP") inventories, net consist primarily of $0.4 million and $0.5 million, respectively, of die wafers and $1.0 million and $1.1 million, respectively, of tested, unmarked devices held for sale, which are completed upon customer orders.

The Company capitalized $5.35 million in pre-production design and development costs as tooling to be utilized under its long-term professional services contracts for thenine months ended* September 29, 2024*. $3.6 million in pre-production design and development costs were capitalized as tooling for thenine months ended* October 1, 2023*. The capitalized assets recognized in the period are owned by the Company.

The Company recorded depreciation and amortization expense of $2.6 million and $1.2 million for thenine months ended* September 29, 2024and October 1, 2023*, respectively. No interest was capitalized for any period presented.

Depreciation and amortization expense included approximately $0.5 million and $0.4 million of amortization expense related to capitalized internal-use software for thenine months ended* September 29, 2024and October 1, 2023*, respectively.

Note5 — Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation begins at the time the asset is placed in service. Maintenance and repairs are charged to operations as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives of the assets:

The amortization period of leasehold improvements made at the inception of the lease is directly related to the initial lease term, while the amortization period for subsequent leasehold improvements is directly related to the initial lease term adjusted for extensions.

Note6 — Intangible Assets

The following table provides the details of the carrying value of intangible assets recorded from the2019 acquisition of SensiML at* September 29, 2024* (in thousands):** **

The following table provides the details of future annual amortization of intangible assets, based upon the current useful lives at* September 29, 2024* (in thousands):

Note7 — Debt Obligations

Revolving Line of Credit

As of* September 29, 2024* and* December 31, 2023*, the Company had$20.0 million of revolving debt outstanding with an interest rate of 8.50% per annum and 9.00% per annum, respectively. Heritage Bank has afirst priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the agreement. The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period. Related interest expenses and annual facility fees recognized were $149 thousand and$205 thousand for thethree andnine months ended* September 29, 2024*, respectively and $30 thousandand $92 thousand for thethree andnine months ended* October 1, 2023*, respectively.

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Financing Arrangements

The amount of assets, net purchased through financing arrangements on the condensed consolidated balance sheet were $3.2 million and $1.0 million as of* September 29, 2024and October 1, 2023*, respectively. The financed assets consist primarily of tooling for performance under revenue contracts with customers, with smaller amounts related to IT infrastructure components. The corresponding note payable amount for these financing arrangements was $3.1 million and $1.0 million as of* September 29, 2024and October 1, 2023*, respectively. Payments related to financing arrangements were $0.4 million and $0.9 million for thethree andnine months ended* September 29, 2024*, respectively, and $0.2 million and $0.5 million for thethree andnine months ended* October 1, 2023*, respectively. The Company's outstanding financing arrangements as of* September 29, 2024* have remaining terms of 0.27 years to 2.57 years, with a weighted average remaining term of 1.91 years. Stated interest rates for its financing arrangements outstanding as of* September 29, 2024* range from 6.75% to 9.89%, with a weighted average interest rate of 8.89%. The Company's outstanding financing arrangements as of* October 1, 2023* had remaining terms of 0.92 years to 2.46 years, with a weighted average remaining term of 1.70 years. Stated interest rates for its financing arrangements outstanding as of* October 1, 2023* ranged from 3.75% to 9.89%, with a weighted average interest rate of 6.93%.

The following table provides the details of future payments for assets purchased through financing arrangements as of* September 29, 2024* (in thousands):

Note8 — Leases

The Company's principal research and development and corporate facilities are leased office buildings located in the United States. These lease facilities are classified as operating leases and have lease terms ofone tothree years. The Company maintains sales offices out of which it conducts sales and marketing activities in various countries outside of the United States which are rented under short-term leases. The Company has elected the practical expedient to apply to recognition requirements to short-term leases and recognizes rent payments on short-term leases on a straight-line basis over the lease term. Total rent expenses were $0.1 millionfor thethree months ended* September 29, 2024and October 1, 2023* and $0.3 million for thenine months ended* September 29, 2024and October 1, 2023*.

The following table provides the expenses related to operating leases (in thousands):

The following table provides the details of supplemental cash flow information (in thousands):

Non-cash ROU assets related to operating leases included in the operating cash flows for thenine months ended* September 29, 2024and October 1, 2023* were $199 thousand and $274 thousand, respectively.

The following table provides the details of right-of-use assets and lease liabilities as of* September 29, 2024* and* December 31, 2023* (in thousands):

The following table provides the details of future lease payments for operating leases as of* September 29, 2024* (in thousands):

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The following table provides the details of lease terms and discount rates as of* September 29, 2024* and* December 31, 2023*:

(1) The operating lease relates to the Company's headquarters in San Jose, CA. The lease term expires on* June 14, 2027*.

Note 9 —** Capital Stock**

*** Issuance of Common Stock***

On* March 13, 2024,the Company entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 222,500 shares of common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $3.5 million. The purchase price for each share of common stock was $16.00. The per share purchase price reflects azero* discount based upon the10-day volume weighted average price on the day the pricing was agreed. Issuance costs related to the offering were immaterial.

On* March 21, 2023*, the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450 thousand shares of its common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $2.3 million. Issuance costs related to the offering were immaterial. The purchase price for each share of common stock in the Share Placement was $5.14.

On* August 17, 2022,the Company filed a Registration Statement on Form S-3 (FileNo.* 333-266942) with the SEC, under which it* maysell, from time-to-time common stock, preferred stock, depositary shares, warrants, debt securities, and units, individually or as units comprised ofone* or more of the other securities or a combination thereof. The Company's registration statement became effective on* August 26, 2022.*

Note10 — Stock-Based Compensation

Stock-based compensation expense included in the Company's consolidated financial statements for thethree andnine months ended* September 29, 2024* and* October 1, 2023* was as follows (in thousands):

The Company capitalized certain stock-based compensation amounts to capitalized internal-use software and tooling, net of ($27 thousand) and $124 thousand for thethree andnine months ended* September 29, 2024*, respectively and $48 thousand and $109 thousand for thethree andnine months ended* October 1, 2023*, respectively. The capitalized stock-based compensation amounts relate to compensation for employees involved in the development of capitalized internal-use software and tooling.

Stock-Based Compensation Award Activity

The following table summarizes the activity in the shares available for grant under the2019 Plan during thenine months ended* September 29, 2024* (in thousands):

Stock Options

The following table summarizes stock options outstanding and stock option activity under the2009 Plan and the2019 Plan, and the related weighted average exercise price for thenine months ended* September 29, 2024*:

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No stock options were granted or exercised during thenine months ended* September 29, 2024and October 1, 2023*. Stock options equivalent to 6 thousand and 2 thousand shares expired during thenine months ended* September 29, 2024and October 1, 2023*.

Total stock-based compensation related to stock options was $0 during thenine months ended* September 29, 2024and October 1, 2023*.

Restricted Stock Units

The Company grants restricted stock units (“RSUs”) and performance restricted stock units ("PRSUs") to employees and directors with various vesting terms. RSUs entitle the holder to receive, atno cost,one common share for each RSU as it vests. In general, the Company's policy is to withhold shares in settlement of employee tax withholding obligations upon the vesting of RSUs. The stock-based compensation expense related to RSUs and PRSUs were approximately$1.1 million and$3.4 million forthethree andnine months ended* September 29, 2024*, respectively and $0.6 million and $1.8 million, for thethree andnine months ended* October 1, 2023*, respectively.

As of* September 29, 2024and October 1, 2023*, there was approximately$3.8 million and $3.7 million, respectively, in unrecognized stock-based compensation expense related to RSUs. The remaining unrecognized stock-based compensation expense as of* September 29, 2024* is expected to be recorded over a weighted average period of 1.19 years.

A summary of activity for the Company's RSUs and PRSUs for thenine months ended* September 29, 2024* is as follows:

Employee Stock Purchase Plan

Total stock-based compensation related to the Company's Employee Stock Purchase Plan was approximately$32 thousand and$73 thousand forthethree andnine months ended* September 29, 2024*, respectively and $25 thousand and $100 thousand, for thethree andnine months ended* October 1, 2023*, respectively.

Note11 — Income Taxes

The Company recorded a net income tax expense of $13 thousand and $4 thousand for thethree months ended* September 29, 2024and October 1, 2023*, respectively. Additionally, the Company recorded a net income tax expense of $14 thousand and $4 thousand for thenine months ended* September 29, 2024and October 1, 2023*, respectively. The difference between the estimated annual effective tax 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 thannot that the Company willnot 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*.

Note12 — Information Concerning Product Lines, Geographic Information and Revenue Concentration

The Company identifies its business segment based on business activities, management responsibility and geographic location. For all periods presented, the Company operated in a single reportable business segment.

The following is a breakdown of revenue by product family (in thousands):

New products revenue consists of revenues from the sale of hardware products manufactured on180 nanometer or smaller semiconductor processes, eFPGA IP license and eFPGA-related professional services, QuickAI and SensiML AI software as a service (SaaS) revenue. Mature products include all products produced on semiconductor processes larger than180 nanometer.

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The following is a breakdown of new product revenue (in thousands):

eFPGA IP and professional services revenue for thethree months ended* September 29, 2024and October 1, 2023* was $3.4 million and $5.8 million, respectively, and for thenine months ended* September 29, 2024and October 1, 2023* was $10.0 million and $10.5 million, respectively, which were primarily professional services revenue.

Contract assets related to professional services revenue were $2.3 million and $4.0 million as of* September 29, 2024* and* October 1, 2023*, respectively. Contract liabilities related to professional services revenue were $0.4 million and $0.3 million as of* September 29, 2024* and* October 1, 2023*, respectively. As of* December 31, 2023,$1.1 million in deferred revenues were outstanding. In thenine* months ended* September 29, 2024,$1.0 million of the outstanding $1.1 million in deferred revenues was recognized by the Company as revenue. Of the $0.4 million in deferred revenues as of September 29, 2024,the Company expects to recognize these revenues using the input time-based method through the end ofQ1'25.* Of its remaining unsatisfied performance obligationsnot currently on the Company's balance sheet, the Company expects to recognize $1.2 million byQ2'25, either through the input time-based method or the output method, recognizing revenue as deliverables such as IP and various technologies and training are transferred or provided to the customer. For the majority of the Company's contracts, payment schedules are in place and cash receipts willnot always follow the timeline of the Company's revenue recognition policies.

The tables below present disaggregated revenues by geographical location. Revenue attributed to geographic location is based on the destination of the product or service. Substantially all revenues in North America were in the United States. Revenue in the United States was $3.7 million, or 85% of total revenue, and $12.0 million, or 83% of total revenue for thethree andnine months ended* September 29, 2024*, respectively and $6.0 million, or 91% of total revenue, and $11.7 million, or 85% of total revenue for thethree andnine months ended* October 1, 2023*, respectively.

The following is a breakdown of revenue by destination (in thousands):

The following distributors and customers accounted for10% or more of the Company's revenue for the periods presented:

The following distributors and customers accounted for10% or more of the Company's accounts receivable as of the dates presented:

Note13 — Commitments and Contingencies

Commitments

The Company's principal contractual commitments include purchase obligations, re-payments of draw-downs from the revolving line of credit, and payments under operating and financing arrangements. Purchase obligations are largely comprised of open purchase order commitments to suppliers and to subcontractors under professional services agreements. The Company's risk associated with the purchase obligations under professional services agreements is limited to the termination liability provisions within those contracts, and as such, it doesnot believe they represent a material liquidity risk to the Company.

Certain wafer manufacturers require the Company to forecast wafer starts several months in advance. The Company is committed to taking delivery of and paying for a portion of the forecasted wafer volume. As of* September 29, 2024*, the Company had $89 thousand in outstanding commitments for the purchase of wafer inventory.

Purchase Obligations

Purchase obligations represent contractual agreements to purchase goods or services entered into in the ordinary course of business. Purchase obligations are legally binding and amongst other things, specify a minimum or a range of quantities, pricing, and approximate timing of the transaction. Purchase obligations include amounts that are recorded on the Company's consolidated balance sheets, as well as amounts that arenot recorded on the Company's consolidated balance sheets. As of* September 29, 2024*, total outstanding purchase obligations for other goods and services were $2.4 million due within the nexttwelve months,not recorded on the Company's consolidated balance sheet.

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Litigation

From time to time, the Company* maybecome involved in legal actions arising in the ordinary course of business including, butnot* limited to, intellectual property infringement and collection matters. Absolute assurance cannot be given that any suchthird-party assertions will be resolved without costly litigation; in a manner that isnot adverse to the Company’s financial position, results of operations or cash flows; or without requiring royalty or other payments which* may*adversely impact gross profit.