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What changed in QUICKLOGIC Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of QUICKLOGIC Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+363 added−365 removedSource: 10-K (2023-03-28) vs 10-K (2022-03-22)

Top changes in QUICKLOGIC Corp's 2023 10-K

363 paragraphs added · 365 removed · 239 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

71 edited+22 added−18 removed45 unchanged
Biggest changeAs of January 2, 2022, our research a nd development staff consist of 20 employees located in California, India, and Oregon. • Our system software group creates the drivers and other system code required to connect our silicon devices to Application Processors, drivers and microcode to support our sensor hubs. • Our platform engineering group develops low power programmable devices and system IP that can be used in standalone solution platforms such as PolarPro 3E, or combined in solution platforms such as EOS S3. • Our electronic design and automation ("EDA") software group collaborates with the open source software community to ensure the design libraries, interface routines and place and route software that allow our customer to take their own designs and target them to programmable devices, and develops the design tools that support algorithm development for our sensor hubs. • Our hardware group develops and verifies IP Blocks that can be programmed into our programmable logic and develops primarily open source hardware reference designs to showcase and verify our solutions. • Our product engineering group oversees product manufacturing and process development with our third-party foundries, and is involved in ongoing process improvements to increase yields and optimize device characteristics. • The office of the CTO investigates future trends and requirements in order to define the next generation of solutions and platforms. • Our SensiML group develops and maintains all software with respect to the SensiML Analytics Software Suite.
Biggest changeAs of January 1, 2023 , our research and development staff consists of eighteen employees located in California, Oregon and Taiwan. • Our system software group creates the drivers and other system code required to connect our silicon hardware products to Application Processors, drivers and microcode to support our sensor hubs. • Our platform engineering group develops low power programmable hardware products and system IP that can be used in standalone solution platforms such as PolarPro 3E or combined in solution platforms such as EOS S3. • Our electronic design and automation software group collaborates with the open source software community to ensure the design libraries, interface routines and place and route software that allow our customer to take their own designs and target them to programmable hardware products and develops the design tools that support algorithm development for our sensor hubs. • Our hardware group develops and verifies IP Blocks that can be programmed into our programmable logic and develops primarily open source hardware reference designs to showcase and verify our solutions. • Our product engineering group oversees product manufacturing and process development with our third-party foundries and is involved in ongoing process improvements to increase yields and optimize device characteristics. • The office of the CTO investigates future trends and requirements in order to define the next generation of solutions and platforms. • Our SensiML group develops and maintains all software with respect to the SensiML Analytics Software Suite. 8 Table of Contents Manufacturing We have close relationships with third-party manufacturers for our customer commercial products for wafer fabrication, package assembly, and testing requirements to help us ensure stability in the supply of our products and to allow us to focus our internal efforts on product and solution design and sales.
In order to grow our revenue from its current level, we depend upon increased revenue from our new products including existing new product platforms, eFPGA IP and platforms currently in development. We expect our business growth to be driven mainly by our silicon solutions, eFPGA IP and SensiML AI Software.
In order to grow our revenue from its current level, we depend upon increased revenue from our new products including existing new product platforms and platforms currently in development. We expect our business growth to be driven mainly by our silicon solutions, eFPGA IP and SensiML AI Software.
QuickLogic’s products enable Consumer/Industrial IoT, Consumer Electronics, Military, Aerospace and Defense customers to deliver highly differentiated products with longer battery life.
QuickLogic’s products enable Consumer/Industrial IoT, Consumer Electronics, Military, and Aerospace and Defense customers. to deliver highly differentiated products with longer battery life.
We believe this flow enables a scalable development and support model for QuickLogic. For our eFPGA strategy, we typically work with semiconductor manufacturing partners prior to this IP being licensed to an SoC company.
We believe this flow enables a scalable development and support model for QuickLogic. For our eFPGA strategy, we typically work with semiconductor manufacturing partners prior to this IP being licensed to a SoC company.
Faith has also served as the board member of the Global Semiconductor Alliance (GSA), the Chairman of the Marketing Committee for the CE-ATA Organization. He holds a B.S. degree in Computer Engineering from Santa Clara University and was an Adjunct Lecturer at Santa Clara University for Programmable Logic courses. Elias Nader joined QuickLogic on February 1, 2022, Mr.
Faith has also served as the board member of the Global Semiconductor Alliance (GSA), the Chairman of the Marketing Committee for the CE-ATA Organization. He holds a B.S. degree in Computer Engineering from Santa Clara University and was an Adjunct Lecturer at Santa Clara University for Programmable Logic courses. Elias Nader joined QuickLogic in February 2022. Mr.
Nader worked at Sigma Designs, Inc. as the Senior Vice President, Chief Financial Officer and Corporate Secretary. Mr. Nader has also served in executive capacities at Imperial Jet and Dionex Corporation. Mr. Nader holds a Bachelor of Science Degree in Accounting and Bachelor of Arts Degree in Economics and an MBA in International Business from San Jose State University.
Nader worked at Sigma Designs, Inc. as the Senior Vice President, Chief Financial Officer and Corporate Secretary. Mr. Nader has also served in executive capacities at Imperial Jet and Dionex Corp. Mr. Nader holds a Bachelor of Science Degree in Accounting and Bachelor of Arts Degree in Economics and an MBA in International Business from San Jose State University.
We believe our future success depends in part on our continued ability to attract, hire and retain qualified personnel. None of our employees are represented by a labor union and we believe our employee relations are favorable. We recognize that in order to drive innovation and operational excellence, we must attract, develop, motivate and retain highly qualified talent.
We believe o ur future success depends in part on our continued ability to attract, hire and retain qualified personnel. None of our employees are represented by a labor union and we believe our employee relations are favorable. We recognize that in order to drive innovation and operational excellence, we must attract, develop, motivate and retain highly qualified talent.
These devices typically integrate a number of common peripherals or functions and the functionality of these devices is fixed prior to wafer fabrication; • Programmable Logic Devices ("PLDs") are general-purpose devices, which can be used by a variety of electronic systems manufacturers and are customized after purchase for a specific application.
These hardware products typically integrate a number of common peripherals or functions and the functionality of these hardware products is fixed prior to wafer fabrication; • Programmable Logic Devices ("PLDs") are general-purpose hardware products, which can be used by a variety of electronic systems manufacturers and are customized after purchase for a specific application.
System designers can customize their products using programmable logic ASICs or MCUs. The competitive dynamic between these classes of core silicon are well understood. High development risks, development costs and opportunity costs are incurred when using ASICs to produce custom devices with very low unit production cost.
System designers can customize their products using programmable logic ASICs or MCUs. The competitive dynamic between these classes of core silicon are well understood. High development risks, development costs and opportunity costs are incurred when using ASICs to produce custom hardware products with very low unit production cost.
Hardware customization gives our devices the ability to execute key actions faster than software implementations, and at lower power. Second, our ArcticLink and EOS S3, EOS S3 LV, and EOS S3AI platforms combine mixed signal physical functions, hard-wired logic and programmable logic on one device.
Hardware customization gives our hardware products the ability to execute key actions faster than software implementations, and at lower power. Second, our ArcticLink and EOS S3, EOS S3 LV, and EOS S3AI platforms combine mixed signal physical functions, hard-wired logic and programmable logic on one device.
Information regarding the backgrounds of our directors is incorporated by reference from our definitive Proxy Statement relating to the 2022 Annual Meeting of Stockholders, which Proxy Statement is anticipated to be filed within 120 days after the end of the fiscal year covered by this Report. 10 Table of Contents
Information regarding the backgrounds of our directors is incorporated by reference from our definitive Proxy Statement relating to the 2023 Annual Meeting of Stockholders, which Proxy Statement is anticipated to be filed within 120 days after the end of the Fiscal Year covered by this Report. 10 Table of Contents
Structured ASICs, a sub-category of ASICs, provide a limited amount of custom content to broaden the applicability of a device for additional applications. ASSPs are offered broadly to the market, making it challenging for a system designer to create differentiated products from these devices alone.
Structured ASICs, a sub-category of ASICs, provide a limited amount of custom content to broaden the applicability of a device for additional applications. ASSPs are offered broadly to the market, making it challenging for a system designer to create differentiated products from these hardware products alone.
Suppliers of programmable logic devices, which have lower development and market risks and development costs relative to ASICs, have aggressively reduced the unit cost of their products over time, making programmable logic devices the solution of choice for custom products unless the volume is very high.
Suppliers of programmable logic hardware products, which have lower development and market risks and development costs relative to ASICs, have aggressively reduced the unit cost of their products over time, making programmable logic hardware products the solution of choice for custom products unless the volume is very high.
This drives a need for faster and lower risk product development. There is intense pressure on the bill of materials("BOM") cost of these devices, including per unit component costs and non-recurring development costs. As more people experience the advantages of a mobile lifestyle at home, they demand the same advantages in their professional lives.
This drives a need for faster and lower risk product development. There is intense pressure on the bill of materials ("BOM") cost of these hardware products, including per unit component costs and non-recurring development costs. As more people experience the advantages of a mobile lifestyle at home, they demand the same advantages in their professional lives.
We believe our solutions are resonating with our target customers who value the differentiated user experience, lower power consumption, platform design capability, rapid time-to-market, longer time-in-market and low total cost of ownership available through the use of our solutions. We sell our products through a network of sales managers in North America, Europe and Asia.
We believe our solutions are resonating with our target customers who value the differentiated user experience, lower power consumption, platform design capability, rapid time-to-market, longer time-in-market and low total cost of ownership available through the use of our solutions. 7 Table of Contents We sell our products through a network of sales managers in North America, Europe and Asia.
ITEM 1. BUSINESS General QuickLogic Corporation ("the Company") was founded in 1988 and reincorporated in Delaware in 1999. Our vision is to transform the way people and devices interact with each other and their surroundings. Our mission is to provide innovative silicon and software platforms to successfully enable our customers to develop products that fundamentally change the end-user experience.
ITEM 1. BUSINESS General QuickLogic Corporation was founded in 1988 and reincorporated in Delaware in 1999. Our vision is to transform the way people and hardware products interact with each other and their surroundings. Our mission is to provide innovative silicon and software platforms to successfully enable our customers to develop hardware products that fundamentally change the end-user experience.
The trends to add more sensors to these connected devices is driven from the desire to enable more intelligence in these devices so that they can operate without continuously sending raw data back to a cloud-based infrastructure; sending metadata in lieu of raw data is more efficient for cost and power consumption, and is generally viewed as more secure.
The trends to add more sensors to these connected hardware products is driven from the desire to enable more intelligence in these hardware products so that they can operate without continuously sending raw data back to a cloud-based infrastructure; sending metadata in lieu of raw data is more efficient for cost and power consumption and is generally viewed as more secure.
Our customers can use our eFPGA IP for hardware acceleration and pre-processing in their own custom semiconductor devices, our SoCs to run our customer’s software and build their hardware around, and our discrete FPGAs to implement their custom functionality.
Our customers can use our eFPGA IP for hardware acceleration and pre-processing in their own custom semiconductor hardware products, our SoCs to run our customer’s software and build their hardware around, and our discrete FPGAs to implement their custom functionality.
They are designed to be programmed with software for embedded applications; • Application Specific Standard Products ("ASSPs") other than processors, are fixed function devices designed to address a relatively narrow set of applications.
They are designed to be programmed with software for embedded applications; • Application Specific Standard Products ("ASSPs") other than processors, are fixed function hardware products designed to address a relatively narrow set of applications.
Three important trends in this market are (i) proliferation of devices at the edge of the network connected via a wireless network, (ii) an increasing adoption of sensors, and (iii) desire to increase processing efficiency as a means to lower power consumption and increase battery life.
Three important trends in this market are (i) proliferation of hardware products at the edge of the network connected via a wireless network, (ii) an increasing adoption of sensors, and (iii) desire to increase processing efficiency as a means to lower power consumption and increase battery life.
These cost reduction efforts have significantly increased the volume required to justify the total cost of an ASIC. IoT devices (both Consumer and Industrial) incorporate complex, rapidly changing technology, require rapid product proliferation, and have varying product life and development cycles.
These cost reduction efforts have significantly increased the volume required to justify the total cost of an ASIC. IoT hardware products (both Consumer and Industrial) incorporate complex, rapidly changing technology, require rapid product proliferation, and have varying product life and development cycles.
FPGAs are a subset of PLDs and are typically used to implement complex system functions; and • Application Specific Integrated Circuits ("ASICs"), are custom devices designed and fabricated to meet the needs of one specific application for one end-customer.
FPGAs are a subset of PLDs and are typically used to implement complex system functions; and • Application Specific Integrated Circuits ("ASICs") are custom hardware products designed and fabricated to meet the needs of one specific application for one end-customer.
Nader most recently served as Senior Vice President and Chief Financial officer at Pixelworks, Inc., where he was directly responsible for all of G&A worldwide and worked directly with the Board of Directors to provide strategic and operational direction to the company. Prior to that, Mr.
Nader most recently served as Senior Vice President and Chief Financial officer at Pixelworks, Inc., where he was directly responsible for all of General and Administrative worldwide and worked directly with the Board of Directors to provide strategic and operational direction to the company. Prior to that, Mr.
The following are the four main classes of non-memory core silicon: • Microcontrollers ("MCUs") are typically small, low-power devices on a single integrated circuit that contain a processor core, memory and a number of peripherals.
The following are the four main classes of non-memory core silicon: • Microcontrollers ("MCUs") are typically small, low-power hardware products on a single integrated circuit that contain a processor core, memory and a number of peripherals.
All of our silicon platforms are standard devices and must be programmed to be effective in a system. Through the acquisition of SensiML, in January 2019, our core IP also expanded to include the SensiML Analytics Toolkit that enables Original Equipment Manufacturers ("OEMs") to develop AI software for a broad array of resource-constrained time-series sensor endpoint applications.
All of our silicon platforms are standard hardware products and must be programmed to be effective in a system. Through the acquisition of SensiML our core IP also expanded to include the SensiML Analytics Toolkit that enables Original Equipment Manufacturers ("OEMs") to develop AI software for a broad array of resource-constrained time-series sensor endpoint applications.
We also have a military, industrial and IoT product customer base that purchases our mature silicon products. We expect to continue to offer silicon devices to these customers, as well as new eFPGA IP for when these customers choose to implement their own customer silicon.
We also have a military, industrial and IoT product customer base that purchases our mature silicon products. We expect to continue to offer silicon hardware products to these customers, as well as new eFPGA IP for when these customers choose to implement their own silicon platform solution.
Our solutions typically fall into one of four categories: Sensor Processing, eFPGA IP and its associated Tools, Display and Smart Connectivity. Our solutions include a unique combination of our silicon platforms, IP cores, software drivers, and in some cases, firmware and application software.
Our solutions typically fall into one of four categories: Hardware products consisting of Sensor Processing, Display Smart Connectivity, and eFPGA intellectual property and its associated Tools. Our solutions include a unique combination of our silicon platforms, IP cores, software drivers, and in some cases, firmware and application software.
Fiscal Year Our fiscal year ends on the Sunday closest to December 31. References to fiscal years 2021, 2020 and 2019 refer to the fiscal years ended January 2, 2022, January 3, 2021 and December 29, 2019, respectively.
Fiscal Year Our fiscal year ends on the Sunday closest to December 31. References to Fiscal Years 2022, 2021, and 2020 refer to the Fiscal Years ended January 1, 2023 , January 2, 2022 , and January 3, 2021 , respectively.
We have two distinct types of programmable logic. We have an SRAM-reprogrammable logic architecture that utilizes a standard CMOS-logic process to meet the specific needs of the sensor and I/O subsystems of IoT devices: very low standby power, low dynamic power, and in-system reprogrammable technology.
We have an SRAM-reprogrammable logic architecture that utilizes a standard CMOS-logic process to meet the specific needs of the sensor and I/O subsystems of IoT hardware products: very low standby power, low dynamic power, and in-system reprogrammable technology.
Our vision is to transform the way people and devices interact with each other and their surroundings. Our mission is to provide innovative platforms to successfully enable our customers to develop products that fundamentally change the end-user experience. Specifically, we develop low power SoCs, FPGAs, embedded FPGA intellectual property and the SensiML Analytics Toolkit for AI Software.
Our mission is to provide innovative platforms to successfully enable our customers to develop products that fundamentally change the end-user experience. Specifically, we develop low power SoCs, FPGAs, embedded FPGA intellectual property and the SensiML Analytics Toolkit for AI Software.
SensiML collaborates with several microcontroller and sensors manufacturers to integrate the microcontroller and/or sensor manufacturers’ development kits with SensiML’s Analytics Toolkit in order to showcase combined solutions for AI/ML applications. Currently, these collaborations include Infineon, onsemi, Microchip Technology, Silicon Labs, ST Microelectronics, Arduino, NXP, Raspberry Pi, and Nordic Semiconductor.
SensiML collaborates with several microcontroller and sensors manufacturers to integrate the microcontroller and/or sensor manufacturers’ development kits with SensiML’s Analytics Toolkit in order to showcase combined solutions for AI/ML applications. Currently, these collaborations include Infineon Technologies, On Semiconductor Corp., Microchip Technology Inc., Silicon Laboratories, Inc., STMicroelectronics N.V., Arduino, NXP Semiconductors N.V., Raspberry Pi, and Nordic Semiconductor.
Our customers typically order our semiconductor device products through our distributors. Currently, we have two distributors in North America and a network of sixteen distributors and sales representative throughout Europe and Asia to support our international business. QuickLogic eFPGA IP customers and SensiML SaaS subscribers typically enter into licensing agreements directly with QuickLogic and SensiML, respectively.
Customers typically order our products through our distributor s. Currently, we have seven distributors in North America and a network of twenty-three distributors and sales representative throughout Eu rope 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.
The following table sets forth certain information concerning our current executive officers and directors as of March 14, 2022: Name Age Position Brian C.
The following table sets forth certain information concerning our current executive officers and dir ectors as of March 20, 2023: Name Age Position Brian C.
Our solutions enable energy and cost-efficient solutions on design platforms from which a range of products can be introduced. 7 Table of Contents We recognize that our markets require a range of solutions, and we intend to work with market leading companies to combine silicon solution platforms, packaging technology, sensor software algorithms, software drivers and firmware, to meet the product proliferation, high bandwidth, time-to-market, time-in-market and form factor requirements of IoT device manufacturers.
We recognize that our markets require a range of solutions, and we intend to work with market leading companies to combine silicon solution platforms, packaging technology, sensor software algorithms, software drivers and firmware, to meet the product proliferation, high bandwidth, time-to-market, time-in-market and form factor requirements of IoT device manufacturers.
By using our silicon platforms, our IPs, our software, and our in-depth architecture knowledge, we can deliver energy efficient custom solutions that blend the benefits of traditional ASSPs with the flexibility, product proliferation, differentiation and low total cost of ownership advantages of programmable logic. 6 Table of Contents Our product technology consists of five major elements: First, our programmable logic allows us to hardware customize our platforms.
By using our silicon platforms, our IPs, our software, and our in-depth architecture knowledge, we can deliver energy efficient custom solutions that blend the benefits of traditional ASSPs with the flexibility, product proliferation, differentiation and low total cost of ownership advantages of programmable logic.
Available Information Our corporate headquarters are located at 2220 Lundy Avenue, San Jose, California 95131. We can be reached at (408) 990-4000, and our website address is www.quicklogic.com . The information on our website is not incorporated herein by reference and is not a part of this Form 10-K.
We can be reached at (408) 990-4000, and our website address is www.quicklogic.com . The information on our website is not incorporated herein by reference and is not a part of this Form 10-K.
We also have our ViaLink programmable logic that uses proprietary and patented technology to meet the specific smart connectivity needs when the characteristics of non-volatility and instant-on, very low standby power, low dynamic power, small form factor, single chip solutions that power cycle easily and quickly are required.
Our SRAM-reprogrammable logic is the basis of our eFPGA IP License initiative, and is the logic used in our EOS S3, EOS S3 LV, and EOS S3AI products. 6 Table of Contents We also have our ViaLink programmable logic that uses proprietary and patented technology to meet the specific smart connectivity needs when the characteristics of non-volatility and instant-on, very low standby power, low dynamic power, small form factor, single chip solutions that power cycle easily and quickly are required.
Consequently, QuickLogic expects these trends to result in higher growth. Markets and Product Technology We market our solutions primarily to IoT device OEMs and ODMs and Defense contractors. We have complete solutions incorporating our silicon platforms, IPs, software drivers, SensiML Analytics Toolkit and our system architecture expertise.
Markets and Product Technology We market our solutions primarily to IoT device OEMs and ODMs, defense contractors, and U.S. Government entities. We have complete solutions incorporating our silicon platforms, IPs, software drivers, SensiML Analytics Toolkit and our system architecture expertise.
The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase shareholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives. 9 Table of Contents Intellectual Property We believe that it is important to maintain a large patent portfolio to protect our innovations.
The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase shareholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.
Since the AI software market is nascent, particularly for the edge and endpoint applications, the SensiML competitors tend to be venture-backed startups such as Edge Impulse. Competitors for our eFPGA IP license product include a few startup companies. 8 Table of Contents Research and Development We are focused on developing our solutions and platforms.
In addition, because they are complete solutions, they reduce the system development cost and risk. Since the AI software market is nascent, particularly for the edge and endpoint applications, the SensiML competitors tend to be venture-backed startups such as Edge Impulse. Competitors for our eFPGA IP license product include a few startup companies.
QuickLogic has also entered into eFPGA-related agreements with customers in the defense market and expects to continue to do so in the future. Historically, the defense market has followed QuickLogic's mature product revenue trend, but recent advancements in QuickLogic's Australis IP generator tool and participation in the DARPA Toolbox, have enabled renewed interest from customers in this area.
Historically, the defense market has followed QuickLogic's mature products revenue trend, but recent advancements in QuickLogic's Australis IP generator tool and participation in the DARPA Toolbox, have enabled renewed interest from customers in this area. Consequently, QuickLogic expects these trends to result in higher growth.
We specialize in enhancing the user experience in leading edge IoT devices and products. For our customers, we enable hardware and sensor algorithmic differentiation quickly, cost-effectively and at low power. For our partners, we expand their reach into new segments and new use cases thereby expanding the served available market for their existing devices.
For our customers, we enable hardware and sensor algorithmic differentiation quickly, cost-effectively and at low power. For our partners, we expand their reach into new segments and new use cases thereby expanding the served available market for their existing hardware products. Our vision is to transform the way people and hardware products interact with each other and their surroundings.
This effectively limits the average battery-powered system designer to ASSPs, small PLDs, mobile-oriented FPGAs, and MCUs to create a virtual level playing field among battery-powered system designers and makes product proliferation and differentiation extremely hard to achieve.
This effectively limits the average battery-powered system designer to ASSPs, small PLDs, mobile-oriented FPGAs, and MCUs to create a virtual level playing field among battery-powered system designers and makes product proliferation and differentiation extremely hard to achieve. ASICs with their long development cycles, long lead times and high non-recurring development costs are only used in very high-volume mainstream consumer products.
Saxe was Vice President of FLASH Engineering at Actel Corporation, a semiconductor manufacturing company, from November 2000 to February 2001. Dr. Saxe joined GateField Corporation, a design verification tools and services company formerly known as Zycad, in June 1983 and was a founder of their semiconductor manufacturing division in 1993. Dr.
Saxe joined GateField Corp., a design verification tools and services company formerly known as Zycad, in June 1983 and was a founder of their semiconductor manufacturing division in 1993. Dr. Saxe became GateField’s Chief Executive Officer in February 1999 and served in that capacity until Actel Corp. acquired GateField in November 2000. Dr.
Through the acquisition of SensiML, we now have an AI software platform that 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 product revenue category.
SensiML provides an AI software platform for products which include 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.
Lastly, the SensiML Application Programmer’s Interface ("API") is a simplified interface to extend the SensiML algorithms and manage advanced features like edge model tuning and continuous learning updates to the cloud. Marketing, Sales and Customers We monetize our technology through silicon sales, eFPGA IP license, and SensiML Analytics Toolkit subscriptions and per unit royalties.
Lastly, the SensiML Application Programmer’s Interface ("API") is a simplified interface to extend the SensiML algorithms and manage advanced features like edge model tuning and continuous learning updates to the cloud.
We believe our solutions allow OEMs and ODMs to rapidly bring new and differentiated products to market quickly and cost-effectively.
We believe our solutions allow OEMs and ODMs to rapidly bring new and differentiated products to market quickly and cost-effectively. Our solutions enable energy and cost-efficient solutions on design platforms from which a range of products can be introduced.
Our solutions enable custom functions and system designs with fast time-to-market and longer time-in-market since they are customized by us using our solution platforms that contain programmable logic. In addition, because they are complete solutions, they reduce the system development cost and risk.
MCUs offer extensive software flexibility, but often do not offer sensor software algorithms, the lowest power, nor any hardware flexibility. Our solutions enable custom functions and system designs with fast time-to-market and longer time-in-market since they are customized by us using our solution platforms that contain programmable logic.
PLDs are more expensive and consume more power than ASSPs or ASICs, but they offer fast time-to-market and are typically reprogrammable. OEMs have adopted mobile-oriented FPGAs in the IoT product market, but offer very little in terms of hard logic blocks that may decrease power consumption or selling price to the OEM.
OEMs have adopted mobile-oriented FPGAs in the IoT product market but offer very little in terms of hard logic blocks that may decrease power consumption or selling price to the OEM. ASICs have a large development cost and risk and a long time to market. As a result, ASICs are generally only used for single designs with very high volumes.
Saxe became GateField’s Chief Executive Officer in February 1999 and served in that capacity until Actel Corporation acquired GateField in November 2000. Dr. Saxe holds a B.S.E.E. degree from North Carolina State University, and an M.S.E.E. degree and a Ph.D. in Electrical Engineering from Stanford University.
Saxe holds a B.S.E.E. degree from North Carolina State University, and an M.S.E.E. degree and a Ph.D. in Electrical Engineering from Stanford University.
Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sales and marketing of our new solution platforms, IP and software. 4 Table of Contents COVID-19 - Impact on Business On January 30, 2020, the World Health Organization (“WHO”) declared a global emergency due to the COVID-19 pandemic, and on February 28, 2020, the WHO raised its assessment of the threat from high to very high at a global level.
Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sales and marketing of our new solution platforms, IP and software. 4 Table of Contents Supply Chain Disruptions Global, supply chain constraints have not had a material impact on our business.
Faith 47 President and Chief Executive Officer; Director Elias Nader 57 Chief Financial Officer and Senior Vice President (SVP) of Finance Rajiv Jain 61 Vice President, Worldwide Operations Timothy Saxe 65 Senior Vice President Engineering and Chief Technology Officer Michael R. Farese 75 Chairman of the Board Joyce Kim 51 Director Radhika Krishnan 51 Director Andrew J.
Faith 48 President and Chief Executive Officer; Director Elias Nader 58 Chief Financial Officer and Senior Vice President (SVP) of Finance Rajiv Jain 62 Vice President, Worldwide Operations Timothy Saxe 66 Senior Vice President Engineering and Chief Technology Officer Owen Bateman 56 Vice President, Worldwide Sales Michael R.
We outsource our product packaging primarily to Amkor Technology, Inc. and STATS-ChipPAC. GLOBALFOUNDRIES manufactures our EOS S3, EOS S3 LV, and EOS S3AI Sensor Platform in a 40 nm CMOS process, and PolarPro 3E, ArcticLink III VX and BX, and ArcticLink 3 S2 Sensor Hub, in a 65 nm CMOS process.
GlobalFoundries manufactures our EOS S3, EOS S3 LV, and EOS S3AI Sensor Platform in a 40 nm CMOS process, and PolarPro 3E, ArcticLink III VX and BX, and ArcticLink 3 S2 Sensor Hub, in a 65 nm CMOS process. TSMC manufactures our pASIC 3, QuickRAM and certain QuickPCI products, using a 0.35 micron complementary metal oxide semiconductor, ("CMOS"), process.
We currently hold eighteen active U.S. patents and have one pending applications for an additional U.S. patent. Our patents contain claims covering various aspects of programmable integrated circuits, programmable interconnect structures and programmable metal devices. In Europe and Asia, we hold three patents and have two pending applications. Our issued patents expire between 2023 and 2039.
Intellectual Property We believe that it is important to maintain a large patent portfolio to protect our innovations. We currently hold eighteen active U.S. patents and have five pending applications for an additional U.S. patent. Our patents contain claims covering various aspects of programmable integrated circuits, programmable interconnect structures and programmable metal hardware products.
In most cases, revenue will decline from a decrease in demand for our mature products long before the expiration of pending or issued patents relating to the underlying technology in such products. The decision to cease maintaining a patent is made based on the importance of the patent in our current or future product offerings.
In Europe and Asia, we hold three patents and have two pending applications. Our issued patents expire between 2033 and 2039. I n most cases, revenue will decline from a decrease in demand for our mature products long before the expiration of pending or issued patents relating to the underlying technology in such products.
Our existing competitors for conventional FPGAs include suppliers of low power CPLDs and FPGAs such as Lattice, Xilinx, Intel and MicroSemi ASSPs offer proven functionality which reduces development time, risk and cost, but it is difficult to offer a differentiated product using standard devices, and ASSPs that meet the system design objectives are not always available.
ASSPs offer proven functionality which reduces development time, risk and cost, but it is difficult to offer a differentiated product using standard hardware products, and ASSPs that meet the system design objectives are not always available. Conventional programmable logic may be used to create custom functions that provide product differentiation or make up for deficiencies in available ASSPs.
Our solutions combine our silicon platforms with our IPs, software drivers, and other system software, and may include SensiML software for AI applications. Our future success will depend largely on our ability to rapidly develop, enhance and introduce our platform solutions that meet emerging industry standards and satisfy changing customer requirements.
Our future success will depend largely on our ability to rapidly develop, enhance and introduce our platform solutions that meet emerging industry standards and satisfy changing customer requirements. We have made and expect to continue to make substantial investments in R&D.
Saxe has served as our Senior Vice President of Engineering and Chief Technology Officer since August 2016 and Senior Vice President and Chief Technology Officer since November 2008. Previously, Dr. Saxe has held a variety of executive leadership positions in QuickLogic including Vice President of Engineering and Vice President of Software Engineering. Dr.
Mr. Bateman holds a Higher National Certificate in Electronic and Microelectronic Engineering from Brooklands College, England. Timothy Saxe (Ph.D.) joined QuickLogic in May 2001. Dr. Saxe has served as our Senior Vice President of Engineering and Chief Technology Officer since August 2016 and Senior Vice President and Chief Technology Officer since November 2008. Previously, Dr.
Our new products include our ArcticPro™, EOS™, QuickAI™, SensiML Analytics Toolkit, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products (which together comprise our new product category). Our mature products include primarily FPGA families named pASIC®3 and QuickRAM® as well as programming hardware and design software.
Our new products include our ArcticPro™, EOS™, QuickAI™, SensiML Analytics Toolkit, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products.
ASICs with their long development cycles, long lead times and high non-recurring development costs are only used in very high volume mainstream consumer products. The traditional defense and industrial markets are well served by existing core silicon or custom ASIC development. Much of this market's uses are generally not as price, power and size sensitive.
The traditional defense and industrial markets are well served by existing core silicon or custom ASIC development. Much of this market's uses are generally not as price, power and size sensitive. When there is a strong need for a custom solution in high volume applications, designers turn to an ASIC and, in low to medium volume applications, they use FPGAs.
TSMC manufactures our pASIC 3, QuickRAM and certain QuickPCI products, using a 0.35 micron complementary metal oxide semiconductor, or CMOS, process. TSMC also manufactures our Eclipse products on 0.25 micron CMOS process, and other mature products using a 65nm CMOS process on twelve-inch wafers. We purchase products from GLOBALFOUNDRIES, and TSMC on a purchase order basis.
TSMC also manufactures our Eclipse products on 0.25 micron CMOS process, and other mature products using a 65nm CMOS process on twelve-inch wafers. We purchase products from GlobalFoundries, and TSMC on a purchase order basis. Outsourcing of commercial wafer manufacturing enables us to take advantage of the high volume economies of scale offered by these suppliers.
We have six registered trademarks and one pending trademark with the U.S. Patent and Trademark Office. Information About Our Executive Officers and Directors Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There are no family relationships among our directors and officers.
Government may use or authorize others to use the inventions covered by such patents. Information About Our Executive Officers and Directors Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There are no family relationships among our directors and officers.
Our semiconductor competitors include: (i) suppliers of ASSPs such as divisions of Synaptics, formerly known as the DSP Group; (ii) suppliers of application processors; (iii) suppliers of ASICs; (iv) suppliers of low density FPGAs such as Lattice and MicroSemi (a subsidiary of Microchip Technology); and (v) suppliers of low power microcontrollers such as ST Microelectronics and NXP.
Competition A number of companies offer products that compete with one or more of our semiconductor products and solutions. Our semiconductor competitors include: (i) suppliers of ASSPs such as Synaptics; (ii) suppliers of application processors; (iii) suppliers of ASICs; (iv) suppliers of low density FPGAs such as Lattice Semiconductor Corp. and Microsemi Corp.
When there is a strong need for a custom solution in high volume applications, designers turn to an ASIC and, in low to medium volume applications, they use FPGAs. QuickLogic FPGAs have a loyal following in certain segments of these markets, particularly when instant-on, energy efficiency, high reliability or intellectual property security is important.
QuickLogic FPGAs have a loyal following in certain segments of these markets, particularly when instant-on, energy efficiency, high reliability or intellectual property security is important. QuickLogic has also entered into eFPGA-related agreements with customers in the defense market and expects to continue to do so in the future.
In addition to delivering our own semiconductor solutions, we have an IP business that licenses our eFPGA technology for use in other semiconductor companies SoCs. We began delivering our eFPGA IP product ArcticPro in 2017, which is included in the new product revenue category along with subsequent families of our eFPGA IP.
In addition to delivering our own semiconductor solutions, our new products category includes our IP business that licenses our eFPGA technology for use in other semiconductor companies SoCs and provides professional services, consisting of development and integration of eFPGA technology into bespoke semiconductor solutions.
Jain holds a Master’s degree in Chemical Engineering from the University of California, Berkeley and a B.S. degree in Chemical Engineering from the University of Illinois, Champaign/Urbana. Timothy Saxe (Ph.D.) joined QuickLogic in May 2001. Dr.
Jain holds a Master’s degree in Chemical Engineering from the University of California, Berkeley and a B.S. degree in Chemical Engineering from the University of Illinois, Champaign/Urbana. Owen Bateman joined QuickLogic in February 1997. Mr. Bateman has served as our Vice President of Worldwide Sales since April 2022. Prior to this role, Mr.
We have made and expect to continue to make substantial investments in research and development. Our research and development expenses for the years ended January 2, 2022, January 3, 2021 and December 29, 2019 we re $6.9 million ( 55%of revenue), $7.5 million (87% of revenue), and 12.4 million (120% of re venue), respectively.
Our R&D expenses were $5.0 million, or 31% of revenue, $6.9 million, or 55% of revenue, and $7.5 million, or 87% of revenue for the years ended January 1, 2023, January 2, 2022 and January 3, 2021, respectively.
Four customers represented approximately 22% , 16% , 14% , and 10% of our total revenue for the year ended January 2, 2022 and three customers represented 19% , 16% , and 10% for the year ended January 3, 2021 , respectively.
Three customers represented approximately 20%, 16% and 12% of our total revenue for the year ended January 1, 2023 . Three customers represented 16 %, 14%, and 10% of our total revenue f or the year ended January 2, 2022 . In addition, a significant portion of our revenue comes from sales to customers located outside of the United States.
However, we may experience seasonal patterns in the future due to global economic conditions, the overall volatility of the semiconductor industry and the inherent seasonality of the consumer markets. Backlog We do not believe that backlog as of any particular date is indicative of future results. A majority of our quarterly shipments typically are booked during the quarter.
See Note 13 to the consolidated financial statements for additional information. Backlog We do not believe that backlog as of any particular date is indicative of future results. The majority of our quarterly shipments are typically booked during the quarter. Our sales are made primarily pursuant to standard purchase orders issued by OEM customers and distributors.
Pease 71 Director Arturo Krueger 82 Director Daniel A. Rabinovitsj 57 Director Christine Russell 72 Director Gary H. Tauss 67 Director Brian C. Faith joined QuickLogic in June 1996. Mr.
Farese 76 Chairman of the Board Joyce Kim 52 Director Radhika Krishnan 52 Director Andrew J. Pease 72 Director Christine Russell 73 Director Gary H. Tauss 68 Director 9 Table of Contents Brian C. Faith joined QuickLogic in June 1996. Mr.
Conventional programmable logic may be used to create custom functions that provide product differentiation or make up for deficiencies in available ASSPs. PLDs require more designer input since the designer has to develop and integrate the IP and may have to develop the software to drive the IP.
PLDs require more designer input since the designer has to develop and integrate the IP and may have to develop the software to drive the IP. PLDs are more expensive and consume more power than ASSPs or ASICs, but they offer fast time-to-market and are typically reprogrammable.
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The social and economic impact of the COVID-19 outbreak has continued to increase exponentially since this declaration. The outbreak has resulted in significant governmental measures being implemented to control the spread of COVID-19 and countries across the world continue to manage repeated waves of the pandemic, including variant strains of COVID-19 amid increasing, yet uneven progress toward vaccination.
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While we have experienced some volatilities with input material costs and supplier costs in accordance with domestic and global economic conditions, none of these have had a material impact to our business during our Fiscal 2022 year. We do not expect material increases in costs over the next twelve months.
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Restrictions on travel, business operations and the movement of people in many regions of the world in which the Company operates, and the imposition of shelter-in-place or similarly restrictive work-from-home orders have impacted many of the Company’s offices and employees, including those located in the United State s.
Added
However, we expect to be subject to continued, broader-based inflationary, labor, and supplier costs increases in alignment with domestic and global economic conditions. We expect any increases in costs to be dilutive to our gross profit; and we may be limited in our ability to offset any increased costs with price increases to customers.
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As a result, the Company has temporarily closed or substantially limited the presence of personnel in its offices in several impacted locations, implemented travel restrictions and withdrawn from various industry events.
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This may have a negative impact to our results from operations and cash flows. 2023 Cybersecurity Incident On January 20, 2023, the Company detected a ransomware infection affecting a limited number of IT systems, including systems that contained personal information of our employees.
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The Company has also experienced some disruption and delays in its supply chain, customer deployment plans, and logistics challenges, including certain limitations on its ability to access customer fulfillment and service sites.
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Upon detection of the incident, the Company promptly began an assessment of all Company IT systems, notified law enforcement, and engaged legal counsel and other incident response professionals. The Company continued its business operations during this incident and successfully restored all of its critical operational data. The Company has also taken steps to further secure its IT systems.
Removed
As such, while COVID-19 has had an impact on the Company's financial results for the twelve months ended January 2, 2022, and the period from March 20, 2020 to January 3, 2021, the COVID-19 pandemic and its potential effects on the Company’s business in subsequent periods remains dynamic, and the broader implications for its business and future results of operations remain uncertain and cannot be predicted.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf (i) we are unable to design, produce and sell new products, eFPGA IP, SensiML and other products and solutions that meet design specifications, address customer requirements and generate sufficient revenue and gross profit; (ii) market demand for our new products, eFPGA IP product and other products fails to materialize; (iii) we are unable to obtain adequate fabrication capacity on a timely basis; (iv) we are unable to develop new silicon platforms or solutions in a timely manner; or (v) our customers do not successfully introduce products incorporating our devices, or choose a competing offering, our revenue and gross margin of the new products and eFPGA IP product will be materially harmed, which could have an overall adverse and potentially disproportionate effect on our business, results of operations and financial condition. 16 Table of Contents Two of our products target new unproven markets, and if these markets do not develop, or if our products do not meet their needs, the loss of or reduction in orders could adversely affect our revenue and harm our business financial condition, operating results and cash flows. eFPGA : We have history and experience in developing, selling and supporting FPGA products and incorporating FPGA IP developed by us into our platform solutions.
Biggest changeIf (i) we are unable to design, produce and sell new products and other products and solutions that meet design specifications, address customer requirements and generate sufficient revenue and gross profit; (ii) market demand for our new products and other products fails to materialize; (iii) we are unable to obtain adequate fabrication capacity on a timely basis; (iv) we are unable to develop new silicon platforms or solutions in a timely manner; or (v) our customers do not successfully introduce products incorporating our hardware products, or choose a competing offering, our revenue and gross margin of the new products will be materially harmed, which could have an overall adverse and potentially disproportionate effect on our business, results of operations and financial condition.
If we are unable to successfully compete with companies that supply ASSPs, lower power FPGAs, MCUs, ASICs, eFPGA IP, or sensor algorithm software in any of the following areas, our business, results of operations and financial condition will be materially adversely affected: (i) the development of new products, solutions and advanced manufacturing technologies; (ii) the quality, power characteristics, performance characteristics, price and availability of devices, programming hardware and software development tools; (iii) the ability to engage with companies that provide synergistic products and services, including algorithms that may be preloaded into our device at configuration; (iv) the incorporation of industry standards in our products and solutions; (v) the diversity of product offerings available to customers; and (vi) the quality and cost-effectiveness of design, development, manufacturing and marketing efforts.
If we are unable to successfully compete with companies that supply ASSPs, lower power FPGAs, MCUs, ASICs, eFPGA IP, or sensor algorithm software in any of the following areas, our business, results of operations and financial condition will be materially adversely affected: (i) the development of new products, solutions and advanced manufacturing technologies; (ii) the quality, power characteristics, performance characteristics, price and availability of hardware products, programming hardware and software development tools; (iii) the ability to engage with companies that provide synergistic products and services, including algorithms that may be preloaded into our device at configuration; (iv) the incorporation of industry standards in our products and solutions; (v) the diversity of product offerings available to customers; and (vi) the quality and cost-effectiveness of design, development, manufacturing and marketing efforts.
If we are unable to maintain a close working relationship with our partners it would hinder our ability to continue to develop and introduce leading solutions effectively in the future, which may have a material adverse effect on our business, results of operations and financial condition. We depend on our relationships with third parties to manufacture our new products.
If we are unable to maintain a close working relationship with our partners it would hinder our ability to continue to develop and introduce leading solutions effectively in the future, which may have a material adverse effect on our business, results of operations and financial condition. We depend on our relationships with third parties to manufacture our new hardware products.
Any losses or damages incurred by us as a result of a catastrophic event or any other significant uninsured loss could have a material adverse effect on our business. There may be some potential effects of system outages or data security breaches, which could adversely affect our operations, financial results or reputation.
Any losses or damages incurred by us as a result of a catastrophic event or any other significant uninsured loss could have a material adverse effect on our business. There may be some effects of system outages or data security breaches, which could adversely affect our operations, financial results or reputation.
In order to increase our revenue from its current level, we depend upon increased revenue from our existing new products, especially solutions based on our EOS S3, ArcticLink and PolarPro solution platforms, the eFPGA IP product and the development of additional new products and solutions.
In order to increase our revenue from its current level, we depend upon increased revenue from our existing new products, especially solutions based on our EOS S3, ArcticLink and PolarPro solution platforms, eFPGA IP and the development of additional new products and solutions.
Our new products and products currently under development have been generating lower gross margin as a percentage of revenue than our mature products due to the markets that we have targeted and the larger order quantities associated with these applications.
Our new products and products currently under development have been generating lower gross margin as a percentage of revenue than our mature products due to the markets that we have targeted and the larger order quantities associated with these new products.
There is no guarantee that economic downturns, whether actual or perceived, any further decrease in economic growth rates or an otherwise uncertain economic outlook in China will not occur or persist in the future, that they will not be protracted or that governments will respond adequately to control and reverse such conditions, any of which could materially and adversely affect our business, financial condition and results of operations.
There is no guarantee that economic downturns, whether actual or perceived, any further decrease in economic growth rates or an otherwise uncertain economic outlook in Japan will not occur or persist in the future, that they will not be protracted or that governments will respond adequately to control and reverse such conditions, any of which could materially and adversely affect our business, financial condition and results of operations.
If customers cancel, reduce or delay product orders from us, or choose not to release products that incorporate our devices after we have spent substantial time and resources developing products or assisting customers with their product design, our revenue levels may be less than anticipated and our business, results of operations and financial condition may be materially adversely affected.
If customers cancel, reduce or delay product orders from us, or choose not to release products that incorporate our hardware products after we have spent substantial time and resources developing products or assisting customers with their product design, our revenue levels may be less than anticipated and our business, results of operations and financial condition may be materially adversely affected.
We would have to identify and qualify substitute suppliers, which could be time consuming, difficult and result in unforeseen operational problems, or we could announce an end-of-life program for these products. Alternate suppliers might not be available to fabricate, assemble, test and program our devices or, if available, might be unwilling or unable to offer services on acceptable terms.
We would have to identify and qualify substitute suppliers, which could be time consuming, difficult and result in unforeseen operational problems, or we could announce an end-of-life program for these products. Alternate suppliers might not be available to fabricate, assemble, test and program our hardware products or, if available, might be unwilling or unable to offer services on acceptable terms.
In general, each of our devices is fabricated, assembled and programmed by a single supplier, and the loss of a supplier, transfer of manufacturing to a new location, expiration of a supply agreement or the inability of our suppliers to manufacture our products to meet volume, performance, quality and cost targets could have a material adverse effect on our business.
In general, each of our hardware products is fabricated, assembled and programmed by a single supplier, and the loss of a supplier, transfer of manufacturing to a new location, expiration of a supply agreement or the inability of our suppliers to manufacture our products to meet volume, performance, quality and cost targets could have a material adverse effect on our business.
Risk Factor Summary Some of the factors that could materially and adversely affect our business, financially condition, results of operations and cash flows, but are not limited to, the following: Risks Related to Our Business, Industry and Global and Economic Conditions ● We have incurred losses in the past years.
Risk Factor Summary Some of the factors that could materially and adversely affect our business, financial condition, results of operations and cash flows, but are not limited to, the following: Risks Related to Our Business, Industry and Global and Economic Conditions • We have incurred losses in the past years.
W e expect this high level of customer concentration to reduce as we continue to market our solutions to customers in more fragmented IoT markets as well as Military, Aerospace and Defense customers. As in the past, future demand from these customers may fluctuate significantly from quarter to quarter.
We expect this high level of customer concentration to reduce as we continue to market our solutions to customers in more fragmented IoT markets as well as Military, Aerospace and Defense customers. As in the past, future demand from these customers may fluctuate significantly from quarter to quarter.
Risk Related to Our Products ● If we fail to successfully develop, introduce and sell new products, eFPGA IP product, SensiML Software subscriptions/licenses, and other new solutions or if our design opportunities do not generate the revenue we expect, we may be unable to compete effectively in the future and our future gross margins and operating results will be lower. ● Two of our products target new unproven markets, and if these markets do not develop, or if our products do not meet their needs, the loss of or reduction in orders could adversely affect our revenue and harm our business financial condition, operating results and cash flows. ● If our AI products are not low touch, the cost of addressing the fragmented AI market will be high which will delay market penetration, result in reduced revenues or require increased expenses, any of which could adversely affect our revenue and harm our business financial condition, operating results and cash flows. ● Our products are subject to a lengthy sales cycle and our customers may cancel or change their product plans after we have expended substantial time and resources in the design of their products. ● If we fail to adequately forecast demand for our products, we may incur product shortages or excess product inventories.
Risk Related to Our Products • If we fail to successfully develop, introduce and sell new products and other new solutions or if our design opportunities do not generate the revenue we expect, we may be unable to compete effectively in the future and our future gross margins and operating results will be lower. • Two of our products target new unproven markets, and if these markets do not develop, or if our products do not meet their needs, the loss of or reduction in orders could adversely affect our revenue and harm our business financial condition, operating results and cash flows. • If our AI products are not low touch, the cost of addressing the fragmented AI market will be high which will delay market penetration, result in reduced revenues or require increased expenses, any of which could adversely affect our revenue and harm our business financial condition, operating results and cash flows. • Our products are subject to a lengthy sales cycle and our customers may cancel or change their product plans after we have expended substantial time and resources in the design of their products. • If we fail to adequately forecast demand for our products, we may incur product shortages or excess product inventories.
Most of our products are manufactured outside of the United States at manufacturing facilities operated by our suppliers in Asia and South Asia. A significant portion of our total revenue comes from sales to customers located outside the United States.
Many of our products are manufactured outside of the United States at manufacturing facilities operated by our suppliers in Asia and South Asia. A significant portion of our total revenue comes from sales to customers located outside the United States.
Customers may also discontinue products incorporating our devices at any time or they may choose to replace our products with lower cost semiconductors. In addition, we are working with leading customers in our target markets to define our future products.
Customers may also discontinue products incorporating our hardware products at any time or they may choose to replace our products with lower cost semiconductors. In addition, we are working with leading customers in our target markets to define our future products.
If we are unable to continue to develop and retain existing executive officers or other key employees or are unsuccessful in attracting new highly-qualified employees, our financial condition, cash flows, and results of operations could be materially and adversely affected. We may have increasing difficulty attracting and retaining qualified outside board members.
If we are unable to continue to develop and retain existing executive officers or other key employees or are unsuccessful in attracting new highly-qualified employees, our financial condition, cash flows, and results of operations could be materially and adversely affected. 13 Table of Contents We may have increasing difficulty attracting and retaining qualified outside board members.
If revenue from any significant customer were to decline substantially, we may be unable to offset this decline with increased revenue and gross margin from other customers and we may purchase excess inventories. These factors could have a material adverse impact on our business, results of operations and financial condition.
If revenue from any significant customer were to decline substantially, we may be unable to offset this decline with increased revenue and gross margin from other customers and we may purchase excess inventories. These factors could have a materi al adverse impact on our business, results of operations and financial condition.
We have experienced net losses in the past years and expect to experience losses in at least some of the fiscal quarters during 2022, as we continue to develop new products, applications and technologies.
We have experienced net losses in the past years and expect to experience losses in at least some of the fiscal quarters during 2023, as we continue to develop new products, applications and technologies.
In addition, our past operating results may not be an indicator of future operating results. 12 Table of Contents Factors that could cause our operating results to fluctuate include, without limitation: (i) successful development and market acceptance of our products and solutions; (ii) our ability to accurately forecast product volumes and mix, and to respond to rapid changes in customer demand; (iii) changes in sales volume or expected sales volume, product mix, average selling prices or production variances that affect gross profit; (iv) the effect of end-of-life programs; (v) a significant change in sales to, or the collectability of accounts receivable from, our largest customers; (vi) our ability to adjust our product features, manufacturing capacity and costs in response to economic and competitive pressures; (vii) our reliance on subcontract manufacturers for product capacity, yield and quality; (viii) our competitors’ product portfolio and product pricing policies; (ix) timely implementation of efficient manufacturing technologies; (x) errors in applying or changes in accounting and corporate governance rules; (xi) the issuance of equity compensation awards or changes in the terms of our stock plan or employee stock purchase plan; (xii) mergers or acquisitions; (xiii) the impact of import and export laws and regulations; (xiv) the cyclical nature of the semiconductor industry and general economic, market, political and social conditions in the countries where we sell our products and the related effect on our customers, distributors and suppliers; and (xv) our ability to obtain capital, debt financing and insurance on commercially reasonable terms, and allocations between our operating expenses and cost of sales .
Factors that could cause our operating results to fluctuate include, without limitation: (i) successful development and market acceptance of our products and solutions; (ii) our ability to accurately forecast product volumes and mix, and to respond to rapid changes in customer demand; (iii) changes in sales volume or expected sales volume, product mix, average selling prices or production variances that affect gross profit; (iv) the effect of end-of-life programs; (v) a significant change in sales to, or the collectability of accounts receivable from, our largest customers; (vi) our ability to adjust our product features, manufacturing capacity and costs in response to economic and competitive pressures; (vii) our reliance on subcontract manufacturers for product capacity, yield and quality; (viii) our competitors’ product portfolio and product pricing policies; (ix) timely implementation of efficient manufacturing technologies; (x) errors in applying or changes in accounting and corporate governance rules; (xi) the issuance of equity compensation awards or changes in the terms of our stock plan or employee stock purchase plan; (xii) mergers or acquisitions; (xiii) the impact of import and export laws and regulations; (xiv) the cyclical nature of the semiconductor industry and general economic, market, political and social conditions in the countries where we sell our products and the related effect on our customers, distributors and suppliers; and (xv) our ability to obtain capital, debt financing and insurance on commercially reasonable terms, and allocations between our operating expenses and cost of sales .
The State of California enacted the California Consumer Privacy Act of 2018 ("CCPA") effective on January 1, 2020, which contains requirements similar to GDPR for the handling of personal information of California residents, commencing on January 1, 2020.
The State of California enacted the California Consumer Privacy Act of 2018 (“CCPA”) effective on January 1, 2020, which contains requirements similar to GDPR for the handling of personal information of California residents, commencing on January 1, 2020.
To the extent any such risks materialize, our business, results of operations and financial condition could be materially adversely affected. We have implemented import and export control procedures to comply with United States regulations but we are still exposed to potential risks from import and export activity.
To the extent any such risks materialize, our business, results of operations and financial condition could be materially adversely affected. 18 Table of Contents We have implemented import and export control procedures to comply with United States regulations but we are still exposed to potential risks from import and export activity.
The market for differentiated consumer devices is highly competitive and dynamic, with short end market product life cycles and rapid obsolescence of existing products.
The market for differentiated consumer hardware products is highly competitive and dynamic, with short end market product life cycles and rapid obsolescence of existing products.
Our solutions face competition from suppliers of ASSPs, suppliers of integrated application processors, low power FPGAs, low power MCUs, suppliers of ASICs, suppliers of eFPGA IP, and suppliers of sensor algorithm software whose software is running on competitors’ devices. We face competition from companies that offer ASSPs.
Our solutions face competition from suppliers of ASSPs, suppliers of integrated application processors, low power FPGAs, low power MCUs, suppliers of ASICs, suppliers of eFPGA IP, and suppliers of sensor algorithm software whose software is running on competitors’ hardware products. We face competition from companies that offer ASSPs.
Unless such cash flow levels are achieved, in addition to the proceeds that we received in September 2021 from the sale of our equity securities, and the credit line we may be able to draw down from Heritage Bank of Commerce, we may need to obtain additional funds through strategic divestiture, or sell debt or equity securities, or some combination thereof, to provide funding for our operations.
Unless such cash flow levels are achieved, in addition to the proceeds that we received during Fiscal 2022 from the sale of our equity securities, and the credit line we may be able to draw down from Heritage Bank of Commerce, we may need to obtain additional funds through strategic divestiture, or sell debt or equity securities, or some combination thereof, to provide funding for our operations.
This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to finance our operations Risks Related to Our Products If we fail to successfully develop, introduce and sell new products, eFPGA IP product, SensiML Software subscriptions/licenses, and other new solutions or if our design opportunities do not generate the revenue we expect, we may be unable to compete effectively in the future and our future gross margins and operating results will be lower.
This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline and make it more difficult for us to finance our operations Risks Related to Our Products If we fail to successfully develop, introduce and sell new products and other new solutions or if our design opportunities do not generate the revenue we expect, we may be unable to compete effectively in the future and our future gross margins and operating results will be lower.
Due to the short product life cycle of these devices, our revenue is subject to fluctuation in a short period of time and our ability to grow our business depends on accelerating our design win activity.
Due to the short product life cycle of these hardware products, our revenue is subject to fluctuation in a short period of time and our ability to grow our business depends on accelerating our design win activity.
While we expect revenue and gross profit growth from new products and eFPGA IP product will offset the expected decline in revenue and gross profit from our mature products, there is no assurance whether or when this will occur.
While we expect revenue and gross profit growth from new products will offset the expected decline in revenue and gross profit from our mature products, there is no assurance whether or when this will occur.
Any problems at these third parties could adversely affect our business, results of operations and financial condition. We contract with third parties to fabricate, assemble, test and program our devices, and vendors for logistics.
Any problems at these third parties could adversely affect our business, results of operations and financial condition. We contract with third parties to fabricate, assemble, test and program our hardware products, and vendors for logistics.
We have entered into informal partnerships with other parties that involve the development of solutions that interface with their devices or standards. These informal partnerships also may involve joint marketing campaigns and sales calls.
We have entered into informal partnerships with other parties that involve the development of solutions that interface with their hardware products or standards. These informal partnerships also may involve joint marketing campaigns and sales calls.
We anticipate that sales to customers located outside the United States will continue to represent a significant portion of our total revenue in future periods. In addition, most of our domestic customers sell their products outside of North America, thereby indirectly exposing us to risks associated with foreign commerce and economic instability.
We anticipate that sales to customers located outside the United States will continue to represent a significant portion of our total revenue in future periods. In addition, most of our domestic customers sell their products outside of North America, thereby indirectly exposing us to risks associated with foreign commerce and economic instability. The Company continues to maintain overseas sales offices.
Changes to existing accounting pronouncements or taxation rules or practices may cause adverse revenue fluctuations, affect our reported financial results or how we conduct our business. Generally accepted accounting principles in the United States ("GAAP") are promulgated by and are subject to the interpretation of the Financial Accounting Standards Board ("FASB") and the SEC.
Changes to existing accounting pronouncements or taxation rules or practices may cause adverse income fluctuations, affect our reported financial results or how we conduct our business. Generally accepted accounting principles in the United States (“GAAP”) are promulgated by and are subject to the interpretation of the Financial Accounting Standards Board (“FASB”) and the SEC.
These implications could include further disruptions or restrictions on the Company’s ability to source, manufacture or distribute its products, including temporary disruptions to the facilities of its contract manufacturers in China, Taiwan, Philippines and Singapore, or the facilities of its suppliers and their contract manufacturers globally.
This could lead to further disruptions or restrictions on the Company’s ability to source, manufacture or distribute its products, including temporary disruptions to the facilities of its contract manufacturers in China, Taiwan, Philippines and Singapore, or the facilities of its suppliers and their contract manufacturers globally.
In particular, since we derived in 2021 and expect to continue to derive a noticeable portion of our revenue from China, our business development plans, results of operations and financial condition may be materially adversely affected by significant political, social and economic developments in China.
In particular, since we derived in 2022 and expect to continue to derive a notable portion of our revenue from Japan, our business development plans, results of operations and financial condition may be materially adversely affected by a significant political, social and economic developments in Japan.
A slowdown in economic growth in China, such as due to the outbreak of the COVID-19 virus could adversely impact our customers, prospective customers, suppliers, distributors and partners in China, which could have a material adverse effect on our results of the operations and financial condition.
A slowdown in economic growth in Japan, such as due to the outbreak of a pandemic could adversely impact our customers, prospective customers, suppliers, distributors and partners in Japan, which could have a material adverse effect on our results of the operations and financial condition.
Additionally, multiple countries have imposed and may further impose restrictions on business operations and movement of people and products to limit the spread of COVID-19.
Additionally, multiple countries have imposed and may further impose restrictions on business operations and movement of people and products to limit the spread of a pandemic.
Delays in production or delivery of components or raw materials that are part of the Company’s global supply chain due to restrictions imposed to limit the spread of COVID-19 could delay or inhibit its ability to obtain the supply of components and finished goods.
Delays in production or delivery of components or raw materials that are part of the Company’s global supply chain due to restrictions imposed to limit the spread of a pandemic could delay or inhibit our ability to obtain the supply of components and finished goods.
Security vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in external parties gaining access to our networks, datacenters, cloud datacenters, corporate computers, manufacturing systems, and or access to accounts we have at our suppliers, vendors, and customers.
As demonstrated by the 2023 cybersecurity incident, security vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in external parties gaining access to our networks, datacenters, cloud datacenters, corporate computers, manufacturing systems, and or access to accounts we have at our suppliers, vendors, and customers.
Regulatory activity, such as enforcement of U.S. export control and sanctions laws, and the imposition of tariffs and export regulations, have in the past and may materially limit our ability to make sales to customers in China, which may harm our results of operations and financial condition. Since the beginning of 2018, there have been several rounds of U.
Regulatory activity, such as enforcement of U.S. export control and sanctions laws, and the imposition of tariffs and export regulations, have in the past and may materially limit our ability to make sales to customers in China, which may harm our results of operations and financial condition.
Our future operating results are likely to fluctuate and therefore may fail to meet expectations, which could cause our stock price to decline. Our operating results have varied widely in the past and are likely to do so in the future.
Our future operating results are likely to fluctuate and therefore may fail to meet expectations, which could cause our stock price to decline. Our operating results have varied widely in the past and are likely to do so in the future. In addition, our past operating results may not be an indicator of future operating results.
The Company continues to maintain overseas sales offices. 13 Table of Contents International operations are subject to certain risks inherent in conducting business outside the U.S., such as changes in currency exchange rates, tax laws, price and currency exchange controls, export and import restrictions, environmental regulations, protection of intellectual property rights, nationalization, expropriation and other governmental action.
International operations are subject to certain risks inherent in conducting business outside the U.S., such as changes in currency exchange rates, tax laws, price and currency exchange controls, export and import restrictions, environmental regulations, protection of intellectual property rights, nationalization, expropriation and other governmental action.
Any such action could adversely affect our financial results and the market price of our common stock. 18 Table of Contents Risks Related to Our Customers and Partners We currently depend on a limited number of significant customers, for a significant portion of our revenue and the loss of or reduction in orders from such significant customers could adversely affect our revenue and harm our business financial condition, operating results and cash flows.
Risks Related to Our Customers and Partners We currently depend on a limited number of significant customers, for a significant portion of our revenue and the loss of or reduction in orders from such significant customers could adversely affect our revenue and harm our business financial condition, operating results and cash flows.
If COVID-19 becomes more prevalent in the locations where the Company, its customers or suppliers conduct business, or the Company experiences more pronounced disruptions in its operations, the Company may experience constrained supply or curtailed demand that may materially adversely impact its business and results of operations.
If the impact of a pandemic becomes more severe in the locations where the Company, its customers or suppliers conduct business, or the Company experiences more pronounced disruptions in its operations, the Company may experience constrained supply or curtailed demand that may materially adversely impact its business, cash flows and results of operations.
Our business could be adversely affected if such informal partnerships fail to grow as we expected. 11 Table of Contents Risks Related to Our Business, Industry and Global and Economic Conditions We have incurred losses in the past years.
Our business could be adversely affected if such informal partnerships fail to grow as we expected. 11 Table of Contents Risks Related to Our Financial Position and Capital Needs We have incurred losses in the past years.
Although we are targeting to break even during the 2022 fiscal year, we may not be able to generate sufficient revenue or raise additional financing to fund future losses, and we may not be able to sustain sufficient liquidity, and as a result, our financial condition and operating results could be materially and adversely affected.
We may not be able to generate sufficient revenue or raise additional financing to fund future losses, and we may not be able to sustain sufficient liquidity, and as a result, our financial condition and operating results could be materially and adversely affected.
Current events, including potential disruption caused by the COVID-19 virus outbreak, the United Kingdom’s exit from the European Union, potential changes in immigration policies and tax reform proposals, create a level of uncertainty for multi-national companies.
Current events, including the Russia-Ukraine military conflict, potential disruption caused by pandemics, the United Kingdom’s recent exit from the European Union, potential changes in immigration policies and tax reform proposals, create a level of uncertainty for multi-national companies.
Although we are targeting to break even during the 2022 fiscal year, we may not be able to generate sufficient revenue or raise additional financing to fund future losses, and we may not be able to sustain sufficient liquidity, and as a result, our financial condition and operating results could be materially and adversely affected. ● The COVID-19 pandemic could have a material adverse effect on our business, cash flows and results of operations. ● We may be unable to accurately estimate quarterly revenue, which could adversely affect the trading price of our stock. ● Our future operating results are likely to fluctuate and therefore may fail to meet expectations, which could cause our stock price to decline. ● Cyberattacks through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position.
Although we are targeting to break even during the 2023 Fiscal Year, we may not be able to generate sufficient revenue or raise additional financing to fund future losses, and we may not be able to sustain sufficient liquidity, and as a result, our financial condition and operating results could be materially and adversely affected. • Pandemics or other widespread public health problems could adversely affect our business, results of operations, and financial condition in a material way. • We may be unable to accurately estimate quarterly revenue, which could adversely affect the trading price of our stock. • Our future operating results are likely to fluctuate and therefore may fail to meet expectations, which could cause our stock price to decline. • Cyberattacks, like the 2023 cybersecurity incident can lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position.
The gross margin associated with our new products is generally lower than the gross margin of our mature products, due primarily to the price-sensitive nature of the higher volume IoT consumer opportunities that we are pursuing with new products and eFPGA IP product.
The new product revenues growth of our new products needs to be strong enough to achieve profitability. The gross margin associated with our new products is generally lower than the gross margin of our mature products, due primarily to the price-sensitive nature of the higher volume IoT consumer opportunities that we are pursuing with new products.
Securities litigation could result in substantial costs and divert management’s attention. 14 Table of Contents If we do not maintain compliance with the listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could, among other things, reduce the price of our common stock and the levels of liquidity available to our stockholders.
If we do not maintain compliance with the listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could, among other things, reduce the price of our common stock and the levels of liquidity available to our stockholders.
Alternate foundries might not be available to fabricate our new products, or if available, might be unwilling or unable to offer services on acceptable terms and our ability to operate our business or deliver our products to our customers could be severely impaired.
This would be time consuming, difficult and result in unforeseen operational problems. Alternate foundries might not be available to fabricate our new hardware products, or if available, might be unwilling or unable to offer services on acceptable terms and our ability to operate our business or deliver our products to our customers could be severely impaired.
To mitigate these security issues, we have implemented measures throughout our organization, including firewalls, backups, encryption, employee information technology policies and user account policies. However, there can be no assurance these measures will be sufficient to avoid cyberattacks.
The vulnerability could be caused by inadequate account security practices such as failure to timely remove employee access when terminated. To mitigate these security issues, we have implemented measures throughout our organization, including firewalls, backups, encryption, employee information technology policies and user account policies. However, there can be no assurance these measures will be sufficient to avoid cyberattacks.
S. tariffs on Chinese goods taking effect in 2018 and 2019, some of which prompted retaliatory Chinese tariffs on U.S. goods.
Since the beginning of 2018, there have been several rounds of U.S. tariffs on Chinese goods taking effect in 2018 and 2019, some of which prompted retaliatory Chinese tariffs on U.S. goods.
A small number of end-customers represented a significant portion our total revenue in our fiscal year ended January 2, 2022 . During our fiscal year ended January 2, 2022 , four customers accounted for 22%, 16%, 14%, and 10% respectively, of our total revenue.
A small number of end-customers represented a significant portion of our total revenue in our Fiscal Year ended January 1, 2023 . During our Fiscal Year ended January 1, 2023 , three customers accounted for 20%, 16% and 12%, respectively, of our total revenue.
If we fail to adequately forecast demand for our products, our business, the relationship with our customers, our results of operations and financial condition could be materially adversely affected. Our business could be adversely affected by undetected errors or defect in our products. Difficulties encountered during the complex semiconductor manufacturing process can render a substantial percentage of semiconductor devices nonfunctional.
If we fail to adequately forecast demand for our products, our business, the relationship with our customers, our results of operations and financial condition could be materially adversely affected. 17 Table of Contents Our business could be adversely affected by undetected errors or defect in our products.
We cannot be certain as to the outcome of an evaluation, investigation, inquiry or other action or the impact of these items on our operations.
We cannot be certain as to the outcome of an evaluation, investigation, inquiry or other action or the impact of these items on our operations. Any such action could adversely affect our financial results and the market price of our common stock.
Part of our business strategy is to acquire businesses that we believe can complement our current business activities, both financially and strategically.
We may not be able to achieve the anticipated synergies and benefits from business acquisitions. Part of our business strategy is to acquire businesses that we believe can complement our current business activities, both financially and strategically.
If we are unable to generate sufficient sales from its new products or adequate funds are not available when needed, our liquidity, financial condition and operating results would be materially and adversely affected, and we may not be able to operate our business without significant changes in our operations or at all.
If we are unable to generate sufficient sales from our new products or adequate funds are not available when needed, our liquidity, financial condition and operating results would be materially and adversely affected, and we may not be able to operate our business without significant changes in our operations or at all, Risks Related to Adverse Developments Affecting Financial Institutions Adverse Developments Affecting Financial Institutions, Companies in the Financial Services Industry or the Financial Services Industry Generally, such as Actual Events or Concerns Involving Liquidity, Defaults or Non-Performance, Could Adversely Affect our Operations and Liquidity.
The market price of our common stock may fluctuate significantly and could lead to securities litigation. Stock prices for many companies in the technology and emerging growth sectors have experienced wide fluctuations that have often been unrelated to the operating performance of such companies.
Stock prices for many companies in the technology and emerging growth sectors have experienced wide fluctuations that have often been unrelated to the operating performance of such companies. In the past, securities class action litigation has often been brought against companies following periods of volatility in the market price of its securities.
Such disruptions and data loss may adversely impact our ability to fulfill orders, patent our intellectual property or protect our source code, and interrupt other processes. Delayed sales or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation.
Such disruptions and data loss may adversely impact our ability to fulfill orders, patent our intellectual property or protect our source code, and interrupt other processes.
Similar to past years, recent unfavorable economic conditions have resulted in a tightening of the credit markets. If signs of improvement in the global economy do not progress as expected and global economic conditions worsen, we may experience a decline in our average selling prices.
If signs of improvement in the global economy do not progress as expected and global economic conditions worsen, we may experience a decline in our average selling prices. In addition, our competitors have in the past, and may again in the future, lower prices in order to increase their market share.
Undetected errors or defects may also result from new manufacturing processes or when new intellectual property is incorporated into our products. If our products or software development tools contain undetected or unresolved defects, we may lose market share, experience delays in or loss of market acceptance, reserve or scrap inventories or be required to issue a product recall.
If our products or software development tools contain undetected or unresolved defects, we may lose market share, experience delays in or loss of market acceptance, reserve or scrap inventories or be required to issue a product recall. In addition, we would be at risk of product liability litigation if defects in our products were discovered.
Approximately $0.1 million, or approximately 1%, of our total revenue for the year ended January 2, 2022, approximately $0.1 million, or 1%, of our total revenue for the year ended January 3, 2021 , and approximately $1.1 million, or 11%, of our total revenue for the year ended December 29, 2019, consisted of sales of our EOS S3 and FPGA products to both OEMs and ODMs in China.
We had sales to OEM and ODM customers in China of approximately $0.5 million, or 3% of our total revenue for the year ended January 1, 2023, and $0.1 million, or 1% of our total revenue for the years ended January 2, 2022 and January 3, 2021 of EOS S3 and eFPGA products.
Effective May 25, 2018, the European Union ("EU") implemented the General Data Protection Regulation("GDPR") a broad data protection framework that expands the scope of current EU data protection law to non-European Union entities that process, or control the processing of, the personal information of EU subjects.
Delayed sales or lost customers resulting from these disruptions could adversely affect our financial results, stock price and reputation. 15 Table of Contents Effective May 25, 2018, the European Union ("EU") implemented the General Data Protection Regulation (“GDPR”) a broad data protection framework that expands the scope of current EU data protection law to non-European Union entities that process, or control the processing of, the personal information of EU subjects.
Our reliance on third-party suppliers may extend the period of time required to analyze and correct these problems. Once corrected, our customers may be required to redesign or re-qualify their products. As a result, we may incur substantially higher manufacturing costs, shortages of inventories or reduced customer demand.
We have, in the past, experienced manufacturing runs that have contained substantially reduced or no functioning hardware products, or that generated hardware products with below normal performance characteristics. Our reliance on third-party suppliers may extend the period of time required to analyze and correct these problems. Once corrected, our customers may be required to redesign or re-qualify their products.
The pricing pressure in the semiconductor industry in past years has been due to a large number of factors, many of which were not easily foreseeable, such as currency crisis, industry-wide excess manufacturing capacity, weak economic growth, the slowdown in capital spending that followed the "dot-com" collapse, the reduction in capital spending by telecom companies and satellite companies, and the effects of the terrorism since September 11, 2001.
The pricing pressure in the semiconductor industry in past years has been due to a large number of factors, many of which were not easily foreseeable, such as industry-wide excess manufacturing capacity, weak economic growth, and at times, the slowdown in capital spending. Similar to past years, recent unfavorable economic conditions have resulted in a tightening of the credit markets.
We depend upon GLOBALFOUNDRIES, TSMC, Amkor and STATS-chipPAC to manufacture our new products. The inability of any one of these companies to continue manufacture of our new products for any reason would require us to identify and qualify a new foundry to manufacture our new products. This would be time consuming, difficult and result in unforeseen operational problems.
We depend upon GlobalFoundries, TSMC, Amkor Technology, Inc., Integra Specialty Products, JCET Group Co. Ltd., and Golden Altos Corp. to manufacture our new hardware products. The inability of any one of these companies to continue manufacture of our new hardware products for any reason would require us to identify and qualify a new foundry to manufacture our new hardware products.
System-wide or local failures that affect our information processing could have a material adverse effect on our business, financial condition, results of operations and cash flows.
System-wide or local failures that affect our information processing could have a material adverse effect on our business, financial condition, results of operations and cash flows. Further, insurance coverage does not generally protect from normal wear and tear, which can affect system performance. Any applicable insurance coverage for an occurrence could prove to be inadequate.
Although we attempt to limit our liability to end users through disclaimers of special, consequential and indirect damages and similar provisions, we cannot assure you that such limitations of liability will be legally enforceable. 17 Table of Contents We will be unable to compete effectively if we fail to anticipate product opportunities based upon emerging technologies and standards or fail to develop products and solutions that incorporate these technologies and standards in a timely manner.
Although we attempt to limit our liability to end users through disclaimers of special, consequential and indirect damages and similar provisions, we cannot assure you that such limitations of liability will be legally enforceable.
New manufacturing facilities or processes are often more complex and take a period of time to achieve expected quality levels and manufacturing efficiencies. While we test our products, including our software development tools, they may still contain errors or defects that are found after we have commenced commercial production.
While we test our products, including our software development tools, they may still contain errors or defects that are found after we have commenced commercial production. Undetected errors or defects may also result from new manufacturing processes or when new intellectual property is incorporated into our products.
In any case, others may come to know about or determine our trade secrets through a variety of methods. In addition, the laws of certain territories in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as the laws of the United States.
In addition, the laws of certain territories in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as the laws of the United States. 14 Table of Contents The market price of our common stock may fluctuate significantly and could lead to securities litigation.
We spend significant resources designing and developing silicon solution platforms, IP and software and reference designs, and adopting emerging technologies. We intend to develop additional products and solutions and to adopt new technologies in the future.
We intend to develop additional products and solutions and to adopt new technologies in the future.
Additional security legislation and regulations are constantly being considered and any such laws enacted may have an adverse impact on our business if we are not able to comply or if compliance requires time and resources for implementation. 15 Table of Contents Our and our collaborators’ and contractors’ failure to fully comply with GDPR, CCPA and other laws could lead to significant fines and require onerous corrective action.
Privacy and security laws, self-regulatory schemes, regulations, standards, and other obligations are constantly evolving, and may conflict with each other, and any such laws, schemes, regulations and standards may have an adverse impact on our business if we are not able to comply or if compliance requires time and resources for implementation.
Yield fluctuations frequently occur in connection with the manufacture of newly introduced products, with changes in product architecture, with manufacturing at new facilities, on new fabrication processes or in conjunction with new backend manufacturing processes. Newly introduced solutions and products are often more complex and more difficult to produce, increasing the risk of manufacturing related defects.
As a result, we may incur substantially higher manufacturing costs, shortages of inventories or reduced customer demand. Yield fluctuations frequently occur in connection with the manufacture of newly introduced products, with changes in product architecture, with manufacturing at new facilities, on new fabrication processes or in conjunction with new backend manufacturing processes.
In addition, we quote opportunities in anticipation of future cost reductions and may aggressively price products to gain market share. In order to react quickly to opportunities or to obtain favorable wafer prices, we make significant investments in and commitments to purchase inventories and capital equipment before we have firm commitments from customers.
In addition, we quote opportunities in anticipation of future cost reductions and may aggressively price products to gain market share.
Cyberattacks through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position.
Coverage may be or become unavailable or inapplicable to any risks then prevalent. Cyberattacks, like the 2023 cybersecurity incident, can lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position.
In that event, downward price pressure in the industry may harm our competitive position and materially and adversely affect our financial condition, cash flows, and results of operations. We may not be able to achieve the anticipated synergies and benefits from business acquisitions.
Despite the recent industry-wide price increases being implemented, prices may reduce in the future as the supply chain becomes more normalized again. In that event, downward price pressure in the industry may harm our competitive position and materially and adversely affect our financial condition, cash flows, and results of operations.
They may gain access to our data or our users’ or customers’ data or attack the networks causing denial of service or attempt to hold our data or systems in ransom. The vulnerability could be caused by inadequate account security practices such as failure to timely remove employee access when terminated.
Due to the actions of outside parties, employee error, malfeasance, or otherwise, an authorized party may gain access to our data or our users’ or customers’ data or attack the networks causing denial of service or attempt to hold our data or systems in ransom.
In addition, any other widespread health crisis that could adversely affect global and regional economies, financial markets and overall demand environment for the Company's products could have a material adverse effect on the Company’s business, cash flows or results of operations. We may be unable to accurately estimate quarterly revenue, which could adversely affect the trading price of our stock.
We may be unable to accurately estimate quarterly revenue, which could adversely affect the trading price of our stock.
New manufacturing techniques or fluctuations in the manufacturing process may change the performance distribution and yield of our products. We have, in the past, experienced manufacturing runs that have contained substantially reduced or no functioning devices, or that generated devices with below normal performance characteristics.
Difficulties encountered during the complex semiconductor manufacturing process can render a substantial percentage of semiconductor hardware products nonfunctional. New manufacturing techniques or fluctuations in the manufacturing process may change the performance distribution and yield of our products.
We expect our business growth to be driven do by new products, which currently include EOS™, Quick AI, SensiML, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, Eclipse II products. We also launched a business that licenses our FPGA technology for use in other semiconductor companies’ SoCs and delivered our first eFPGA IP product ArcticPro™ in 2017.
In order to react quickly to opportunities or to obtain favorable wafer prices, we make significant investments in and commitments to purchase inventories and capital equipment before we have firm commitments from customers. 16 Table of Contents We expect our business growth to be driven by new products, which currently include ArcticPro™, EOS™, QuickAI™, SensiML Analytics Toolkit, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, Eclipse II products and eFPGA IP licenses and professional services.
Removed
The COVID-19 pandemic could continue to have a material adverse effect on our business, cash flows and results of operations. On January 30, 2020, the World Health Organization ("WHO") declared a global emergency due to the COVID-19 pandemic, and on February 28, 2020, the WHO raised its assessment of the threat from high to very high at a global level.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our principal administrative, sales, marketing, research and development and final testing facility is located in a building of approximately 24,164 square feet of premises located at 2220 Lundy Avenue, San Jose, California, leased for a period of five years, effective April 15, 2019.
Biggest changeITEM 2. PROPERTIES Our principal administrative, sales, marketing, research and development and final testing facility is located in a building of approximately 24,164 square feet of premises located at 2220 Lundy Avenue, San Jose, California, leased for a duration from April 15, 2019 to April 14, 2024.
Removed
In October 2018, the Company leased a facility for Research and Development in San Diego, California, the lease of which expired in July 2020. The Company did not renew the lease agreement and closed the San Diego office.
Added
Our subsidiary, SensiML Corp., occupies a 706 square feet facility space in Beaverton, Oregon, leased for a duration from April 2021 until March 2023. We lease flexible work-space on a monthly basis for sales offices in Shanghai, China; London, England; and Taipei, Taiwan. We also lease sales office space in the Seoul Capital Area, South Korea on a short-term basis.
Removed
On February 28, 2019, SensiML Corporation, our subsidiary, entered into an agreement to lease approximately 925 square feet of facility space in Beaverton, Oregon, which expired in March 2021. The Company subsequently entered into a new lease agreement for a 705 square foot facility in Beaverton Oregon with a lease term duration from April 2021 until March 2023.
Removed
Additionally, we leased a 9,400 square foot facility in Bangalore, India for the purpose of software development, which expired in June 2021. On July 10, 2020, the Company's Indian subsidiary leased a smaller office premises of 1,100 square feet for a period of 11 months to accommodate the reduced headcount resulting from our restructuring in 2020.
Removed
The lease was subsequently renewed to end in May 2022. We also lease office space in Shanghai, China; in London, England; in Taipei, Taiwan; and in Seongnam City, South Korea where the six-month lease will expire in May 2022. Leases in London, Shanghai, and Taiwan relate to flexible work-space, monthly rentals used for sales offices.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−0 removed3 unchanged
Biggest changeThe graph assumes that $100 was invested on December 30, 2016 in QuickLogic’s common stock and in each of the other two indices and the reinvestment of all dividends, if any, through January 2, 2022 The information contained in the Performance Graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that QuickLogic specifically incorporates it by reference into any such filing.
Biggest changeThe information contained in the Performance Graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that QuickLogic specifically incorporates it by reference into any such filing.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Information Our common stock is currently traded on the Nasdaq Capital Market under the symbol QUIK.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Information O ur common stock is currently traded on the Nasdaq Capital Market under the symbol QUIK.
From October 15, 1999, the date of our initial public offering to July 21, 2019, our common stock was traded on the Nasdaq Global Market under the same symbol. The closing price of our common stock on the Nasdaq was $4.80 per share on March 14, 2022.
From October 15, 1999, the date of our initial public offering to July 21, 2019, our common stock was traded on the Nasdaq Global Market under the same symbol. The closing price of our common stock on the Nasdaq was $5.06 per share on March 20, 2023.
Stock Performance Graph The following graph compares the cumulative total return to stockholders of our common stock from December 30, 2016 to January 2, 2022 to the cumulative total return over such period of (i) the S&P 500 Index and (ii) the S&P Semiconductors Index.
Stock Performance Graph The following graph compares the cumulative total return to stockholders of our common stock from December 31, 2017 to January 1, 2023 to the cumulative total return over such period of (i) the S&P 500 Index and (ii) the S&P Semiconductors Index.
As of March 14, 2022, there were 12,362,334 shares of common stock outstanding that were held of record by 117 stockholders. The actual number of stockholders is greater than this number of holders of record since this number does not include stockholders whose shares are held in trust by other entities.
As of March 20, 2023, there were 13,236,478 shares of common stock outstanding that were held of record by 115 stockholders. The actual number of stockholders is greater than this number of holders of record since this number does not include stockholders whose shares are held in trust by other entities.
Stockholders are cautioned against drawing any conclusions from the data contained therein, as past results are not necessarily indicative of future performance. 22 Table of Contents 1/1/2017 12/31/2017 12/30/2018 12/29/2019 1/3/2021 1/2/2022 QuickLogic Corporation 100.00 125.18 54.73 23.54 19.48 26.26 S&P 500 100.00 121.83 116.49 153.17 181.35 233.41 S&P Semiconductor 100.00 136.32 127.62 187.29 269.19 402.02 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 23 Table of Contents
Stockholders are cautioned against drawing any conclusions from the data contained therein, as past results are not necessarily indicative of future performance. 12/31/2017 12/30/2018 12/29/2019 1/3/2021 1/2/2022 1/1/2023 QuickLogic Corporation 100.00 43.72 18.80 15.56 20.98 21.10 S&P 500 100.00 95.62 125.72 148.85 191.58 156.89 S&P Semiconductor 100.00 93.62 137.39 197.46 294.91 184.86 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 22 Table of Contents ITEM 6. [RESERVED]
Added
The graph assumes that $100 was invested on December 31, 2017 in QuickLogic’s common stock and in each of the other two indices and the reinvestment of all dividends, if any, through January 1, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+70 added−91 removed29 unchanged
Biggest changeIn addition, changes in working capital accounts provided cash of $1.6 million as a result of decreases in accounts receivable $0.3 million, inventory of $0.4 million and other assets of $0.5 million, and increases in accounts payable of $0.3 million and accrued liabilities of $0.2 million, partially offset by cash inflow from a decrease in deferred revenue of $0.1 million. 34 Table of Contents Net Cash from Investing Activities Net cash used for investing activities in 2021 was approximately $0.7 million, which was primarily attributable to the capitalization of internal use software of $533 and capital expenditures primarily related to computer equipment of $185,000.
Biggest changeNet cash used for investing activities in Fiscal Year 2021 was approximately $0.7 million, which was primarily attributable to the capitalization of internal use software of $0.5 million and capital expenditures primarily related to property and equipment of $0.2 million.
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 statem ents.
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 consolidated financial statem ents.
Recently Issued Accounting Pronouncements See Note 2 to the Consolidated Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial condition and results of operations, which is incorporated herein by reference.
Recently Issued Accounting Pronouncements See Note 2 to the consolidated financial statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial condition and results of operations, which is incorporated by reference herein.
Our semiconductor products have historically had an unusually long product life cycle and obsolescence has not been a significant factor in the valuation of inventories. However, as we pursue opportunities in the IoT market and continue to develop new products, we believe our new product life cycle may be shorter, which could increase the potential for obsolescence.
Our hardware products have historically had an unusually long product life cycle and obsolescence has not been a significant factor in the valuation of inventories. However, as we pursue opportunities in the IoT market and continue to develop new products, we believe our new product life cycle may be shorter, which could increase the potential for obsolescence.
In the case of the input methods, the key factors reviewed by management to estimate costs to complete each contract is the estimated labor days-effort necessary to complete the project, budgeted hours, hourly cost to the Company, profit margins, and engineering hours at cut-off when projects extend beyond a reporting period.
In the case of the input methods, the key factors reviewed by management to estimate costs to complete each contract is the estimated labor days-effort necessary to complete the project, budgeted hours, hourly cost to us, profit margins, and engineering hours at cut-off when projects extend beyond a reporting period.
Practical Expedients and Exemptions (i) Taxes collected from customers and remitted to government authorities and that are related to the sales of our products are excluded from revenues. (ii) Sales commissions are expensed when incurred because the amortization period would have been one year or less.
Practical Expedients and Exemptions • Taxes collected from customers and remitted to government authorities and that are related to the sales of our products are excluded from revenues. • Sales commissions are expensed when incurred because the amortization period would have been one year or less.
In order to grow our revenue from its current level, we depend upon increased revenue from our new products including existing new product platforms, eFPGA IP and platforms currently in development. We expect our business growth to be driven mainly by our silicon solutions, eFPGA IP and SensiML AI Software.
In order to grow our revenue from its current level, we depend upon increased revenue from our new products including existing new product platforms and platforms currently in development. We exp ect our business growth to be driven mainly by our silicon solutions, eFPGA IP and SensiML AI Software.
Through the acquisition of SensiML, our core IP also includes the SensiML AI Toolkit that enables OEMs to develop AI software for a broad array of resource-constrained time-series sensor endpoint applications. These include a wide range of consumer and industrial sensing applications.
Our core IP also includes the SensiML Analytics Toolkit that enables OEMs to develop AI software for a broad array of resource-constrained time-series sensor endpoint applications. These include a wide range of consumer and industrial sensing applications.
After the next twelve months, our cash requirements will depend on many factors, including our level of revenue and gross profit, the market acceptance of our existing and new products, the levels at which we maintain inventories and accounts receivable, costs of securing access to adequate manufacturing capacity, new product development efforts, capital expenditures and the level of our operating expenses.
After the next twelve months, the Company's cash requirements will depend on many factors, including its level of revenue and gross profit, the market acceptance of its existing and new products, the levels at which it maintains inventories and accounts receivable, costs of securing access to adequate manufacturing capacity, new product development efforts, capital expenditures and the level of our operating expenses.
The re have been further restrictions by the governmental authorities as a result of a surge in COVID-19 cases during the year 2021 and continuing into fiscal 2022.
There have been further restrictions by the governmental authorities as a result of a surge in COVID-19 cases during the year 2021, 2022, and potentially continuing into Fiscal 2023.
Net Cash from Financing Activities In 2021, net cash provided by financing activities was $0.4 million, primarily attributable to the collective net proceeds of approximately $1.0 million related to the issuance of 198,664 shares of common stock sold on September 30, 2021. The proceeds from the share issuances were partially offset by $0.6 million in payments related to financing leases.
In Fiscal Year 2021, net cash provided by financing activities was $0.4 million, primarily attributable to the collective net proceeds of approximately $1.0 million related to the issuance of approximately 199 thousand shares of common stock sold on September 30, 2021. The proceeds from the share issuances were partially offset by $0.6 million in payments related to finance leases.
The full range of platforms, software tools and eFPGA IP enables the practical and efficient adoption of AI, voice and sensor processing across Consumer/Industrial IoT, Consumer Electronics, Military, Aerospace and Defense applications. Our new products include our EOS™, QuickAI™, SensiML Analytics Studio, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products (which together comprise our new product category).
The full range of platforms, software tools and eFPGA IP enables the practical and efficient adoption of AI, voice and sensor processing across Consumer/Industrial IoT, Consumer Electronics, Military, Aerospace and Defense applications. Our new products include our ArcticPro™, EOS™, QuickAI™, SensiML Analytics Toolkit, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products.
Our research and development, or 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 were $6.9 million and $7.5 million in 2021 and 2020, respectively, which represented 55% and 87%, respectively, of revenue for those periods.
Our research and development ("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 were $5.0 million and $6.9 million in Fiscal Years 2022 and Fiscal 2021, respectively, which represented 31% and 55%, respectively, of revenue for those periods.
Unless such cash flow levels are achieved, in addition to the approximately $1 million in proceeds that we received in September 2021 from the sale of our equity securities, the subsequent event of the sale of our equity securities for approximately $1.5 million in proceeds during February 2022, and the credit line we may be able to draw down from Heritage Bank of Commerce, we may need to obtain additional funds through strategic divestiture, or sell debt or equity securities, or some combination thereof, to provide funding for our operations.
Unless such cash flow levels are achieved, in addition to the $3.2 million and $1.5 million in proceeds that we received in September 2022 and February 2022, respectively, from the sale of our equity securities, and the revolving line of credit we may be able to draw down from Heritage Bank of Commerce, we may need to obtain additional funds through strategic divestiture, or sell debt or equity securities, or some combination thereof, to provide fundin g for our operations.
We have concluded that none of the costs we have incurred to obtain and fulfill our ASC, 606 contracts meet the capitalization criteria, and as such, there are no costs deferred and recognized as assets on the consolidated balance sheets at January 2, 2022and January 3, 2021.
We have concluded that none of the costs we have incurred to obtain and fulfill our Accounting Standard Codification ("ASC"), 606 contracts meet the capitalization criteria, and as such, there are no costs deferred and recognized as assets on the consolidated balance sheets at January 1, 2023 and January 2, 2022.
Our new products and products currently under development have been generating lower gross margin as a percentage of revenue than our mature products due to the markets that we have targeted and the larger order quantities associated with these applications.
Our new hardware products and hardware products currently under development are generating stable gross margins year over year and higher margins than our mature products due to the markets that we have targeted, and the larger order quantities associated with these new products. New eFPGA products have been generating lower gross margin as a percentage of revenue.
Non-cash charges consisted primarily stock-based compensation expense of $2.5 million and depreciation and amortization of long-lived assets and certain definite-lived intangible assets of $0.6 million.
Non-cash charges primarily consisted of stock-based compensation expense of $2.0 million, depreciation and amortization of long-lived assets and certain definite-lived intangible assets of $0.7 million and write-down of inventories of $0.2 million.
Assets Recognized from Costs to Obtain a Contract with a Customer We recognize an asset for the incremental costs of obtaini ng a contract with a customer if we expect the benefit of those costs to be longer than one year.
We defer costs until related revenue is recognized. 26 Table of Contents Assets Recognized from Costs to Obtain a Contract with a Customer We recognize an asset for the incremental costs of obtaini ng a contract with a customer if we expect the benefit of those costs to be longer than one year.
In 2020, net cash used in operating activities was $6.7 million, which was primarily due to a net loss of $11.2 million, adjusted for non-cash charges of $2.8 million. Non-cash charges consisted primarily stock-based compensation expense of $1.7 million and depreciation and amortization of long-lived assets and certain definite lived intangible assets of $0.8 million.
In Fiscal Year 2021, net cash used in operating activities was $2.9 million, which was primarily due to a net loss of $6.6 million, adjusted for non-cash charges of $2.2 million. Non-cash charges primarily consisted of stock-based compensation expense of $2.5 million and depreciation and amortization of long-lived assets and certain definite-lived intangible assets of $0.6 million.
We require substantial cash to fund our business. However, we believe that our existing cash and cash equivalents, together with available financial resources from the Revolving Facility will be sufficient to satisfy our operations and capital expenditures over the next twelve months. Our Revolving Facility will expire in December 2023.
The Company requires substantial cash to fund our business. However, the Company believes that its existing cash and cash equivalents, together with available financial resources from the revolving facility will be sufficient to satisfy our operations and capital expenditures over the next twelve months. The Company's revolving facility will expire in December 2024.
We shipped our new products into four of our targeted mobile market segments: Smartphones, Wearables, Mobile Enterprise, Tablets, and SaaS revenue from the new Artificial Intelligence or AI market beginning in 2020 .
We shipped new products into four of our targeted mobile market segments: Smartphones, Wearables, Mobile Enterprise, Tablets, and SaaS revenue from the new Artificial Intelligence ("AI") market beginning in the Fiscal Year ended January 3, 2021 .
Standard cost approximates actual cost on a first-in, first-out basis. We routinely evaluate quantities and values of our inventories in light of current market conditions and market trends and record reserves for quantities in excess of demand and product obsolescence.
Valuation of Inventories Inventories are stated at the lower of standard cost or net realizable value. Standard cost approximates actual cost on a first-in, first-out basis. We routinely evaluate quantities and values of our inventories in light of current market conditions and market trends and record reserves for quantities in excess of demand and product obsolescence.
SG&A expenses were $8.0 million and $6.8 million in 2021 and 2020, respectively, which represented 63% and 79% of revenue for those periods.
SG&A expenses were $7.6 million and $8.0 million in Fiscal Years 2022 and 2021, respectively, which represented 47% and 63%, respectively, of revenue for those periods.
Earnings from our foreign subsidiaries are currently deemed to be indefinitely reinvested. We do not expect such reinvestment to affect our liquidity and capital resources, and we continually evaluate our liquidity needs and ability to meet global cash requirements as a part of our overall capital deployment strategy.
We do not expect such reinvestment to affect our liquidity and capital resources, and we continually evaluate our liquidity needs and ability to meet global cash requirements as a part of our overall capital deployment strategy.
Results of Operations The following table sets forth the percentage of revenue for certain items in our statements of operations for the periods indicated: Fiscal Years 2021 2020 2019 Statements of Operations: Revenue 100 % 100 % 100 % Cost of revenue 42 % 51 % 43 % Gross profit 58 % 49 % 57 % Operating expenses: Research and development 55 % 87 % 120 % Selling, general and administrative 63 % 79 % 86 % Restructuring costs — % 9 % — % Loss from operations (59 )% (126 )% (149 )% Interest expense (1 )% (4 )% (3 )% Gain on forgiveness of PPP Loan 9 % — % — % Interest income and other expense, net — % 1 % 2 % Loss before income taxes (51 )% (129 )% (151 )% Provision for (benefit from) income taxes 1 % 1 % (1 )% Net loss (52 )% (130 )% (150 )% Impact of inflation and product price changes on our revenue and on income was immaterial in 2021, 2020 and 2019.
Results of Operations The following table sets forth the percentage of revenue for certain items in our statements of operations for the periods indicated: Fiscal Years 2022 2021 2020 Statements of Operations: Revenue 100 % 100 % 100 % Cost of revenue 46 % 42 % 51 % Gross profit 54 % 58 % 49 % Operating expenses: Research and development 31 % 55 % 87 % Selling, general and administrative 46 % 63 % 79 % Restructuring costs — % — % 9 % Loss from operations (23 )% (59 )% (126 )% Interest expense (1 )% (1 )% (4 )% Gain on forgiveness of PPP Loan — % 9 % — % Interest income and other (expense) income, net (2 )% — % 1 % Loss before income taxes (26 )% (51 )% (129 )% Provision for income taxes — % 1 % 1 % Net loss (26 )% (52 )% (130 )% Co mparison of Fiscal Years 2022 and 2021 Revenue .
In summary, our cash flows were as follows (in thousands): Fiscal Year 2021 2020 2019 Net cash (used in) operating activities $ (2,859 ) $ (11,594 ) $ (12,638 ) Net cash (used in) investing activities (718 ) (921 ) (288 ) Net cash provided by financing activities 434 7,600 22,862 Net Cash from Operating Activities In 2021, net cash used in operating activities was $2.9 million, which was primarily due to a net loss of $6.6 million, adjusted for non-cash charges of $2.2 million.
Our cash flows were as follows (in thousands): Fiscal Year 2022 2021 2020 Net cash used in operating activities $ (4,056 ) $ (2,859 ) $ (11,594 ) Net cash used in investing activities (814 ) (718 ) (921 ) Net cash provided by financing activities 4,466 434 7,600 Net Cash from Operating Activities In Fiscal Year 2022, net cash used in operating activities was $4.1 million, which was primarily due to a net loss of $4.3 million, adjusted for non-cash charges of $3.0 million.
On September 30, 2021, the Company entered into a Common Stock Purchase Agreement for the sale of 73,664 shares of our common stock, in a registered direct offering pursuant to our effective shelf registration statement on Form S-3 (File No. 333-230352) (the “Registered Direct Offering,” and together with the Private Placement, the “Share Placements”).
On September 30, 2021, the Company entered into a common stock purchase agreement for the sale of 74 thousand shares of its common stock, in a registered direct offering pursuant to our effective shelf registration statement on Form S-3 (File No. 333-230352).
Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sales and marketing of our new solution platforms, IP and software.
Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sales and marketing of our new solution platforms, IP and software. We are expecting revenue growth from EOS S3, SensiML AI SaaS, and eFPGA IP license in Fiscal Year 2023.
The table below sets forth the changes in revenue for fiscal year ended January 2, 2022, as compared to fiscal year ended January 3, 2021 (in thousands, except percentage data): Fiscal Years 2021 2020 Amount % of Total Revenues Amount % of Total Revenues Year-Over-Year Change Revenue by product family (1): New products $ 7,761 61 % $ 2,782 32 % $ 4,979 179 % Mature products 4,924 39 % 5,852 68 % (928 ) (16 )% Total revenue $ 12,685 100 % $ 8,634 100 % $ 4,051 47 % (1) New products include all products manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license, professional services, QuickAI and SensiML AI software as a service (SaaS) revenue.
The table below sets forth the changes in revenue for Fiscal Year ended January 1, 2023, compared to Fiscal Year ended January 2, 2022 (in thousands, except percentage data): Fiscal Years 2022 2021 Year-Over-Year Change Amount % of Total Revenues Amount % of Total Revenues Amount Percentage New products $ 11,675 72 % $ 7,761 61 % $ 3,914 50 % Mature products 4,505 28 % 4,924 39 % (419 ) (9 )% Total revenue $ 16,180 100 % $ 12,685 100 % $ 3,495 28 % New products revenue consists of revenues from the sale of hardware products manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license, professional services, QuickAI and SensiML AI software as a service (SaaS) revenues.
The table below sets forth the changes in provision for income taxes in the fiscal year ended January 2, 2022, as compared to the fiscal year ended January 3, 2021 (in thousands, except percentage data): Fiscal Years Year-Over-Year Change 2021 2020 Amount Percentage Provision for income taxes $ 119 $ 51 $ 68 133 % Income tax expense for 2021 relates primarily to foreign income tax provision on our foreign entities, primarily India and the UK.
The table below sets forth the changes in provision for income taxes in the Fiscal Year ended January 1, 2023 compared to the Fiscal Year ended January 2, 2022 (in thousands, except percentage data): Fiscal Years Year-Over-Year Change 2022 2021 Amount Percentage Provision for income taxes $ 98 $ 119 $ (21 ) (18 )% Income tax expense for the Fiscal Year 2022 relates primarily to foreign income tax provision for the Company's India entity.
Comparison of Fiscal Years 2020 and 2019 For discussion related to the results of operations and changes in financial condition for fiscal 2020 compared to fiscal 2019, please refer to “Part II, Item 7.
We will continue to assess the realizability of deferred tax assets in future periods. Comparison of Fiscal Years 2021 and 2020 For discussion related to the results of operations and changes in financial condition for Fiscal Year 2021 compared to Fiscal Year 2020, please refer to “Part II, Item 7.
Paycheck Protection Program On May 6, 2020, we entered into a loan agreement with Heritage Bank for a loan of $1.2 million pursuant to the Paycheck Protection Program, or PPP Loan under the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020, or CARES Act.
Paycheck Protection Program On May 6, 2020, the Company entered into a loan agreement with Heritage Bank for a loan of $1.2 million pursuant to the Paycheck Protection Program ("PPP Loan") under the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 ("CARES Act") On June 5, 2020, the President of the United States of America signed into law the Paycheck Protection Flexibility Act (“PPPFA”) to address many concerns expressed by the small business community.
As of the end of 2021, our ability to utilize our U.S. deferred tax assets in future periods is uncertain and, accordingly, we have recorded a full valuation allowance against the related U.S. deferred tax assets. We will continue to assess the realizability of deferred tax assets in future periods.
Income tax expense for the Fiscal Year 2021 relates primarily to foreign income tax provision for the Company's India and UK entities. As of the end of Fiscal Year 2022, our ability to utilize our U.S. deferred tax assets in future periods is uncertain and, accordingly, we have recorded a full valuation allowance against the related U.S. deferred tax assets.
Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our fiscal 2020 Form 10-K, which was originally filed with the SEC on March 23, 2021. Liquidity and Capital Resources We have financed our operating losses and capital investments through sales of common stock, capital and operating leases, a revolving line of credit and cash flows from operations.
Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Fiscal Year 2021 Form 10-K, which was originally filed with the SEC on March 22, 2022. 29 Table of Contents Liquidity and Capital Resources The Company has historically financed its operating losses and capital investments through the sale of its common stock, finance and operating leases, and cash flows provided by operations.
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 standalone selling price.
We elected a practical expedient in which we do not assess whether a contract has a significant financing component since our standard payment terms are less than one year. We allocate the transaction price of customer contracts to each distinct product based on its relative standalone selling price. The majority of our revenue is derived from hardware product sales.
In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, it determines the SSP using information that may include market conditions and other observable inputs. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customers.
In instances where the SSP is not directly observable because we do not sell the promised goods or services separately, we determine the SSP using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances.
The Company determines the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, type of the customer, customer tier, type of the technology used, customer demographics, geographic locations, and other factors.
In these instances, we may use information such as our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, type of the customer, customer tier, type of the technology used, customer demographics, geographic locations, and other factors.
(iii) We do not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed. We record allowance for sales returns.
These costs are recorded in selling, general and administrative expense in the consolidated statements of operations. • We do not dis close the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed.
We generally purchase these single or limited source services through standard purchase orders. Because we rely on independent subcontractors to perform these services, we cannot directly control product delivery schedules, costs or quality levels. Our future success also depends on the financial viability of our independent subcontractors.
Because we rely on independent subcontractors to perform these services, we cannot directly control product delivery schedules, costs or quality levels. Our future success also depends on the financial viability of our independent subcontractors. These subcontract manufacturers produce products for other companies, and we must place orders in advance of expected delivery.
The table below sets forth the changes in interest expense and interest income and other expense, net, for the fiscal year ended January 2, 2022, as compared to fiscal year ended January 3, 2021 (in thousands, except percentage data): Fiscal Years Year-Over-Year Change 2021 2020 Amount Percentage Interest income (expense) $ (130 ) $ (328 ) $ 198 (60 )% Gain on forgiveness of PPP Loan 1,190 - 1,190 100 % Interest income and other (expense), net (43 ) 97 (140 ) (144 )% $ 1,017 $ (231 ) $ 1,248 (540 )% 32 Table of Contents Interest expense relates primarily to our line of credit facility and our PPP Loan.
The table below sets forth the changes in interest expense, gain on forgiveness of debt, interest income and other (expense) income, net, for the Fiscal Year ended January 1, 2023, as compared to Fiscal Year ended January 2, 2022 (in thousands, except percentage data): Fiscal Years Year-Over-Year Change 2022 2021 Amount Percentage Interest expense $ (148 ) $ (130 ) $ (18 ) 14 % Gain on forgiveness of debt — 1,192 (1,192 ) (100 )% Interest income and other (expense) income, net (221 ) (43 ) (178 ) 414 % Total interest expense, gain on forgiveness of debt, and interest income and other (expense) income, net $ (369 ) $ 1,019 $ (1,388 ) (136 )% Interest expense relates primarily to our line of credit facility.
As of January 2, 2022, the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $19.6million, including $15.0 million drawn down from its revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce ("Heritage Bank").
The Company also has the ability to draw advances from its revolving facility with Heritage Bank of Commerce ("Heritage Bank"). As of January 1, 2023, the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $19.2 million, inclusive of $15.0 million in advances from its revolving facility.
See Note 7 to the Consolidated Financial Statements for additional information. 35 Table of Contents Concentration of Suppliers We depend on a limited number of contract manufacturers, subcontractors, and suppliers for wafer fabrication, assembly, programming and testing of our devices, and for the supply of programming equipment. These services are typically provided by one supplier for each of our devices.
Concentration of Suppliers We depend on a limited number of contract manufacturers, subcontractors, and suppliers for wafer fabrication, assembly, programming and testing of our hardware products, and for the supply of programming equipment. These services are typically provided by one supplier for each of our hardware products. We generally purchase these single or limited source services through standard purchase orders.
We recognize deferred revenue as net sales once control of goods and/or services have been transferred to the customer and all revenue recognition criteria have been met and any constraints have been resolved. We defer the product costs until recognition of the related revenue occurs.
Balances in contract liabilities (deferred revenue) are recognized as revenue once control of goods and services has been transferred to the customer and all revenue recognition criteria have been met and any constraints have been resolved.
The table below sets forth the changes in gross profit for fiscal year ended January 2, 2022, as compared to fiscal year ended January 3, 2021 (in thousands, except percentage data): Fiscal Years 2021 2020 Amount % of Total Revenues Amount % of Total Revenues Year-Over-Year Change Revenue $ 12,685 100 % $ 8,634 100 % $ 4,051 47 % Cost of revenue 5,266 42 % 4,386 51 % 880 20 % Gross profit $ 7,419 58 % $ 4,248 49 % $ 3,171 75 % The increase in gross profit and gross profit percentage was substantially due to strong revenue growth in new products, primarily in eFPGA IP license, connectivity, and sensors combined with higher margin professional engineering services in fiscal 2021.
The table below sets forth the changes in gross profit for Fiscal Year ended January 1, 2023 , compared to Fiscal Year ended January 2, 2022 (in thousands, except percentage data): Fiscal Years 2022 2021 Year-Over-Year Change Amount % of Total Revenues Amount % of Total Revenues Amount Percentage Revenue $ 16,180 100 % $ 12,685 100 % $ 3,495 28 % Cost of revenue 7,378 46 % 5,266 42 % 2,112 40 % Gross profit $ 8,802 54 % $ 7,419 58 % $ 1,383 19 % The $1.4 million increase in gross profit and 19% increase in gross profit percentage was substantially due to revenue growth of eFPGA IP professional services revenue, partially offset by prior year eFPGA intellectual property license revenue with minimal associated cost.
Interest income and other expenses, net, relates to the interest earned on our money market accounts and foreign exchange gain or losses recorded. In fiscal 2021, the Company's PPP loan was forgiven under the Federal Government's CARES act. As a result, the Company subsequently recognized a gain of approximately $1.2 million on its Consolidated Statement of Operations for fiscal 2021.
Interest income and other (expenses) income, net, relates to the interest earned on our money market accounts and foreign exchange gain or losses recorded. In fiscal 2021, the Company's Paycheck Protection Program ("PPP") loan was forgiven under the Federal Government's Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 ("CARES Act").
On January 26, 2021 we received a notice from Heritage Bank that amounts under the PPP Loan had been forgiven. See Note 7 to the Consolidated Financial Statements for additional information. Cash Flows As of January 2, 2022, most of our cash and cash equivalents were invested in a Heritage Bank Money Market account.
See Note 6 to the consolidated financial statements for additional information. 30 Table of Contents Cash Flows As of January 1, 2023, most of our cash and cash equivalents were invested in a Heritage Bank Money Market account.
Based on this definition, our critical policies include revenue recognition and determination of the Stand-Alone Selling Price ("SSP") for certain distinct performance obligations (such as for IP licensing and professional services contracts), goodwill and intangible asset s, valuation of inventories including identification of excess quantities and product obsolescence, allowance for doubtful accounts, valuation of long-lived assets, leases, measurement of stock-based compensation , and accounting for income taxes.
Based on this definition, our critical accounting policies include revenue recognition and determination of the standalone selling price ("SSP") for certain distinct performance obligations , and in the valuation of inventories including identification of excess quantities and product obsolescence .
The table below sets forth the changes in operating expenses for fiscal year ended January 2, 2022, as compared to fiscal year ended January 3, 2021 (in thousands, except percentage data): Fiscal Years 2021 2020 Amount % of Total Revenues Amount % of Total Revenues Year-Over-Year Change R&D expenses $ 6,927 55 % $ 7,544 87 % $ (617 ) (8 )% SG&A expenses $ 8,008 63 % $ 6,820 79 % $ 1,188 17 % Restructuring costs $ — — % $ 753 9 % $ (753 ) 100 % Total operating expenses $ 14,935 (118 )% $ 15,117 (175 )% $ (182 ) (1 )% Research and Development Expenses.
The table below sets forth the changes in operating expenses for Fiscal Year ended January 1, 2023 compared to Fiscal Year ended January 2, 2022 (in thousands, except percentage data): Fiscal Years 2022 2021 Year-Over-Year Change Amount % of Total Revenues Amount % of Total Revenues Amount Percentage Research and development $ 5,001 31 % $ 6,927 55 % $ (1,926 ) (28 )% Selling, general and administrative 7,601 47 % 8,008 63 % (407 ) (5 )% Total operating expenses $ 12,602 78 % $ 14,935 118 % $ (2,333 ) (16 )% Research and Development Expenses.
Our solutions include a unique combination of our silicon platforms, IP cores, software drivers, and in some cases, firmware and application software. All of our silicon platforms are standard devices and must be programmed to be effective in a system.
All of our silicon platforms are standard hardware products and must be programmed to be effective in a system.
We determine revenue recognition through the following steps: ● Identification of the contract, or contracts, with a customer, ● Identification of the performance obligations in the contract, ● Determination of the transaction price, ● Allocation of the transaction price to the performance obligations in the contract, and ● Recognition of revenue when, or as, we satisfy a performance obligation.
Our contracts with customers containing variable consideration are generally sales based royalties, which is fully constrained. • Allocation of the transaction price to the performance obligations in the contract, and • Recognition of revenue when, or as, we satisfy a performance obligation.
Credit Agreement On September 28, 2018, we 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 $9.0 million.
Credit Agreement On December 21, 2018 , the Company entered into the QuickLogic Corporation Heritage Bank of Commerce Amended and Restated Loan and Security Agreement (the "Loan Agreement") with Heritage Bank which among other things, provided a revolving facility ("Revolving Facility") allowing the Company to draw advances up to $15.0 million.
Inputs involved in estimating the fair value of the private company common stock include the selection of a peer company group, the estimated volatility of the equity, based on a basket of peer group public company common stock, the discount rate, discount for a lack of marketability, and time to exit significantly affect the estimated fair value of the non-cash consideration received.
Inputs used to estimate the fair value of the common stock included the selection of a publicly traded peer company group, the estimated volatility of the equity based on the peer group, the discount rate, an estimate of a discount due to lack of marketability, and an estimated lead time for a hypothetical sale of the investment.
In order to satisfy our longer-term liquidity requirements, we may be required to raise additional equity or debt financing. There can be no assurance that financing will be available at commercially acceptable terms or at all.
In order to satisfy the Company's longer-term liquidity requirements, it may be required to raise additional equity or debt financing.
However, as we pursue opportunities in the IoT market and continue to develop new CSSPs and products, we believe our product life cycle may be shorter, which will increase the potential for obsolescence. In general, our standard manufacturing lead times are longer than the binding forecasts we receive from customers. Operating Expenses.
Our hardware products have historically had a long product life cycle and obsolescence has not been a significant factor in the valuation of inventories. However, as we pursue opportunities in the IoT market and continue to develop new products, we believe our product life cycle may be shorter, which will increase the potential for obsolescence.
As of January 2, 2022, our interest-bearing debt consisted of $0.7 million outstanding under finance leases and $15.0 million outstanding under our Revolving Facility. See Note 7 to the Consolidated Financial Statements for additional information. Cash balances held at our foreign subsidiaries were approximately $401,000 and $342,000 at January 2, 2022 and January 3, 2021, respectively.
As of January 1, 2023, our interest-bearing debt consisted of $0.9 million outstanding under finance leases and $15.0 million outstanding under our Revolving Facility. Se e Note 6 t o the consolidated financial statements for additional information.
We are expecting revenue growth from EOS S3, SensiML AI SaaS, and eFPGA IP license in fiscal year 2021. 25 Table of Contents We continue to seek to expand our revenue, including pursuing high-volume sales opportunities in our target market segments, by providing solutions incorporating IP, or industry standard interfaces.
We continue to seek to expand our revenue, including pursuing high-volume sales opportunities in our target market segments, by providing solutions incorporating IP, or industry standard interfaces. Our industry is characterized by intense price competition and by lower margins as order volumes increase.
Net cash used for investing activities in 2020 was $1.1 million, which was primarily attributable to the leasehold improvements and computer equipment at the new office premises of $253,000 and capitalization of internal use software of $801 thousand.
Net Cash from Investing Activities Net cash used for investing activities in Fiscal Year 2022 was approximately $0.8 million, which was primarily attributable to the capitalization of internal use software of $0.7 million, and capital expenditures primarily related to property and equipment of $0.1 million.
In 2021, 2020, and 2019, the Company capitalized costs of approximately $533 thousand, $801 thousand, and $365 thousand, respectively, associated with internal-use software. Selling, General and Administrative Expenses. Our selling, general and administrative, or SG&A, expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management.
R&D costs allocable to cost of revenues are included in cost of revenue in the consolidated statements of operations. Selling, General and Administrative Expenses. 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.
Through the acquisition of SensiML, we now have an IoT AI software platform that includes 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 product revenue category. Our semiconductor solutions typically fall into one of three categories: Sensor Processing, Display and Smart Connectivity.
SensiML provides an AI software platform for products that include 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.
Overall, with the improvements in reduced operating expenses achieved by our restructuring activities implemented in early fiscal 2020, offset partially by the impact of the COVID-19 pandemic in 2021 , we reported a net loss of $6.6 million for 2021 compared to a net loss of $11.2 million for 2020 We have experienced net losses in the past years and expect to experience losses in at least some of the fiscal quarters during 2022, as we continue to develop new products, applications and technologies.
We have experienced net losses in the past years and expect to experience losses in at least some of the fiscal quarters during 2023, as we continue to develop new products, applications and technologies.
In 2020, net cash provided by financing activities was $9.0 million, primarily attributable to the net proceeds of $8.1 million from the issuance of 2.5 million shares of common stock in June 2020 and over allotment of 141,733 share to underwriters in July 2020, and proceeds from the PPP Loan of $1.2 million, partially offset by $0.3 million for scheduled repayments of finance lease obligations and tax payments related to net settlement of stock awards.
Net Cash from Financing Activities In Fiscal Year 2022, net cash provided by financing activities was $4.5 million, primarily attributable to proceeds from issuance of common stock of $4.9 million, partially offset by $0.5 million in payments related to finance leases.
The customer is a privately-held company, and as such, its common stock is not publicly tradeable. This contract requires the Company to apply significant judgement in the inputs for estimating the fair value of the shares of private company common stock for the purpose of determining the entire consideration received under the contract with the customer.
The customer was a privately-held company and its common stock was not publicly traded. We applied significant judgement to estimate the fair value of the shares as a portion of the total contractual consideration.
Of the $7.8 million in fiscal 2021 new product revenue, approximately $2.7 million was generated by professional engineering services related to our eFPGA IP. Our mature product revenue during 2021 was $4.9 million, which represents a 16% decrease from 2020 .
Of the $11.7 million in new products revenue, approximately $7.5 million was generated from eFPGA IP revenue, primarily eFPGA-related professional engineering services, as compared to approximately $2.7 million in the Fiscal Year ended January 2, 2022 .
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Determining whether promised goods and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. In some contractual arrangements, we have concluded that the promised goods and services are distinct from each other and then these promised goods and services are considered individual performance obligations.
Mature products include all products produced on semiconductor processes larger than 180 nanometer. 31 Table of Contents The 179% increase in new product revenue in 2021 compared to 2020 was primarily due to professional services revenue growth of approximately $1.5 million and growth in all product lines within this category.
Mature products include all products produced on semiconductor processes larger than 180 nanometer. 27 Table of Contents Total revenue increased approximately $3.5 million, or 28% in Fiscal Year ended January 1, 2023 as compared to the Fiscal Year ended January 2, 2022 .
We are committed to take delivery of and pay for a portion of forecasted wafer volume. (2) The current maturity date on our Revolving line of credit is December 31, 2023. However, we include this amount in the less than 1 year category due to the revolving nature of the balance and our expected use of the line of credit.
However, we include this amount in the less than 1 year category due to the revolving nature of the balance and our expected use of the line of credit. See Note 6 to th e consolidated financial statements for additional information. (2) Certain wafer manufacturers require us to forecast wafer starts several months in advance.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
We recognize revenue in an amount that reflects the consideration we expect to receive in exchange for those products, which also represents the SSP of our performance obligation. Hardware product transaction prices are fixed.
While the pandemic has created delays on the inbound supply chain at our partners and our own facilities and both inbound and outbound logistical challenges, we have been able to identify alternative solutions such that none of the issues have had a material impact on our ability to fulfill demand. 26 Table of Contents Critical Accounting Policies and Estimates The methods, 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.
We do meaningful work with a global impact. 24 Table of Contents Critical Accounting Policies The methods, 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 Company customization services revenue based on the duration of the project and specific terms and deliverables unique to each contract: ● an over time model, measured using the input method such as units of labor ● an over time model measured using the output method such as specific deliverables produced Due to the nature of the work performed in these arrangements, the estimation of the over-time model is complex and involves significant judgment.
Due to the nature of the work performed in contractual arrangements, the estimation of the over-time model is complex and involves significant judgment.
Our mature products include primarily FPGA families named pASIC®3 and QuickRAM® as well as programming hardware and design software. In addition to delivering our own semiconductor solutions, we have an IP business that licenses our eFPGA technology for use in other semiconductor companies SoCs.
In addition to delivering our own semiconductor solutions, our new products category includes our IP business that licenses our eFPGA technology for use in other semiconductor companies SoCs and provides professional services, consisting of development and integration of eFPGA technology into bespoke semiconductor solutions.
See Note 1 and Note 7 to the Consolidated Financial Statements for additional information. 33 Table of Contents Common Stock Offerings On June 22, 2020, we closed an underwritten public offering of 2.5 million shares of common stock, $0.001 par value p er share at a price of $3.50 per share, which included 141,733 additional shares pursuant to the underwriters' exercise of their over-allotment option.
The net proceeds to the Company in aggregate, after deducting equity issuance costs of approximately $45 thousand was approximately $1.0 million. On June 22, 2020, the Company closed an underwritten public offering of 2.5 million shares of common stock which included 142 thousand additional shares pursuant to the underwriters' exercise of their over-allotment option.
The Company recognizes hardware product revenue at the point of time when control of products is transferred to the customers, when the Company’s performance obligation is satisfied, which typically occurs upon shipment from the Company’s manufacturing site or its headquarters. 27 Table of Contents Intellectual Property and Software License Revenue The Company generates revenue from licensing their intellectual property or IP, software tools and royalties from licensing its technology.
We recognize revenue on hardware products when we transfer control of the promised products to the customer. Transfer of control of hardware products occurs when our performance obligation is satisfied, which typically occurs upon shipment from our manufacturing site or our headquarters.
The Company’s contracts with customers are generally for product only, and do not include other performance obligations such as services, extended warranties or other material rights.
Standard hardware products may be programmed by us, distributors, end-customers or third parties. Contracts with customers for hardware products generally do not include other performance obligations such as services, extended warranties or other material rights. O ur promise to transfer hardware products is identified as a distinct performance obligation.
Some of the IP and Software License contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis.
When contractual agreements contain multiple performance obligations, we account for individual performance obligations separately if they are distinct. We allocate the transaction price to the separate performance obligations based on their relative SSP. We also provide eFPGA-related professional services on a time-and-material basis.
On January 2, 2022 and January 3, 2021, the Company had $15.0 million of outstanding revolving line of credit with interest rates of 3.75% and 3.75%, respectively. We were in compliance with all loan covenants under the Amended and Restated Loan Agreement, as amended, as of the end of the current reporting period.
On December 31, 2022 the Company and Heritage Bank amended the maturity date for advances under the Revolving Facility to December 31, 2024. On January 1, 2023 and January 2, 2022, the Company had a $15.0 million outstanding balance on the Revolving Facility with interest rates of 8.00% and 3.75%, respectively.
Royalty Revenue The Company recognizes royalty revenue when the later of the following events occurs: (a) The subsequent sale or usage occurs. (b) The performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied Deferred Revenue Receivables are recognized in the period we ship the product.
We recognize royalty revenue on the later of (i) the subsequent sale or usage, or (ii) satisfaction of a performance obligation to which some or all of the sales-based royalty has been allocated We recognized SaaS and Other Revenue of approxim ately $0.4 million , or 2% of total revenue, $0.2 million, or 1% of total revenue, and $0.2 million, or 2% of total revenue, in the Fiscal Years ended January 1, 2023, January 2, 2022, and January 3, 2021, respectively.
As part of its assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay, or credit risk. For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations.
As part of its assessment of each contract, we evaluate certain factors including the customer’s ability to pay, or credit risk. The following is a description our revenue recognition policy by principal activity: Hardware Product Revenue We generate revenue by supplying standard hardware products, which must be programmed before they can be used in an application.
Our industry is characterized by intense price competition and by lower margins as order volumes increase. While winning large volume sales opportunities will increase our revenue, we believe these opportunities may decrease our gross profit as a percentage of revenue.
While winning large volume sales opportunities will increase our revenue, we believe these opportunities may decrease our gross profit as a percentage of revenue. 23 Table of Contents New products revenue for the Fiscal Year ended January 1, 2023 was $11.7 million, an increase of $3.9 million as compared to the Fiscal Year ended January 2, 2022 .
The Company records contract assets when revenue is recognized prior to invoicing, and a contract liability when revenue is recognized subsequent to invoicing. The contract assets are transferred to receivables when billing occurs and contract liabilities are transferred to revenue once the related performance obligation is satisfied.
Balances in contract liabilities (deferred revenue) are transferred to revenue once the performance obligation is satisfied. Balances in contract assets are transferred to accounts receivable when we have an unconditional right to invoice the customer.
In relation to the output method, key factors reviewed by the Company are the specific deliverables specified in the contracts with customers.
In the case of the output method, key factors reviewed by us are the specific deliverables specified in the contracts with customers. We have methods and controls in place for tracking labor-days incurred in completing customization and other professional services as well as quantifying changes in estimates.

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