QUICKLOGIC Corp: Form 10-Q for the period ended Sep 28, 2025

Forward-Looking Statements

The following Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in “Risk Factors” in Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q, contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend that these forward-looking statements be subject to the safe harbor created by those provisions. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” "future," "potential," "target," "seek," "continue," "if" or other similar words.

The forward-looking statements contained in the Quarterly Report include statements regarding our strategies as well as (1) our revenue levels, including the commercial success of our solutions and new products, (2) the conversion of our design opportunities into revenue, (3) our liquidity, (4) our gross profit and breakeven revenue level and factors that affect gross profit and the break-even revenue level, (5) our level of operating expenses, (6) our research and development efforts, (7) our partners and suppliers, (8) industry and market trends, (9) our manufacturing and product development strategies, and (10) our competitive position.

The following discussion should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto, and with our audited consolidated financial statements and notes thereto for the fiscal year ended December 29, 2024, found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 26, 2025. Although we believe that the assumptions underlying the forward-looking statements contained in this Quarterly Report are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that such statements will be accurate. The risks, uncertainties, and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in Part II, Item 1A hereto and the risks, uncertainties, and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements included in this document are based on information available to us as of the date hereof. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements, or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, that may arise after the date of this Quarterly Report on Form 10-Q.

Overview

QuickLogic Corporation was founded in 1988 and reincorporated in Delaware in 1999. We provide innovative programmable silicon and software platforms to enable our customers to develop custom hardware products in a fast time-to-market and cost-effective way. Specifically, we are a fabless semiconductor company with a variety of products: embedded FPGA ("eFPGA") intellectual property ("IP"), which consists primarily of Hard IP, low power, multi-core semiconductor system-on-chips ("SoCs"), and discrete FPGAs. Our customers can use our eFPGA IP for hardware acceleration and pre-processing in their Application Specific Integrated Circuit ("ASIC") products, our SoCs to run our customers' software and build their hardware around, and our discrete FPGAs to implement their custom functionality. The full range of products, software tools, and eFPGA IP enables the practical and efficient programmability for our customers across Aerospace and Defense, Consumer/Industrial IoT, and Consumer Electronics markets.

In the first quarter of 2025, the Company discontinued operations at its wholly-owned subsidiary, SensiML Corporation ("SensiML"), and is actively exploring options for the possible sale of SensiML or its assets. SensiML's Analytics Toolkit provides an end-to-end Artificial Intelligence / Machine Learning development platform with accurate sensor algorithms using AI technology, spanning data collection, labeling, algorithm and firmware auto generation, and testing. This cutting-edge software enables ultra-low power IoT endpoints that implement AI to transform raw sensor data into meaningful insight at the device itself. Revenue streams from SensiML include Software as a Service (SaaS) subscriptions for development, per unit license fees when deployed in production, and proof-of-concept services. Furthermore, the Company started accounting for the SensiML subsidiary in accordance with ASC 205-20, Discontinued Operations. As such, the following Management's Discussion and Analysis of Financial Condition and Results of Operations has been disaggregated as appropriate between continuing and discontinued operations.

Our new products include the following: eFPGA IP Licensing business and associated professional services, consisting of development and integration of eFPGA technology into custom semiconductor solutions and our silicon products consisting of EOS™, QuickAI™, ArcticLink® III, PolarPro®3, PolarPro II, PolarPro, and Eclipse II products. In addition to delivering our own semiconductor solutions, our new products category includes our AI/ML Software Platform from our wholly-owned subsidiary company, SensiML, which includes Software as a Service (SaaS) subscriptions for development, per unit license fees when deployed in production, and proof-of-concept services, all of which are also included in the new products revenue category. Our mature products include primarily FPGA families named PASIC®3 and QuickRAM®, as well as programming hardware and design software. We currently have a total of four patent applications pending.

For our IP and silicon platforms, we collaborate with multiple partners on co-marketing and/or co-selling initiatives. These partners could have primary business lines in semiconductor IP, Design Services, semiconductor foundry, semiconductor assembly and test, and others. Currently, these collaborations include Infineon Technologies, On Semiconductor Corp., Microchip Technology Inc., Silicon Laboratories, Inc., STMicroelectronics N.V., Arduino, NXP Semiconductors N.V., Raspberry Pi, and Nordic Semiconductor.

Our eFPGA IP is currently developed on Intel 18A, as well as the following process technologies on certain other semiconductor foundries (GF, TSMC, and others): 12nm, 16nm, 22nm, 28nm, 40nm, 65nm, 90nm, 130nm, and 250nm. We also have a roadmap to more advanced, sub-10nm nodes. The licensable IP is generated by our automated compiler tool called Australis™, which enables our engineers to create an eFPGA IP for our licensees that they can then integrate into their SoC without significant involvement by QuickLogic. 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.

We have changed our manufacturing strategies to reduce the cost of our silicon solution platforms to enable their use in a range of unique products ranging from low to high volume. Our EOS S3, EOS S3AI, QuickAI and ArcticLink III silicon platforms combine mixed signal physical functions and hard-wired logic alongside our field programmable logic. Our EOS S3, EOS S3AI, and ArcticLink III solution platforms are manufactured on process nodes where we can benefit from smaller die sizes and lower power consumption. We typically implement sophisticated logic blocks and mixed signal functions in hard-wired logic because it is very cost-effective and energy efficient. We use small form factor packages, which are less expensive to manufacture and include smaller pin counts. Reduced pin counts result in lower costs for our customers' printed circuit board space and routing. Furthermore, our SRAM reprogrammable silicon platforms can be programmed in-system by our customers, and therefore, we do not incur programming costs, lowering the overall cost of ownership to our customers. We expect to continue to invest in silicon solution platforms and manufacturing technologies that make us competitive for the variety of markets and applications that programmable logic serves.

In order to grow our revenue from its current level, we depend upon increased revenue from our new products, including existing new product platforms and platforms currently in development. We expect our business growth to be driven mainly by eFPGA IP and our silicon solutions. Therefore, our revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sale, and marketing of our new solution platforms, IP, and software.

We market our programmable logic (FPGAs and eFPGA IP) solutions primarily to Defense Industrial Base contractors, U.S. Government entities, System OEMs, and fabless semiconductor companies. These customers may value one or more of our product categories. A solution can be based on our programmable technology, which enables customized designs, low power, flexibility, rapid time-to-market, longer time-in-market, and lower total cost of ownership. We are capable of providing complete solutions because of our investment in developing the low power IP and software required to implement specific functions. In some cases, we develop the IPs and either software or firmware ourselves and, in other cases, we utilize third parties to develop the mixed signal physical layers, logic, and/or software.

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.

We monetize our technology through hardware product sales, per unit royalties, and eFPGA IP licenses, with any necessary corresponding work delivered via professional engineering services. We specialize in enhancing the user experience in leading edge IoT hardware 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 hardware products.

Our embedded FPGA technology gives ASIC and SoC developers the benefit of flexibility to make post-manufacturing design changes at very fast time-to- and time-in-market, while keeping power consumption low. Our multi-core sensor processing products such as ArcticLink 3 S1, ArcticLink 3 S2, EOS 3, EOS S3 LV, and EOS S3AI provide an extremely power-efficient approach for real-time multi-modal (vision, motion, voice, location, biometric, and environmental) sensor processing independently of the cloud.

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, FPGA User Tools, 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 our customers. We intend to continue to define and implement compelling solutions for our target customers and partners.

We believe our solutions are resonating with our target customers who value lower power consumption, platform design flexibility, 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. In addition to our corporate headquarters in San Jose, California, we have international sales operations in Japan and the United Kingdom. Our sales personnel and independent sales representatives are responsible for sales and application support for a given region, focusing on major strategic accounts, and managing our channel sales partners such as distributors.

Customers typically order our products through our distributors. Currently, we have fourteen active distributors in North America and a network of sixteen active distributors and sales representatives throughout Europe and Asia to support our international business. eFPGA IP customers typically enter into licensing agreements directly with QuickLogic.

We also have an Aerospace and Defense, 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.

During the third quarter of 2025, we generated total revenue from continuing operations of $2.0 million, a decrease of 45% compared to the prior quarter, and a decrease of 52% compared to the same quarter last year. Our new product revenue from continuing operations in the third quarter was $1.0 million, a decrease of 67% from the prior quarter and a decrease of 73% from the third quarter of 2024. Our mature product revenue from continuing operations was $1.1 million in the third quarter of 2025, an increase of 40% compared to the prior quarter, and an increase of 46% compared to the third quarter of 2024. We expect our mature product revenue to continue to fluctuate over time.

During the third quarter of 2025, we generated total revenue from discontinued operations of $0 thousand, consistent with the prior quarter, and a decrease of 100% compared to the same quarter last year.

We devote substantially all of our development, sales, and marketing efforts to our new eFPGA IP licensing and professional services. Overall, we reported a net loss from continuing operations of $4.0 million for the third quarter of 2025, as compared to a net loss from continuing operations of $2.7 million in the prior quarter and a net loss from continuing operations of $1.8 million for the third quarter of 2024.

We reported a net loss from discontinued operations of $3 thousand for the third quarter of 2025, as compared to a net loss from discontinued operations of $9 thousand in the prior quarter and a net loss from discontinued operations of $0.3 million for the third quarter of 2024.

As of September 28, 2025, we had one operating lease with a remaining lease term of 1.67 years. The operating lease relates to our company headquarters in San Jose, CA.

Critical Accounting Policies and Estimates

The methodologies, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of the Company's financial condition and results of operations and requires us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical accounting policies include revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets. We believe that we apply judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented. However, any factual errors or errors in these judgments and estimates may have a material impact on our financial statements. During the three and nine months ended September 28, 2025, there were no changes in our critical accounting policies from our disclosure in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024, which was filed with the SEC on March 26, 2025.

Continuing Operations

Results of Operations

The following table sets forth the percentage of revenue from continuing operations for certain items in our unaudited condensed consolidated statements of operations for the periods indicated:

Three Months Ended September 28, 2025 Compared to Three Months Ended September 29, 2024

Revenue

The table below sets forth the changes in revenue from continuing operations in the three months ended September 28, 2025 compared to the three months ended September 29, 2024 (in thousands, except percentage data):

Note: For all periods presented, new products include hardware products and related revenues manufactured on 180 nanometer or smaller semiconductor processes, intellectual property license, professional services, and QuickAI. Mature products include all products produced on semiconductor processes larger than 180 nanometer.

Product revenue for the third quarter of 2025 compared to the third quarter of 2024 decreased $2.2 million. The decrease resulted from decreases in eFPGA IP and professional services revenues.

New Product Revenue

The table below sets forth the changes in new product revenue from continuing operations in the three months ended September 28, 2025 compared to the three months ended September 29, 2024 (in thousands, except percentage data):

eFPGA IP revenue for the three months ended September 28, 2025 and September 29, 2024 was $0.7 million and $3.4 million, respectively, which was primarily professional services revenue.

Gross Profit

The table below sets forth the changes in gross profit from continuing operations for the three months ended September 28, 2025 compared to the three months ended September 29, 2024 (in thousands, except percentage data):

In the third quarter of 2025, gross profit decreased $3.0 million, or 119%, compared to the same quarter in the prior year. The net decrease in gross profit reflects a 52% decrease in revenues, combined with a 45% net increase in cost of revenue. Revenue decreased from the same quarter in the prior year due to decreased eFPGA IP and professional services revenues as the result of timing for related contracts. The net increase in cost of revenues was primarily due to increases in depreciation and amortization related to tooling for revenue contracts, as well as increased labor costs.

Our semiconductor products have historically had long product life cycles and obsolescence has not been a significant factor in the valuation of inventories. However, some growth opportunities in non-Aerospace and Defense markets may experience shorter product life cycles, and the risk of obsolescence will increase. In general, our standard manufacturing lead times are longer than the binding forecasts we receive from customers.

Operating Expenses

The table below sets forth the changes in operating expenses from continuing operations for the three months ended September 28, 2025 compared to the three months ended September 29, 2024 (in thousands, except percentage data):

Research and Development

Our R&D expenses consist primarily of personnel, overhead and other costs associated with System on Chip (SoC) and software development, programmable logic design, AI and eFPGA development. R&D expenses for the third quarter of 2025 as compared to the same quarter in 2024 decreased $0.4 million, primarily due to increased labor allocations to Cost of Revenue for revenue projects.

Selling, General and Administrative

Our selling, general and administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources, and general management. The $0.2 million decrease in SG&A expenses in the third quarter of 2025, as compared to the third quarter of 2024, was attributable primarily to decreased bonuses and incentives in administrative expenses.

Interest Expense, Interest Income and Other Income (Expense), Net

The table below sets forth the changes in interest expense and interest income and other income (expense), net from continuing operations for the three months ended September 28, 2025 compared to the three months ended September 29, 2024 (in thousands, except percentage data):

Interest expense relates primarily to our revolving line of credit facility and notes payable. Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned in our money market accounts. Changes in interest expense are related to varying levels of utilization of our revolving loan. Interest expense for the third quarter of this year as compared to the same period in the prior year decreased approximately $100 thousand. Interest income and other income (expense), which is mostly comprised of bank fees, net foreign exchange losses, and refunds, decreased approximately $35 thousand.

Provision for Income Taxes

The table below sets forth the changes in the provisions for income taxes from continuing operations in the three months ended September 28, 2025, compared to the three months ended September 29, 2024 (in thousands, except percentage data):

The Company recorded a net income tax benefit of approximately $1 thousand for the three months ended September 28, 2025 and a net income tax expense of $13 thousand for the three months ended September 29, 2024. The effective tax rate for the third quarter ended September 28, 2025 was (0.12)% as compared to (0.60)% for the same period in the prior year.

Nine Months Ended September 28, 2025 Compared to Nine Months Ended September 29, 2024

Revenue

The table below sets forth the changes in revenue from continuing operations in the nine months ended September 28, 2025 compared to the nine months ended September 29, 2024 (in thousands, except percentage data):

Note: For all periods presented, new products include hardware products and related revenues manufactured on 180 nanometer or smaller semiconductor processes, intellectual property license, professional services, and QuickAI. Mature products include all products produced on semiconductor processes larger than 180 nanometer.

Product revenue for the third quarter of 2025 compared to the third quarter of 2024 decreased $3.9 million. The decrease resulted from decreases in professional services eFPGA revenues, revenues from sales of new and mature devices, and royalty revenues.

New Product Revenue

The table below sets forth the changes in new product revenue from continuing operations in the nine months ended September 28, 2025 compared to the nine months ended September 29, 2024 (in thousands, except percentage data):

eFPGA IP revenue for the nine months ended September 28, 2025 and September 29, 2024 was $6.9 million and $10.0 million, respectively, which was primarily professional services revenue.

Gross Profit

The table below sets forth the changes in gross profit from continuing operations for the nine months ended September 28, 2025 compared to the nine months ended September 29, 2024 (in thousands, except percentage data):

In the nine months ended September 28, 2025, gross profit decreased $6.2 million, or 72%, compared to the same period in the prior year. The net decrease in gross profit reflects a 28% decrease in revenues, combined with a 41% net increase in cost of revenue. Revenue decreased from the same period in the prior year due to the timing of Department of Defense contracts. The net increase in cost of revenues was primarily due to increases in depreciation and amortization related to tooling for revenue contracts and direct tooling costs, as well as increases in labor cost allocations.

Operating Expenses

The table below sets forth the changes in operating expenses from continuing operations for the nine months ended September 28, 2025 compared to the nine months ended September 29, 2024 (in thousands, except percentage data):

Research and Development

Our R&D expenses consist primarily of personnel, overhead and other costs associated with System on Chip (SoC) and software development, programmable logic design, AI and eFPGA development. R&D expenses for the nine months ended September 28, 2025 as compared to the same period in 2024 decreased $0.6 million, primarily the result of increased labor allocations to Cost of Revenue for fulfillment of revenue contracts and decreased incentive compensation, partially offset by increases in amortization expense associated with tooling.

Selling, General and Administrative

Our selling, general and administrative (SG&A) expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources, and general management. The $0.2 million decrease in SG&A expenses in the nine months ended September 28, 2025, as compared to the same period in 2024, was attributable primarily to reduced compensation and incentives.

Impairment Charges

The $0.3 million in impairment charges for the nine months ended September 28, 2025 was attributable to the impairment of the Company's non-marketable equity investment.

Restructuring Costs

The $75 thousand in restructuring costs for the nine months ended September 28, 2025 was primarily attributable to severance payments for employees within QuickLogic related to the SensiML discontinued operations.

Interest Expense, Interest Income and Other Income (Expense), Net

The table below sets forth the changes in interest expense and interest income and other income (expense), net from continuing operations for the nine months ended September 28, 2025 compared to the nine months ended September 29, 2024 (in thousands, except percentage data):

Interest expense relates primarily to our revolving line of credit facility and notes payable. Interest income and other income (expense), net, relates to net foreign exchange losses recorded, partially offset by interest earned in our money market accounts. Changes in interest expense are related to varying levels of utilization of our revolving loan. Interest expense for the nine months ended September 28, 2025 as compared to the same period in the prior year decreased approximately $3 thousand. Interest income and other income (expense), which is mostly comprised of bank fees, net foreign exchange losses, and refunds, increased approximately $23 thousand.

Provision for Income Taxes

The table below sets forth the changes in the provisions for income taxes from continuing operations in the nine months ended September 28, 2025, compared to the nine months ended September 29, 2024 (in thousands, except percentage data):

The Company recorded a net income tax expense of $5 thousand for the nine months ended September 28, 2025 and a net income tax expense of $14 thousand for the nine months ended September 29, 2024. The effective tax rate for the nine months ended September 28, 2025 was (0.06)% as compared to (0.40)% for the same period in the prior year.

Discontinued Operations

Results of Operations

The following table sets forth the percentage of revenue from discontinued operations for certain items in our unaudited condensed consolidated statements of operations for the periods indicated:

Balance Sheet Activities

Balance sheet amounts from continuing operations at September 28, 2025 compared to December 29, 2024 resulted from typical and usual activities in the normal course of business.

Total assets decreased by approximately $5.8 million, primarily due to a $4.5 million reduction in cash and cash equivalents due to greater payments than borrowings on the Company's revolving line of credit and a $1.7 million reduction in accounts receivable and contract assets due to the collection of outstanding receivables, a $0.4 million reduction in prepaid expenses and other current assets, a $0.3 million reduction in the non-marketable equity investment due to its full impairment, and a $0.2 million in amortization expense of the Company's right-of-use assets, partially offset by a $1.3 million net increase in equipment and internal-use software assets.

Liabilities decreased by approximately $5.7 million due to greater payments than borrowings in the amount of $3.0 million on the Company's revolving line of credit, payments on notes payable of $1.4 million, payments on operating leases of $0.2 million, reductions in accrued liabilities and deferred revenues of $0.7 million, and a $0.3 million decrease in trade payables.

Equity decreased $0.2 million due to a $8.9 million net loss for the nine months ended September 28, 2025, partially offset by $8.7 million increase in additional paid in capital arising from the sale of shares of common stock and recognition of stock-based compensation.

Liquidity and Capital Resources

We have financed our operations and capital investments through public and private offerings of our common stock, financing arrangements, operating leases, borrowings under a revolving line of credit, and cash flows from operations. In addition to our cash and cash equivalents from continuing operations of $17.3 million, as of September 28, 2025, other sources of liquidity included a $15.0 million drawn down from our revolving line of credit ("Revolving Facility") with Heritage Bank of Commerce (“Heritage Bank”), and $5.9 million in net proceeds from the sale of our common stock on March 6, 2025 and as a part of our ATM Offering. Costs related to the offerings were $183 thousand.

As of September 28, 2025, we were not in compliance with our Remaining Months Liquidity Financial Covenant ("RML Covenant") as defined in Section 6.9 of the Fifth Amendment (the "Fifth Amendment"), dated April 4, 2022, to the Amended and Restated Loan and Security Agreement (as amended, the "Loan Agreement") dated December 21, 2018, with Heritage Bank of Commerce ("Heritage Bank"). We received a waiver from Heritage Bank for the third fiscal quarter of 2025.

As of September 28, 2025, the Company had $15.0 million outstanding on the Revolving Facility with an interest rate of 7.75%. In the first quarter of 2025, we entered into the Eighth Amendment (the "Eighth Amendment") to the Loan Agreement. The Eight Amendment, which became effective on March 17, 2025, amended the Loan Agreement to, among other things, extend the loan maturity date for one year through December 31, 2026.

We note that the absence of the negative cash flows associated with our discontinued operations will likely have a positive effect on the Company's liquidity moving forward.

On April 28, 2023, we converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Original Note"). At the time, the Original Note bore an interest rate of 3.0% compounded monthly. On June 28, 2023, we cancelled the Original Note and entered into a revised promissory note ("Second Revised Note") with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.8% effective annual interest rate, accruing from the date of the Original Note. On June 27, 2024, we cancelled the Second Revised Note and entered into a revised promissory note ("Current Note") with the customer, where the interest rate changed to 10.0% per annum. Accrued but unpaid interest will be compounded monthly, accruing from the date of the Current Note. Additionally, if not prepaid prior to the Current Note maturity date of the earlier of (i) 24 months from June 28, 2024 or (ii) the closing of the customer's Series B financing, the principal and all accrued and unpaid interest will be due and payable to us. If an event of default occurs, the interest rate will increase to 15.31%. All other terms of the Note remained the same. As of September 28, 2025, the related note receivable balance was $1.39 million, including $225 thousand in accrued interest.

On March 6, 2025, the Company entered into Common Stock Purchase Agreements with certain institutional investors for the sale of an aggregate of 256 thousand shares of common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $1.5 million. Issuance costs related to the offering were $20 thousand. The purchase price for each share of common stock was $5.93.

On February 25, 2025, the Company entered into an At Market Issuance Sales Agreement (the "Sales Agreement") with Needham & Company, LLC (the "Agent"), which was subsequently amended and restated on August 14, 2025 (the "Sales Agreement"). Pursuant to the Sales Agreement, the Company may offer and sell, from time to time, through the Agent, as sales agent, shares of the Company's common stock, par value $0.001 per share, having an aggregate offering price of up to $20,000,000 (the "ATM Offering"). As of September 28, 2025, the Company sold 713 thousand shares under the ATM offering, resulting in net cash proceeds of approximately $4.4 million. Issuance costs related to the ATM Offering were $163 thousand.

On March 13, 2024, the Company entered into Common Stock Purchase Agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 223 thousand shares of common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $3.5 million. Issuance costs related to the offering were $24 thousand. The purchase price for each share of common stock was $16.00.

We currently use our cash to fund our working capital, to accelerate the development of next-generation products, and for general corporate purposes. Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with $6.1 million gross cash proceeds from the March 6, 2025 financing and ATM Offering and sales thereby, our revenues from operations, and the available financial resources from the Revolving Facility with Heritage Bank will be sufficient to fund our operations and capital expenditures and provide adequate working capital for the next twelve months.

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

Over the longer term, we anticipate that sales generated from our new product offerings, existing cash and cash equivalents, together with financial resources from our Revolving Facility with Heritage Bank, assuming renewal of the Revolving Facility or us entering into a new debt agreement with an alternative lender prior to the expiration of the revolving line of credit in December 2026, and our ability to raise additional capital in the public capital markets will be sufficient to satisfy our operations and capital expenditures. However, we cannot provide any assurance that we will be able to raise additional capital, if required, or that such capital will be available on terms acceptable to us. The inability to generate sufficient sales from our new product offerings and/or raise additional capital if needed could have a material adverse effect on our operations and financial condition, including our ability to maintain compliance with our lender’s financial covenants.

As of September 28, 2025, most of our cash and cash equivalents were invested in a money market account at Heritage Bank. As of September 28, 2025, our interest-bearing debt consisted of $1.8 million outstanding under notes payable and $15.0 million outstanding under our Revolving Facility. See Note 8, Debt Obligations, to the unaudited condensed consolidated financial statements for more details.

Cash balances held at our foreign subsidiaries were approximately $0.1 million as of September 28, 2025 and December 29, 2024. 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. Factors that affect our global capital deployment strategy include anticipated cash flows, the ability to repatriate cash in a tax-efficient manner, funding requirements for operations and investment activities, acquisitions and divestitures, and capital market conditions.

In summary, our cash flows were as follows (in thousands):

Net cash provided by (used in) operating activities

For the nine months ended September 28, 2025, net cash used in operating activities was $1.4 million, which was primarily due to the net loss of $8.9 million, adjusted for net non-cash charges of $7.2 million, which included $3.9 million in depreciation and amortization expenses, $2.6 million of stock-based compensation, $0.3 million in impairment charges related to the Company's investment in a non-affiliate, $0.2 million in ROU asset amortization expenses, and $0.1 million in inventory write-downs. Cash inflow from changes in operating assets and liabilities was approximately $0.3 million and was primarily due to decreases in accounts receivable and contract assets, partially offset by decreases in accrued liabilities, accounts payable, lease liabilities, and deferred revenues.

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

Net cash provided by (used in) investing activities

For the nine months ended September 28, 2025 and September 29, 2024 cash used in investing activities was $4.5 million and $5.0 million, respectively, which were primarily attributable to the capital expenditures relating to licensed software, capitalized internal-use software, and purchase of specialized semiconductor tooling, which was capitalized.

Net cash provided by (used in) financing activities

Cash flows from financing activities include the draw-downs and repayments of our line of credit. For the nine months ended September 28, 2025, repayments were greater than drawn-downs by $3.0 million. For the nine months ended September 29, 2024, these draw-downs and repayments netted to zero.

For the nine months ended September 28, 2025, cash provided by financing activities was $1.4 million, which was primarily derived from the net proceeds of $6.1 million from the common stock issuance, partially offset by $1.8 million in payments related to financing arrangements.

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

Part I. Financial Information (continued)

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet partnerships, arrangements, or other relationships with unconsolidated entities or others, often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Evaluation of Disclosure Controls and Procedures

Based on management's evaluation as of September 28, 2025, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors set forth in our 2024 Annual Report on Form 10-K for the year ended December 29, 2024, filed with the SEC on March 26, 2025, which includes a detailed discussion of our risk factors at Part I, Item 1A, Risk Factors, which discussion is hereby incorporated by reference into this Part II, Item 1A.