skyt-20230402

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

______________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: April 2, 2023


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 001-40345

______________________

SkyWater Technology, Inc.

(Exact name of registrant as specified in its charter)

______________________


Delaware			37-1839853
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

2401 East 86th Street, Bloomington, Minnesota 55425

(Address of registrant’s principal executive offices and zip code)

Registrant’s telephone number, including area code: (952) 851-5200

______________________

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class

Trading
Symbol

Name of Each Exchange
on Which Registered

Common stock, par value $0.01 per share

SKYT

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 17(a)(2)(B) of the Securities Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

On May 10, 2023, the number of shares of common stock, $0.01 par value, outstanding was 44,471,829.

Table of Contents

SkyWater Technology, Inc.

TABLE OF CONTENTS


		Page No.

Forward-Looking Statements		3

PART I. FINANCIAL INFORMATION		4

Item 1.	Condensed Con s olidated Financial Statements (unaudited)	4

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Operations	5

	Condensed Consolidated Statements of Shareholders’ Equity	6

	Condensed Consolidated Statements of Cash Flows	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION		31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults Upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	33

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that we believe to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, our expectations regarding our business, results of operations, financial condition and prospects, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “may,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “seek,” “potential,” “believe,” “will,” “could,” “should,” “would” and “project” or the negative thereof or variations thereon or similar words or expressions that convey the uncertainty of future events or outcomes are generally intended to identify forward-looking statements.

Our forward-looking statements are subject to a number of risks, uncertainties and assumptions. Key factors that may affect our results include, among others, the following:

•our goals and strategies;

•our future business development, financial condition and results of operations;

•our ability to continue operating our sole semiconductor foundry at full capacity;

•our ability to appropriately respond to changing technologies on a timely and cost-effective basis;

•our customer relationships and our ability to retain and expand our customer relationships;

•our ability to accurately predict our future revenues for the purpose of appropriately budgeting and adjusting our expenses;

•our expectations regarding dependence on our largest customers;

•our ability to diversify our customer base and develop relationships in new markets;

•the performance and reliability of our third-party suppliers and manufacturers;

•our ability to procure tools, materials, and chemicals amid industry-wide supply chain shortages;

•our ability to control costs, including our operating and capital expenses;

•the size and growth potential of the markets for our solutions, and our ability to serve and expand our presence in those markets;

•the level of demand in our customers’ end markets;

•our ability to attract, train and retain key qualified personnel in a competitive labor market;

•adverse litigation judgments, settlements or other litigation-related costs;

•changes in trade policies, including the imposition of tariffs;

•our ability to raise additional capital or financing;

•our ability to accurately forecast demand;

•changes in local, regional, national and international economic or political conditions, including those resulting from rising inflation and interest rates, a recession, or intensified international hostilities;

•the level and timing of U.S. government program funding;

•our ability to maintain compliance with certain U.S. government contracting requirements;

•regulatory developments in the United States and foreign countries;

•our ability to protect our intellectual property rights; and

•other factors disclosed in the section entitled “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended January 1, 2023.

Moreover, our business, results of operations, financial condition and prospects may be affected by new risks that could emerge from time to time. In light of these risks, uncertainties and assumptions, the forward-looking events and outcomes discussed in this Quarterly Report on Form 10-Q may not occur and our actual results could differ materially and adversely from those expressed or implied in our forward-looking statements. No forward-looking statement is a guarantee of future performance. You should not rely on forward-looking statements as predictions of future events or outcomes. Although we believe that the expectations reflected in the forward-looking statements are reasonable, the results, levels of activity, performance or events and circumstances reflected in the forward-looking statements may not be achieved or occur.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views only as of the date hereof. We anticipate that subsequent events and developments will cause our views to change. However, we undertake no obligation to update publicly any forward-looking statements to conform such statements to changes in our expectations or to our actual results, or for any other reason, except as required by law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date hereof.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


	April 2, 2023		January 1, 2023

	(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	13,840	$	30,025
Accounts receivable, net	67,016		62,670
Inventories	14,366		13,397
Prepaid expenses and other current assets	12,457		10,290
Income tax receivable	169		169
Total current assets	107,848		116,551
Property and equipment, net	175,368		179,915
Intangible assets, net	5,324		5,608
Other assets	4,286		3,690
Total assets	$	292,826	$	305,764
Liabilities and shareholders' equity
Current liabilities:
Current portion of long-term debt	$	2,021	$	1,855
Accounts payable	13,931		21,102
Accrued expenses	26,264		25,212
Short-term financing, less unamortized debt issuance costs	52,213		55,817

Deferred revenue - current	28,168		28,186
Total current liabilities	122,597		132,172
Long-term liabilities:
Long-term debt, less current portion and net of unamortized debt issuance costs	35,194		35,181

Long-term incentive plan	—		1,643
Deferred revenue - long-term	62,740		67,967
Deferred income tax liability, net	1,239		1,239
Other long-term liabilities	13,584		13,585
Total long-term liabilities	112,757		119,615
Total liabilities	235,354		251,787
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred stock, $0.01 par value per share (80,000,000 shares authorized; zero issued and outstanding)	—		—
Common stock, $0.01 par value per share (200,000,000 shares authorized; 44,280,198 and 43,704,876 shares issued and outstanding)	443		437
Additional paid-in capital	154,764		147,304
Accumulated deficit	(98,720)		(94,072)
Total shareholders’ equity, SkyWater Technology, Inc.	56,487		53,669
Non-controlling interests	985		308
Total shareholders’ equity	57,472		53,977
Total liabilities and shareholders’ equity	$	292,826	$	305,764

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended
	April 2, 2023		April 3, 2022

	(in thousands, except share and per share data)
Revenue	$	66,094	$	48,121
Cost of revenue	49,626		49,061
Gross profit (loss)	16,468		(940)
Research and development	2,668		2,282
Selling, general and administrative expenses	14,895		11,690

Operating income (loss)	(1,095)		(14,912)
Other income (expense):

Interest expense	(2,471)		(1,029)
Total other income (expense)	(2,471)		(1,029)
Income (loss) before income taxes	(3,566)		(15,941)
Income tax expense (benefit)	—		(194)
Net income (loss)	(3,566)		(15,747)
Less: net income attributable to non-controlling interests	707		859
Net income (loss) attributable to SkyWater Technology, Inc.	$	(4,273)	$	(16,606)
Net income (loss) per share attributable to common shareholders, basic and diluted:	$	(0.10)	$	(0.42)
Weighted average shares used in computing net income (loss) per common share, basic and diluted:	43,817,417		39,861,688

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Statements of Shareholders’ Equity

For the Three Months Ended April 2, 2023 and April 3, 2022

(dollars and shares in thousands)

(Unaudited)


	Preferred Stock	Common Stock		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)	Total Shareholders’ Equity, SkyWater Technology, Inc.			Non-controlling Interests		Total Shareholders’ Equity
			Shares			Amount				Shares					Amount
Balance at January 2, 2022			—	$	—		39,836	$	398		$	115,208	$	(54,479)		$	61,127	$	(1,200)	$	59,927
Issuance of common stock pursuant to equity compensation plans			—	—			69	1			658		—			659		—		659
Stock-based compensation			—	—			—	—			3,007		—			3,007				3,007
Distribution to VIE member			—	—			—	—			—		—			—		(337)		(337)
Net income (loss)			—	—			—	—			—		(16,606)			(16,606)		859		(15,747)
Balance at April 3, 2022			—	$	—		39,905	$	399		$	118,873	$	(71,085)		$	48,187	$	(678)	$	47,509

Balance at January 1, 2023			—	$	—		43,705	$	437		$	147,304	$	(94,072)		$	53,669	$	308	$	53,977

Adoption of new accounting principle			—	—			—	—			—		(375)			(375)		—		(375)

Issuance of common stock			—	—			245	3			2,693		—			2,696		—		2,696
Issuance of common stock pursuant to equity compensation plans			—	—			330	3			2,914		—			2,917		—		2,917

Stock-based compensation			—	—			—	—			1,853		—

SEC Form 10-Q filed by SkyWater Technology Inc.