0001819974-22-000021.txt : 20220518 0001819974-22-000021.hdr.sgml : 20220518 20220518163116 ACCESSION NUMBER: 0001819974-22-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 91 CONFORMED PERIOD OF REPORT: 20220403 FILED AS OF DATE: 20220518 DATE AS OF CHANGE: 20220518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SkyWater Technology, Inc CENTRAL INDEX KEY: 0001819974 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 371839853 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40345 FILM NUMBER: 22939574 BUSINESS ADDRESS: STREET 1: 2401 EAST 86TH STREET CITY: BLOOMINGTON STATE: MN ZIP: 55425 BUSINESS PHONE: 952-851-5200 MAIL ADDRESS: STREET 1: 2401 EAST 86TH STREET CITY: BLOOMINGTON STATE: MN ZIP: 55425 FORMER COMPANY: FORMER CONFORMED NAME: CMI Acquisition, LLC DATE OF NAME CHANGE: 20200803 10-Q 1 skyt-20220403.htm 10-Q skyt-20220403
2022Q10001819974January 1false9121212http://fasb.org/us-gaap/2021-01-31#OtherAssetsNoncurrenthttp://fasb.org/us-gaap/2021-01-31#PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationhttp://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesNoncurrenthttp://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesNoncurrent00018199742022-01-032022-04-0300018199742022-05-13xbrli:shares00018199742022-04-03iso4217:USD00018199742022-01-02iso4217:USDxbrli:shares00018199742021-01-042021-04-040001819974us-gaap:CapitalUnitsMemberus-gaap:PreferredClassAMember2021-01-030001819974us-gaap:PreferredClassBMemberus-gaap:CapitalUnitsMember2021-01-030001819974skyt:CommonUnitsMemberus-gaap:CapitalUnitsMember2021-01-030001819974us-gaap:PreferredStockMember2021-01-030001819974us-gaap:CommonStockMember2021-01-030001819974us-gaap:AdditionalPaidInCapitalMember2021-01-030001819974us-gaap:RetainedEarningsMember2021-01-030001819974us-gaap:ParentMember2021-01-030001819974us-gaap:NoncontrollingInterestMember2021-01-0300018199742021-01-030001819974skyt:CommonUnitsMemberus-gaap:CapitalUnitsMember2021-01-042021-04-040001819974us-gaap:ParentMember2021-01-042021-04-040001819974us-gaap:NoncontrollingInterestMember2021-01-042021-04-040001819974us-gaap:RetainedEarningsMember2021-01-042021-04-040001819974us-gaap:CapitalUnitsMemberus-gaap:PreferredClassAMember2021-04-040001819974us-gaap:PreferredClassBMemberus-gaap:CapitalUnitsMember2021-04-040001819974skyt:CommonUnitsMemberus-gaap:CapitalUnitsMember2021-04-040001819974us-gaap:PreferredStockMember2021-04-040001819974us-gaap:CommonStockMember2021-04-040001819974us-gaap:AdditionalPaidInCapitalMember2021-04-040001819974us-gaap:RetainedEarningsMember2021-04-040001819974us-gaap:ParentMember2021-04-040001819974us-gaap:NoncontrollingInterestMember2021-04-0400018199742021-04-040001819974us-gaap:CapitalUnitsMemberus-gaap:PreferredClassAMember2022-01-020001819974us-gaap:PreferredClassBMemberus-gaap:CapitalUnitsMember2022-01-020001819974skyt:CommonUnitsMemberus-gaap:CapitalUnitsMember2022-01-020001819974us-gaap:PreferredStockMember2022-01-020001819974us-gaap:CommonStockMember2022-01-020001819974us-gaap:AdditionalPaidInCapitalMember2022-01-020001819974us-gaap:RetainedEarningsMember2022-01-020001819974us-gaap:ParentMember2022-01-020001819974us-gaap:NoncontrollingInterestMember2022-01-020001819974us-gaap:CommonStockMember2022-01-032022-04-030001819974us-gaap:AdditionalPaidInCapitalMember2022-01-032022-04-030001819974us-gaap:ParentMember2022-01-032022-04-030001819974us-gaap:NoncontrollingInterestMember2022-01-032022-04-030001819974us-gaap:RetainedEarningsMember2022-01-032022-04-030001819974us-gaap:CapitalUnitsMemberus-gaap:PreferredClassAMember2022-04-030001819974us-gaap:PreferredClassBMemberus-gaap:CapitalUnitsMember2022-04-030001819974skyt:CommonUnitsMemberus-gaap:CapitalUnitsMember2022-04-030001819974us-gaap:PreferredStockMember2022-04-030001819974us-gaap:CommonStockMember2022-04-030001819974us-gaap:AdditionalPaidInCapitalMember2022-04-030001819974us-gaap:RetainedEarningsMember2022-04-030001819974us-gaap:ParentMember2022-04-030001819974us-gaap:NoncontrollingInterestMember2022-04-030001819974us-gaap:IPOMemberus-gaap:CommonStockMember2021-04-232021-04-230001819974us-gaap:PreferredClassBMember2022-01-032022-04-03xbrli:pure0001819974skyt:RestrictedStockUnitsRSUsAndStockOptionsMember2022-04-032022-04-030001819974skyt:RestrictedStockUnitsRSUsAndStockOptionsMember2021-04-042021-04-040001819974skyt:CommonUnitsMember2021-01-042021-04-040001819974skyt:CommonUnitHoldersMemberus-gaap:CommonStockMember2021-01-042021-04-04skyt:segment0001819974skyt:WaferServicesMember2022-01-032022-04-030001819974skyt:WaferServicesMemberus-gaap:TransferredAtPointInTimeMember2022-01-032022-04-030001819974skyt:WaferServicesMemberus-gaap:TransferredOverTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesTimeAndMaterialsMemberus-gaap:TransferredAtPointInTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesTimeAndMaterialsMemberus-gaap:TransferredOverTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesTimeAndMaterialsMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesFixedPriceMemberus-gaap:TransferredAtPointInTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesFixedPriceMemberus-gaap:TransferredOverTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesFixedPriceMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesOtherMemberus-gaap:TransferredAtPointInTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesOtherMemberus-gaap:TransferredOverTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesOtherMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesMemberus-gaap:TransferredAtPointInTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesMemberus-gaap:TransferredOverTimeMember2022-01-032022-04-030001819974skyt:AdvancedTechnologyServicesMember2022-01-032022-04-030001819974us-gaap:TransferredAtPointInTimeMember2022-01-032022-04-030001819974us-gaap:TransferredOverTimeMember2022-01-032022-04-030001819974skyt:WaferServicesMemberus-gaap:TransferredAtPointInTimeMember2021-01-042021-04-040001819974skyt:WaferServicesMemberus-gaap:TransferredOverTimeMember2021-01-042021-04-040001819974skyt:WaferServicesMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesTimeAndMaterialsMemberus-gaap:TransferredAtPointInTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesTimeAndMaterialsMemberus-gaap:TransferredOverTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesTimeAndMaterialsMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesFixedPriceMemberus-gaap:TransferredAtPointInTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesFixedPriceMemberus-gaap:TransferredOverTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesFixedPriceMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesOtherMemberus-gaap:TransferredAtPointInTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesOtherMemberus-gaap:TransferredOverTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesOtherMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesMemberus-gaap:TransferredAtPointInTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesMemberus-gaap:TransferredOverTimeMember2021-01-042021-04-040001819974skyt:AdvancedTechnologyServicesMember2021-01-042021-04-040001819974us-gaap:TransferredAtPointInTimeMember2021-01-042021-04-040001819974us-gaap:TransferredOverTimeMember2021-01-042021-04-040001819974country:US2022-01-032022-04-030001819974country:US2021-01-042021-04-040001819974country:GB2022-01-032022-04-030001819974country:GB2021-01-042021-04-040001819974country:CA2022-01-032022-04-030001819974country:CA2021-01-042021-04-040001819974skyt:OthersCountriesMember2022-01-032022-04-030001819974skyt:OthersCountriesMember2021-01-042021-04-040001819974skyt:WaferServicesMember2022-04-0300018199742022-04-042022-04-0300018199742023-04-022022-04-0300018199742024-04-012022-04-0300018199742025-03-312022-04-030001819974us-gaap:TradeAccountsReceivableMember2022-04-030001819974us-gaap:TradeAccountsReceivableMember2022-01-020001819974skyt:UnbilledRevenueMember2022-04-030001819974skyt:UnbilledRevenueMember2022-01-020001819974skyt:OtherReceivablesMember2022-04-030001819974skyt:OtherReceivablesMember2022-01-020001819974us-gaap:MachineryAndEquipmentMember2021-01-042021-11-300001819974us-gaap:MachineryAndEquipmentMember2021-12-012021-12-310001819974srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-01-032022-04-030001819974us-gaap:ComputerSoftwareIntangibleAssetMember2022-01-032022-04-030001819974us-gaap:ComputerSoftwareIntangibleAssetMember2022-04-030001819974us-gaap:ComputerSoftwareIntangibleAssetMember2022-01-020001819974us-gaap:CustomerListsMember2022-04-030001819974us-gaap:CustomerListsMember2022-01-020001819974us-gaap:CustomerListsMember2022-01-032022-04-030001819974us-gaap:CustomerListsMember2021-01-042021-04-040001819974us-gaap:ComputerSoftwareIntangibleAssetMember2021-01-042021-04-040001819974us-gaap:LineOfCreditMember2022-04-030001819974us-gaap:LineOfCreditMember2022-01-020001819974us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:LoansPayableMember2022-04-030001819974us-gaap:VariableInterestEntityPrimaryBeneficiaryMemberus-gaap:LoansPayableMember2022-01-020001819974us-gaap:LineOfCreditMemberskyt:WellsFargoBankMember2022-04-030001819974us-gaap:LineOfCreditMember2022-04-032022-04-030001819974us-gaap:LineOfCreditMember2022-01-032022-04-030001819974skyt:LineOfCreditAndLoansPayableMember2022-04-030001819974us-gaap:PreferredClassAMember2022-04-0300018199742021-04-140001819974us-gaap:CommonStockMember2021-04-142021-04-140001819974us-gaap:CommonStockMemberskyt:ClassBPreferredUnitHoldersMember2021-04-142021-04-140001819974skyt:CommonUnitHoldersMemberus-gaap:CommonStockMember2021-04-142021-04-140001819974us-gaap:IPOMemberus-gaap:CommonStockMember2021-04-230001819974us-gaap:IPOMember2021-04-232021-04-230001819974us-gaap:EmployeeStockOptionMember2022-01-032022-04-030001819974us-gaap:EmployeeStockOptionMember2021-01-042021-04-040001819974us-gaap:EmployeeStockOptionMember2022-04-030001819974skyt:NewlyAppointedDirectorsMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-032022-04-030001819974us-gaap:RestrictedStockUnitsRSUMember2022-01-032022-04-030001819974us-gaap:RestrictedStockUnitsRSUMember2021-01-042021-04-040001819974us-gaap:RestrictedStockUnitsRSUMember2022-04-030001819974us-gaap:RestrictedStockUnitsRSUMember2022-01-020001819974us-gaap:EmployeeStockMember2021-04-230001819974us-gaap:EmployeeStockMembersrt:MaximumMember2021-04-232021-04-230001819974us-gaap:EmployeeStockMembersrt:MinimumMember2021-04-042021-04-040001819974us-gaap:EmployeeStockMembersrt:MaximumMember2021-04-042021-04-040001819974us-gaap:EmployeeStockMember2021-04-042021-04-040001819974us-gaap:EmployeeStockMember2022-01-032022-04-030001819974us-gaap:EmployeeStockMember2021-01-042022-01-020001819974us-gaap:EmployeeStockMember2022-04-030001819974us-gaap:CostOfSalesMember2022-01-032022-04-030001819974us-gaap:CostOfSalesMember2021-01-042021-04-040001819974us-gaap:ResearchAndDevelopmentExpenseMember2022-01-032022-04-030001819974us-gaap:ResearchAndDevelopmentExpenseMember2021-01-042021-04-040001819974us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-01-032022-04-030001819974us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-042021-04-040001819974skyt:CustomerAMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-01-032022-04-030001819974skyt:CustomerAMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-01-042021-04-040001819974skyt:CustomerBMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-01-032022-04-030001819974skyt:CustomerBMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-01-042021-04-040001819974us-gaap:SalesRevenueNetMemberskyt:CustomerCMemberus-gaap:CustomerConcentrationRiskMember2021-01-042021-04-040001819974skyt:MajorCustomersMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-01-032022-04-030001819974skyt:MajorCustomersMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-01-042021-04-040001819974us-gaap:AccountsReceivableMemberskyt:CustomerOneMemberus-gaap:CustomerConcentrationRiskMember2022-01-032022-04-030001819974us-gaap:AccountsReceivableMemberskyt:CustomerTwoMemberus-gaap:CustomerConcentrationRiskMember2022-01-032022-04-030001819974us-gaap:AccountsReceivableMemberskyt:CustomerOneMemberus-gaap:CustomerConcentrationRiskMember2021-01-042022-01-020001819974us-gaap:AccountsReceivableMemberskyt:CustomerTwoMemberus-gaap:CustomerConcentrationRiskMember2021-01-042022-01-020001819974skyt:OxbowIndustriesLlcMember2022-01-032022-04-030001819974skyt:OxbowIndustriesLlcMember2021-01-042021-04-040001819974skyt:MembersOfBoardOfDirectorsMember2022-01-032022-04-030001819974skyt:MembersOfBoardOfDirectorsMember2021-01-042021-04-040001819974skyt:OxbowRealtyMember2020-09-292020-09-290001819974skyt:OxbowRealtyMember2020-09-290001819974skyt:OxbowRealtyMember2022-04-030001819974us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-04-030001819974us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-01-020001819974us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-01-032022-04-030001819974us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-01-042021-04-0400018199742022-01-0300018199742022-04-0100018199742020-03-31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 3, 2022
¨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
______________________
skyt-20220403_g1.jpg
SkyWater Technology, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware37-1839853
(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 ClassTrading
Symbol
Name of Each Exchange
on Which Registered
Common stock, par value $0.01 per shareSKYTThe 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 filerxSmaller reporting company¨
Emerging growth companyx
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 13, 2022, the number of shares of common stock, $0.01 par value, outstanding was 40,310,292.



SkyWater Technology, Inc.
TABLE OF CONTENTS
Page No.

2

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;
the impact of the coronavirus 2019, or COVID-19, pandemic on our business, results of operations and financial condition and our customers, suppliers and workforce;
the impact of the COVID-19 pandemic on the global economy;
the level and timing of US government program funding;
our ability to maintain compliance with certain US 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 2, 2022.
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.
3

PART I. FINANCIAL INFORMATION
Item 1.    Financial Statements
SKYWATER TECHNOLOGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
April 3, 2022January 2, 2022
(in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents$6,435 $12,917 
Accounts receivable, net47,698 39,381 
Inventories13,113 17,500 
Prepaid expenses and other current assets6,417 3,854 
Income tax receivable744 745 
Total current assets74,407 74,397 
Property and equipment, net187,364 180,475 
Intangible assets, net5,494 3,891 
Other assets4,411 4,835 
Total assets$271,676 $263,598 
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt$1,030 $1,021 
Accounts payable6,014 7,637 
Accrued expenses24,082 17,483 
Current portion of contingent consideration816 816 
Deferred revenue - current23,273 20,808 
Total current liabilities55,215 47,765 
Long-term liabilities:
Long-term debt, less current portion and unamortized debt issuance costs67,727 58,428 
Long-term incentive plan4,249 4,039 
Deferred revenue - long-term82,944 88,094 
Deferred income tax liability, net798 995 
Other long-term liabilities13,234 4,350 
Total long-term liabilities168,952 155,906 
Total liabilities224,167 203,671 
Commitments and contingencies
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; 39,904,690 and 39,836,038 shares issued and outstanding)
399 398 
Additional paid-in capital118,873 115,208 
Accumulated deficit(71,085)(54,479)
Total shareholders’ equity, SkyWater Technology, Inc.48,187 61,127 
Non-controlling interests(678)(1,200)
Total shareholders’ equity47,509 59,927 
Total liabilities and shareholders’ equity$271,676 $263,598 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

SKYWATER TECHNOLOGY, INC.
Condensed Consolidated Statements of Operations
(Unaudited) 
Three Months Ended
April 3, 2022April 4, 2021
(in thousands, except share, unit and per share and unit data)
Revenue$48,121 $48,101 
Cost of revenue49,061 38,935 
Gross profit (loss)(940)9,166 
Research and development2,282 1,927 
Selling, general and administrative expenses11,690 8,603 
Change in fair value of contingent consideration 56 
Operating loss(14,912)(1,420)
Other income (expense):
Interest expense(1,029)(1,058)
Total other expense(1,029)(1,058)
Loss before income taxes(15,941)(2,478)
Income tax expense (benefit)(194)(425)
Net loss(15,747)(2,053)
Less: net income attributable to non-controlling interests859 758 
Net loss attributable to SkyWater Technology, Inc.$(16,606)$(2,811)
Net loss per share attributable to common shareholders, basic and diluted:$(0.42)$(1.04)
Weighted average shares used in computing net loss per common share, basic and diluted:39,861,688 3,060,343 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

SKYWATER TECHNOLOGY, INC.
Condensed Consolidated Statements of Shareholders’ Equity (Deficit)
For the Three Months Ended April 3, 2022 and April 4, 2021
(dollars, units and shares in thousands)
(Unaudited)
Class A UnitsClass B UnitsCommon UnitsPreferred StockCommon StockAdditional Paid-in CapitalRetained
Earnings
(Accumulated Deficit)
Total
Shareholders’ Equity (Deficit),
 SkyWater Technology, Inc.
Non-controlling
Interests
Total Shareholders’
Equity (Deficit)
UnitsAmountUnitsAmountUnitsAmountSharesAmountSharesAmount
Balance at January 3, 2021 $ 18,000 $ 2,108 $3,767  $  $ $ $(3,783)$(16)$(1,568)$(1,584)
Unit-based compensation— — — — — 5 — — — — — — 5 — 5 
Other— — — — (2)— — — — — — — — — 
Distribution to VIE member— — — — — — — — — — — — — (981)(981)
Net income (loss)— — — — — — — — — — — (2,811)(2,811)758 (2,053)
Balance at April 4, 2021 $ 18,000 $ 2,106 $3,772  $  $ $ $(6,594)$(2,822)$(1,791)$(4,613)
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 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

SKYWATER TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
April 3, 2022April 4, 2021
(in thousands)
Cash flows from operating activities:
Net loss$(15,747)$(2,053)
Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities:
Depreciation and amortization6,458 6,482 
Amortization of debt issuance costs included in interest expense172 160 
Long-term incentive and stock-based compensation3,216 235 
Change in fair value of contingent consideration 56 
Cash paid for contingent consideration in excess of initial valuation (3,356)
Deferred income taxes(197)(1,697)
Non-cash revenue related to customer equipment (2,481)
Changes in operating assets and liabilities:
Accounts receivable(86)3,265 
Inventories(3,843)(4,061)
Prepaid expenses and other assets(2,139)4,546 
Accounts payable and accrued expenses4,057 2,187 
Deferred revenue(2,684)(14,514)
Income tax payable and receivable1 2,807 
Net cash used in operating activities(10,792)(8,424)
Cash flows from investing activities:
Purchase of software and licenses(400)(219)
Purchases of property and equipment(4,414)(5,178)
Net cash used in investing activities(4,814)(5,397)
Cash flows from financing activities:
Net proceeds on Revolver9,392 13,030 
Proceeds from employee stock purchase plan659  
Cash paid for offering costs (1,199)
Cash paid for capital leases(334) 
Distributions to VIE member(337)(981)
Repayment of Financing(256)(249)
Net cash provided by financing activities9,124 10,601 
Net change in cash and cash equivalents(6,482)(3,220)
Cash and cash equivalents - beginning of period12,917 7,436 
Cash and cash equivalents - end of period$6,435 $4,216 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

SKYWATER TECHNOLOGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended
April 3, 2022April 4, 2021
(in thousands)
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest$882 $1,009 
Income taxes2 (1,534)
Noncash investing and financing activity:
Property and equipment acquired, not yet paid$1,537 $6,622 
Equipment acquired through capital lease obligations9,035 2,470 
Intangible assets acquired, not yet paid1,628  
The accompanying notes are an integral part of these condensed consolidated financial statements.
8

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
Note 1 Nature of Business
SkyWater Technology, Inc., together with its consolidated subsidiaries (collectively, “we”, “us”, “our”, or “SkyWater”), is a U.S. investor-owned, independent, pure-play technology foundry that offers advanced semiconductor development and manufacturing services from our fabrication facility, or fab, in Minnesota and advanced packaging services from our Florida facility. In our technology as a service model, we leverage a strong foundation of proprietary technology to co-develop process technology intellectual property with our customers that enables disruptive concepts through our Advanced Technology Services for diverse microelectronics (integrated circuits, or ICs) and related micro- and nanotechnology applications. In addition to these differentiated technology development services, we support customers with volume production of ICs for high-growth markets through our Wafer Services.
Emerging Growth Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012.
Corporate Conversion and Initial Public Offering
Effective April 14, 2021, we converted into a Delaware corporation pursuant to a statutory conversion and changed our name to SkyWater Technology, Inc. Previously, we operated as a Delaware limited liability company under the name CMI Acquisition, LLC. As a result of the corporate conversion, the holders of the different series of units of CMI Acquisition, LLC, became holders of common stock and options to purchase common stock of SkyWater Technology, Inc. The number of shares of common stock that holders of Class B preferred units and common units were entitled to receive in the corporate conversion was determined in accordance with a plan of conversion, which was based upon the terms of the CMI Acquisition, LLC operating agreement, and varied depending on which class of Units a holder owned. See Note 8 – Shareholders’ Equity.
On April 23, 2021, we completed our initial public offering (“IPO”) and issued 8,004,000 shares of common stock. Shares of common stock began trading on the Nasdaq Stock Market on April 21, 2021 under the symbol “SKYT”.
Note 2 Basis of Presentation and Principles of Consolidation
The condensed consolidated financial statements as of April 3, 2022, and for the three months ended April 3, 2022 and April 4, 2021, are presented in thousands of U.S. dollars (except share and per share information), are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all financial information and disclosures required by U.S. GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the related notes thereto as of January 2, 2022. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair presentation of our financial position as of April 3, 2022, our results of operations, shareholders' equity (deficit) and cash flows for the three months ended April 3, 2022 and April 4, 2021.
The results of operations for the three months ended April 3, 2022 are not necessarily indicative of the results of operations to be expected for the year ending January 1, 2023, or for any other interim period, or for any other future year.
Principles of Consolidation
Our condensed consolidated financial statements include our assets, liabilities, revenues, and expenses, as well as the assets, liabilities, revenues, and expenses of subsidiaries in which we have a controlling financial interest, SkyWater Technology Foundry, Inc. (“SkyWater Technology Foundry”), SkyWater Federal, LLC (“SkyWater Federal”), and SkyWater Florida, Inc. (“SkyWater Florida”), and variable interest entities (“VIE”) for which we are the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.
The condensed consolidated statements of operations, shareholders’ equity (deficit) and cash flows are for the three months ended April 3, 2022 and April 4, 2021, each of which consisted of 13 weeks.
9

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
Liquidity and Cash Requirements
Our ability to execute our operating strategy is dependent on our ability to continue to access capital through our Revolver (as defined in Note 6 – Debt) and other sources of financing. Our current business plans indicate that we will require additional liquidity to continue our operations for the next 12 months from the issuance of the consolidated financial statements. In response to this, we are in the process of implementing a plan to reduce operating costs to improve cash flow, which includes a reduction in spending and a delayed increase in personnel, and may require us to decrease our level of investment in new products and technologies, discontinue further expansion of our business, or scale back our existing operations. Management believes that its cash and cash equivalents on hand, available borrowings on our Revolver, and these cost reduction measures, as needed, will provide sufficient liquidity to fund its operations for the next 12 months from the issuance of the consolidated financial statements.
The Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. To the extent that our current resources and plans to reduce expenses are insufficient to satisfy our cash requirements, we may need to seek additional equity or debt financing. Our ability to do so depends on prevailing economic conditions and other factors, many of which are beyond our control.
Use of Estimates
The preparation of our condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions, third-party evaluations and various other assumptions that management believes are reasonable under the circumstances. Actual results could differ from those estimates.
COVID-19
In March 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) outbreak a global pandemic. The COVID-19 pandemic has spread throughout the United States and the world, with the continued potential for significant impact. Our business has been adversely affected by the effects of the COVID-19 pandemic. We implemented modifications to employee travel and employee work locations, as required in some cases by federal, state and local authorities, which has had a negative impact on employee productivity. Because we have manufacturing operations, we may be vulnerable to an outbreak of a new coronavirus or other contagious diseases. Although we have not experienced a shutdown of our manufacturing facilities, the effects of such an outbreak could include the temporary shutdown of our operations or the operations of our customers, disruptions or restrictions on the ability to ship our products to our customers as well as disruptions that may affect our suppliers. Any disruption of our ability to manufacture or distribute our products, the ability of our suppliers to deliver key components on a timely basis, or our customers’ ability to order and take delivery of our products could have a material adverse effect on our revenue and operating results. The future broader implications of the pandemic remain uncertain and will depend on certain future developments, including the duration, scope and severity of the pandemic, the effectiveness of vaccines and the impact of our workforce of vaccine mandates.
Net Loss Per Share
We calculate basic and diluted net loss per common share in conformity with the two-class method required for companies with participating securities. Our previously outstanding Class B preferred units met the criteria of a participating security as they contained the rights to an 8% “preferred return” on the deemed original equity value of each such Class B preferred unit (accrued daily since the date of issuance of each such Class B preferred unit). Under the two-class method, income or losses are allocated between the common shareholders and the Class B preferred unitholders. The two-class method includes an allocation formula that determines income or loss per unit for each class according to preferred dividends and undistributed earnings or losses for the period. Our reported net loss for the three months ended April 4, 2021 is increased by the amount allocated to the Class B preferred units to arrive at the loss allocated to common shareholders for purposes of calculating net loss per share. As a result of our April 2021 corporate conversion and IPO, the number of common shares used to compute net loss per common share for the three months ended April 4, 2021 was retrospectively adjusted to reflect the conversion akin to a split-like situation.
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing
10

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
the net loss by the weighted-average number of shares and potentially dilutive securities outstanding for the period determined using the treasury-stock method. Because we reported a net loss for the three months ended April 3, 2022 and April 4, 2021, the number of shares used to calculate diluted net loss per common share is the same as the number of shares used to calculate basic net loss per common share because the potentially dilutive shares would have been anti-dilutive if included in the calculation. At April 3, 2022 and April 4, 2021, there were restricted stock units and stock options totaling 3,414,000 and 2,329,000, respectively, excluded from the computation of diluted weighted-average shares outstanding because their inclusion would have been anti-dilutive.
The following table sets forth the computation of basic and diluted net loss per common share for the three months ended April 3, 2022 and April 4, 2021:
Three Months Ended
April 3, 2022April 4, 2021
(in thousands, except per share data)
Numerator:
Net loss attributable to SkyWater Technology, Inc.$(16,606)$(2,811)
Undistributed preferred return to Class B preferred unitholders (359)
Net loss attributable to common shareholders$(16,606)$(3,170)
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)39,862 3,060 
Net loss per common share, basic and diluted$(0.42)$(1.04)
__________________
(1)The weighted-average common shares outstanding for the three months ended April 4, 2021 reflects the retrospective adjustment for the April 14, 2021 corporate conversion of 2,105,936 common units into 3,060,343 shares of common stock.
Operating Segment Information
Operating segments are identified as components of an enterprise about which separate financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. We view our operations and manage our business as one operating segment.
Note 3 Summary of Significant Accounting Policies
Our audited consolidated financial statements include an additional discussion of the significant accounting policies and estimates used in the preparation of our condensed consolidated financial statements. There were no material changes to our significant accounting policies and estimates during the three months ended April 3, 2022, except with respect to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update ("ASU") 2016-2, Leases (“Topic 842”).
Recently Issued Accounting Standards
In February 2016, the FASB issued Topic 842. The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The standard is effective for public business entities for fiscal years beginning after December 15, 2018. As an emerging growth company, we adopted the new standard on January 3, 2022 for our year ending January 1, 2023. The adoption of Topic 842 did not have a material impact on our condensed consolidated financial statements as disclosed in Note 15 – Leases.
In June 2016, the FASB issued a new credit loss accounting standard, ASU 2016-13, Current Expected Credit Losses (“Topic 326”). This guidance replaces the current allowance for loan and lease loss accounting standard and focuses on estimation of expected losses over the life of the loans instead of relying on incurred losses. The standard is effective for certain public business entities for fiscal years beginning after December 15, 2019. As an emerging growth company, we intend to adopt the new standard on January 2, 2023 for our year ending December 31, 2023. However if we lose our emerging growth
11

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
company status prior to our intended adoption date, we may be required to adopt the new standard in the year we lose such status. We do not expect adopting Topic 326 will have a material impact on our condensed consolidated financial statements.
Note 4 Revenue
Wafer Services Contract
In March 2022, we signed a new contract with a significant wafer services customer. Under the contract, orders are non-cancellable and we have an enforceable right to complete the orders and to payment for any finished or in-process wafers plus a reasonable margin. The wafers produced for that customer are highly customized and have no alternative use to us. Control of these wafers is deemed to transfer to the customer over time during the fabrication process, using the same measure of progress toward satisfying the promise to deliver the units to the customer. Consequently, the transaction price is recognized as revenue over time based on actual costs incurred in the fabrication process to date relative to total expected costs to produce all wafers beginning in March 2022. The contract terms and pricing is applicable to all in-process and future wafers. We recorded revenue of $8,230 in the first quarter of 2022 to account for recognition of wafer services activities in process at the date the contract was signed.
Disaggregated Revenue
The following table discloses revenue by product type and the timing of recognition of revenue for transfer of goods and services to customers:
Three Months Ended April 3, 2022
Topic 606 Revenue
Point-in-TimeOver TimeLease RevenueTotal Revenue
Wafer Services$13,205 $8,341 $ $21,546 
Advanced Technology Services
T&M 18,908  18,908 
Fixed Price 6,500  6,500 
Other  1,167 1,167 
Total Advanced Technology Services
 25,408 1,167 26,575 
Total revenue$13,205 $33,749 $1,167 $48,121 

 Three Months Ended April 4, 2021
Topic 606 Revenue
 Point-in-TimeOver TimeLease RevenueTotal Revenue
Wafer Services$10,019 $ $ $10,019 
Advanced Technology Services
T&M 10,792  10,792 
Fixed Price 26,123  26,123 
Other  1,167 1,167 
Total Advanced Technology Services
 36,915 1,167 38,082 
Total revenue$10,019 $36,915 $1,167 $48,101 
12

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
The following table discloses revenue by country as determined based on customer address:
Three Months Ended
April 3, 2022April 4, 2021
United States$42,359 $43,621 
United Kingdom1,781 2,086 
Canada1,670 1,609 
All others2,311 785 
$48,121 $48,101 
Deferred Contract Costs
We recognized amortization of deferred contract costs in our condensed consolidated statements of operations totaling $195 and $551 for the three months ended April 3, 2022 and April 4, 2021, respectively.
Contract Assets
Contract assets are $26,207 and $16,303 at April 3, 2022 and January 2, 2022, respectively, and are included in accounts receivable, net in our condensed consolidated balance sheets. The contract assets balance at April 3, 2022 includes the impact from the new wafer services contract described above, in which we recorded revenue and contract assets of $8,230 for in-process wafers.
Contract Liabilities
The contract liabilities and other significant components of deferred revenue are as follows:
 April 3, 2022January 2, 2022
Contract
Liabilities
Deferred
Lease Revenue
Total
Deferred Revenue
Contract
Liabilities
Deferred
Lease Revenue
Total
Deferred Revenue
Current$18,606 $4,667 $23,273 $16,141 $4,667 $20,808 
Long-term72,833 10,111 82,944 76,816 11,278 88,094 
Total$91,439 $14,778 $106,217 $92,957 $15,945 $108,902 
The decrease in contract liabilities from January 2, 2022 to April 3, 2022 was primarily the result of completion of specific performance obligations for our customers. Approximately 3% of our total contract liabilities at January 2, 2022 were recognized in revenue in the first three months of 2022. Approximately 15% of our total contract liabilities at January 3, 2021 were recognized in revenue in the first three months of 2021.
Remaining Performance Obligations
As of April 3, 2022, we had approximately $89,903 of transaction price allocated to remaining performance obligations that are unsatisfied (or partially satisfied) on contracts with an original expected duration of one year or more, which are primarily related to Advanced Technology Services contracts. We expect to recognize those remaining performance obligations as follows:
Within one year$17,070 
From one to two years17,992 
From two to three years10,968 
After three years43,873 
Total$89,903 
We do not disclose the value of remaining performance obligations for contracts with an original expected duration of one year or less. Further, we do not adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
13

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
Note 5 Balance Sheet Information
Certain significant amounts included in our condensed consolidated balance sheets consist of the following:
April 3, 2022January 2, 2022
Accounts receivable, net:
Trade accounts receivable$21,491 $23,022 
Unbilled revenue (contract assets)26,207 16,303 
Other receivables 56 
Total accounts receivable, net$47,698 $39,381 
April 3, 2022January 2, 2022
Inventories:
Raw materials$3,865 $3,340 
Work-in-process1,390 7,339 
Supplies and spare parts7,858 6,821 
Total inventories—current13,113 17,500 
Supplies and spare parts classified as other assets2,252 2,388 
Total inventories$15,365 $19,888 
April 3, 2022January 2, 2022
Prepaid expenses and other current assets:
Prepaid expenses$3,116 $1,759 
Deferred contract costs2,785 1,579 
Prepaid inventory516 516 
Total prepaid assets and other current assets$6,417 $3,854 

April 3, 2022January 2, 2022
Property and equipment, net:
Land$5,396 $5,396 
Buildings and improvements87,396 87,156 
Machinery and equipment173,924 143,105 
Fixed assets not yet in service11,059 29,229 
Total property and equipment, at cost277,775 264,886 
Less: Accumulated depreciation(90,411)(84,411)
Total property and equipment, net$187,364 $180,475 
Depreciation expense was $6,031 and $6,047 for the three months ended April 3, 2022 and April 4, 2021, respectively. In December 2021, we completed an assessment of the useful lives of our machinery and equipment and adjusted the estimated useful life from seven years to ten years to better reflect the estimated periods during which the assets will remain in service. This change in accounting estimate was effective beginning in December of 2021 on a prospective basis for all machinery and equipment acquired after March 1, 2017, the date in which we became an independent company as part of a divestiture from Cypress. The effect of this change in estimate resulted in a $445 decrease in depreciation expense for the three months ended April 3, 2022.
Intangible assets consist of purchased software and license costs from our acquisition of the business in 2017. Additionally, we have entered into license agreements for third-party software and licensed technology, which also comprise intangible assets. During the three months ended April 3, 2022, we acquired third-party software and licensed technology of
14

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
$2,028, which will be amortized over a weighted average estimated life of 8.8 years. Intangible assets are summarized as follows:
April 3, 2022January 2, 2022
Intangible assets, net:
Software and licensed technology$8,653 $6,625 
Customer list 1,500 
Total intangible assets, at cost8,653 8,125 
Less: Accumulated amortization(3,159)(4,234)
Total intangible assets, net$5,494 $3,891 
For the three months ended April 3, 2022 and April 4, 2021, amortization of the customer list intangible asset charged to operations was $0 and $88, respectively, and amortization of software and licensed technology was $425 and $347, respectively.
Remaining estimated aggregate annual amortization expense is as follows for the years ending:
Amortization
Expense
Remainder of 2022$1,403 
20231,429 
2024754 
2025601 
2026433 
Thereafter874 
Total$5,494 
April 3, 2022January 2, 2022
Other assets:
Supplies and spare parts$2,252 $2,388 
Deferred contract costs862 1,760 
Other assets1,297 687 
Total other assets$4,411 $4,835 
April 3, 2022January 2, 2022
Accrued expenses:
Accrued compensation$5,596 $4,557 
Patents and licensed technology obligations2,000  
Accrued commissions241 189 
Accrued fixed asset expenditures1,252 861 
Accrued royalties2,586 1,854 
Capital lease obligations1,597 1,192 
Other accrued expenses10,810 8,830 
Total accrued expenses$24,082 $17,483 
15

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
Note 6 Debt
The components of debt outstanding are as follows:
April 3, 2022January 2, 2022
Revolver$35,615 $26,223 
Financing (by VIE)37,593 37,850 
Unamortized debt issuance costs (1)(4,451)(4,624)
Total long-term debt, including current maturities68,757 59,449 
Less: Current portion of long-term debt(1,030)(1,021)
Long-term debt, excluding current portion and unamortized debt issuance costs$67,727 $58,428 
__________________
(1)Unamortized debt issuance costs as of April 3, 2022 included $1,379 for the Revolver (as defined below) and $3,072 for the Financing (as defined below). Unamortized debt issuance costs as of January 2, 2022 included $1,471 for the Revolver and $3,153 for the Financing (by VIE).
Revolver
The outstanding balance of our amended and restated revolving credit agreement with Wells Fargo Bank, National Association (the “Revolver”) was $35,615 as of April 3, 2022 at an interest rate of 2.9%. Our remaining availability under the Revolver was $29,101 as of April 3, 2022. However, we must maintain availability under the Revolver of at least $15,000 in order to not have to comply with the leverage ratio and fixed charge coverage ratio financial covenants contained in the Revolver with respect to the fiscal quarters ending on or prior to July 2, 2023. As of April 3, 2022, our unused remaining availability was $29,101 and we were in compliance with applicable financial covenants of the Revolver and expect to be in compliance with applicable financial covenants over the next twelve months.
Maturities
As of April 3, 2022, the Revolver is due in December 2025. The Financing is repayable in equal monthly installments of $194 over 10 years, with the balance payable at the maturity date of October 6, 2030. Future principal payments of our Revolver and consolidated VIE’s Financing, excluding unamortized debt issuance costs, are as follows:
Remainder of 2022$767 
20231,060 
20241,094 
202536,749 
20261,177 
Thereafter32,361 
Total$73,208 
Note 7 Income Taxes
The effective tax rates for the three months ended April 3, 2022 and April 4, 2021 differ from the statutory tax rates due to state income taxes, permanent tax differences, and changes in our deferred tax asset valuation allowance. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. The effective income tax rate for the three months ended April 3, 2022 was 1.2%, compared to 17.2% for the three months ended April 4, 2021. The income tax benefit rate applied to our pre-tax loss was lower for the three months ended April 3, 2022 and April 4, 2021 than our statutory tax rate of 21% primarily due to a deferred tax asset valuation allowances.
Management regularly evaluates the future realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strategies, and future expectations of income. Based upon this analysis, a valuation allowance of $12,918 was recorded as of April 3, 2022 to reduce our net deferred tax assets to the amount that is more likely than not to be realized. The valuation allowance at January 2, 2022 was $9,819.
16

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
No liability has been recorded for uncertain tax positions. We would accrue, if applicable, income tax related interest and penalties in income tax expense in our condensed consolidated statement of operations. There were no interest and penalties incurred during the three months ended April 3, 2022 and April 4, 2021.
Note 8 Shareholders’ Equity
Classes of Equity Units
Until our corporate conversion on April 14, 2021, we had three classes of limited liability interests, designated as Class A preferred units, Class B preferred units, and common units (collectively, the “Unit” or “Units”). The Class A preferred units were authorized specifically for issuance upon exercise of warrants, of which none were issued and outstanding. Class A preferred units and common units were non-voting classes, and Class B preferred units are a voting class.
Conversion
On April 14, 2021, we completed a corporate conversion. Pursuant to the certificate of incorporation effected in connection with the corporate conversion, our authorized capital stock consists of 200,000,000 shares of voting common stock, par value $0.01 per share, and 80,000,000 shares of preferred stock, par value $0.01 per share. As of April 3, 2022, giving effect to the corporate conversion and our IPO, 39,904,690 shares of common stock were issued and outstanding. No shares of our preferred stock were outstanding. On April 21, 2021, our common stock began trading on the Nasdaq Stock Market under the symbol “SKYT”.
Upon the corporate conversion, all Units were converted into an aggregate of 31,055,743 shares of our common stock. Each Class B preferred unit and common unit was converted into a number of shares of common stock determined by dividing (1) the amount that would have been distributed in respect of each such Unit in accordance with CMI Acquisition, LLC’s operating agreement if all assets of CMI Acquisition, LLC had been sold for a cash amount equal to the pre-offering value of CMI Acquisition, LLC, as such value is determined by CMI Acquisition, LLC’s board of managers based on the fair value of each share of common stock (net of any underwriting discounts, fees and expenses), by (2) such per share fair value. The amounts that would have been distributed for this purpose in respect of Class B preferred units and common units were determined by reference to the terms of CMI Acquisition, LLC’s operating agreement, with different values applicable to each series of Units. Before any distributions were made on common units, distributions were made on each Class B preferred unit in an amount equal to the sum of an 8% “preferred return” on the deemed original equity value of each such Class B preferred unit (accrued daily since the date of issuance of each such Class B preferred unit) plus the amount of such original equity value. Only after those distributions were made, the common units, together with the Class B preferred units, shared in the remainder of the distribution on a pro rata basis. For purposes of the corporate conversion, pre-offering “per share fair value” was determined taking into account an assumed initial public offering price of common stock. Accordingly, the outstanding Units were converted as follows:
holders of Class B preferred units received an aggregate of 27,995,400 shares of common stock; and
holders of common units received an aggregate of shares 3,060,343 of common stock.
Initial Public Offering
On April 23, 2021, we completed our initial public offering (“IPO”) and issued 8,004,000 shares of common stock, including the underwriter’s exercise of their right to purchase additional shares, at an initial offering price to the public of $14.00 per share. We received net proceeds from the IPO of approximately $100,162 after deducting underwriting discounts and commissions of $7,844 and offering costs of approximately $4,050.
Note 9 Share-Based Compensation
2021 Equity Incentive Plan
In connection with our IPO, we adopted the 2021 Equity Incentive Plan (the “2021 Equity Plan”). The 2021 Equity Plan became effective upon the consummation of the IPO. As of April 3, 2022, the 2021 Equity Plan provides for the issuance of up to 5,150,000 shares of common stock to eligible individuals in the form of options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, other equity-based awards and cash bonus awards. The share reserve of the 2021 Equity Plan will be increased effective the first business day of each calendar year by an amount equal to the lesser of: (i) 150,000 shares of common stock; (ii) three percent (3%) of the shares of common stock
17

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
outstanding on the final day of the immediately preceding calendar year; and (iii) such smaller number of shares of common stock as determined by the compensation committee.
Stock Options
During the three months ended April 3, 2022, we granted 549,000 stock options, respectively, which vest ratably on each of the first, second, third, and fourth anniversaries of the grant date and expire 10 years from the grant date. No stock options were granted during the three months ended April 4, 2021. Share-based compensation expense related to stock option awards was $423 and $0 for the three months ended April 3, 2022 and April 4, 2021, respectively. Actual forfeitures are recognized as they occur.
The fair value of each stock option is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions noted in the following table. The risk-free interest rate used in the option valuation model was based on yields available on the grant dates for U.S. Treasury Strips with maturity consistent with the expected life assumption. The expected term of the option represents the period of time that options granted are expected to be outstanding and is based on the Securities and Exchange Commission ("SEC") Simplified Method (midpoint of average vesting time and contractual term). Expected volatility is based on an average of the historical, daily volatility of a peer group of similar companies over a period consistent with the expected life assumption ending on the grant date. We assumed no dividend yield in the valuation of the options granted as we have never declared or paid dividends on our common stock and currently intend to retain earnings for use in operations.

Three Months Ended
April 3, 2022
Expected volatility:47.2%
Expected term (in years):
6.25
Risk-free interest rate:1.9%
The following table summarizes our stock option activity during the three months ended April 3, 2022:
Number of Stock Options
(in thousands)
Weighted Average
Exercise Price Per Share
Aggregate Intrinsic Value
(in thousands)
Weighted-Average Remaining Contractual Life
Balance outstanding as of January 2, 2022986 $14.29 
Granted549 $11.24 
Exercised $ 
Forfeited or canceled(99)$13.25 
Balance outstanding as of April 3, 20221,436 $13.20 $ 7.4 years
Balance vested and exercisable as of April 3, 202222 $14.00 $ 0.2 years
The weighted average grant-date fair value of options granted in the three months ended April 3, 2022 was $5.37. As of April 3, 2022, total unrecognized compensation cost related to stock options was $5,782 and is expected to be recognized over a weighted average period of approximately 3.5 years.
Restricted Common Stock Units
During the three months ended April 3, 2022, we granted 10,000 restricted common stock units to newly appointed directors which vest in full on May 31, 2022. During the three months ended April 3, 2022, we granted 263,000 restricted common stock units, which vest ratably on each of the first, second and third anniversaries of the grant date. The common stock relating to these restricted common stock units is issued upon vesting. The grantee has no rights as a common stockholder until the common stock related to the restricted common stock units have been issued. No restricted common stock units were granted during the three months ended April 4, 2021.
Share-based compensation expense related to restricted common stock unit awards was $2,377 and $0 for the three months ended April 3, 2022 and April 4, 2021, respectively. Actual forfeitures are recognized as they occur. As of April 3, 2022, total unrecognized compensation cost related to restricted common stock units was $7,511 and is expected to be
18

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
recognized over a weighted average period of approximately 1.8 years. The estimated fair value of restricted common stock units is based on the grant date closing price of our common stock for time-based vesting awards. No restricted stock units vested during the three months ended April 3, 2022 and April 4, 2021.
The following table summarizes our restricted common stock unit activity during the three months ended April 3, 2022:
Number of Restricted Common Stock Units
(in thousands)
Weighted Average Grant Date Fair Value Per Share
Balance outstanding as of January 2, 20221,745 $8.34 
Granted273 $11.24 
Vested $ 
Forfeited or canceled(40)$16.57 
Balance outstanding as of April 3, 20221,978 $8.52 
2021 Employee Stock Purchase Plan
In connection with our IPO, we also adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). A maximum of 707,000 shares of our common stock has been reserved for issuance under the 2021 ESPP. Under the 2021 ESPP, eligible employees may purchase our common stock through payroll deductions at a discount not to exceed 15% of the lower of the fair market values of our common stock as of the beginning or end of each offering period, which may range from 6 to 27 months. Payroll deductions are limited to 15% of the employee’s eligible compensation and a maximum of 2,500 shares of our common stock may be purchased by an employee each offering period. The initial six-month offering period commenced on September 1, 2021 and 69,000 shares were purchased under the 2021 ESPP during the three months ended April 3, 2022. As of April 3, 2022 and January 2, 2022, $351 and $937, respectively, was withheld on behalf of employees for future purchases under the 2021 ESPP and recorded as accrued compensation. Share-based compensation expense related to the 2021 ESPP was $207 for the three months ended April 3, 2022. Actual forfeitures are recognized as they occur. As of April 3, 2022, total unrecognized compensation cost related to the 2021 ESPP was $381 and will be recognized on a straight-line basis over the six-month offering period.
The fair value of the 2021 ESPP is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions noted in the following table. The risk-free interest rate used in the option valuation model was based on yields available on the grant dates for U.S. Treasury Strips with maturity consistent with the expected life assumption. Expected volatility is based on an average of the historical, daily volatility of a peer group of similar companies over a period consistent with the expected life assumption ending on the grant date. We assumed no dividend yield in the valuation of the options granted as we have never declared or paid dividends on our common stock and currently intend to retain earnings for use in operations.
Three Months Ended
April 3, 2022
Expected volatility:47.2%
Expected term (in years):0.50
Risk-free interest rate:0.60%
Weighted average grant-date fair value per share
$3.20
Share-Based Compensation Expense Allocation
Share-based compensation expense was allocated in the condensed consolidated statements of operations as follows:
19

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
Three Months Ended
April 3, 2022April 4, 2021
Cost of revenue$1,040 $ 
Research and development207  
Selling, general and administrative expenses1,760 5 
$3,007 $5 
Note 10 Fair Value Measurements
The FASB defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine fair value, we use a fair value hierarchy categorized into three levels based on inputs used. Generally, the three levels are as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Level 3 inputs are used in the valuation of our contingent consideration obligation. The change in level 3 assets measured at fair value on a recurring basis is summarized as follows:
Three Months Ended
April 3, 2022April 4, 2021
Beginning balance$816 $10,900 
Payments (3,356)
Change in fair value 56 
Ending balance$816 $7,600 
We expect to pay our contingent consideration liability in the second quarter of 2022 at the amount currently recorded on our condensed consolidated balance sheet.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying values of accounts receivable, accounts payable, accrued liabilities, and other financial working capital items approximate fair values at April 3, 2022 and January 2, 2022 due to the short maturity of these items. The carrying values of our borrowings under our Revolver and Financing approximate their fair values due to the frequency of the floating interest rate resets on these borrowings. The fair value of the Revolver and Financing were determined based on inputs that are classified as Level 2 in the fair value hierarchy.
Our non-financial assets such as property and equipment and intangible assets are recorded at fair value upon acquisition and are remeasured at fair value only if an impairment charge is recognized. As of April 3, 2022 and January 2, 2022, we did not have any assets or liabilities measured at fair value on a non-recurring basis.
Note 11 Commitments and Contingencies
Litigation
From time to time, we are involved in legal proceedings and subject to claims arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the resolution of these ordinary-course matters will not have a material adverse effect on our business, operating results, financial condition or cash flows. Even if any particular litigation is resolved in a manner that is favorable to our interests, such litigation can have a negative impact on us because of defense and settlement costs, diversion of management resources from our business and other factors.
20

SKYWATER TECHNOLOGY, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited in thousands, except share, unit and per share and unit data)
Capital Expenditures
We have various contracts outstanding with third parties which primarily relate to the completion of a building expansion project to increase manufacturing capacity at our Minnesota facility. We have approximately $10 million of contractual commitments outstanding as of April 3, 2022 that we expect to be paid in 2022, through cash on hand and operating cash flows.
Note 12 Major Customers and Concentration Risk
The following customers accounted for 10% or more of revenue for the three months ended April 3, 2022 and April 4, 2021:
Three Months Ended
April 3, 2022April 4, 2021
Customer A16 %37 %
Customer B40 %19 %
Customer C*