10-Q

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: July 4, 2021

¨ 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.    ¨  Yes    x  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	x	Smaller reporting company	x
		Emerging growth company	x

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 August 2, 2021, the number of shares of common stock, $0.01 par value, outstanding was 39,059,743.

SkyWater Technology, Inc.

TABLE OF CONTENTS

Forward-Looking Statements		3
Explanatory Note		5
PART I. FINANCIAL INFORMATION		6
Item 1.	Condensed Financial Statements (unaudited)	6
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Shareholders’ Equity	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II. OTHER INFORMATION		42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43

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 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;

•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 COVID-19 pandemic on our business, results of operations and financial condition;

•the impact of the COVID-19 pandemic on the global economy;

•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 IPO prospectus filed with the Securities and Exchange Commission on April 22, 2021 and in this Quarterly Report on Form 10-Q.

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.

3

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.

4

EXPLANATORY NOTE

On April 14, 2021, CMI Acquisition, LLC, a Delaware limited liability company, converted into SkyWater Technology, Inc., a Delaware corporation, as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Corporate Conversion and Initial Public Offering.” We refer to this transaction herein as the “corporate conversion.” As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to the “Company,” “SkyWater,” “we,” “us,” or “our” refer to CMI Acquisition, LLC, a Delaware limited liability company, and its subsidiaries for periods beginning as of March 1, 2017 and ending immediately before the completion of our corporate conversion and to SkyWater Technology, Inc., a Delaware corporation and its subsidiaries for periods beginning with the completion of our corporate conversion and thereafter. In the corporate conversion, 18,000,000 Class B preferred units of CMI Acquisition, LLC converted into 27,995,400 shares of common stock of SkyWater Technology, Inc. using an approximate one-to-1.56 conversion ratio and 2,105,936 common units of CMI Acquisition, LLC converted into 3,060,343 shares of common stock of SkyWater Technology, Inc. using an approximate one-to-1.45 conversion ratio.

5

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

	July 4, 2021		January 3, 2021
	(in thousands, except share and unit data)
Assets
Current assets:
Cash and cash equivalents	$	64,603	$	7,436
Accounts receivable, net	33,396		29,995
Inventories	29,167		27,169
Prepaid expenses and other current assets	3,597		11,972
Total current assets	130,763		76,572
Property and equipment, net	179,441		178,078
Intangible assets, net	4,029		4,561
Other assets	4,518		3,998
Total assets	$	318,751	$	263,209
Liabilities and Members’ Equity (Deficit)
Current liabilities:
Current portion of long-term debt	$	1,006	$	2,772
Accounts payable	15,880		16,792
Accrued expenses	20,733		25,496
Income taxes payable	539		1,710
Current portion of contingent consideration	3,900		8,904
Deferred revenue - current	24,919		30,653
Total current liabilities	66,977		86,327
Long-term liabilities:
Long-term debt, less current portion and unamortized debt issuance costs	65,348		69,828
Contingent consideration, less current portion	—		1,996
Long-term incentive plan	3,648		3,185
Deferred revenue - long-term	84,438		95,399
Deferred income tax liability, net	2,866		8,058
Total long-term liabilities	156,300		178,466
Total liabilities	223,277		264,793
Commitments and contingencies
Shareholders’ equity (deficit):
Preferred stock, $0.01 par value per share (80,000,000 and zero shares authorized; zero issued and outstanding)	—		—
Common stock, $0.01 par value per share (200,000,000 and zero shares authorized; 39,059,743 and zero shares issued and outstanding)	391		—
Additional paid-in capital	110,082		—
Class A preferred units (zero and 2,000,000 units authorized; zero issued and outstanding)	—		—
Class B preferred units (zero and 18,000,000 units authorized; zero and 18,000,000 units issued and outstanding)	—		—
Common units (zero and 5,000,000 units authorized; zero and 3,057,344 units issued; zero and 2,107,452 outstanding)	—		3,767
Accumulated deficit	(13,573)		(3,783)
Total shareholders’ equity (deficit), SkyWater Technology, Inc.	96,900		(16)
Non-controlling interests	(1,426)		(1,568)
Total shareholders’ equity (deficit)	95,474		(1,584)
Total liabilities and shareholders’ equity	$	318,751	$	263,209

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

6

SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Statements of Operations

(Unaudited) 

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
	(in thousands, except share, unit and per share and unit data)
Net sales	$	41,189	$	30,759	$	89,290	$	67,663
Cost of sales	39,377		25,297		78,312		55,777
Gross profit	1,812		5,462		10,978		11,886
Research and development	3,339		786		5,266		1,448
Selling, general and administrative expenses	15,415		6,921		24,018		12,554
Change in fair value of contingent consideration	(942)		712		(886)		1,553
Operating loss	(16,000)		(2,957)		(17,420)		(3,669)
Other income (expense):
Paycheck Protection Program loan forgiveness	6,453		—		6,453		—
Change in fair value of warrant liability	—		(99)		—		(240)
Interest expense	(912)		(1,322)		(1,970)		(2,784)
Total other expense	5,541		(1,421)		4,483		(3,024)
Loss before income taxes	(10,459)		(4,378)		(12,937)		(6,693)
Income tax (benefit) expense	(4,237)		915		(4,662)		(28)
Net loss	(6,222)		(5,293)		(8,275)		(6,665)
Less: net income attributable to non-controlling interests	757		—		1,515		—
Net loss attributable to SkyWater Technology, Inc.	$	(6,979)	$	(5,293)	$	(9,790)	$	(6,665)
Net loss per share attributable to common shareholders, basic and diluted:	$	(0.20)			$	(0.54)
Net loss per unit attributable to Class B preferred unitholders, basic and diluted:			$	(0.29)			$	(0.37)
Weighted average shares used in computing net loss per common share, basic and diluted:	34,707,758				18,884,051
Weighted average units used in computing net loss per Class B preferred unit, basic and diluted:			18,000,000				18,000,000

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

7

SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Statements of Shareholders’ Equity

For the Three Months Ended July 4, 2021 and June 28, 2020

(dollars, units and shares in thousands)

(Unaudited)

	Class A Units			Class B Units			Common Units			Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity (Deficit),  SkyWater Technology, Inc.		Non-controlling Interests		Total Shareholders’ Equity (Deficit)
	Units	Amount		Units	Amount		Units	Amount		Shares	Amount		Shares	Amount
Balance at March 29, 2020	—	$	—	18,000	$	—	—	$	7,821	—	$	—	—	$	—	$	—	$	15,462	$	23,283	$	—	$	23,283
Net loss	—	—		—	—		—	—		—	—		—	—		—		(5,293)		(5,293)		—		(5,293)
Balance at June 28, 2020	—	$	—	18,000	$	—	—	$	7,821	—	$	—	—	$	—	$	—	$	10,169	$	17,990	$	—	$	17,990
Balance at April 4, 2021	—	$	—	18,000	$	—	2,106	$	3,772	—	$	—	—	$	—	$	—	$	(6,594)	$	(2,822)	$	(1,791)	$	(4,613)
Corporate conversion	—	—		(18,000)	—		(2,106)	(3,772)		—	—		31,056	311		3,461		—		—		—		—
Issuance of common stock sold in initial public offering, net of issuance costs	—	—		—	—		—	—		—	—		8,004	80		100,082		—		100,162		—		100,162
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		6,539		—		6,539		—		6,539
Distribution to VIE member	—	—		—	—		—	—		—	—		—	—		—		—		—		(392)		(392)
Net income (loss)	—	—		—	—		—	—		—	—		—	—		—		(6,979)		(6,979)		757		(6,222)
Balance at July 4, 2021	—	$	—	—	$	—	—	$	—	—	$	—	39,060	$	391	$	110,082	$	(13,573)	$	96,900	$	(1,426)	$	95,474

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

8

SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Statements of Shareholders’ Equity

For the Six Months Ended July 4, 2021 and June 28, 2020

(dollars, units and shares in thousands)

(Unaudited)

	Class A Units			Class B Units			Common Units			Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity (Deficit),  SkyWater Technology, Inc.		Non-controlling Interests		Total Shareholders’ Equity (Deficit)
	Units	Amount		Units	Amount		Units	Amount		Shares	Amount		Shares	Amount
Balance at December 29, 2019	—	$	—	18,000	$	—	—	$	7,333	—	$	—	—	$	—	$	—	$	16,834	$	24,167	$	—	$	24,167
Unit-based compensation	—	—		—	—		—	488		—	—		—	—		—		—		488		—		488
Net loss	—	—		—	—		—	—		—	—		—	—		—		(6,665)		(6,665)		—		(6,665)
Balance at June 28, 2020	—	$	—	18,000	$	—	—	$	7,821	—	$	—	—	$	—	$	—	$	10,169	$	17,990	$	—	$	17,990
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)	—		—	—		—	—		—		—		—		—		—
Corporate conversion	—	—		(18,000)	—		(2,106)	(3,772)		—	—		31,056	311		3,461		—		—		—		—
Issuance of common stock sold in initial public offering, net of issuance costs	—	—		—	—		—	—		—	—		8,004	80		100,082		—		100,162		—		100,162
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		6,539		—		6,539		—		6,539
Distribution to VIE member	—	—		—	—		—	—		—	—		—	—		—		—		—		(1,373)		(1,373)
Net income (loss)	—	—		—	—		—	—		—	—		—	—		—		(9,790)		(9,790)		1,515		(8,275)
Balance at July 4, 2021	—	$	—	—	$	—	—	$	—	—	$	—	39,060	$	391	$	110,082	$	(13,573)	$	96,900	$	(1,426)	$	95,474

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

9

SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	July 4, 2021		June 28, 2020
	(in thousands)
Cash flows from operating activities:
Net loss	$	(8,275)	$	(6,665)
Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities:
Depreciation and amortization	13,336		8,639
Gain on Paycheck Protection Program loan forgiveness	(6,453)		—
Foundry services obligation	—		(3,732)
Gain on sale of property and equipment	—		(1,117)
Amortization of debt issuance costs included in interest expense	320		781
Long-term incentive and stock-based compensation	7,008		865
Change in fair value of warrant liability	—		240
Change in fair value of contingent consideration	(886)		1,553
Cash paid for contingent consideration in excess of initial valuation	(6,114)		—
Deferred income taxes	(5,191)		(1,190)
Non-cash revenue related to customer equipment	(2,481)		—
Changes in operating assets and liabilities:
Accounts receivable	(3,401)		43,854
Inventories	(1,998)		(1,778)
Prepaid expenses and other assets	5,672		(5,390)
Accounts payable	(610)		(529)
Accrued expenses	(3,872)		9,841
Deferred revenue	(16,695)		56,777
Income tax payable and receivable	(1,171)		886
Net cash (used in) provided by operating activities	(30,811)		103,035
Cash flows from investing activities:
Purchase of software and licenses	(357)		—
Proceeds from sale of property and equipment	—		1,650
Purchases of property and equipment	(12,898)		(38,409)
Net cash used in investing activities	(13,255)		(36,759)
Cash flows from financing activities:
Proceeds from issuance of common stock pursuant to the initial public offering, net of underwriting discounts and commissions	104,212		—
Cash paid for offering costs	(1,205)		—
Proceeds from Paycheck Protection Program loan	—		6,453
Repayment of term loan	—		(2,574)
Net repayment on line of credit	—		(9,759)
Net proceeds from Revolver	382		—
Repayment of Financing	(495)		—
Cash paid for capital leases	(288)		—
Cash paid for debt issuance costs	—		(100)
Cash paid for contingent consideration	—		(5,253)
Distributions to VIE member	(1,373)		—
Net cash provided by (used in) financing activities	101,233		(11,233)
Net change in cash and cash equivalents	57,167		55,043
Cash and cash equivalents - beginning of period	7,436		4,605
Cash and cash equivalents - end of period	$	64,603	$	59,648

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

10

SKYWATER TECHNOLOGY, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	July 4, 2021		June 28, 2020
	(in thousands)
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	1,635	$	2,144
Income taxes	1,701		90
Noncash investing and financing activity:
Capital expenditures incurred, not yet paid	$	11,444	$	13,808
Common stock issuance costs incurred, not yet paid	662		—
Equipment acquired through capital lease obligations	2,603		—

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

11

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, 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.

Shares of common stock began trading on the Nasdaq Stock Market on April 21, 2021 under the symbol “SKYT”. The shares were registered under the Securities Act on a registration statement on Form S-1, which was declared effective by the Securities and Exchange Commission (“SEC”) on April 20, 2021.

We expect to use the proceeds from the IPO for working capital and other general corporate purposes, which may include financing our growth and funding capital expenditures. On July 26, 2021, we announced that our Board of Directors approved $56 million in strategic capital investments for expanding manufacturing capacity and technology capabilities at our Minnesota facility. The majority of this investment is targeted to expand capacity and capabilities at our Minnesota fab which is expected to increase our output.

Note 2 Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements as of July 4, 2021, and for the three and six months ended July 4, 2021 and June 28, 2020, 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 3, 2021. 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 a fair statement of our financial position as of July 4, 2021, our results of operations and shareholders' equity for the three and six months ended July 4, 2021 and June 28, 2020, and our cash flows for the six months ended July 4, 2021 and June 28, 2020.

12

SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

The results of operations for the three and six months ended July 4, 2021 are not necessarily indicative of the results of operations to be expected for the year ending January 2, 2022, 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 and cash flows are for the three and six months ended July 4, 2021 and June 28, 2020. The three and six months ended July 4, 2021 and June 28, 2020 each consisted of 13 and 26 weeks, respectively.

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 sales 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 and the availability and effectiveness of vaccines.

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 and six months ended July 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. For the three and six months ended June 28, 2020, we did not apply the two-class method since only Class B preferred units were outstanding and were thus the lowest level of equity subordination. 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 and six months ended July 4, 2021 were retrospectively adjusted to reflect the conversion akin to a split-like situation.

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

Our historical balance sheets reflect the number of common units outstanding prior to the corporate conversion and no adjustment was made.

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 the net loss by the weighted-average number of shares and potentially dilutive securities outstanding for the year determined using the treasury-stock method. Because we reported a net loss for the three and six months ended July 4, 2021 and June 28, 2020, the number of shares used to calculate diluted net loss per common share is the same as the number of units 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 July 4, 2021, there were restricted stock units and stock options totaling 3,966,000 excluded from the computation of diluted weighted-average because their inclusion would have been anti-dilutive. There were no restricted stock units and stock options outstanding at June 28, 2020.

The following table sets forth the computation of basic and diluted net loss per common share for the three and six months ended July 4, 2021:

	Three Months Ended July 4, 2021		Six Months Ended July 4, 2021
	(in thousands, except per share data)
Numerator:
Net loss attributable to SkyWater Technology, Inc.	$	(6,979)	$	(9,790)
Undistributed preferred return to Class B preferred unitholders	(39)		(398)
Net loss attributable to common shareholders	$	(7,018)	$	(10,188)
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)	34,708		18,884
Net loss per common share, basic and diluted	$	(0.20)	$	(0.54)

__________________

(1)The weighted-average common shares outstanding for the three and six months ended July 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. The April 14, 2021 corporate conversion of 18,000,000 Class B preferred units into 27,995,400 shares of common stock is reflected prospectively on the date of conversion for the three and six months ended July 4, 2021.

The following table sets forth the computation of basic and diluted net loss per unit attributable to Class B preferred unitholders for the three and six months ended June 28, 2020. There were no common units outstanding during the period.

	Three Months Ended June 28, 2020		Six Months Ended June 28, 2020
	(in thousands, except per unit data)
Numerator:
Net loss attributable to SkyWater Technology, Inc.	$	(5,293)	$	(6,665)
Denominator:
Weighted-average Class B preferred units outstanding, basic and diluted	18,000		18,000
Net loss per unit attributable to Class B preferred unitholders, basic and diluted	$	(0.29)	$	(0.37)

Center for NeoVation

Through our subsidiary, SkyWater Florida, we entered into several agreements on January 25, 2021 with the government of Osceola County, Florida (“Osceola”) and ICAMR, Inc., a Florida non-profit corporation (“BRIDG”), to operate the Center for NeoVation (“CfN”), a semiconductor research and development and manufacturing facility. These agreements included a technology and economic development agreement (the “TED Agreement”), a lease agreement (the “CfN Lease”) and a semiconductor line operation agreement (the “LOA”). Under the TED Agreement and the CfN Lease, we agreed to operate the CfN, including certain semiconductor manufacturing equipment, and an advanced water treatment facility currently owned by

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

Osceola for a period of at least 23 years for a lease payment of $1.00 per year. During the period of the CfN Lease, we are responsible for taxes, utilities, insurance, maintenance and operation of those assets. We may terminate the TED Agreement and CfN Lease with 18 months’ notice. In the event we terminate the agreements, we would be required to continue to operate the center until we find a replacement operator or the 18 months expire and may be required to make a payment of up to $15,000 to Osceola.

We are accounting for the CfN Lease as a lease. Given the nominal minimum lease payments required under the lease ($23.00), no assets were initially recognized on our condensed consolidated balance sheet. As we perform under the agreements, expenses we incur and any revenue we are able to generate from the operations of CfN will be included in our condensed consolidated statements of operations as they are incurred or earned. If we are able to reach and maintain full capacity in the CfN for a minimum period of 20 years, Osceola will convey the land, buildings and equipment to us for no consideration at the end of the CfN Lease. At such time that we believe the conveyance of the land, buildings and equipment is reasonably assured, we will record those assets on our condensed consolidated balance sheet at fair value and record a corresponding deferred gain. We will subsequently depreciate the assets over their remaining economic life and recognize an equivalent amount of income from the amortization of the deferred gain.

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 consolidated financial statements. There were no material changes to our significant accounting policies and estimates during the three and six months ended July 4, 2021.

Contingent Consideration

Royalties of $2,758 and $2,714 were paid during the three months ended July 4, 2021 and June 28, 2020, respectively, and $6,114 and $5,253 during the six months ended July 4, 2021 and June 28, 2020, respectively. During the three months ended July 4, 2021 and June 28, 2020, we recorded royalty expense of $(942) and $712, respectively, to reflect the change in fair value of the contingent consideration obligation in our condensed consolidated statements of operations. During the six months ended July 4, 2021 and June 28, 2020, we recorded royalty expense of $(886) and $1,553, respectively, to reflect the change in fair value of the contingent consideration obligation in our condensed consolidated statements of operations.

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-2, Leases (“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 intend to adopt the new standard on January 3, 2022 for our year ending January 1, 2023. However if we lose our emerging growth 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 842 will have a material impact on our condensed consolidated financial statements.

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

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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

BRIDG

In connection with the TED Agreement and CfN Lease as discussed in Note 2 – Basis of Presentation and Principles of Consolidation–Center for NeoVation, we executed the LOA pursuant to which we agreed to provide engineering and test wafer services as requested by BRIDG based on our standard hourly and activity-based rates, which we are accounting for as revenue over time as we perform. In addition, we agreed to provide BRIDG access to the cleanrooms in the facilities that are subject to the TED Agreement and the CfN Lease for an access fee of approximately $14,000. We are accounting for the access fee as a stand-ready obligation with revenue recognized ratably over 38 months, the life of BRIDG’s third-party contracts for which we are a subcontractor.

Disaggregated Revenue

The following table discloses revenue by service type and the timing of recognition of revenue for transfer of goods and services to customers (point-in-time or over time):

	Three Months Ended July 4, 2021
	Topic 606 Revenue
	Point-in-Time		Over Time		Lease Revenue		Total Revenue
Wafer Services	$	14,312	$	—	$	—	$	14,312
Advanced Technology Services
T&M	—		10,692		—		10,692
Fixed Price	—		15,018		—		15,018
Other	—		—		1,167		1,167
Total Advanced Technology Services	—		25,710		1,167		26,877
Total revenue	$	14,312	$	25,710	$	1,167	$	41,189

	Three Months Ended June 28, 2020
	Topic 606 Revenue
	Point-in-Time		Over Time		Revenue recognized from foundry services obligation		Total Revenue
Wafer Services	$	10,885	$	—	$	11	$	10,896
Advanced Technology Services
T&M	—		12,548		—		12,548
Fixed Price	—		7,315		—		7,315
Total Advanced Technology Services	—		19,863		—		19,863
Total revenue	$	10,885	$	19,863	$	11	$	30,759

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

	Six Months Ended July 4, 2021
	Topic 606 Revenue
	Point-in-Time		Over Time		Lease Revenue		Total Revenue
Wafer Services	$	24,331	$	—	$	—	$	24,331
Advanced Technology Services
T&M	—		21,484		—		21,484
Fixed Price	—		41,141		—		41,141
Other	—		—		2,334		2,334
Total Advanced Technology Services	—		62,625		2,334		64,959
Total revenue	$	24,331	$	62,625	$	2,334	$	89,290

	Six Months Ended June 28, 2020
	Topic 606 Revenue
	Point-in-Time		Over Time		Revenue recognized from foundry services obligation		Total Revenue
Wafer Services	$	23,815	$	—	$	399	$	24,214
Advanced Technology Services
T&M	—		31,954		—		31,954
Fixed Price	—		11,495		—		11,495
Other	—		—		—		—
Total Advanced Technology Services	—		43,449		—		43,449
Total revenue	$	23,815	$	43,449	$	399	$	67,663

The following table discloses revenue by country as determined based on customer address:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
United States	$	36,612	$	26,327	$	80,233	$	57,797
Canada	1,547		2,048		3,156		5,084
All others	3,030		2,384		5,901		4,782
	$	41,189	$	30,759	$	89,290	$	67,663

Deferred Contract Costs

We recognized amortization of deferred contract costs in our condensed consolidated statements of operations totaling $426 and $0 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $977 and $0 for the six months ended July 4, 2021 and June 28, 2020, respectively.

Contract Assets

Contract assets are $15,969 and $8,147 at July 4, 2021 and January 3, 2021, respectively, and are included in accounts receivable, net in our condensed consolidated balance sheets.

Contract Liabilities

The contract liabilities and other significant components of deferred revenue are as follows:

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

	July 4, 2021						January 3, 2021
	Contract Liabilities		Deferred Lease Revenue		Total Deferred Revenue		Contract Liabilities		Deferred Lease Revenue		Total Deferred Revenue
Current	$	20,252	$	4,667	$	24,919	$	25,986	$	4,667	$	30,653
Long-term	70,827		13,611		84,438		79,455		15,944		95,399
Total	$	91,079	$	18,278	$	109,357	$	105,441	$	20,611	$	126,052

The decrease in contract liabilities from January 3, 2021 to July 4, 2021 was primarily the result of completion of specific performance obligations for our customers. Approximately 20% of our total contract liabilities at January 3, 2021 were recognized in revenue in the first six months of 2021.

Remaining Performance Obligations

As of July 4, 2021, we had approximately $85,019 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	$	15,196
From one to two years	12,695
From two to three years	12,695
After three years	44,433
Total	$	85,019

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.

Note 5 Balance Sheet Information

Certain significant amounts included in our condensed consolidated balance sheets consist of the following:

Accounts receivable, net:

	July 4, 2021		January 3, 2021
Trade accounts receivable	$	17,197	$	21,357
Unbilled revenue (contract assets)	15,969		8,147
Note receivable	—		230
Employee note receivable	223		222
Other receivables	7		39
Total accounts receivable, net	$	33,396	$	29,995

On December 31, 2020, we entered into a note receivable with a key employee for $222. The note may be repaid any time prior to its maturity date of March 31, 2022 and bears interest at 6%.

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

Inventories:

	July 4, 2021		January 3, 2021
Raw materials	$	2,585	$	1,463
Work-in-process	20,874		19,719
Supplies and spare parts	5,708		5,987
Total inventories—current	29,167		27,169
Supplies and spare parts classified as other assets	2,350		1,949
Total inventories	$	31,517	$	29,118

Prepaid expenses and other current assets:

	July 4, 2021		January 3, 2021
Prepaid expenses	$	1,839	$	2,761
Equipment purchased for customers (1)	—		5,343
Deferred contract costs	1,724		1,647
Deferred offering costs	—		2,183
Other	34		38
Total prepaid assets and other current assets	$	3,597	$	11,972

__________________

(1)We acquired equipment for a customer that we installed and calibrated in our facility. Prior to the customer obtaining ownership and control of the equipment, we recorded costs incurred to date within prepaid expenses and other current assets.

Property and equipment, net:

	July 4, 2021		January 3, 2021
Land	$	5,396	$	5,396
Buildings and improvements	86,092		85,197
Machinery and equipment	135,824		124,130
Fixed assets not yet in service	23,823		22,602
Total property and equipment, at cost	251,135		237,325
Less: Accumulated depreciation	(71,694)		(59,247)
Total property and equipment, net	$	179,441	$	178,078

Depreciation expense was $6,400 and $4,130 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $12,447 and $8,261 for the six months ended July 4, 2021 and June 28, 2020, respectively.

Intangible assets, net:

Intangible assets consist of purchased software and license costs and a customer list from our acquisition of the business in 2017. Intangible assets are summarized as follows:

	July 4, 2021		January 3, 2021
Customer list	$	1,500	$	1,500
Software and licenses	5,766		5,408
Total intangible assets, at cost	7,266		6,908
Less: Accumulated amortization	(3,237)		(2,347)
Total intangible assets, net	$	4,029	$	4,561

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

For the three months ended July 4, 2021 and June 28, 2020, amortization of the customer list intangible asset charged to operations was $88 and amortization of software and licenses was $366 and $99, respectively. For the six months ended July 4, 2021 and June 28, 2020, amortization of the customer list intangible asset charged to operations was $176 and amortization of software and licenses was $713 and $202, respectively.

Remaining estimated aggregate annual amortization expense is as follows for the years ending:

	Amortization Expense
Remainder of 2021	$	842
2022	1,140
2023	800
2024	445
2025	445
Thereafter	357
Total	$	4,029

Other assets:

	July 4, 2021		January 3, 2021
Supplies and spare parts	$	2,350	$	1,949
Deferred contract costs	1,699		2,049
Other assets	469		—
Total other assets	$	4,518	$	3,998

Accrued expenses:

	July 4, 2021		January 3, 2021
Accrued compensation	$	5,624	$	6,315
Accrued commissions	1,586		5,183
Accrued fixed asset expenditures	2,468		6,337
Accrued royalties	1,525		2,145
Accrued customer payable	1,455		783
Other accrued expenses	8,075		4,733
Total accrued expenses	$	20,733	$	25,496

Note 6 Debt

The components of debt outstanding are as follows:

	July 4, 2021		January 3, 2021
Revolver	$	32,686	$	32,303
Financing (by VIE)	38,343		38,839
Paycheck Protection Program loan	—		6,453
Unamortized debt issuance costs (1)	(4,675)		(4,995)
Total long-term debt, including current maturities	66,354		72,600
Less: Current portion of long-term debt	(1,006)		(2,772)
Long-term debt, excluding current portion and unamortized debt issuance costs	$	65,348	$	69,828

__________________

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

(1)Unamortized debt issuance costs as of July 4, 2021 included $1,383 for the Revolver (as defined below) and $3,292 for the Financing (as defined below). Unamortized debt issuance costs as of January 3, 2021 included $1,537 for the Revolver and $3,458 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 $32,686 as of July 4, 2021 at an interest rate of 3%. Our remaining availability under the Revolver was $28,900 as of July 4, 2021.

Financing

On September 30, 2020, the VIE which we consolidate entered into a loan agreement for $39,000 (the “Financing”) at a fixed interest rate of 3.44%. The outstanding balance of the Financing was $38,343 as of July 4, 2021.

Paycheck Protection Program Loan

On April 18, 2020, we received proceeds of $6,453 pursuant to a loan from TCF Bank under the Paycheck Protection Program (the “PPP” Loan). Under the terms of the loan, recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the program. During the three months ended July 4, 2021, the PPP Loan was fully forgiven and $6,453 was recorded as other income in the condensed consolidated statement of operations.

Covenants

As of July 4, 2021, we were not in compliance with the fixed charge coverage ratio and the leverage ratio related to the Revolver. On August 1, 2021, we entered into an amendment to the Revolver that, effective as of August 1, 2021, amended the Revolver to eliminate the requirement for us to comply with those financial covenants as of July 4, 2021. Under the Revolver, as amended, we were in full compliance with the Revolver covenant requirements as of July 4, 2021. Our VIE was in compliance with the financial covenants related to the Financing.

Maturities

As of July 4, 2021, 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 2021	$	497
2022	1,024
2023	1,060
2024	1,094
2025	33,820
Thereafter	33,534
Total	$	71,029

Historically, we have addressed our liquidity needs (including funds required to make scheduled principal and interest payments, refinance debt and fund working capital, and planned capital expenditures) with operating cash flows, borrowings under credit facilities, and proceeds from the term loans. Our ability to execute our operating strategy is dependent on our ability to continue to access capital through our Revolver, public markets and other sources of financing and if we were unable to obtain financing on reasonable terms, this may impact our ability to execute our operating strategy.

Note 7 Income Taxes

The effective tax rates for the three and six months ended July 4, 2021 and June 28, 2020 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

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

of resolution. The effective income tax rate for the three and six months ended July 4, 2021 was 40.5% and 36.0%, compared to (20.9)% and 0.4% for the three and six months ended June 28, 2020. The income tax benefit rate applied to our pre-tax loss was higher for the three and six months ended July 4, 2021 than our statutory tax rate of 21% primarily due to the gain on the PPP Loan forgiveness, which is exempt from federal income taxation. For the three and six months ended June 28, 2020, the effective income tax rate applied to our pre-tax loss was lower than our statutory tax rate of 21% due to a deferred tax asset valuation allowance, partially offset by excess tax benefits related to stock-based compensation expense.

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 $1,401 was recorded as of July 4, 2021 to reduce our net deferred tax assets to the amount that is more likely than not to be realized. The valuation allowance at January 3, 2021 was $1,609.

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 and six months ended July 4, 2021 and June 28, 2020.

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”). There were 2,000,000 Class A preferred units authorized specifically for issuance upon exercise of warrants, of which none were issued and outstanding at January 3, 2021. There were 18,000,000 Class B preferred units authorized, of which 18,000,000 were issued and outstanding at January 3, 2021. There were 5,000,000 common units authorized, of which 3,057,344 were issued as of January 3, 2021 and 2,107,452 were outstanding as of January 3, 2021. 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 July 4, 2021, giving effect to the corporate conversion and our IPO, 39,059,743 shares of common stock were issued and outstanding. No shares of our preferred stock were outstanding. As discussed in Note 1 – Nature of Business, 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.

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

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 and no further awards will be issued under the previous Employee Unit Option Plan. No awards remained outstanding from the Employee Unit Option Plan as of July 4, 2021 and at the corporate conversion date. Under the 2021 Equity Plan, 5,000,000 shares of common stock are available for issuance 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 Plan will be increased effective the first business day of each calendar year commencing in 2022 by an amount equal to the least of: (i) 150,000 shares of common stock; (ii) three percent (3%) of the shares of common stock 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

On April 21, 2021, we granted 342,783 stock options which vest in full on the first anniversary of the grant date and expire 15 months from the grant date; and granted 744,374 stock options 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. Share-based compensation expense related to stock option awards was $439 and $0 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $444 and $488 for the six months ended July 4, 2021 and June 28, 2020, 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 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.

	Six Months Ended July 4, 2021
Expected volatility:	46.0%
Expected term (in years):	1.13 - 6.25
Risk-free interest rate:	0.09% - 1.19%

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

The following table summarizes our stock option activity during the six months ended July 4, 2021:

	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 3, 2021	—	$	—
Granted	1,087	$	14.00
Exercised	—	$	—
Forfeited or canceled	(54)	$	14.00
Balance outstanding as of July 4, 2021	1,033	$	14.00	$	13,003	7.1 years
Balance vested and exercisable as of July 4, 2021	—	$	—	$	—	0.0 years

The weighted average grant-date fair value of options granted in the six months ended July 4, 2021 was $5.29. As of July 4, 2021, total unrecognized compensation cost related to stock options was $5,057 and is expected to be recognized over a weighted average period of approximately 3.4 years.

Restricted Common Stock

On November 1, 2020, we granted 4,672 restricted common units to two directors. Upon the corporate conversion, such restricted common units were converted into 6,788 shares of restricted common stock which continue to vest over a one-year period.

Restricted Common Stock Units

On April 21, 2021, we granted 440,836 restricted common stock units to eligible employees and directors which vest in full on the first anniversary of the grant date and granted 204,910 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.

On December 18, 2020, we granted restricted unit units to acquire up to 1,602,588 common units to certain key employees. Upon the corporate conversion, such restricted unit units were converted into 2,328,880 shares of restricted common stock units which continue to vest in equal amounts over a three-year period, but only in the event we complete an IPO of our stock or experience a change of control event. 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. With our IPO completed on April 23, 2021, these restricted common stock units began vesting in accordance with their other terms.

Share-based compensation expense related to restricted common stock unit awards was $6,100 and $0 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $6,100 and $0 for the six months ended July 4, 2021 and June 28, 2020, respectively. Actual forfeitures are recognized as they occur. As of July 4, 2021, total unrecognized compensation cost related to restricted common stock units was $11,360 and is expected to be recognized over a weighted average period of approximately 1.5 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.

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

The following table summarizes our restricted common stock unit activity during the six months ended July 4, 2021:

	Number of Restricted Common Stock Units (in thousands)	Weighted Average Grant Date Fair Value Per Share
Balance outstanding as of January 3, 2021	2,329	$	3.87
Granted	646	$	14.00
Vested	—	$	—
Forfeited or canceled	(42)	$	14.00
Balance outstanding as of July 4, 2021	2,933	$	5.95

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 700,000 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. As of July 4, 2021, the initial offering period had not commenced.

Share-Based Compensation Expense Allocation

Share-based compensation expense was allocated in the consolidated statements of operations as follows:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Cost of sales	$	704	$	—	$	704	$	—
Research and development	1,480		—		1,480		—
Selling, general and administrative expenses	4,355		—		4,360		488
	$	6,539	$	—	$	6,544	$	488

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:

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

	Contingent Consideration
Balance at January 3, 2021	$	10,900
Payments	(6,114)
Change in fair value	(886)
Balance at July 4, 2021	$	3,900

The change in fair value is reflected in our condensed consolidated statements of operations.

The fair value of our contingent consideration liability at July 4, 2021 and January 3, 2021 was determined using forecasted receipts of projected future revenues of Advanced Technology Services. The royalty is paid out quarterly through 2021. The forecasted future cash flows were discounted reflecting the risk in estimating future revenues. We expect total future cash payments to be between $3,900 and $4,000.

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 July 4, 2021 and January 3, 2021 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 July 4, 2021 and January 3, 2021, we did not have any assets or liabilities measured at fair value on a non-recurring basis.

Note 11 Commitments and Contingencies

Foundry Services Agreement

Under a Foundry Services Agreement (“FSA”) which expired in June 2020, we were required to provide semiconductor wafers to our main customer over a 40-month period, beginning March 1, 2017, at contractual rates. As part of the FSA, the customer guaranteed certain levels of purchase orders for wafers. Sales of Wafer Services to this customer were $10,932 and $23,477 for the three and six months ended June 28, 2020, respectively.

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.

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 $15 million of contractual commitments outstanding as of July 4, 2021 that we expect to be paid in 2021, through cash on hand and operating cash flows. As of July 4, 2021, the Company had executed a capital lease that had not yet commenced. The capital lease was executed to replace the existing nitrogen plant, which is owned by the vendor, with a larger and more modern nitrogen generator. The capital lease has a lease term of 15 years for total payments of $14 million and is expected to commence during the second half of 2021.

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

Note 12 Major Customers and Concentration Risk

The following customers accounted for 10% or more of sales for the three and six months ended July 4, 2021 and June 28, 2020:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Customer A	19	%	12	%	28	%	*
Customer B	28	%	34	%	23	%	34	%
Customer C	15	%	*		11	%	*
Customer D	*		19	%	*		24	%
	62	%	65	%	62	%	58	%

__________________

* Represents less than 10% of net sales.

We had four major customers that accounted for 26%, 19%, 10% and 10% of outstanding trade accounts receivable as of July 4, 2021 and four major customers that accounted for 30%, 20%, 19% and 18% of outstanding trade accounts receivable as of January 3, 2021. The loss of a major customer could adversely affect our operating results and financial condition.

Note 13 Related Party Transactions

Professional Services

Oxbow Industries, LLC (“Oxbow”), our principal owner, provided management and financial consulting services to us for an annual management fee not to exceed $700. We incurred management fees to Oxbow of $55 and $160 of during the three months ended July 4, 2021 and June 28, 2020, respectively, and $215 and $320 for the six months ended July 4, 2021 and June 28, 2020, respectively, which have been expensed and included in general and administrative expenses in our condensed consolidated statements of operations.

Members of our board of directors provided legal and professional services to us. We incurred fees of $1 and $46 for the three months ended July 4, 2021 and June 28, 2020, and $117 and $108 for the six months ended July 4, 2021 and June 28, 2020, which have been expensed and included in general and administrative expenses in our condensed consolidated statements of operations. 

Sale-Leaseback Transaction

On September 29, 2020, we entered into an agreement to sell the land and building representing our primary operating location in Bloomington, Minnesota to an entity (“Oxbow Realty”) controlled by our principal owner. We subsequently entered into an agreement to lease the land and building from Oxbow Realty for initial payments of $394 per month over 20 years. The monthly payments are subject to a 2% increase each year during the term of the lease. Future minimum lease commitments to Oxbow Realty as of July 4, 2021 were as follows (such amounts are eliminated from our condensed consolidated financial statements due to the consolidation of Oxbow Realty, see Note 14 – Variable Interest Entities):

Remainder of 2021	$	2,378
2022	4,836
2023	4,932
2024	5,031
2025	5,132
Thereafter	89,350
Total lease payments	111,659
Less: imputed interest	(84,476)
Total	$	27,183

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SKYWATER TECHNOLOGY, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited in thousands, except share, unit and per share and unit data)

Note 14 Variable Interest Entities

Oxbow Realty was established for the purpose of holding real estate and facilitating real estate transactions. This included facilitating the purchase of our land and building with proceeds from a bank loan and managing the leaseback of the land and building to us. We determined that Oxbow Realty meets the definition of a VIE under Topic 810, Consolidation, because it lacks sufficient equity to finance its activities. We concluded that we are the primary beneficiary of Oxbow Realty as we have the power to direct operation and maintenance decisions during the lease term, which would most significantly affect the VIE’s economic performance. As the primary beneficiary, we consolidate the assets, liabilities and results of operations of Oxbow Realty, eliminate any transactions between us and Oxbow Realty, and record a non-controlling interest for the economic interest in Oxbow Realty not owned by us because the owners of our common stock do not legally have rights or obligations to those profits or losses. In addition, the assets of Oxbow Realty can only be used to settle its liabilities, and the creditors of Oxbow Realty do not have recourse to the general credit of SkyWater.

The following table shows the carrying amounts of assets and liabilities of Oxbow Realty that are consolidated by us as of July 4, 2021 and January 3, 2021. The assets and liabilities are presented prior to consolidation, and thus a portion of these assets and liabilities are eliminated in consolidation.

	July 4, 2021		January 3, 2021
Cash and cash equivalents	$	495	$	860
Prepaid expenses	—		99
Finance receivable	37,301		36,930
Other assets	100		—
Total assets	$37,896		$37,889
Accounts payable	$	720	$	672
Accrued expenses	319		9
Debt	38,283		38,776
Total liabilities	$39,322		$39,457

 The following table shows the revenue and expenses of Oxbow Realty that are consolidated by us for the three and six months ended July 4, 2021, which we began consolidating on September 29, 2020. We have included these amounts, net of eliminations, in the corresponding tables in the notes to our condensed consolidated financial statements.

	Three Months Ended July 4, 2021		Six Months Ended July 4, 2021
Revenue	$	1,159	$	2,504
General and administrative expenses	66		318
Interest expense	336		671
Total expenses	402		989
Net income	$	757	$	1,515

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes, included in our prospectus filed with the Securities and Exchange Commission on April 22, 2021 (“Prospectus”) in connection with our initial public offering (“IPO”) of our common stock. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those discussed or implied in our forward-looking statements due to a number of factors, including those described in the sections entitled “Risk Factors” and “Forward-Looking Statements” herein and elsewhere in our Prospectus.

We refer to the three-month periods ended July 4, 2021 and June 28, 2020 as the second quarter of 2021 and second quarter of 2020, respectively. Each of these three-month periods includes 13 weeks. We refer to the six-month periods ended July 4, 2021 and June 28, 2020 as the first six months of 2021 and the first six months of 2020, respectively. Each of these six-month periods includes 26 weeks. All percentage amounts and ratios presented in this management’s discussion and analysis were calculated using the underlying data in thousands. Unless otherwise indicated, all changes identified for the current period results represent comparisons to results for the prior corresponding period.

For purposes of this section, the terms “we,” “us,” “our,” and “SkyWater” refer to CMI Acquisition, LLC and its subsidiaries collectively before the corporate conversion discussed below and to SkyWater Technology, Inc. and its subsidiaries collectively after the corporate conversion.

Corporate Conversion and Initial Public Offering

On April 14, 2021, in connection with our IPO, CMI Acquisition, LLC filed a certificate of conversion, whereby CMI Acquisition, LLC effected a corporate conversion from a Delaware limited liability company to a Delaware corporation and changed its name to SkyWater Technology, Inc. As part of the corporate conversion, holders of Class B preferred units and common units of CMI Acquisition, LLC received shares of our common stock for each unit held immediately prior to the corporate conversion using an approximate one-to-1.56 conversion ratio for Class B preferred units and one-to-1.45 conversion ratio for common units. In connection with this corporate conversion, we filed a certificate of incorporation. Pursuant to our certificate of incorporation, we are authorized to issue up to 200,000,000 shares of common stock, $0.01 par value per share, and 80,000,000 shares of preferred stock, $0.01 par value per share.

On April 23, 2021, we completed our 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 $100.2 million, after deducting underwriting discounts and commissions and offering costs of approximately $11.9 million.

Shares of our common stock began trading on the Nasdaq Stock Market on April 21, 2021 under the symbol “SKYT”. The shares were registered under the Securities Act on a registration statement on Form S-1, which was declared effective by the Securities and Exchange Commission (“SEC”) on April 20, 2021.

Overview

We are 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 (“IP”) 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 differentiated technology development services, we support customers with volume production of ICs for high-growth markets through our Wafer Services.

The combination of semiconductor development and manufacturing services we provide our customers is not available to them from a conventional fab. In addition, our status as a publicly-traded, U.S.- based, U.S. investor-owned pure-play technology foundry with DMEA Category 1A accreditation from the U.S. Department of Defense, or DoD, is expected to position us well to provide distinct, competitive advantages to our customers. These advantages include the benefits of enhanced IP security and easy access to a U.S. domestic supply chain. In September 2019, we entered into a contract with the

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DoD to receive up to $170 million to expand and upgrade our manufacturing capabilities, specifically to build next-generation rad-hard wafer solutions for the aerospace and defense sector which will have significant benefits for other commercial markets. Our fab expansion supporting this project began operations in October 2020. In January 2021, we entered into an agreement with Osceola County, Florida to take over operation of the Center for NeoVation facility in Kissimmee, Florida to accelerate pure-play advanced packaging services for differentiated technologies.

We primarily focus on serving diversified, high-growth end users in numerous vertical markets, including (1) advanced computation, (2) aerospace and defense, or A&D, (3) automotive and transportation, (4) bio-health, (5) consumer and (6) industrial/internet of things, or IoT. By housing both development and manufacturing in a single operation, we rapidly and efficiently transition newly-developed processes to high-yielding volume production, eliminating the time it would otherwise take to transfer production to a third-party fab. Through our Advanced Technology Services, we specialize in co-creating with our customers advanced solutions that directly serve our end markets, such as superconducting ICs for quantum computing, integrated photonics, carbon nanotube technologies, or CNTs, microelectromechanical systems, or MEMS, technologies for biomedical and imaging applications, and advanced packaging. Our Wafer Services include the manufacture of silicon-based analog and mixed-signal ICs for our end markets. Our focus on the differentiated analog and mixed-signal and complementary metal-oxide-semiconductor, or CMOS, markets supports long product life-cycles and requirements that value performance over cost-efficiencies, and leverages our portfolio IP.

Before we began independent operations, our fab was owned and operated by Cypress Semiconductor Corporation (“Cypress”) as a captive manufacturing facility for 20 years. We have leveraged the Cypress system, manufacturing technology and process development capabilities to advance our product offerings. We became an independent company in March 2017 when we were acquired by Oxbow Industries, LLC, or Oxbow, as part of a divestiture from Cypress. Our multi-year Foundry Service Agreement with Cypress, which ended in June 2020, created a runway for us to operate the foundry at a high utilization rate while continuing to expand and diversify the customer base transferred by Cypress. Cypress was acquired in April 2020 by Infineon Technologies AG (“Infineon”).

Factors and Trends Affecting our Business and Results of Operations

The following trends and uncertainties either affected our financial performance during the first six months of 2021 or are likely to impact our results in the future.

■Macroeconomic and competitive conditions, including cyclicality and consolidation, affecting the semiconductor industry.

■The global economic climate, including the impact on the economy from geopolitical issues and the ongoing COVID-19 pandemic. 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 our employee productivity. As a result of the COVID-19 pandemic, one customer reduced its research and development expenditures with us, and a second customer experienced facility shutdowns which resulted in delays in project milestones, in each case negatively affecting our revenues. Because we have a manufacturing facility, we may be vulnerable to an outbreak of a new coronavirus or other contagious diseases. The effects of such an outbreak could include the temporary shutdown of our facilities, 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 or of the ability of our suppliers to delivery key components on a timely basis could have material adverse effect on our sales and operating results. See “Risk Factors—The effects of the COVID-19 outbreak could adversely affect our business, results of operations, and financial condition” in our Prospectus and our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further information regarding the effects of the COVID-19 pandemic on our business.

■On April 18, 2020, we received proceeds of $6.5 million pursuant to a loan under the Paycheck Protection Program, or PPP, under the terms of the Coronavirus Aid, Relief, and Economic Security Act. PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the program. On June 10, 2021, our PPP loan was forgiven.

■The Creating Helpful Incentives to Produce Semiconductors for America Act, in which the United States has committed to a renewed focus on providing incentives and funding for onshore companies to develop and advance the latest semiconductor technologies, supporting onshore manufacturing capabilities, and on

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strengthening key onshore supply chains. However, the timing of when we may receive funding under this Act is difficult to forecast.

■Our overall level of indebtedness from our revolving credit agreement for up to $65 million, which we refer to as the Revolver, and a $39 million financing from the sale of the land and building representing our headquarters in Minnesota, which we refer to as the Financing, the corresponding interest rates charged to us by our lenders and our ability to access borrowings under the Revolver.

■Identification and pursuit of specific product and geographic market opportunities that we find attractive both within and outside the United States. We will continue to more effectively address these opportunities through research and development and additional sales and marketing resources.

■Material and other cost inflation. We strive for productivity improvements, and we implement increases in selling prices to help mitigate inflation. We expect the current economic environment will result in continuing price volatility for many of our raw materials.

Financial Performance Metrics

Our senior management team regularly reviews certain key financial performance metrics within our business, including:

■Net sales and gross profit; and

■Earnings before interest, taxes, depreciation and amortization, as adjusted, or adjusted EBITDA, which is a financial measure not prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, that excludes certain items that may not be indicative of our core operating results, as well as items that can vary widely across different industries or among companies within the same industry. For information regarding our non-GAAP financial measure, see the section entitled “—Non-GAAP Financial Measure” below.

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Results of Operations

Second Quarter of 2021 Compared to Second Quarter of 2020

The following table summarizes certain financial information relating to our operating results for the second quarter of 2021 and for the second quarter of 2020.

	Second Quarter Ended				Dollar Change		Percentage Change
	July 4, 2021 (1)		June 28, 2020 (1)
	(in thousands)
Consolidated Statement of Operations Data:
Net sales	$	41,189	$	30,759	$	10,430	34	%
Cost of sales	39,377		25,297		14,080		56	%
Gross profit	1,812		5,462		(3,650)		(67)	%
Research and development	3,339		786		2,553		325	%
Selling, general and administrative expenses	15,415		6,921		8,494		123	%
Change in fair value of contingent consideration	(942)		712		(1,654)		(232)	%
Operating loss	(16,000)		(2,957)		(13,043)		(441)	%
Other income (expense):
Paycheck Protection Program loan forgiveness	6,453		—		6,453		N/A
Change in fair value of warrant liability	—		(99)		99		(100)	%
Interest expense	(912)		(1,322)		410		(31)	%
Total other income (expense)	5,541		(1,421)		6,962		490	%
Loss before income taxes	(10,459)		(4,378)		(6,081)		(139)	%
Income tax (benefit) expense	(4,237)		915		(5,152)		(563)	%
Net loss	(6,222)		(5,293)		(929)		(18)	%
Less: net income attributable to non-controlling interests	757		—		757		N/A
Net loss attributable to SkyWater Technology, Inc.	$	(6,979)	$	(5,293)	$	(1,686)	(32)	%
Other Financial Data:
Adjusted EBITDA (2)	$	(804)	$	2,462	$	(3,266)	(133)	%

__________________

(1)The consolidated statements of operations are for the second quarter of 2021 and the second quarter of 2020. The second quarter of 2021 and 2020 each contained 13 weeks.

(2)See “—Non-GAAP Financial Measure” for the definition of adjusted EBITDA and reconciliation to the most directly comparable GAAP measure.

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Six Months Ended July 4, 2021 Compared to Six Months Ended June 28, 2020

The following table summarizes certain financial information relating to our operating results for the six months ended July 4, 2021 and for the six months ended June 28, 2020.

	Six Months Ended				Dollar Change		Percentage Change
	July 4, 2021 (1)		June 28, 2020 (1)
	(in thousands)
Consolidated Statement of Operations Data:
Net sales	$	89,290	$	67,663	$	21,627	32	%
Cost of sales	78,312		55,777		22,535		40	%
Gross profit	10,978		11,886		(908)		(8)	%
Research and development	5,266		1,448		3,818		264	%
Selling, general and administrative expenses	24,018		12,554		11,464		91	%
Change in fair value of contingent consideration	(886)		1,553		(2,439)		(157)	%
Operating loss	(17,420)		(3,669)		(13,751)		(375)	%
Other income (expense):
Paycheck Protection Program loan forgiveness	6,453		—		6,453		N/A
Change in fair value of warrant liability	—		(240)		240		(100)	%
Interest expense	(1,970)		(2,784)		814		(29)	%
Total other income (expense)	4,483		(3,024)		7,507		248	%
Loss before income taxes	(12,937)		(6,693)		(6,244)		(93)	%
Income tax (benefit) expense	(4,662)		(28)		(4,634)		(16,550)	%
Net loss	(8,275)		(6,665)		(1,610)		(24)	%
Less: net income attributable to non-controlling interests	1,515		—		1,515		N/A
Net loss attributable to SkyWater Technology, Inc.	$	(9,790)	$	(6,665)	$	(3,125)	(47)	%
Other Financial Data:
Adjusted EBITDA (2)	$	4,825	$	7,814	$	(2,989)	(38)	%

__________________

(1)The consolidated statements of operations are for the first six months of 2021 and the first six months of 2020. The first six months of 2021 and 2020 each contained 26 weeks.

(2)See “—Non-GAAP Financial Measure” for the definition of adjusted EBITDA and reconciliation to the most directly comparable GAAP measure.

Net sales

Net sales increased $10.4 million, or 34%, to $41.2 million for the second quarter of 2021, from $30.8 million for the second quarter of 2020. Net sales increased $21.6 million, or 32%, to $89.3 million for the six months ended July 4, 2021, from $67.7 million for the six months ended June 28, 2020. The increases were driven by continued momentum in sales of our Advanced Technology Services, primarily in the aerospace and defense industry.

The following table shows net sales by services type for the second quarters of 2021 and 2020 and first six months of 2021 and 2020:

	Second Quarter Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
	(in thousands)
Wafer Services	$	14,312	$	10,896	$	24,331	$	24,214
Advanced Technology Services	26,877		19,863		64,959		43,449
Total	$	41,189	$	30,759	$	89,290	$	67,663

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The Wafer Services sales increase for the second quarter of 2021 reflects the rebound from 2020 levels, driven primarily by demand in the IoT and automotive industries. The Advanced Technology Services sales increases during the second quarter of 2021 and first six months of 2021 were driven by continued program expansion with existing customers and new program additions. Additionally, the second quarter and first six months of 2021 included $2.3 million and $15.4 million of sales recognized in the first quarter related to services we provide to qualify customer funded tool technologies as our customers invest in our capabilities to expand our technology platforms.

Gross profit

Gross profit decreased $3.7 million, or 67%, to $1.8 million for the second quarter of 2021, from $5.5 million for the second quarter of 2020. Gross profit decreased $0.9 million, or 8%, to $11.0 million for the first six months of 2021, from $11.9 million for the first six months of 2020. The decreases were due to increased cost of sales. The cost of sales increases were driven by increased labor costs as we ramp up our Minnesota and Florida facilities, increased wafer output which typically has a lower margin than Advanced Technology Services, and investments we are making for long-term growth to build out our rad-hard and advanced packaging capabilities. The labor market for skilled manufacturing remains tight as the United States restarts the economy after the COVID-19 pandemic and we have increased our average starting wage in our fabs to attract the best talent in the market. The cost of sales increases for the second quarter and first six months of 2021 also reflect the additional depreciation expense related to our foundry expansion in Minnesota.

Research and development

Research and development costs increased to $3.3 million for the second quarter of 2021, from $0.8 million for the second quarter of 2020. The increase of $2.6 million, or 325%, was attributable to increased equity-based compensation expense of $1.5 million; increased personnel expense of $0.6 million from our continued investment in internal personnel and external engineering support; and increased equipment, parts and supplies expense of $0.4 million. Research and development costs increased to $5.3 million for the first six months of 2021, from $1.4 million for the first six months of 2020. The increase of $3.8 million, or 264%, was attributable to increased equity-based compensation expense of $1.5 million; increased personnel expense of $1.2 million; and increased equipment, parts and supplies expense of $0.8 million.

Selling, general and administrative expenses

Selling, general and administrative expenses increased to $15.4 million for the second quarter of 2021, from $6.9 million for the second quarter of 2020. The increase of $8.5 million, or 123%, was attributable to increased equity-based compensation expense of $4.4 million; corporate conversion and IPO related costs of $1.5 million, which includes bonus awards granted to employees upon the completion of the IPO; increased personnel expense of $1.1 million due to the increase in headcount due to public company requirements and build out of strategic sales and business leadership in the first and second quarter of 2021; increased insurance expense of $1.1 million; and executive transition expense of $0.4 million.

Selling, general and administrative expenses increased to $24.0 million for the first six months of 2021, from $12.6 million for the first six months of 2020. The increase of $11.5 million, or 91%, was attributable to increased equity-based compensation expense of $3.9 million; increased personnel expense of $2.0 million due to the increase in headcount due to public company requirements and build out of strategic sales and business leadership in the first six months of 2021; increased insurance expense of $1.7 million; corporate conversion and IPO related costs of $1.5 million, which includes bonus awards granted to employees upon the completion of the IPO; increased information technology expense of $0.8 million; increased commission expenses of $0.5 million due to increased net sales; and executive transition expense of $0.4 million.

Change in fair value of contingent consideration

Change in fair value of contingent consideration was $(0.9) million for the second quarter of 2021, compared to $0.7 million for the second quarter of 2020. Change in fair value of contingent consideration was $(0.9) million for the first six months of 2021, compared to $1.6 million for the first six months of 2020. We expect the revaluation of future estimated earn-out payments to Infineon and the corresponding change in fair value of the liability to remain at a lower level as we approach the end of the out-of-market royalty payments to Infineon for Advanced Technology Services sales.

Paycheck Protection Program Loan Forgiveness

On April 18, 2020, we received proceeds of $6.5 million pursuant to a loan from TCF Bank under the Paycheck Protection Program (the “PPP” Loan). Under the terms of the loan, recipients can apply for and be granted forgiveness for all or

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a portion of the loan granted under the program. During the second quarter of 2021, the PPP Loan was fully forgiven and $6.5 million was recorded as other income in the condensed consolidated statement of operations.

Change in fair value of warrant liability

Change in fair value of warrant liability was an expense of $0.1 million and $0.2 million for the second quarter and first six months of 2020. We had no similar expense during 2021 as the related warrants were repurchased in December 2020.

Interest expense

Interest expense decreased to $0.9 million for the second quarter of 2021, from $1.3 million for the second quarter of 2020. Interest expense decreased to $2.0 million for the first six months of 2021, from $2.8 million for the first six months of 2020. The decreases in interest expense were a result of lower interest rates on our Revolver and the Financing during the first six months of 2021 compared to the interest rates charged on our previous line of credit and term loan during the comparable prior year periods.

Income tax benefit

The income tax benefit increased to $4.2 million for the second quarter of 2021, from an expense of $0.9 million for the second quarter of 2020. The income tax benefit increased to $4.7 million for the first six months of 2021, from a benefit of $28,000 for the first six months of 2020. The effective income tax rate for the second quarter and first six months of 2021 was a benefit of 40.5% and 36.0%, compared to a benefit (expense) of (20.9)% and 0.4% for the second quarter and first six months of 2020. The income tax benefit rate applied to our pre-tax loss was higher for the second quarter and first six months of 2021 than our statutory tax rate of 21% primarily due to the gain on the PPP Loan forgiveness, which is exempt from federal income taxation. For the three and six months ended June 28, 2020, the effective income tax rate applied to our pre-tax loss was lower than our statutory tax rate of 21% due to a deferred tax asset valuation allowance, partially offset by excess tax benefits related to stock-based compensation expense.

Net income attributable to non-controlling interests

Net income attributable to non-controlling interests reflects the net income of the variable interest entity, or VIE, that we consolidate, representing the economic interest in the profits and losses of Oxbow Realty that the owners of our shareholders’ equity do not legally have rights or obligations to. We began consolidating Oxbow Realty in the fourth quarter of 2020 and therefore have no similar presentation for the first and second quarters of 2020.

Adjusted EBITDA

Adjusted EBITDA decreased $3.3 million, or (133)%, to $(0.8) million for the second quarter of 2021 from $2.5 million for the second quarter of 2020. Adjusted EBITDA decreased $3.0 million, or 38%, to $4.8 million for the first six months of 2021 from $7.8 million for the first six months of 2020. The decrease in adjusted EBITDA during the second quarter and first six months of 2021 primarily reflects decreased gross profit due to increased labor and infrastructure costs as we continue to scale our business to meet the demands of our customers and the requirements of being a public company, offset by a shift in mix to more profitable Advanced Technology Services sales. For a discussion of adjusted EBITDA as well as a reconciliation to the most directly comparable U.S. GAAP measure, see the section below entitled “—Non-GAAP Financial Measure.”

Liquidity and Capital Resources

General

We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations and other commitments, with cash flows from operations and other sources of funding. Our current working capital needs relate mainly to the expansion of our operations, payment of amounts due under our contingent consideration liability, lease obligations and the normal operation of our business. Our ability to meet these working capital needs and grow our business will depend on many factors, including our future working capital needs, the evolution of our operating cash flows and our ability to secure additional sources of financing.

We had $64.1 million in cash and cash equivalents, not including cash held by a variable interest entity that we consolidate, and availability under our Revolver of $28.9 million as of July 4, 2021. We believe our operating cash flows, together with our cash on hand, cash received from the completion of our IPO on April 23, 2021 and current availability under

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the Revolver will be sufficient to meet our working capital and capital expenditure requirements for a period of at least 12 months. We may, however, need additional cash resources due to changed business conditions or other developments, including significant acquisitions, strategic capital investments and competitive pressures. We expect our capital expenditures and working capital requirements to continue to increase in the immediate future, as we seek to expand our business. To the extent that our current resources, including our ability to generate operating cash flows, 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. If the needed financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in new products and technologies, discontinue further expansion of our business, or scale back our existing operations, which could have an adverse impact on our business and financial prospects.

Initial Public Offering

On April 23, 2021, we completed our 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 $100.2 million, after deducting underwriting discounts and commissions and offering costs of approximately $11.9 million.

Capital Expenditures

On July 26, 2021, we announced that our Board of Directors approved $56 million in strategic capital investments for expanding manufacturing capacity and technology capabilities at our Minnesota facility. The majority of this investment is targeted to expand capacity and capabilities at our Minnesota fab which is expected to increase overall output by at least 40% and to enable accelerated revenue growth. The remainder is focused on expediting our entry into the gallium nitride (GaN) market, a promising technology for electric vehicles, 5G and consumer electronics, among others due to its properties that enable higher charging efficiencies, smaller ship size, and lighter weight for many applications. We believe SkyWater can fill the need for a US-based 200 mm foundry to offer technology services for GaN-based solutions expanding the serviceable market for our Technology as a ServiceSM model.

For the first six months of 2021, we spent approximately $13.3 million on capital expenditures, including purchases of property, equipment and software. The majority of these capital expenditures relate to our foundry expansion in Minnesota, as discussed above, and the development of our advanced packaging capabilities at the Center for NeoVation in Florida. We anticipate our cash on hand, our Revolver and future cash flows from operations will provide the funds needed to meet our customer demand and anticipated capital expenditures in 2021.

We have various contracts outstanding with third parties in connection with the completion of a building expansion project to increase manufacturing capacity at our Minnesota facility. We have approximately $15 million of contractual commitments outstanding as of July 4, 2021 that we expect to be paid in 2021, through cash on hand and operating cash flows.

Contingent Consideration

For the first six months of 2021, we made cash payments of $6.1 million related to our contingent consideration royalty liability. We estimate that we will pay between $3.9 million and $4.0 million on contingent consideration related to this liability in the future. We anticipate our cash on hand and cash flows from operations will provide the funds necessary to settle the contingent consideration royalty liability.

Working Capital

Historically, we have depended on cash flows from operations, cash on hand, funds available under our previous line of credit and term loan, funds from the sale of our land and building in Minnesota, funds from our Revolver, and in the future may depend on additional debt and equity financings, similar to our IPO, to finance our expansion strategy, working capital needs and capital expenditures. We believe that these sources of funds will be adequate to provide cash, as required, to support our strategy, ongoing operations, capital expenditures, lease obligations and working capital for at least the next 12 months. However, we cannot be certain that we will be able to obtain future debt or equity financings adequate for our cash requirements on commercially reasonable terms or at all.

As of July 4, 2021, we had available aggregate undrawn borrowing capacity of approximately $28.9 million under our Revolver. For the periods presented, our use of cash was primarily driven by our investing activities, and specifically by our investments in capital expenditures.

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The following table sets forth general information derived from our statement of cash flows for the first quarter of 2021 and the first quarter of 2020:

	Six Months Ended
	July 4, 2021		June 28, 2020
	(in thousands)
Net cash (used in) provided by operating activities	$	(30,811)	$	103,035
Net cash used in investing activities	$	(13,255)	$	(36,759)
Net cash provided by (used in) financing activities	$	101,233	$	(11,233)

First Six Months of 2021 Compared to First Six Months of 2020

Cash and Cash Equivalents

At July 4, 2021 and January 3, 2021, we had $64.6 million and $7.4 million of cash and cash equivalents, respectively, including cash of $0.5 million and $0.9 million, respectively, held by a variable interest entity that we consolidate.

Operating Activities

Net cash used in operating activities was $30.8 million during the first six months of 2021, a decrease of $133.8 million from $103.0 million of cash provided by operating activities during the first six months of 2020. The decrease in cash provided by operating activities during the first six months of 2021 was driven primarily by a change in our working capital accounts, specifically deferred revenue and accounts receivable. Deferred revenue decreased during the first six months of 2021 as we recognized revenue from customers who funded our building expansion during 2020. Accounts receivable increased during the first six months of 2021 due to the timing of cash collected from customers.

Investing Activities

Capital expenditures are a significant use of our capital resources. These investments are intended to enable sales growth in new and expanding markets, help us meet product demand and increase our manufacturing efficiencies and capacity. During 2020, we had various contracts outstanding with third parties in connection with the construction of a building expansion project to increase manufacturing capacity at our Minnesota fab, a portion of which continues into 2021.

Net cash used in investing activities was $13.3 million during the first six months of 2021, a decrease of $23.5 million from $36.8 million during the first six months of 2020. The decrease in cash used during the first six months of 2021 reflects decreased capital spending on property and equipment as we fully complete our foundry expansion project to increase manufacturing capacity at our Minnesota facility, offset by $0.4 million of capital spending on software.

Financing Activities

Net cash provided by financing activities was $101.2 million during the first six months of 2021, an increase of $112.5 million from net cash used in financing activities of $11.2 million during the first six months of 2020. The increase in net cash provided by financing activities during the first six months of 2021 was driven by the proceeds from the IPO. The increase was partially offset by cash paid for offering costs and distributions to our VIE.

Indebtedness

Off-balance sheet arrangements

As of July 4, 2021, we had no material off-balance sheet arrangements.

Contractual Obligations

There have been no material changes to our contractual obligations as disclosed in our Prospectus.

Sale Leaseback Transaction

On September 29, 2020, we entered into an agreement to sell the land and building representing our primary operating location in Bloomington, Minnesota to Oxbow Realty, LLC, or Oxbow Realty, an entity controlled by our principal owner for

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$39 million, less applicable transaction costs of $1.5 million and transaction services fees paid to Oxbow Realty of $2.0 million and paid a guarantee fee to our principal owner of $2.0 million. We subsequently entered into an agreement to lease the land and building from Oxbow Realty for initial payments of $0.4 million per month over 20 years. The monthly payments are subject to a 2% increase each year during the term of the lease.

Due to our continuing involvement in the property, we are accounting for the transactions as a failed sale leaseback (a financing transaction). Under failed sale leaseback accounting, we are deemed the owner of the property with the proceeds received recorded as a financial obligation.

Revolving Credit Agreement

On December 28, 2020, we entered into an amended and restated revolving credit agreement with Wells Fargo, our Revolver, of up to $65 million that replaced our previous line of credit and term loan. Under the agreement, the facility is available on a revolving basis, subject to availability under a borrowing base consisting of a percentage of eligible accounts receivable, inventory and owned equipment. The Revolver can be repaid and borrowed again at any time without penalty or premium until the maturity date of December 28, 2025. The Revolver is available for issuance of letters of credit to a specified limit of $10 million.

Under the Revolver, we can elect the base rate (greatest of the federal funds rate plus 0.5%, LIBOR for a one-month period plus 1%, or the institution’s prime rate) or LIBOR for a period of one, two, three or six months as selected by us, plus a margin depending on the amount of borrowings outstanding “prime rate.” We will also pay a commitment fee equal to 0.25% to 0.375% of the average commitment not utilized, depending on the amount not utilized. Interest payments are due monthly.

The Revolver includes a financial covenant that requires us to maintain a fixed charge coverage ratio of at least 1.1 to 1.0 on a rolling twelve-month basis. The fixed charge coverage ratio included in our revolving credit agreement is defined as (A) earnings before interest, taxes, depreciation and amortization, or EBITDA, less unfinanced capital expenditures, divided by (B) fixed charges, which are generally defined as cash interest and income taxes, scheduled principal payments on loans and contingent consideration arrangements, and restricted payments such as dividends. EBITDA, as defined, includes adjustments for such items as unusual gains or losses, equity-based compensation and management fees, as well as other adjustments. The Revolver also includes a financial covenant that requires us to maintain a leverage ratio of no greater than 3.5 to 1.0 on a rolling twelve-month basis measured quarterly. On January 2, 2022, the ratio decreases to 3.0 to 1.0 through the remainder of the agreement. The leverage ratio included in our revolving credit agreement is defined as our funded indebtedness as of the measurement date divided by our EBITDA for the twelve-month period as of the measurement date.

The Revolver contains covenants, including restrictions on indebtedness, liens, mergers, consolidations, investments, acquisitions, disposition of assets, and transactions with affiliates. Dividends, redemptions and other payments on equity (restricted payments) are limited to (1) restricted payments to the loan parties, and (2) declaring and making dividend payments or other distributions payable solely in capital stock. Customary events of default (with customary grace periods, notice and cure periods and thresholds) include payment default, breach of representation in any material respect, breach of certain covenants, default to material indebtedness, bankruptcy, ERISA violations, material judgments, change in control and termination or invalidity of guaranty or security documents.

The Revolver is secured by a security interest in substantially all of our accounts receivable, inventory and equipment. In connection with the Revolver, we repaid all outstanding amounts owed under our previous term loan totaling $28.2 million of principal, accrued interest and prepayment penalties. Amounts owed under our previous line of credit totaling $2.8 million of principal and accrued interest were rolled over into the Revolver and our previous line of credit was discontinued. On December 28, 2020, we also repurchased the warrants held by the lender of our term loan for $14 million from our cash and cash equivalents.

As of July 4, 2021, we were not in compliance with the fixed charge coverage ratio and the leverage ratio related to the Revolver. On August 1, 2021, we entered into an amendment to the Revolver that, effective as of August 1, 2021, amended the Revolver to eliminate the requirement for us to comply with those financial covenants as of July 4, 2021. Under the Revolver, as amended, we were in full compliance with the Revolver covenant requirements as of July 4, 2021.

JOBS Act

We qualify as an “emerging growth company” pursuant to the provisions of the JOBS Act. For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being

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required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and shareholder advisory votes on golden parachute compensation.

The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use the extended transition period for complying with new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that comply with such new or revised accounting standards on a non-delayed basis.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based upon our condensed consolidated financial statements. The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates, impacting our reported results of operations and financial condition.

There have been no material changes to our critical accounting policies and estimates disclosed in our Prospectus. For more information, refer to “Note 3 — Summary of Significant Accounting Policies” to the condensed consolidated financial statements included in our Prospectus.

Recent Accounting Pronouncements

For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see “Note 3 — Summary of Significant Accounting Policies” to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measure

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. To supplement our condensed consolidated financials presented in accordance with U.S. GAAP, an additional non-GAAP financial measure is provided and reconciled in the following table.

We provide supplemental non-GAAP financial information that our management utilizes to evaluate our ongoing financial performance and provide additional insight to investors as supplemental information to our U.S. GAAP results. We use adjusted EBITDA to provide a baseline for analyzing trends in our business and to exclude certain items that may not be indicative of our core operating results. The use of non-GAAP financial information should not be considered as an alternative to, or more meaningful than, the comparable U.S. GAAP measure. In addition, because our non-GAAP measure is not determined in accordance with U.S. GAAP, it is susceptible to differing calculations, and not all comparable or peer companies may calculate their non-GAAP measures in the same manner. As a result, the non-GAAP financial measure presented in this Quarterly Report on Form 10-Q may not be directly comparable to similarly titled measures presented by other companies.

This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. GAAP.

Adjusted EBITDA

Adjusted EBITDA is not a financial measure determined in accordance with U.S. GAAP. We define adjusted EBITDA as net income before interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation and certain other items that we do not view as indicative of our ongoing performance, including fair value changes in contingent consideration, equity-based compensation, fair value changes in warrants and management fees, corporate conversion and IPO related costs, PPP Loan forgiveness, SkyWater Florida start-up costs, and management transition expense.

We believe adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude

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the items listed above from net income in arriving at adjusted EBITDA because these amounts can vary substantially within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with U.S. GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that our results will be unaffected by the items excluded from adjusted EBITDA. In future fiscal periods, we may exclude such items and may incur income and expenses similar to these excluded items. Accordingly, the exclusion of these items and other similar items in our non-GAAP presentation should not be interpreted as implying that these items are non-recurring, infrequent or unusual, unless otherwise expressly indicated.

The following table presents a reconciliation of net income (loss) to adjusted EBITDA, our most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

	Second Quarter Ended				Six Months Ended Quarter Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
	(in thousands)
Net loss attributable to SkyWater Technology, Inc.	$	(6,979)	$	(5,293)	$	(9,790)	$	(6,665)
Interest expense	912		1,322		1,970		2,784
Income tax benefit	(4,237)		915		(4,662)		(28)
Depreciation and amortization	6,854		4,314		13,336		8,639
EBITDA	(3,450)		1,258		854		4,730
Paycheck Protection Program loan forgiveness	(6,453)		—		(6,453)		—
Corporate conversion and initial public offering related costs (1)	1,521		—		1,521		—
SkyWater Florida start-up costs (2)	504		—		504		—
Management transition expense (3)	435		—		435		—
Fair value changes in contingent consideration (4)	(942)		712		(886)		1,553
Equity-based compensation (5)	6,768		187		7,003		863
Fair value changes in warrants (6)	—		99		—		240
Management fees (7)	56		206		332		428
Net income attributable to non-controlling interests (8)	757		—		1,515		—
Adjusted EBITDA	$	(804)	$	2,462	$	4,825	$	7,814

__________________

(1)Represents expenses directly associated with the corporate conversion and IPO, such as professional, consulting, legal and accounting services. This also includes bonus awards granted to employees upon the completion of the IPO. These expenses are not indicative of our ongoing costs and were discontinued following the completion of our initial public offering.

(2)Represents start-up costs associated with our 200 mm advanced packaging facility in Kissimmee, Florida, which includes legal fees, recruiting expenses, retention awards and facility start-up expenses. These expenses are not indicative of our ongoing costs and will be discontinued following completion of the start-up of SkyWater Florida.

(3)Represents expense for the departure of our former Chief Administrative Officer, which includes primarily severance benefits.

(4)Represents non-cash valuation adjustment of contingent consideration to fair market value during the period.

(5)Represents non-cash equity-based compensation expense.

(6)Represents non-cash valuation adjustment of warrants to fair market value during the period.

(7)Represents a related party transaction with Oxbow, our principal financial investor. As these fees are not part of the core business, will not continue after our IPO and are excluded from management’s assessment of the business, we believe it is useful to investors to view our results excluding these fees.

(8)Represents net income attributable to our VIE, which was formed for the purpose of purchasing our land and building with the proceeds of a bank loan. Since depreciation and interest expense are excluded from net loss in our adjusted EBITDA financial measure, we also exclude the net income attributable to the VIE.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. Currently, our market risks relate to potential changes in the fair value of our debt due to fluctuations in applicable market interest rates. In the future, our market risk exposure generally will be limited to those risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions, nor do we utilize financial instruments or derivative instruments for trading purposes.

Credit Risk

Financial instruments that potentially subject us to credit risk are cash and cash equivalents and accounts receivable. Cash balances are maintained in financial institutions, which at times exceed federally insured limits. We monitor the financial condition of the financial institutions in which our accounts are maintained and have not experienced any losses in such accounts. We perform ongoing credit evaluations as to the financial condition of our customers with respect to trade receivables. Generally, no collateral is required as a condition of sale. Our consideration of the need for an allowance for doubtful accounts is based upon current market conditions and other factors.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, our principal executive officer and principal financial officer, respectively, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of July 4, 2021.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of July 4, 2021 due to the material weaknesses in our internal control over financial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, the condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Previously Reported Material Weaknesses in Internal Control over Financial Reporting

As disclosed in the section titled “Risk Factors” in our Prospectus, we previously identified material weaknesses in our internal control over financial reporting. As of July 4, 2021, we have material weaknesses in components of the COSO framework, including the control environment and risk assessment due to our limited accounting and finance resources, which resulted in inappropriate preparation, review and maintenance of documentation and information that is critical to the design and consistent execution and monitoring of internal controls. We did not sufficiently design, implement, and maintain control activities related to the recording of revenue to sufficiently capture and measure progress to complete performance obligations and recognize revenue as part of the monthly close process to support the accounting for certain contracts. These material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Remediation Plan

To address our material weaknesses, we have hired and are in the process of hiring additional qualified accounting and finance personnel in addition to formalizing documentation of policies, procedures and controls and further evolving our accounting processes related the recognition of revenue.

41

While we believe that these efforts will improve our internal control over financial reporting, the design and implementation of our remediation is ongoing and will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period of financial reporting cycles. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. Until these weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated financial statements are prepared in accordance with GAAP.

Changes in Internal Control Over Financial Reporting

As part of our remediation plan discussed above, we hired three additional resources and continued formalizing documentation of policies, procedures and controls and evaluating the implementation of new and existing controls during the quarter ended July 4, 2021. Such remediation actions were changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended July 4, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management continues to implement the comprehensive remediation program to ensure that control deficiencies contributing to the material weakness are remediated and that our controls operate effectively.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition.

Item 1A. Risk Factors

This Quarterly Report on Form 10-Q should be read in conjunction with the risk factors included in our Prospectus. There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our Prospectus.

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

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Initial Public Offering of Common Stock

On April 23, 2021, we completed our IPO in which we issued 8,004,000 shares of our common stock at a public offering price of $14.00 per share, which included 1,044,000 shares issued pursuant to the exercise by the underwriters of their over-allotment option (the “Over-Allotment Option”) at the IPO price, less the underwriting discount and commissions. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to the Company’s registration statement on Form S-1 (File No. 333-254580), as amended, which was declared effective by the SEC on April 20, 2021, and the Company’s registration statement on Form S-1 (File No. 333-255385) filed on April 20, 2021 pursuant to Rule 462(b) under the Securities Act. Jefferies LLC and Cowen and Company, LLC acted as the representatives of the several underwriters in our IPO.

Following the sale of the shares in connection with the April 23, 2021 closing of the IPO, the offering was terminated. We received aggregate net proceeds of $100.2 million, net of underwriting discounts and commissions of approximately $7.8 million and estimated offering expenses of approximately $4.1 million. None of such payments have been made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. Since the closing of the IPO, we estimate that we have utilized approximately $15 million of our IPO proceeds to pay down our Revolver and approximately $7 million of our IPO proceeds to fund capital expenditures. We may also use a portion of the proceeds from the IPO for acquisitions or strategic investments in businesses or technologies, including $56 million in strategic capital investments for expanding manufacturing capacity and technology capabilities at our Minnesota facility which is

42

expected to increase our output. There has been no material change in the expected use of the net proceeds from our IPO as described in our registration statement on Form S-1.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On August 1, 2021, the Company and Wells Fargo Bank, National Association (“Wells Fargo”) entered into a Second Amendment to Amended and Restated Credit Agreement (the “Amendment”) that, effective as of July 3, 2021, amended the Company’s Amended and Restated Credit Agreement with Wells Fargo to eliminate the requirement for the Company to comply with the fixed charge coverage ratio and leverage ratio financial covenants contained therein as of July 4, 2021. The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Item 6. Exhibits

The following is a list of all exhibits filed or furnished as part of this report:

Exhibit Number	Description
3.1	Certificate of Incorporation of SkyWater Technology, Inc. (incorporated by reference)
3.2	Bylaws of SkyWater Technology, Inc. (incorporated by reference)
10.1	Second Amendment to Amended and Restated Credit Agreement, dated as of August 1, 2021, by and among Wells Fargo Bank, National Association, as administrative agent, SkyWater Technology, Inc. and SkyWater Technology Foundry, Inc.
31.1	Certification of the Chief Executive Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section  302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Exchange Act Rules Rule 13a-14(a), as adopted pursuant to Section  302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+    Indicates a management contract or any compensatory plan, contract or arrangement.

43

*    The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

44

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SkyWater Technology, Inc.
Date: August 4, 2021	By:	/s/ Thomas Sonderman
	Thomas Sonderman President and Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Steve Manko
	Steve Manko Chief Financial Officer (Principal Financial Officer)

45

EX-10.1

Exhibit 31.2

SECOND AMENDMENT

TO AMENDED AND RESTATED CREDIT AGREEMENT

This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is entered into as of August 1st, 2021 by and among the lenders identified on the signature pages hereof (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter each individually as a "Lender" and collectively as "Lenders"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, "Agent"), SKYWATER TECHNOLOGY, INC., a Delaware corporation, successor by conversion to CMI Acquisition, LLC, a Delaware limited liability company ("Parent"), and SKYWATER TECHNOLOGY FOUNDRY, INC., a Delaware corporation ("SkyWater").

WHEREAS, Parent, SkyWater, Agent, and sole Lender are parties to that certain Amended and Restated Credit Agreement dated as of December 28, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement"); and

WHEREAS, Agent and Lenders have agreed to modify the Credit Agreement subject to the terms and provisions hereof;

NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the parties hereto agree as follows:

1.     Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Credit Agreement.

2.     Amendments to Credit Agreement. Subject to the satisfaction of the conditions set forth in Section 5 below and in reliance upon the representations and warranties of the Loan Parties set forth in Section 6 below, the Credit Agreement is hereby amended as follows:

(a)     Effective as of July 3, 2021, the definition of "Covenant Testing Period" set forth in Section 1.1 of the Credit Agreement is amended and restated in its entirety as follows:

"Covenant Testing Period" means a period (a) commencing on the last day of the fiscal month of Parent most recently ended prior to a Covenant Trigger Event for which Borrowers are required to deliver to Agent monthly, quarterly or annual financial statements pursuant to Section 5.1, and (b) continuing through and including the first day after such Covenant Trigger Event that Excess Availability has equaled or exceeded $15,000,000 for 90 consecutive days; provided, that, Covenant Testing Period shall exclude the fiscal month of Parent ending July 4, 2021.

-1-

(b)     Effective as of July 3, 2021, Section 7(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:

(b)     Leverage Ratio. Have a Leverage Ratio, measured on a quarter-end basis, of not greater than the applicable ratio set forth in the following table for the applicable date set forth opposite thereto:

Applicable Ratio	Applicable Date
3.5:1.0	October 3, 2021
3.0:1.0	January 2, 2022 and the last day of each Fiscal Quarter thereafter

3.     Continuing Effect. Except as expressly set forth in Section 2 of this Amendment, nothing in this Amendment shall constitute a modification or alteration of the terms, conditions or covenants of the Credit Agreement or any other Loan Document, or a waiver of any other terms or provisions thereof, and the Credit Agreement and the other Loan Documents shall remain unchanged and shall continue in full force and effect, in each case as amended hereby.

4.     Reaffirmation and Confirmation. Each Loan Party hereby ratifies, affirms, acknowledges and agrees that the Credit Agreement and the other Loan Documents represent the valid, enforceable and collectible obligations of such Loan Party, and further acknowledges that there are no existing claims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to the Credit Agreement or any other Loan Document. Each Loan Party hereby agrees that this Amendment in no way acts as a release or relinquishment of the Liens and rights securing payments of the Obligations. The Liens and rights securing payment of the Obligations are hereby ratified and confirmed by the Loan Parties in all respects.

5.     Conditions to Effectiveness of Amendment. This Amendment shall become effective as of the date first written above upon the satisfaction of the following conditions precedent:

(a)     Each party hereto shall have executed and delivered this

Amendment to Agent; and

(b)    All proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be reasonably satisfactory to Agent and its legal counsel.

6.     Representations and Warranties. In order to induce Agent and Lenders to enter into this Amendment, each Loan Party hereby represents and warrants to Agent and Lenders, immediately after giving effect to this Amendment:

-2-

(a)     All representations and warranties of each Loan Party or its Subsidiaries contained in this Amendment or in the other Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date hereof, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such earlier date);

(b)     No Default or Event of Default has occurred and is continuing; and

(c)     This Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of such Loan Party and are enforceable against such Loan Party in accordance with their respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors' rights generally.

7.     Further Assurances. The Loan Parties shall execute and deliver all agreements, documents and instruments reasonably requested by the Agent, each in form and substance reasonably satisfactory to the Agent, and take all actions as the Agent may reasonably request from time to time, to perfect and maintain the perfection and priority of the security interest in the Collateral held by the Agent and to fully consummate the transactions contemplated under this Amendment and the Credit Agreement, as modified hereby.

8.     Miscellaneous.

(a)     Expenses. Borrowers agree to pay on demand all Lender Group Expenses of Agent in connection with the preparation, negotiation, execution, delivery and administration of this Amendment in accordance with the terms of the Credit Agreement.

(b)     Governing Law. This Amendment shall be a contract made under and governed by, and construed in accordance with the internal laws of the State of Illinois.

(c)     Counterparts. This Amendment may be executed in any number of counterparts, and by the parties hereto on the same or separate counterparts, and each such counterpart, when executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Amendment. Delivery of an executed signature page of this Amendment by facsimile transmission or electronic photocopy (e.g., "pdf") shall be effective as delivery of a manually executed counterpart hereof.

9.     Release. In consideration of the agreements of Agent and Lenders contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, each Loan Party, on behalf of itself and its respective successors, assigns, and other legal representatives, hereby absolutely, unconditionally and irrevocably

-3-

releases, remises and forever discharges Agent and Lenders, and their successors and assigns, and their present and former shareholders, affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees, agents and other representatives (Agent, each Lender and all such other Persons being hereinafter referred to collectively as the "Releasees" and individually as a "Releasee"), of and from all demands, actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever (individually, a "Claim" and collectively, "Claims") of every name and nature, known as of the date of this Amendment, both at law and in equity, which each Loan Party, or any of its respective successors, assigns, or other legal representatives may now or hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises at any time on or prior to the day and date of this Amendment, in each case for or on account of, or in relation to, or in any way in connection with any of the Credit Agreement, or any of the other Loan Documents or transactions thereunder or related thereto.

[Signature Pages Follow]

-4-

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized and delivered as of the date first above written.

BORROWER:	SKYWATER TECHNOLOGY FOUNDRY, INC.,
	a Delaware corporation
	By:	/s/ Steve Manko
	Name: Steve Manko
	Title: Chief Financial Officer
PARENT:	SKYWATER TECHNOLOGY, INC.,
	a Delaware corporation
	By:	/s/ Steve Manko
	Name: Steve Manko
	Title: Chief Financial Officer

-5-

WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, as
Agent and as a Lender
By:	/s/ Kerri Otto
Name: Kerri Otto
Title: Senior Vice President

-6-

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Thomas Sonderman, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of SkyWater Technology, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2021	/s/ Thomas Sonderman
	Thomas Sonderman
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 302 of Sarbanes-Oxley Act of 2002

I, Steve Manko, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of SkyWater Technology, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2021	/s/ Steve Manko
	Steve Manko
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to Rule 18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q of SkyWater Technology, Inc. (the “Company”) for the period ended July 4, 2021, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Thomas Sonderman, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 4, 2021	/s/ Thomas Sonderman
	Thomas Sonderman
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to Rule 18 U.S.C. Section 1350

In connection with the Quarterly Report on Form 10-Q of SkyWater Technology, Inc. (the “Company”) for the period ended July 4, 2021, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Steve Manko, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 4, 2021	/s/ Steve Manko
	Steve Manko
	Chief Financial Officer
	(Principal Financial Officer)

XML

Cover Page - shares	6 Months Ended
	Jul. 04, 2021	Aug. 02, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jul. 04, 2021
Document Transition Report	false
Entity File Number	001-40345
Entity Registrant Name	SkyWater Technology, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	37-1839853
Entity Address, Address Line One	2401 East 86th Street
Entity Address, City or Town	Bloomington
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55425
City Area Code	952
Local Phone Number	851-5200
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	SKYT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding (in shares)		39,059,743
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001819974
Current Fiscal Year End Date	--01-02
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Current assets:
Cash and cash equivalents	$ 64,603	$ 7,436
Accounts receivable, net	33,396	29,995
Inventories	29,167	27,169
Prepaid expenses and other current assets	3,597	11,972
Total current assets	130,763	76,572
Property and equipment, net	179,441	178,078
Intangible assets, net	4,029	4,561
Other assets	4,518	3,998
Total assets	318,751	263,209
Current liabilities:
Current portion of long-term debt	1,006	2,772
Accounts payable	15,880	16,792
Accrued expenses	20,733	25,496
Income taxes payable	539	1,710
Current portion of contingent consideration	3,900	8,904
Deferred revenue - current	24,919	30,653
Total current liabilities	66,977	86,327
Long-term liabilities:
Long-term debt, less current portion and unamortized debt issuance costs	65,348	69,828
Contingent consideration, less current portion	0	1,996
Long-term incentive plan	3,648	3,185
Deferred revenue - long-term	84,438	95,399
Deferred income tax liability, net	2,866	8,058
Total long-term liabilities	156,300	178,466
Total liabilities	223,277	264,793
Commitments and contingencies
Shareholders’ equity (deficit):
Preferred stock, $0.01 par value per share (80,000,000 and zero shares authorized; zero issued and outstanding)	0	0
Common stock, $0.01 par value per share (200,000,000 and zero shares authorized; 39,059,743 and zero shares issued and outstanding)	391	0
Additional paid-in capital	110,082	0
Common units (zero and 5,000,000 units authorized; zero and 3,057,344 units issued; zero and 2,107,452 outstanding)	0	3,767
Accumulated deficit	(13,573)	(3,783)
Total shareholders’ equity (deficit), SkyWater Technology, Inc.	96,900	(16)
Non-controlling interests	(1,426)	(1,568)
Total shareholders’ equity (deficit)	95,474	(1,584)
Total liabilities and shareholders’ equity	318,751	263,209
Class A Units
Shareholders’ equity (deficit):
Preferred units	0	0
Total shareholders’ equity (deficit)	0	0
Class B Units
Shareholders’ equity (deficit):
Preferred units	0	0
Total shareholders’ equity (deficit)	$ 0	$ 0

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jul. 04, 2021	Jan. 03, 2021
Preferred stock, par value per share (in USD per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	80,000,000	0
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value per share (in USD per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	200,000,000	0
Common stock, shares issued (in shares)	39,059,743	0
Common stock, shares outstanding (in shares)	39,059,743	0
Common units authorized (in shares)	0	5,000,000
Common units issued (in shares)	0	3,057,344
Common units outstanding (in shares)	0	2,107,452
Class A Units
Preferred units authorized (in shares)	0	2,000,000
Preferred units issued (in shares)	0	0
Preferred units outstanding (in shares)	0	0
Class B Units
Preferred units authorized (in shares)	0	18,000,000
Preferred units issued (in shares)	0	18,000,000
Preferred units outstanding (in shares)	0	18,000,000

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Net sales	$ 41,189	$ 30,759	$ 89,290	$ 67,663
Cost of sales	39,377	25,297	78,312	55,777
Gross profit	1,812	5,462	10,978	11,886
Research and development	3,339	786	5,266	1,448
Selling, general and administrative expenses	15,415	6,921	24,018	12,554
Change in fair value of contingent consideration	(942)	712	(886)	1,553
Operating loss	(16,000)	(2,957)	(17,420)	(3,669)
Other income (expense):
Paycheck Protection Program loan forgiveness	6,453	0	6,453	0
Change in fair value of warrant liability	0	(99)	0	(240)
Interest expense	(912)	(1,322)	(1,970)	(2,784)
Total other expense	5,541	(1,421)	4,483	(3,024)
Loss before income taxes	(10,459)	(4,378)	(12,937)	(6,693)
Income tax (benefit) expense	(4,237)	915	(4,662)	(28)
Net loss	(6,222)	(5,293)	(8,275)	(6,665)
Less: net income attributable to non-controlling interests	757	0	1,515	0
Net loss attributable to SkyWater Technology, Inc.	$ (6,979)	$ (5,293)	$ (9,790)	$ (6,665)
Net loss per unit, basic (in USD per share)	$ (0.20)		$ (0.54)
Net loss per unit, diluted (in USD per share)	$ (0.20)		$ (0.54)
Weighted average units used in computing net loss per unit, basic (in shares)	34,707,758		18,884,051
Weighted average units used in computing net loss per unit, diluted (in shares)	34,707,758		18,884,051
Class B Units
Other income (expense):
Net loss per unit, basic (in USD per share)		$ (0.29)		$ (0.37)
Net loss per unit, diluted (in USD per share)		$ (0.29)		$ (0.37)
Weighted average units used in computing net loss per unit, basic (in shares)		18,000,000		18,000,000
Weighted average units used in computing net loss per unit, diluted (in shares)		18,000,000		18,000,000

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Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)	Total Shareholders’ Equity (Deficit), SkyWater Technology, Inc.	Non-controlling Interests	Class A Units	Class B Units	Common Units
Beginning balance (in shares) at Dec. 29, 2019		0	0					0	18,000,000	0
Beginning balance at Dec. 29, 2019	$ 24,167	$ 0	$ 0	$ 0	$ 16,834	$ 24,167	$ 0	$ 0	$ 0	$ 7,333
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unit-based compensation	488					488				$ 488
Net income (loss)	(6,665)				(6,665)	(6,665)
Ending balance (in shares) at Jun. 28, 2020		0	0					0	18,000,000	0
Ending balance at Jun. 28, 2020	17,990	$ 0	$ 0	0	10,169	17,990	0	$ 0	$ 0	$ 7,821
Beginning balance (in shares) at Mar. 29, 2020		0	0					0	18,000,000	0
Beginning balance at Mar. 29, 2020	23,283	$ 0	$ 0	0	15,462	23,283	0	$ 0	$ 0	$ 7,821
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(5,293)				(5,293)	(5,293)
Ending balance (in shares) at Jun. 28, 2020		0	0					0	18,000,000	0
Ending balance at Jun. 28, 2020	17,990	$ 0	$ 0	0	10,169	17,990	0	$ 0	$ 0	$ 7,821
Beginning balance (in shares) at Jan. 03, 2021		0	0					0	18,000,000	2,108,000
Beginning balance at Jan. 03, 2021	(1,584)	$ 0	$ 0	0	(3,783)	(16)	(1,568)	$ 0	$ 0	$ 3,767
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Unit-based compensation	5					5				$ 5
Other (in shares)										(2,000)
Corporate conversion (in shares)			31,056,000						18,000,000	2,106,000
Corporate conversion	0		$ 311	3,461						$ 3,772
Issuance of common stock sold in initial public offering (in shares)			8,004,000
Issuance of common stock sold in initial public offering, net of issuance costs	100,162		$ 80	100,082		100,162
Stock-based compensation	6,539			6,539		6,539
Distribution to VIE member	(1,373)						(1,373)
Net income (loss)	(8,275)				(9,790)	(9,790)	1,515
Ending balance (in shares) at Jul. 04, 2021		0	39,060,000					0	0	0
Ending balance at Jul. 04, 2021	95,474	$ 0	$ 391	110,082	(13,573)	96,900	(1,426)	$ 0	$ 0	$ 0
Beginning balance (in shares) at Apr. 04, 2021		0	0					0	18,000,000	2,106,000
Beginning balance at Apr. 04, 2021	(4,613)	$ 0	$ 0	0	(6,594)	(2,822)	(1,791)	$ 0	$ 0	$ 3,772
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Corporate conversion (in shares)			31,056,000						18,000,000	2,106,000
Corporate conversion	0		$ 311	3,461						$ 3,772
Issuance of common stock sold in initial public offering (in shares)			8,004,000
Issuance of common stock sold in initial public offering, net of issuance costs	100,162		$ 80	100,082		100,162
Stock-based compensation	6,539			6,539		6,539
Distribution to VIE member	(392)						(392)
Net income (loss)	(6,222)				(6,979)	(6,979)	757
Ending balance (in shares) at Jul. 04, 2021		0	39,060,000					0	0	0
Ending balance at Jul. 04, 2021	$ 95,474	$ 0	$ 391	$ 110,082	$ (13,573)	$ 96,900	$ (1,426)	$ 0	$ 0	$ 0

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020
Cash flows from operating activities:
Net loss	$ (8,275)	$ (6,665)
Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities:
Depreciation and amortization	13,336	8,639
Gain on Paycheck Protection Program loan forgiveness	(6,453)	0
Foundry services obligation	0	(3,732)
Gain on sale of property and equipment	0	(1,117)
Amortization of debt issuance costs included in interest expense	320	781
Long-term incentive and stock-based compensation	7,008	865
Change in fair value of warrant liability	0	240
Change in fair value of contingent consideration	(886)	1,553
Cash paid for contingent consideration in excess of initial valuation	(6,114)	0
Deferred income taxes	(5,191)	(1,190)
Non-cash revenue related to customer equipment	(2,481)	0
Changes in operating assets and liabilities:
Accounts receivable	(3,401)	43,854
Inventories	(1,998)	(1,778)
Prepaid expenses and other assets	5,672	(5,390)
Accounts payable	(610)	(529)
Accrued expenses	(3,872)	9,841
Deferred revenue	(16,695)	56,777
Income tax payable and receivable	(1,171)	886
Net cash (used in) provided by operating activities	(30,811)	103,035
Cash flows from investing activities:
Purchase of software and licenses	(357)	0
Proceeds from sale of property and equipment	0	1,650
Purchases of property and equipment	(12,898)	(38,409)
Net cash used in investing activities	(13,255)	(36,759)
Cash flows from financing activities:
Proceeds from issuance of common stock pursuant to the initial public offering, net of underwriting discounts and commissions	104,212	0
Cash paid for offering costs	(1,205)	0
Proceeds from Paycheck Protection Program loan	0	6,453
Repayment of term loan	0	(2,574)
Net repayment on line of credit	0	(9,759)
Net proceeds from Revolver	382	0
Repayment of Financing	(495)	0
Cash paid for capital leases	(288)	0
Cash paid for debt issuance costs	0	(100)
Cash paid for contingent consideration	0	(5,253)
Distributions to VIE member	(1,373)	0
Net cash provided by (used in) financing activities	101,233	(11,233)
Net change in cash and cash equivalents	57,167	55,043
Cash and cash equivalents - beginning of period	7,436	4,605
Cash and cash equivalents - end of period	64,603	59,648
Supplemental disclosure of cash flow information:
Interest	1,635	2,144
Income taxes	1,701	90
Noncash investing and financing activity:
Capital expenditures incurred, not yet paid	11,444	13,808
Common stock issuance costs incurred, not yet paid	662	0
Equipment acquired through capital lease obligations	$ 2,603	$ 0

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Nature of Business

6 Months Ended

Jul. 04, 2021

Accounting Policies [Abstract]

Nature of Business

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, 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.

Shares of common stock began trading on the Nasdaq Stock Market on April 21, 2021 under the symbol “SKYT”. The shares were registered under the Securities Act on a registration statement on Form S-1, which was declared effective by the Securities and Exchange Commission (“SEC”) on April 20, 2021.

We expect to use the proceeds from the IPO for working capital and other general corporate purposes, which may include financing our growth and funding capital expenditures. On July 26, 2021, we announced that our Board of Directors approved $56 million in strategic capital investments for expanding manufacturing capacity and technology capabilities at our Minnesota facility. The majority of this investment is targeted to expand capacity and capabilities at our Minnesota fab which is expected to increase our output.

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Basis of Presentation and Principles of Consolidation

6 Months Ended

Jul. 04, 2021

Accounting Policies [Abstract]

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of ConsolidationThe condensed consolidated financial statements as of July 4, 2021, and for the three and six months ended July 4, 2021 and June 28, 2020, 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 3, 2021. 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 a fair statement of our financial position as of July 4, 2021, our results of operations and shareholders' equity for the three and six months ended July 4, 2021 and June 28, 2020, and our cash flows for the six months ended July 4, 2021 and June 28, 2020.

The results of operations for the three and six months ended July 4, 2021 are not necessarily indicative of the results of operations to be expected for the year ending January 2, 2022, 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 and cash flows are for the three and six months ended July 4, 2021 and June 28, 2020. The three and six months ended July 4, 2021 and June 28, 2020 each consisted of 13 and 26 weeks, respectively.

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 sales 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 and the availability and effectiveness of vaccines.

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 and six months ended July 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. For the three and six months ended June 28, 2020, we did not apply the two-class method since only Class B preferred units were outstanding and were thus the lowest level of equity subordination. 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 and six months ended July 4, 2021 were retrospectively adjusted to reflect the conversion akin to a split-like situation.

Our historical balance sheets reflect the number of common units outstanding prior to the corporate conversion and no adjustment was made.

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 the net loss by the weighted-average number of shares and potentially dilutive securities outstanding for the year determined using the treasury-stock method. Because we reported a net loss for the three and six months ended July 4, 2021 and June 28, 2020, the number of shares used to calculate diluted net loss per common share is the same as the number of units 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 July 4, 2021, there were restricted stock units and stock options totaling 3,966,000 excluded from the computation of diluted weighted-average because their inclusion would have been anti-dilutive. There were no restricted stock units and stock options outstanding at June 28, 2020.

The following table sets forth the computation of basic and diluted net loss per common share for the three and six months ended July 4, 2021:

	Three Months Ended July 4, 2021		Six Months Ended July 4, 2021
	(in thousands, except per share data)
Numerator:
Net loss attributable to SkyWater Technology, Inc.	$	(6,979)	$	(9,790)
Undistributed preferred return to Class B preferred unitholders	(39)		(398)
Net loss attributable to common shareholders	$	(7,018)	$	(10,188)
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)	34,708		18,884
Net loss per common share, basic and diluted	$	(0.20)	$	(0.54)

__________________

(1)The weighted-average common shares outstanding for the three and six months ended July 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. The April 14, 2021 corporate conversion of 18,000,000 Class B preferred units into 27,995,400 shares of common stock is reflected prospectively on the date of conversion for the three and six months ended July 4, 2021.

The following table sets forth the computation of basic and diluted net loss per unit attributable to Class B preferred unitholders for the three and six months ended June 28, 2020. There were no common units outstanding during the period.

	Three Months Ended June 28, 2020		Six Months Ended June 28, 2020
	(in thousands, except per unit data)
Numerator:
Net loss attributable to SkyWater Technology, Inc.	$	(5,293)	$	(6,665)
Denominator:
Weighted-average Class B preferred units outstanding, basic and diluted	18,000		18,000
Net loss per unit attributable to Class B preferred unitholders, basic and diluted	$	(0.29)	$	(0.37)

Center for NeoVation

Through our subsidiary, SkyWater Florida, we entered into several agreements on January 25, 2021 with the government of Osceola County, Florida (“Osceola”) and ICAMR, Inc., a Florida non-profit corporation (“BRIDG”), to operate the Center for NeoVation (“CfN”), a semiconductor research and development and manufacturing facility. These agreements included a technology and economic development agreement (the “TED Agreement”), a lease agreement (the “CfN Lease”) and a semiconductor line operation agreement (the “LOA”). Under the TED Agreement and the CfN Lease, we agreed to operate the CfN, including certain semiconductor manufacturing equipment, and an advanced water treatment facility currently owned by

Osceola for a period of at least 23 years for a lease payment of $1.00 per year. During the period of the CfN Lease, we are responsible for taxes, utilities, insurance, maintenance and operation of those assets. We may terminate the TED Agreement and CfN Lease with 18 months’ notice. In the event we terminate the agreements, we would be required to continue to operate the center until we find a replacement operator or the 18 months expire and may be required to make a payment of up to $15,000 to Osceola.

We are accounting for the CfN Lease as a lease. Given the nominal minimum lease payments required under the lease ($23.00), no assets were initially recognized on our condensed consolidated balance sheet. As we perform under the agreements, expenses we incur and any revenue we are able to generate from the operations of CfN will be included in our condensed consolidated statements of operations as they are incurred or earned. If we are able to reach and maintain full capacity in the CfN for a minimum period of 20 years, Osceola will convey the land, buildings and equipment to us for no consideration at the end of the CfN Lease. At such time that we believe the conveyance of the land, buildings and equipment is reasonably assured, we will record those assets on our condensed consolidated balance sheet at fair value and record a corresponding deferred gain. We will subsequently depreciate the assets over their remaining economic life and recognize an equivalent amount of income from the amortization of the deferred gain.

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.

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Summary Of Significant Accounting Policies

6 Months Ended

Jul. 04, 2021

Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

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 consolidated financial statements. There were no material changes to our significant accounting policies and estimates during the three and six months ended July 4, 2021.

Contingent Consideration

Royalties of $2,758 and $2,714 were paid during the three months ended July 4, 2021 and June 28, 2020, respectively, and $6,114 and $5,253 during the six months ended July 4, 2021 and June 28, 2020, respectively. During the three months ended July 4, 2021 and June 28, 2020, we recorded royalty expense of $(942) and $712, respectively, to reflect the change in fair value of the contingent consideration obligation in our condensed consolidated statements of operations. During the six months ended July 4, 2021 and June 28, 2020, we recorded royalty expense of $(886) and $1,553, respectively, to reflect the change in fair value of the contingent consideration obligation in our condensed consolidated statements of operations.

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-2, Leases (“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 intend to adopt the new standard on January 3, 2022 for our year ending January 1, 2023. However if we lose our emerging growth 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 842 will have a material impact on our condensed consolidated financial statements.

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

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.

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Revenue

6 Months Ended

Jul. 04, 2021

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

BRIDG

In connection with the TED Agreement and CfN Lease as discussed in Note 2 – Basis of Presentation and Principles of Consolidation–Center for NeoVation, we executed the LOA pursuant to which we agreed to provide engineering and test wafer services as requested by BRIDG based on our standard hourly and activity-based rates, which we are accounting for as revenue over time as we perform. In addition, we agreed to provide BRIDG access to the cleanrooms in the facilities that are subject to the TED Agreement and the CfN Lease for an access fee of approximately $14,000. We are accounting for the access fee as a stand-ready obligation with revenue recognized ratably over 38 months, the life of BRIDG’s third-party contracts for which we are a subcontractor.

Disaggregated Revenue

The following table discloses revenue by service type and the timing of recognition of revenue for transfer of goods and services to customers (point-in-time or over time):

	Three Months Ended July 4, 2021
	Topic 606 Revenue
	Point-in-Time		Over Time		Lease Revenue		Total Revenue
Wafer Services	$	14,312	$	—	$	—	$	14,312
Advanced Technology Services
T&M	—		10,692		—		10,692
Fixed Price	—		15,018		—		15,018
Other	—		—		1,167		1,167
Total Advanced Technology Services	—		25,710		1,167		26,877
Total revenue	$	14,312	$	25,710	$	1,167	$	41,189

	Three Months Ended June 28, 2020
	Topic 606 Revenue
	Point-in-Time		Over Time		Revenue recognized from foundry services obligation		Total Revenue
Wafer Services	$	10,885	$	—	$	11	$	10,896
Advanced Technology Services
T&M	—		12,548		—		12,548
Fixed Price	—		7,315		—		7,315
Total Advanced Technology Services	—		19,863		—		19,863
Total revenue	$	10,885	$	19,863	$	11	$	30,759

	Six Months Ended July 4, 2021
	Topic 606 Revenue
	Point-in-Time		Over Time		Lease Revenue		Total Revenue
Wafer Services	$	24,331	$	—	$	—	$	24,331
Advanced Technology Services
T&M	—		21,484		—		21,484
Fixed Price	—		41,141		—		41,141
Other	—		—		2,334		2,334
Total Advanced Technology Services	—		62,625		2,334		64,959
Total revenue	$	24,331	$	62,625	$	2,334	$	89,290

	Six Months Ended June 28, 2020
	Topic 606 Revenue
	Point-in-Time		Over Time		Revenue recognized from foundry services obligation		Total Revenue
Wafer Services	$	23,815	$	—	$	399	$	24,214
Advanced Technology Services
T&M	—		31,954		—		31,954
Fixed Price	—		11,495		—		11,495
Other	—		—		—		—
Total Advanced Technology Services	—		43,449		—		43,449
Total revenue	$	23,815	$	43,449	$	399	$	67,663

The following table discloses revenue by country as determined based on customer address:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
United States	$	36,612	$	26,327	$	80,233	$	57,797
Canada	1,547		2,048		3,156		5,084
All others	3,030		2,384		5,901		4,782
	$	41,189	$	30,759	$	89,290	$	67,663

Deferred Contract Costs

We recognized amortization of deferred contract costs in our condensed consolidated statements of operations totaling $426 and $0 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $977 and $0 for the six months ended July 4, 2021 and June 28, 2020, respectively.

Contract Assets

Contract assets are $15,969 and $8,147 at July 4, 2021 and January 3, 2021, respectively, and are included in accounts receivable, net in our condensed consolidated balance sheets.

Contract Liabilities

The contract liabilities and other significant components of deferred revenue are as follows:

	July 4, 2021						January 3, 2021
	Contract Liabilities		Deferred Lease Revenue		Total Deferred Revenue		Contract Liabilities		Deferred Lease Revenue		Total Deferred Revenue
Current	$	20,252	$	4,667	$	24,919	$	25,986	$	4,667	$	30,653
Long-term	70,827		13,611		84,438		79,455		15,944		95,399
Total	$	91,079	$	18,278	$	109,357	$	105,441	$	20,611	$	126,052

The decrease in contract liabilities from January 3, 2021 to July 4, 2021 was primarily the result of completion of specific performance obligations for our customers. Approximately 20% of our total contract liabilities at January 3, 2021 were recognized in revenue in the first six months of 2021.

Remaining Performance Obligations

As of July 4, 2021, we had approximately $85,019 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	$	15,196
From one to two years	12,695
From two to three years	12,695
After three years	44,433
Total	$	85,019

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.

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Balance Sheet Information

6 Months Ended

Jul. 04, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Information

Balance Sheet Information

Certain significant amounts included in our condensed consolidated balance sheets consist of the following:

Accounts receivable, net:

	July 4, 2021		January 3, 2021
Trade accounts receivable	$	17,197	$	21,357
Unbilled revenue (contract assets)	15,969		8,147
Note receivable	—		230
Employee note receivable	223		222
Other receivables	7		39
Total accounts receivable, net	$	33,396	$	29,995

On December 31, 2020, we entered into a note receivable with a key employee for $222. The note may be repaid any time prior to its maturity date of March 31, 2022 and bears interest at 6%.

Inventories:

	July 4, 2021		January 3, 2021
Raw materials	$	2,585	$	1,463
Work-in-process	20,874		19,719
Supplies and spare parts	5,708		5,987
Total inventories—current	29,167		27,169
Supplies and spare parts classified as other assets	2,350		1,949
Total inventories	$	31,517	$	29,118

Prepaid expenses and other current assets:

	July 4, 2021		January 3, 2021
Prepaid expenses	$	1,839	$	2,761
Equipment purchased for customers (1)	—		5,343
Deferred contract costs	1,724		1,647
Deferred offering costs	—		2,183
Other	34		38
Total prepaid assets and other current assets	$	3,597	$	11,972

__________________

(1)We acquired equipment for a customer that we installed and calibrated in our facility. Prior to the customer obtaining ownership and control of the equipment, we recorded costs incurred to date within prepaid expenses and other current assets.

Property and equipment, net:

	July 4, 2021		January 3, 2021
Land	$	5,396	$	5,396
Buildings and improvements	86,092		85,197
Machinery and equipment	135,824		124,130
Fixed assets not yet in service	23,823		22,602
Total property and equipment, at cost	251,135		237,325
Less: Accumulated depreciation	(71,694)		(59,247)
Total property and equipment, net	$	179,441	$	178,078

Depreciation expense was $6,400 and $4,130 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $12,447 and $8,261 for the six months ended July 4, 2021 and June 28, 2020, respectively.

Intangible assets, net:

Intangible assets consist of purchased software and license costs and a customer list from our acquisition of the business in 2017. Intangible assets are summarized as follows:

	July 4, 2021		January 3, 2021
Customer list	$	1,500	$	1,500
Software and licenses	5,766		5,408
Total intangible assets, at cost	7,266		6,908
Less: Accumulated amortization	(3,237)		(2,347)
Total intangible assets, net	$	4,029	$	4,561

For the three months ended July 4, 2021 and June 28, 2020, amortization of the customer list intangible asset charged to operations was $88 and amortization of software and licenses was $366 and $99, respectively. For the six months ended July 4, 2021 and June 28, 2020, amortization of the customer list intangible asset charged to operations was $176 and amortization of software and licenses was $713 and $202, respectively.

Remaining estimated aggregate annual amortization expense is as follows for the years ending:

	Amortization Expense
Remainder of 2021	$	842
2022	1,140
2023	800
2024	445
2025	445
Thereafter	357
Total	$	4,029

Other assets:

	July 4, 2021		January 3, 2021
Supplies and spare parts	$	2,350	$	1,949
Deferred contract costs	1,699		2,049
Other assets	469		—
Total other assets	$	4,518	$	3,998

Accrued expenses:

	July 4, 2021		January 3, 2021
Accrued compensation	$	5,624	$	6,315
Accrued commissions	1,586		5,183
Accrued fixed asset expenditures	2,468		6,337
Accrued royalties	1,525		2,145
Accrued customer payable	1,455		783
Other accrued expenses	8,075		4,733
Total accrued expenses	$	20,733	$	25,496

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Debt

6 Months Ended

Jul. 04, 2021

Debt Disclosure [Abstract]

Debt

Debt

The components of debt outstanding are as follows:

	July 4, 2021		January 3, 2021
Revolver	$	32,686	$	32,303
Financing (by VIE)	38,343		38,839
Paycheck Protection Program loan	—		6,453
Unamortized debt issuance costs (1)	(4,675)		(4,995)
Total long-term debt, including current maturities	66,354		72,600
Less: Current portion of long-term debt	(1,006)		(2,772)
Long-term debt, excluding current portion and unamortized debt issuance costs	$	65,348	$	69,828

__________________

(1)Unamortized debt issuance costs as of July 4, 2021 included $1,383 for the Revolver (as defined below) and $3,292 for the Financing (as defined below). Unamortized debt issuance costs as of January 3, 2021 included $1,537 for the Revolver and $3,458 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 $32,686 as of July 4, 2021 at an interest rate of 3%. Our remaining availability under the Revolver was $28,900 as of July 4, 2021.

Financing

On September 30, 2020, the VIE which we consolidate entered into a loan agreement for $39,000 (the “Financing”) at a fixed interest rate of 3.44%. The outstanding balance of the Financing was $38,343 as of July 4, 2021.

Paycheck Protection Program Loan

On April 18, 2020, we received proceeds of $6,453 pursuant to a loan from TCF Bank under the Paycheck Protection Program (the “PPP” Loan). Under the terms of the loan, recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the program. During the three months ended July 4, 2021, the PPP Loan was fully forgiven and $6,453 was recorded as other income in the condensed consolidated statement of operations.

Covenants

As of July 4, 2021, we were not in compliance with the fixed charge coverage ratio and the leverage ratio related to the Revolver. On August 1, 2021, we entered into an amendment to the Revolver that, effective as of August 1, 2021, amended the Revolver to eliminate the requirement for us to comply with those financial covenants as of July 4, 2021. Under the Revolver, as amended, we were in full compliance with the Revolver covenant requirements as of July 4, 2021. Our VIE was in compliance with the financial covenants related to the Financing.

Maturities

As of July 4, 2021, 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 2021	$	497
2022	1,024
2023	1,060
2024	1,094
2025	33,820
Thereafter	33,534
Total	$	71,029

Historically, we have addressed our liquidity needs (including funds required to make scheduled principal and interest payments, refinance debt and fund working capital, and planned capital expenditures) with operating cash flows, borrowings under credit facilities, and proceeds from the term loans. Our ability to execute our operating strategy is dependent on our ability to continue to access capital through our Revolver, public markets and other sources of financing and if we were unable to obtain financing on reasonable terms, this may impact our ability to execute our operating strategy.

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Income Taxes

6 Months Ended

Jul. 04, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesThe effective tax rates for the three and six months ended July 4, 2021 and June 28, 2020 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 and six months ended July 4, 2021 was 40.5% and 36.0%, compared to (20.9)% and 0.4% for the three and six months ended June 28, 2020. The income tax benefit rate applied to our pre-tax loss was higher for the three and six months ended July 4, 2021 than our statutory tax rate of 21% primarily due to the gain on the PPP Loan forgiveness, which is exempt from federal income taxation. For the three and six months ended June 28, 2020, the effective income tax rate applied to our pre-tax loss was lower than our statutory tax rate of 21% due to a deferred tax asset valuation allowance, partially offset by excess tax benefits related to stock-based compensation expense.

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 $1,401 was recorded as of July 4, 2021 to reduce our net deferred tax assets to the amount that is more likely than not to be realized. The valuation allowance at January 3, 2021 was $1,609.

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 and six months ended July 4, 2021 and June 28, 2020.

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Shareholders' Equity

6 Months Ended

Jul. 04, 2021

Stockholders' Equity Note [Abstract]

Shareholders' Equity

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”). There were 2,000,000 Class A preferred units authorized specifically for issuance upon exercise of warrants, of which none were issued and outstanding at January 3, 2021. There were 18,000,000 Class B preferred units authorized, of which 18,000,000 were issued and outstanding at January 3, 2021. There were 5,000,000 common units authorized, of which 3,057,344 were issued as of January 3, 2021 and 2,107,452 were outstanding as of January 3, 2021. 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 July 4, 2021, giving effect to the corporate conversion and our IPO, 39,059,743 shares of common stock were issued and outstanding. No shares of our preferred stock were outstanding. As discussed in Note 1 – Nature of Business, 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.

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Share-Based Compensation

6 Months Ended

Jul. 04, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

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 and no further awards will be issued under the previous Employee Unit Option Plan. No awards remained outstanding from the Employee Unit Option Plan as of July 4, 2021 and at the corporate conversion date. Under the 2021 Equity Plan, 5,000,000 shares of common stock are available for issuance 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 Plan will be increased effective the first business day of each calendar year commencing in 2022 by an amount equal to the least of: (i) 150,000 shares of common stock; (ii) three percent (3%) of the shares of common stock 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

On April 21, 2021, we granted 342,783 stock options which vest in full on the first anniversary of the grant date and expire 15 months from the grant date; and granted 744,374 stock options 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. Share-based compensation expense related to stock option awards was $439 and $0 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $444 and $488 for the six months ended July 4, 2021 and June 28, 2020, 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 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.

	Six Months Ended July 4, 2021
Expected volatility:	46.0%
Expected term (in years):	1.13 - 6.25
Risk-free interest rate:	0.09% - 1.19%

The following table summarizes our stock option activity during the six months ended July 4, 2021:

	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 3, 2021	—	$	—
Granted	1,087	$	14.00
Exercised	—	$	—
Forfeited or canceled	(54)	$	14.00
Balance outstanding as of July 4, 2021	1,033	$	14.00	$	13,003	7.1 years
Balance vested and exercisable as of July 4, 2021	—	$	—	$	—	0.0 years

The weighted average grant-date fair value of options granted in the six months ended July 4, 2021 was $5.29. As of July 4, 2021, total unrecognized compensation cost related to stock options was $5,057 and is expected to be recognized over a weighted average period of approximately 3.4 years.

Restricted Common Stock

On November 1, 2020, we granted 4,672 restricted common units to two directors. Upon the corporate conversion, such restricted common units were converted into 6,788 shares of restricted common stock which continue to vest over a one-year period.

Restricted Common Stock Units

On April 21, 2021, we granted 440,836 restricted common stock units to eligible employees and directors which vest in full on the first anniversary of the grant date and granted 204,910 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.

On December 18, 2020, we granted restricted unit units to acquire up to 1,602,588 common units to certain key employees. Upon the corporate conversion, such restricted unit units were converted into 2,328,880 shares of restricted common stock units which continue to vest in equal amounts over a three-year period, but only in the event we complete an IPO of our stock or experience a change of control event. 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. With our IPO completed on April 23, 2021, these restricted common stock units began vesting in accordance with their other terms.

Share-based compensation expense related to restricted common stock unit awards was $6,100 and $0 for the three months ended July 4, 2021 and June 28, 2020, respectively, and $6,100 and $0 for the six months ended July 4, 2021 and June 28, 2020, respectively. Actual forfeitures are recognized as they occur. As of July 4, 2021, total unrecognized compensation cost related to restricted common stock units was $11,360 and is expected to be recognized over a weighted average period of approximately 1.5 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.

The following table summarizes our restricted common stock unit activity during the six months ended July 4, 2021:

	Number of Restricted Common Stock Units (in thousands)	Weighted Average Grant Date Fair Value Per Share
Balance outstanding as of January 3, 2021	2,329	$	3.87
Granted	646	$	14.00
Vested	—	$	—
Forfeited or canceled	(42)	$	14.00
Balance outstanding as of July 4, 2021	2,933	$	5.95

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 700,000 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. As of July 4, 2021, the initial offering period had not commenced.

Share-Based Compensation Expense Allocation

Share-based compensation expense was allocated in the consolidated statements of operations as follows:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Cost of sales	$	704	$	—	$	704	$	—
Research and development	1,480		—		1,480		—
Selling, general and administrative expenses	4,355		—		4,360		488
	$	6,539	$	—	$	6,544	$	488

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Fair Value Measurements

6 Months Ended

Jul. 04, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

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:

	Contingent Consideration
Balance at January 3, 2021	$	10,900
Payments	(6,114)
Change in fair value	(886)
Balance at July 4, 2021	$	3,900

The change in fair value is reflected in our condensed consolidated statements of operations.

The fair value of our contingent consideration liability at July 4, 2021 and January 3, 2021 was determined using forecasted receipts of projected future revenues of Advanced Technology Services. The royalty is paid out quarterly through 2021. The forecasted future cash flows were discounted reflecting the risk in estimating future revenues. We expect total future cash payments to be between $3,900 and $4,000.

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 July 4, 2021 and January 3, 2021 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 July 4, 2021 and January 3, 2021, we did not have any assets or liabilities measured at fair value on a non-recurring basis.

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Commitments and Contingencies

6 Months Ended

Jul. 04, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Foundry Services Agreement

Under a Foundry Services Agreement (“FSA”) which expired in June 2020, we were required to provide semiconductor wafers to our main customer over a 40-month period, beginning March 1, 2017, at contractual rates. As part of the FSA, the customer guaranteed certain levels of purchase orders for wafers. Sales of Wafer Services to this customer were $10,932 and $23,477 for the three and six months ended June 28, 2020, respectively.

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.

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 $15 million of contractual commitments outstanding as of July 4, 2021 that we expect to be paid in 2021, through cash on hand and operating cash flows. As of July 4, 2021, the Company had executed a capital lease that had not yet commenced. The capital lease was executed to replace the existing nitrogen plant, which is owned by the vendor, with a larger and more modern nitrogen generator. The capital lease has a lease term of 15 years for total payments of $14 million and is expected to commence during the second half of 2021.

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Major Customers and Concentration Risk

6 Months Ended

Jul. 04, 2021

Revenue from Contract with Customer [Abstract]

Major Customers and Concentration Risk

Major Customers and Concentration Risk

The following customers accounted for 10% or more of sales for the three and six months ended July 4, 2021 and June 28, 2020:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Customer A	19	%	12	%	28	%	*
Customer B	28	%	34	%	23	%	34	%
Customer C	15	%	*		11	%	*
Customer D	*		19	%	*		24	%
	62	%	65	%	62	%	58	%

__________________

* Represents less than 10% of net sales.

We had four major customers that accounted for 26%, 19%, 10% and 10% of outstanding trade accounts receivable as of July 4, 2021 and four major customers that accounted for 30%, 20%, 19% and 18% of outstanding trade accounts receivable as of January 3, 2021. The loss of a major customer could adversely affect our operating results and financial condition.

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Related Party Transactions

6 Months Ended

Jul. 04, 2021

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Professional Services

Oxbow Industries, LLC (“Oxbow”), our principal owner, provided management and financial consulting services to us for an annual management fee not to exceed $700. We incurred management fees to Oxbow of $55 and $160 of during the three months ended July 4, 2021 and June 28, 2020, respectively, and $215 and $320 for the six months ended July 4, 2021 and June 28, 2020, respectively, which have been expensed and included in general and administrative expenses in our condensed consolidated statements of operations.

Members of our board of directors provided legal and professional services to us. We incurred fees of $1 and $46 for the three months ended July 4, 2021 and June 28, 2020, and $117 and $108 for the six months ended July 4, 2021 and June 28, 2020, which have been expensed and included in general and administrative expenses in our condensed consolidated statements of operations. 

Sale-Leaseback Transaction

On September 29, 2020, we entered into an agreement to sell the land and building representing our primary operating location in Bloomington, Minnesota to an entity (“Oxbow Realty”) controlled by our principal owner. We subsequently entered into an agreement to lease the land and building from Oxbow Realty for initial payments of $394 per month over 20 years. The monthly payments are subject to a 2% increase each year during the term of the lease. Future minimum lease commitments to Oxbow Realty as of July 4, 2021 were as follows (such amounts are eliminated from our condensed consolidated financial statements due to the consolidation of Oxbow Realty, see Note 14 – Variable Interest Entities):

Remainder of 2021	$	2,378
2022	4,836
2023	4,932
2024	5,031
2025	5,132
Thereafter	89,350
Total lease payments	111,659
Less: imputed interest	(84,476)
Total	$	27,183

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Variable Interest Entities

6 Months Ended

Jul. 04, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

Variable Interest Entities

Oxbow Realty was established for the purpose of holding real estate and facilitating real estate transactions. This included facilitating the purchase of our land and building with proceeds from a bank loan and managing the leaseback of the land and building to us. We determined that Oxbow Realty meets the definition of a VIE under Topic 810, Consolidation, because it lacks sufficient equity to finance its activities. We concluded that we are the primary beneficiary of Oxbow Realty as we have the power to direct operation and maintenance decisions during the lease term, which would most significantly affect the VIE’s economic performance. As the primary beneficiary, we consolidate the assets, liabilities and results of operations of Oxbow Realty, eliminate any transactions between us and Oxbow Realty, and record a non-controlling interest for the economic interest in Oxbow Realty not owned by us because the owners of our common stock do not legally have rights or obligations to those profits or losses. In addition, the assets of Oxbow Realty can only be used to settle its liabilities, and the creditors of Oxbow Realty do not have recourse to the general credit of SkyWater.

The following table shows the carrying amounts of assets and liabilities of Oxbow Realty that are consolidated by us as of July 4, 2021 and January 3, 2021. The assets and liabilities are presented prior to consolidation, and thus a portion of these assets and liabilities are eliminated in consolidation.

	July 4, 2021		January 3, 2021
Cash and cash equivalents	$	495	$	860
Prepaid expenses	—		99
Finance receivable	37,301		36,930
Other assets	100		—
Total assets	$37,896		$37,889
Accounts payable	$	720	$	672
Accrued expenses	319		9
Debt	38,283		38,776
Total liabilities	$39,322		$39,457

 The following table shows the revenue and expenses of Oxbow Realty that are consolidated by us for the three and six months ended July 4, 2021, which we began consolidating on September 29, 2020. We have included these amounts, net of eliminations, in the corresponding tables in the notes to our condensed consolidated financial statements.

	Three Months Ended July 4, 2021		Six Months Ended July 4, 2021
Revenue	$	1,159	$	2,504
General and administrative expenses	66		318
Interest expense	336		671
Total expenses	402		989
Net income	$	757	$	1,515

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Basis Of Presentation And Principles Of Consolidation (Policies)

6 Months Ended

Jul. 04, 2021

Accounting Policies [Abstract]

Principles of Consolidation

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 and cash flows are for the three and six months ended July 4, 2021 and June 28, 2020. The three and six months ended July 4, 2021 and June 28, 2020 each consisted of 13 and 26 weeks, respectively.

Use of Estimates

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

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 sales 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 and the availability and effectiveness of vaccines.

Net Loss Per Share

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 and six months ended July 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. For the three and six months ended June 28, 2020, we did not apply the two-class method since only Class B preferred units were outstanding and were thus the lowest level of equity subordination. 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 and six months ended July 4, 2021 were retrospectively adjusted to reflect the conversion akin to a split-like situation.

Our historical balance sheets reflect the number of common units outstanding prior to the corporate conversion and no adjustment was made.

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 the net loss by the weighted-average number of shares and potentially dilutive securities outstanding for the year determined using the treasury-stock method. Because we reported a net loss for the three and six months ended July 4, 2021 and June 28, 2020, the number of shares used to calculate diluted net loss per common share is the same as the number of units 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 July 4, 2021, there were restricted stock units and stock options totaling 3,966,000 excluded from the computation of diluted weighted-average because their inclusion would have been anti-dilutive. There were no restricted stock units and stock options outstanding at June 28, 2020.

Center for NeoVation

Center for NeoVation

Through our subsidiary, SkyWater Florida, we entered into several agreements on January 25, 2021 with the government of Osceola County, Florida (“Osceola”) and ICAMR, Inc., a Florida non-profit corporation (“BRIDG”), to operate the Center for NeoVation (“CfN”), a semiconductor research and development and manufacturing facility. These agreements included a technology and economic development agreement (the “TED Agreement”), a lease agreement (the “CfN Lease”) and a semiconductor line operation agreement (the “LOA”). Under the TED Agreement and the CfN Lease, we agreed to operate the CfN, including certain semiconductor manufacturing equipment, and an advanced water treatment facility currently owned by

Osceola for a period of at least 23 years for a lease payment of $1.00 per year. During the period of the CfN Lease, we are responsible for taxes, utilities, insurance, maintenance and operation of those assets. We may terminate the TED Agreement and CfN Lease with 18 months’ notice. In the event we terminate the agreements, we would be required to continue to operate the center until we find a replacement operator or the 18 months expire and may be required to make a payment of up to $15,000 to Osceola.

We are accounting for the CfN Lease as a lease. Given the nominal minimum lease payments required under the lease ($23.00), no assets were initially recognized on our condensed consolidated balance sheet. As we perform under the agreements, expenses we incur and any revenue we are able to generate from the operations of CfN will be included in our condensed consolidated statements of operations as they are incurred or earned. If we are able to reach and maintain full capacity in the CfN for a minimum period of 20 years, Osceola will convey the land, buildings and equipment to us for no consideration at the end of the CfN Lease. At such time that we believe the conveyance of the land, buildings and equipment is reasonably assured, we will record those assets on our condensed consolidated balance sheet at fair value and record a corresponding deferred gain. We will subsequently depreciate the assets over their remaining economic life and recognize an equivalent amount of income from the amortization of the deferred gain.

Operating Segment Information

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.

Contingent Consideration

Contingent ConsiderationRoyalties of $2,758 and $2,714 were paid during the three months ended July 4, 2021 and June 28, 2020, respectively, and $6,114 and $5,253 during the six months ended July 4, 2021 and June 28, 2020, respectively. During the three months ended July 4, 2021 and June 28, 2020, we recorded royalty expense of $(942) and $712, respectively, to reflect the change in fair value of the contingent consideration obligation in our condensed consolidated statements of operations. During the six months ended July 4, 2021 and June 28, 2020, we recorded royalty expense of $(886) and $1,553, respectively, to reflect the change in fair value of the contingent consideration obligation in our condensed consolidated statements of operations.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-2, Leases (“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 intend to adopt the new standard on January 3, 2022 for our year ending January 1, 2023. However if we lose our emerging growth 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 842 will have a material impact on our condensed consolidated financial statements.

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

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.

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Basis of Presentation and Principles of Consolidation (Tables)

6 Months Ended

Jul. 04, 2021

Accounting Policies [Abstract]

Schedule of Computation of Basic and Diluted Net Loss Per Common Share

The following table sets forth the computation of basic and diluted net loss per common share for the three and six months ended July 4, 2021:

	Three Months Ended July 4, 2021		Six Months Ended July 4, 2021
	(in thousands, except per share data)
Numerator:
Net loss attributable to SkyWater Technology, Inc.	$	(6,979)	$	(9,790)
Undistributed preferred return to Class B preferred unitholders	(39)		(398)
Net loss attributable to common shareholders	$	(7,018)	$	(10,188)
Denominator:
Weighted-average common shares outstanding, basic and diluted (1)	34,708		18,884
Net loss per common share, basic and diluted	$	(0.20)	$	(0.54)

__________________

(1)The weighted-average common shares outstanding for the three and six months ended July 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. The April 14, 2021 corporate conversion of 18,000,000 Class B preferred units into 27,995,400 shares of common stock is reflected prospectively on the date of conversion for the three and six months ended July 4, 2021.

The following table sets forth the computation of basic and diluted net loss per unit attributable to Class B preferred unitholders for the three and six months ended June 28, 2020. There were no common units outstanding during the period.

	Three Months Ended June 28, 2020		Six Months Ended June 28, 2020
	(in thousands, except per unit data)
Numerator:
Net loss attributable to SkyWater Technology, Inc.	$	(5,293)	$	(6,665)
Denominator:
Weighted-average Class B preferred units outstanding, basic and diluted	18,000		18,000
Net loss per unit attributable to Class B preferred unitholders, basic and diluted	$	(0.29)	$	(0.37)

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Revenue (Tables)

6 Months Ended

Jul. 04, 2021

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregated Revenue

The following table discloses revenue by service type and the timing of recognition of revenue for transfer of goods and services to customers (point-in-time or over time):

	Three Months Ended July 4, 2021
	Topic 606 Revenue
	Point-in-Time		Over Time		Lease Revenue		Total Revenue
Wafer Services	$	14,312	$	—	$	—	$	14,312
Advanced Technology Services
T&M	—		10,692		—		10,692
Fixed Price	—		15,018		—		15,018
Other	—		—		1,167		1,167
Total Advanced Technology Services	—		25,710		1,167		26,877
Total revenue	$	14,312	$	25,710	$	1,167	$	41,189

	Three Months Ended June 28, 2020
	Topic 606 Revenue
	Point-in-Time		Over Time		Revenue recognized from foundry services obligation		Total Revenue
Wafer Services	$	10,885	$	—	$	11	$	10,896
Advanced Technology Services
T&M	—		12,548		—		12,548
Fixed Price	—		7,315		—		7,315
Total Advanced Technology Services	—		19,863		—		19,863
Total revenue	$	10,885	$	19,863	$	11	$	30,759

	Six Months Ended July 4, 2021
	Topic 606 Revenue
	Point-in-Time		Over Time		Lease Revenue		Total Revenue
Wafer Services	$	24,331	$	—	$	—	$	24,331
Advanced Technology Services
T&M	—		21,484		—		21,484
Fixed Price	—		41,141		—		41,141
Other	—		—		2,334		2,334
Total Advanced Technology Services	—		62,625		2,334		64,959
Total revenue	$	24,331	$	62,625	$	2,334	$	89,290

	Six Months Ended June 28, 2020
	Topic 606 Revenue
	Point-in-Time		Over Time		Revenue recognized from foundry services obligation		Total Revenue
Wafer Services	$	23,815	$	—	$	399	$	24,214
Advanced Technology Services
T&M	—		31,954		—		31,954
Fixed Price	—		11,495		—		11,495
Other	—		—		—		—
Total Advanced Technology Services	—		43,449		—		43,449
Total revenue	$	23,815	$	43,449	$	399	$	67,663

Schedule of Revenue by Country

The following table discloses revenue by country as determined based on customer address:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
United States	$	36,612	$	26,327	$	80,233	$	57,797
Canada	1,547		2,048		3,156		5,084
All others	3,030		2,384		5,901		4,782
	$	41,189	$	30,759	$	89,290	$	67,663

Schedule of Deferred Revenue

The contract liabilities and other significant components of deferred revenue are as follows:

	July 4, 2021						January 3, 2021
	Contract Liabilities		Deferred Lease Revenue		Total Deferred Revenue		Contract Liabilities		Deferred Lease Revenue		Total Deferred Revenue
Current	$	20,252	$	4,667	$	24,919	$	25,986	$	4,667	$	30,653
Long-term	70,827		13,611		84,438		79,455		15,944		95,399
Total	$	91,079	$	18,278	$	109,357	$	105,441	$	20,611	$	126,052

Schedule of Performance Obligations

We expect to recognize those remaining performance obligations as follows:

Within one year	$	15,196
From one to two years	12,695
From two to three years	12,695
After three years	44,433
Total	$	85,019

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Balance Sheet Information (Tables)

6 Months Ended

Jul. 04, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Accounts Receivable, Net

Accounts receivable, net:

	July 4, 2021		January 3, 2021
Trade accounts receivable	$	17,197	$	21,357
Unbilled revenue (contract assets)	15,969		8,147
Note receivable	—		230
Employee note receivable	223		222
Other receivables	7		39
Total accounts receivable, net	$	33,396	$	29,995

Schedule of Inventories

Inventories:

	July 4, 2021		January 3, 2021
Raw materials	$	2,585	$	1,463
Work-in-process	20,874		19,719
Supplies and spare parts	5,708		5,987
Total inventories—current	29,167		27,169
Supplies and spare parts classified as other assets	2,350		1,949
Total inventories	$	31,517	$	29,118

Schedule of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets:

	July 4, 2021		January 3, 2021
Prepaid expenses	$	1,839	$	2,761
Equipment purchased for customers (1)	—		5,343
Deferred contract costs	1,724		1,647
Deferred offering costs	—		2,183
Other	34		38
Total prepaid assets and other current assets	$	3,597	$	11,972

__________________

(1)We acquired equipment for a customer that we installed and calibrated in our facility. Prior to the customer obtaining ownership and control of the equipment, we recorded costs incurred to date within prepaid expenses and other current assets.

Schedule of Property and Equipment, Net

Property and equipment, net:

	July 4, 2021		January 3, 2021
Land	$	5,396	$	5,396
Buildings and improvements	86,092		85,197
Machinery and equipment	135,824		124,130
Fixed assets not yet in service	23,823		22,602
Total property and equipment, at cost	251,135		237,325
Less: Accumulated depreciation	(71,694)		(59,247)
Total property and equipment, net	$	179,441	$	178,078

Schedule of Intangible Assets

Intangible assets are summarized as follows:

	July 4, 2021		January 3, 2021
Customer list	$	1,500	$	1,500
Software and licenses	5,766		5,408
Total intangible assets, at cost	7,266		6,908
Less: Accumulated amortization	(3,237)		(2,347)
Total intangible assets, net	$	4,029	$	4,561

Schedule of Remaining Estimated Aggregate Annual Amortization Expense

Remaining estimated aggregate annual amortization expense is as follows for the years ending:

	Amortization Expense
Remainder of 2021	$	842
2022	1,140
2023	800
2024	445
2025	445
Thereafter	357
Total	$	4,029

Schedule of Other Assets

Other assets:

	July 4, 2021		January 3, 2021
Supplies and spare parts	$	2,350	$	1,949
Deferred contract costs	1,699		2,049
Other assets	469		—
Total other assets	$	4,518	$	3,998

Schedule of Accrued Expenses

Accrued expenses:

	July 4, 2021		January 3, 2021
Accrued compensation	$	5,624	$	6,315
Accrued commissions	1,586		5,183
Accrued fixed asset expenditures	2,468		6,337
Accrued royalties	1,525		2,145
Accrued customer payable	1,455		783
Other accrued expenses	8,075		4,733
Total accrued expenses	$	20,733	$	25,496

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Debt (Tables)

6 Months Ended

Jul. 04, 2021

Debt Disclosure [Abstract]

Schedule of Debt Outstanding

The components of debt outstanding are as follows:

	July 4, 2021		January 3, 2021
Revolver	$	32,686	$	32,303
Financing (by VIE)	38,343		38,839
Paycheck Protection Program loan	—		6,453
Unamortized debt issuance costs (1)	(4,675)		(4,995)
Total long-term debt, including current maturities	66,354		72,600
Less: Current portion of long-term debt	(1,006)		(2,772)
Long-term debt, excluding current portion and unamortized debt issuance costs	$	65,348	$	69,828

__________________

(1)Unamortized debt issuance costs as of July 4, 2021 included $1,383 for the Revolver (as defined below) and $3,292 for the Financing (as defined below). Unamortized debt issuance costs as of January 3, 2021 included $1,537 for the Revolver and $3,458 for the Financing (by VIE).

Summary of Future Principal Payments

Future principal payments of our Revolver and consolidated VIE’s Financing, excluding unamortized debt issuance costs, are as follows:

Remainder of 2021	$	497
2022	1,024
2023	1,060
2024	1,094
2025	33,820
Thereafter	33,534
Total	$	71,029

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Share-Based Compensation (Tables)

6 Months Ended

Jul. 04, 2021

Share-based Payment Arrangement [Abstract]

Schedule of Black-Scholes Option Pricing Model Assumptions

	Six Months Ended July 4, 2021
Expected volatility:	46.0%
Expected term (in years):	1.13 - 6.25
Risk-free interest rate:	0.09% - 1.19%

Schedule of Stock Option Activity

The following table summarizes our stock option activity during the six months ended July 4, 2021:

	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 3, 2021	—	$	—
Granted	1,087	$	14.00
Exercised	—	$	—
Forfeited or canceled	(54)	$	14.00
Balance outstanding as of July 4, 2021	1,033	$	14.00	$	13,003	7.1 years
Balance vested and exercisable as of July 4, 2021	—	$	—	$	—	0.0 years

Schedule of Restricted Common Stock Unit Activity

The following table summarizes our restricted common stock unit activity during the six months ended July 4, 2021:

	Number of Restricted Common Stock Units (in thousands)	Weighted Average Grant Date Fair Value Per Share
Balance outstanding as of January 3, 2021	2,329	$	3.87
Granted	646	$	14.00
Vested	—	$	—
Forfeited or canceled	(42)	$	14.00
Balance outstanding as of July 4, 2021	2,933	$	5.95

Schedule of Share-based Compensation Expense

Share-based compensation expense was allocated in the consolidated statements of operations as follows:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Cost of sales	$	704	$	—	$	704	$	—
Research and development	1,480		—		1,480		—
Selling, general and administrative expenses	4,355		—		4,360		488
	$	6,539	$	—	$	6,544	$	488

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Fair Value Measurements (Tables)

6 Months Ended

Jul. 04, 2021

Fair Value Disclosures [Abstract]

Schedule of Change in Level 3 Assets Measured at Fair Value On a Recurring Basis

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:

	Contingent Consideration
Balance at January 3, 2021	$	10,900
Payments	(6,114)
Change in fair value	(886)
Balance at July 4, 2021	$	3,900

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Major Customers and Concentration Risk (Tables)

6 Months Ended

Jul. 04, 2021

Revenue from Contract with Customer [Abstract]

Summary of Concentration Risk Percentage of Customers

The following customers accounted for 10% or more of sales for the three and six months ended July 4, 2021 and June 28, 2020:

	Three Months Ended				Six Months Ended
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Customer A	19	%	12	%	28	%	*
Customer B	28	%	34	%	23	%	34	%
Customer C	15	%	*		11	%	*
Customer D	*		19	%	*		24	%
	62	%	65	%	62	%	58	%

__________________

* Represents less than 10% of net sales.

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Related Party Transactions (Tables)

6 Months Ended

Jul. 04, 2021

Related Party Transactions [Abstract]

Schedule of Future Minimum Lease Commitments

Future minimum lease commitments to Oxbow Realty as of July 4, 2021 were as follows (such amounts are eliminated from our condensed consolidated financial statements due to the consolidation of Oxbow Realty, see Note 14 – Variable Interest Entities):

Remainder of 2021	$	2,378
2022	4,836
2023	4,932
2024	5,031
2025	5,132
Thereafter	89,350
Total lease payments	111,659
Less: imputed interest	(84,476)
Total	$	27,183

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Variable Interest Entities (Tables)

6 Months Ended

Jul. 04, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of VIE Condensed Balance Sheet Statements

The following table shows the carrying amounts of assets and liabilities of Oxbow Realty that are consolidated by us as of July 4, 2021 and January 3, 2021. The assets and liabilities are presented prior to consolidation, and thus a portion of these assets and liabilities are eliminated in consolidation.

	July 4, 2021		January 3, 2021
Cash and cash equivalents	$	495	$	860
Prepaid expenses	—		99
Finance receivable	37,301		36,930
Other assets	100		—
Total assets	$37,896		$37,889
Accounts payable	$	720	$	672
Accrued expenses	319		9
Debt	38,283		38,776
Total liabilities	$39,322		$39,457

Schedule of VIE Condensed Income Statements

The following table shows the revenue and expenses of Oxbow Realty that are consolidated by us for the three and six months ended July 4, 2021, which we began consolidating on September 29, 2020. We have included these amounts, net of eliminations, in the corresponding tables in the notes to our condensed consolidated financial statements.

	Three Months Ended July 4, 2021		Six Months Ended July 4, 2021
Revenue	$	1,159	$	2,504
General and administrative expenses	66		318
Interest expense	336		671
Total expenses	402		989
Net income	$	757	$	1,515

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Nature of Business (Details) - USD ($) $ / shares in Units, $ in Thousands		6 Months Ended
	Apr. 23, 2021	Jul. 04, 2021	Jun. 28, 2020	Jul. 26, 2021
Sale of Stock [Line items]
Stock offering costs		$ 1,205	$ 0
Subsequent Event
Sale of Stock [Line items]
Strategic capital investments				$ 56,000
IPO
Sale of Stock [Line items]
Underwriting discounts and commissions	$ 7,844
Stock offering costs	$ 4,050
IPO | Common Stock
Sale of Stock [Line items]
Shares issued in public offering (in shares)	8,004,000
Public offering price per share (in USD per share)	$ 14.00
Proceeds from public offering	$ 100,162

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Basis of Presentation and Principles of Consolidation - Schedule of Basic And Diluted Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Apr. 14, 2021	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020	Apr. 04, 2021	Jan. 03, 2021	Mar. 29, 2020	Dec. 29, 2019
Numerator:
Net loss attributable to SkyWater Technology, Inc.		$ (6,979)	$ (5,293)	$ (9,790)	$ (6,665)
Undistributed preferred return to Class B preferred unitholders, basic		(39)		(398)
Undistributed preferred return to Class B preferred unitholders, diluted		(39)		(398)
Net loss attributable to common shareholders, basic		(7,018)		(10,188)
Net loss attributable to common shareholders, diluted		$ (7,018)		$ (10,188)
Denominator:
Weighted average shares outstanding, basic (in shares)		34,707,758		18,884,051
Weighted average shares outstanding, diluted (in shares)		34,707,758		18,884,051
Net loss per share, basic (in USD per share)		$ (0.20)		$ (0.54)
Net loss per share, diluted (in USD per share)		$ (0.20)		$ (0.54)
Common Units
Denominator:
Number of units converted (in shares)	2,105,936
Units outstanding (in shares)		0	0	0	0	2,106,000	2,108,000	0	0
Common Stock
Denominator:
Conversion of units (in shares)	31,055,743
Common Stock | Common Unit Holders
Denominator:
Conversion of units (in shares)	3,060,343
Common Stock | Class B Preferred Unitholders
Denominator:
Conversion of units (in shares)	27,995,400
Class B Units
Denominator:
Weighted average shares outstanding, basic (in shares)			18,000,000		18,000,000
Weighted average shares outstanding, diluted (in shares)			18,000,000		18,000,000
Net loss per share, basic (in USD per share)			$ (0.29)		$ (0.37)
Net loss per share, diluted (in USD per share)			$ (0.29)		$ (0.37)
Number of units converted (in shares)	18,000,000
Units outstanding (in shares)		0	18,000,000	0	18,000,000	18,000,000	18,000,000	18,000,000	18,000,000

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Basis of Presentation and Principles of Consolidation - Narrative (Details)		6 Months Ended
	Jul. 04, 2021 USD ($) shares	Jul. 04, 2021 USD ($) segment shares	Apr. 04, 2021 shares	Jan. 03, 2021 shares	Jun. 28, 2020 shares	Mar. 29, 2020 shares	Dec. 29, 2019 shares
Lessee, Lease, Description [Line Items]
Minimum lease payment	$ 111,659,000	$ 111,659,000
Number of operating segments | segment		1
Class B Units
Lessee, Lease, Description [Line Items]
Preferred units rate of return		8.00%
Units outstanding (in shares) | shares	0	0	18,000,000	18,000,000	18,000,000	18,000,000	18,000,000
CNF Lease [Member]
Lessee, Lease, Description [Line Items]
Lease term	23 years	23 years
Lease payment per year		$ 1.00
Payment for lease termination		$ 15,000,000
CNF Lease [Member] | Minimum
Lessee, Lease, Description [Line Items]
Lease term	18 months	18 months
Minimum lease payment	$ 23.00	$ 23.00
Restricted Stock Units And Stock Options
Lessee, Lease, Description [Line Items]
Units excluded from computation (in shares) | shares	3,966,000
Units outstanding (in shares) | shares					0

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Accounting Policies [Abstract]
Royalty payments	$ 2,758	$ 2,714	$ 6,114	$ 5,253
Contingent consideration royalties expense	$ (942)	$ 712	$ (886)	$ 1,553

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Revenue - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020	Jan. 03, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 85,019		$ 85,019
Amortization of deferred contract costs	426	$ 0	977	$ 0
Contract assets	15,969		$ 15,969		$ 8,147
Percentage of contract liabilities recognized in revenue			20.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-05
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 15,196		$ 15,196
Revenue recognition period	6 months		6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-05 | BRIDG
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 14,000		$ 14,000
Revenue recognition period	38 months		38 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-04
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 12,695		$ 12,695
Revenue recognition period	12 months		12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-03
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 12,695		$ 12,695
Revenue recognition period	12 months		12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 44,433		$ 44,433
Revenue recognition period	12 months		12 months

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Revenue - Summary of Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Disaggregation of Revenue [Line Items]
Lease Revenue	$ 1,167		$ 2,334
Revenue recognized from foundry services obligation		$ 11		$ 399
Total Revenue	41,189	30,759	89,290	67,663
Point-in-Time
Disaggregation of Revenue [Line Items]
Net sales	14,312	10,885	24,331	23,815
Over Time
Disaggregation of Revenue [Line Items]
Net sales	25,710	19,863	62,625	43,449
Wafer Services
Disaggregation of Revenue [Line Items]
Lease Revenue	0		0
Revenue recognized from foundry services obligation		11		399
Total Revenue	14,312	10,896	24,331	24,214
Wafer Services | Point-in-Time
Disaggregation of Revenue [Line Items]
Net sales	14,312	10,885	24,331	23,815
Wafer Services | Over Time
Disaggregation of Revenue [Line Items]
Net sales	0	0	0	0
Total Advanced Technology Services
Disaggregation of Revenue [Line Items]
Lease Revenue	1,167		2,334
Revenue recognized from foundry services obligation		0		0
Total Revenue	26,877	19,863	64,959	43,449
Total Advanced Technology Services | Point-in-Time
Disaggregation of Revenue [Line Items]
Net sales	0	0	0	0
Total Advanced Technology Services | Over Time
Disaggregation of Revenue [Line Items]
Net sales	25,710	19,863	62,625	43,449
T&M
Disaggregation of Revenue [Line Items]
Lease Revenue	0		0
Revenue recognized from foundry services obligation		0		0
Total Revenue	10,692	12,548	21,484	31,954
T&M | Point-in-Time
Disaggregation of Revenue [Line Items]
Net sales	0	0	0	0
T&M | Over Time
Disaggregation of Revenue [Line Items]
Net sales	10,692	12,548	21,484	31,954
Fixed Price
Disaggregation of Revenue [Line Items]
Lease Revenue	0		0
Revenue recognized from foundry services obligation		0		0
Total Revenue	15,018	7,315	41,141	11,495
Fixed Price | Point-in-Time
Disaggregation of Revenue [Line Items]
Net sales	0	0	0	0
Fixed Price | Over Time
Disaggregation of Revenue [Line Items]
Net sales	15,018	$ 7,315	41,141	11,495
Other
Disaggregation of Revenue [Line Items]
Lease Revenue	1,167		2,334
Revenue recognized from foundry services obligation				0
Total Revenue	1,167		2,334	0
Other | Point-in-Time
Disaggregation of Revenue [Line Items]
Net sales	0		0	0
Other | Over Time
Disaggregation of Revenue [Line Items]
Net sales	$ 0		$ 0	$ 0

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Revenue - Summary of Revenue by Country (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Disaggregation of Revenue [Line Items]
Revenues	$ 41,189	$ 30,759	$ 89,290	$ 67,663
United States
Disaggregation of Revenue [Line Items]
Revenues	36,612	26,327	80,233	57,797
Canada
Disaggregation of Revenue [Line Items]
Revenues	1,547	2,048	3,156	5,084
All others
Disaggregation of Revenue [Line Items]
Revenues	$ 3,030	$ 2,384	$ 5,901	$ 4,782

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Revenue - Summary of Deferred Revenue (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Revenue Recognition and Deferred Revenue [Abstract]
Current contract liabilities	$ 20,252	$ 25,986
Long-term contract liabilities	70,827	79,455
Total contract liabilities	91,079	105,441
Current deferred lease revenue	4,667	4,667
Long-term deferred lease revenue	13,611	15,944
Total deferred lease revenue	18,278	20,611
Current deferred revenue	24,919	30,653
Long-term deferred revenue	84,438	95,399
Total deferred revenue	$ 109,357	$ 126,052

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Revenue - Summary of Performance Obligations (Details) $ in Thousands	Jul. 04, 2021 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 85,019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-05
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	15,196
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-04
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	12,695
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-03
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	12,695
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue obligation amount	$ 44,433

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Balance Sheet Information - Summary of Accounts Receivable, Net (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable, net	$ 33,396	$ 29,995
Trade accounts receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable, net	17,197	21,357
Unbilled revenue (contract assets)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable, net	15,969	8,147
Note receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable, net	0	230
Employee note receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable, net	223	222
Other receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable, net	$ 7	$ 39

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Balance Sheet Information - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020	Dec. 31, 2020
Debt Instrument [Line Items]
Depreciation expense	$ 6,400	$ 4,130	$ 12,447	$ 8,261
Key Employee
Debt Instrument [Line Items]
Loan agreement face amount					$ 222
Debt instrument, interest rate					6.00%
Customer list
Debt Instrument [Line Items]
Amortization of intangible assets	88	88	176	176
Software and licenses
Debt Instrument [Line Items]
Amortization of intangible assets	$ 366	$ 99	$ 713	$ 202

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Balance Sheet Information - Summary Of Inventories (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Inventory Disclosure [Abstract]
Raw materials	$ 2,585	$ 1,463
Work-in-process	20,874	19,719
Supplies and spare parts	5,708	5,987
Total inventories—current	29,167	27,169
Supplies and spare parts classified as other assets	2,350	1,949
Total inventories	$ 31,517	$ 29,118

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Balance Sheet Information - Summary of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Prepaid Expense and Other Assets, Current [Abstract]
Prepaid expenses	$ 1,839	$ 2,761
Equipment purchased for customers	0	5,343
Deferred contract costs	1,724	1,647
Deferred offering costs	0	2,183
Other	34	38
Total prepaid assets and other current assets	$ 3,597	$ 11,972

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Balance Sheet Information - Summary of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Property, Plant and Equipment [Abstract]
Land	$ 5,396	$ 5,396
Buildings and improvements	86,092	85,197
Machinery and equipment	135,824	124,130
Fixed assets not yet in service	23,823	22,602
Total property and equipment, at cost	251,135	237,325
Less: Accumulated depreciation	(71,694)	(59,247)
Total property and equipment, net	$ 179,441	$ 178,078

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Balance Sheet Information - Summary of Intangible Assets (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Finite-Lived Intangible Assets [Line Items]
Total intangible assets, at cost	$ 7,266	$ 6,908
Less: Accumulated amortization	(3,237)	(2,347)
Total intangible assets, net	4,029	4,561
Customer list
Finite-Lived Intangible Assets [Line Items]
Total intangible assets, at cost	1,500	1,500
Software and licenses
Finite-Lived Intangible Assets [Line Items]
Total intangible assets, at cost	$ 5,766	$ 5,408

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Balance Sheet Information - Summary of Remaining Estimated Aggregate Annual Amortization Expense (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Remainder of 2021	$ 842
2022	1,140
2023	800
2024	445
2025	445
Thereafter	357
Total intangible assets, net	$ 4,029	$ 4,561

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Balance Sheet Information - Summary of Other Assets (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Other Assets, Noncurrent [Abstract]
Supplies and spare parts	$ 2,350	$ 1,949
Deferred contract costs	1,699	2,049
Other assets	469	0
Total other assets	$ 4,518	$ 3,998

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Balance Sheet Information - Summary of Accrued Expenses (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Payables and Accruals [Abstract]
Accrued compensation	$ 5,624	$ 6,315
Accrued commissions	1,586	5,183
Accrued fixed asset expenditures	2,468	6,337
Accrued royalties	1,525	2,145
Accrued customer payable	1,455	783
Other accrued expenses	8,075	4,733
Total accrued expenses	$ 20,733	$ 25,496

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Debt - Summary of Debt Outstanding (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021	Apr. 18, 2020
Debt Instrument [Line Items]
Unamortized debt issuance costs	$ (4,675)	$ (4,995)
Total long-term debt, including current maturities	66,354	72,600
Less: Current portion of long-term debt	(1,006)	(2,772)
Long-term debt, excluding current portion and unamortized debt issuance costs	65,348	69,828
Revolver
Debt Instrument [Line Items]
Long-term debt	32,686	32,303
Unamortized debt issuance costs	1,383	1,537
Financing (by VIE)
Debt Instrument [Line Items]
Long-term debt	38,343	38,839
Unamortized debt issuance costs	3,292	3,458
Paycheck Protection Program loan
Debt Instrument [Line Items]
Long-term debt	$ 0	$ 6,453	$ 6,453

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Debt - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Apr. 04, 2021	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020	Jan. 03, 2021	Sep. 30, 2020	Apr. 18, 2020
Debt Instrument [Line Items]
Paycheck Protection Program loan forgiveness		$ 6,453	$ 0	$ 6,453	$ 0
Revolver
Debt Instrument [Line Items]
Outstanding balance of loan		32,686		32,686		$ 32,303
Debt instrument, periodic payment	$ 194
Debt instrument, term	10 years
Financing (by VIE)
Debt Instrument [Line Items]
Outstanding balance of loan		38,343		38,343		38,839
Debt instrument, interest rate							3.44%
Loan agreement face amount							$ 39,000
Paycheck Protection Program loan
Debt Instrument [Line Items]
Outstanding balance of loan		$ 0		$ 0		$ 6,453		$ 6,453
Wells Fargo Bank | Revolver
Debt Instrument [Line Items]
Debt instrument, interest rate		3.00%		3.00%
Remaining balance of revolver		$ 28,900		$ 28,900

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Debt - Summary of Future Principal Payments (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Long-term Debt, Fiscal Year Maturity [Abstract]
Total long-term debt, including current maturities	$ 66,354	$ 72,600
Line of Credit And Loans Payable
Long-term Debt, Fiscal Year Maturity [Abstract]
Remainder of 2021	497
2022	1,024
2023	1,060
2024	1,094
2025	33,820
Thereafter	33,534
Total long-term debt, including current maturities	$ 71,029

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020	Jan. 03, 2021
Income Tax Disclosure [Abstract]
Effective income tax rate	40.50%	(20.90%)	36.00%	0.40%
Federal statutory income tax rate			21.00%	21.00%
Valuation allowance	$ 1,401		$ 1,401		$ 1,609
Penalties and interest expense	$ 0	$ 0	$ 0	$ 0

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Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands			6 Months Ended
	Apr. 23, 2021	Apr. 14, 2021	Jul. 04, 2021	Jun. 28, 2020	Jan. 03, 2021
Class of Stock [Line Items]
Common shares authorized (in shares)		200,000,000	200,000,000		0
Common shares, per share (in USD per share)		$ 0.01	$ 0.01		$ 0.01
Preferred shares authorized (in shares)		80,000,000	80,000,000		0
Preferred shares, per share (in USD per share)		$ 0.01	$ 0.01		$ 0.01
Common shares, issued (in shares)			39,059,743		0
Preferred shares outstanding (in shares)			0		0
Stock offering costs			$ 1,205	$ 0
Class A Units
Class of Stock [Line Items]
Preferred units authorized (in shares)			0		2,000,000
Preferred units outstanding (in shares)			0		0
Preferred units issued (in shares)			0		0
Class B Units
Class of Stock [Line Items]
Preferred units authorized (in shares)			0		18,000,000
Preferred units outstanding (in shares)			0		18,000,000
Preferred units issued (in shares)			0		18,000,000
Preferred units rate of return			8.00%
Common Units
Class of Stock [Line Items]
Preferred units authorized (in shares)					5,000,000
Preferred units outstanding (in shares)					2,107,452
Preferred units issued (in shares)					3,057,344
Common Stock
Class of Stock [Line Items]
Conversion of units (in shares)		31,055,743
IPO
Class of Stock [Line Items]
Underwriting discounts and commissions	$ 7,844
Stock offering costs	$ 4,050
IPO | Common Stock
Class of Stock [Line Items]
Shares issued in public offering (in shares)	8,004,000
Public offering price per share (in USD per share)	$ 14.00
Proceeds from public offering	$ 100,162
Class B Preferred Unitholders | Common Stock
Class of Stock [Line Items]
Conversion of units (in shares)		27,995,400
Common Unit Holders | Common Stock
Class of Stock [Line Items]
Conversion of units (in shares)		3,060,343

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Share-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands						2 Months Ended	3 Months Ended		6 Months Ended
	Apr. 23, 2021	Apr. 21, 2021	Apr. 04, 2021	Dec. 18, 2020	Nov. 01, 2020	Jul. 04, 2021	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares available for issuance (in shares)						5,000,000	5,000,000		5,000,000
Annual increase of number of shares reserved for issuance (in shares)						150,000	150,000		150,000
Annual percent increase of number of shares reserved for issuance						3.00%	3.00%		3.00%
Number of stock options granted (in shares)									1,087,000
Share-based compensation expense							$ 6,539	$ 0	$ 6,544	$ 488
Weighted average grant-date fair value of options granted									$ 5.29
Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Additional awards issued under previous plan (in shares)						0
Awards outstanding under previous plan (in shares)						0	0		0
Share-based compensation expense							$ 439	0	$ 444	488
Unrecognized compensation cost						$ 5,057	5,057		$ 5,057
Weighted average period of recognition for unrecognized compensation cost									3 years 4 months 24 days
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Units granted (in shares)				1,602,588	4,672
Number of units converted (in shares)					6,788
Award vesting period					1 year
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense							6,100	$ 0	$ 6,100	$ 0
Unrecognized compensation cost						$ 11,360	$ 11,360		$ 11,360
Weighted average period of recognition for unrecognized compensation cost									1 year 6 months
Award vesting period				3 years
Number of units converted upon corporate conversion (in shares)				2,328,880
Employee Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved for ESPP issuance (in shares)	700,000
Percentage of earnings applied to purchase of stock under ESPP	15.00%
Shares available for purchase by an employee at each offering period (in shares)			2,500
Employee Stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of fair value of shares at grant date to determine purchase price	15.00%
Offering period			27 months
Employee Stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Offering period			6 months
Share-based Payment Arrangement, Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock options granted (in shares)		342,783
Share-based Payment Arrangement, Tranche One | Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of options granted		15 months
Share-based Payment Arrangement, Tranche One | Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Units granted (in shares)		440,836
Share-based Payment Arrangement, Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock options granted (in shares)		744,374
Share-based Payment Arrangement, Tranche Two | Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of options granted		10 years
Share-based Payment Arrangement, Tranche Two | Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Units granted (in shares)		204,910

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Share-Based Compensation - Schedule of Option Pricing Model Assumption (Details) - Options	6 Months Ended
	Jul. 04, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility:	46.00%
Risk-free interest rate, minimum	0.09%
Risk-free interest rate, maximum	1.19%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years):	1 year 1 month 17 days
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (in years):	6 years 3 months

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Share-Based Compensation - Schedule of Option Activity (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jul. 04, 2021 USD ($) $ / shares shares
Number of Stock Options
Number of stock options outstanding at beginning of period (in shares) | shares	0
Number of stock options granted (in shares) | shares	1,087,000
Number of stock options exercised (in shares) | shares	0
Number of stock options forfeited or canceled (in shares) | shares	(54,000)
Number of stock options outstanding at end of period (in shares) | shares	1,033,000
Number of stock options vested and exercisable (in shares) | shares	0
Weighted Average Exercise Price Per Share
Weighted average exercise of options outstanding at beginning of period (in USD per share) | $ / shares	$ 0
Weighted average exercise of options granted (in USD per share) | $ / shares	14.00
Weighted average exercise of options exercised (in USD per share) | $ / shares	0
Weighted average exercise of options forfeited or canceled (in USD per share) | $ / shares	14.00
Weighted average exercise of options outstanding at end of period (in USD per share) | $ / shares	14.00
Weighted average exercise of options vested and exercisable (in USD per share) | $ / shares	$ 0
Aggregate intrinsic value of shares outstanding | $	$ 13,003
Aggregate intrinsic value of shares vested and exercisable | $	$ 0
Weighted-average remaining contractual life of shares outstanding	7 years 1 month 6 days
Weighted-average remaining contractual life of shares vested and exercisable	0 years

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Share-Based Compensation - Schedule of RSU Activity (Details) - Restricted Stock Units (RSUs)	6 Months Ended
	Jul. 04, 2021 $ / shares shares
Number of Restricted Common Stock Units
RSUs outstanding at beginning of period (in shares) | shares	2,329,000
RSUs granted (in shares) | shares	646,000
RSUs vested (in shares) | shares	0
RSUs forfeited or canceled (in shares) | shares	(42,000)
RSUs outstanding at end of period (in shares) | shares	2,933,000
Weighted Average Grant Date Fair Value Per Share
Weighted average grant date fair value of RSUs outstanding at beginning of period (in USD per share) | $ / shares	$ 3.87
Weighted average grant date fair value of RSUs granted (in USD per share) | $ / shares	14.00
Weighted average grant date fair value of RSUs vested (in USD per share) | $ / shares	0
Weighted average grant date fair value of RSUs forfeited or canceled (in USD per share) | $ / shares	14.00
Weighted average grant date fair value of RSUs outstanding at end of period (in USD per share) | $ / shares	$ 5.95

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Share-Based Compensation - Schedule of Share-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	$ 6,539	$ 0	$ 6,544	$ 488
Cost of sales
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	704	0	704	0
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	1,480	0	1,480	0
Selling, general and administrative expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	$ 4,355	$ 0	$ 4,360	$ 488

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Fair Value Measurements - Summary of Change in Level 3 Assets Measured at Fair Value On a Recurring Basis (Detail) $ in Thousands	6 Months Ended
	Jul. 04, 2021 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration balance at beginning of period	$ 10,900
Payments	(6,114)
Change in fair value	(886)
Contingent consideration balance at end of period	$ 3,900

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Fair Value Measurements - Narrative (Details) - Fair Value, Recurring - Fair Value, Inputs, Level 3 $ in Thousands	6 Months Ended
	Jul. 04, 2021 USD ($)
Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Future cash payments	$ 4,000
Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Future cash payments	$ 3,900

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Commitments and Contingencies (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 28, 2020	Jun. 28, 2020	Jul. 04, 2021	Mar. 01, 2017
Commitments And Contingencies [Line Items]
Revenue recognized from foundry services obligation	$ 11	$ 399
Contractual commitments outstanding			$ 15,000
Capital lease term			15 years
Capital lease			$ 14,000
Wafer Services
Commitments And Contingencies [Line Items]
Revenue recognized from foundry services obligation	11	399
Wafer Services | Main Customer
Commitments And Contingencies [Line Items]
Commitment obligation period				40 months
Revenue recognized from foundry services obligation	$ 10,932	$ 23,477

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Major Customers and Concentration Risk - Summary of Concentration Risk Percentage of Customers (Details) - Revenue Benchmark - Customer Concentration Risk	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Customer A
Concentration Risk [Line Items]
Customer percentage of revenue	19.00%	12.00%	28.00%
Customer B
Concentration Risk [Line Items]
Customer percentage of revenue	28.00%	34.00%	23.00%	34.00%
Customer C
Concentration Risk [Line Items]
Customer percentage of revenue	15.00%		11.00%
Customer D
Concentration Risk [Line Items]
Customer percentage of revenue		19.00%		24.00%
Major Customers
Concentration Risk [Line Items]
Customer percentage of revenue	62.00%	65.00%	62.00%	58.00%

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Major Customers and Concentration Risk - Narrative (Details) - Accounts Receivable - Customer Concentration Risk	6 Months Ended	12 Months Ended
	Jul. 04, 2021	Jan. 03, 2021
Customer One
Concentration Risk [Line Items]
Customer percentage of trade receivables	26.00%	30.00%
Customer Two
Concentration Risk [Line Items]
Customer percentage of trade receivables	19.00%	20.00%
Customer Three
Concentration Risk [Line Items]
Customer percentage of trade receivables	10.00%	19.00%
Customer Four
Concentration Risk [Line Items]
Customer percentage of trade receivables	10.00%	18.00%

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Related Party Transactions - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Sep. 29, 2020	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Board Of Directors
Related Party Transaction [Line Items]
Management fees incurred		$ 1	$ 46	$ 117	$ 108
Oxbow Realty
Related Party Transaction [Line Items]
Lease payment per month	$ 394
Lease term	20 years
Annual percentage increase in monthly lease payments	2.00%
Oxbow Industries LLC
Related Party Transaction [Line Items]
Management fees incurred		$ 55	$ 160	215	$ 320
Maximum | Oxbow Industries LLC
Related Party Transaction [Line Items]
Annual management fee				$ 700

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Related Party Transactions - Summary of Minimum Lease Payments Sale Lease back Transactions (Details) $ in Thousands	Jul. 04, 2021 USD ($)
Minimum Lease Payments, Sale Leaseback Transactions, Fiscal Year Maturity [Abstract]
Remainder of 2021	$ 2,378
2022	4,836
2023	4,932
2024	5,031
2025	5,132
Thereafter	89,350
Total lease payments	111,659
Less: imputed interest	(84,476)
Total	$ 27,183

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Variable Interest Entities - Summary of Condensed Balance Sheet Statements (Details) - USD ($) $ in Thousands	Jul. 04, 2021	Jan. 03, 2021
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents	$ 64,603	$ 7,436
Total assets	318,751	263,209
Total liabilities	223,277	264,793
VIEs
Condensed Balance Sheet Statements, Captions [Line Items]
Cash and cash equivalents	495	860
Prepaid expenses	0	99
Finance receivable	37,301	36,930
Other assets	100	0
Total assets	37,896	37,889
Accounts payable	720	672
Accrued expenses	319	9
Debt	38,283	38,776
Total liabilities	$ 39,322	$ 39,457

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Variable Interest Entities - Summary of Condensed Income Statements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jul. 04, 2021	Jun. 28, 2020	Jul. 04, 2021	Jun. 28, 2020
Condensed Income Statements, Captions [Line Items]
Interest expense	$ 912	$ 1,322	$ 1,970	$ 2,784
Net loss attributable to SkyWater Technology, Inc.	(6,979)	$ (5,293)	(9,790)	$ (6,665)
VIEs
Condensed Income Statements, Captions [Line Items]
Revenue	1,159		2,504
General and administrative expenses	66		318
Interest expense	336		671
Total expenses	402		989
Net loss attributable to SkyWater Technology, Inc.	$ 757		$ 1,515