quicklo20240401

quicklo20240401_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2024

☐	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: 000-22671

QUICKLOGIC CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

77-0188504

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2220 Lundy Avenue, San Jose, CA 95131-1816

(Address of principal executive offices including zip code))

(408) 990-4000

(Registrant's telephone number, including area code)

Securities registered pursuant Section 12(b) of the act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	QUIK	The Nasdaq Capital Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). 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 an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated Filer	☐
Non-accelerated filer	☒	Smaller Reporting Company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

As of May 10, 2024, there were 14,424,023 shares of registrant’s common stock, par value $0.001 per share, outstanding.

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QUICKLOGIC CORPORATION

FORM 10-Q

March 31, 2024

TABLE OF CONTENTS

		Page
Part I - Financial Information		3

Item 1.	Unaudited Condensed Consolidated Financial Statements	3

	Consolidated Balance Sheets	3

	Consolidated Statements of Operations	4

	Consolidated Statements of Cash Flows	5

	Consolidated Statements of Changes in Stockholders’ Equity	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	22

Part II - Other Information		22

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 3.	Defaults Upon Senior Securities	22

Item 6.	Exhibits	22

Signatures		23

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PART I. Financial Information

Item 1. Financial Statements

QUICKLOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value amount)

	*March 31,*			*December 31,*
	*2024*			*2023*
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	27,399		$	24,606
Accounts receivable, net of allowance for doubtful accounts of $24 and $34, as of March 31, 2024 and December 31, 2023, respectively		1,560			1,625
Contract assets		1,085			3,609
Note receivable		1,214			1,200
Inventories		1,923			2,029
Prepaid expenses and other current assets		2,128			1,561
Total current assets		35,309			34,630
Property and equipment, net		12,420			8,948
Capitalized internal-use software, net		2,147			2,069
Right of use assets, net		916			981
Intangible assets, net		510			537
Non-marketable equity investment		300			300
Goodwill		185			185
Other assets		142			142
TOTAL ASSETS	$	51,929		$	47,792

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit	$	20,000		$	20,000
Trade payables		4,892			4,657
Accrued liabilities		1,545			2,673
Deferred revenue		778			1,052
Notes payable, current		993			946
Lease liabilities, current		263			302
Total current liabilities		28,471			29,630
Long-term liabilities:
Lease liabilities, non-current		636			681
Notes payable, non-current		450			461
Other liabilities, non-current		125			125
Total liabilities		29,682			30,897
Commitments and contingencies (see Note 11)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value; 200,000 authorized; 14,422 and 14,118 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		14			14
Additional paid-in capital		327,680			322,436
Accumulated deficit		(305,447	)		(305,555	)
Total stockholders' equity		22,247			16,895
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	51,929		$	47,792

See accompanying notes to unaudited condensed consolidated financial statements.

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QUICKLOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	*Three Months Ended*
	*March 31,*			*April 2,*
	*2024*			*2023*
Revenue	$	6,007		$	4,133
Cost of revenue		2,024			1,743
Gross profit		3,983			2,390
Operating expenses:
Research and development		1,459			1,629
Selling, general and administrative		2,351			1,861
Total operating expenses		3,810			3,490
Operating income (loss)		173			(1,100	)
Interest expense		(69	)		(58	)
Interest income and other income (expense), net		11			(63	)
Income (loss) before income taxes		115			(1,221	)
(Benefit from) provision for income taxes		7			7
Net income (loss)	$	108		$	(1,228	)
Net income (loss) per share:
Basic	$	0.01		$	(0.09	)
Diluted	$	0.01		$	(0.09	)
Weighted average shares outstanding:
Basic		14,177			13,215
Diluted		14,545			13,215

Note: Net income (loss) equals comprehensive income (loss) for all periods presented.

See accompanying notes to unaudited condensed consolidated financial statements.

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QUICKLOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	*Three Months Ended*
	*March 31,*			*April 2,*
	*2024*			*2023*
Cash flows provided by (used in) operating activities:
Net income (loss)	$	108		$	(1,228	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		760			358
ROU asset amortization		65			90
Stock-based compensation		1,562			715
Write-down of inventories and reclassifications		(2	)		171
Other		(10	)		(10	)
Changes in operating assets and liabilities:
Accounts receivable		75			609
Contract assets		2,524			(341	)
Inventories		108			(175	)
Other assets		(106	)		(74	)
Trade payables		(3,347	)		(325	)
Accrued liabilities		(1,293	)		(80	)
Deferred revenue		(274	)		27
Lease liabilities		(84	)		(96	)
Net cash provided by (used in) operating activities		86			(359	)
Cash flows provided by (used in) investing activities:
Capital expenditures for property and equipment		(94	)		(2	)
Capitalized internal-use software		(496	)		(185	)
Net cash provided by (used in) investing activities		(590	)		(187	)
Cash flows provided by (used in) financing activities:
Payment of notes payable		(239	)		(151	)
Proceeds from notes payable		—			105
Proceeds from line of credit		20,000			15,000
Repayment of line of credit		(20,000	)		(15,000	)
Proceeds from issuance of common stock to investors		3,560			2,313
Stock issuance cost		(24	)		(20	)
Net cash provided by (used in) financing activities		3,297			2,247
Net increase (decrease) in cash, cash equivalents and restricted cash		2,793			1,701
Cash, cash equivalents and restricted cash at beginning of period		24,606			19,201
Cash, cash equivalents and restricted cash at end of period	$	27,399		$	20,902

Supplemental disclosures of cash flow information:
Interest paid	$	25		$	56
Income taxes paid	$	22		$	2

Supplemental disclosures of non-cash financing and investing items
Purchases of fixed assets with financing arrangements	$	—		$	446
Stock-based compensation capitalized as internal-use software	$	146		$	—
Purchases of property and equipment in accounts payable	$	3,547		$	22

See accompanying notes to unaudited condensed consolidated financial statements.

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QUICKLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

					*Additional*					*Total*
	*Common Stock*				*Paid-In*		*Accumulated*			*Stockholders'*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balance at December 31, 2023		14,118	$	14	$	322,436	$	(305,555	)	$	16,895
Issuance of common stock from private placement, net of stock issuance cost		223		—		3,535		—			3,535
Common stock issued under stock plans and employee stock purchase plans		81		—		—		—			—
Stock-based compensation		—		—		1,709		—			1,709
Net income		—		—		—		108			108
Balance at March 31, 2024		14,422	$	14	$	327,680	$	(305,447	)	$	22,247

					*Additional*					*Total*
	*Common Stock*				*Paid-In*		*Accumulated*			*Stockholders'*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balance at January 1, 2023		13,202	$	13	$	317,174	$	(305,292	)	$	11,895
Issuance of common stock from private placement, net of stock issuance cost		450		1		2,292		—			2,293
Common stock issued under stock plans and employee stock purchase plans		34		—		—		—			—
Stock-based compensation		—		—		715		—			715
Net loss		—		—		—		(1,228	)		(1,228	)
Balance at April 2, 2023		13,686	$	14	$	320,181	$	(306,520	)	$	13,675

See accompanying notes to unaudited condensed consolidated financial statements.

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Notes to unaudited condensed consolidated financial statements

Note 1 — The Company and Basis of Presentation

QuickLogic Corporation was founded in 1988 and reincorporated in Delaware in 1999. The Company provides innovative, programmable silicon and software platforms to enable its customers to develop custom hardware products in a fast time-to-market and cost-effective way. Specifically, QuickLogic is a fabless semiconductor company with a variety of products: embedded FPGA ("eFPGA") intellectual property ("IP"), low power, multi-core semiconductor system-on-chips ("SoCs"), discrete FPGAs, and AI software. QuickLogic's customers can use its eFPGA IP for hardware acceleration and pre-processing in their Application Specific Integrated Circuit ("ASIC") products, the Company's SoCs to run its customers' software and build their hardware around, and the Company's discrete FPGAs to implement their custom functionality. The Analytics Toolkit from SensiML Corporation ("SensiML"), the Company's wholly-owned subsidiary, provides an end-to-end Artificial Intelligence / Machine Learning solution with accurate sensor algorithms using AI technology. The full range of platforms, software tools, and eFPGA IP enables the practical and efficient adoption of AI, voice, and sensor processing across Aerospace and Defense, Consumer/Industrial IoT, and Consumer Electronics markets.

The accompanying interim condensed consolidated financial statements are unaudited. In the opinion of the Company’s management, these statements have been prepared in accordance with the United States generally accepted accounting principles (“U.S. GAAP”), and include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of results for the interim periods presented. The Company recommends that these interim unaudited condensed consolidated financial statements be read in conjunction with the Company's Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on March 27, 2024. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year.

QuickLogic's fiscal year ends on the Sunday closest to December 31 and each fiscal quarter ends on the Sunday closest to the end of each calendar quarter. QuickLogic's first fiscal quarter for 2024 and 2023 ended on March 31, 2024 and April 2, 2023, respectively.

The Company has one reportable business segment based on how its Chief Operating Decision Maker ("CODM") manages the business and in a manner consistent with the internal reporting provided to the CODM. The CODM, the Company's Chief Executive Officer ("CEO"), reviews detailed income statements, balance sheets, and sales reports in order to assess performance of the Company. Sales and operating income are some of the key variables monitored by the CODM and management when determining the Company's financial condition and operating performance.

Liquidity

The Company has financed its operations and capital investments through the sale of common stock, financing arrangements, operating leases, a revolving line of credit with Heritage Bank (the "Revolving Facility"), and cash flows from operations. As of March 31, 2024, the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $27.4 million, inclusive of a $20.0 million advance from its Revolving Facility and $3.5 million in net proceeds from the Company's sale of common stock in the three months ended March 31, 2024. The Company's restricted cash balance as of March 31, 2024 was $0.1 million and relates to amounts pledged as cash security for the use of credit cards.

The Company was in compliance with all the Revolving Facility loan covenants as of March 31, 2024. As of March 31, 2024, the Company had $20.0 million outstanding on the Revolving Facility with an interest rate of 9.00%.

On March 13, 2024, the Company entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 223 thousand shares of common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $3.5 million. Issuance costs related to the offering were negligible. The purchase price for each share of common stock was $16.00. See Note 9 for additional information.

On March 21, 2023, the Company entered into common stock purchase agreements with certain investors for the sale of an aggregate of 450 thousand shares of its common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $2.3 million. Issuance costs related to the offering were immaterial. The purchase price for each share of common stock in the Share Placement was $5.14.

On April 28, 2023, the Company converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Note"). At the time, the Note bore an interest rate of 3.0% compounded monthly. On June 28, 2023, the Company cancelled the original note and entered into a revised promissory note with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.8% effective annual interest rate, accruing from the date of the prior note. If not prepaid prior to the Note maturity date of June 28, 2024, the principal and all accrued and unpaid interest will be due and payable to the Company. If an event of default occurs, the interest rate will increase to 10.0%. All other terms of the Note remained the same. As of March 31, 2024, the related note receivable balance was $1.21 million, including $54 thousand in accrued interest.

The Company currently uses its cash to fund its working capital, to accelerate the development of next generation products, and for general corporate purposes. Based on past performance and current expectations, the Company believes that its existing cash and cash equivalents, together with $3.5 million gross cash proceeds from the March 13, 2024 financing, its revenues from operations, and the available financial resources from the Revolving Facility with Heritage Bank will be sufficient to fund its operations and capital expenditures and provide adequate working capital for the next twelve months.

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

Over the longer term, the Company anticipates that sales generated from its new product offerings, existing cash and cash equivalents, together with financial resources from its Revolving Facility with Heritage Bank, assuming renewal of the Revolving Facility or the Company entering into a new debt agreement with an alternative lender prior to the expiration of the revolving line of credit on December 31, 2025, and its ability to raise additional capital in the public capital markets will be sufficient to satisfy its operations and capital expenditures. However, the Company cannot provide any assurance that it will be able to raise additional capital, if required, or that such capital will be available on terms acceptable to the Company. The inability of the Company to generate sufficient sales from its new product offerings and/or raise additional capital if needed could have a material adverse effect on the Company’s operations and financial condition, including its ability to maintain compliance with its lender’s financial covenants.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of QuickLogic and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Foreign Currency

The functional currency of the Company's non-U.S. operations is the U.S. dollar. Accordingly, all monetary assets and liabilities of these foreign operations are translated into U.S. dollars at current period-end exchange rates and non-monetary assets and related elements of expense are translated using historical exchange rates. Income and expense elements are translated to U.S. dollars using the average exchange rates in effect during the period. Gains and losses from the foreign currency transactions of these subsidiaries are recorded as interest income and other expense, net in the unaudited condensed consolidated statements of operations, and are insignificant for all periods presented.

Uses of Estimates

The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of commitments and contingencies at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

The methods, estimates, and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results it reports in its consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of the Company's financial condition and results of operations and requires it to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. Areas where management uses subjective judgment include, but are not limited to, revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets. The Company believes that it applies judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented. However, any factual errors or errors in these judgments and estimates may have a material impact on the Company's financial statements. For additional information, please refer to the Company's most recent Annual Report on Form 10-K, which was filed with the SEC on March 27, 2024.

Concentration of Risk

The Company's accounts receivable and note receivable are denominated in U.S. dollars and are derived primarily from sales to customers located in North America, Asia Pacific, and Europe. The Company performs ongoing credit evaluations of its customers and does not require collateral. See Note 12, Information Concerning Product Lines, Geographic Information and Revenue Concentration, for information regarding concentrations associated with accounts receivable.

As of March 31, 2024 and December 31, 2023, the Company had $20.0 million of revolving debt outstanding with Heritage Bank; the revolving debt carried an interest rate of 9.00% per annum. Heritage Bank has a first priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the agreement. The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period. The maturity date for advances under the revolving debt agreement is December 31, 2025. At March 31, 2024, the Company had utilized a significant portion of the revolving debt, and as a result, it maintains a substantial amount of cash deposits with Heritage Bank. The concentration of cash with one financial institution poses certain risks.

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For instance, adverse developments affecting financial institutions, companies in the financial services industry, or the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance, could adversely impact the stability of Heritage Bank, leading to additional financial risks for the Company.

Any material decline in available funding or the Company's ability to access its cash, cash equivalents, and liquidity resources, inclusive of those at Heritage Bank, could adversely impact its ability to meet its operating expenses, financial and contractual obligations, or result in breaches of its contractual obligations. Any of these impacts could have material adverse impacts on the Company's operations and liquidity.

Note 2 — Significant Accounting Policies

During the three months ended March 31, 2024, there were no changes to the Company's significant accounting policies from its disclosures in the Annual Report on Form 10-K for the year ended December 31, 2023. For a discussion of the significant accounting policies, please see the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 27, 2024.

In the three months ended March 31, 2024, there we no observable indicators of impairment for the non-marketable equity investment. Furthermore, utilizing the probability-of-default method to determine the current expected credit loss for the Company's note receivable, the Company determined the associated current expected credit loss to be de minimis as of March 31, 2024.

Financing Arrangements, Non-Cash Activities, & Correction of an Error

The Company previously classified certain licensed tooling software as leased assets and liabilities under ROU assets and financing lease liabilities pursuant to lease accounting under ASC 842, Leases. Upon further analysis, the Company determined these amounts are intangible assets subject to amortization in accordance with ASC 350, Intangibles, Goodwill, and Other and financed through financing arrangements. As a result, the Company corrected immaterial errors to revise its statement of cash flows for the three months ended April 2, 2023. Cash payments on notes payable during the three months ended April 2, 2023 were $0.2 million, instead of presented as payments of finance lease obligations. Proceeds from notes payable during the three months ended April 2, 2023 were $0.1 million, instead of increases in accrued liabilities and other long-term liabilities. Additionally, $0.2 million was added to the depreciation and amortization adjustment for amortization of software tools financed through financing arrangements for the three months ended April 2, 2023.

Additionally, non-cash activities of $0.9 million related to deferred charges and fixed assets in AP were removed from the statement of cash flows. Purchases of property and equipment with financing arrangements were $0.4 million for the three months ended April 2, 2023. Purchases of property and equipment in accounts payable was $22 thousand for the three months ended April 2, 2023.

The Company has determined the correction of these errors did not have a material impact on the Company's financial statements, including net income and the balance of accumulated deficit as of and for the three months ended April 2, 2023.

Additional Classifications in the Statement of Cash Flows

To conform with current quarter's classifications on the statement of cash flows, the Company has added the following classification lines: ROU asset amortization, Changes in lease liabilities, and Proceeds from issuance of common stock to investors. These reclassifications to the Statement of Cash Flows for the three months ended April 2, 2023 were not material.

Recent Accounting Standards Adopted

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions to clarify the measurement of the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and requires disclosures related to these types of equity securities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company adopted ASU No. 2020-06 on January 1, 2024 and it had no material impact on the Company's consolidated financial statements or related disclosures.

Recent Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures by providing information to better assess how an entity's operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. For public entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements or disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Disclosures About Reportable Segments to enhance disclosures about significant segment expenses, among other interim disclosure requirements. For public entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements or disclosures.

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Note 3 — Net Income (Loss) Per Share

Basic net income (loss) per share was computed by dividing net income (loss) available by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share was computed using the weighted average number of common shares outstanding during the period plus potentially dilutive common shares outstanding during the period under the treasury stock method. In computing diluted net income (loss) per share, the weighted average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants. For periods in which the Company has reported a net loss, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders as dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. For periods in which the Company has reported a net income, diluted net income per share attributable to common stockholders is different from basic net income per share attributable to common stockholders as dilutive common shares would increase the amount of shares outstanding reduced by the amounts of treasury shares repurchased from the proceeds at the average market price for the period.

For the three months ended March 31, 2024, 0.7 million shares of common stock associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding. Of these, a 0.4 million share equivalent was determined to be dilutive and included in the computation of diluted net income per share for the period. Estimated proceeds for the dilutive shares were determined to be $59 thousand, which resulted in a reduction of dilutive shares by 4,127 using the treasury stock method at an average market price of $14.39.

For the three months ended April 2, 2023, 0.7 million shares of common stock associated with equity awards and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan were outstanding. These shares were not included in the computation of diluted net loss per share, as they were considered anti-dilutive due to the net losses the Company experienced during this period. Warrants to purchase up to 386 thousand shares that were issued in connection with the May 29, 2018, stock offering were not included in the diluted loss per share calculation of the periods presented as they were also considered anti-dilutive due to the net loss the Company experienced during these periods. The warrants were exercisable through May 29, 2023 at a price of $19.32 per share. The warrants expired unexercised on May 29, 2023.

Note 4 — Balance Sheet Components

The following table provides details relating to certain balance sheet line items as of March 31, 2024, and December 31, 2023 (in thousands):

	*March 31,*			*December 31,*
	*2024*			*2023*
Inventories:
Work-in-process	$	1,555		$	1,602
Finished goods		368			427
	$	1,923		$	2,029
Prepaid expenses and other current assets:
Prepaid taxes	$	449		$	498
Deferred charges		523			290
Other prepaid taxes, royalties, and other prepaid expenses		717			629
Other		439			144
	$	2,128		$	1,561
Property and equipment, net:
Equipment	$	10,510		$	10,503
Software tools		1,364			2,163
Tooling		11,044			7,085
Software		1,803			1,803
Furniture and fixtures		65			65
Leasehold improvements		647			580
		25,433			22,199
Less: Accumulated depreciation and amortization		(13,013	)		(13,251	)
	$	12,420		$	8,948
Capitalized internal-use software, net:
Capitalized internal-use software	$	3,742		$	3,491
Less: Accumulated amortization		(1,595	)		(1,422	)
	$	2,147		$	2,069
Intangible assets, net:
Intangible assets	$	1,156		$	1,156
Less: Accumulated amortization		(646	)		(619	)
	$	510		$	537
Accrued liabilities:
Accrued compensation	$	570		$	1,910
Accrued employee benefits		184			57
Accrued payroll tax		295			197
Other		496			509
	$	1,545		$	2,673

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The Company capitalized $3.96 million in pre-production design and development costs as tooling to be utilized under its long-term professional services contracts for the three months ended March 31, 2024. No pre-production design and development costs were capitalized for the three months ended April 2, 2023. The capitalized assets recognized in the period are owned by the Company.

The Company recorded depreciation and amortization expense of $0.8 million and $0.4 million for the three months ended March 31, 2024 and April 2, 2023, respectively. No interest was capitalized for any period presented.

Depreciation and amortization expense included approximately $0.2 million and $0.1 million of amortization expense related to capitalized internal-use software for the three months ended March 31, 2024 and April 2, 2023, respectively.

Note 5 — Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation begins at the time the asset is placed in service. Maintenance and repairs are charged to operations as incurred. Depreciation is computed using the straight-line method over the following estimated useful lives of the assets:

	Useful Lives
Equipment	1 - 10 years
Software tools	1 - 2 years
Tooling	7 years
Software	1 - 7 years
Furniture and fixtures	5 - 7 years
Leasehold improvements	3 - 5 years

The amortization period of leasehold improvements made at the inception of the lease is directly related to the initial lease term, while the amortization period for subsequent leasehold improvements is directly related to the initial lease term adjusted for extensions.

Note 6 — Intangible Assets

The following table provides the details of the carrying value of intangible assets recorded from the 2019 acquisition of SensiML at March 31, 2024 (in thousands):

	*March 31, 2024*
	*Remaining Useful Life*		*Gross Carrying Amount*		*Accumulated Amortization*			*Net Carrying Amount*
Developed technology		4.75	$	959	$	(503	)	$	456
Customer relationships		—		81		(81	)		—
Trade names and trademarks		4.75		116		(62	)		54
Total acquired identifiable intangible assets			$	1,156	$	(646	)	$	510

The following table provides the details of future annual amortization of intangible assets, based upon the current useful lives at March 31, 2024 (in thousands):

	*Amount*
Annual Fiscal Years
2024 (remaining period)	$	80
2025		107
2026		107
2027		107
2028		109
Total	$	510

Note 7 — Debt Obligations

Revolving Line of Credit

As of March 31, 2024 and December 31, 2023, the Company had $20.0 million of revolving debt outstanding with an interest rate of 9.00% per annum. Heritage Bank has a first priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the agreement. The Company was in compliance with all loan covenants under the agreement as of the end of the current reporting period. Related interest expenses and annual facility fees recognized were $41 thousand for the three months ended March 31, 2024 and $33 thousand for the three months ended April 2, 2023.

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Financing Arrangements

The amount of assets purchased through financing arrangements on the balance sheet were $1.4 million and $1.2 million as of March 31, 2024 and April 2, 2023, respectively. The corresponding note payable amount for these financing arrangements was $1.4 million and $1.3 million as of March 31, 2024 and April 2, 2023, respectively. Payments related to financing arrangements were $0.2 million for the three months ended March 31, 2024 and April 2, 2023. The Company's outstanding financing arrangements as of March 31, 2024 have remaining terms of 0.42 years to 1.99 years, with a weighted average remaining term of 1.60 years. Stated interest rates for its financing arrangements outstanding as of March 31, 2024 range from 3.75% to 9.89%, with a weighted average interest rate of 8.20%. The Company's outstanding financing arrangements as of April 2, 2023 had remaining terms of 1.42 years to 2.95 years, with a weighted average remaining term of 2.16 years. Stated interest rates for its financing arrangements outstanding as of April 2, 2023 ranged from 3.75% to 9.89%, with a weighted average interest rate of 6.91%.

Remaining amounts due to be paid in Fiscal Years 2024 and 2025 as of March 31, 2024 are $0.9 million and $0.7 million, respectively, less amounts representing interest of $0.1 million results in the total notes payable amount of $1.4 million.

Note 8 — Leases

The Company's principal research and development and corporate facilities are leased office buildings located in the United States. These lease facilities are classified as operating leases and have lease terms of one to five years. The Company maintains sales offices out of which it conducts sales and marketing activities in various countries outside of the United States which are rented under short-term leases. The Company has elected the practical expedient to apply to recognition requirements to short-term leases and recognizes rent payments on short-term leases on a straight-line basis over the lease term. Total rent expenses were $0.1 million for the three months ended March 31, 2024 and April 2, 2023.

Right-of-use assets were approximately $0.9 million and $1.0 million as of March 31, 2024 and December 31, 2023, respectively. Lease liabilities were approximately $0.9 million and $1.0 million as of March 31, 2024 and December 31, 2023, respectively.

The following table provides the expenses related to operating and finance leases (in thousands):

	*Three Months Ended*
	*March 31, 2024*		*April 2, 2023*
Operating lease costs:
Fixed	$	91	$	100
Short term		4		4
Total	$	95	$	104

The following table provides the details of supplemental cash flow information (in thousands):

	*Three Months Ended*
	*March 31, 2024*		*April 2, 2023*
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	106	$	103

Non-cash ROU assets related to operating leases included in the operating cash flows for the three months ended March 31, 2024 and April 2, 2023 were $65 thousand and $90 thousand, respectively.

The following table provides the details of right-of-use assets and lease liabilities as of March 31, 2024 and December 31, 2023 (in thousands):

	*March 31, 2024*		*December 31, 2023*
Right-of-use assets:
Operating leases	$	916	$	981
Lease liabilities:
Operating leases	$	899	$	983

The following table provided the details of future lease payments for operating leases as of March 31, 2024 (in thousands):

	Operating Leases
2024 (remaining period)	$	272
2025		340
2026		351
2027		64
Total lease payments		1,027
Less: Interest		(128	)
Present value of lease liabilities	$	899

The following table provides the details of lease terms and discount rates as of March 31, 2024 and December 31, 2023:

	*March 31, 2024*			*December 31, 2023*
Right-of-use assets:
Weighted-average remaining lease term (years)
Operating leases⁽¹⁾		3.00			3.25
Weighted-average discount rates:
Operating leases		6.00	%		6.00	%

⁽¹⁾ The operating lease relates to the Company's headquarters in San Jose, CA. The lease term expires on April 14, 2027.

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Note 9 — Capital Stock

Issuance of Common Stock

On March 13, 2024, the Company entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 222,500 thousand shares of common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $3.5 million. The purchase price for each share of common stock was $16.00. The per share purchase price reflects a zero discount based upon the 10-day volume weighted average price on the day the pricing was agreed. Issuance costs related to the offering were immaterial.

On August 17, 2022, the Company filed a Registration Statement on Form S-3 (File No. 333-266942) with the SEC, under which it may sell, from time-to-time common stock, preferred stock, depositary shares, warrants, debt securities, and units, individually or as units comprised of one or more of the other securities or a combination thereof. The Company's registration statement became effective on August 26, 2022.

Note 10 — Stock-Based Compensation

Stock-based compensation expense included in the Company's consolidated financial statements for the three months ended March 31, 2024 and April 2, 2023 was as follows (in thousands):

	*Three Months Ended*
	*March 31, 2024*		*April 2, 2023*
Cost of revenue	$	237	$	78
Research and development		357		184
Selling, general and administrative		969		453
Total	$	1,563	$	715

The Company capitalized stock-based compensation amounts to capitalized internal-use software and tooling, net of $146 thousand and $18 thousand for the three months ended March 31, 2024 and April 2, 2023, respectively.

Stock-Based Compensation Award Activity

The following table summarizes the activity in the shares available for grant under the 2019 Plan during the three months ended March 31, 2024 (in thousands):

	*Shares Available for Grants*
Balance at December 31, 2023		595
Restricted stock units (RSUs) granted		(114	)
RSUs forfeited or expired		1
Balance at March 31, 2024		482

Stock Options

The following table summarizes stock options outstanding and stock option activity under the 2009 Plan and the 2019 Plan, and the related weighted average exercise price for the three months ended March 31, 2024:

Weighted

Average

Aggregate

Number of

Exercise

Remaining

Intrinsic

Shares

Price

Term

Value

(in thousands)

(in years)

(in thousands)

Balance outstanding at December 31, 2023

19.45

Activity during period

—

Balance outstanding, exercisable, and vested at March 31, 2024

19.45

2.03

190

No stock options were granted, exercised or forfeited during the three months ended March 31, 2024 and April 2, 2023.

Total stock-based compensation related to stock options was $0 during the three months ended March 31, 2024 and April 2, 2023.

Restricted Stock Units

The Company grants restricted stock units (“RSUs”) and performance restricted stock units ("PRSUs") to employees and directors with various vesting terms. RSUs entitle the holder to receive, at no cost, one common share for each RSU as it vests. In general, the Company's policy is to withhold shares in settlement of employee tax withholding obligations upon the vesting of RSUs. The stock-based compensation expense related to RSUs and PRSUs were approximately $1.5 million and $0.7 million for the three months ended March 31, 2024 and April 2, 2023, respectively.

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As of March 31, 2024 and April 2, 2023, there was approximately $3.1 million and $2.2 million, respectively, in unrecognized compensation expense related to RSUs. The remaining unrecognized stock-based compensation expense as of March 31, 2024 is expected to be recorded over a weighted average period of 0.81 years.

A summary of activity for the Company's RSUs and PRSUs for the three months ended March 31, 2024 is as follows:

	*RSUs & PRSUs Outstanding*
				*Weighted*
				*Average*
	*Number of*			*Grant Date*
	*Shares*			*Fair Value*
	(in thousands)
Nonvested at December 31, 2023		589		$	7.35
Granted		114			14.17
Vested and released		(70	)		12.89
Forfeited		(1	)		6.10
Nonvested at March 31, 2024		632		$	7.97

Employee Stock Purchase Plan

Total stock-based compensation related to the Company's Employee Stock Purchase Plan was approximately $28 thousand and $30 thousand for the three months ended March 31, 2024 and April 2, 2023, respectively.

Note 11 — Income Taxes

The Company recorded a net income tax expense of $7 thousand for the three months ended March 31, 2024 and April 2, 2023. The difference between the estimated annual effective tax rate of 0.80% and the U.S. federal statutory tax rate of 21% is primarily due to the Company's valuation allowance movement in each period presented. It is more likely than not that the Company will not realize the federal, state, and certain foreign deferred tax assets as of March 31, 2024. As such, the Company continues to maintain a full valuation allowance against all of its US and certain foreign net deferred tax assets as of March 31, 2024.

SEC Form 10-Q filed by QuickLogic Corporation