quicklo20230614

quicklo20230614_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 July 2, 2023

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

For the Transition Period From To

COMMISSION FILE NUMBER: 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 August 11, 2023, there were 13,858,652 shares of registrant’s common stock, par value $0.001 per share, outstanding.

Table of Contents

QUICKLOGIC CORPORATION

FORM 10-Q

July 2, 2023

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	24

Item 4.	Controls and Procedures	24

Part II - Other Information		25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 3.	Defaults Upon Senior Securities	25

Item 6.	Exhibits	25

Signatures		26

Table of Contents

PART I. Financial Information

Item 1. Financial Statements

QUICKLOGIC CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value amount)

	*July 2,*			*January 1,*
	*2023*			*2023*
ASSETS
Current assets:
Cash, cash equivalents and restricted cash	$	20,565		$	19,201
Accounts receivable, net of allowance for doubtful accounts of $14 and $18, as of July 2, 2023 and January 1, 2023, respectively		937			2,689
Contract assets		1,013			1,987
Inventories		2,455			2,493
Prepaid expenses and other current assets		3,045			1,570
Total current assets		28,015			27,940
Property and equipment, net		2,183			465
Capitalized internal-use software, net		1,622			1,514
Right of use assets, net		1,338			1,397
Intangible assets, net		591			645
Non-marketable equity investment		300			300
Goodwill		185			185
Other assets		142			140
TOTAL ASSETS	$	34,376		$	32,586

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit	$	15,000		$	15,000
Trade payables		3,406			2,391
Accrued liabilities		1,965			1,509
Deferred revenue		294			272
Lease liabilities, current		914			850
Total current liabilities		21,579			20,022
Long-term liabilities:
Lease liabilities, non-current		441			544
Other liabilities, non-current		181			125
Total liabilities		22,201			20,691
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; 13,725 and 13,202 shares issued and outstanding as of July 2, 2023 and January 1, 2023, respectively		14			13
Additional paid-in capital		320,950			317,174
Accumulated deficit		(308,789	)		(305,292	)
Total stockholders' equity		12,175			11,895
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	34,376		$	32,586

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*						*Six Months Ended*
	*July 2,*			*July 3,*			*July 2,*			*July 3,*
	*2023*			*2022*			*2023*			*2022*
Revenue	$	2,921		$	4,541		$	7,054		$	8,637
Cost of revenue		1,718			1,997			3,461			3,632
Gross profit		1,203			2,544			3,593			5,005
Operating expenses:
Research and development		1,505			1,190			3,134			2,523
Selling, general and administrative		1,924			1,981			3,785			4,118
Total operating expenses		3,429			3,171			6,919			6,641
Loss from operations		(2,226	)		(627	)		(3,326	)		(1,636	)
Interest expense		(50	)		(22	)		(108	)		(55	)
Interest income and other expense, net		—			142			(63	)		19
Loss before income taxes		(2,276	)		(507	)		(3,497	)		(1,672	)
Provision for (benefit from) income tax		(7	)		17			—			16
Net loss	$	(2,269	)	$	(524	)	$	(3,497	)	$	(1,688	)
Net loss per share:
Basic and diluted	$	(0.17	)	$	(0.04	)	$	(0.26	)	$	(0.14	)
Weighted average shares outstanding:
Basic and diluted		13,709			12,412			13,297			12,269

Note: Net loss equals comprehensive 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)

	*Six Months Ended*
	*July 2,*			*July 3,*
	*2023*			*2022*
Cash flows from operating activities:
Net loss	$	(3,497	)	$	(1,688	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		411			334
Stock-based compensation		1,301			860
Write-down of inventories and reclassifications		212			54
Gain on disposal of equipment		—			(76	)
Other		5			—
Changes in operating assets and liabilities:
Accounts receivable		1,747			(2,266	)
Contract assets		974			—
Inventories		(174	)		(188	)
Other assets		(1,475	)		(6	)
Trade payables		(269	)		1,161
Accrued liabilities		455			87
Deferred revenue		22			(313	)
Other long-term liabilities		56			(22	)
Net cash used in operating activities		(232	)		(2,063	)
Cash flows from investing activities:
Capital expenditures for property and equipment		(227	)		(117	)
Capitalized internal-use software		(303	)		(285	)
Net cash used in investing activities		(530	)		(402	)
Cash flows from financing activities:
Payment of finance lease obligations		(288	)		(198	)
Proceeds from line of credit		30,000			30,000
Repayment of line of credit		(30,000	)		(30,000	)
Proceeds from issuance of common stock		121			1,604
Proceeds from issuance of common stock to investors		2,313			—
Stock issuance cost		(20	)		—
Net cash provided by financing activities		2,126			1,406
Net increase (decrease) in cash, cash equivalents and restricted cash		1,364			(1,059	)
Cash, cash equivalents and restricted cash at beginning of period		19,201			19,605
Cash, cash equivalents and restricted cash at end of period	$	20,565		$	18,546

Supplemental disclosures of cash flow information:
Interest paid	$	42		$	13
Income taxes paid	$	10		$	12

Supplemental disclosures of non-cash financing and investing items
Purchases of fixed assets with financing lease	$	445		$	—
Stock-based compensation capitalized as internal-use software	$	20		$	—
Stock-based compensation capitalized as tooling and fixed assets	$	41		$	—
Purchases of property and equipment in accounts payable	$	1,147		$	13

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 January 1, 2023		13,202	$	13	$	317,174	$	(305,292	)	$	11,895
Issuance of common stock under public stock offering, 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
Common stock issued under stock plans and employee stock purchase plan		39		—		122		—			122
Stock-based compensation		—		—		647		—			647
Net loss		—		—		—		(2,269	)		(2,269	)
Balance at July 2, 2023		13,725	$	14	$	320,950	$	(308,789	)	$	12,175

					*Additional*					*Total*
	*Common Stock*				*Paid-In*		*Accumulated*			*Stockholders'*
	*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balance at January 2, 2022		11,863	$	12	$	310,222	$	(301,025	)	$	9,209
Issuance of common stock under public stock offering, net of stock issuance cost		310		—		1,482		—			1,482
Common stock issued under stock plans and employee stock purchase plans		189		—		383		—			383
Net loss		—		—		—		(1,164	)		(1,164	)
Balance at April 3, 2022		12,362		12		312,087		(302,189	)		9,910
Common stock issued under stock plans and employee stock purchase plan		66		—		122		—			122
Stock-based compensation		—		—		477		—			477
Net loss		—		—		—		(524	)		(524	)
Balance at July 3, 2022		12,428	$	12	$	312,686	$	(302,713	)	$	9,985

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 ("QuickLogic" or, the "Company"), was founded in 1988 and reincorporated in Delaware in 1999. The Company enables Original Equipment Manufacturers ("OEMs"), to maximize battery life for highly differentiated, immersive user experiences with Smartphone, Wearable, Hearable, Tablet, and Internet-of-Things or IoT hardware products, Military, Aerospace and Defense products. QuickLogic delivers these benefits through industry leading ultra-low power customer programmable System on Chip ("SoC") semiconductor solutions, embedded software, and algorithm solutions for always-on voice and sensor processing. The Company is a fabless semiconductor provider of comprehensive, flexible sensor processing solutions, ultra-low power display bridges, and ultra-low power Field Programmable Gate Arrays ("FPGAs"). Starting in late 2021, the Company increased its professional engineering services business related to its eFPGA products for both civilian and military applications. The Company’s wholly owned subsidiary, SensiML Corp. ("SensiML"), provides Analytics Toolkit, which is used in many of the applications where the Company’s ArcticPro™, eFPGA intellectual property ("IP") plays a critical role. SensiML Analytics toolkit is an end-to-end software suite that provides OEMs a straightforward process for developing pattern matching sensor algorithms using machine learning technology that are optimized for ultra-low power consumption.

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 January 1, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on March 28, 2023. Operating results for the three and six months ended July 2, 2023 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 second fiscal quarter for 2023 and 2022 ended on July 2, 2023 and July 3, 2022, respectively.

2023 Cybersecurity Incident

On January 20, 2023, the Company detected a ransomware infection affecting a limited number of IT systems, including systems that contained personal information of our employees. Upon detection of the incident, the Company promptly began an assessment of all Company IT systems, notified law enforcement, and engaged legal counsel and other incident response professionals. Through counsel, the Company retained a leading cybersecurity forensics firm to review and investigate the incident. We have completed our forensic work and have found no impact on our financial systems. For potentially affected individuals or entities whose personally identifiable data may have been accessed, we are providing free credit monitoring services to them.

The Company is voluntarily taking steps to further secure its IT infrastructure, systems, and security. The Company believes the incident has not had nor will have a material impact on its business operations, ability to service its customers, or financial results. The Company carries insurance, including cyber insurance, commensurate with its size and the nature of its operations.

Liquidity

The Company has financed its operations and capital investments through the sale of common stock, finance and operating leases, a revolving line of credit with Heritage Bank (the "Revolving Facility"), and cash flows from operations. As of July 2, 2023, the Company's principal sources of liquidity consisted of cash, cash equivalents and restricted cash of $20.6 million, inclusive of a $15.0 million advance from its Revolving Facility, and $2.3 million in net proceeds from the Company's sale of common stock in the six months ended July 2, 2023. The Company's restricted cash balance as of July 2, 2023 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 July 2, 2023. As of July 2, 2023, the Company had $15.0 million outstanding on the Revolving Facility with an interest rate of 8.75%.

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.

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 common stock, par value $0.001, in a registered direct offering, resulting in net cash proceeds of approximately $2.3 million. Issuance costs related to the offering were negligible. The purchase price for each share of common stock was $5.14. See Note 7 for additional information.

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 as of July 2, 2023, together with 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 its, ArcticLink® and PolarPro® platforms, ArcticPro™, EOS S3 SoC, Quick AI solution, and ™, QuickAI™, SensiML Analytics Toolkit, Eclipse II products, eFPGA IP licenses 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 ability to capitalize on synergies with our subsidiary SensiML; 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 in December 2024, 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

SEC Form 10-Q filed by QuickLogic Corporation