QuickLogic(QUIK) - 2024 Q1 - Quarterly Report

Part I - Financial Information This section provides a comprehensive overview of the company's financial performance and position, including statements, notes, and management's analysis Item 1. Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's accounting policies, financial position, and operational results for the quarter ended April 2, 2023 Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric (in thousands) | April 2, 2023 | January 1, 2023 | Change | % Change | | :-------------------- | :------------ | :-------------- | :----- | :------- | | Cash, cash equivalents and restricted cash | $20,902 | $19,201 | $1,701 | 8.86% | | Total current assets | $29,881 | $27,940 | $1,941 | 6.95% | | TOTAL ASSETS | $34,736 | $32,586 | $2,150 | 6.60% | | Revolving line of credit | $15,000 | $15,000 | $0 | 0.00% | | Total current liabilities | $20,275 | $20,022 | $253 | 1.26% | | Total liabilities | $21,061 | $20,691 | $370 | 1.79% | | Total stockholders' equity | $13,675 | $11,895 | $1,780 | 14.96% | Consolidated Statements of Operations This statement details the company's revenues, expenses, and net loss over a specific reporting period | Metric (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Revenue | $4,133 | $4,096 | $37 | 0.90% | | Cost of revenue | $1,743 | $1,635 | $108 | 6.61% | | Gross profit | $2,390 | $2,461 | $(71) | -2.89% | | Research and development | $1,629 | $1,333 | $296 | 22.21% | | Selling, general and administrative | $1,861 | $2,137 | $(276) | -12.91% | | Total operating expenses | $3,490 | $3,470 | $20 | 0.58% | | Loss from operations | $(1,100) | $(1,009) | $(91) | 9.02% | | Net loss | $(1,228) | $(1,164) | $(64) | 5.50% | | Net loss per share (Basic and diluted) | $(0.09) | $(0.10) | $0.01 | -10.00% | | Weighted average shares outstanding (Basic and diluted) | 13,215 | 12,126 | 1,089 | 8.98% | Consolidated Statements of Cash Flows This statement reports the cash generated and used by operating, investing, and financing activities | Metric (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Net cash used in operating activities | $(262) | $(700) | $438 | -62.57% | | Net cash used in investing activities | $(188) | $(149) | $(39) | 26.17% | | Net cash provided by financing activities | $2,151 | $1,384 | $767 | 55.42% | | Net increase in cash, cash equivalents and restricted cash | $1,701 | $535 | $1,166 | 217.94% | | Cash, cash equivalents and restricted cash at end of period | $20,902 | $20,140 | $762 | 3.78% | Consolidated Statements of Changes in Stockholders' Equity This statement outlines the changes in the company's equity accounts over the reporting period | Metric (in thousands) | January 1, 2023 | April 2, 2023 | Change | | :-------------------- | :-------------- | :------------ | :----- | | Common Stock (Shares) | 13,202 | 13,686 | 484 | | Common Stock (Amount) | $13 | $14 | $1 | | Additional Paid-In Capital | $317,174 | $320,181 | $3,007 | | Accumulated Deficit | $(305,292) | $(306,520) | $(1,228) | | Total Stockholders' Equity | $11,895 | $13,675 | $1,780 | - The increase in stockholders' equity was primarily driven by the issuance of common stock under a public offering, net of issuance costs, contributing $2.29 million, and common stock issued under stock plans and employee stock purchase plans, adding $0.715 million, partially offset by a net loss of $1.228 million[17] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide additional details and explanations for the figures presented in the financial statements Note 1 — The Company and Basis of Presentation This note describes the company's business, operations, and the foundational principles of financial statement preparation - QuickLogic Corporation, founded in 1988, is a fabless semiconductor provider specializing in ultra-low power SoC solutions, embedded software, and algorithm solutions for always-on voice and sensor processing. The company's offerings include eFPGA IP, display bridges, and FPGAs, with an increased focus on professional engineering services since late 2021. Its subsidiary, SensiML Corp., provides an Analytics Toolkit for developing machine learning-based sensor algorithms optimized for ultra-low power consumption[20] - On January 20, 2023, the Company detected a ransomware infection affecting a limited number of IT systems. The company believes the incident has not had, nor will have, a material impact on its business operations, ability to serve customers, or financial results, and has restored critical operational data and enhanced IT security[23][24] - As of April 2, 2023, the Company's liquidity included $20.9 million in cash, cash equivalents, and restricted cash, a $15.0 million advance from its Revolving Facility, and $2.3 million in net proceeds from a common stock sale. The company believes these resources, along with operational revenues, will be sufficient to fund operations and capital expenditures for the next twelve months[25][28] Note 2 — Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - There were no changes to the Company's significant accounting policies during the three months ended April 2, 2023, from those disclosed in its Annual Report on Form 10-K for the year ended January 1, 2023. The Company early adopted ASU No. 2020-06 on January 2, 2023, which had no material impact on its financial statements[40][41] Note 3 — Net Loss Per Share This note details the calculation of basic and diluted net loss per share for the reporting period - For the three months ended April 2, 2023, 740 thousand shares associated with equity awards and the Employee Stock Purchase Plan, along with warrants for 386 thousand shares, were excluded from diluted net loss per share calculations as they were anti-dilutive due to the Company's net losses[44] Note 4 — Balance Sheet Components This note provides disaggregated information on various assets and liabilities presented on the balance sheet | Balance Sheet Item (in thousands) | April 2, 2023 | January 1, 2023 | | :-------------------------------- | :------------ | :-------------- | | Accounts receivable, net | $2,090 | $2,689 | | Inventories | $2,497 | $2,493 | | Prepaid expenses and other current assets | $2,064 | $1,570 | | Property and equipment, net | $442 | $465 | | Capitalized internal-use software, net | $1,576 | $1,514 | | Accrued liabilities | $1,706 | $1,509 | Note 5 — Debt Obligations This note describes the company's outstanding debt, including terms, interest rates, and compliance with covenants - As of April 2, 2023, the Company had $15.0 million outstanding on its revolving debt with Heritage Bank, carrying an interest rate of 8.5% per annum, up from 8.00% on January 1, 2023. The Company was in compliance with all loan covenants[46] | Metric (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Interest expense | $33 | $24 | $9 | 37.50% | Note 6 — Leases This note provides details on the company's operating and finance lease arrangements and associated costs | Lease Costs (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Operating lease costs | $104 | $106 | $(2) | -1.89% | | Finance lease costs | $182 | $116 | $66 | 56.90% | | Total cash paid for lease liabilities | $267 | $205 | $62 | 30.24% | | Lease Liabilities (in thousands) | April 2, 2023 | January 1, 2023 | Change | % Change | | :------------------------------- | :------------ | :-------------- | :----- | :------- | | Total right-of-use assets | $1,592 | $1,397 | $195 | 13.96% | | Total lease liabilities | $1,601 | $1,394 | $207 | 14.85% | Note 7 — Capital Stock This note outlines changes in the company's capital stock, including issuances and related proceeds - On March 21, 2023, the Company completed a registered direct offering, selling 450 thousand shares of common stock at $5.14 per share, generating approximately $2.3 million in net cash proceeds[53] Note 8 — Stock-Based Compensation This note details the expense recognized for stock options, restricted stock units, and other equity awards | Stock-Based Compensation (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Cost of revenue | $78 | $56 | $22 | 39.29% | | Research and development | $184 | $85 | $99 | 116.47% | | Selling, general and administrative | $453 | $242 | $211 | 87.27% | | Total | $715 | $383 | $332 | 86.68% | - Total stock-based compensation expense increased by 86.68% year-over-year, from $383 thousand in Q1 2022 to $715 thousand in Q1 2023. Unrecognized compensation expense related to RSUs was approximately $2.2 million as of April 2, 2023, expected to be recorded over 1.38 years[56][61] Note 9 — Income Taxes This note provides information on the company's income tax expense, effective tax rates, and deferred tax assets/liabilities | Income Tax (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :------------------------ | :------------------------------- | :------------------------------- | :----- | :------- | | Net income tax expense (benefit) | $7 | $(1) | $8 | -800.00% | - The Company recorded a net income tax expense of $7 thousand for Q1 2023, compared to a net benefit of $1 thousand for Q1 2022. The effective tax rates were (0.6%) and 0.1% respectively, differing from the statutory rate primarily due to a full valuation allowance against US and certain foreign net deferred tax assets[64] Note 10 — Information Concerning Product Lines, Geographic Information and Revenue Concentration This note disaggregates revenue by product family, geographic region, and significant customer concentration | Revenue by Product Family (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :------------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | New products | $3,055 | $3,450 | $(395) | -11.45% | | Mature products | $1,078 | $646 | $432 | 66.87% | | Total revenue | $4,133 | $4,096 | $37 | 0.90% | | New Product Revenue Breakdown (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Hardware products | $162 | $1,835 | $(1,673) | -91.17% | | eFPGA IP and professional services | $2,810 | $1,581 | $1,229 | 77.73% | | SaaS & Other | $83 | $34 | $49 | 144.12% | | Total new product revenue | $3,055 | $3,450 | $(395) | -11.45% | | Revenue by Destination (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :------------------------------------ | :------------------------------- | :------------------------------- | :----- | :------- | | Asia Pacific | $713 | $1,491 | $(778) | -52.18% | | North America | $3,318 | $2,433 | $885 | 36.37% | | Europe | $102 | $172 | $(70) | -40.70% | | Total revenue | $4,133 | $4,096 | $37 | 0.90% | | Major Customers/Distributors (Revenue Concentration) | April 2, 2023 | April 3, 2022 | | :------------------------------------------------- | :------------ | :------------ | | Customer "A" | 54% | * | | Distributor "A" | 16% | 11% | | Customer "O" | * | 27% | | Customer "P" | * | 23% | | Distributor "E" | * | 30% | Note 11 — Commitments and Contingencies This note discloses the company's contractual obligations, legal matters, and other potential future liabilities - As of April 2, 2023, the Company had $1.3 million in outstanding purchase obligations for other goods and services due within the next twelve months. Contingent commitments were approximately $3.8 million due within the next twelve months and $8.7 million due within two to three years[77][78] Note 12 — Subsequent Events This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - On April 28, 2023, the Company converted approximately $1.16 million in accounts receivable from a customer into a notes receivable, bearing a 3.0% monthly compounded interest rate and maturing on April 28, 2024[80] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended April 2, 2023, discussing revenue trends, gross profit, operating expenses, liquidity, and capital resources, and highlighting key factors influencing performance Overview This section provides a general introduction to the company's business model, strategic focus, and recent financial highlights - QuickLogic develops low-power, multi-core semiconductor platforms and IP for AI, voice, and sensor processing, including eFPGA for hardware acceleration and the SensiML Analytics Toolkit for AI software development. The company's growth is expected to be driven by silicon solutions, eFPGA IP, and SensiML AI Software, with anticipated revenue growth from EOS S3, SensiML AI SaaS, and eFPGA IP licensing in fiscal year 2023[85][94] - Total revenue for Q1 2023 was $4.1 million, a 1% increase year-over-year. New product revenue decreased by 11% to $3.1 million, primarily due to a $1.7 million reduction in hardware product revenue, offset by a $1.2 million increase in eFPGA IP revenue. Mature product revenue increased by 67% to $1.1 million[96] - The company reported a net loss of $1.2 million for Q1 2023, an increase of 5% compared to Q1 2022, and expects losses to continue through at least fiscal year 2023 due to ongoing investments in new products and technologies[97][98] Critical Accounting Policies and Estimates This section discusses the accounting policies and estimates that require significant judgment and can materially impact financial results - The Company's critical accounting policies include revenue recognition, determination of Stand-Alone Selling Price (SSP) for IP licensing and professional services, and valuation of inventories. No changes to these policies occurred during the three months ended April 2, 2023[101] Results of Operations This section analyzes the company's revenues, costs, and expenses, explaining the factors driving changes in financial performance | Metric | Three Months Ended April 2, 2023 (% of Revenue) | Three Months Ended April 3, 2022 (% of Revenue) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Revenue | 100% | 100% | | Cost of revenue | 42% | 40% | | Gross profit | 58% | 60% | | Research and development | 39% | 33% | | Selling, general and administrative | 46% | 52% | | Loss from operations | (27)% | (25)% | | Net loss | (30)% | (28)% | - Gross profit decreased by $71 thousand (3%) year-over-year, reflecting a 7% increase in cost of revenue primarily due to higher eFPGA IP tooling costs and increased outside costs and material price variances[107] - Research and Development (R&D) expenses increased by $0.3 million (22%) year-over-year, mainly due to decreased R&D costs allocated to Cost of Goods Sold for eFPGA professional services, and increases in stock-based compensation and software costs. Selling, General and Administrative (SG&A) expenses decreased by $0.3 million (13%) year-over-year, driven by reductions in consulting, salary, and accounting/audit expenses, partially offset by higher stock-based compensation, insurance, and sales commissions[109][110][111] | Interest & Other Income/Expense (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Interest expense | $(58) | $(33) | $25 | 75.76% | | Interest income and other income (expense), net | $(63) | $(123) | $60 | -48.78% | | Total interest expense, interest income and other income (expense), net | $(121) | $(156) | $35 | -22.44% | Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations and fund its operations - The Company's liquidity sources as of April 2, 2023, included $20.9 million in cash, cash equivalents, and restricted cash, a $15.0 million draw from its revolving line of credit, and $2.3 million in net proceeds from a common stock sale. Management believes these resources are sufficient to fund operations and capital expenditures for the next twelve months[115][118] | Cash Flows (in thousands) | Three Months Ended April 2, 2023 | Three Months Ended April 3, 2022 | Change | % Change | | :------------------------ | :------------------------------- | :------------------------------- | :----- | :------- | | Net cash used in operating activities | $(262) | $(700) | $438 | -62.57% | | Net cash used in investing activities | $(188) | $(149) | $(39) | 26.17% | | Net cash provided by financing activities | $2,151 | $1,384 | $767 | 55.42% | - Net cash used in operating activities decreased significantly to $0.3 million in Q1 2023 from $0.7 million in Q1 2022, primarily due to a decrease in accounts receivable and increases in accrued liabilities. Net cash provided by financing activities increased to $2.2 million, mainly from stock issuances[126][129] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there are no material quantitative and qualitative disclosures about market risk applicable to the Company for the reported period - Not Applicable[134] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of April 2, 2023, and reported no material changes in internal control over financial reporting during the period - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of April 2, 2023[135] - There were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period[137] Part II - Other Information This section covers non-financial information, including legal proceedings, risk factors, defaults, exhibits, and signatures Item 1. Legal Proceedings This section indicates that there are no material legal proceedings to report for the period - None[140] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Company's 2022 Annual Report on Form 10-K - There have been no material changes to the risk factors set forth in the Company's 2022 Annual Report on Form 10-K for the year ended January 1, 2023[141] Item 3. Defaults Upon Senior Securities This section reports that there were no defaults upon senior securities during the period - None[142] Item 6. Exhibits This section lists the exhibits filed or incorporated by reference into the report, including certifications from the CEO and CFO, and Inline XBRL documents | Exhibit Number | Description | | :------------- | :---------- | | 31.1 | Certification of Brian C. Faith, CEO, pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | | 31.2 | Certification of Elias Nadar, CFO, pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | | 32.1 | Certification of Brian C. Faith, CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | | 32.2 | Certification of Elias Nadar, CFO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | | 101.INS | Inline XBRL Instance Document | | 104 | The cover page from the Company's quarterly report on Form 10-Q for the quarter ended April 2, 2023, has been formatted in Inline XBRL and contained in exhibit 101 | Signatures This section contains the required signatures for the Form 10-Q filing - The report was signed on behalf of QuickLogic Corporation by Elias Nader, Chief Financial Officer and Senior Vice-President, Finance, on May 17, 2023[146]