See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — The Company and Basis of Presentation
QuickLogic Corporation, or QuickLogic or the Company was founded in 1988 and reincorporated in Delaware in 1999. The Company enables Original Equipment Manufacturers, or OEMs to maximize battery life for highly differentiated, immersive user experiences with Smartphone, Wearable, Hearable, Tablet and Internet-of-Things, or IoT devices. QuickLogic delivers these benefits through industry leading ultra-low power customer programmable System on Chip, or SoC semiconductor solutions, embedded software, and algorithm solutions for always-on voice and sensor processing, and enhanced visual experiences. 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, or FPGAs. The Company’s wholly owned subsidiary, SensiML Corporation, or SensiML, provides Analytics Toolkit, which is used in many of the applications where the Company’s ArcticPro™ eFPGA intellectual property, or 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, or 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 condensed consolidated financial statements be read in conjunction with the Company's Form 10-K for the year ended December 30, 2018, which was filed with the Securities and Exchange Commission, or SEC, on March 15, 2019, as amended. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the full 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 quarters for 2019 and for 2018 ended on June 30, 2019 and July 1, 2018, respectively.
Liquidity
The Company has financed its operations and capital investments through sales of common stock, finance leases, bank lines of credit and cash flows from operations. As of June 30, 2019, the Company's principal sources of liquidity consisted of cash and cash equivalents and restricted cash of $28.2 million, including $15.0 million drawn down from its revolving line of credit with Heritage Bank of Commerce, or Heritage Bank. The maturity date for loans under this revolving facility, or the Revolving Facility, is September 28, 2020.
On June 21, 2019, the Company issued an aggregate of 18.4 million shares of common stock, $0.001 par value, including the exercise of option for overallotment of 2.4 million shares by the underwriters, in an underwritten public offering at a price of $ 0.50 per share. The company received net proceeds of approximately $8.3 million, after deducting underwriting commissions and other offering-related expenses paid in the second quarter of 2019.
Various factors can 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
®
, PolarPro
®
platforms, eFPGA, EOS S3 SoC, Quick AI solution, SensiML software and Freedom Aware SoC Templates; 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 newly acquired 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.
7
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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 Revo
lving Facility with the 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 September 2020, and its ability to rai
se 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 f
inancial condition, including its ability to maintain compliance with its lender’s financial covenants.
Principles of Consolidation
The 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.
Uses of Estimates
The preparation of these 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 contingent assets and liabilities and the reported amounts of revenue and expenses during the period. Actual results could differ materially from those estimates, particularly in relation to revenue recognition, the allowance for doubtful accounts, sales returns, valuation of investments, valuation of long-lived assets including mask sets, valuation of goodwill and intangibles related to the acquisition of SensiML, including the estimated useful lives of acquired intangible assets, valuation of inventories including identification of excess quantities, market value and obsolescence, measurement of stock-based compensation awards, accounting for income taxes and estimating accrued liabilities.
Contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Judgment is required to determine the Stand-alone Selling Price, or SSP, for each distinct performance obligation. The Company uses a range of amounts to estimate SSP when each of the products and services are sold separately and determines the discount to be allocated based on the relative SSP of the various products and services when products and services sold are bundled. In instances where SSP is not directly observable, such as when the Company does not sell the product or service separately, it determines the SSP using information that may include market conditions and other observable inputs. The Company typically has more than one SSP for individual products and services due to the stratification of those products and services by customers. In these instances, the Company may use information such as the size of the customer, customer tier, type of the technology used, customer demographics, geographic region and other factors in determining the SSP.
Concentration of Risk
The Company's accounts 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 generally does not require collateral. See Note 14 for information regarding concentrations associated with accounts receivable.
8
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 2 — Significant Ac
counting Policies
During the six-month period ended June 30, 2019, there were no changes in the Company's significant accounting policies from its disclosures in the Annual Report on Form 10-K for the year ended December 30, 2018 except the new accounting standards adopted during the first six months of 2019. For a discussion of the significant accounting policies, please see the Annual Report on Form 10-K for the fiscal year ended December 30, 2018, filed with the SEC on March 15, 2019, as amended.
Revenue Recognition
The Company applies Accounting Standards Codification, or ASC, Topic 606,
Revenue from Contracts with Customers
, to recognize revenue. The guidance states that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Under the new standard revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration it expects to receive in exchange for those products or services.
The Company determines revenue recognition through the following steps:
|
•
|
Identification of the contract, or contracts, with a customer
|
|
•
|
Identification of the performance obligations in the contract
|
|
•
|
Determination of the transaction price
|
|
•
|
Allocation of the transaction price to the performance obligations in the contract; and
|
|
•
|
Recognition of revenue when, or as, a performance obligation
is satisfied
|
As part of its assessment of each contract, the Company evaluates certain factors including the customer’s ability to pay, or credit risk. For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. In determining the transaction price, the price stated on the purchase order is typically fixed and represents the net consideration to which the Company expects to be entitled, and therefore there is no variable consideration. As the Company’s standard payment terms are less than one year, the Company has elected, as a practical expedient, to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative stand-alone selling price. The product price as specified on the purchase order is considered the stand-alone selling price as it is an observable source that depicts the price as if sold to a similar customer in similar circumstances.
Leases
The Company adopted Accounting Standards Update, or ASU, No. 2016-02,
Leases (Topic 842)
and related ASUs, which provide supplementary guidance and clarifications on December 31, 2018, utilizing the modified retrospective transition method through a cumulative-effect adjustment at the beginning of the first quarter of 2019. Additionally, the Company elected the practical expedient approach and did not reassess whether any contracts that existed prior to adoption have or contain leases or the classification of our existing leases
.
Under Topic 842, all significant lease arrangements are generally recognized at lease commencement. Operating lease right-of-use, or ROU, assets and lease liabilities are recognized at the commencement date. A ROU asset and corresponding lease liability is not recorded for leases with an initial term of 12 months or less (short term leases) and the Company recognizes lease expense for these leases as incurred over the lease term.
ROU assets represent our right to use an underlying asset during the reasonably certain lease terms and lease liabilities represent our obligation to make lease payments arising from the lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company primarily uses its incremental borrowing rate, based on the information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments related to initial direct cost and prepayments and excludes lease incentives. Lease expense is recognized on a straight-line basis over the
9
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
lease term. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. Upon adoption of ASU No. 2016-02, the Company recognized right-of-use asse
ts of approximately $975,000 and lease liabilities of approximately $939,000 on the Company’s Consolidated Balance Sheet as of March 31, 2019, with no material impact to its Consolidated Statements of operations.
As of June 30, 2019, the Company recognized
right-of-use assets of approximately $2.4 million and lease liability of approximately $2.3 million on the Company’s Consolidated Balance Sheet. See Note 8 and 15 to the Unaudited Consolidated Financial Statements for more details.
Business Combinations
The Company recognizes assets acquired (including goodwill and identifiable intangible assets) and liabilities assumed at fair value on the acquisition date. Subsequent changes to the fair value of such assets acquired and liabilities assumed are recognized in earnings, after the expiration of the measurement period, a period not to exceed 12 months from the acquisition date. Acquisition-related expenses and acquisition-related restructuring costs are recognized in earnings in the period in which they are incurred.
Goodwill and Intangible Assets
Goodwill represents the excess fair value of consideration transferred over the fair value of net assets acquired in business combinations. The carrying value of goodwill and indefinite lived intangible assets are not amortized, but are annually tested for impairment and more often if there is an indicator of impairment.
Intangible assets with finite useful lives are amortized on a straight-line basis over the periods benefited. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company's ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets.
Restricted cash
Restricted cash represents amounts pledged as cash security related to the Silicon Valley Bank credit cards.
New Accounting Pronouncements
Recently adopted accounting pronouncements:
In January 2017, the FASB issued Accounting Standards Update ASU No. 2017-04,
Simplifying the Test for Goodwill Impairment
, which simplifies the subsequent measurement of goodwill.
G
oodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Furthermore, the ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step 2 of the goodwill impairment test.
The guidance will be applied prospectively, and is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for any impairment tests performed on testing dates after January 1, 2017.
The Company has elected to early adopt this guidance effective December 31, 2018 for goodwill impairment test, which will be performed during the fourth quarter of fiscal 2019. The adoption of this guidance did not have a material impact on our consolidated financial statements.
In February 2018, FASB issued ASU No. 2018-02,
Income Statement - Reporting Comprehensive Income.
The new standard provides companies with an option to reclassify stranded tax effects resulting from enactment of the Tax Cuts and Jobs Act, or TCJA, from accumulated other comprehensive income to retained earnings. The guidance will be effective for the Company beginning in the first quarter of 2019 with early adoption permitted, and would be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the tax rate as a result of TCJA is recognized. The Company adopted this ASU on December 31, 2018 with no material impact on its results of operations, financial position and cash flows.
10
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In March 2018, FASB issued ASU No. 201
8-05,
Income Taxes (Topic 740)
. The new standard allows to insert the SEC’s interpretive guidance from Staff Accounting Bulletin, or SAB, No.118 into the income tax accounting codification under U.S. GAAP. The ASU permits companies to use provisional amoun
ts for certain income tax effects of the Tax Act during a one-year measurement period. The provisional accounting impacts for the Company may change in future reporting periods until the accounting analysis is finalized, which will occur no later than the
first quarter of fiscal 2019. The Company completed SAB No.118 analysis with no material impact to the consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07
, Improvements to nonemployee share-based payment accounting
. Currently, share-based payments to nonemployees are accounted for under Subtopic 505-50, which significantly differs from the guidance for share-based payments to employees under Topic 718. This ASU supersedes Subtopic 505-50 by expanding the scope of Topic 718 to include nonemployee awards and generally aligning the accounting for nonemployee awards with the accounting for employee awards.
The effective date for public companies is for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the effective date is fiscal years beginning after December 15, 2019.
The Company adopted this ASU on December 31, 2018 with no material impact on its results of operations, financial position and cash flows.
Recently issued accounting pronouncements not yet adopted:
In August 2018 the FASB issued ASU No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement
. This new standard modifies certain disclosure requirements on fair value measurements. This new standard will be effective for public companies on January 1, 2020. The Company is currently evaluating the impact of our pending adoption of the new standard on the consolidated financial statements.
Note 3 — Net Loss Per Share
Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net 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 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 the three and six months ended June 30, 2019 and July 1, 2018, 8.0 million and 7.3 million of common shares 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, respectively. 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 these periods. Warrants to purchase up to 5.4 million shares were issued in connection with May 29, 2018 stock offering were also not included in the diluted loss per share calculation of the three and six months ended June 30, 2019 as they were also considered anti-dilutive due to the net loss the Company experienced during these periods.
11
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 4 — Balance Sheet Components
The following table provides details relating to certain balance sheet line items as of June 30, 2019, and December 30, 2018 (in thousands):
|
|
June 30,
2019
|
|
|
December 30,
2018
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
196
|
|
|
$
|
-
|
|
Work-in-process
|
|
|
2,481
|
|
|
|
3,120
|
|
Finished goods
|
|
|
825
|
|
|
|
716
|
|
|
|
$
|
3,502
|
|
|
$
|
3,836
|
|
Other current assets:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
1,360
|
|
|
$
|
1,483
|
|
Other
|
|
|
357
|
|
|
|
292
|
|
|
|
$
|
1,717
|
|
|
$
|
1,775
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
10,729
|
|
|
$
|
10,607
|
|
Software
|
|
|
1,823
|
|
|
|
2,788
|
|
Furniture and fixtures
|
|
|
55
|
|
|
|
42
|
|
Leasehold improvements
|
|
|
489
|
|
|
|
712
|
|
|
|
|
13,096
|
|
|
|
14,149
|
|
Less: Accumulated depreciation and amortization
|
|
|
(11,986
|
)
|
|
|
(12,700
|
)
|
|
|
$
|
1,110
|
|
|
$
|
1,449
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Employee related accruals
|
|
$
|
739
|
|
|
$
|
1,154
|
|
Other
|
|
|
568
|
|
|
|
749
|
|
|
|
$
|
1,307
|
|
|
$
|
1,903
|
|
Note 5 — Business Acquisition
SensiML Acquisition
On January 3, 2019, the Company entered into a stock purchase agreement, or the Stock Purchase Agreement, with SensiML for the purchase of all of its issued and outstanding common stock in exchange for the Company’s common stock, or the SensiML Acquisition.
SensiML has a software toolkit enabling IoT developers to quickly and easily create smart devices, transforming rich sensors into actionable event detectors.
SensiML’s 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 SensiML Analytics Toolkit enables OEMs to quickly and easily leverage the power of local AI in edge, endpoint and wearable designs without the need for significant Data Science or Firmware Engineering resources.
The results of operations for the Company for the three and six months ended June 30, 2019 include operating activity for SensiML since its acquisition date of
January 3
, 2019. For the six months ended June 30, 2019, revenues attributable to SensiML included in the condensed consolidated statement of operations were not significant. For the three and six months ended June 30, 2019, charges of $38,000 and $74,000, respectively, were attributable to the amortization of purchased intangible assets were included in the statements of operations for respective periods. Deal costs associated with the acquisition were $104,000 for the six months period ended June 30, 2019. Deal costs were included in general and administrative expenses in the Company’s consolidated results of operations.
12
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Purchase Price Allocation
Under the purchase accounting method, the total preliminary purchase price was allocated to SensiML’s net tangible and intangible assets based upon their estimated fair values as of the acquisition date. The excess purchase price over the value of the net tangible and identified intangible assets was recorded as goodwill.
During the measurement period, which can be no more than one year from the date of acquisition, the Company expects to continue to obtain information to determine the final fair value of the net assets acquired at the acquisition date during the measurement period. Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. Thus, the provisional measurements of fair value discussed above are subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill.
Intangible assets associated with the acquisition is primarily attributable to the future technology, market presence and knowledgeable and experienced workforce. The fair value assigned to identifiable intangible assets acquired was determined using the income approach taking into account the Company’s consideration of a number of inputs, including an independent third-party analysis that was based upon estimates and assumptions provided by the Company. These estimates and assumptions were determined through established and generally accepted valuation techniques. The estimated fair value of the tangible and intangible assets acquired was allocated at SensiML’s acquisition date. Although goodwill is not amortized for financial accounting purposes, it is amortized in its entirely for tax purposes over fifteen years.
Goodwill recognized upon acquisition is not expected to be deductible for income tax purposes.
The Stock Purchase Agreement contains customary representations and warranties between the Company and SensiML, who agreed to indemnify each other for certain breaches of representations, warranties, covenants and other specified matters. Approximately $200,000 in value of the Company’s common stock of the purchase price was placed in escrow as security for post-closing working capital adjustments.
Note 6 — Intangible Assets
The following table provides the details of the carrying value of intangible assets recorded from the acquisition of SensiML during the six months of 2019 (in thousands):
|
|
June 30, 2019
|
|
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Net Carrying Amount
|
|
Developed technology
|
|
$
|
959
|
|
|
$
|
(48
|
)
|
|
$
|
911
|
|
Customer relationships
|
|
|
81
|
|
|
|
(20
|
)
|
|
|
61
|
|
Trade names and trade marks
|
|
|
116
|
|
|
|
(6
|
)
|
|
|
110
|
|
Total acquired identifiable intangible assets
|
|
$
|
1,156
|
|
|
$
|
(74
|
)
|
|
$
|
1,082
|
|
The following table provides the details of annual amortization of intangible assets, based upon the current useful lives as of June 30, 2019 (in thousands):
|
|
Amount
|
|
Annual Fiscal Years
|
|
|
|
|
2019 (remaining period)
|
|
$
|
75
|
|
2020
|
|
|
148
|
|
2021
|
|
|
107
|
|
2022
|
|
|
107
|
|
2023
|
|
|
107
|
|
Thereafter
|
|
|
538
|
|
Total
|
|
$
|
1,082
|
|
13
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 7 — Debt Obligations
Revolving Line of credit
On September 28, 2018, the Company entered into a Loan Agreement with Heritage Bank. The Loan Agreement provided for, among other things, a Revolving Facility with aggregate commitments of $9,000,000, which was increased to $15,000,000 by an amended and restated agreement dated December 21, 2018. The maturity date for loans under the Revolving Facility is September 28, 2020.
On December 21, 2018, the Company entered into an Amended and Restated Loan and Security Agreement, or the Amended and Restated Loan Agreement with Heritage Bank to replace in its entirety the Loan and Security Agreement entered on September 28, 2018. The Amended and Restated Loan Agreement increases the Revolving Facility from $9,000,000 to $15,000,000. The Amended and Restated Loan Agreement requires the Company to maintain at least $3,000,000 in unrestricted cash at Heritage Bank. The Company was in compliance with all loan covenants under the Amended and Restated Loan Agreement as of the end of the current reporting period.
Loans under the Revolving Facility bear interest at a rate equal to one half of one percentage point (0.50%) above the variable rate of interest, per annum, that appears in The Wall Street Journal from time to time, whether or not such announced rate is the lowest rate available from Heritage Bank. As of June 30, 2019 and December 30, 2018, the Company had $15.0 million of revolving debt outstanding with an interest rate of 6.0% per annum.
Note 8 — Leases
The Company entered into operating leases for office space for its headquarter, domestic and foreign subsidiaries and sales offices. Finance leases are primarily engineering design software. Operating leases generally have lease terms of 1 year to 5 years. Finance leases are generally 2 years to 3 years. During the second quarter of 2019, the Company recognized right-of-use assets of approximately $1.7 million and lease liability of approximately $1.7 million relating to the new operating leases signed for the premises of its headquarters in San Jose and its subsidiary SensiML in Oregon.
The following table provides the details of operating and finance lease costs (in thousands):
|
Three
Months
Ended
|
|
|
Six Months Ended
|
|
|
June 30, 2019
|
|
|
June 30, 2019
|
|
Operating lease costs:
|
|
|
|
|
|
|
|
Fixed
|
$
|
259
|
|
|
$
|
411
|
|
Variable
|
|
-
|
|
|
|
-
|
|
Short term
|
|
9
|
|
|
|
27
|
|
Total
|
|
268
|
|
|
|
438
|
|
Finance lease costs:
|
|
|
|
|
|
|
|
Amortization of ROU asset
|
|
91
|
|
|
|
182
|
|
Interest
|
|
5
|
|
|
|
11
|
|
Total
|
$
|
96
|
|
|
$
|
193
|
|
14
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The
following table provides the details of supplemental cash flow information (in thousands):
|
|
Six Months Ended
|
|
|
|
June 30, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows used for operating leases
|
|
$
|
451
|
|
Operating cash flows used for finance leases
|
|
|
10
|
|
Financing cash flows used for financing leases
|
|
|
194
|
|
Total
|
|
$
|
655
|
|
Right-of-use assets obtained in exchange for obligations:
|
|
|
|
|
Operating leases
|
|
$
|
2,076
|
|
Finance leases
|
|
|
341
|
|
Total
|
|
$
|
2,417
|
|
The following table provides the details of right-of-use assets and lease liabilities as of June 30, 2019 (in thousands):
|
|
June 30, 2019
|
|
Right-of-use assets:
|
|
|
|
|
Operating leases
|
|
$
|
2,076
|
|
Finance leases
|
|
|
341
|
|
Total
|
|
$
|
2,417
|
|
Lease liabilities:
|
|
|
|
|
Operating leases
|
|
|
2,100
|
|
Finance leases
|
|
|
230
|
|
Total
|
|
$
|
2,330
|
|
The following table provided the details of future lease payments for operating and finance leases as of June 30, 2019 (in thousands):
.
Annual Fiscal Years
|
|
Operating
|
|
|
Finance
|
|
2019 (Remaining period)
|
|
$
|
339
|
|
|
$
|
183
|
|
2020
|
|
|
613
|
|
|
|
64
|
|
2021
|
|
|
494
|
|
|
|
-
|
|
2022
|
|
|
409
|
|
|
|
-
|
|
2023
|
|
|
421
|
|
|
|
-
|
|
Thereafter
|
|
|
106
|
|
|
|
-
|
|
Total lease payments
|
|
|
2,382
|
|
|
|
247
|
|
Less: Interest
|
|
|
(282
|
)
|
|
|
(17
|
)
|
Present value of lease liabilities
|
|
$
|
2,100
|
|
|
$
|
230
|
|
The following table provides the details of lease terms and discount rates as of June 30, 2019:
|
|
June 30, 2019
|
|
Right-of-use assets:
|
|
|
|
|
Weighted-average remaining lease term (years)
|
|
|
|
|
Operating leases
|
|
4.17
|
|
Finance leases
|
|
|
0.76
|
|
Weighted-average discount rates:
|
|
|
|
|
Operating leases
|
|
|
5.99
|
%
|
Finance leases
|
|
|
7.00
|
%
|
15
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 9 — Fair Value Measurements
Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.
Our cash and cash equivalents include money market account balance of $26.7 million and money market funds of $262,000 as of June 30, 2019 and December 30, 2018, respectively. Investment in money market funds was classified within level 1 of the fair value hierarchy because they were valued using quoted market prices for identical assets. Fair value of the money market account balance with Heritage Bank equals to book value.
Note 10 — Stockholders' Equity
Common Stock and Preferred Stock
As of June 30, 2019, the Company was authorized to issue 200 million shares of common stock and had 10 million shares of authorized but unissued shares of preferred stock. Without any further vote or action by the Company's stockholders, the Board of Directors has the authority to determine the powers, preferences, rights, qualifications, limitations or restrictions granted to or imposed upon any wholly unissued shares of undesignated preferred stock.
Issuance of Common Stock
On June 21, 2019, the Company issued an aggregate of 18.4 million shares of common stock, including the exercise of option for overallotment of 2.4 million shares by the underwriters, $0.001 par value, in an underwritten public offering at a price of $ 0.50 per share. The company received net proceeds from the offering of approximately $8.3 million, net of underwriter’s commission and other offering expenses paid in the second quarter of 2019.
On March 15, 2019, the Company filed a shelf registration statement on Form S-3, under which the Company may, from time to time, sell securities on one or more offerings up to a total amount of $75 million. The Company’s shelf registration statement was declared effective on March 29, 2019.
In May, 2018, the company issued an aggregated of 13.5 million shares of common stock, and warrants to purchase up to an aggregate of 5.4 million shares of common stock in a confidentially marketed underwritten offering. The common stock and warrants were issued in units, or the Units, with each Unit consisting of (i) one share of common stock and (ii) a warrant to purchase 0.40 of a share of common stock, at a price of $1.15 per Unit. The Company received total net proceeds from the offering of $13.9 million.
The warrants are exercisable any time for a period of 60 months from the date of issuance on May 29, 2018, and are exercisable at a price of $1.38 per share. The Company allocated the proceeds between the common stock and the warrants based on the relative fair value of each on the date of issuance. The estimated grant date fair value was $0.57 per warrant and was calculated based on the following assumptions used in the Black-Scholes model: expected term of 5 years, risk-free interest rate of 2.58%, expected volatility of 52.75% and expected dividend of zero.
16
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 11 — Employee Stock Plans
2019 Stock Plan
On April 24, 2019, the Company’s Board of Directors and shareholders approved the 2019 Stock Plan, or 2019 Plan, to replace the 2009 stock Plan, or the 2009 Plan. Under the 2019 Plan, 5,000,000 shares of common stock are available for grants, plus any shares subject to any outstanding options or other awards granted under the Company’s 2009 Stock Plan that expire, are forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements, settled for cash or otherwise terminated without payment being made thereunder. The remaining balance of available shares under the 2009 Plan of 4,186,979 were cancelled as of April 24, 2019.
Employee Stock Purchase Plan
The 2009 Employee Stock Purchase Plan, or the 2009 ESPP, was adopted in March 2009. The 2009 ESPP was amended by the Board of Directors in January 2015 and in February 2017, and was approved by the Company's stockholders on April 23, 2015 and April 26, 2017, to reserve an additional 1.0 million and 1.5 million shares of common stock, respectively, for issuance under the 2009 ESPP.
As of June 30, 2019, approximately 4.8 million shares of the Company’s common stock were reserved for issuance under the 2009 ESPP. On May 6, 2019, the Board of Directors approved the extension of the term of the 2009 ESSP to March 5, 2029, which also requires t
he stockholders’ ratification within 12 months of the approval by the Board of Directors. The Company plans to submit the extension of the term of the 2009 ESSP for our stockholders to ratify in the next annual general meeting, if not sooner.
Note 12 — Stock-Based Compensation
Stock-based compensation expense included in the Company's consolidated financial statements for the three and six months ended June 30, 2019 and July 1, 2018 was as follows (in thousands):
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
Cost of revenue
|
|
$
|
18
|
|
|
$
|
35
|
|
|
$
|
44
|
|
|
$
|
69
|
|
Research and development
|
|
|
532
|
|
|
|
207
|
|
|
|
1,187
|
|
|
|
390
|
|
Selling, general and administrative
|
|
|
241
|
|
|
|
237
|
|
|
|
511
|
|
|
|
452
|
|
Total costs and expenses
|
|
$
|
791
|
|
|
$
|
479
|
|
|
$
|
1,742
|
|
|
$
|
911
|
|
No stock-based compensation was capitalized during any period presented above.
No stock options were granted during the three and six-month periods ended June 30, 2019 and July 1, 2018. As of June 30, 2019 and July 1, 2018, the fair value of unvested stock options, net of expected forfeitures, was approximately $102,000 and $200,000, respectively. The remaining unrecognized stock-based compensation expense relating to stock options is expected to be recognized over a weighted average period of 2.59 years as of June 30, 2019.
17
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Stock-Based Compensation Award Activity
The following table summarizes the activity in the shares available for grant under the 2019 Plan and 2009 Plan during the six months ended June 30, 2019 (in thousands):
|
Shares available for grants
|
|
|
2019 Plan
|
|
|
2009 Plan
|
|
Balance at December 30, 2018
|
|
-
|
|
|
|
6,760
|
|
Authorized
|
|
5,000
|
|
|
|
-
|
|
RSUs granted
|
|
(794
|
)
|
|
|
(3,355
|
)
|
RSUs forfeited or expired
|
|
184
|
|
|
|
762
|
|
Options forfeited
|
|
15
|
|
|
|
20
|
|
Plan shares expired
|
|
-
|
|
|
|
(4,187
|
)
|
Balance at June 30, 2019
|
|
4,405
|
|
|
|
-
|
|
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 six months ended June 30, 2019:
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
(in years)
|
|
|
(in thousands)
|
|
Balance outstanding at December 30, 2018
|
|
|
3,201
|
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance outstanding at June 30, 2019
|
|
|
2,617
|
|
|
$
|
2.29
|
|
|
|
3.97
|
|
|
$
|
-
|
|
Exercisable at June 30, 2019
|
|
|
2,383
|
|
|
$
|
2.43
|
|
|
|
3.65
|
|
|
$
|
-
|
|
Vested and expected to vest at June 30, 2019
|
|
|
2,594
|
|
|
$
|
2.31
|
|
|
|
3.94
|
|
|
$
|
-
|
|
The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $0.58 as of June 30, 2019, which would have been received by the option holders had all option holders exercised their options as of that date.
The total intrinsic value of options exercised during the six months ended June 30, 2019 and July 1, 2018 was $0 as the stock price was lower than exercise price. Total cash received from employees as a result of employee stock option exercises during the six months ended June 30, 2019 and July 1, 2018 was approximately $3,600 and $0, respectively. The Company settles employee stock option exercises with newly issued common shares. In connection with these exercises, there was no tax benefit realized by the Company due to the Company's current loss position. Total stock-based compensation related to stock options was $24,000 and $34,000 for the three months ended June 30, 2019 and July 1, 2018, respectively, and $49,000 and $72,000 for the six months ended June 30, 2019 and July 1, 2018, respectively.
Restricted Stock Units
The Company grants restricted stock units or RSUs, 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 related to RSUs was $756,000 and $382,000 for the three months ended and $1.6 million and $722,000 for six months ended June 30, 2019 and July 1, 2018, respectively. As of June 30, 2019 and July 1, 2018, there was approximately $3.1 million and $2.3 million, respectively, in unrecognized compensation expense related to RSUs. The remaining unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 1.76 years.
18
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
A summary of activity for the Company'
s RSUs for the six months ended June 30, 2019 is as follows:
|
|
RSUs & PRSUs Outstanding
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
|
|
(in thousands)
|
|
|
|
|
|
Nonvested at December 30, 2018
|
|
|
2,570
|
|
|
$
|
1.23
|
|
Granted
|
|
|
4,148
|
|
|
|
0.85
|
|
Vested
|
|
|
(926
|
)
|
|
|
1.08
|
|
Forfeited
|
|
|
(401
|
)
|
|
|
0.96
|
|
Nonvested at June 30, 2019
|
|
|
5,391
|
|
|
$
|
1.04
|
|
Employee Stock Purchase Plan
As of June 30, 2019, 873,000 shares remained available for issuance under the 2009 ESPP. For the three months ended June 30, 2019 and July 1, 2018, the Company recorded stock-based compensation expense related to the 2009 ESPP of $11,000 and $63,000, respectively. For the six months ended June 30, 2019 and July 1, 2018, the Company recorded stock-based compensation expense related to the 2009 ESPP of $60,000 and $117,000, respectively. The weighted average estimated fair value, as defined by the amended authoritative guidance, of rights issued pursuant to the Company's 2009 ESPP during the second quarter ended June 30, 2019 and July 1, 2018, was $0.31 and $0.47, respectively, per right, respectively.
The fair value of rights issued pursuant to the Company's 2009 ESPP was estimated on the commencement date of each offering period using the following weighted average assumptions:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
Expected term (months)
|
|
|
6.00
|
|
|
|
6.0
|
|
|
|
6.00
|
|
|
|
6.00
|
|
Risk-free interest rate
|
|
|
2.40
|
%
|
|
|
2.09
|
%
|
|
|
2.40
|
%
|
|
|
2.09
|
%
|
Volatility
|
|
|
53.77
|
%
|
|
|
44.76
|
%
|
|
|
53.77
|
%
|
|
|
44.76
|
%
|
Dividend yield
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
As of June 30, 2019, there was no unrecognized stock-based compensation expense relating to the Company's 2009 ESPP.
Note 13 — Income Taxes
The Company recorded a net income tax expense of $27,000 and $29,000 for the three months ended June 30, 2019 and July 1, 2018, respectively. For the six months ended June 30, 2019 and July 1, 2018 the Company recorded a net income tax benefit of $241,000 and tax expense of $90,000 respectively. A majority of the income tax expense for the second quarters of 2019 and 2018 and six months ended July 1, 2018 relates to the Company's foreign subsidiaries, which are cost-plus entities. Income tax benefit for the six months ended June 30, 2019 relates to the deferred tax benefit arising from Intangible assets acquired from the acquisition of SensiML, which was offset by the income taxes from the Company's foreign subsidiaries.
The Company believes it is more likely than not that federal and state net deferred tax assets will not be fully realized. In assessing the realizability of deferred tax assets, the Company’s management considers whether it is more likely than not that some portion or all of our deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. A valuation allowance is recorded for loss carryforwards and other deferred tax assets where it is more likely than not that such deferred tax assets will not be realized. Accordingly, the Company continues to maintain a valuation allowance against all of U.S. and certain foreign net deferred tax assets as of June 30, 2019. The Company continues to maintain a full valuation allowance against net federal, state and certain foreign deferred tax assets until there is sufficient evidence to support recoverability of the Company’s deferred tax assets.
19
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
The Company had no unrecognized tax benefits as of June 30, 2019 and December 30, 201
8, which would affect the Company's effective tax rate. The Company does not anticipate any material changes to its unrecognized tax benefits during the next 12 months.
Accrued interest and penalties related to unrecognized tax benefits are recognized as part of the income tax provision in the condensed consolidated statements of operations.
The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates. The U.S. tax years from 1999 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits.
Under the Tax Reform Act of 1986, the amount of and the benefit from net operating loss carryforwards and credit carryforwards may be impaired or limited in certain circumstances. Events which may restrict utilization of a company's net operating loss and credit carryforwards include, but are not limited to, certain ownership change limitations as defined in Internal Revenue Code Section 382 and similar state provisions. In the event the Company has had a change of ownership, utilization of carryforwards could be restricted to an annual limitation. The annual limitation may result in the expiration of net operating loss carryforwards and credit carryforwards before utilization.
The Company has not undertaken a study to determine if its net operating losses are limited. In the event the Company previously experienced an ownership change, or should experience an ownership change in the future, the amount of net operating losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized.
Note 14 — Information Concerning Product Lines, Geographic Information and Revenue Concentration
The Company identifies its business segment based on business activities, management responsibility and geographic location. For all periods presented, the Company operated in a single reportable business segment.
The following is a breakdown of revenue by product line (in thousands):
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
Revenue by product line
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New products
|
|
$
|
711
|
|
|
$
|
1,581
|
|
|
$
|
1,398
|
|
|
$
|
2,881
|
|
Mature products
|
|
|
1,376
|
|
|
|
1,541
|
|
|
|
3,883
|
|
|
|
3,005
|
|
Total revenue
|
|
$
|
2,087
|
|
|
$
|
3,122
|
|
|
$
|
5,281
|
|
|
$
|
5,886
|
|
(1)
|
For all periods presented: New products include all products manufactured on 180 nanometer or smaller semiconductor processes, eFPGA IP license, Quick AI and Software revenues. Mature products include all products produced on semiconductor processes larger than 180 nanometer.
|
The following is a breakdown of revenue by shipment destination (in thousands):
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
Revenue by geography:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific
(1)
|
|
$
|
537
|
|
|
$
|
1,372
|
|
|
$
|
1,968
|
|
|
$
|
2,293
|
|
North America
(2)
|
|
|
1,066
|
|
|
|
1,474
|
|
|
|
2,229
|
|
|
|
3,039
|
|
Europe
|
|
|
484
|
|
|
|
276
|
|
|
|
1,084
|
|
|
|
554
|
|
Total revenue
|
|
$
|
2,087
|
|
|
$
|
3,122
|
|
|
$
|
5,281
|
|
|
$
|
5,886
|
|
20
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(1)
|
Asia Pacific includes revenue from Japan of $330,000, or 16% of total revenue, and $632,000, or 20% of total revenue, for the quarters ended June 30, 2019 and July 1, 2018, respectively. For the six months ended June 30, 2019 and July 1, 2018, revenue from Japan was $764,000, or 14% of total revenue, and $1.0 million, or 17% of total revenue for the quarters ended June 30, 2019 and July 1, 2018, respectively. For the three months ended June 30, 2019 and July 1, 2018, revenue from China was $119,000 or 6% and $466,000 or 15% of total revenue, respectively. For the six months ended June 30, 2019 and July 1, 2108, revenue from China was $1.1 million, or 20% of total revenue, and $602,000 million, or 10% of total revenue, respectively.
|
(2)
|
North America includes revenue from the United States of $1.1 million, or 51% of total revenue, and $1.4 million, or 46% of total revenue, for the three months ended June 30, 2019 and July 1, 2018, respectively. For the six months ended June 30, 2019 and July 1, 2018 revenue from the United States was $2.2 million, or 42% of total revenue, and $3.0 million, or 50% of total revenue, respectively.
|
The following distributors and customers accounted for 10% or more of the Company's revenue for the periods presented:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
|
June 30,
2019
|
|
|
July 1,
2018
|
|
Distributor "A"
|
|
|
40
|
%
|
|
|
32
|
%
|
|
|
38
|
%
|
|
|
36
|
%
|
Distributor "C"
|
|
*
|
|
|
*
|
|
|
|
12
|
%
|
|
*
|
|
Distributor "E"
|
|
*
|
|
|
|
15
|
%
|
|
*
|
|
|
*
|
|
Distributor "G"
|
|
*
|
|
|
|
10
|
%
|
|
|
16
|
%
|
|
*
|
|
Customer "B"
|
|
|
18
|
%
|
|
|
14
|
%
|
|
|
13
|
%
|
|
|
12
|
%
|
Customer "E"
|
|
|
18
|
%
|
|
*
|
|
|
*
|
|
|
*
|
|
Customer "H"
|
|
*
|
|
|
|
16
|
%
|
|
*
|
|
|
|
13
|
%
|
Customer "I"
|
|
*
|
|
|
|
10
|
%
|
|
|
16
|
%
|
|
`
|
|
Customer "J"
|
|
*
|
|
|
|
15
|
%
|
|
*
|
|
|
|
16
|
%
|
The following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented:
|
|
June 30,
2019
|
|
|
December 30,
2018
|
|
Distributor "A"
|
|
|
31
|
%
|
|
|
35
|
%
|
Distributor “J”
|
|
|
23
|
%
|
|
*
|
|
Distributor "G"
|
|
*
|
|
|
|
10
|
%
|
Customer "L"
|
|
|
13
|
%
|
|
*
|
|
Customer "M"
|
|
|
10
|
%
|
|
|
23
|
%
|
*
|
Represents less than 10% of revenue and accounts receivable as of the date presented.
|
As of June 30, 2019, 11% of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States.
Note 15 — Commitments and Contingencies
Commitments
The Company's manufacturing suppliers require the forecast of wafer starts several months in advance. The Company is required to take delivery of and pay for a portion of forecasted wafer volume. As of June 30, 2019, and December 30, 2018, the Company had $74,000 and $22,000, respectively, of outstanding commitments for the purchase of wafer and finished goods inventory.
The Company has obligations with certain suppliers for the purchase of other goods and services entered into in the ordinary course of business. As of June 30, 2019, total outstanding purchase obligations for other goods and services were $1.2 million, all of which, except for $12,000 were due within the next twelve months.
21
QUICKLOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Note 16 — Litigation
From time to time, the Company may become involved in legal actions arising in the ordinary course of business including, but not limited to, intellectual property infringement and collection matters. Absolute assurance cannot be given that any such third party assertions will be resolved without costly litigation; in a manner that is not adverse to the Company’s financial position, results of operations or cash flows; or without requiring royalty or other payments which may adversely impact gross profit. As of June 30, 2019, the Company was not involved in any litigation.
Note 17 — Subsequent event
Loan Repayment
On July 1, 2019, the Company repaid $12.0 of its outstanding debt under the Revolving Facility with Heritage Bank at an interest rate of 6.0%.
22