QUICKLOGIC Corp 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties including those discussed under Part I, Item 1A, “Risk Factors.” These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements. Overview QuickLogic Corporation was founded in 1988 and completed its reincorporation in Delaware in 1999. We are a fabless semiconductor company specializing in programmable logic technologies, including embedded FPGA ("eFPGA") intellectual property ("IP") and programmable logic semiconductor devices. Our technologies enable semiconductor companies and system developers to incorporate configurable hardware functionality into custom semiconductor devices and electronic systems. We generate revenue primarily through the sale of FPGA semiconductor devices and the licensing of eFPGA IP for integrating into application-specific integrated circuits ("ASICs") and system-on-chip ("SoC") devices. In connection with these engagements, we may also provide professional engineering services to support customer integration efforts and may receive royalties based on customer production volumes. Our programmable logic technologies are used across a range of markets including aerospace and defense systems, industrial and infrastructure systems, computing platforms, and semiconductor devices developed by fabless semiconductor companies. These technologies enable system designers to implement adaptable hardware functionality, accelerate data processing workloads, and support evolving application requirements while maintaining low power consumption and design flexibility. Our growth strategy focuses on expanding adoption of our eFPGA IP, continuing development of programmable logic semiconductor devices, and supporting customers integrating programmable logic technologies into custom semiconductor designs and mission-critical electronic systems. New products revenue from continuing operations for the Fiscal Year ended December 28, 2025 was $10.5 million, a decrease of $5.2 million as compared to the Fiscal Year ended December 29, 2024 . Of the $10.5 million in new products revenue from continuing operations, approximately $9.5 million was generated from eFPGA IP revenue, primarily eFPGA-related professional engineering services, as compared to approximately $13.1 million in the Fiscal Year ended December 29, 2024 . Mature products revenue from continuing operations for the Fiscal Year ended December 28, 2025 was $3.3 million, a decrease of $0.7 million compared to the Fiscal Year ended December 29, 2024 . We shipped new products into multiple end market segments including Aerospace and Defense, Industrial, IoT, and Consumer beginning in the Fiscal Year ended December 28, 2025. We reported a net loss from continuing operations of $12.3 million for the Fiscal Year ended December 28, 2025 , compared to a net loss from continuing operations of $2.9 million in the Fiscal Year ended December 29, 2024 . We have experienced net losses in the past years and expect to experience losses in at least some of the fiscal quarters during 2026 as we continue to develop new products, applications, and technologies. Our new hardware products and hardware products currently under development are generating stable gross margins year over year and higher margins than our mature products due to the markets that we have targeted, and the larger order quantities associated with these new products. New eFPGA products have been generating higher gross margins as a percentage of revenue. Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted, and our investment portfolio is subject to a degree of interest rate and liquidity risk. Unless such cash flow levels are achieved, in addition to the $8.7 million and $6.8 million in net proceeds that we received from our 2025 and 2024 sales of our equity securities, respectively, and the revolving line of credit we may be able to draw down from Heritage Bank of Commerce, or any future similar banking partners, we may need to obtain additional funds through strategic divestiture, or sell debt or equity securities, or some combination thereof, to provide fundin g for our operations. Such additional funding may not be available on commercially reasonable terms, or at all. 30 Table of Contents Impact of Supply Chain Disruptions on Business We continue to experience increased product and logistics costs and impacts from the worldwide semiconductor supply shortage. The semiconductor supply shortage is due, in part, to increased demand across multiple industries, resulting in a slowdown in production schedules. The semiconductor supply shortage is also impacting our supply chain and our ability to meet demand for some of our customers. Our Employees and Customers Our employees are critical to our ability to develop and support our programmable logic technologies and serve our customers. We seek to maintain a collaborative work environment that supports innovation, operational execution, and technical expertise across our engineering, product development, sales, and administrative teams. We offer competitive compensation and benefits programs designed to attract, retain, and motivate qualified employees. Our workforce includes personnel located in the United States and internationally, and many of our employees operate in hybrid or remote work environments depending on their role and responsibilities. We emphasize collaboration among our employees and with our customers in order to support the development and deployment of programmable logic technologies and solutions. Our teams work closely with customers to support design, integration, and deployment of our programmable logic devices and IP technologies in a range of semiconductor and system-level applications. Critical Accounting Policies and Estimates The methods, estimates, and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of our financial condition and results of operations and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Although these estimates are based on our knowledge of current events and actions we may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions. Areas where we use subjective judgment include, but are not limited to, revenue recognition, inventory valuation, including the identification of excess quantities, market value, and obsolescence, and valuation of goodwill and long-lived and intangible assets. We believe that we apply judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented. However, any factual errors or errors in these judgments and estimates may have a material impact on our consolidated financial statements. Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification ("ASC") Topic 606 and related Accounting Standards Updates ("ASUs"). We earn revenue from principal activities by (i) delivering standard hardware products and (ii) delivering and providing eFPGA IP products and professional services, as well as (iii) other miscellaneous revenue. In accordance with ASC 606, we apply a five-step model for recognizing revenue: 1. Identification of the contract, or contracts, with a customer, 2. Identification of the performance obligations in the contract, 3. Determination of the transaction price. We estimate the transaction price based on the amount expected to be received for transferring the performance obligations in the contract, which may include both fixed consideration and variable consideration. Our contracts with customers containing variable consideration are generally sales-based royalties, which is fully constrained, 4. Allocation of the transaction price to the performance obligations in the contract, and 5. Recognition of revenue when, or as, we satisfy a performance obligation. When entering into a new contract, we evaluate certain factors including the customer’s ability to pay, or credit risk. 31 Table of Contents The following is a description of our revenue recognition policy by principal activity: Hardware Product Revenue We generate revenue by supplying standard hardware products, which must be programmed before they can be used in an application. Standard hardware products may be programmed by us, distributors, end customers, or third parties. Contracts with customers for hardware products generally do not include other performance obligations such as services, extended warranties, or other material rights. Our promise to transfer hardware products is identified as a distinct performance obligation. We recognize revenue on hardware products when we transfer control of the promised products to the customer. Transfer of control of hardware products occurs when our performance obligation is satisfied, which typically occurs upon shipment from our manufacturing site or headquarters. We recognize revenue in an amount that reflects the consideration we expect to receive in exchange for those products, which also represents the standalone selling price ("SSP") of our performance obligation. Hardware product prices are fixed. We elected a practical expedient in which we do not assess whether a contract has a significant financing component since our standard payment terms are less than one year. We allocate the transaction price of customer contracts to each distinct product based on its relative SSP. The sale of hardware products does not typically involve significant judgment or estimates by management. However, we do record an allowance for hardware product sales returns, which requires some judgment by management. We recognized hardware product revenue of approxima tely $4.2 million, or 31% of total revenue from continuing operations and $6.1 million, or 31% of total revenue from continuing operations in the Fiscal Years ended December 28, 2025 and December 29, 2024, respectively. Hardware Product Sales Return Allowance While the terms and conditions of the sale of hardware products generally do not allow for refunds or product returns other than for warranty repairs, we do record an allowance for hardware product sales returns. The allowance for sales returns is based on a historical returns analysis of the prior four quarters that is performed on a quarterly basis. Amounts recorded for hardware product sales returns were $2 thousand and $1 thousand for the Fiscal Years ended December 28, 2025 and December 29, 2024, respectively, on our consolidated statements of operations. While hardware product sales returns have not been material to the Company in recent reporting periods, we note there is an inherent uncertainty in estimating this allowance. In the case where actual results may significantly vary from management estimates, we may be required to make future adjustments to our revenues and operating results. eFPGA IP Revenue eFPGA IP revenue is comprised of eFPGA intellectual property revenue, eFPGA-related professional services revenue, and eFPGA-related support and maintenance revenue. We recognize eFPGA intellectual property revenue from licensing our eFPGA intellectual property to customers and recognize eFPGA-related professional services revenue from the fees associated with the custom development and integration of our technology solutions into hardware products. We recognize eFPGA revenue from support and maintenance services for post-implementation customer support ratably over the service term. Renewals of support and maintenance contracts create new performance obligations for which we recognize as revenue ratably over the service term. The majority of our revenue is derived from sales of eFPGA IP licenses and professional services. eFPGA IP contractual arrangements often include promises to transfer intellectual property licenses, to customize hardware products, and to provide professional services and technical support services. We must determine whether the promised goods and services are distinct performance obligations that should be accounted for separately or are a single, combined performance obligation and should be accounted for together. In accordance with ASC 606, we must evaluate whether the customer can benefit from each good or service on its own or together with other resources that are readily available to the customer and whether the transfer of each good or service can be separately identifiable. We also must evaluate when control of the performance obligation is transferred to and accepted by the customer. We note these determinations, in addition to identifying contractual terms and conditions within the contract, including termination for convenience clauses, enforceable rights to payment for performance completed-to-date, and consideration of the alternative use of the asset, require significant judgment. In these judgments, we consider the context of the contract, historical experience with similar contracts, and the interdependency of the promised goods and services. Additionally, judgment is required by management to allocate the transaction price to the separately identifiable performance obligations in the contract. We allocate the transaction price of the contract to each performance obligation based on its relative SSP. We rarely sell eFPGA intellectual property licenses on a standalone basis. Generally, we will provide eFPGA-related professional services and support and maintenance services to customers in conjunction with eFPGA IP licenses based on unique contractual arrangement terms and conditions. As such, we are required to estimate the SSP for each performance obligation. In instances where the SSP is not directly observable because we do not sell the promised goods or services separately, we typically determine the SSP using either the adjusted market assessment approach, residual approach, or the expected cost plus a margin approach, depending on the characteristics and context of the deliverable. The selected method is applied by us consistently for similar arrangements and deliverables. The factors used to select the most appropriate estimation method, as well as select the most appropriate SSP include, but are not limited to, the extent of internal costs required to provide the promised performance obligation, margins achieved on standalone sales of similar products, profit objectives, cost structure, location-specific factors, and competition. 32 Table of Contents In other instances, we may have more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, we may use information such as our overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, customer type, customer tier, type of the technology used, customer demographics, and geographic locations, among other factors. We also provide eFPGA-related professional services on a time-and-material basis. Generally, we satisfy eFPGA-related contractual performance obligations over time as the customer simultaneously receives and consumes the benefits provided by our performance as we perform, our performance creates or enhances an asset that the customer controls as it is created or enhanced, or our performance does not create an asset with an alternative use to the company and we have an enforceable right to payment for performance completed to date. When we satisfy performance obligations over time, we recognize revenue by applying an over-time methodology that faithfully depicts our performance toward satisfaction of the performance obligation. Due to the nature of the work performed under contractual arrangements, the selection and application of an over-time methodology is complex and involves significant judgment. In the case of the selection of an input method, the key factors reviewed by management to estimate costs to complete each contract include, but are not limited to, the estimated labor days-effort necessary to complete the project, budgeted hours, hourly cost to the Company, profit margins, and engineering hours at cut-off when projects extend beyond a reporting period. In the case of the selection of an output method, key factors reviewed by management include, but are not limited to, the specific deliverables specified in the contracts with customers and the duration of performance, inclusive of delays. We have methods and controls in place for tracking labor-days incurred in completing eFPGA IP contracts, as well as quantifying changes in estimates used within the chosen methodology. We consider labor-days to be a critical estimate as any significant variation of labor and time required to complete a contractual arrangement could cause a revenue claw-back from prior periods and deferral of revenue to future periods. When the expected consideration from a revenue contract with a customer is less than the expected costs of fulfilling the contract, we are required to first impair any capitalized costs associated with the contract. We are also required to recognize a provision for contract losses as a liability on our balance sheet. This would result in an unfavorable impact to income from operations. We recognized eFPGA IP revenue of approximately $9.5 million, or 69% of total revenue from continuing operations and $13.1 million, or 67% of total revenue from continuing operations in the Fiscal Years ended December 28, 2025 and December 29, 2024, respectively. Other Miscellaneous Revenue Other miscellaneous revenue is comprised primarily of royalties from licensing our technology. We recognize royalty revenue on the later of (i) the subsequent sale or usage, or (ii) satisfaction of a performance obligation to which some or all of the sales-based royalty has been allocated. We recognized Other Miscellaneous Revenue of approxim ately $0.1 million , or 0.5% of total revenue from continuing operations and $0.4 million, or 2.2% of total revenue from continuing operations in the Fiscal Years ended December 28, 2025 and December 29, 2024, respectively. Practical Expedients, Elections, and Exemptions • Taxes collected from customers and remitted to government authorities and that are related to the sales of our products are excluded from revenues. • Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general, and administrative expense in the consolidated statements of operations. • We do not disclose the value of unsatisfied performance obligations for (i) contracts with original expected lengths of one year or less or (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for the services performed. Valuation of Inventories Hardware product inventories are stated at the lower of standard cost or net realizable value. Standard cost approximates actual cost on a first-in, first-out basis. We routinely evaluate quantities and values of our inventories in light of current market conditions and trends and record reserves for quantities in excess of demand and for product obsolescence. The evaluation may take into consideration historic usage, expected demand, anticipated sales price, the stage in the product life cycle of our customers’ products, new product development schedules, the effect new products might have on the sale of existing products, product obsolescence, customer design activity, customer concentrations, and product merchantability, among other factors. Actual consumption of inventories could differ from forecasted demand and this difference could have a material impact on our gross margin and inventory balances based on additional provisions for excess or obsolete inventories or a benefit from inventories previously written down. We also regularly review the cost of inventories against estimated market value and record a lower of cost or market reserve for inventories that have a cost in excess of estimated market value, which could have a material impact on our hardware product gross margin and hardware product inventory balances based on additional write-downs to net realizable value or a benefit from inventories previously written down. Estimates of market value for our products require subjective criteria such as anticipated demand and market acceptance for unique products. Differences between these estimates and actual results could result in gross margin volatilities from period to period. Our hardware products have historically had an unusually long product life cycle and obsolescence has not been a significant factor in the valuation of inventories. However, as we continue to develop new products, we believe our new product life cycle may be shorter, which could increase the potential for obsolescence. A significant decrease in demand could result in an increase in excess inventory on hand. Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or frequent new product developments could have a significant impact on the value of our inventory and our results of operations. 33 Table of Contents Goodwill Goodwill represents the excess fair value of the purchase price over the fair value of identifiable net assets acquired. Goodwill is not amortized but is tested for impairment annually during our fourth fiscal quarter and interim periods if events or changes in circumstances (triggering events) indicate that the carrying amount of goodwill may not be recoverable, in accordance with ASC 350. Our annual goodwill impairment test performed in the fourth quarter of Fiscal Year 2024 indicated that no impairment was identified. As of December 28, 2025, we determined that the criteria for a held-for-sale classification for the SensiML subsidiary were no longer met. As run-off operations at the SensiML subsidiary concluded in Fiscal Year 2025, we decided to account for the SensiML subsidiary as an asset group held for disposal in accordance with ASC 360-10. As a result of this classification, we evaluated the recoverability, or undiscounted cash flows expected to result from the disposition of the SensiML subsidiary, including goodwill associated with the SensiML acquisition, to determine fair value of the asset group. In our evaluation, we determined that such goodwill was fully impaired, and accordingly, recorded an impairment of that goodwill in the amount of $0.2 million in accordance with ASC 350-20 and ASC 205-20. Long-Lived and Intangible Assets Our long-lived assets include property and equipment, software, tooling, furniture and fixtures, leasehold improvements, and internally developed software. These assets are stated at cost less accumulated depreciation and amortization. Depreciation and amortization of long-lived assets is recognized on a straight-line basis over the estimated useful lives of the assets, which generally range from one to ten years. Internal-use software is generally amortized over five years and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset, generally three to five years. Determining the useful lives of long-lived assets requires management judgment. In estimating useful lives, we consider factors including technological obsolescence, competition, historical product life cycles, and industry and market conditions. Refer to Note 6 for additional information on the useful life ranges of our long-lived assets. We recognize assets for pre-production development and tooling costs for which there is an alternative use to the Company. These assets are classified as 'tooling' within property and equipment and are depreciated over their estimated useful lives, generally seven years. Tooling may include both tangible and intangible assets, including but not limited to, mask sets and other semiconductor production tooling used in the manufacture of customer-specific products. We capitalize costs related to the development and enhancement of internally used engineering software, hosted services platforms provided to customers, and certain enterprise-level operational systems as internal-use software. Capitalization of internally developed software for internal-use begins when the application development stage is reached and management determines that the project is probable for completion and the software will be used to perform the function intended. Costs incurred during the application development stage, including upgrades and enhancements, are capitalized and amortized on a straight-line basis over their estimated lives, generally five to seven years. Costs incurred during the planning stage and post-implementation activities are expensed as incurred. Acquired intangible assets with finite useful lives are amortized on a straight-line basis over the periods benefited. We review the recoverability of our long-lived assets annually and when events or changes in circumstances indicate that the carrying value of an asset group may not be recoverable. Recoverability is assessed based on the expected future undiscounted cash flows of the asset group. If the carrying value exceeds the expected future undiscounted cash flows, an impairment loss is recognized for the difference between the carrying value and the estimated fair value of the asset group. In estimating future cash flows and fair value, we consider changes in legal factors, the business climate, technological obsolescence, and competitive conditions. Our annual impairment assessments performed in the fourth quarters of Fiscal Years 2025 and 2024 indicated that no impairment of long-lived or intangible assets was identified for our continuing operations. As of December 28, 2025, we determined that the criteria for a held-for-sale classification for the SensiML subsidiary were no longer met. As run-off operations at the SensiML subsidiary concluded in Fiscal Year 2025, we decided to account for the SensiML subsidiary as an asset group held for disposal in accordance with ASC 360-10. As a result of this classification, we evaluated the recoverability, or undiscounted cash flows expected to result from the disposition of the SensiML subsidiary, including its long-lived and intangible assets, to determine the fair value of the asset group. In our evaluation, we decided to record impairment charges to reduce the carrying value of the long-lived and intangible assets within the SensiML subsidiary asset group. The impairment charges of $2.2 million, reduced the carrying value of the long-lived and intangible assets within the SensiML subsidiary asset group to $0. Additionally, we recogniz ed a loss of $5 thousand on the disposal of equipment i n the Fiscal Year December 28, 2025. We did not recognize any gains or losses on the disposal of equipment in the year ended December 29, 2024 . Continuing Operations Results of Operations The following table sets forth the percentage of revenue for certain items in our statements of operations for the periods indicated: Fiscal Years 2025 2024 Revenue 100 % 100 % Cost of revenue 78 % 38 % Gross profit 22 % 62 % Operating expenses: Research and development 39 % 30 % Selling, general and administrative 67 % 45 % Impairment charges 2 % — % Restructuring costs 1 % — % Operating income (loss) (87 )% (13 )% Interest expense (3 )% (2 )% Interest income and other (expense) income, net — % — % Income (loss) before income taxes (90 )% (15 )% Provision for income taxes — % — % Net income (loss) (90 )% (15 )% 34 Table of Contents Co mparison of Fiscal Years 2025 and 2024 Revenue . The table below sets forth the changes in revenue for Fiscal Year ended December 28, 2025, compared to Fiscal Year ended December 29, 2024 (in thousands, except percentage data): Fiscal Years 2025 2024 Year-Over-Year Change Amount % of Total Revenues Amount % of Total Revenues Amount Percentage New products $ 10,464 76 % $ 15,667 80 % $ (5,203 ) (33 )% Mature products 3,310 24 % 3,984 20 % (674 ) (17 )% Total revenue $ 13,774 100 % $ 19,651 100 % $ (5,877 ) (30 )% New products revenue consists of revenues from the sale of hardware products manufactured on 180 nanometer or smaller semiconductor processes and eFPGA IP licenses, as well as professional services. Mature products include all products produced on semiconductor processes larger than 180 nanometer. Associated royalty revenues are included within their respective device's Total revenue decreased approximately $5.9 million, or (30)% in Fiscal Year ended December 28, 2025 as compared to the Fiscal Year ended December 29, 2024 . The decrease in total revenue was comprised of a decrease of $5.2 million in new product revenue and a decrease of $0.7 million in mature product revenue. New Products Revenue . The table below sets forth the changes in new products revenue for Fiscal Year ended December 28, 2025 , compared to Fiscal Year ended December 29, 2024 (in thousands, except percentage data): Fiscal Years 2025 2024 Year-Over-Year Change Amount % of Total Revenues Amount % of Total Revenues Amount Percentage Hardware products $ 987 7 % $ 2,547 13 % $ (1,560 ) (61 )% eFPGA IP 9,477 69 % 13,120 67 % (3,643 ) (28 )% Total new products revenue $ 10,464 76 % $ 15,667 80 % $ (5,203 ) (33 )% The decrease in new product revenue was primarily driven by a decrease in eFPGA IP revenue. eFPGA IP revenue is comprised primarily of eFPGA intellectual property revenue, eFPGA-related professional services revenue, and eFPGA-related support and maintenance revenue. eFPGA IP revenue decreased approximately $3.6 million, or (28)%, as compared to the Fiscal Year ended December 29, 2024 . The decrease in eFPGA IP revenue was primarily comprised of a $3.7 million decrease in eFPGA-related professional services revenue. New hardware revenue decreased by approximately $1.6 million, or (61)%, in the Fiscal Year ended December 28, 2025 compared to the Fiscal Year ended December 29, 2024 . The decrease in new hardware product revenue was primarily comprised of a decrease of $1.6 million in connectivity product revenue. Contract liabilities (deferred revenue) associated with eFPGA IP revenues were $0.1 million and $0.4 million and were included in deferred revenue on the consolidated balance sheets as of December 28, 2025 and December 29, 2024, respectively. Contract assets associated with eFPGA IP revenues were $0.2 million and $2.7 million on the consolidated balance sheets as of December 28, 2025 and December 29, 2024, respectively. Gross Profit. The table below sets forth the changes in gross profit for Fiscal Year ended December 28, 2025 , compared to Fiscal Year ended December 29, 2024 (in thousands, except percentage data): Fiscal Years 2025 2024 Year-Over-Year Change Amount % of Total Revenues Amount % of Total Revenues Amount Percentage Revenue $ 13,774 100 % $ 19,651 100 % $ (5,877 ) (30 )% Cost of revenue 10,740 78 % 7,558 38 % 3,182 42 % Gross profit $ 3,034 22 % $ 12,093 62 % $ (9,059 ) (75 )% Gross profit in Fiscal Year 2025 compared to Fiscal Year 2024 decreased approximately $9.1 million, or (75)%. The change in gross profit reflects a decrease in revenue of $5.9 million, or (30)%, accompanied by an increase in cost of revenue of $3.2 million, or 42%. The decrease in revenue was driven by a $5.2 million decrease in new product revenue, primarily due to reductions in eFPGA IP professional services revenue, accompanied by a $0.7 million decrease in mature product rev enu e. The $3.2 million increase in cost of revenue was primarily comprised of increases in compensation expense, tooling, and tooling-related depreciation expense, all collectively associated with performing for revenue contracts, in addition to an increase in reserves related to certain wafer product inventory. In Fiscal Years 2025 and 2024, we capitalized costs associated with internal-use software of approxima tely $0.6 million and $0.4 million, respectively. For Fiscal Years 2025 and 2024, we recognized $0.2 million and $0.1 million, respectively in amortiza tion expense of internal-use software in cost of revenues on our consolidated statements of operations. Our hardware products have historically had a long product life cycle and obsolescence has not been a significant factor in the valuation of inventories. However, as we pursue opportunities in the IoT market and continue to develop new products, we believe our product life cycle may be shorter, which will increase the potential for obsolescence. In general, our standard manufacturing lead times are longer than the binding forecasts we receive from customers. The sale of inventories previously written-off was approximately $0.1 million and $0.1 million in Fiscal Years 2025 and 2024, respectively. We wrote down approximately $0.6 million and $0.1 million to inventory reserves in Fiscal Years 2025 and 2024, respectively. 35 Table of Contents Operating Expenses. The table below sets forth the changes in operating expenses for Fiscal Year ended December 28, 2025 compared to Fiscal Year ended December 29, 2024 (in thousands, except percentage data): Fiscal Years 2025 2024 Year-Over-Year Change Amount % of Total Revenues Amount % of Total Revenues Amount Percentage Research and development $ 5,295 39 % $ 5,846 30 % $ (551 ) (9 )% Selling, general and administrative 9,283 67 % 8,767 45 % 516 6 % Impairment charges 300 2 % — — % 300 100 % Restructuring costs 75 1 % — — % 75 100 % Total operating expenses $ 14,953 109 % $ 14,613 75 % $ 340 2 % Research and Development Expenses. Our research and development expenses consist primarily of personnel, overhead, and other costs associated with System on Chip ("SoC") and software development, programmable logic design, and AI and eFPGA development. R&D expenses were $5.3 million and $5.8 million in Fiscal Years 2025 and 2024, respectively, which represented 39% and 30%, respectively, of revenue for those periods. The $0.6 million decrease in R&D expense s in Fiscal Year 2025 as compared to Fiscal Year 2024 was primarily attributable to an increase of R&D labor allocations to Cost of Revenues and decreases in salaries and compensation, partially offset by an increase in general allocations and software tool amortization. Selling, General and Administrative Expenses. Our selling, general and administrative ("SG&A") expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources, and general management. SG&A expenses were $9.3 million and $8.8 million in Fiscal Years 2025 and 2024, respectively, which represented 67% and 45%, respectively, of revenue for those periods. The $0.5 million increase in SG&A expenses in Fiscal Year 2025 as compared to Fiscal Year 2024 was primarily attributable to an increase in bonus incentive compensation, partially offset by decreases in stock-based compensation costs. Impairment Charges. The $0.3 million in impairment charges in Fiscal Year 2025 were attributable to the full impairment of the Company's non-marketable equity investment. Restructuring Costs: The $75 thousand in restructuring costs in Fiscal Year 2025 were primarily attributable to severance payments for employees within QuickLogic related to SensiML discontinued operations. Interest Expense and Interest Income and Other (Expense) Income, net. The table below sets forth the changes in interest expense and interest income and other (expense) income, net, for the Fiscal Year ended December 28, 2025, as compared to Fiscal Year ended December 29, 2024 (in thousands, except percentage data): Fiscal Years Year-Over-Year Change 2025 2024 Amount Percentage Interest expense $ (370 ) $ (406 ) $ (36 ) (9 )% Interest income and other (expense) income, net $ (28 ) $ 24 52 (217 )% Total interest expense and interest income and other (expense) income, net $ (398 ) $ (382 ) $ 16 4 % Interest expense relates primarily to our line of credit facility. Interest income and other (expenses) income, net, relates to the interest earned on our money market accounts and foreign exchange gain or losses recorded. Provision for Income Taxes. The table below sets forth the changes in provision for income taxes in the Fiscal Year ended December 28, 2025 compared to the Fiscal Year ended December 29, 2024 (in thousands, except percentage data): Fiscal Years Year-Over-Year Change 2025 2024 Amount Percentage Provision for income taxes $ 18 $ 3 $ 15 500 % Income tax expense for the Fiscal Year 2025 and 2024 relates primarily to US state and foreign income tax provisions. As of the end of Fiscal Year 2025, our ability to utilize our U.S. deferred tax assets in future periods is uncertain and, accordingly, we have recorded a full valuation allowance against the related U.S. deferred tax assets. We will continue to assess the realizability of deferred tax assets in future periods. 36 Table of Contents Discontinued Operations In the first quarter of 2025, we announced our Board of Directors was actively exploring options for our wholly owned subsidiary, SensiML. This decision by the Company and our Board of Directors was influenced by recent events, including eFPGA IP design wins with strategic customers, expansion of large government ruggedized FPGA and eFPGA IP contracts, performance improvements of its eFPGA IP products, recent changes in the FPGA market competitor landscape, and an increase in inbound interest from customers of former eFPGA market competitors. With the success of our eFPGA IP and ruggedized FPGA business, we plan to focus all of our resources on leveraging and growing the cornerstones of our core business model. SensiML's Analytics Toolkit provides an end-to-end Artificial Intelligence / Machine Learning development platform with accurate sensor algorithms using AI technology, spanning data collection, labeling, algorithm and firmware auto generation, and testing. This cutting-edge software enables ultra-low power IoT endpoints that implement AI to transform raw sensor data into meaningful insight at the device itself. Revenue streams from SensiML included Software as a Service (SaaS) subscriptions for development, per unit license fees when deployed in production, and proof-of-concept services. As of January 7, 2025, the Company began accounting for the SensiML subsidiary in accordance with ASC 205-20, Discontinued Operations. As of December 28, 2025, we determined that the criteria for a held-for-sale classification for the SensiML subsidiary were no longer met. As run-off operations at the SensiML subsidiary concluded in Fiscal Year 2025, we decided to account for the SensiML subsidiary as an asset group held for disposal in accordance with ASC 360-10. As a result of this classification, we evaluated the recoverability, or undiscounted cash flows expected to result from the disposition of the SensiML subsidiary. Based on our evaluation, we decided to fully impair the asset group of the SensiML subsidiary in the amount of $2.4 million, constituting a significant portion of the SensiML subsidiary's net loss from discontinued operations of $2.5 million for the Fiscal Year ended December 28, 2025 . This is compared to a net loss from discontinued operations of $0.9 million in the Fiscal Year ended December 29, 2024 . Additionally, we forgave approximately $7.9 million of intercompany payables owed by SensiML to the parent company. The forgiveness of this intercompany balance was accounted for as a capital contribution to SensiML and was approved by the Company's Board of Directors as a related-party transaction. Refer to Note 3 for additional information related to the related party transaction. We marketed our SensiML solutions to OEMs and ODMs offering differentiated Consumer/IoT products, to processor vendors wishing to expand their served available market, and to sensor manufacturers and sensor processing software companies wishing to expand their ecosystems. Our target markets for our SensiML products included Consumer/Industrial IoT and Consumer Electronics. SensiML SaaS subscribers typically entered into licensing agreements directly with SensiML. New products revenue from discontinued operations for the Fiscal Year ended December 28, 2025 was $11 thousand, a decrease of $0.5 million as compared to the Fiscal Year ended December 29, 2024 . Contract liabilities (deferred revenue) associated with SensiML were $0 and $10 thousand and were included in deferred revenue on the consolidated balance sheets as of December 28, 2025 and December 29, 2024, respectively. Revenue Recognition The following is a description of our revenue recognition policy by principal activity for discontinued operations: SensiML revenues were comprised primarily of software as a service ("SaaS") revenue and software-related professional services revenue. SaaS revenue was generated when we licensed our software to customers and allowed customers to access the software over a short-term subscription basis. We granted the customer the right to access and use software at the outset of the arrangement and throughout the entire term of the arrangement. We recognized SaaS revenue ratably over the license term. We recognized revenue from software-related professional services as services are provided to the customer. In Fiscal Years 2025 and 2024, we capitalized costs associated with SensiML internal-use software of approxima tely $0 and $0.7 million, respectively. For Fiscal Years 2025 and 2024, we recognized $0 and $0.7 million, respectively, in amortiza tion expense of SensiML internal-use software in cost of revenues on our consolidated statements of operations. 37 Table of Contents Results of Operations The following table sets forth the percentage of revenue from discontinued operations for certain items in our consolidated statements of operations for the periods indicated: Fiscal Years 2025 2024 Revenue 100 % 100 % Cost of revenue 27 % 145 % Gross profit 73 % (45 )% Operating expenses: Research and development 246 % 151 % Selling, general and administrative 182 % 1 % Impairment charges 21409 % — % Restructuring costs 791 % — % Interest income and other income (expense), net — % 6 % Income (loss) from discontinued operations before income taxes (22555 )% (203 )% (Benefit from) provision for income taxes — % — % Net income (loss) from discontinued operations (22555 )% (203 )% Key Performance Indicators Sales, operating income, and net income are some of the key performance indicators that management uses to manage the business. Management uses sales, operating income (loss), and net income (loss) to evaluate the Company's financial condition and operating performance, as well as evaluate income generated in deciding whether to reinvest profits into the Company or to use such profits for other purposes, such as for acquisitions or share repurchases. These key performance indicators are also used to monitor budget versus actual results, as well as in competitive analyses by benchmarking to our competitors. Liquidity and Capital Resources We have historically financed our operating losses and capital investments through the sale of our common stock, financing arrangements, operating leases, and cash flows provided by operations. We also have a revolving facility with Heritage Bank of Commerce ("Heritage Bank"). As of December 28, 2025, our principal sources of liquidity consisted of cash, cash equivalents, and restricted cash of $18.8 million, inclusive of $15.0 million in advances from our $20 million revolving facility. The revolving credit facility with Heritage Bank expires on December 31, 2026. Our principal contractual commitments include purchase obligations, re-payments of advances from our revolving facility, and payments under financing arrangements and operating leases. Purchase obligations include amounts that are recorded on our consolidated balance sheets, as well as amounts that are not recorded on our consolidated balance sheets. Purchase obligations that are recorded on our consolidated balance sheets are largely comprised of open purchase order commitments to suppliers and to subcontractors. Our risk associated with these purchase obligations is limited to the termination liability provisions within those contracts and as such, we do not believe they represent a material liquidity risk to us. Purchase obligations not recorded on our consolidated balance sheets represent significant future obligations associated with ongoing eFPGA IP revenue contracts. These obligations are dependent on numerous variables and therefore, it is difficult to predict the amount and timing of payments which could differ materially from our estimates. 38 Table of Contents Credit Agreement On December 21, 2018 , we entered into an Amended and Restated Loan and Security Agreement with Heritage Bank of Commerce (as amended, the "Loan Agreement") which among other things, provided a revolving line of credit facility (as amended, the "Revolving Facility") allowing the us to draw advances up to $15 million. The Revolving Facility includes a number of customary and restrictive financial covenants including maintaining certain minimum cash levels with the lender. On December 8, 2023, we entered into the Seventh Amendment to the Loan Agreement, which increased the line of credit to $20 million. The Revolving Facility bears an annual facility fee of $60 thousand, payable each December 31st. Advances under the Revolving Facility bear a variable annual interest rate equal to one half of one percentage point (0.50%) above the prime rate. On March 14, 2025, we entered into the Eighth Amendment to the Loan Agreement, which extended the loan maturity date for one year from December 31, 2025 to December 31, 2026. On December 28, 2025, we had a $15.0 million outstanding balance on the Revolving Facility with an interest rate of 7.25%. On December 29, 2024, we had an $18.0 million outstanding balance on the Revolving Facility with an interest rate of 8.00%. We were in compliance with all loan covenants under the Loan Agreement, as of the end of the current reporting period. Heritage Bank has a first-priority security interest in substantially all of the company’s tangible and intangible assets to secure any outstanding amounts under the Loan Agreement. See Note 8 to the consolidated financial statements for additional information regarding our Loan Agreement and other debt obligations. In accordance with ASC 205-40, Presentation of Financial Statements - Going Concern , we evaluated whether conditions or events, considered in the aggregate, raise concerns about our ability to meet our obligations as they become due within one year after the date that the consolidated financial statements are issued. As part of this evaluation, we identified conditions and events related primarily to the maturity of our current revolving credit facility on December 31, 2026. We have concluded that we will have sufficient liquidity to meet our obligations as they become due within one year after the date the consolidated financial statements are issued. In anticipation of the maturity of the current revolving credit facility, we signed a term sheet with Sunflower Bank, N.A., who has approved with their credit committee, a $10 million credit facility where parties have agreed upon all material terms, with a maturity date that extends beyond one year after the date the consolidated financial statements are issued. We expect to execute definitive agreements with Sunflower Bank, N.A. during the second quarter. Common Stock Offerings On February 25, 2025, we entered into an At Market Sales Agreement (the "Sales Agreement") with Needham & Company, LLC, as sales agent (the "Agent"). Pursuant to the Sales Agreement, we are able to offer and sell, from time to time, through the Agent, shares of the Company's common stock, par value of $0.001 per share, having an aggregate offering price of up to $20,000,000 (the "ATM Offering"). From February 25, 2025 to August 14, 2025, we sold 713 thousand shares under the ATM Offering, resulting in net cash proceeds of approximately $4.2 million. Issuance costs related to the ATM Offering were $339 thousand. On March 6, 2025, we entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 256 thousand shares of common stock in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $1.5 million. Issuance costs related to the offering were $20 thousand. On August 14, 2025, we filed a new Registration Statement on Form S-3 (File No 333-289610) ("New Registration Statement") with the SEC to replace our expiring Registration Statement on Form S-3, under which we may sell, from time-to-time, common stock, preferred stock, depositary shares, warrants, debt securities, and units, individually or as units comprised of one or more of the other securities or a combination thereof in an aggregate amount of up to $125,000,000. Our registration statement became effective August 22, 2025. In connection with the New Registration Statement, we filed a sales agreement prospectus whereby we amended, restated, and renewed our ATM program allowing us to sell an aggregate offering price of up to $20,000,000 (the "Amended ATM Offering"). We also amended and restated our At Market Sales Agreement with the Agent on August 14, 2025. The $20,000,000 of shares of our common stock that may be sold under the Amended ATM Offering is included in the $125,000,000 of our securities that may be sold under the New Registration Statement. From August 14, 2025 through Fiscal Year ended December 28, 2025, we sold 487 thousand shares under the Amended ATM Offering, resulting in net cash proceeds of approximately $3.1 million. Issuance costs related to the Amended ATM Offering were $98 thousand. Issuance costs for the our ATM Offering and Amended ATM Offering are recorded on a pro-rata basis reflective of the percentage of shares sold to total shares available for sale under the ATM Offering and Amended ATM Offering, respectively. On December 5, 2024, we entered into common stock purchase agreements with certain institutional investors and their affiliated entities for the sale of an aggregate of 424 thousand shares of common stock in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $3.2 million. Issuance costs related to the offering were $27 thousand. On March 13, 2024, we entered into common stock purchase agreements with certain institutional investors for the sale of an aggregate of 223 thousand shares of our common stock, in a registered direct offering pursuant to an effective shelf registration statement on Form S-3, resulting in net cash proceeds of approximately $3.5 million. Issuance costs related to the offering were $24 thousand. See N ote 12 to the consolid ated financial statements for additional information regarding our common stock offerings, such as purchase price of shares sold. Cash Flows As of December 28, 2025, most of our cash and cash equivalents were invested in a Heritage Bank money market account. As of December 28, 2025, our interest-bearing debt consisted of $2.8 million outstanding under finance arrangements and $15 million outstanding under our Revolving Facility. Se e Note 8 t o the consolidated financial statements for additional information. Cash balances held at our foreign subsidiaries were approximately $0.1 million and $0.1 million as of December 28, 2025 and December 29, 2024 , respectively. Earnings from our foreign subsidiaries are currently deemed to be indefinitely reinvested. We do not expect such reinvestment to affect our liquidity and capital resources and we continually evaluate our liquidity needs and ability to meet global cash requirements as a part of our overall capital deployment strategy. Factors which affect our liquidity, capital resources, and global capital deployment strategy include anticipated cash flows, the ability to repatriate cash in a tax efficient manner, funding requirements for operations and investment activities, acquisitions and divestitures, and capital market conditions. Our cash flows were as follows (in thousands): Fiscal Year 2025 2024 Net cash provided by (used in) operating activities $ (3,262 ) $ 27 Net cash provided by (used in) investing activities (3,689 ) (6,465 ) Net cash provided by (used in) financing activities 3,913 3,712 39 Table of Contents Net Cash provided by (used in) Operating Activities In Fiscal Year 2025, net cash used in operating activities was $3.3 million, which was primarily due to the Company's net loss of $14.8 million and changes in working capital of $0.7 million, which consisted of a decrease in accounts payable of $1.8 million, a decrease in deferred revenue of $0.4 million, an increase in accounts receivable of $0.4 million, and a decrease in lease liabilities of $0.3 million, partially offset by a decrease in contract assets of $2.5 million and an increase in accrued liabilities of $0.2 million. The Company's net loss and changes in working capital were partially offset by non-cash charges of $12.3 million. Non-cash charges primarily consisted of depreciation and amortization of long-lived assets and certain definite-lived intangible assets of $5.7 million, stock-based compensation expense of $3.3 million, impairment of assets held by SensiML disposal group of $2.4 million, impairment of investments in non-affiliates of $0.3 million, and write-down of inventories of $0.6 million In Fiscal Year 2024, net cash provided by operating activities was $27 thousand, which was primarily due to non-cash charges of $8.9 million. Non-cash charges consisted of stock-based compensation expense of $4.6 million, depreciation and amortization of long-lived assets and certain definite-lived intangible assets of $4.2 million, and write-downs of inventories of $0.1 million. Non-cash charges were partially offset by a net loss of $3.8 million and changes in working capital of $5.1 million. Changes in working capital consisted of a decrease in trades payable of $3.6 million, a decrease in accrued liabilities of $1.1 million, an increase in accounts receivable of $0.8 million, a decrease in deferred revenue of $0.6 million, and a decrease in lease liabilities of $0.3 million, partially offset by a decrease in contract assets of $0.9 million, a decrease in inventories of $0.3 million, and a decrease in other assets of $0.2 million. Net Cash provided by (used in) Investing Activities Net cash used in investing activities in Fiscal Year 2025 was approximately $3.7 million, which was primarily attributable to capital expenditures related to property and equipment of $3.2 million and the capitalization of internal-use software in the amount of $0.5 million. Net cash used in investing activities in Fiscal Year 2024 was approximately $6.5 million, which was primarily attributable to capital expenditures related to property and equipment of $5.4 million, $0.1 million in expenditures related to intangible assets, and the capitalization of internal-use software in the amount of $1.1 million, partially offset by stock-based compensation capitalized to property and equipment and internal-use software in the amount of $9 thousand and $149 thousand, respectively. Net Cash provided by (used in) Financing Activities In Fiscal Year 2025, net cash provided by financing activities was $3.9 million, primarily attributable to net proceeds from the issuance of common stock in the amount of $9.1 million, partially offset by $2.2 million in payments related to financing arrangements primarily for tooling related to revenue contracts with customers and $3.0 million in greater payments than borrowings on the Company's revolving line of credit. In Fiscal Year 2024, net cash provided by financing activities was $3.7 million, primarily attributable to proceeds from the issuance of common stock in the amount of $7.1 million, partially offset by $1.4 million in payments related to financing arrangements primarily for tooling related to revenue contracts with customers and $2.0 million in greater payments than borrowings on the Company's revolving line of credit. We require substantial cash to fund our business. However, we believe that our existing cash and cash equivalents, together with available financial resources from the Revolving Facility and our Amended ATM Offering, will be sufficient to satisfy our operations and capital expenditures over the next twelve months. Our revolving facility will expire on December 31, 2026. Further, any violations of debt covenants may restrict our access to any additional cash draws from the revolving line of credit and may require our immediate repayment of the outstanding debt amounts. After the next twelve months, our cash requirements will depend on many factors, including our level of revenue and gross profit, the market acceptance of our existing and new products, the levels at which we maintain inventories and accounts receivable, costs of securing access to adequate manufacturing capacity, new product development efforts, capital expenditures, and the level of our operating expenses. In order to satisfy our longer-term liquidity requirements, we may be required to raise additional equity or debt financing. There can be no assurance that financing will be available at commercially acceptable terms or at all. 40 Table of Contents Material Cash Requirements The following discussion describes the material cash requirements from known contractual obligations and other obligations, and the effect such obligations are expected to have on our liquidity and cash flows in future fiscal periods. The following summarizes our material cash requirements as of December 28, 2025: Payments Due by Period Total Less than 1 year 1-3 Years 4-5 Years More than 5 Years Operating lease obligations $ 477 $ 349 $ 128 $ — $ — Financing arrangements 2,975 2,008 967 — — Revolving Facility (1) 15,000 15,000 — — — Purchase obligations: Wafer purchases (2) 170 170 — — — Other purchase commitments 1,836 1,796 40 — — Total material cash requirements $ 20,458 $ 19,323 $ 1,135 $ — $ — (1) The current maturity date on our Revolving Facility is December 31, 2026. See Note 8 to the consolidated financial statements for additional information. (2) Certain wafer manufacturers require us to forecast wafer starts several months in advance. We are committed to take delivery of and pay for a portion of forecasted wafer volume. Concentration of Suppliers We depend on a limited number of contract manufacturers, subcontractors, and suppliers for wafer fabrication, assembly, programming, and testing of our hardware products and for the supply of programming equipment. These services are typically provided by one supplier for each of our hardware products. We generally purchase these single or limited source services through standard purchase orders. Since we rely on independent subcontractors to perform these services, we cannot directly control product delivery schedules, costs, or quality levels. Our future success also depends on the financial viability of our independent subcontractors. These subcontract manufacturers produce products for other companies and we must place orders in advance of expected delivery. As a result, we have only a limited ability to react to fluctuations in demand for our products, which could cause us to have an excess or a shortage of inventories of a particular product, and our ability to respond to changes in demand is limited by these suppliers’ ability to provide products with the quantity, quality, cost, and timeliness that we require. The decision not to provide these services to us or the inability to supply these services to us, such as in the case of a natural or financial disaster, would have a significant impact on our business. Increased demand from other companies could result in these subcontract manufacturers allocating available capacity to customers that are larger or have long-term supply contracts in place and we may be unable to obtain adequate foundry and other capacity at acceptable prices, or we may experience delays or interruption in supply. Additionally, volatility of economic, market, social, and political conditions in countries where these suppliers operate may be unpredictable and could result in a reduction in product revenue or increase our cost of revenue and could adversely affect our business, financial condition, and results of operations. Off-Balance Sheet Arrangements We do not maintain any off-balance arrangements within the meaning of Item 303(b) of Regulation S-K. Recently Issued Accounting Pronouncements See Note 2 to the consolidated financial statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on financial condition and results of operations, which is incorporated by reference herein. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 41 Table of Contents