10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 28, 2014

OR

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

For the Transition Period From  To 

COMMISSION FILE NUMBER: 000-22671

QUICKLOGIC CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	77-0188504
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1277 ORLEANS DRIVE SUNNYVALE, CA 94089

(Address of principal executive offices, including Zip Code)

(408) 990-4000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.    Yes  [x]    No  [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  [x ]    No  [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[ ]	Accelerated Filer	[x]
Non-accelerated filer	[ ] (Do not check if a smaller reporting company)	Smaller Reporting Company	[ ]

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

As of October 30, 2014, the registrant had outstanding 55,859,141 shares of common stock, par value $0.001.

QUICKLOGIC CORPORATION

FORM 10-Q

September 28, 2014

		Page
Part I - Financial Information		3
Item 1.	Financial Statements (condensed unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Loss	5
	Consolidated Statements of Cash Flows	6
	Notes to Condensed Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
Part II - Other Information		32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 4.	Mine Safety Disclosures	32
Item 6.	Exhibits	33
Signatures		34

2

PART I. Financial Information

Item 1. Financial Statements

QUICKLOGIC CORPORATION

CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value amount)

	September 28, 2014			December 29, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	31,159		$	37,406
Accounts receivable, net of allowances for doubtful accounts of $0 in both periods	1,747			3,261
Inventories	6,878			4,136
Other current assets	964			1,272
Total current assets	40,748			46,075
Property and equipment, net	2,889			2,840
Other assets	228			211
TOTAL ASSETS	$	43,865		$	49,126
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit	$	—		$	1,000
Trade payables	1,724			3,578
Accrued liabilities	1,839			3,519
Current portion of capital lease obligations	223			177
Total current liabilities	3,786			8,274
Long-term liabilities:
Revolving line of credit	$	1,000		—
Capital lease obligations, less current portion	225			133
Other long-term liabilities	64			121
Total liabilities	5,075			8,528
Commitments and contingencies (see Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.001 par value; 100,000 shares authorized; 55,859 and 53,788 shares issued and outstanding, respectively	56			54
Additional paid-in capital	237,500			230,373
Accumulated deficit	(198,766		)	(189,829		)
Total stockholders' equity	38,790			40,598
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	43,865		$	49,126

See accompanying Notes to Condensed Unaudited Consolidated Financial Statements.

3

QUICKLOGIC CORPORATION

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Revenue	$	4,124		$	9,066		$	22,124		$	17,209
Cost of revenue	2,361			6,037			13,287			11,210
Gross profit	1,763			3,029			8,837			5,999
Operating expenses:
Research and development	3,057			2,052			8,754			5,902
Selling, general and administrative	2,579			3,207			8,892			8,648
Restructuring costs	—			(32		)	—			181
Total operating expenses	5,636			5,227			17,646			14,731
Loss from operations	(3,873		)	(2,198		)	(8,809		)	(8,732		)
Gain on sale of TowerJazz Semiconductor Ltd. Shares	—			—			—			181
Interest expense	(34		)	(8		)	(67		)	(37		)
Interest income and other expense, net	(17		)	(74		)	(79		)	(130		)
Loss before income taxes	(3,924		)	(2,280		)	(8,955		)	(8,718		)
Provision for (benefit from) income taxes	6			(18		)	(18		)	369
Net loss	$	(3,930	)	$	(2,262	)	$	(8,937	)	$	(9,087	)
Net loss per share:
Basic	$	(0.07	)	$	(0.05	)	$	(0.16	)	$	(0.20	)
Diluted	$	(0.07	)	$	(0.05	)	$	(0.16	)	$	(0.20	)
Weighted average shares:
Basic	55,812			44,761			55,208			44,640
Diluted	55,812			44,761			55,208			44,640

See accompanying Notes to Condensed Unaudited Consolidated Financial Statements.

4

QUICKLOGIC CORPORATION

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

	Three Months Ended						Nine Months Ended
	September 28, 2014			September 29, 2013			September 28, 2014			September 29, 2013
Net loss	$	(3,930	)	$	(2,262	)	$	(8,937	)	$	(9,087	)
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale investments	—			—			—			11
Total comprehensive loss	$	(3,930	)	$	(2,262	)	$	(8,937	)	$	(9,076	)

See accompanying Notes to Condensed Unaudited Consolidated Financial Statements.

5

QUICKLOGIC CORPORATION

CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended
	September 28, 2014			September 29, 2013
Cash flows from operating activities:
Net loss	$	(8,937	)	$	(9,087	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,129			952
Stock-based compensation	1,750			1,067
Write-down of inventories	96			379
Gain on sale of TowerJazz Semiconductor Ltd. Shares	—			(181		)
(Gains) losses on disposal of equipment	(2		)	27
Write-off of equipment	5			3
Tax effect on other comprehensive income	—			273
Allowance for doubtful accounts	—			(20		)
Changes in operating assets and liabilities:
Accounts receivable	1,514			(3,733		)
Inventories	(2,838		)	(202		)
Other assets	291			350
Trade payables	(2,106		)	862
Accrued liabilities	(635		)	1,396
Other long-term liabilities	(57		)	(27		)
Net cash used in operating activities	(9,790		)	(7,941		)
Cash flows from investing activities:
Capital expenditures for property and equipment	(525		)	(1,207		)
Proceeds from sale of fixed assets	2			—
Proceeds from sale of TowerJazz Semiconductor Ltd. Shares	—			265
Net cash used in investing activities	(523		)	(942		)
Cash flows from financing activities:
Payment of debt and capital lease obligations	(268		)	(182		)
Stock issuance cost	—			(70		)
Proceeds from debt obligations	—			1,000
Net proceeds from issuance of common stock	4,334			428
Net cash provided by financing activities	4,066			1,176
Net (decrease) in cash and cash equivalents	(6,247		)	(7,707		)
Cash and cash equivalents at beginning of period	37,406			22,578
Cash and cash equivalents at end of period	$	31,159		$	14,871
Supplemental schedule of non-cash investing and financing activities :
Capital lease obligation to finance capital expenditures	$	448		$	194
Purchase of equipment included in accounts payable	$	33		$	123

See accompanying Notes to Condensed Unaudited Consolidated Financial Statements.

6

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — The Company and Basis of Presentation

QuickLogic Corporation ("QuickLogic" or "the Company"), was founded in 1988 and reincorporated in Delaware in 1999. The Company develops and markets low-power programmable solutions that enable customers to add differentiated features and capabilities to their mobile, consumer and industrial products. The Company is a fabless semiconductor company that designs, markets and supports Customer Specific Standard Products, or CSSPs, Field Programmable Gate Arrays, or FPGAs, application solutions, associated design software and programming hardware.

The accompanying interim condensed consolidated financial statements are unaudited. In the opinion of management, these statements have been prepared in accordance with generally accepted accounting principles, or 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 condensed consolidated financial statements be read in conjunction with the Company's Form 10-K for the year ended December 29, 2013. Operating results for the nine months ended September 28, 2014 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 the fiscal quarters each end on the Sunday closest to the end of each calendar quarter. QuickLogic's third fiscal quarter for 2014 and for 2013 ended on Sunday, September 28, 2014 and September 29, 2013, respectively.

Liquidity

The Company has financed its operations and capital investments through sales of common stock, capital and operating leases, and bank lines of credit. As of September 28, 2014, the Company's principal sources of liquidity consisted of cash and cash equivalents of $31.2 million and $5.0 million in available credit under its revolving line of credit with Silicon Valley Bank. Effective June 30, 2014, the Company entered into a Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank as amended by the First Amendment to the Third Amended and Restated Loan and Security Agreement, dated September 26, 2014 to extend the line of credit for two years through June 27, 2016. The Third Loan Agreement provides for committed loan advances of up to $6.0 million, subject to increase at the Company's election to up to $10.0 million.

The Company currently uses its cash to fund its capital expenditures and operating losses. Based on past performance and current expectations, the Company believes that its existing cash and cash equivalents, together with available financial resources from the revolving line of credit with Silicon Valley Bank will be sufficient to fund its operations and capital expenditures and provide adequate working capital for the next twelve months.

Over the longer term, the Company believes that its existing cash and cash equivalents, together with financial resources from its revolving line of credit with Silicon Valley Bank and its ability to sell additional shares to capital markets will be sufficient to satisfy its operations and capital expenditures.

The Company's liquidity is affected by many factors 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 CSSPs based on its ArcticLink^® and PolarPro^® solution platforms; 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 and finished goods 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 our investment portfolio; changes in operating assets and liabilities; the ability to obtain or renew debt financing and to remain in compliance with the terms of existing credit facilities; the ability to raise funds from the sale of equity in the Company; the issuance and exercise of stock options and participation in the Company's employee stock purchase plan; and other factors related to the uncertainties of the industry and global economics. Accordingly, there can be no assurance that events in the future will not require the Company to seek additional capital or, if so required, that such capital will be available on terms acceptable to the Company.

7

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

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 condensed unaudited consolidated statements of operations.

Uses of Estimates

The preparation of these consolidated financial statements in conformity with 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 from those estimates, particularly in relation to revenue recognition, the allowance for doubtful accounts, sales returns, valuation of investments, valuation of long-lived 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.

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 11 for information regarding concentrations associated with accounts receivable.

For the three months and nine months ended September 28, 2014, the Company generated 27% and 53%, respectively, of its total revenue from shipments to Samsung Electronics Co., Ltd. ("Samsung"). See Note 11 for information regarding concentrations associated with customers and distributors.

Note 2 — Significant Accounting Policies

During the nine months ended September 28, 2014, there were no changes in the Company's significant accounting policies from its disclosure in the Annual Report on Form 10-K for the year ended December 29, 2013. For a discussion of the significant accounting policies, please see the Annual Report on Form 10-K for the fiscal year ended December 29, 2013, filed with the Securities Exchange Commission, or SEC, on March 6, 2014.

New Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of our pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2017.

8

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Sub Topic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern(ASU 2014-15). This ASU 2014-15 provides guidance to an entity’s management with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are currently commonly provided by entities today in the financial statement footnotes. This ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is currently evaluating the impact of ASU 2014-15 on its consolidated financial statements andfootnote disclosures.

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 income (loss) per share was computed using the weighted average number of common shares outstanding during the period plus potentially dilutive common shares outstanding during the period under the treasury stock method. In computing diluted net income (loss) per share, the weighted average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants.

The following shares were not included in the calculation of diluted net loss per share for the three months and nine months ended September 28, 2014 and September 29, 2013: (i) 6.6 million and 7.3 million of common shares associated with equity awards outstanding and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan, respectively, and (ii) warrants to purchase up to 4.2 million shares of common stock. These shares were not included as they were considered antidilutive due to the net loss the Company experienced during these periods.

Note 4 — Balance Sheet Components

	As of
	September 28, 2014			December 29, 2013
	(in thousands)
Inventories:
Raw materials	$	—		$	19
Work-in-process	1,133			1,343
Finished goods	5,745			2,774
	$	6,878		$	4,136
Other current assets:
Prepaid expenses	$	880		$	845
Other	84			427
	$	964		$	1,272
Property and equipment:
Equipment	$	13,883		$	13,294
Software	3,332			3,349
Furniture and fixtures	710			710
Leasehold improvements	646			640
	18,571			17,993
Accumulated depreciation and amortization	(15,682		)	(15,153		)
	$	2,889		$	2,840
Accrued liabilities:
Employee related accruals	$	1,452		$	2,821
Other	387			698
	$	1,839		$	3,519

9

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Note 5 — Obligations

	As of
	September 28, 2014			December 29, 2013
	(in thousands)
Debt and capital lease obligations:
Revolving line of credit	$	1,000		$	1,000
Capital leases	448			310
	1,448			1,310
Current portion of debt and capital lease obligations	(223		)	(1,177		)
Long term portion of capital lease obligations	$	1,225		$	133

Revolving Line of Credit

The Company has entered into the Third Loan Agreement. The terms of the Third Loan Agreement include a $6.0 million revolving line of credit available through June 27, 2016. Upon each advance, the Company can elect a fixed interest rate, which is the prime rate plus the prime rate margin, or a fixed rate, which is LIBOR plus the LIBOR rate margin. During the third quarter of 2014, the Company had $1.0 million of revolving debt outstanding with an interest rate of 3.75%.

Silicon Valley 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 Third Loan Agreement. Under the terms of the Third Loan Agreement, the Company must maintain a minimum tangible net worth of at least $15 million, an adjusted quick ratio of 2-to-1 and a minimum unrestricted cash or cash equivalents balance of at least $8 million. The Third Loan Agreement also has certain restrictions including, among others, restrictions on the incurrence of other indebtedness, the maintenance of depository accounts, the disposition of assets, mergers, acquisitions, investments, the granting of liens, cash balances with subsidiaries and the payment of dividends. The Company was in compliance with the financial covenants of the Third Loan Agreement as of the end of the current reporting period.

Capital Leases

In July 2014, the Company leased design software under a 41 month capital lease at an imputed interest rate of 3.15% per annum. Terms of the agreement require the Company to make payments of principal and interest of $42,000 in August 2014, $16,000 in December 2014, $58,000 in January 2016 and $58,000 in January 2017. The total payments for the lease will be $174,000. As of September 28, 2014, $126,000 was outstanding under this capital lease, of which $15,000 was classified as a current liability.

In May 2014, the Company leased design software under a three-year capital lease at an imputed interest rate of 4.80% per annum. Terms of the agreement require the Company to make annual payments of approximately $84,000 through April 2016, for a total of $252,000. As of September 28, 2014, $157,000 was outstanding under the capital lease, of which $77,000 was classified as a current liability.

In December 2013, the Company leased design software under a two-year capital lease at an imputed interest rate of 4.34% per annum. Terms of the agreement require the Company to make quarterly payments of approximately $34,000 through September 2015, for a total of $273,000. As of September 28, 2014, $165,000 was outstanding under the capital lease, of which $131,000 was classified as a current liability.

Note 6 — 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 it considers assumptions that market participants would use when pricing the asset or liability.

10

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The accounting guidance for fair value measurement also specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the company's own assumptions of market participant valuation (unobservable inputs). The fair value hierarchy consists of the following three levels:

• Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

• Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table presents the Company's financial assets that are measured at fair value on a recurring basis as of September 28, 2014 and December 29, 2013, consistent with the fair value hierarchy provisions of the authoritative guidance (in thousands):

	As of September 28, 2014								As of December 29, 2013
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	29,949	$	—	$	29,949	$	—	$	35,812	$	35,812	$	—	$	—
Total assets	$	29,949	$	—	$	29,949	$	—	$	35,812	$	35,812	$	—	$	—

_________________

⁽¹⁾Money market funds are presented as a part of cash and cash equivalents on the accompanying consolidated balance sheets as of September 28, 2014 and December 29, 2013.

Note 7 - Stockholders' Equity

Common and Preferred Stock

The Company is authorized to issue 100 million shares of common stock and has 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 and Warrants

On July 31, 2013, the Company filed a shelf registration statement on Form S-3 under which the Company may, from time to time, sell securities in one or more offerings up to a total dollar amount of $40.0 million. The Company's shelf registration statement was declared effective on August 30, 2013 and expires in August 2016.

In November 2013, the Company issued an aggregate of 8,740,000 shares of common stock, $0.001 par value, in an underwritten public offering at a price of $2.90 per share. The Company received net proceeds from the offering of approximately $23.1 million, net of underwriter's commission and other offering expenses of $2.2 million.

In June 2012, the Company issued an aggregate of 5,122,000 shares of common stock and warrants to purchase up to an aggregate of 2,304,900 shares of common stock in a confidentially marketed underwritten offering. The common stock and warrants were issued in units (the “Units”), with each Unit consisting of (i) one share of common stock and (ii) a warrant to purchase 0.45 of a share of common stock, at a price of $2.50 per Unit. The Company received total net proceeds from the offering of $11.9 million, net of underwriting discounts and other offering expenses of $929,000

11

The warrants are exercisable any time for a period of 60 months from the date of issuance on June 6, 2012, and are exercisable at a price of $2.98 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 $0.97 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 0.89%, expected volatility of 62.18% and expected dividend of zero.

Note 8 — Employee Stock Plans

1999 Stock Plan

The 1999 Stock Plan, or 1999 Plan, provided for the issuance of incentive and non-qualified options, restricted stock units and restricted stock. Equity awards granted under the 1999 Plan have a term of up to ten years. Options typically vest at a rate of 25% one year after the vesting commencement date, and one forty-eighth for each month of service thereafter. In March 2009, the Board adopted the 2009 Stock Plan, which was approved by the Company's stockholders on April 22, 2009. Effective April 22, 2009, no further stock options may be granted under the 1999 Plan.

2009 Stock Plan

The 2009 Stock Plan, or 2009 Plan, was amended and restated by the Board of Directors in March 2011 and approved by the Company's stockholders on April 28, 2011 to, among other things, reserve an additional 1.5 million shares of common stock for issuance under the 2009 Plan. As of September 28, 2014, approximately 7.0 million shares were reserved for issuance under the 2009 Plan. Equity awards that are cancelled, forfeited or repurchased under the 1999 Plan become available for grant under the 2009 Plan, up to a maximum of an additional 7.5 million shares. Equity awards granted under the 2009 Plan have a term of up to ten years. Options typically vest at a rate of 25% one year after the vesting commencement date, and one forty-eighth for each month of service thereafter. The Company may implement different vesting schedules in the future with respect to any new equity awards.

Employee Stock Purchase Plan

The 2009 Employee Stock Purchase Plan, or 2009 ESPP, was adopted in March 2009. The Company has reserved 2.3 million shares for issuance under the 2009 ESPP. The 2009 ESPP provides for six month offering periods. Participants purchase shares through payroll deductions of up to 20% of an employee's total compensation (maximum of 20,000 shares per offering period). The 2009 ESPP permits the Board of Directors to determine, prior to each offering period, whether participants purchase shares at: (i) 85% of the fair market value of the common stock at the end of the offering period; or (ii) 85% of the lower of the fair market value of the common stock at the beginning or the end of an offering period. The Board of Directors has determined that, until further notice, future offering periods will be made at 85% of the lower of the fair market value of the common stock at the beginning or the end of an offering period.

Note 9 — Stock-Based Compensation

The Company's equity incentive program is a broad-based, long-term retention program intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. The Company provides stock-based incentive compensation, or awards, to eligible employees and non-employee directors. Awards that may be granted under the program include non-qualified and incentive stock options, restricted stock units, or RSUs, performance-based restricted stock units, or PRSUs, and cash settlement of stock appreciation rights, or SARs. To date, awards granted under the program consist of stock options, RSUs and PRSUs. The majority of stock-based awards granted under the program vest over four years. Stock options granted under the program have a maximum contractual term of ten years.

12

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The stock-based compensation expense included in the Company's consolidated financial statements for the three and nine months ended September 28, 2014 and September 29, 2013 was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Cost of revenue	$	32	$	24	$	110	$	76
Research and development	176		74		750		286
Selling, general and administrative	244		232		890		705
Total costs and expenses	$	452	$	330	$	1,750	$	1,067

 No stock-based compensation was capitalized during any period presented above.

Valuation Assumptions

The Company uses the Black-Scholes option pricing model to estimate the fair value of employee stock options and rights to purchase shares under the Company's 2009 ESPP. Using the Black-Scholes pricing model requires the Company to develop highly subjective assumptions including the expected term of awards, expected volatility of its stock, expected risk-free interest rate and expected dividend rate over the term of the award. The Company's expected term of awards assumption is based primarily on its historical experience with similar grants. The Company's expected stock price volatility assumption for both stock options and ESPP shares is based on the historical volatility of the Company's stock, using the daily average of the opening and closing prices and measured using historical data appropriate for the expected term. The risk-free interest rate assumption approximates the risk-free interest rate of a Treasury Constant Maturity bond with a maturity approximately equal to the expected term of the stock option or ESPP shares. This fair value is expensed over the requisite service period of the award. The fair value of RSUs and PRSUs is based on the closing price of the Company's common stock on the date of grant. Equity compensation awards which vest with service are expensed using the straight-line attribution method over the requisite service period.

In addition to the assumptions used in the Black-Scholes pricing model, the amended authoritative guidance requires that the Company recognize expense for awards ultimately expected to vest; therefore the Company is required to develop an estimate of the number of awards expected to be forfeited prior to vesting, or forfeiture rate. The forfeiture rate is estimated based on historical pre-vest cancellation experience and is applied to all share-based awards.

The following weighted average assumptions are included in the estimated fair value calculations for stock option grants:

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Expected term (years)	6.2		4.9		6.2		6.1
Risk-free interest rate	1.98	%	1.51	%	1.98	%	1.19	%
Expected volatility	55.10	%	62.62	%	55.10	%	60.53	%
Expected dividend yield	—		—		—		—

The weighted average estimated fair value for options granted during the third quarter of 2014 and 2013 was $2.10 and $1.39 per option, respectively. The weighted average estimated fair value for options granted during the first nine months of 2014 and 2013 was $2.10 and $1.30, per option, respectively. As of September 28, 2014 and September 29, 2013, the fair value of unvested stock options, net of expected forfeitures, was approximately $1.9 million and $1.4 million, respectively. This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 2.34 years.

13

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Stock-Based Compensation Award Activity

The following table summarizes the activity in the shares available for grant under the 2009 Plan during the first nine months of 2014:

	Shares Available for Grant
	(in thousands)
Balance at December 29, 2013	2,253
Options granted	(208	)
Options forfeited or expired	154
RSUs granted	(416	)
PRSUs forfeited or expired	24
Balance at September 28, 2014	1,807

Stock Options

The following table summarizes stock options outstanding and stock option activity under the 1999 Plan and the 2009 Plan, and the related weighted average exercise price, for the first nine months of 2014:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Balance outstanding at December 29, 2013	7,242		$	2.62
Granted	208		3.84
Forfeited or expired	(154	)	3.55
Exercised	(1,687	)	2.56
Balance outstanding at September 28, 2014	5,609		$	2.66	5.42	$	3,237
Exercisable at September 28, 2014	4,461		$	2.55	4.60	$	2,992
Vested and expected to vest at September 28, 2014	5,404		$	2.64	5.29	$	3,199

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $3.03 as of the end of the Company's current reporting period, 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 first nine months of 2014 and 2013 was $3.7 million and $46,000, respectively. Total cash received from employees as a result of employee stock option exercises during the first nine months of 2014 and 2013 was approximately $4.3 million and $108,000 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 $225,000 and $832,000 for the third quarter and first nine months ended September 28, 2014, respectively.

Restricted Stock Units and Performance-based Restricted Stock Units

The Company began issuing RSUs and PRSUs in the third quarter of 2007. RSUs entitle the holder to receive, at no cost, one common share for each restricted stock unit as it vests. The Company's policy is to withhold shares in settlement of employee tax withholding obligations upon the vesting of restricted stock units. The stock-based compensation related to RSUs and PRSUs was $154,000 and $2,000, respectively, for the third quarter of 2014. As of September 28, 2014, there was $515,000 in unrecognized compensation expense related to RSUs and PRSUs.

14

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

A summary of activity for the Company's RSUs and PRSUs for the nine months ended September 28, 2014 and information regarding RSUs and PRSUs outstanding and expected to vest as of September 28, 2014 is as follows:

	RSUs & PRSUs Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested at December 29, 2013	225		$	3.17
Granted	416		4.47
Vested	(300	)	4.76
Forfeited	(24	)	—
Nonvested at September 28, 2014	317		$	3.36

Employee Stock Purchase Plan

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 third quarter of 2014 and 2013 was $1.01 and $0.59 per right, respectively.

As of September 28, 2014, 1,002,000 shares remained available for issuance under the 2009 ESPP. For the third quarter of 2014, the Company recorded compensation expense related to the 2009 ESPP of $71,000.

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				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Expected term (months)	6.09		6.08		6.09		6.08
Risk-free interest rate	0.05	%	0.09	%	0.05	%	0.09	%
Volatility	49.17	%	39.03	%	49.17	%	39.03	%
Dividend yield	—		—		—		—

As of September 28, 2014, the unrecognized stock-based compensation expense relating to the Company's 2009 ESPP was $37,000 and is expected to be recognized over a weighted average period of approximately 1.6 months.

Note 10 — Income Taxes

In the third quarter of 2014 and 2013, the Company recorded net income tax expense of $6,000 and a net tax benefit of $18,000, respectively. The income tax expense for the third quarter of 2014 relates to income taxes from its foreign operations which are cost-plus entities. The income tax benefit for the third quarter of 2013 resulted primarily from a reversal of a foreign tax accrual and its foreign operations which are cost-plus entities.

Based on the available objective evidence, management believes it is more likely than not that the Company's net deferred tax assets will not be fully realizable. Accordingly, with the exception of its foreign subsidiaries, the Company has provided a full valuation allowance against the associated deferred tax assets. The Company will continue to assess the realizability of the deferred tax assets in future periods.

The Company had approximately $47,000 and $79,000 of unrecognized tax benefits at September 28, 2014 and December 29, 2013, respectively, which, if recognized, would affect the Company's effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the nine month period ended September 28, 2014, the Company accrued $4,000 of interest and penalties. As of September 28, 2014, the Company had approximately $21,000 of accrued interest and penalties related to uncertain tax positions.

15

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

Included in the balance of unrecognized tax benefits at September 28, 2014 is $16,000 related to tax positions, interest, and penalties for which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.

The Company is no longer subject to U.S. federal, state and non-U.S. income tax audits by taxing authorities for fiscal years through 1997.

Note 11 — 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				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Revenue by product line (1):
New products	$	2,236	$	7,139	$	15,634	$	11,174
Mature products	1,888		1,927		6,490		6,035
Total revenue	$	4,124	$	9,066	$	22,124	$	17,209

_________________

⁽¹⁾For all periods presented:  New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

The following is a breakdown of revenue by shipment destination (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Revenue by geography:
Asia Pacific	$	2,341	$	7,467	$	16,179	$	12,555
North America	1,084		1,025		3,158		3,292
Europe	699		574		2,787		1,362
Total revenue	$	4,124	$	9,066	$	22,124	$	17,209

The following distributors and customers accounted for 10% or more of the Company's revenue for the periods presented:

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Distributor "A"	26	%	15	%	15	%	20	%
Distributor "B"	12	%	*		*		*
Customer "B"	13	%	*		*		10	%
Customer "G"	27	%	68	%	53	%	49	%

* Represents less than 10% of revenue for the period presented.

16

QUICKLOGIC CORPORATION

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

The following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented:

	September 28, 2014		December 29, 2013
Distributor "A"	25	%	20	%
Customer "G"	53	%	71	%

As of September 28, 2014, less than 10% of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States.

Note 12 — Commitments and Contingencies

The Company's manufacturing suppliers require us to forecast wafer starts several months in advance. The Company is committed to take delivery of and pay for a portion of forecasted wafer volume. As of September 28, 2014 and December 29, 2013, the Company had $569,000 and $10.8 million, 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 September 28, 2014, total outstanding purchase obligations were $1.9 million, which are primarily due within the next twelve months.

The Company leases its primary facility under a non-cancelable operating lease that expires at the end of 2018. In addition, the Company rents development facilities in India as well as sales offices in Europe and Asia. Total rent expense, net of sublease income, for the third quarters of 2014 and 2013 was approximately $239,000 and $234,000, respectively. Total rent expense, net of sublease income, for the first nine months of 2014 and 2013 was approximately $710,000 and $726,000, respectively.

As of September 28, 2014, future minimum lease commitments under the Company's operating leases, excluding property taxes and insurance are as follows:

	Operating Leases
	(in thousands)
Fiscal Years
2014 (Remaining 3 months)	$	226
2015	925
2016	847
2017	781
2018	799
	$	3,578

Note 13 — 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: (i) without costly litigation; (ii) in a manner that is not adverse to the Company's financial position, results of operations or cash flows; or (iii) without requiring royalty or other payments which may adversely impact gross profit.

Note 14 — Subsequent Events

Subsequent to September 28, 2014, the Company issued Purchase Orders to Staples, Inc. and also various other vendors for leasehold improvements at its headquarters for a total amount of approximately $469,000.

17

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

The following Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in “Risk Factors” in Part II, Item 1A and elsewhere in this Quarterly Report on Form 10-Q, contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend that these forward-looking statements be subject to the safe harbor created by those provisions. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “will,” “may,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. Forward-looking statements include statements regarding our strategies as well as (1) our revenue levels, including the commercial success of our Customer Specific Standard Products, or CSSPs, and new products, (2) the conversion of our design opportunities into revenue, (3) our liquidity, (4) our research and development efforts, (5) our gross profit and factors that affect gross profit, (6) our level of operating expenses, (7) our partners and suppliers and (8) industry trends. The following discussion should be read in conjunction with the attached condensed unaudited consolidated financial statements and notes thereto, and with our condensed audited consolidated financial statements and notes thereto for the fiscal year ended December 29, 2013, found in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 6, 2014. Although we believe that the assumptions underlying the forward-looking statements contained in this Quarterly Report are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate. The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are not limited to, those discussed under the heading “Risk Factors” in Part II, Item 1A hereto and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements included in this document are based on information available to us as of the date hereof. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We develop and market low-power customizable semiconductor solutions that enable customers to add new differentiated features, enable always-on and contextually aware sensor applications, extend battery life and improve the visual experience with their mobile, consumer and enterprise products. Our targeted mobile market segment includes Smartphones, Tablets, Wearables, and Mobile Enterprise. Our solutions typically fall into one of three product categories: Display & Visual Enhancement, Smart Connectivity and Ultra-Low Power Sensor Hubs. We are a fabless semiconductor company that designs Customer Specific Standard Products, or CSSPs, which are complete, customer-specific solutions that include one or more of the following: a combination of silicon solution platforms; Proven System Blocks, or PSBs; customer-specific logic; algorithms; software drivers; and firmware. Our main platform families, ArcticLink^® and PolarPro^®, are standard silicon platforms. Recent examples of PSBs that have been developed and that are available to customers include driving one or more Light Emitting Diodes, or LEDs, Barcode transmission via InfraRed (IR) LED and TV remote control via LED. The variety of PSBs offered by us allows system designers to combine multiple discrete chips onto a single CSSP, simplifying design and board layout, lowering BOM cost, and accelerating time-to-market. The programmable logic of the platforms is used for adding differentiated features and provides flexibility to address hardware-based product requirements quickly.

Utilizing a focused customer engagement model, we market CSSPs to Original Equipment Manufacturers, or OEMs, and Original Design Manufacturers, or ODMs, that offer differentiated mobile products, and to processor vendors wishing to expand their served available market through the deployment of reference designs to their customers. Our solutions enable OEMs and ODMs to add new features, deploy sensor-enabled applications, extend battery life and improve the visual experience of their handheld mobile devices. In addition to working directly with our customers, we partner with other companies with expertise in certain technologies to develop additional intellectual property, reference platforms and system software to provide application solutions.

We work with mobile processor manufacturers and sensor suppliers in the development of reference designs. Through the use of reference designs that incorporate our CSSPs, we believe mobile processor manufacturers can expand the served available market for their processors. In the event that a CSSP development with a processor manufacturer or a set of sensor vendors is applicable to a set of common OEMs or ODMs, we can amortize our R&D investment over that set of OEMs/ODMs. We call this type of solution a Catalog CSSP. The most recent example of a Catalog CSSP, announced during early

18

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

2014, was an Android KitKat compatible, context aware, ultra-low power sensor hub. We are placing a greater emphasis on developing and marketing Catalog CSSPs in the future.

In order to grow our revenue from its current level, we depend upon increased revenue from our new products, including existing new product platforms and platforms currently in development. We expect our business growth to be driven by CSSPs and our CSSP revenue growth needs to be strong enough to enable us to sustain profitability while we continue to invest in the development, sales and marketing of our new solution platforms, PSBs, algorithms, firmware, and new CSSPs. The gross margin associated with our CSSPs is generally lower than the gross margin of our FPGA products, due primarily to the price sensitive nature of the higher volume mobile consumer opportunities that we are pursuing with CSSPs.

During the third quarter of 2014, we generated total revenue of $4.1 million which represents a decrease of 40% from the prior quarter and a decrease of 55% over the third quarter of 2013. Our new product revenue decreased to $2.2 million, down 50% sequentially and down 69% year over year. The overall branded Android tablet market declined significantly during the first nine months of 2014. The decrease in our new product revenue was primarily due to reduced shipments of our ArcticLink III display solution platform to Samsung for certain Android tablets. We anticipate new product revenue generated from our Display & Visual Enhancement product category will continue to fluctuate depending on the demand in the Android tablet market.

For the third quarter of 2014, revenue generated from Samsung accounted for 51% of our new product revenue and 27% of our total revenue compared to 60% and 40% respectively for the second quarter of 2014. During the third quarter, new products were shipped into the Tablet, Smartphone and the Mobile Enterprise markets. Our mature product revenue was $1.9 million, down 20% sequentially and down 2% period over period. We devote substantially all of our development, sales and marketing efforts to our new solution platforms, PSBs and CSSPs. Overall, we reported a net loss of $3.9 million for the third quarter of 2014 compared to a net loss of $2.3 million for the third quarter of 2013.

Critical Accounting 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 difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical policies include revenue recognition, valuation of inventories including identification of excess quantities and product obsolescence, valuation of investments, valuation of long-lived assets, measurement of stock-based compensation and estimation of accrued liabilities. We believe that we apply judgments and estimates in a consistent manner and that this 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 financial statements. For a discussion of critical accounting policies and estimates, please see Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 29, 2013, filed with the SEC on March 6, 2014.

19

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Results of Operations

The following table sets forth the percentage of revenue for certain items in our condensed consolidated statements of operations for the periods indicated:

	Three Months Ended
	September 28, 2014		September 29, 2013
Revenue	100	%	100	%
Cost of revenue	57	%	67	%
Gross profit	43	%	33	%
Operating expenses:
Research and development	74	%	23	%
Selling, general and administrative	63	%	35	%
Restructuring Costs	—	%	(0.4	)%
Loss from operations	(94	)%	(25	)%
Interest expense	(1	)%	*
Interest income and other expense, net	*		(1	)%
Loss before income taxes	(95	)%	(25	)%
Provision for income taxes	*		*
Net loss	(95	)%	(25	)%

*Percentage is not considered due to the insignificant amount.

20

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Three Months Ended September 28, 2014 and September 29, 2013

Revenue

The table below sets forth the changes in revenue for the three months ended September 28, 2014, as compared to the three months ended September 29, 2013 (in thousands, except percentage data):

	Three Months Ended
	September 28, 2014				September 29, 2013				Change
	Amount		% of Total Revenues		Amount		% of Total Revenues		Amount			Percentage
Revenue by product line (1):
New products	$	2,236	54	%	$	7,139	79	%	$	(4,903	)	(69	)%
Mature products	1,888		46	%	1,927		21	%	(39		)	(2	)%
Total revenue	$	4,124	100	%	$	9,066	100	%	$	(4,942	)	(55	)%

_________________

⁽¹⁾  For all periods presented: New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

The decrease in new product revenue was primarily due to decreased shipments of our ArcticLink III display bridge solution platform to Samsung for certain Android tablets. Revenue generated from Samsung accounted for 51% of the new product revenue and 27% of total revenue in the third quarter of 2014. The decrease in mature product revenue is primarily due to decreased orders from our customers in the aerospace, test and instrumentation sectors and royalty income.

We continue to seek to expand our revenue through the pursuit of high volume sales opportunities in our target market segments and the sale of CSSPs incorporating our PSBs. Our industry is characterized by intense price competition and by lower margins as order volumes increase. Due to the concentration of our new product revenue in Samsung, combined with the cyclical nature of the mobile market, we have experienced significant fluctuation in new product revenue. While winning large-volume sales opportunities will increase our revenue, due to the pricing negotiation leverage of large companies, these opportunities may decrease our gross profit as a percentage of revenue. In addition, these large companies provide longer-term purchase forecasts which are not binding and may not result in revenue.

Gross Profit

The table below sets forth the changes in gross profit for the three months ended September 28, 2014 as compared to the three months ended September 29, 2013 (in thousands, except percentage data):

	Three Months Ended
	September 28, 2014				September 29, 2013				Change
	Amount		% of Total Revenues		Amount		% of Total Revenues		Amount			Percentage
Revenue	$	4,124	100	%	$	9,066	100	%	$	(4,942	)	(55	)%
Cost of revenue	2,361		57	%	6,037		67	%	(3,676		)	(61	)%
Gross Profit	$	1,763	43	%	$	3,029	33	%	$	(1,266	)	(42	)%

The $1.3 million decrease in gross profit in the third quarter of 2014 as compared to the third quarter of 2013 was mainly due to the decrease in revenue from our new and matured products. The sale of previously reserved inventory was $144,000 and $136,000 in the third quarter of 2014 and 2013, respectively. The increase in gross margin percentage in the third quarter of 2014 as compared to the third quarter of 2013 was primarily driven by the mix of customers and products shipped during the third quarter of 2014.

Our semiconductor products have historically had long product life cycles and obsolescence has not been a significant factor in the valuation of inventories. However, as we continue to pursue opportunities in the mobile market and continue to develop new CSSPs and products, our product life cycle will be shorter and the risk of obsolescence will increase. 

21

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

We regularly review the cost of inventories and purchase commitments 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. This could have a material impact on our gross margin and inventory balances based on additional write-downs to net realizable value or a benefit from inventories previously written down. In general, our standard manufacturing lead times are longer than the binding forecasts we receive from customers. The revenue fluctuations we have experienced with Samsung have increased the risk of inventory obsolescence of our ArcticLink III display solution platform family.

Operating Expenses

The table below sets forth the changes in operating expenses for the three months ended September 28, 2014, as compared to the three months ended September 29, 2013 (in thousands, except percentage data):

	Three Months Ended
	September 28, 2014				September 29, 2013					Change
	Amount		% of Total Revenues		Amount			% of Total Revenues		Amount			Percentage
R&D expense	$	3,057	74	%	$	2,052		23	%	$	1,005		49	%
SG&A expense	2,579		63	%	3,207			35	%	(628		)	(20	)%
Restructuring costs	—		—	%	(32		)	—	%	32			(100	)%
Total operating expenses	$	5,636	137	%	$	5,227		58	%	$	409		8	%

Research and Development

Our research and development, or R&D, expenses consist primarily of personnel, overhead and other costs associated with engineering process improvements, programmable logic design, CSSP design and software development. The $1.0 million increase in R&D expenses in the third quarter of 2014, as compared to the third quarter of 2013, was primarily attributable to a $546,000 increase in compensation expenses due to increased headcount; a $311,000 increase in third-party chip design costs; and a $102,000 increase in stock-based compensation expenses. We expect that our R&D expenses will continue to increase due to planned engineering hires.

Selling, General and Administrative Expense

Our selling, general and administrative, or SG&A, expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, administration, human resources and general management. The $628,000 decrease in SG&A expenses in the third quarter of 2014, as compared to the third quarter of 2013, was primarily due to lower compensation expenses as a result of a $617,000 decrease in executive bonus accruals.

Interest Expense and Interest Income and Other Expense, Net

The table below sets forth the changes in interest expense and interest income and other, net, for the three months ended September 28, 2014 as compared to the three months ended September 29, 2013 (in thousands, except percentage data):

	Three Months Ended						Change
	September 28, 2014			September 29, 2013			Amount			Percentage
Interest expense	$	(34	)	$	(8	)	$	(26	)	325	%
Interest income and other expense, net	(17		)	(74		)	57			(77	)%
	$	(51	)	$	(82	)	$	31		(38	)%

The increase in interest expense was primarily due to bank fee charges related to the renewal of our credit line in the third quarter of 2014 as compared to the third quarter of 2013. The decrease in interest income and other expense, net, was primarily due to foreign exchange fluctuations in the third quarter of 2014 as compared to the third quarter of 2013.

22

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

We conduct a portion of our research and development activities in Canada and India and we have sales and marketing activities in various countries outside of the United States. Most of these international expenses are incurred in local currency. Foreign currency transaction gains and losses are included in interest and other income (expense), net, as they occur. We do not use derivative financial instruments to hedge our exposure to fluctuations in foreign currency and, therefore, our results of operations are, and will continue to be, susceptible to fluctuations in foreign exchange gains or losses.

Provision for (Benefit from) Income Taxes

The table below sets forth the changes in the income tax provision (benefit) for the three months ended September 28, 2014 as compared to the three months ended September 29, 2013 (in thousands, except percentage data):

	Three Months Ended					Change
	September 28, 2014		September 29, 2013			Amount		Percentage
Provision for (Benefit from) income taxes	$	6	$	(18	)	$	24	(133	)%

The income tax provision for the third quarter of 2014 was primarily from our foreign operations, which are cost-plus entities. The income tax benefit for the third quarter of 2013 resulted from the reversal of a foreign tax accrual and its foreign operations which are cost-plus entities.

As of the end of the third quarter of 2014, our ability to utilize our income tax loss carryforwards in future periods is uncertain and, accordingly, we recorded a full valuation allowance against the related U.S. tax provision. We will continue to assess the realizability of deferred tax assets in future periods.

23

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Nine Months EndedSeptember 28, 2014 and September 29, 2013

Revenue

The table below sets forth the changes in revenue for the nine months ended September 28, 2014 as compared to the nine months ended September 29, 2013 (in thousands, except percentage data):

	Nine Months Ended
	September 28, 2014				September 29, 2013				Change
	Amount		% of Total Revenues		Amount		% of Total Revenues		Amount		Percentage
Revenue by product line (1):
New products	$	15,634	71	%	$	11,174	65	%	$	4,460	40	%
Mature products	6,490		29	%	6,035		35	%	455		8	%
Total revenue	$	22,124	100	%	$	17,209	100	%	$	4,915	29	%

_________________

⁽¹⁾For all periods presented: New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

The increase in new product revenue was primarily driven by shipments of our ArcticLink III display bridge device to Samsung during the first quarter of 2014. Revenue generated from Samsung accounted for 75% of the new product revenue and 53% of the total revenue. The increase in mature product revenue is due primarily to orders from our customers in the aerospace, test and instrumentation sectors.

We continue to seek to expand our revenue, through the pursuit of high volume sales opportunities in the consumer market segment and the sale of CSSPs incorporating our PSBs. Our industry is characterized by intense price competition and by lower margins as order volumes increase. While winning large volume sales opportunities will increase our revenue, we believe these opportunities may decrease our gross profit as a percentage of revenue.

Gross Profit

The table below sets forth the changes in gross profit for the nine months ended September 28, 2014 as compared to the nine months ended September 29, 2013 (in thousands, except percentage data):

	Nine Months Ended
	September 28, 2014				September 29, 2013				Change
	Amount		% of Total Revenues		Amount		% of Total Revenues		Amount		Percentage
Revenue	$	22,124	100	%	$	17,209	100	%	$	4,915	29	%
Cost of revenue	13,287		60	%	11,210		65	%	2,077		19	%
Gross Profit	$	8,837	40	%	$	5,999	35	%	$	2,838	47	%

The $2.8 million increase in gross profit in the first nine months of 2014 as compared to the first nine months of 2013 was primarily due to the increase in revenue from new and mature products and favorable purchase price adjustments, sale of previously reserved inventory, and an increase in royalties. Inventory reserve provisions were $96,000 and $379,000 in the first nine months of 2014 and 2013, respectively. The sale of previously reserved inventories was $496,000 and $473,000 in the first nine months of 2014 and 2013, respectively. The increase in gross margin percentage period over period was primarily driven by the mix of customers and products shipped in the first nine months of 2014.

24

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Operating Expenses

The table below sets forth the changes in operating expenses for the nine months ended September 28, 2014 as compared to the nine months ended September 29, 2013 (in thousands, except percentage data):

	Nine Months Ended
	September 28, 2014				September 29, 2013				Change
	Amount		% of Total Revenues		Amount		% of Total Revenues		Amount			Percentage
R&D expense	$	8,754	40	%	$	5,902	34	%	$	2,852		48	%
SG&A expense	8,892		40	%	8,648		50	%	244			3	%
Restructuring costs	—		—	%	181		1	%	(181		)	(100	)%
Total operating expenses	$	17,646	80	%	$	14,731	85	%	$	2,915		20	%

Research and Development

The $2.9 million increase in R&D expenses in the first nine months of 2014 as compared to the first nine months of 2013 was primarily attributable to a $1.2 million increase in compensation expenses related to an increase in headcount; a $592,000 increase in stock-based compensation expenses; a $349,000 increase due to the purchase of intellectual property; and a $341,000 increase in third party chip design costs.

Selling, General and Administrative Expense

The $244,000 increase in SG&A expenses in the first nine months of 2014 as compared to the first nine months of 2013 was primarily due to an increase of $470,000 in consulting expenses related to the upgrade of the Company's ERP system; a $118,000 increase in international sales representative commissions; a $100,000 increase in legal expenses; a $107,000 increase in occupancy cost; a $98,000 increase in other outside services; a $71,000 increase in stock expense consulting expenses; and an increase of $44,000 in equipment and supplies purchased. These increases were offset by a $820,000 decrease in compensation expenses due to a decrease in headcount and a $617,000 decrease in executive bonus accruals.

Interest Expense and Interest Income and Other, Net

The table below sets forth the changes in interest expense and interest income and other, net, for the nine months ended September 28, 2014, as compared to the nine months ended September 29, 2013 (in thousands, except percentage data):

	Nine Months Ended						Change
	September 28, 2014			September 29, 2013			Amount			Percentage
Interest expense	$	(67	)	$	(37	)	$	(30	)	81	%
Interest income and other expense, net	(79		)	(130		)	51			(39	)%
	$	(146	)	$	(167	)	$	21		(13	)%

The increase in interest expense was due to bank fee charges related to the renewal of our credit line and the increase in our average debt obligation to $1.4 million in the first nine months of 2014 from $810,000 in the first nine months of 2013. The decrease in interest income and other expense, net was due primarily due to foreign exchange fluctuations in the first nine months of 2014 as compared to the first nine months of 2013.

25

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Provision for (Benefit from) Income Taxes

The table below sets forth the changes for income taxes provision (benefit) for the nine months ended September 28, 2014 as compared to the nine months ended September 29, 2013 (in thousands, except percentage data):

	Nine Months Ended				Change
	September 28, 2014			September 29, 2013	Amount			Percentage
(Benefit from) Provision for Income Taxes	$	(18	)	369	$	(387	)	(105	)%

The income tax benefit for the first nine months of 2014 was primarily from a release of tax contingency reserves when the statute of limitations expired, offset by tax on foreign operations which are cost plus entities. The income tax provision for the first nine months of 2013 was primarily from our foreign operations which are cost-plus entities, a charge relating to the reclassification of the tax effect of historical unrealized gains on our investment in TowerJazz, previously recorded as a component of accumulated other comprehensive income, and a reversal of a foreign tax accrual.

As of September 28, 2014, our ability to utilize our income tax loss carryforwards in future periods is uncertain and, accordingly, we recorded a full valuation allowance against the related U.S. tax provision. We will continue to assess the realizability of deferred tax assets in future periods.

Liquidity and Capital Resources

We have financed our operating losses and capital investments through sales of common stock, private equity investments, capital and operating leases, a revolving line of credit and cash flows from operations. As of September 28, 2014, our principal sources of liquidity consisted of our cash and cash equivalents of $31.2 million and available credit under our $5.0 million revolving line of credit with Silicon Valley Bank, which expires on June 27, 2016. The borrowing under the Company's line of credit is subject to maintaining a tangible net worth of at least $15.0 million, an unrestricted cash or cash equivalent balance of at least $8.0 million and a quick ratio of 2-to-1. Upon each advance, the Company can elect one of two interest rates: (i) the prime rate plus the prime rate margin, or (ii) the LIBOR plus the LIBOR rate margin. We were in compliance with all loan covenants as of the end of the current reporting period. As of September 28, 2014, the Company had $1.0 million of revolving debt outstanding with an interest rate of 3.75%.

We currently use cash to fund capital expenditures and operating losses. Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with available financial resources from the revolving line of credit facility, will be sufficient to fund our operations and capital expenditures, and provide adequate working capital for the next twelve months.

Over the longer term, we believe that our existing cash and cash equivalents, together with financial resources generated from our revolving line of credit with Silicon Valley Bank and our ability to sell additional shares to capital markets, will be sufficient to satisfy our operations and capital expenditures.

Most of our cash and cash equivalents were invested in money market funds with investment bankers rated AAAm/Aaa. Our interest-bearing debt consisted of $448,000 outstanding under capital leases and $1.0 million outstanding under our revolving debt (see Note 5 of the Condensed Unaudited Consolidated Financial Statements).

Cash balances held at our foreign subsidiaries were approximately $888,000 and $882,000 at September 28, 2014 and December 29, 2013, 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 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.  

26

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Net cash from operating activities

Net cash used for operating activities was $9.8 million in the first nine months of 2014. The cash used for operating activities is a result of the net loss of $8.9 million and cash used for operating assets and liabilities of $3.8 million partially offset by $3.0 million of net non-cash charges. These non-cash charges consisted primarily of stock-based compensation of $1.8 million, depreciation and amortization of $1.1 million, and a write-down of inventory of $96,000. The cash used for operating assets and liabilities was mostly due to an increase in inventories in anticipation of potential future revenues and a reduction in accounts payable due to timing of payments.

Net cash used for operating activities was $7.9 million in the first nine months of 2013. The cash used for operating activities is a result of the net loss of $9.1 million and changes in operating assets and liabilities of $1.3 million, partially offset by $2.5 million of net non-cash charges. These non-cash charges consisted primarily of stock-based compensation of $1.1 million, depreciation and amortization of $952,000, tax effect on other comprehensive income of $273,000, a gain on the sale of TowerJazz shares of $181,000, and a write-down of inventory of $379,000.

Net cash from investing activities

Net cash used by investing activities for the first nine months of 2014 was $523,000, which was primarily from cash used to acquire equipment and software used for the production and development of new products. Capital expenditures, which are largely driven by leasehold improvements to the Company's facility and the development of new products and manufacturing levels, are projected to be approximately $715,000 during the remainder of fiscal year 2014.

Net cash used by investing activities for the first nine months of 2013 was $942,000, which was primarily due to the purchase of equipment and software used for the production and development of new products, partially offset by the proceeds from the sale of TowerJazz stock.

Net cash from financing activities

Net cash provided by financing activities was $4.1 million for the first nine months of 2014, primarily derived from proceeds related to the issuance of common shares to employees under our equity plans, which was partially offset by scheduled repayments of lease obligations.

Net cash provided by financing activities was $1.2 million for the first nine months of 2013, due primarily to $1.0 million in proceeds from our revolving loan, $428,000 in proceeds related to the issuance of common shares to employees under our equity plans, which was partially offset by $182,000 of scheduled repayments under the terms of our capital lease obligations, and $70,000 of stock issuance cost related to filing of a shelf registration statement in the third quarter of 2013.

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 line of credit facility and our access to capital markets, will be sufficient to satisfy our operations and capital expenditures over the next twelve months. 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.

27

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments as of September 28, 2014 and the effect such obligations and commitments are expected to have on our liquidity and cash flows in future fiscal periods (in thousands):

	Payments Due by Period
	Total		Less than 1 Year		1-3 Years		More than 3 Years
Contractual obligations:
Operating leases	$	3,578	$	922	$	1,663	$	993
Wafer purchases (1)	569		569		—		—
Other purchase commitments	1,918		1,374		544		—
Total contractual cash obligations	6,065		2,865		2,207		993
Other commercial commitments (2):
Revolving line of credit	1,000		—		1,000		—
Capital lease obligations (3)	448		223		225		—
Total commercial commitments	1,448		223		1,225		—
Total contractual obligations and commercial commitments (4)	$	7,513	$	3,088	$	3,432	$	993

_________________

⁽¹⁾ Certain of our 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 forecast wafer volume. Wafer and finished goods purchase commitments of $569,000 include firm purchase commitments as of September 28, 2014. 

⁽²⁾  Other commercial commitments are included as liabilities on our balance sheet as of September 28, 2014.

⁽³⁾  For a detailed explanation, see Note 5 of the Condensed Unaudited Consolidated Financial Statements. 

⁽⁴⁾  Does not include unrecognized tax benefits of $47,000 as of September 28, 2014. See Note 10 of the Condensed Unaudited Consolidated Financial Statements.

Concentration of Suppliers

We depend on a limited number of contract manufacturers, subcontractors, and suppliers for wafer fabrication, assembly, programming and testing of our devices, and for the supply of programming equipment. These services are typically provided by one supplier for each of our devices. We generally purchase these single or limited source services through standard purchase orders. Because 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 up to several months 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 sheet partnerships, arrangements or other relationships with unconsolidated entities or others, often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

28

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Recently Issued Accounting Pronouncements

See Note 2 of the Condensed Unaudited Consolidated Financial Statements for a description of recent accounting pronouncements, including the respective dates of adoption and expected effects on results of operations and financial condition.

29

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio and variable rate debt. We do not use derivative financial instruments to manage our interest rate risk. We are adverse to principal loss and ensure the safety and preservation of invested funds by limiting default, market risk and reinvestment risk. Our investment portfolio is generally comprised of investments that meet high credit quality standards and have active secondary and resale markets. Since these securities are subject to interest rate risk, they could decline in value if interest rates fluctuate or if the liquidity of the investment portfolio were to change. Due to the short duration and conservative nature of our investment portfolio, we do not anticipate any material loss with respect to our investment portfolio. A 10% move in interest rates as of the end of the third quarter of 2014 would have an immaterial effect on our financial position, results of operations and cash flows.

Foreign Currency Exchange Rate Risk

All of our sales and costs of manufacturing are transacted in U.S. dollars. We conduct a portion of our research and development activities in Canada and India and have sales and marketing offices in several locations outside of the United States. We use the U.S. dollar as our functional currency. Most of the costs incurred at these international locations are in local currency. If these local currencies strengthen against the U.S. dollar, our payroll and other local expenses will be higher than we currently anticipate. Since our sales are transacted in U.S. dollars, this negative impact on expenses would not be offset by any positive effect on revenue. Operating expenses denominated in foreign currencies were approximately 19% and 21% of total operating expenses for the first nine months of 2014 and 2013, respectively. A currency exchange rate fluctuation of 10% would have caused our operating expenses to change by approximately $328,000 in the first nine months of 2014.

30

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on management's evaluation as of September 28, 2014, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and frauds. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

31

Part II. Other Information

Item 1. Legal Proceedings

See Note 13 of the Condensed Unaudited Consolidated Financial Statements for a description of legal proceedings.

Item 1A. Risk Factors

Our 2013 Annual Report on Form 10-K for the year ended December 29, 2013, filed with the SEC on March 6, 2014, includes a detailed discussion of our risk factors at Part I, Item 1A, Risk Factors, which discussion is hereby incorporated by reference into this Part II, Item 1A. The information presented below updates and supplements, and should be read in conjunction with the risk factors and information disclosed in that Form 10-K and in conjunction with any subsequent updates disclosed in our quarterly filings on Form 10-Q.

The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks not currently known to us or that we currently deem to be immaterial may also adversely affect our business and results from operations.

Risk Factors

Currently we depend on Samsung for a significant portion of our revenue and the loss of or reduction in orders from Samsung could adversely impact our inventory levels and affect our revenue and harm our business, financial condition, operating results and cash flows.

During our third quarter ended September 28, 2014, Samsung accounted for 27% of our total revenue. In the future, Samsung may decide to purchase fewer of our products or discontinue purchase of our products.  Samsung may also decide to modify the terms on which they purchase our products.  Samsung is not contractually required to continue to purchase our products. If we fail to continue to make design wins with Samsung, or properly time our inventory purchases, which require a commitment by us with suppliers several months prior to forecasted shipments to Samsung, our revenue and profitability may be adversely affected and the risk of inventory obsolescence may increase.

Item 4. Mine Safety Disclosures

Not applicable.

32

Item 6. Exhibits

a.     Exhibits

The following Exhibits are filed with this report:

Exhibit Number	Description
10.39	First Amendment to Third Amended and Restated Loan and Security Agreement between Silicon Valley Bank and QuickLogic Corporation dated September 26, 2014.
31.1	CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	CEO and CFO Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

33

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		QUICKLOGIC CORPORATION
		/s/ Ralph S. Marimon
Date:	November 4, 2014	Ralph S. Marimon
		Vice President, Finance and Chief Financial Officer (as Principal Accounting and Financial Officer and on behalf of theRegistrant)

34

EXHIBIT INDEX

Exhibit Number	Description
10.39	First Amendment to Third Amended and Restated Loan and Security Agreement between Silicon Valley Bank and QuickLogic Corporation dated September 26, 2014.
31.1	CEO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	CFO Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	CEO and CFO Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

35

EX-10.39

FIRST AMENDMENT

TO

THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this“Amendment”) is entered into this 26th day of September 2014, by and between SILICON VALLEY BANK, a California banking corporation (“Bank”) and QUICKLOGIC CORPORATION, a Delaware corporation (“Borrower”) whose address is 1277 New Orleans Drive, Sunnyvale, CA 94089-1138.

RECITALS

A.    Bank and Borrower have entered into that certain Third Amended and Restated Loan and Security Agreement dated as of June 30, 2014 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).

B.    Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C.    Borrower has requested that Bank amend the Loan Agreement to (i) lower the interest rate payable on the Advances, and (ii) increase the amount of Permitted Investments in Quicklogic Korea, Quicklogic Taiwan and Quicklogic United Kingdom, each as more fully set forth herein.

D.    Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.Amendments to Loan Agreement.

2.1Section 13 (Definitions).

(a)    LIBOR Rate Margin. The definition of “LIBOR Rate Margin” set forth in Section 13.1 is hereby amended in its entirety and replaced with the following:

“LIBOR Rate Margin” is two and three-quarters percent (2.75%).

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(b)    Permitted Investments. Clause (d) of the definition “Permitted Investments” set forth in Section 13.1 is hereby amended in its entirety and replaced with the following:

“(d)     Investments by Borrower in Subsidiaries in the form of: (A) capital stock of Subsidiaries not to exceed $500,000 in the aggregate in any fiscal year and (B) all other investments, so long as any such investment is made for the purpose of funding operational requirements of the relevant Subsidiary and so long as no Subsidiary maintains cash and cash equivalents at any time in excess of: (i) $800,000 for Quicklogic India; (ii) $200,000 for each of Quicklogic Korea, Quicklogic Taiwan and Quicklogic United Kingdom; and (iii) $100,000 for each subsidiary other than those identified in subclauses (i) and (ii) above. In the event that any Subsidiary does maintain cash and cash equivalents in excess of the aforementioned limitation, any transfer of cash by Borrower to any Subsidiary shall not be permitted under the terms of this Agreement

(c)    Prime Rate Margin. The definition of “Prime Rate Margin” set forth in Section 13.1 is hereby amended in its entirety and replaced with the following:

“Prime Rate Margin” is negative one-quarter of one percent (-0.25%).

3.Limitation of Amendments.

3.1The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4.Representations and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

4.2Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

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4.3The organizational documents of Borrower delivered to Bank on the Closing Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

4.7This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.Integration. This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment and the Loan Documents merge into this Amendment and the Loan Documents.

6.Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

7.Effectiveness. This Amendment shall be deemed effective upon the due execution and delivery to Bank of this Amendment by each party hereto.

[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

BANK	BORROWER
SILICON VALLEY BANK By:  /s/ Stephen Chang Name: Stephen Chang Title:  Vice President	QUICKLOGIC CORPORATION By:  /s/ Ralph Marimon Name: Ralph Marimon Title:  CFO

FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Andrew J. Pease, certify that:

1. I have reviewed this quarterly report on Form 10-Q of QuickLogic Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 4, 2014
		/s/ Andrew J. Pease
		Andrew J. Pease
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Ralph S. Marimon, certify that:

1. I have reviewed this quarterly report on Form 10-Q of QuickLogic Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	November 4, 2014
		/s/ Ralph S. Marimon
		Ralph S. Marimon
		Vice President, Finance and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew J. Pease, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of QuickLogic Corporation on Form 10-Q for the quarter ended September 28, 2014, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of QuickLogic Corporation.

By:	/s/ Andrew J. Pease
Date:	November 4, 2014
Name:	Andrew J. Pease
Title:	President and Chief Executive Officer

I, Ralph S. Marimon, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of QuickLogic Corporation on Form 10-Q for the quarter ended September 28, 2014, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of QuickLogic Corporation.

By:	/s/ Ralph S. Marimon
Date:	November 4, 2014
Name:	Ralph S. Marimon
Title:	Vice President, Finance and Chief Financial Officer

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Stock-Based Compensation (Schedule of Stock Based Compensation Award Activity) (Details)	9 Months Ended
	Sep. 28, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Available for Grant, Number of Shares [Roll Forward]
Options granted (in shares)	(208,000)
Options forfeited or expired (in shares)	154,000
RSUs granted (in shares)	(416,000)
PRSUs forfeited or expired (in shares)	24,000
2009 Stock Plan [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Available for Grant, Number of Shares [Roll Forward]
Balance at beginning of period (in shares)	2,253,000
Options granted (in shares)	(208,000)
Options forfeited or expired (in shares)	154,000
RSUs granted (in shares)	(416,000)
PRSUs forfeited or expired (in shares)	24,000
Balance at end of period (in shares)	1,807,000

XML

Commitments and Contingencies (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014 Wafer purchase commitment [Member]	Dec. 29, 2013 Wafer purchase commitment [Member]	Sep. 28, 2014 Other goods and services [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Outstanding commitment for purchases					$ 569	$ 10,800	$ 1,900
Total rent expense, net of sublease income	$ 239	$ 234	$ 710	$ 726

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Information Concerning Product Lines, Geographic Information and Revenue Concentration (Schedule of Customer Concentration) (Details)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Dec. 29, 2013
Distributor A [Member]
Revenue, Major Customer [Line Items]
Percentage of revenue from major customer	26.00%	15.00%	15.00%	20.00%
Percentage of accounts receivable from major customer	25.00%		25.00%		20.00%
Distributor B [Member]
Revenue, Major Customer [Line Items]
Percentage of revenue from major customer	12.00%
Customer B [Member]
Revenue, Major Customer [Line Items]
Percentage of revenue from major customer	13.00%			10.00%
Customer G [Member]
Revenue, Major Customer [Line Items]
Percentage of revenue from major customer	27.00%	68.00%	53.00%	49.00%
Percentage of accounts receivable from major customer	53.00%		53.00%		71.00%

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Obligations (Narrative) (Details) (USD $)			1 Months Ended		1 Months Ended							1 Months Ended			9 Months Ended
	Sep. 28, 2014	Dec. 29, 2013	Jul. 31, 2014 Capital Lease Obligation, Leased July 2014 [Member] Software [Member]	Sep. 28, 2014 Capital Lease Obligation, Leased July 2014 [Member] Software [Member]	Jul. 31, 2014 Capital Lease Obligation, Leased July 2014 [Member] Software Tools [Member]	Jul. 31, 2014 July Lease Payment One [Member] Software [Member]	Jul. 31, 2014 July Lease Payment Two [Member] Software [Member]	Jul. 31, 2014 July Lease Payment Three [Member] Software [Member]	Jul. 31, 2014 July Lease Payment Four [Member] Software [Member]	May 31, 2014 Capital Lease Obligation, Leased May 2014 [Member] Software [Member]	Sep. 28, 2014 Capital Lease Obligation, Leased May 2014 [Member] Software [Member]	May 31, 2014 Capital Lease Obligation, Leased May 2014 [Member] Software Tools [Member]	Dec. 29, 2013 Capital Lease Obligation, Leased December 2013 [Member] Software [Member]	Sep. 28, 2014 Capital Lease Obligation, Leased December 2013 [Member] Software [Member]	Sep. 28, 2014 Revolving Credit Facility [Member] Silicon Valley Bank [Member]	Jun. 30, 2014 Revolving Credit Facility [Member] Silicon Valley Bank [Member]
Debt and Capital Lease Obligations [Line Items]
Maximum borrowing capacity																$ 6,000,000
Revolving line of credit	1,000,000	1,000,000													1,000,000
Interest rate															3.75%
Minimum net worth required for compliance with covenants															15,000,000
Minimum adjusted quick ratio required for compliance with covenants															2
Minimum cash balance required for compliance with covenants															8,000,000
Capital lease, term					41 months							3 years	2 years
Capital lease, implied interest rate			3.15%							4.80%			4.34%
Capital lease, periodic payment			174,000			42,000	16,000	58,000	58,000	84,000			34,000
Capital lease obligations	448,000	310,000		126,000						252,000	157,000		273,000	165,000
Current portion of capital lease obligations	$ 223,000	$ 177,000		$ 15,000							$ 77,000			$ 131,000

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 28, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The stock-based compensation expense included in the Company's consolidated financial statements for the three and nine months ended September 28, 2014 and September 29, 2013 was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Cost of revenue	$	32	$	24	$	110	$	76
Research and development	176		74		750		286
Selling, general and administrative	244		232		890		705
Total costs and expenses	$	452	$	330	$	1,750	$	1,067

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The following weighted average assumptions are included in the estimated fair value calculations for stock option grants:

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Expected term (years)	6.2		4.9		6.2		6.1
Risk-free interest rate	1.98	%	1.51	%	1.98	%	1.19	%
Expected volatility	55.10	%	62.62	%	55.10	%	60.53	%
Expected dividend yield	—		—		—		—

Schedule of Share-based Compensation, Activity

The following table summarizes the activity in the shares available for grant under the 2009 Plan during the first nine months of 2014:

	Shares Available for Grant
	(in thousands)
Balance at December 29, 2013	2,253
Options granted	(208	)
Options forfeited or expired	154
RSUs granted	(416	)
PRSUs forfeited or expired	24
Balance at September 28, 2014	1,807

Schedule of Share-based Compensation, Stock Options, Activity

The following table summarizes stock options outstanding and stock option activity under the 1999 Plan and the 2009 Plan, and the related weighted average exercise price, for the first nine months of 2014:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Balance outstanding at December 29, 2013	7,242		$	2.62
Granted	208		3.84
Forfeited or expired	(154	)	3.55
Exercised	(1,687	)	2.56
Balance outstanding at September 28, 2014	5,609		$	2.66	5.42	$	3,237
Exercisable at September 28, 2014	4,461		$	2.55	4.60	$	2,992
Vested and expected to vest at September 28, 2014	5,404		$	2.64	5.29	$	3,199

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

A summary of activity for the Company's RSUs and PRSUs for the nine months ended September 28, 2014 and information regarding RSUs and PRSUs outstanding and expected to vest as of September 28, 2014 is as follows:

	RSUs & PRSUs Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested at December 29, 2013	225		$	3.17
Granted	416		4.47
Vested	(300	)	4.76
Forfeited	(24	)	—
Nonvested at September 28, 2014	317		$	3.36

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumption

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				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Expected term (months)	6.09		6.08		6.09		6.08
Risk-free interest rate	0.05	%	0.09	%	0.05	%	0.09	%
Volatility	49.17	%	39.03	%	49.17	%	39.03	%
Dividend yield	—		—		—		—

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Stock-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Dec. 29, 2013	Nov. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity award vesting period			4 years
Weighted average estimated fair value, options (in dollars per share)	$ 2.10	$ 1.39	$ 2.10	$ 1.30
Fair value of unvested stock options	$ 1,900,000	$ 1,400,000	$ 1,900,000	$ 1,400,000
Closing stock price (in dollars per share)	$ 3.03		$ 3.03			$ 2.90
The total intrinsic value of options exercised			3,700,000	46,000
Total cash received from employees as a result of employee stock option exercises			4,300,000	108,000
Stock-based compensation	452,000	330,000	1,750,000	1,067,000
Unrecognized stock-based compensation expense	37,000		37,000
Weighted average estimated fair value (in dollars per share)	$ 3.36		$ 3.36		$ 3.17
Compensation expense related to ESPP	71,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period			10 years
Weighted average recognition period of unrecognized stock-based compensation expense			2 years 4 months 2 days
Stock-based compensation	225,000		832,000
Restricted Stock Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	154,000
Performance Restricted Stock Unit [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	2,000
Unrecognized stock-based compensation expense	$ 515,000		$ 515,000
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average recognition period of unrecognized stock-based compensation expense			1 year 7 months 6 days
Weighted average estimated fair value (in dollars per share)	$ 1.01	$ 0.59	$ 1.01	$ 0.59
Shares available for issuance (in shares)	1,002,000		1,002,000

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Stock-Based Compensation (Schedule of Allocation of Recognized Period Cost) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total costs and expenses	$ 452	$ 330	$ 1,750	$ 1,067
Cost of revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total costs and expenses	32	24	110	76
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total costs and expenses	176	74	750	286
Selling, general and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total costs and expenses	$ 244	$ 232	$ 890	$ 705

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Commitments and Contingencies (Schedule of Future Minimum Lease Payments for Operating Leases) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014
Future minimum lease commitments under operating leases:
2014 (Remaining 3 months)	$ 226
2015	925
2016	847
2017	781
2018	799
Total	$ 3,578

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Net Loss Per Share

9 Months Ended

Sep. 28, 2014

Earnings Per Share [Abstract]

Net Loss Per Share

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 income (loss) per share was computed using the weighted average number of common shares outstanding during the period plus potentially dilutive common shares outstanding during the period under the treasury stock method. In computing diluted net income (loss) per share, the weighted average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants.

The following shares were not included in the calculation of diluted net loss per share for the three months and nine months ended September 28, 2014 and September 29, 2013: (i) 6.6 million and 7.3 million of common shares associated with equity awards outstanding and the estimated number of shares to be purchased under the current offering period of the 2009 Employee Stock Purchase Plan, respectively, and (ii) warrants to purchase up to 4.2 million shares of common stock. These shares were not included as they were considered antidilutive due to the net loss the Company experienced during these periods.

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013	Dec. 29, 2013
Income Tax Disclosure [Abstract]
Tax (benefit) provision from income taxes	$ 6	$ (18)	$ (18)	$ 369
Unrecognized tax benefits	47		47		79
Penalties and interest expense			4
Accrued interest and penalties related to uncertain tax positions	21		21
Unrecognized tax benefits expiring from lapse of applicable statute of limitation in next twelve months	$ 16		$ 16

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Net Loss Per Share (Details)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	6,600,000	7,300,000	6,600,000	7,300,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Warrants available to purchase (in shares)	4,205,000	4,200,000.0	4,200,000.0	4,200,000.0

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The Company and Basis of Presentation (Details) (USD $)							3 Months Ended	9 Months Ended
	Sep. 28, 2014	Dec. 29, 2013	Sep. 29, 2013	Dec. 30, 2012	Sep. 28, 2014 Revolving Credit Facility [Member] Silicon Valley Bank [Member]	Jun. 30, 2014 Revolving Credit Facility [Member] Silicon Valley Bank [Member]	Sep. 28, 2014 Samsung [Member]	Sep. 28, 2014 Samsung [Member]
Liquidity [Line Items]
Cash and cash equivalents	$ 31,159,000	$ 37,406,000	$ 14,871,000	$ 22,578,000
Line of credit facility, additional borrowing capacity					5,000,000
Maximum borrowing capacity						6,000,000
Additional borrowing capacity						$ 10,000,000
Percentage of revenue from major customer							27.00%	53.00%

XML

Information Concerning Product Lines, Geographic Information and Revenue Concentration (Schedule of Revenue by Product Line) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 28, 2014 segment		Sep. 29, 2013 segment		Sep. 28, 2014 segment		Sep. 29, 2013 segment
Revenue from External Customer [Line Items]
Number of reportable segments	1		1		1		1
Total revenue	$ 4,124	[1]	$ 9,066	[1]	$ 22,124	[1]	$ 17,209	[1]
New Products [Member]
Revenue from External Customer [Line Items]
Total revenue	2,236	[1]	7,139	[1]	15,634	[1]	11,174	[1]
Mature Products [Member]
Revenue from External Customer [Line Items]
Total revenue	$ 1,888	[1]	$ 1,927	[1]	$ 6,490	[1]	$ 6,035	[1]

[1] For all periods presented: New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

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Balance Sheet Components (Details) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Inventories:
Raw materials	$ 0	$ 19
Work-in-process	1,133	1,343
Finished goods	5,745	2,774
Inventories	6,878	4,136
Other current assets:
Prepaid expenses	880	845
Other	84	427
Other current assets	964	1,272
Accrued liabilities:
Employee related accruals	1,452	2,821
Other	387	698
Accrued liabilities	$ 1,839	$ 3,519

XML

Balance Sheet Components (Property and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Property and equipment:
Property and equipment, gross	$ 18,571	$ 17,993
Accumulated depreciation and amortization	(15,682)	(15,153)
Property and equipment, net	2,889	2,840
Equipment [Member]
Property and equipment:
Property and equipment, gross	13,883	13,294
Software [Member]
Property and equipment:
Property and equipment, gross	3,332	3,349
Furniture and Fixtures [Member]
Property and equipment:
Property and equipment, gross	710	710
Leasehold Improvements [Member]
Property and equipment:
Property and equipment, gross	$ 646	$ 640

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Significant Accounting Policies

9 Months Ended

Sep. 28, 2014

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

During the nine months ended September 28, 2014, there were no changes in the Company's significant accounting policies from its disclosure in the Annual Report on Form 10-K for the year ended December 29, 2013. For a discussion of the significant accounting policies, please see the Annual Report on Form 10-K for the fiscal year ended December 29, 2013, filed with the Securities Exchange Commission, or SEC, on March 6, 2014.

New Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of our pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2017.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Sub Topic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern(ASU 2014-15). This ASU 2014-15 provides guidance to an entity’s management with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are currently commonly provided by entities today in the financial statement footnotes. This ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is currently evaluating the impact of ASU 2014-15 on its consolidated financial statements andfootnote disclosures.

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Obligations (Schedule of Obligations) (Details) (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Debt and capital lease obligations:
Revolving line of credit	$ 1,000	$ 1,000
Capital leases	448	310
Debt and capital lease obligations	1,448	1,310
Current portion of debt and capital lease obligations	(223)	(1,177)
Long term portion of capital lease obligations	$ 1,225	$ 133

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Stock-Based Compensation (Schedule of Stock Options Activity) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 28, 2014
Number Of Shares
Balance outstanding at beginning of period, in shares	7,242
Granted, in shares	208
Forfeited or expired, in shares	(154)
Exercised, in shares	(1,687)
Balance outstanding at end of period, in shares	5,609
Exercisable, in shares	4,461
Vested and expected to vest, in shares	5,404
Weighted Average Exercise Price
Balance outstanding at beginning of period, in dollars per share	$ 2.62
Granted, in dollars per share	$ 3.84
Forfeited or expired, in dollars per share	$ 3.55
Exercised, in dollars per share	$ 2.56
Balance outstanding at end of period, in dollars per share	$ 2.66
Exercisable, in dollars per share	$ 2.55
Vested and expected to vest, in dollars per share	$ 2.64
Weighted Average Remaining Term
Balance outstanding	5 years 5 months 1 day
Exercisable	4 years 7 months 6 days
Vested and expected to vest	5 years 3 months 15 days
Aggregate Intrinsic Value
Balance outstanding	$ 3,237
Exercisable	2,992
Vested and expected to vest	$ 3,199

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Condensed Unaudited Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Current assets:
Cash and cash equivalents	$ 31,159	$ 37,406
Accounts receivable, net of allowances for doubtful accounts of $0 in both periods	1,747	3,261
Inventories	6,878	4,136
Other current assets	964	1,272
Total current assets	40,748	46,075
Property and equipment, net	2,889	2,840
Other assets	228	211
TOTAL ASSETS	43,865	49,126
Current liabilities:
Revolving line of credit	0	1,000
Trade payables	1,724	3,578
Accrued liabilities	1,839	3,519
Current portion of capital lease obligations	223	177
Total current liabilities	3,786	8,274
Long-term liabilities:
Revolving line of credit	1,000	0
Capital lease obligations, less current portion	225	133
Other long-term liabilities	64	121
Total liabilities	5,075	8,528
Commitments and contingencies (see Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; no shares issued and outstanding	0	0
Common stock, $0.001 par value; 100,000 shares authorized; 55,859 and 53,788 shares issued and outstanding, respectively	56	54
Additional paid-in capital	237,500	230,373
Accumulated deficit	(198,766)	(189,829)
Total stockholders' equity	38,790	40,598
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 43,865	$ 49,126

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Information Concerning Product Lines, Geographic Information and Revenue Concentration (Schedule of Revenue by Geographical Area) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 28, 2014		Sep. 29, 2013		Sep. 28, 2014		Sep. 29, 2013
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 4,124	[1]	$ 9,066	[1]	$ 22,124	[1]	$ 17,209	[1]
Asia Pacific [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	2,341		7,467		16,179		12,555
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	1,084		1,025		3,158		3,292
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 699		$ 574		$ 2,787		$ 1,362

[1] For all periods presented: New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

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Condensed Unaudited Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013
Cash flows from operating activities:
Net loss	$ (8,937)	$ (9,087)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,129	952
Stock-based compensation	1,750	1,067
Write-down of inventories	96	379
Gain on sale of TowerJazz Semiconductor Ltd. Shares	0	(181)
(Gains) losses on disposal of equipment	(2)	27
Write-off of equipment	5	3
Tax effect on other comprehensive income	0	273
Allowance for doubtful accounts	0	(20)
Changes in operating assets and liabilities:
Accounts receivable	1,514	(3,733)
Inventories	(2,838)	(202)
Other assets	291	350
Trade payables	(2,106)	862
Accrued liabilities	(635)	1,396
Other long-term liabilities	(57)	(27)
Net cash used in operating activities	(9,790)	(7,941)
Cash flows from investing activities:
Capital expenditures for property and equipment	(525)	(1,207)
Proceeds from sale of fixed assets	2	0
Proceeds from sale of TowerJazz Semiconductor Ltd. Shares	0	265
Net cash used in investing activities	(523)	(942)
Cash flows from financing activities:
Payment of debt and capital lease obligations	(268)	(182)
Stock issuance cost	0	(70)
Proceeds from debt obligations	0	1,000
Net proceeds from issuance of common stock	4,334	428
Net cash provided by financing activities	4,066	1,176
Net (decrease) in cash and cash equivalents	(6,247)	(7,707)
Cash and cash equivalents at beginning of period	37,406	22,578
Cash and cash equivalents at end of period	31,159	14,871
Supplemental schedule of non-cash investing and financing activities :
Capital lease obligation to finance capital expenditures	448	194
Purchase of equipment included in accounts payable	$ 33	$ 123

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Stockholders' Equity (Details) (USD $)	1 Months Ended		9 Months Ended
	Nov. 30, 2013	Jun. 30, 2012	Sep. 28, 2014	Sep. 29, 2013	Dec. 29, 2013	Jul. 31, 2013
Class of Stock [Line Items]
Common stock, shares authorized			100,000,000		100,000,000
Preferred stock, shares authorized			10,000,000		10,000,000
Maximum offering						$ 40,000,000.0
Shares issued in aggregate (in shares)	8,740,000	5,122,000
Common stock, par value (in dollars per share)	$ 0.001		$ 0.001		$ 0.001
Closing stock price (in dollars per share)	$ 2.90		$ 3.03
Proceeds from offering	23,100,000	11,900,000
Stock issuance cost	$ 2,200,000	$ 929,000	$ 0	$ 70,000
Common stock and warrant (in shares)		2,304,900
Warrant [Member]
Class of Stock [Line Items]
Warrants (in shares)		0.45
Price (in dollars per unit)		2.50
Exercise period of warrants			60 months
Exercise price of warrants (in dollars per unit)			$ 2.98
Expected term			5 years
Fair value grant date (in dollars per unit)			0.97
Risk free interest rate			0.89%
Expected volatility rate			62.18%
Expected dividend payments			$ 0

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Balance Sheet Components (Tables)

9 Months Ended

Sep. 28, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Supplemental Balance Sheet Disclosures

	As of
	September 28, 2014			December 29, 2013
	(in thousands)
Inventories:
Raw materials	$	—		$	19
Work-in-process	1,133			1,343
Finished goods	5,745			2,774
	$	6,878		$	4,136
Other current assets:
Prepaid expenses	$	880		$	845
Other	84			427
	$	964		$	1,272
Property and equipment:
Equipment	$	13,883		$	13,294
Software	3,332			3,349
Furniture and fixtures	710			710
Leasehold improvements	646			640
	18,571			17,993
Accumulated depreciation and amortization	(15,682		)	(15,153		)
	$	2,889		$	2,840
Accrued liabilities:
Employee related accruals	$	1,452		$	2,821
Other	387			698
	$	1,839		$	3,519

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Employee Stock Plans (Details)	9 Months Ended			9 Months Ended		0 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 28, 2014 1999 Stock Plan [Member] Maximum [Member]	Sep. 28, 2014 1999 Stock Plan [Member] Stock Options [Member]	Sep. 28, 2014 1999 Stock Plan [Member] Initial Vesting [Member]	Sep. 28, 2014 1999 Stock Plan [Member] Periodic Vesting [Member]	Apr. 28, 2011 2009 Stock Plan [Member]	Sep. 28, 2014 2009 Stock Plan [Member]	Sep. 28, 2014 2009 Stock Plan [Member] Maximum [Member]	Sep. 28, 2014 2009 Stock Plan [Member] Initial Vesting [Member]	Sep. 28, 2014 2009 Stock Plan [Member] Periodic Vesting [Member]	Sep. 28, 2014 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity award, term		10 years						10 years
Equity award vesting period	4 years			1 year	1 month				1 year	1 month
Percent of options vested				25.00%	2.08%					2.08%
Shares available for grant (in shares)			0
Additional shares reserved for issuance (in shares)						1,500,000
Shares reserved for issuance (in shares)							7,000,000				2,300,000
Number of previously cancelled, forfeited or repurchased shares available for reissuance (in shares)								7,500,000
Maximum percent of employees total compensation allowed for purchase of shares											20.00%
Maximum number of shares per employee per period (in shares)											20,000
Purchase price of shares as a percentage of fair market value											85.00%
Duration of offering period											6 months

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis

The following table presents the Company's financial assets that are measured at fair value on a recurring basis as of September 28, 2014 and December 29, 2013, consistent with the fair value hierarchy provisions of the authoritative guidance (in thousands):

	As of September 28, 2014								As of December 29, 2013
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	29,949	$	—	$	29,949	$	—	$	35,812	$	35,812	$	—	$	—
Total assets	$	29,949	$	—	$	29,949	$	—	$	35,812	$	35,812	$	—	$	—

_________________

⁽¹⁾Money market funds are presented as a part of cash and cash equivalents on the accompanying consolidated balance sheets as of September 28, 2014 and December 29, 2013.

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The Company and Basis of Presentation

9 Months Ended

Sep. 28, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company and Basis of Presentation

The Company and Basis of Presentation

QuickLogic Corporation ("QuickLogic" or "the Company"), was founded in 1988 and reincorporated in Delaware in 1999. The Company develops and markets low-power programmable solutions that enable customers to add differentiated features and capabilities to their mobile, consumer and industrial products. The Company is a fabless semiconductor company that designs, markets and supports Customer Specific Standard Products, or CSSPs, Field Programmable Gate Arrays, or FPGAs, application solutions, associated design software and programming hardware.

The accompanying interim condensed consolidated financial statements are unaudited. In the opinion of management, these statements have been prepared in accordance with generally accepted accounting principles, or 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 condensed consolidated financial statements be read in conjunction with the Company's Form 10-K for the year ended December 29, 2013. Operating results for the nine months ended September 28, 2014 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 the fiscal quarters each end on the Sunday closest to the end of each calendar quarter. QuickLogic's third fiscal quarter for 2014 and for 2013 ended on Sunday, September 28, 2014 and September 29, 2013, respectively.

Liquidity

The Company has financed its operations and capital investments through sales of common stock, capital and operating leases, and bank lines of credit. As of September 28, 2014, the Company's principal sources of liquidity consisted of cash and cash equivalents of $31.2 million and $5.0 million in available credit under its revolving line of credit with Silicon Valley Bank. Effective June 30, 2014, the Company entered into a Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank as amended by the First Amendment to the Third Amended and Restated Loan and Security Agreement, dated September 26, 2014 to extend the line of credit for two years through June 27, 2016. The Third Loan Agreement provides for committed loan advances of up to $6.0 million, subject to increase at the Company's election to up to $10.0 million.

The Company currently uses its cash to fund its capital expenditures and operating losses. Based on past performance and current expectations, the Company believes that its existing cash and cash equivalents, together with available financial resources from the revolving line of credit with Silicon Valley Bank will be sufficient to fund its operations and capital expenditures and provide adequate working capital for the next twelve months.

Over the longer term, the Company believes that its existing cash and cash equivalents, together with financial resources from its revolving line of credit with Silicon Valley Bank and its ability to sell additional shares to capital markets will be sufficient to satisfy its operations and capital expenditures.

The Company's liquidity is affected by many factors 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 CSSPs based on its ArcticLink^® and PolarPro^® solution platforms; 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 and finished goods 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 our investment portfolio; changes in operating assets and liabilities; the ability to obtain or renew debt financing and to remain in compliance with the terms of existing credit facilities; the ability to raise funds from the sale of equity in the Company; the issuance and exercise of stock options and participation in the Company's employee stock purchase plan; and other factors related to the uncertainties of the industry and global economics. Accordingly, there can be no assurance that events in the future will not require the Company to seek additional capital or, if so required, that such capital will be available on terms acceptable to the Company.

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 condensed unaudited consolidated statements of operations.

Uses of Estimates

The preparation of these consolidated financial statements in conformity with 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 from those estimates, particularly in relation to revenue recognition, the allowance for doubtful accounts, sales returns, valuation of investments, valuation of long-lived 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.

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 11 for information regarding concentrations associated with accounts receivable.

For the three months and nine months ended September 28, 2014, the Company generated 27% and 53%, respectively, of its total revenue from shipments to Samsung Electronics Co., Ltd. ("Samsung"). See Note 11 for information regarding concentrations associated with customers and distributors.

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Condensed Unaudited Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 28, 2014	Dec. 29, 2013
Current Assets:
Allowance for doubtful accounts	$ 0	$ 0
Stockholders' Equity:
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	55,859,000	53,788,000
Common stock, shares outstanding	55,859,000	53,788,000

XML

Information Concerning Product Lines, Geographic Information and Revenue Concentration

9 Months Ended

Sep. 28, 2014

Segment Reporting [Abstract]

Information Concerning Product Lines, Geographic Information and Revenue Concentration

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				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Revenue by product line (1):
New products	$	2,236	$	7,139	$	15,634	$	11,174
Mature products	1,888		1,927		6,490		6,035
Total revenue	$	4,124	$	9,066	$	22,124	$	17,209

_________________

⁽¹⁾For all periods presented:  New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

The following is a breakdown of revenue by shipment destination (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Revenue by geography:
Asia Pacific	$	2,341	$	7,467	$	16,179	$	12,555
North America	1,084		1,025		3,158		3,292
Europe	699		574		2,787		1,362
Total revenue	$	4,124	$	9,066	$	22,124	$	17,209

The following distributors and customers accounted for 10% or more of the Company's revenue for the periods presented:

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Distributor "A"	26	%	15	%	15	%	20	%
Distributor "B"	12	%	*		*		*
Customer "B"	13	%	*		*		10	%
Customer "G"	27	%	68	%	53	%	49	%

* Represents less than 10% of revenue for the period presented.

The following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented:

	September 28, 2014		December 29, 2013
Distributor "A"	25	%	20	%
Customer "G"	53	%	71	%

As of September 28, 2014, less than 10% of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States.

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Document and Entity Information	9 Months Ended
	Sep. 28, 2014	Oct. 30, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	QUICKLOGIC CORPORATION
Entity Central Index Key	0000882508
Current Fiscal Year End Date	--12-28
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 28, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		55,859,141

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Commitments and Contingencies

9 Months Ended

Sep. 28, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

The Company's manufacturing suppliers require us to forecast wafer starts several months in advance. The Company is committed to take delivery of and pay for a portion of forecasted wafer volume. As of September 28, 2014 and December 29, 2013, the Company had $569,000 and $10.8 million, 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 September 28, 2014, total outstanding purchase obligations were $1.9 million, which are primarily due within the next twelve months.

The Company leases its primary facility under a non-cancelable operating lease that expires at the end of 2018. In addition, the Company rents development facilities in India as well as sales offices in Europe and Asia. Total rent expense, net of sublease income, for the third quarters of 2014 and 2013 was approximately $239,000 and $234,000, respectively. Total rent expense, net of sublease income, for the first nine months of 2014 and 2013 was approximately $710,000 and $726,000, respectively.

As of September 28, 2014, future minimum lease commitments under the Company's operating leases, excluding property taxes and insurance are as follows:

	Operating Leases
	(in thousands)
Fiscal Years
2014 (Remaining 3 months)	$	226
2015	925
2016	847
2017	781
2018	799
	$	3,578

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Condensed Unaudited Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 28, 2014		Sep. 29, 2013		Sep. 28, 2014		Sep. 29, 2013
Income Statement [Abstract]
Revenue	$ 4,124	[1]	$ 9,066	[1]	$ 22,124	[1]	$ 17,209	[1]
Cost of revenue	2,361		6,037		13,287		11,210
Gross profit	1,763		3,029		8,837		5,999
Operating expenses:
Research and development	3,057		2,052		8,754		5,902
Selling, general and administrative	2,579		3,207		8,892		8,648
Restructuring costs	0		(32)		0		181
Total operating expenses	5,636		5,227		17,646		14,731
Loss from operations	(3,873)		(2,198)		(8,809)		(8,732)
Gain on sale of TowerJazz Semiconductor Ltd. Shares	0		0		0		181
Interest expense	(34)		(8)		(67)		(37)
Interest income and other expense, net	(17)		(74)		(79)		(130)
Loss before income taxes	(3,924)		(2,280)		(8,955)		(8,718)
Provision for (benefit from) income taxes	6		(18)		(18)		369
Net loss	$ (3,930)		$ (2,262)		$ (8,937)		$ (9,087)
Net loss per share:
Basic (in dollars per share)	$ (0.07)		$ (0.05)		$ (0.16)		$ (0.20)
Diluted (in dollars per share)	$ (0.07)		$ (0.05)		$ (0.16)		$ (0.20)
Weighted average shares:
Basic (in shares)	55,812		44,761		55,208		44,640
Diluted (in shares)	55,812		44,761		55,208		44,640

[1] For all periods presented: New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

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Fair Value Measurements

9 Months Ended

Sep. 28, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

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 it considers assumptions that market participants would use when pricing the asset or liability.

The accounting guidance for fair value measurement also specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the company's own assumptions of market participant valuation (unobservable inputs). The fair value hierarchy consists of the following three levels:

• Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.

• Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

• Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following table presents the Company's financial assets that are measured at fair value on a recurring basis as of September 28, 2014 and December 29, 2013, consistent with the fair value hierarchy provisions of the authoritative guidance (in thousands):

	As of September 28, 2014								As of December 29, 2013
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	29,949	$	—	$	29,949	$	—	$	35,812	$	35,812	$	—	$	—
Total assets	$	29,949	$	—	$	29,949	$	—	$	35,812	$	35,812	$	—	$	—

_________________

⁽¹⁾Money market funds are presented as a part of cash and cash equivalents on the accompanying consolidated balance sheets as of September 28, 2014 and December 29, 2013.

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Obligations

9 Months Ended

Sep. 28, 2014

Debt Disclosure [Abstract]

Obligations

Obligations

	As of
	September 28, 2014			December 29, 2013
	(in thousands)
Debt and capital lease obligations:
Revolving line of credit	$	1,000		$	1,000
Capital leases	448			310
	1,448			1,310
Current portion of debt and capital lease obligations	(223		)	(1,177		)
Long term portion of capital lease obligations	$	1,225		$	133

Revolving Line of Credit

The Company has entered into the Third Loan Agreement. The terms of the Third Loan Agreement include a $6.0 million revolving line of credit available through June 27, 2016. Upon each advance, the Company can elect a fixed interest rate, which is the prime rate plus the prime rate margin, or a fixed rate, which is LIBOR plus the LIBOR rate margin. During the third quarter of 2014, the Company had $1.0 million of revolving debt outstanding with an interest rate of 3.75%.

Silicon Valley 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 Third Loan Agreement. Under the terms of the Third Loan Agreement, the Company must maintain a minimum tangible net worth of at least $15 million, an adjusted quick ratio of 2-to-1 and a minimum unrestricted cash or cash equivalents balance of at least $8 million. The Third Loan Agreement also has certain restrictions including, among others, restrictions on the incurrence of other indebtedness, the maintenance of depository accounts, the disposition of assets, mergers, acquisitions, investments, the granting of liens, cash balances with subsidiaries and the payment of dividends. The Company was in compliance with the financial covenants of the Third Loan Agreement as of the end of the current reporting period.

Capital Leases

In July 2014, the Company leased design software under a 41 month capital lease at an imputed interest rate of 3.15% per annum. Terms of the agreement require the Company to make payments of principal and interest of $42,000 in August 2014, $16,000 in December 2014, $58,000 in January 2016 and $58,000 in January 2017. The total payments for the lease will be $174,000. As of September 28, 2014, $126,000 was outstanding under this capital lease, of which $15,000 was classified as a current liability.

In May 2014, the Company leased design software under a three-year capital lease at an imputed interest rate of 4.80% per annum. Terms of the agreement require the Company to make annual payments of approximately $84,000 through April 2016, for a total of $252,000. As of September 28, 2014, $157,000 was outstanding under the capital lease, of which $77,000 was classified as a current liability.

In December 2013, the Company leased design software under a two-year capital lease at an imputed interest rate of 4.34% per annum. Terms of the agreement require the Company to make quarterly payments of approximately $34,000 through September 2015, for a total of $273,000. As of September 28, 2014, $165,000 was outstanding under the capital lease, of which $131,000 was classified as a current liability.

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Obligations (Tables)

9 Months Ended

Sep. 28, 2014

Debt Disclosure [Abstract]

Schedule of Obligations

	As of
	September 28, 2014			December 29, 2013
	(in thousands)
Debt and capital lease obligations:
Revolving line of credit	$	1,000		$	1,000
Capital leases	448			310
	1,448			1,310
Current portion of debt and capital lease obligations	(223		)	(1,177		)
Long term portion of capital lease obligations	$	1,225		$	133

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Litigation

9 Months Ended

Sep. 28, 2014

Commitments and Contingencies Disclosure [Abstract]

Litigation

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: (i) without costly litigation; (ii) in a manner that is not adverse to the Company's financial position, results of operations or cash flows; or (iii) without requiring royalty or other payments which may adversely impact gross profit.

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Stock-Based Compensation

9 Months Ended

Sep. 28, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company's equity incentive program is a broad-based, long-term retention program intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. The Company provides stock-based incentive compensation, or awards, to eligible employees and non-employee directors. Awards that may be granted under the program include non-qualified and incentive stock options, restricted stock units, or RSUs, performance-based restricted stock units, or PRSUs, and cash settlement of stock appreciation rights, or SARs. To date, awards granted under the program consist of stock options, RSUs and PRSUs. The majority of stock-based awards granted under the program vest over four years. Stock options granted under the program have a maximum contractual term of ten years.

The stock-based compensation expense included in the Company's consolidated financial statements for the three and nine months ended September 28, 2014 and September 29, 2013 was as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Cost of revenue	$	32	$	24	$	110	$	76
Research and development	176		74		750		286
Selling, general and administrative	244		232		890		705
Total costs and expenses	$	452	$	330	$	1,750	$	1,067

 No stock-based compensation was capitalized during any period presented above.

Valuation Assumptions

The Company uses the Black-Scholes option pricing model to estimate the fair value of employee stock options and rights to purchase shares under the Company's 2009 ESPP. Using the Black-Scholes pricing model requires the Company to develop highly subjective assumptions including the expected term of awards, expected volatility of its stock, expected risk-free interest rate and expected dividend rate over the term of the award. The Company's expected term of awards assumption is based primarily on its historical experience with similar grants. The Company's expected stock price volatility assumption for both stock options and ESPP shares is based on the historical volatility of the Company's stock, using the daily average of the opening and closing prices and measured using historical data appropriate for the expected term. The risk-free interest rate assumption approximates the risk-free interest rate of a Treasury Constant Maturity bond with a maturity approximately equal to the expected term of the stock option or ESPP shares. This fair value is expensed over the requisite service period of the award. The fair value of RSUs and PRSUs is based on the closing price of the Company's common stock on the date of grant. Equity compensation awards which vest with service are expensed using the straight-line attribution method over the requisite service period.

In addition to the assumptions used in the Black-Scholes pricing model, the amended authoritative guidance requires that the Company recognize expense for awards ultimately expected to vest; therefore the Company is required to develop an estimate of the number of awards expected to be forfeited prior to vesting, or forfeiture rate. The forfeiture rate is estimated based on historical pre-vest cancellation experience and is applied to all share-based awards.

The following weighted average assumptions are included in the estimated fair value calculations for stock option grants:

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Expected term (years)	6.2		4.9		6.2		6.1
Risk-free interest rate	1.98	%	1.51	%	1.98	%	1.19	%
Expected volatility	55.10	%	62.62	%	55.10	%	60.53	%
Expected dividend yield	—		—		—		—

The weighted average estimated fair value for options granted during the third quarter of 2014 and 2013 was $2.10 and $1.39 per option, respectively. The weighted average estimated fair value for options granted during the first nine months of 2014 and 2013 was $2.10 and $1.30, per option, respectively. As of September 28, 2014 and September 29, 2013, the fair value of unvested stock options, net of expected forfeitures, was approximately $1.9 million and $1.4 million, respectively. This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 2.34 years.

Stock-Based Compensation Award Activity

The following table summarizes the activity in the shares available for grant under the 2009 Plan during the first nine months of 2014:

	Shares Available for Grant
	(in thousands)
Balance at December 29, 2013	2,253
Options granted	(208	)
Options forfeited or expired	154
RSUs granted	(416	)
PRSUs forfeited or expired	24
Balance at September 28, 2014	1,807

Stock Options

The following table summarizes stock options outstanding and stock option activity under the 1999 Plan and the 2009 Plan, and the related weighted average exercise price, for the first nine months of 2014:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Balance outstanding at December 29, 2013	7,242		$	2.62
Granted	208		3.84
Forfeited or expired	(154	)	3.55
Exercised	(1,687	)	2.56
Balance outstanding at September 28, 2014	5,609		$	2.66	5.42	$	3,237
Exercisable at September 28, 2014	4,461		$	2.55	4.60	$	2,992
Vested and expected to vest at September 28, 2014	5,404		$	2.64	5.29	$	3,199

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $3.03 as of the end of the Company's current reporting period, 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 first nine months of 2014 and 2013 was $3.7 million and $46,000, respectively. Total cash received from employees as a result of employee stock option exercises during the first nine months of 2014 and 2013 was approximately $4.3 million and $108,000 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 $225,000 and $832,000 for the third quarter and first nine months ended September 28, 2014, respectively.

Restricted Stock Units and Performance-based Restricted Stock Units

The Company began issuing RSUs and PRSUs in the third quarter of 2007. RSUs entitle the holder to receive, at no cost, one common share for each restricted stock unit as it vests. The Company's policy is to withhold shares in settlement of employee tax withholding obligations upon the vesting of restricted stock units. The stock-based compensation related to RSUs and PRSUs was $154,000 and $2,000, respectively, for the third quarter of 2014. As of September 28, 2014, there was $515,000 in unrecognized compensation expense related to RSUs and PRSUs.

A summary of activity for the Company's RSUs and PRSUs for the nine months ended September 28, 2014 and information regarding RSUs and PRSUs outstanding and expected to vest as of September 28, 2014 is as follows:

	RSUs & PRSUs Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested at December 29, 2013	225		$	3.17
Granted	416		4.47
Vested	(300	)	4.76
Forfeited	(24	)	—
Nonvested at September 28, 2014	317		$	3.36

Employee Stock Purchase Plan

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 third quarter of 2014 and 2013 was $1.01 and $0.59 per right, respectively.

As of September 28, 2014, 1,002,000 shares remained available for issuance under the 2009 ESPP. For the third quarter of 2014, the Company recorded compensation expense related to the 2009 ESPP of $71,000.

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				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Expected term (months)	6.09		6.08		6.09		6.08
Risk-free interest rate	0.05	%	0.09	%	0.05	%	0.09	%
Volatility	49.17	%	39.03	%	49.17	%	39.03	%
Dividend yield	—		—		—		—

As of September 28, 2014, the unrecognized stock-based compensation expense relating to the Company's 2009 ESPP was $37,000 and is expected to be recognized over a weighted average period of approximately 1.6 months.

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Stockholders' Equity

9 Months Ended

Sep. 28, 2014

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' Equity

Stockholders' Equity

Common and Preferred Stock

The Company is authorized to issue 100 million shares of common stock and has 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 and Warrants

On July 31, 2013, the Company filed a shelf registration statement on Form S-3 under which the Company may, from time to time, sell securities in one or more offerings up to a total dollar amount of $40.0 million. The Company's shelf registration statement was declared effective on August 30, 2013 and expires in August 2016.

In November 2013, the Company issued an aggregate of 8,740,000 shares of common stock, $0.001 par value, in an underwritten public offering at a price of $2.90 per share. The Company received net proceeds from the offering of approximately $23.1 million, net of underwriter's commission and other offering expenses of $2.2 million.

In June 2012, the Company issued an aggregate of 5,122,000 shares of common stock and warrants to purchase up to an aggregate of 2,304,900 shares of common stock in a confidentially marketed underwritten offering. The common stock and warrants were issued in units (the “Units”), with each Unit consisting of (i) one share of common stock and (ii) a warrant to purchase 0.45 of a share of common stock, at a price of $2.50 per Unit. The Company received total net proceeds from the offering of $11.9 million, net of underwriting discounts and other offering expenses of $929,000

The warrants are exercisable any time for a period of 60 months from the date of issuance on June 6, 2012, and are exercisable at a price of $2.98 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 $0.97 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 0.89%, expected volatility of 62.18% and expected dividend of zero.

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Employee Stock Plans

9 Months Ended

Sep. 28, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Stock Plans

Employee Stock Plans

1999 Stock Plan

The 1999 Stock Plan, or 1999 Plan, provided for the issuance of incentive and non-qualified options, restricted stock units and restricted stock. Equity awards granted under the 1999 Plan have a term of up to ten years. Options typically vest at a rate of 25% one year after the vesting commencement date, and one forty-eighth for each month of service thereafter. In March 2009, the Board adopted the 2009 Stock Plan, which was approved by the Company's stockholders on April 22, 2009. Effective April 22, 2009, no further stock options may be granted under the 1999 Plan.

2009 Stock Plan

The 2009 Stock Plan, or 2009 Plan, was amended and restated by the Board of Directors in March 2011 and approved by the Company's stockholders on April 28, 2011 to, among other things, reserve an additional 1.5 million shares of common stock for issuance under the 2009 Plan. As of September 28, 2014, approximately 7.0 million shares were reserved for issuance under the 2009 Plan. Equity awards that are cancelled, forfeited or repurchased under the 1999 Plan become available for grant under the 2009 Plan, up to a maximum of an additional 7.5 million shares. Equity awards granted under the 2009 Plan have a term of up to ten years. Options typically vest at a rate of 25% one year after the vesting commencement date, and one forty-eighth for each month of service thereafter. The Company may implement different vesting schedules in the future with respect to any new equity awards.

Employee Stock Purchase Plan

The 2009 Employee Stock Purchase Plan, or 2009 ESPP, was adopted in March 2009. The Company has reserved 2.3 million shares for issuance under the 2009 ESPP. The 2009 ESPP provides for six month offering periods. Participants purchase shares through payroll deductions of up to 20% of an employee's total compensation (maximum of 20,000 shares per offering period). The 2009 ESPP permits the Board of Directors to determine, prior to each offering period, whether participants purchase shares at: (i) 85% of the fair market value of the common stock at the end of the offering period; or (ii) 85% of the lower of the fair market value of the common stock at the beginning or the end of an offering period. The Board of Directors has determined that, until further notice, future offering periods will be made at 85% of the lower of the fair market value of the common stock at the beginning or the end of an offering period.

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Income Taxes

9 Months Ended

Sep. 28, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

In the third quarter of 2014 and 2013, the Company recorded net income tax expense of $6,000 and a net tax benefit of $18,000, respectively. The income tax expense for the third quarter of 2014 relates to income taxes from its foreign operations which are cost-plus entities. The income tax benefit for the third quarter of 2013 resulted primarily from a reversal of a foreign tax accrual and its foreign operations which are cost-plus entities.

Based on the available objective evidence, management believes it is more likely than not that the Company's net deferred tax assets will not be fully realizable. Accordingly, with the exception of its foreign subsidiaries, the Company has provided a full valuation allowance against the associated deferred tax assets. The Company will continue to assess the realizability of the deferred tax assets in future periods.

The Company had approximately $47,000 and $79,000 of unrecognized tax benefits at September 28, 2014 and December 29, 2013, respectively, which, if recognized, would affect the Company's effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. For the nine month period ended September 28, 2014, the Company accrued $4,000 of interest and penalties. As of September 28, 2014, the Company had approximately $21,000 of accrued interest and penalties related to uncertain tax positions.

Included in the balance of unrecognized tax benefits at September 28, 2014 is $16,000 related to tax positions, interest, and penalties for which it is reasonably possible that the statute of limitations will expire in various jurisdictions within the next twelve months.

The Company is no longer subject to U.S. federal, state and non-U.S. income tax audits by taxing authorities for fiscal years through 1997.

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Fair Value Measurements (Schedule of Fair Value Assets Measured on Recurring Basis) (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Sep. 28, 2014		Dec. 29, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	$ 29,949		$ 35,812
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0		35,812
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	29,949		0
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total assets	0		0
Money Market Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	29,949	[1]	35,812	[1]
Money Market Funds [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	0	[1]	35,812	[1]
Money Market Funds [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	29,949	[1]	0
Money Market Funds [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Money market funds	$ 0	[1]	$ 0

[1] Money market funds are presented as a part of cash and cash equivalents on the accompanying consolidated balance sheets as of September 28, 2014 and December 29, 2013.

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The Company and Basis of Presentation (Policies)

9 Months Ended

Sep. 28, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Fiscal Period

QuickLogic's fiscal year ends on the Sunday closest to December 31 and the fiscal quarters each end on the Sunday closest to the end of each calendar quarter. QuickLogic's third fiscal quarter for 2014 and for 2013 ended on Sunday, September 28, 2014 and September 29, 2013, respectively.

Liquidity

Liquidity

The Company has financed its operations and capital investments through sales of common stock, capital and operating leases, and bank lines of credit. As of September 28, 2014, the Company's principal sources of liquidity consisted of cash and cash equivalents of $31.2 million and $5.0 million in available credit under its revolving line of credit with Silicon Valley Bank. Effective June 30, 2014, the Company entered into a Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank as amended by the First Amendment to the Third Amended and Restated Loan and Security Agreement, dated September 26, 2014 to extend the line of credit for two years through June 27, 2016. The Third Loan Agreement provides for committed loan advances of up to $6.0 million, subject to increase at the Company's election to up to $10.0 million.

The Company currently uses its cash to fund its capital expenditures and operating losses. Based on past performance and current expectations, the Company believes that its existing cash and cash equivalents, together with available financial resources from the revolving line of credit with Silicon Valley Bank will be sufficient to fund its operations and capital expenditures and provide adequate working capital for the next twelve months.

Over the longer term, the Company believes that its existing cash and cash equivalents, together with financial resources from its revolving line of credit with Silicon Valley Bank and its ability to sell additional shares to capital markets will be sufficient to satisfy its operations and capital expenditures.

The Company's liquidity is affected by many factors 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 CSSPs based on its ArcticLink^® and PolarPro^® solution platforms; 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 and finished goods 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 our investment portfolio; changes in operating assets and liabilities; the ability to obtain or renew debt financing and to remain in compliance with the terms of existing credit facilities; the ability to raise funds from the sale of equity in the Company; the issuance and exercise of stock options and participation in the Company's employee stock purchase plan; and other factors related to the uncertainties of the industry and global economics. Accordingly, there can be no assurance that events in the future will not require the Company to seek additional capital or, if so required, that such capital will be available on terms acceptable to the Company.

Principles of Consolidation

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

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 condensed unaudited consolidated statements of operations.

Use of Estimates

Uses of Estimates

The preparation of these consolidated financial statements in conformity with 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 from those estimates, particularly in relation to revenue recognition, the allowance for doubtful accounts, sales returns, valuation of investments, valuation of long-lived 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.

Concentration Risk

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 11 for information regarding concentrations associated with accounts receivable.

New Accounting Pronouncements

New Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of our pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard in 2017.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements - Going Concern (Sub Topic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern(ASU 2014-15). This ASU 2014-15 provides guidance to an entity’s management with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are currently commonly provided by entities today in the financial statement footnotes. This ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company is currently evaluating the impact of ASU 2014-15 on its consolidated financial statements andfootnote disclosures.

Earnings 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 income (loss) per share was computed using the weighted average number of common shares outstanding during the period plus potentially dilutive common shares outstanding during the period under the treasury stock method. In computing diluted net income (loss) per share, the weighted average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options and warrants.

Valuation Assumptions

Valuation Assumptions

The Company uses the Black-Scholes option pricing model to estimate the fair value of employee stock options and rights to purchase shares under the Company's 2009 ESPP. Using the Black-Scholes pricing model requires the Company to develop highly subjective assumptions including the expected term of awards, expected volatility of its stock, expected risk-free interest rate and expected dividend rate over the term of the award. The Company's expected term of awards assumption is based primarily on its historical experience with similar grants. The Company's expected stock price volatility assumption for both stock options and ESPP shares is based on the historical volatility of the Company's stock, using the daily average of the opening and closing prices and measured using historical data appropriate for the expected term. The risk-free interest rate assumption approximates the risk-free interest rate of a Treasury Constant Maturity bond with a maturity approximately equal to the expected term of the stock option or ESPP shares. This fair value is expensed over the requisite service period of the award. The fair value of RSUs and PRSUs is based on the closing price of the Company's common stock on the date of grant. Equity compensation awards which vest with service are expensed using the straight-line attribution method over the requisite service period.

In addition to the assumptions used in the Black-Scholes pricing model, the amended authoritative guidance requires that the Company recognize expense for awards ultimately expected to vest; therefore the Company is required to develop an estimate of the number of awards expected to be forfeited prior to vesting, or forfeiture rate. The forfeiture rate is estimated based on historical pre-vest cancellation experience and is applied to all share-based awards.

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Information Concerning Product Lines, Geographic Information and Revenue Concentration (Tables)

9 Months Ended

Sep. 28, 2014

Segment Reporting [Abstract]

Schedule of Revenue by Product Line

The following is a breakdown of revenue by product line (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Revenue by product line (1):
New products	$	2,236	$	7,139	$	15,634	$	11,174
Mature products	1,888		1,927		6,490		6,035
Total revenue	$	4,124	$	9,066	$	22,124	$	17,209

_________________

⁽¹⁾For all periods presented:  New products include all products manufactured on 180 nanometer or smaller semiconductor processes. Mature products include all products produced on semiconductor processes larger than 180 nanometers.

Schedule of Revenue by Geographical Areas

The following is a breakdown of revenue by shipment destination (in thousands):

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Revenue by geography:
Asia Pacific	$	2,341	$	7,467	$	16,179	$	12,555
North America	1,084		1,025		3,158		3,292
Europe	699		574		2,787		1,362
Total revenue	$	4,124	$	9,066	$	22,124	$	17,209

Schedule of Customer Concentration

The following distributors and customers accounted for 10% or more of the Company's revenue for the periods presented:

	Three Months Ended				Nine Months Ended
	September 28, 2014		September 29, 2013		September 28, 2014		September 29, 2013
Distributor "A"	26	%	15	%	15	%	20	%
Distributor "B"	12	%	*		*		*
Customer "B"	13	%	*		*		10	%
Customer "G"	27	%	68	%	53	%	49	%

* Represents less than 10% of revenue for the period presented.

Schedule Of Customers Accounting for More than 10% of Accounts Receivable

The following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented:

	September 28, 2014		December 29, 2013
Distributor "A"	25	%	20	%
Customer "G"	53	%	71	%

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Subsequent Event (Details) (Subsequent Event [Member], USD $) In Thousands, unless otherwise specified	Oct. 22, 2014
Subsequent Event [Member]
Subsequent Event [Line Items]
Purchase obligation for leasehold improvements	$ 469

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Stock-Based Compensation (Schedule of Restricted Stock and Restricted Stock Units Activity) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Sep. 28, 2014
Number of Shares
Nonvested at beginning of period, in shares	225
Granted, in shares	416
Vested, in shares	(300)
Forfeited, in shares	(24)
Nonvested at end of period, in shares	317
Weighted Average Grant Date Fair Value
Nonvested at beginning of period, in dollars per share	$ 3.17
Granted, in dollars per share	$ 4.47
Vested, in dollars per share	$ 4.76
Forfeited, in dollars per share	$ 0.00
Nonvested at end of period, in dollars per share	$ 3.36

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Condensed Unaudited Consolidated Statements of Comprehensive Loss (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Statement of Comprehensive Income [Abstract]
Net loss	$ (3,930)	$ (2,262)	$ (8,937)	$ (9,087)
Other comprehensive loss, net of tax:
Unrealized loss on available-for-sale investments	0	0	0	11
Total comprehensive loss	$ (3,930)	$ (2,262)	$ (8,937)	$ (9,076)

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Balance Sheet Components

9 Months Ended

Sep. 28, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Components

Balance Sheet Components

	As of
	September 28, 2014			December 29, 2013
	(in thousands)
Inventories:
Raw materials	$	—		$	19
Work-in-process	1,133			1,343
Finished goods	5,745			2,774
	$	6,878		$	4,136
Other current assets:
Prepaid expenses	$	880		$	845
Other	84			427
	$	964		$	1,272
Property and equipment:
Equipment	$	13,883		$	13,294
Software	3,332			3,349
Furniture and fixtures	710			710
Leasehold improvements	646			640
	18,571			17,993
Accumulated depreciation and amortization	(15,682		)	(15,153		)
	$	2,889		$	2,840
Accrued liabilities:
Employee related accruals	$	1,452		$	2,821
Other	387			698
	$	1,839		$	3,519

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 28, 2014

Commitments and Contingencies Disclosure [Abstract]

Future minimum lease commitments

As of September 28, 2014, future minimum lease commitments under the Company's operating leases, excluding property taxes and insurance are as follows:

	Operating Leases
	(in thousands)
Fiscal Years
2014 (Remaining 3 months)	$	226
2015	925
2016	847
2017	781
2018	799
	$	3,578

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Stock-Based Compensation (Schedule of Valuation Assumptions) (Details)	3 Months Ended		9 Months Ended
	Sep. 28, 2014	Sep. 29, 2013	Sep. 28, 2014	Sep. 29, 2013
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	6 years 2 months 12 days	4 years 10 months 24 days	6 years 2 months 12 days	6 years 1 month 6 days
Risk-free interest rate	1.98%	1.51%	1.98%	1.19%
Expected volatility	55.10%	62.62%	55.10%	60.53%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	6 months 3 days	6 months 3 days	6 months 3 days	6 months 3 days
Risk-free interest rate	0.05%	0.09%	0.05%	0.09%
Expected volatility	49.17%	39.03%	49.17%	39.03%
Expected dividend yield	0.00%	0.00%	0.00%	0.00%

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Subsequent Event

9 Months Ended

Sep. 28, 2014

Subsequent Events [Abstract]

Subsequent Event

Subsequent Events

Subsequent to September 28, 2014, the Company issued Purchase Orders to Staples, Inc. and also various other vendors for leasehold improvements at its headquarters for a total amount of approximately $469,000