QUICKLOGIC Corp Fair Value Disclosure

NOTE 10 — FAIR VALUE MEASUREMENTS

The Company's cash and cash equivalents balances were $18.8 million and $21.9 million, including amounts in money market funds, as of December 28, 2025 and December 29, 2024, respectively. Interest in these funds is earned at a 0.35% annual percentage rate ( "APR"). Due to the short-term nature of the money market funds, the Company believes that carrying value approximates fair value.

During Fiscal Year 2025, in connection with the fair value assessment, or evaluation of the recoverability of the SensiML asset group, the Company estimated the fair value of certain long-lived and intangible assets using valuation techniques that relied on significant unobservable inputs. Due to the absence of observable market transactions and the limited availability of verifiable market data, the valuation relied primarily on management's assumptions regarding potential future economic benefits and market participant considerations. Based on this evaluation, the Company determined that the carrying value of the SensiML asset group was not recoverable and recorded impairment charges as described in Note 3. The inputs used in this valuation would be considered Level 3 within the fair value hierarchy. As these valuations rely on significant unobservable inputs and management judgment, the resulting fair value estimates may differ materially from amounts that could be realized in an actual market transaction.

On April 28, 2023, the Company converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Original Note"). At the time, the Original Note bore an interest rate of 3.0% compounded monthly. On June 28, 2023, the Company cancelled the Original Note and entered into a revised promissory note ("Second Revised Note") with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.8% effective annual interest rate, accruing from the date of the Original Note. On June 27, 2024, the Company cancelled the Second Revised Note and entered into a revised promissory note ("Current Note") with the customer, where the interest rate changed to 10.0% per annum. Accrued but unpaid interest was compounded monthly, accruing from the date of the Current Note. Additionally, if not prepaid prior to the Current Note maturity date of the earlier of (i) 24 months from June 28, 2024 or (ii) the closing of the customer's Series B financing, the principal and all accrued and unpaid interest was due and payable to the Company. If an event of default occurs, the interest rate would increase to 15.31%. All other terms of the Original Note remained the same. As of December 29, 2024, the related note receivable balance was $1.3 million, including $129 thousand in accrued interest. In Fiscal Year 2024, the Company evaluated the note receivable under the current expected credit loss ("CECL") model, which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company utilized the probability-of-default method in Fiscal Year 2024 to determine the current expected credit loss for the note receivable. The probability-of-default method represents the likelihood that a receivable that has reached the point of default will not be collected in full. Using this method, the Company measured the current expected credit loss associated with the note receivable to be de minimis as of December 29, 2024.

In the third quarter of 2021, in connection with a revenue contract with the same non-affiliated customer, the Company received shares of the customer's common stock. The full transaction price under the revenue contract was cash plus a non-cash consideration, which consisted of a certain amount of the customer's equity. The Company considered the non-cash consideration to be an investment in the customer. The full transaction price was the amount of consideration which the Company received under the contract in exchange for transferring the promised goods and services to the customer. Since the non-cash consideration was shares of common stock that were not publicly traded, the fair value was not readily determinable. The Company considered various valuation methods such as market multiples, guideline public company method, and the Black-Scholes Option Pricing model. Due to limited data for the valuation, the Company ultimately selected the Black-Scholes method using back-solve techniques as that was determined to be the most suitable with the available data. The Black-Scholes Option Pricing model is a valuation approach that can be used to determine the value of common shares for companies in which there are no, or infrequent, transactions involving common shares. The Company believed that its valuation method for the non-public equity under this arrangement fell under Level 3 in the fair value hierarchy because the value method relied on unobservable market inputs. The initial fair value of the non-cash consideration is listed below: 

In arriving at the estimated value for the non-cash consideration, the Company utilized inputs relying on significant judgment in accordance with the AICPA Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation (2013). The key assumptions below were utilized: