QUICKLOGIC Corp Income Taxes Disclosure

NOTE 11 — INCOME TAXES

 

The Company notes that Note 11 - Income Taxes, is presented at the consolidated level, inclusive of continuing and discontinued operations, due to income taxes related to discontinued operations being immaterial in nature for the periods presented.

 

The following table presents the U.S. and foreign components of consolidated income (loss) before income taxes and the provision for (benefit from) income taxes (in thousands):

 

		Fiscal Years
		2025				2024
Income (loss) before income taxes
U.S.		$	(14,746	)		$	(3,782	)
Foreign			(52	)			(56	)
Income (loss) before income taxes		$	(14,798	)		$	(3,838	)
(Benefit from) provision for income taxes:
Current:
Federal		$	—			$	—
State			—				(2	)
Foreign			18				(20	)
Subtotal			18				(22	)
Deferred:
Federal		$	—			$	—
State			—				—
Foreign			—				25
Subtotal			—				25
(Benefit from) provision for income taxes		$	18			$	3

 

The following table presents the rate reconciliation between income tax provisions at the U.S. federal statutory rate and the effective rate reflected in the consolidated statements of operations (in thousands):

 

		Fiscal Years
		2025
Income tax (benefit) at statutory rate		$	(3,108	)			21.0	%
State and local income taxes (net of federal income tax effect)			-				0.0	%
Foreign tax effects			29				(0.2	%)
Tax credits			(335	)			2.3	%
Change in valuation allowance			2,706				(18.3	%)
Nontaxable or nondeductible items
Stock compensation			278				(1.9	%)
Other permanent items			107				(0.7	%)
Other reconciling items
Expired tax attributes			287				(1.9	%)
Other			54				(0.4	%)
(Benefit from) provision for income taxes		$	18				(0.1	%)

 

 

		Fiscal Years
		2024
Income tax (benefit) at statutory rate		$	(806	)			21.0	%
State taxes			(2	)			0.1	%
Foreign taxes			17				(0.4	%)
Stock compensation and other permanent differences			8				(0.2	%)
162(m)			147				(3.8	%)
R&D tax credits			(543	)			14.1	%
Expired tax attributes			585				(15.3	%)
Future benefit of deferred tax assets not recognized			597				(15.6	%)
(Benefit from) provision for income taxes		$	3				(0.1	%)

 

Based on the available objective evidence, management believes it is more likely than not that the U.S. net deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its U.S. federal and state deferred tax assets at December 28, 2025. Any future release of the valuation allowance may be recorded as a tax benefit increasing net income. The Company believes it is more likely than not it will be able to realize its foreign deferred tax assets.

 

Deferred tax balances are comprised of the following (in thousands):

 

		December 28, 2025				December 29, 2024
Deferred tax assets:
Net operating losses		$	47,078			$	42,488
Accruals and reserves			1,656				1,232
Credits carryforward			7,724				7,342
Depreciation and amortization			3,978				6,086
Stock-based compensation			521				601
Operating lease liability			103				165
Gross deferred tax assets			61,060				57,914
Deferred tax liabilities:
Right-of-use asset			(107	)			(172	)
Withholding tax on future distribution			(125	)			(125	)
Gross deferred tax liabilities			(232	)			(297	)
Net deferred tax assets			60,828				57,617
Valuation allowance			(60,953	)			(57,742	)
Total deferred tax liability		$	(125	)		$	(125	)

 

Beginning January 1, 2022, the Tax Cuts and Jobs Act (the "Tax Act”) eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to Internal Revenue Code (“IRC”) Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses. As a result of this provision of the Tax Act, the Company capitalized $0.1 million of research expenses in fiscal year 2025.

 

As of December 28, 2025, the Company had federal and state income tax net operating loss ("NOL") carryforwards of approximately $190.3 million and $101.9 million, respectively. Approximately $102.1 million in federal NOLs generated before January 1, 2018 expire beginning in 2026 through 2037. Federal NOLs of $88.2 million generated in years after January l, 2018 can be carried forward indefinitely. State NOLs will expire beginning in fiscal year 2028 through 2045. The Company had research credit carryforwards of approximately $5.5 million for federal and $6.0 million for state income tax purposes as of December 28, 2025. If not utilized, the federal carryforwards will expire beginning in 2026 through 2045. The California research credit carryforward can be carried forward indefinitely.

 

Due to the Company's history of losses, it believes that it is more likely than not that the deferred tax assets and benefits from these federal and state NOL and credit carryforwards will not be realized as of December 28, 2025. Accordingly, the Company established a valuation allowance of $61 million, tax-effected, as of the Fiscal Year ended  December 28, 2025 due to uncertainties related to its ability to utilize its U.S. deferred tax assets before they expire.

 

Events which may restrict utilization of a company’s net operating loss and credit carryforwards include, but are not limited to, certain ownership change limitations as defined in Internal Revenue Code Section 382(a) ("Section 382") and similar state provisions. In the event the Company has had a change of ownership, utilization of carryforwards could be restricted to an annual limitation. The annual limitation may result in the expiration of net operating loss carryforwards and credit carryforwards before utilization.

 

The Company performed a Section 382 Study related to ownership changes in fiscal year 2023, covering the period starting January 1, 2005 through December 31, 2023. Per the Section 382 Study, there were no Section 382 ownership changes during this period. As a result, the future utilization of the Company's NOL and R&D credit carryovers generated since 2005 are not subject to any limitations, assuming the Company does not experience an ownership change in the future.

 

Foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for on the undistributed earnings of certain foreign subsidiaries as of the end of Fiscal Year 2025. The Company intends to reinvest these earnings indefinitely in the Company’s foreign subsidiaries. The Company believes that future domestic cash generation will be sufficient to meet future domestic cash needs. In previous years, the Company recorded a deferred tax liability of approximately $0.1 million on the undistributed earnings of non-U.S. subsidiaries. During Fiscal Year 2025, there were no changes to this balance, and at December 28, 2025, the balance for this deferred tax liability was approximately $0.1 million. The foreign withholding taxes are not expected to have a material impact on the Company’s financial position and results of operations.

 

Certain impairment charges recorded during Fiscal Year 2025 did not result in a material tax benefit due to the Company's valuation allowance against its U.S. deferred tax assets.

 

Uncertain Tax Positions

 

Changes in gross unrecognized benefits are as follows (in thousands):

		Fiscal Years
		2025				2024
Beginning balance of unrecognized tax benefits		$	2,730			$	2,513
Additions (subtractions) for tax positions related to the prior year			(69	)			(63	)
Additions for tax positions related to the current year			210				280
Lapse of statutes of limitations			—				—
Ending balance of unrecognized tax benefits		$	2,871			$	2,730

 

Out of $2.9 million of unrecognized tax benefits, there are no unrecognized tax benefits that would result in a change in the Company's effective tax rate if recognized in future years. The accrued interest and penalties related to uncertain tax positions were not significant as of December 28, 2025 and  December 29, 2024.

 

The Company is not currently under tax examination in the U.S. and the Company’s historical net operating loss and credit carryforwards may be adjusted by the Internal Revenue Service and other tax authorities until the statute closes on the year in which such tax attributes are utilized. The Company estimates that its unrecognized tax benefits will not change significantly within the next twelve months.

 

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates. The U.S. tax years from 2006 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits.

 

Significant components of the Company's income taxes paid are as follows (in thousands):

 

		Fiscal Years
		2025
Federal		$	—
State and local
California			2
New Jersey			8
New York			6
Other states			2
Foreign
Japan			4
Other foreign jurisdictions			1
Total income taxes paid		$	23

 

		Fiscal Years
		2024
Federal		$	—
State and local			13
Japan			1
India			15
China			4
Total income taxes paid		$	33