What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-28 · 84 added, 91 removed, 350 unchanged (33% of the section changed)

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At December 31, 2025 and 2024 , our accumulated deficit was $491.0 million and $451.9 million, respectively.

In 2024 , we earned 59.5% of our total revenue from the internet data center market and 35.2% of our total revenue from the CATV market.

In 2025 , we earned 53.8% of our total revenue from the CATV market and 42.9% of our total revenue from the internet data center market.

We sell our products to leading OEMs in the CATV, telecom, and FTTH markets as well as internet data center operators and CATV MSOs.

In 2024 , revenue from the internet data center market, CATV market, telecom market, FTTH and other markets provided 59.5%, 35.2%, 4.4% and 0.9% of our revenue, respectively, compared to 64.9%, 27.5%, 6.4% and 1.2% of our 2023 revenue, respectively.

In 2024 , our key customers in the internet data center market included Microsoft, Oracle and a U.S.

based datacenter equipment manufacturer.

In 2024 , 2023 , and 2022 , Microsoft accounted for 43.7%, 46.6%, and 18.4% of our revenue and a Oracle accounted for 12.4%, 8.8% and 5.9% of our revenue, respectively.

In 2024, our key customer in the CATV market was Digicomm, a provider of logistics solutions and a distributor of equipment to CATV MSOs.

In 2024 , 2023 , and 2022 , Digicomm accounted for 34.1%, 11.3% and 0% of our revenue.

In 2024 , our increase of revenue of 14.6% over the prior-year was driven primarily by increased demand for our internet data center products, which we believe is arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI, and the demand recovery in the CATV market, offset by the lack of revenue from Non-Recurring Engineering ("NRE") projects.

In 2025 , revenue from CATV market, the internet data center market, telecom market, FTTH and other markets provided 53.8%, 42.9%, 3.0% and 0.3% of our revenue, respectively, compared to 35.2%, 59.5%, 4.4% and 0.9%, respectively, in 2024 .

In 2025 , our key customer in the CATV market was Digicomm.

In 2025 , 2024 , and 2023 , Digicomm accounted for 53.1%, 34.1% and 11.3% of our revenue, respectively, and in 2023, ATX Networks accounted for 15.6% of our revenue.

In 2025 , our key customer in the internet data center market was Microsoft .

In 2025, 2024 and 2023 , Microsoft accounted for 28.8%, 46.6% and 18.4% of our revenue, respectively, and in 2024, Oracle accounted for 12.4% of our revenue.

In 2025 , our increase of revenue of 82.8% over the prior-year was driven primarily by increased demands both for our CATV products and internet data center products, which we believe is arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI.

Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2026.

We also believe that sales in our CATV market will increase in 2026.

We expect continued sales of our 40 Gbps and 100 Gbps products in 2025, and we expect that sales of 400 Gbps products will likely exceed sales of 100 Gbps products later in 2025.

We expect continued sales of our 40 Gbps, 100 Gbps, and 400 Gbps products in 2026, and we expect that sales of 800 Gbps products will likely exceed sales of 400 Gbps products later in 2026.

However, quarter-to-quarter results may show considerable variability as is usual in a period of technology transition.

Similar to revenue, our gross margins can fluctuate materially depending on a variety of factors including average selling price changes, product mix, global supply chain situation, raw material cost reduction or increase, manufacturing utilization rate and changes in manufacturing efficiency.

We currently expect to see material revenue from 800G products in 2025.

Our sales model focuses on direct engagement and close coordination with our customers to determine product design, qualifications, performance and price.

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Factors Affecting Our Performance

Increasing Demand for Data Center Connectivity, Especially for AI applications.

Our large hyperscale customers are increasingly deploying massive data centers to support AI compute (e.g.

training AI models, and drawing inferences from those models).

As the demand for AI compute increases, so does the demand for interconnection between compute elements.

Our products are used to interconnect network elements within data centers generally, and our 800G products in particular are used to interconnect AI compute infrastructure.

Increasing use of AI and building more sophisticated and compute-intensive AI models directly drives the need for our products in interconnects within these AI-focused data centers.

Increasing Consumer Demand for Bandwidth.

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Our product pricing is established when the product is initially introduced to the market, and thereafter through periodic negotiations with customers.

We generally do not agree to periodic automatic price reductions.

Furthermore, due to the dynamics in the CATV market and the value of our outsourced design services to our customers, we believe we face less downward price pressure than many of our competitors in this market.

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Furthermore, we have developed additional original design manufacturer, or ODM, relationships with customers in each of our target markets which should enable us to diversify our revenue base.

We had three customers that accounted for more than 10% of our revenue in 2024 and 2023, respectively.

We had two customers that accounted for more than 10% of our revenue in 2025 and three customers that accounted for more than 10% of our revenue in 2024.

Given the size of our data center customers, however, we continue to expect high concentration of our revenue with the largest of these customers.

Product Development.

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Years ended December 31,

FTTH and other

Percentage of Revenue

FTTH and other

Total Revenue

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For the year ended December 31, 2025 , 57.5% of our total revenue was manufactured at our China-based subsidiary, with $3.4 million denominated in RMB and 38.2% of our total revenue was from products manufactured at our Taiwan-based facility, with no revenue denominated in NT dollars.

We expect a similar portion of our sales to be denominated in foreign currencies in 2025.

We expect a similar (negligible) portion of our sales to be denominated in foreign currencies in 2026.

In 2026, we expect to expand our manufacturing operations in the U.S.

and Taiwan, with these two locations contributing more meaningfully to total revenue than in prior years.

Cost of goods sold and gross margin

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Notwithstanding the foregoing, however, in general for our mature products our cost of goods sold for a particular product declines over time as a result of increasing efficiencies in the manufacturing processes, or supply cost declines, as well as yield improvements and testing enhancements.

We manufacture products in three of our four facilities located in the U.S., Taiwan and China.

We manufacture products in our facilities located in the U.S., Taiwan and China.

Generally, laser chips and optical components are manufactured in our Sugar Land facility, and optical components, subassemblies and optical equipment are manufactured in our Taiwan and China facility.

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We are uncertain whether the demand for our internet data center, CATV, telecom and FTTH products is seasonal, as our sales data does not indicate a significant trend with respect to these products.

We began to manufacture a meaningful quantity of CATV and internet data center products in our Ningbo, China factory in 2017 and 2020, respectively.

This factory experiences a lengthy shut-down associated with the Lunar New Year holiday which occurs in Q1 of each year.

Our Ningbo, China factory experiences a lengthy shut-down associated with the Lunar New Year holiday which occurs in the first quarter of each year.

In addition to the factory shut-down, it is also common for employees in the factory to fail to return to work following resumption of operations.

In the years 2024 , 2023 , and 2022 , the percentage of employees in our China factory who resigned or were terminated during Q1, relative to the average number of employees during the quarter was 17.2%, 53.8% and 66.1%, respectively.

We believe that the turnover in 2022 was higher than usual due to the COVID-19 pandemic which caused travel restrictions, additional health check requirements, and a lengthy shutdown of operations in Ningbo.

In the years 2025 , 2024 , and 2023 , the percentage of employees in our China factory who resigned or were terminated during the first quarter, relative to the average number of employees during the quarter was 7.9%, 17.2% and 53.8% , respectively.

As a result of employee turnover, we must hire and train replacement employees.

These replacement employees require a period of training and improvement, and this impacts the quantity of products we can produce in the quarter.

The combined effect of the factory shut-down and employee turnover in the quarter may also contribute to negative seasonality in Q1.

In 2024, we began to produce more of our CATV and internet data center products outside of China which we believe will be instrumental in further alleviating some of the typical seasonality that we see in Q1.

The combined effect of the factory shut-down and employee turnover in the quarter may also contribute to negative seasonality in the first quarter.

In 2025, we began to produce more of our CATV and internet data center products outside of China which we believe will be instrumental in alleviating some of the typical seasonality that we see in the first quarter.

Our gross margin varies quarter to quarter and varies primarily due to the product mix in a particular quarter, as well as from the level of manufacturing efficiencies, production yields (particularly in the laser chip fabrication process) and overall supply costs.

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Loss before income taxes

Income tax expense

Income tax benefit (expense)

Comparison of Years Ended December 31, 2025 and 2024

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Years ended December 31,

FTTH and other

Total Revenue

Revenue increased by $206.4 million, or 82.8%, from 2024 to 2025.

The increase was driven primarily by increased demand in the CATV market, which we believe is due to market acceptance on our newly release DOCSIS 4.0 products in 2024, and increased demand for our internet data center products, arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI, offset by the lack of NRE project revenue in 2024.

The increase was driven primarily by increased demand in the CATV market, which we believe is due to large scale deployments of our DOCSIS 4.0 products in 2025, and increased demand for our internet data center products, arising from demand for products necessary for new data center construction along with data center upgrades to enable new technologies like AI.

Based on customer forecasts and order backlog we believe that this elevated data center demand will likely continue into 2026.

We also believe that sales in our CATV market will increase in 2025 as a result of further adoption of our DOCSIS 4.0 products.

We also believe that sales in our CATV market will increase in 2026 as a result of further adoption of our DOCSIS 4.0 products, including adoption by new customers.

In the years ended December 31, 2025 and 2024 , our top ten customers represented 96.6% and 95.0% of our revenue, respectively.

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Cost of goods sold

Cost of goods sold increased by $28.8 million, or 18.2%, from 2023 to 2024 , The cost increase in 2024 is due to the increase in direct material and direct labor cost because of revenue growth in 2024.

However, this was partially offset by a decreased inventory reserve, which indicated improved inventory turnover.

The decrease in gross margin for the year ended December 31, 2024 compared to the same period ended December 31, 2023 was primarily due to the lack of NRE projects in 2024, as these NRE projects usually generate revenue with higher than average gross margin.

Cost of goods sold increased by $131.2 million, or 70.0%, from 2024 to 2025.

The increase in 2025 was primarily attributable to higher direct material and direct labor costs associated with increased revenue volumes, as well as an increase in inventory reserves.The increase in the reserve is consistent with the higher inventory levels and overall business expansion in 2025.

The increase in gross margin for the year ended December 31, 2025 compared to the same period ended December 31, 2024 was primarily driven by larger scale production of our CATV products, which resulted in improved manufacturing efficiencies and lower cost variances .

Operating expenses

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Sales and marketing expense increased by $12.1 million, or 66.7%, from 2024 to 2025 .

These increases were primarily due to more sales effort for our Quantum Bandwidth™ products and higher shipping expenses.

These increases were primarily due to more sales effort for our Quantum Bandwidth™ products and higher shipping expenses, including tariffs.

General and administrative expense

General and administrative expense increased by $16.1 million, or 27.1%, from 2024 to 2025 .

These increases were primarily due to the higher professional service fees and share-based compensation expense.

These increases were primarily due to the higher professional service fees and increased headcount and offset by decreased share-based compensation.

Other income (expense), net

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Interest expense decreased by $3.3 million, or 48.8%, from 2024 to 2025 .

The decrease was due to the debt issuance cost of the 2026 Notes, which was replaced with the 2030 Notes in the fourth quarter of 2024 was recognized as loss extinguishment cost.

Interest expense in 2023 included the interest expense from the CIT loan, which we terminated in Q4 2023.

Other expense increased by $104.0 million, or 1,771.4% from 2023 to 2024 .

This increase was primarily due to the debt extinguishment cost relating to the 2026 Notes, reflecting the difference between the book value of the 2026 Notes and its fair value at the time of settlement.

This resulted in a one-time loss recognized in the period, contributing to the overall rise in non-operating expenses.

Benefit (provision) for income taxes

The decrease was primarily due to a lower effective interest rate on the 2030 Notes in 2025 and the absence of loss on extinguishment, which was recognized in 2024 in connection with the exchange of the 2030 Notes with the 2026 Notes.

Other expense of $109.9 million in 2024 shifted to other income of $9.6 million in 2025.

This favorable variance was primarily due to the absence of debt extinguishment costs related to the 2026 Notes, which in the prior period reflected the difference between the carrying value of the 2026 Notes and their fair value at the time of settlement.

The settlement resulted in a one-time loss recognized in the prior period, which increased non-operating expenses.

In 2025, the company recorded $1.9 million foreign currency exchange gains and $4.9 million of government subsidies in other income.

Benefit (expense) for income taxes

Years ended December 31,

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Benefit (provision) for income taxes

Our income tax provision consists of U.S.

Our income tax benefit (expense) consists of U.S.

income tax, state taxes, and Taiwan and China income tax recorded during the periods.

Our effective tax rate is affected by recurring items, such as tax rates in state and foreign jurisdictions and the relative amounts of income we earn in those jurisdictions.

Our effective tax rate is affected by recurring items, such as tax rates in state and foreign jurisdictions, the relative amounts of income we earn in those jurisdictions, and valuation allowances on our deferred taxes.

The income tax benefit in the year ended December 31, 2025 was due primarily to the release of the valuation allowance on our wholly owned subsidiary, Global Technology, Inc.

The income tax expense for the year ended December 31, 2024 was primarily related to the state tax provision and the recording of a valuation allowance on our deferred tax assets.

We recorded no federal tax expense for the years ended December 31, 2025 and December 31, 2024.

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ATM Offerings

On January 5, 2023, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission, which was declared effective on March 21, 2023, providing for the public offer and sale of certain securities of the Company from time to time, at our discretion, up to an aggregate amount of $185 million.

On March 13, 2024, we entered into an Equity Distribution Agreement (the "First ATM Agreement") with Raymond James & Associates (the "Sales Agent") pursuant to which the Company could issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $25 million (the "First ATM Offering"), from time to time through the Sales Agent.

On August 6, 2024, we entered into Amendment No.

1 to the First ATM Agreement with the Sales Agent, to increase the aggregate offering price from $25 million to $60 million.

On November 6, 2024, we provided notice of its termination, effective on such date, of the First ATM Agreement, as amended.

We sold approximately 5.7 million shares at a weighted average price of $10.55 per share, providing proceeds of $58.7 million, net of expenses and underwriting discounts and commissions, under the First ATM Offering.

On November 7, 2024, we entered into another Equity Distribution Agreement (the "Second ATM Agreement") with the Sales Agent pursuant to which the Company could issue and sell shares of the Company's common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $55 million (the "Second ATM Offering"), from time to time through the Sales Agent.

Upon delivery of a placement notice and subject to the terms and conditions of the Agreement, sales of the Shares were made through the Sales Agent in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company’s common stock, on any other existing trading market for the Company’s common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agent.

In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agent, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in any one day.

Subject to the terms and conditions of the Agreement, the Sales Agent would use its commercially reasonable efforts to sell Shares on the Company’s behalf up to the designated amount specified in the placement notice.

The Second ATM Agreement provided that the Sales Agent would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through the Sales Agent from time to time.

The Company also agreed to reimburse the Sales Agent for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred.

The Company agreed to indemnify the Sales Agent against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agent could be required to make because of any of those liabilities.

On November 22, 2024, the Company completed the Second ATM Offering and sold approximately 1.8 million shares at a weighted average price of $31.17 per share, providing proceeds of $53.9 million, net of expenses and underwriting discounts and commissions.

The details of the shares of common stock sold through the First ATM Offering and the Second ATM Offering through December 31, 2024 are as follows (in thousands, except shares and weighted average per share price):

On December 18, 2024, the Company filed an automatic shelf registration statement on Form S-3ASR (Registration File No.

333-283905) with the Securities and Exchange Commission, which became effective immediately upon filing.

On February 28, 2025, the Company entered into an Equity Distribution Agreement with Raymond James & Associates ("Raymond James") pursuant to which the Company could issue and sell shares of the Company’s common stock, having an aggregate offering price of up to $100 million (the "First ATM Offering"), from time to time through Raymond James.

On April 8, 2025, the Company completed the First ATM Offering and sold approximately 2.1 million shares at a weighted average price of $12.69 per share, providing proceeds of approximately $26 million, net of expenses and underwriting discounts and commissions.

On May 28, 2025, the Company entered into an Equity Distribution Agreement with Raymond James and Needham & Company, LLC (collectively, the "Sales Agents" and each, a "Sales Agent") pursuant to which the Company could issue and sell shares of the Company's common stock having an aggregate offering price of up to $100 million (the "Second ATM Offering"), from time to time through the Sales Agents.

On June 18, 2025, the Company completed the Second ATM Offering and sold approximately 5.7 million shares at a weighted average price of $17.46 per share, providing proceeds of approximately $98 million, net of expense and underwriting discounts and commissions.

On August 27, 2025, the Company entered into an Equity Distribution Agreement with the Sales Agents pursuant to which the Company could issue and sell shares of the Company's common stock having an aggregate offering price of up to $150 million (the "Third ATM Offering"), from time to time through the Sales Agents.

On September 22, 2025, the Company completed the Third ATM Offering and sold approximately 5.7 million shares at a weighted average price of $26.41 per share, providing proceeds of approximately $147 million, net of expense and underwriting discounts and commissions.

On November 7, 2025, the Company entered into another Equity Distribution Agreement (the "Agreement") with the Sales Agents pursuant to which the Company could issue and sell shares of the Company's common stock, par value $0.001 per share (the "Shares") having an aggregate offering price of up to $180 million (the "Fourth ATM Offering"), from time to time through the Sales Agents.

Upon delivery of a placement notice and subject to the terms and conditions of this Agreement, sales of the Shares were made through the Sales Agents in transactions that are deemed to be "at the market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), including sales made through the facilities of the Nasdaq Global Market, the principal trading market for the Company's common stock, on any other existing trading market for the Company's common stock, to or through a market maker or as otherwise agreed by the Company and the Sales Agents.

In the placement notice, the Company would designate the maximum number of Shares to be sold through the Sales Agents, the time period during which sales were requested to be made, the minimum price for the Shares to be sold, and any limitation on the number of Shares that could be sold in one day.

Subject to the terms and conditions of the Agreement, the Sales Agents would use its commercially reasonable efforts to sell Shares on the Company's behalf up to the designated amount specified in the placement notice.

The Agreement provided that each of the Sales Agents would be entitled to compensation of up to 2% of the gross sales price of the Shares sold through such Sales Agent from time to time.

The Company also agreed to reimburse the Sales Agents for certain specified expenses in connection with the registration of Shares under state blue sky laws and any filing with, and clearance of the offering by, the Financial Industry Regulatory Authority Inc., not to exceed $10,000 in the aggregate, and any associated application fees incurred.

The Company agreed to indemnify the Sales Agents against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Sales Agents could be required to make because of any of those liabilities.

By December 23, 2025, the Company completed the Fourth ATM Offering and sold approximately 6.7 million shares at a weighted average price of $26.87 per share, providing proceeds of $176 million, net of expenses and underwriting discounts and commissions.

The details of the shares of common stock sold through the First ATM Offering, the Second ATM Offering, the Third ATM Offering and the Fourth ATM Offering through December 31, 2025 are as follows (in thousands, except shares and weighted average per share price):

Distribution Agent

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Raymond James & Associates, Inc.

Automatic Shelf Registration Statement

On December 18, 2024, the Company filed an automatic shelf registration statement on Form S-3ASR (Registration File No.

333-283905) (the "Automatic Shelf Registration Statement") with the U.S.

Securities and Exchange Commission, which became effective immediately upon filing.

Raymond James & Associates and Needham & Company, LLC

Registered Direct Offering

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Note Offerings

On March 5, 2019, the Company issued $80.5 million of 5% convertible senior notes due 2024, bearing interest at a rate of 5% per year maturing on March 15, 2024 (the "2024 Notes"), unless earlier repurchased, redeemed or converted in accordance with their terms.

The Company paid off the remaining $0.29 million of the 2024 Notes on March 15, 2024.

On December 5, 2023, the Company issued approximately $80.2 million aggregate principal amount of 5.250% convertible senior notes due 2026 (the “2026 Notes”), and on the same day consummated various separate, privately negotiated exchange agreements with certain holders of its 2024 Notes to exchange or repurchase approximately $80.2 million principal amount of the 2024 Notes for aggregate consideration consisting of approximately $81.1 million in cash, which included accrued interest on the 2024 Notes, and approximately 466,368 shares of the Company's common stock, par value $0.001 per share.

On December 5, 2023, the Company issued approximately $80.2 million aggregate principal amount of 5.250% convertible senior notes due 2026 (the "2026 Notes"), bearing interest at a rate of 5.250% per year maturing on December 5, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms.

The sale of the 2026 Notes generated net proceeds of $76.2 million, after expenses.

On July 30, 2025, the Company retired the final $3.5 million principal and accrued and unpaid interest on the 2026 Notes by exchanging such outstanding principal for 239,404 shares of the Company's common stock and by paying the accrued and outstanding interest in cash.

Also refer to Note L “Convertible Senior Notes” to the consolidated financial statements for further discussion of the 2026 Notes.

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In 2024, net cash used in operating activities was $69.5 million.

Net cash used in operating activities mainly consisted of our net loss of $186.7 million, after excluding non-cash items of $153.1 million, an increase in accounts receivable from our customers of $68.7 million, an increase in other receivables by $7.9 million, an increase in inventory by $29.4 million, offset by an increase in accounts payable and accrual of $75.9 million.

In 2023, net cash used in operating activities was $7.9 million.

Net cash used in operating activities consisted of our net loss of $56.0 million, after the exclusion of non-cash items of $42.1 million, a decrease in accounts receivable from our customers of $14.5 million and a decrease in our inventory of $6.8 million, contributing to the cash increases.

These cash increases were offset by a decrease in accounts payable of $15.0 million and a decrease in unearned revenue of $2.5 million.

In 2022, net cash used in operating activities was $14.0 million.

Net cash used in operating activities consisted of our net loss of $66.4 million, after the exclusion of non-cash items of $40.5 million, an increase in accounts receivable from our customers of $12.7 million and an increase in other current assets of $2.4 million.

These cash decreases were offset by a decrease of notes receivable of $7.8 million, decrease in inventory of $1.2 million, increase in accounts payable to our vendors of $13.0 million and increase in accrued liability of $5.3 million.

Investing activities

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In 2023, net cash used in investing activities was $14.8 million.

The net cash used consisted of spending on purchase and prepaid of additional property, plant and equipment of $3.7 million and purchase of intangible assets of $0.5 million.

The majority of the cash was used for CapEx spending of $14.3 million.

Financing activities

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In 2025, our financing activities provided $527.9 million in cash.

This increase in cash was primarily due to $113 million of net proceeds from our First ATM Offering and Second ATM Offering, and around $30 million from the 2030 Notes.

This increase in cash was primarily due to $518.9 million of net proceeds from our ATM offerings, and around $19.6 million from net proceeds from line of credit borrowing and bank acceptance payable.

In 2024, our financing activities provided $142.2 million in cash.

This increase in cash was primarily due to $69.0 million of net proceeds from our ATM Offering , $76.1 million from the 2026 Notes, offset by the repayment of 2024 Notes amounting to $80.2 million and repayment of line of credit borrowings of $34.2 million.

This increase in cash was primarily due to $113 million of net proceeds from our ATM offerings, and around $30 million from the 2030 Notes.

In 2023, our financing activities provided $40.6 million in cash.

This increase in cash was due to $12.2 million of net proceeds from line of credit borrowing, $5.1 million of net proceeds from bank acceptance payable and $1.2 million of net proceeds from our ATM Offering.

These activities were offset by $7.3 million debt repayment and $0.5 million related to tax withholding associated with employee share-based compensation.

This increase in cash was primarily due to $69.0 million of net proceeds from our ATM offering , $76.1 million from the 2026 Notes, offset by the repayment of the 2024 Notes amounting to $80.2 million and repayment of line of credit borrowings of $34.2 million.

Loans and commitments

Currently, in the U.S., we do not have a bank loan agreement with any U.S.

financial institution.

However, we may explore lending opportunities in the U.S.

in the future.

In China, we have a revolving line of credit with Shanghai Pudong Development Bank Co., Ltd and a credit facility with China Zheshang Bank Co., Ltd.

for our China subsidiary, Global.

As of December 31, 2025, we have lending arrangements with one U.S.

bank, one financial institution in Taiwan and four financial institutions in China.

As of December 31, 2025, we were in compliance with the covenants in the lending arrangements.

December 31, 2025

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On December 5, 2023, the Company issued $80.2 million of 5.250% convertible senior notes due 2026.

The 2026 Notes will mature on December 15, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms.

As of December 31, 2024, the outstanding principal amount remaining on the 2026 Notes is $3.5 million.

On December 23, 2024, the Company issues $125.0 million of 2.75% convertible senior notes due 2030.

The 2026 Notes were to mature on December 15, 2026, unless earlier repurchased, redeemed or converted in accordance with their terms.

On December 23, 2024, the Company issued $125.0 million of 2.75% convertible senior notes due 2030.

The 2030 Notes will mature on January 15, 2030, unless earlier repurchased, redeemed or converted in accordance with their terms.

See Note K "Notes Payable and Long-term Debt" and Note L "Convertible Senior Notes" of our Consolidated Financial Statements for a description of our notes payable and long-term debt and convertible senior notes.

China factory construction

On February 8, 2018, we entered into a construction contract with Zhejiang Xinyu Construction Group Co., Ltd.

for the construction of a new factory and other facilities at our Ningbo, China location.

Construction costs for these facilities under this contract are estimated to total approximately $27.5 million.

As of December 31, 2024, construction of the building shell is complete and the first floor has been used, and approximately $27.4 million of this total cost has been paid and the remaining portion will be paid in yearly installments for three years after final inspection.

We anticipate additional expenses for building improvements to the factory and we are in the process of evaluating the timing of these expenditures and obtaining bids for any such work.

Based on forecasts, we believe the factory will be placed in full service in the year 2025 after the construction is completed for the building interior.

Property has been transferred from construction in progress to building and improvement in 2024.

Future liquidity needs

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We have outstanding notes payable and debt with varying maturities with various financial institutions.

As of December 31, 2024, our notes payable and debt had an amount of $26.7 million, $22.4 million of which is due within 12 months.

As of December 31, 2025, our debt had an amount of $34.0 million, which is due within 12 months.

Further information regarding our notes payable is provided in Note K – Notes Payable and Long-Term Debt in the Notes to Consolidated Financial Statements in this Form 10-K.

We also have fixed-rate convertible senior notes.

As of December 31, 2024, the 2026 Notes had a principal amount of $3.5 million and future interest payments associated with the 2026 Notes totaled $0.2 million.

As of December 31, 2025, the 2030 Notes had an aggregate principal amount of $125 million and future interest payments associated with the 2030 Notes totaled $10.5 million.

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Even though the inflation has slowed from the peak, it remained above the Federal Reserve's objective of 2%.

The annual inflation rate in Taiwan came down to 2.1% in 2024 from 2.7% in 2023 .

The annual inflation rate in Taiwan came down to around 1.7% in 2025 from 2.1% in 2024 .

The cost of inflation was reflected in increases in shipping costs, labor rates, and in costs of some raw materials.

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The ability to realize deferred tax assets is evaluated annually and a valuation allowance is provided if it is unlikely that the deferred tax assets will not give rise to future benefits in our tax returns.

On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $94.8 millio n has been recorded related to deferred tax assets to recognize only the portion of the deferred tax assets that are more likely than not to be realized.

On the basis of this evaluation, as of December 31, 2025, the company recognized $7.6 million deferred tax assets that are more likely than not to be realized.

The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

6 unchanged sentences

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What changed 10-K

Item 7. Management’s Discussion and Analysis