What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-14 · 382 added, 343 removed, 393 unchanged (65% of the section changed)

Financial Statements.

Financial Statements (Unaudited).

GCT SEMICONDUCTOR HOLDING, INC.

Condensed Consolidated Balance Sheets

( in thousands, except per share data)

March 31, 2024

(unaudited, in thousands, except per share data)

June 30, 2024

December 31, 2023

13 unchanged sentences

Accrued and other current liabilities

Common stock forward liability

Convertible promissory notes, current

11 unchanged sentences

Preferred stock, par value $ 0.0001 per share;

40,000 and 82,352 shares authorized as of March 31, 2024 and December 31, 2023, respectively;

no shares issued and outstanding as of March 31, 2024 and December 31, 2023

40,000 and 82,352 shares authorized as of June 30, 2024 and December 31, 2023, respectively;

no shares issued and outstanding as of June 30, 2024 and December 31, 2023

Common stock, par value $ 0.0001 per share;

400,000 and 200,000 shares authorized as of March 31, 2024 and December 31, 2023, respectively;

45,833 and 24,166 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively (1)

400,000 and 200,000 shares authorized as of June 30, 2024 and December 31, 2023, respectively;

46,679 and 24,166 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively (1)

Additional paid-in capital (1)

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(1) Amounts as of December 31, 2023 differ from those in prior year consolidated financial statements as they were retrospectively adjusted as a result of the accounting for the Business Combination (as defined in the Notes to the Unaudited Condensed Consolidated Financial Statements.)

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GCT SEMICONDUCTOR HOLDING, INC.

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Three Months Ended

Six Months Ended

Net revenues:

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Gain on extinguishment of liability

Total operating (income) expenses

Total operating expenses

Income (loss) from operations

Interest expense

Other (expenses) income, net

Income (loss) before provision for income taxes

Other income (expenses), net

Loss before provision for income taxes

Provision for income taxes

Net income (loss)

Net income (loss) per common share (1) :

Weighted-average shares used in computing net income (loss) per common shares (1) :

(1) Amounts as of December 31, 2023 and before that date differ from those in prior year consolidated financial statements as they were retrospectively adjusted as a result of the accounting for the Business Combination (as defined in the Notes to the Unaudited Condensed Consolidated Financial Statements).

The accompanying notes are an integral part of these condensed consolidated financial statements.

Net loss per common share (1) :

Basic and diluted

Weighted-average common shares outstanding (1) :

Basic and diluted

(1) Amounts for the three and six months ended June 30, 2023 and before that date differ from those in prior year condensed consolidated financial statements as they were retrospectively adjusted as a result of the accounting for the Business Combination (as defined in the Notes to the Unaudited Condensed Consolidated Financial Statements).

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GCT SEMICONDUCTOR HOLDING, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Loss

(unaudited, in thousands)

Three Months Ended

Comprehensive income (loss), net of taxes:

Net income (loss)

Six Months Ended

Comprehensive loss, net of taxes:

Foreign currency translation adjustment

Comprehensive income (loss)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Comprehensive loss

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GCT SEMICONDUCTOR HOLDING, INC.

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Balance as of March 31, 2024

Issuance of common stock under common stock purchase agreement

Issuance of commitment shares in connection with common stock purchase agreement

Issuance of common stock to underwriter

Stock-based compensation

Foreign currency translation adjustment

Balance as of June 30, 2024

Comprehensive

8 unchanged sentences

Balance as of March 31, 2023 (1)

Issuance of common stock upon exercise of stock options (1)

Issuance of common stock from convertible promissory notes conversion (1)

Stock-based compensation (1)

Foreign currency translation adjustment

Balance as of June 30, 2023 (1)

The accompanying notes are an integral part of these condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GCT SEMICONDUCTOR HOLDING, INC.

1 unchanged sentence

(unaudited, in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Operating lease right-of-use amortization

Finance lease right-of-use amortization

Stock-based compensation

Provision for credit losses

Issuance of common stock to underwriter

Change in credit loss allowance

Change in fair value of convertible promissory notes

Change in fair value of warrant liabilities

Loss from initial recognition of common stock forward liability

Gain on extinguishment of liability

Change in valuation of convertible promissory notes

Change in valuation of warrant liabilities

Changes in operating assets and liabilities:

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Financing activities:

Proceeds from exercise of stock options

Proceeds from bank borrowings

Proceeds from issuance of convertible promissory notes

Proceeds from reverse recapitalization and PIPE Financing, net of transaction costs

Repayment of bank borrowings

Proceeds from issuance of convertible promissory notes

Proceeds from issuance of common stock under common stock purchase agreement

Proceeds from bank borrowings

Proceeds from exercise of stock options

Repayments of bank borrowings

Repayments of convertible promissory notes

Payments of financial lease liabilities

Net cash provided by financing activities

1 unchanged sentence

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents cash at end of year

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

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Cash paid for income taxes

Cash paid for amounts included in the measurement of operating leases

Issuance of common stock from conversion of convertible promissory notes and accrued interest

The accompanying notes are an integral part of these condensed consolidated financial statements.

Cash paid for operating leases

Non-cash financing activities:

Issuance of common stock from conversion of convertible promissory notes

Settlement of common stock forward liability in equity

Proceeds from issuance of common stock withheld for outstanding payables

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

GCT SEMICONDUCTOR HOLDING, INC.

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Description of Business

GCT Semiconductor Holdings, Inc.

(formerly known as Concord Acquisition Corp III) and its wholly owned subsidiaries (collectively “GCT”, or the “Company”) is headquartered in San Jose, California with international offices in Korea, China, Taiwan, and Japan.

GCT Semiconductor Holding, Inc.

(formerly known as Concord Acquisition Corp III) and its wholly owned subsidiaries (collectively “GCT” or the “Company”) is headquartered in San Jose, California with international offices in South Korea, China, Taiwan, and Japan.

The Company is a fabless semiconductor company that specializes in the design, manufacturing, and sale of communication semiconductors, including high-speed wireless communication technologies such as 5G/4.75G/4.5G/4G transceivers and modems, which are essential for a wide variety of industrial, B2B and consumer applications.

On March 26, 2024 (the “Closing Date” or “Closing”), Concord Acquisition Corp III (“Concord III”), a Delaware corporation, consummated a series of transactions that resulted in the combination of Gibraltar Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Concord III (“Merger Sub”), and GCT Semiconductor, Inc.

(hereinafter referred to as “Legacy GCT”), pursuant to a Business Combination Agreement, dated November 2, 2023 (as amended, the “Business Combination Agreement”), by and among Concord III, Merger Sub and Legacy GCT.

(“Legacy GCT”), pursuant to a Business Combination Agreement, dated November 2, 2023 (as amended, the “Business Combination Agreement”), by and among Concord III, Merger Sub and Legacy GCT.

Pursuant to the terms of the Business Combination Agreement, Merger Sub merged with and into Legacy GCT, with Legacy GCT surviving the merger as a wholly-owned subsidiary of Concord III (the “Business Combination”).

On the Closing Date, Concord III changed its name from Concord III to “GCT Semiconductor Holding, Inc.”

The Business Combination was accounted for as a reverse recapitalization with Legacy GCT being the accounting acquirer and Concord III as the acquired company for accounting purposes.

The Business Combination was accounted for as a reverse recapitalization with Legacy GCT being the accounting acquirer and Concord III identified as the acquired company for accounting purposes.

Accordingly, all historical financial information presented in the unaudited condensed consolidated financial statements represent the accounts of Legacy GCT.

Pursuant to the Business Combination Agreement, the shares and net loss per common share prior to the Closing have been retroactively restated as shares reflecting the exchange ratio established in the Closing of approximately 0.1868 .

Subsequent to the Business Combination, the shares and net loss per common share information prior to the Closing have been retroactively restated as shares reflecting the exchange ratio established in the Closing of approximately 0.1868 .

Prior to the Business Combination, Concord III’s public shares and public redeemable warrants were listed on the New York Stock Exchange (“NYSE”) under the symbols “CNDB.U,” “CNDB,” and “CNDB.WS,” respectively.

On March 27, 2024, the Company’s common stock and public warrants began trading on the NYSE under the symbols “GCTS” and “GCTSW,” respectively.

See Note 3 for additional information.

In connection with the Closing, Concord III’s Class A common stock and Class B common stock were recapitalized into a single class of common stock.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.

Prior to March 31, 2024, the Company has incurred operating losses and negative cash flows from operating and had an accumulated deficit of $ 548.9 million as of March 31, 2024.

The Company’s existing sources of liquidity as of March 31, 2024 include cash and cash equivalents of $ 16.1 million.

See Note 3 for additional information.

The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.

Prior to June 30, 2024, the Company has incurred operating losses and negative cash flows from operating and had an accumulated deficit of $ 549.9 million as of June 30, 2024.

The Company’s existing sources of liquidity as of June 30, 2024 include cash and cash equivalents of $ 4.0 million.

The Company has historically funded operations primarily with issuances of capital stock and the incurrence of debt.

The Company received $ 17.2 million in cash proceeds from the reverse recapitalization and PIPE Financing (as defined in Note 3), net of transaction costs.

The Company believes the proceeds received in connection with the Business Combination and other capital resources available to the Company , including sales of products and services and the Purchase Agreement (as defined in Note 17), will be sufficient to fund the Company’s operations for at 12 months after the filing date of this Quarterly Report on Form 10-Q.

Over the longer term, the Company will need to raise additional capital through debt or equity financing to fund future operations until it generates positive cash flows from profitable operations.

In March 2024, the Company received $ 17.2 million in cash proceeds from the reverse recapitalization and PIPE Financing (as defined in Note 3), net of transaction costs.

In April 2024, the Company executed a common stock purchase agreement (“Purchase Agreement”) with B.

Riley Principal Capital II, LLC (“B.

Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to sell, from time to time, B.

Riley up to $ 50.0 million worth of shares of the Company’s common stock at its request, at any time prior to June 2026, subject to compliance with the required conditions and limitations.

Through June 30, 2024, the Company received $ 2.8 million in net proceeds under the Purchase Agreement.

Management believes that the available financing under the Purchase Agreement and other capital resources available to the Company, including future sales of products and services, will be sufficient to fund the Company’s operations for at least 12 months after the filing date of this Quarterly Report on Form 10-Q.

To fund its operations over the longer term, the Company will need to start generating positive cash flows, renegotiate its existing debt obligations and raise additional capital through debt or equity financing.

There can be no assurance that such additional debt or equity financing will be available on terms acceptable to the Company or at all.

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Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements and accompanying notes include the accounts of the Company and its wholly owned subsidiaries, after elimination of intercompany balances and transactions.

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

The unaudited condensed consolidated financial statements and accompanying notes include the accounts of the Company and its wholly owned subsidiaries, after elimination of intercompany balances and transactions.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”) for interim financial information.

Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S.

Certain information and disclosures normally included in unaudited consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023, which are included in the Company’s Form 8-K filed with the SEC on April 1, 2024.

The information as of December 31, 2023 included in the condensed consolidated balance sheets was derived from those audited consolidated financial statements.

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2023, which are included in the Company’s Form 8-K filed with the SEC on April 1, 2024.

The information as of December 31, 2023 included in the condensed consolidated balance sheets was derived from the audited consolidated financial statements.

Certain amounts reported in the audited consolidated financial statements for the year ended December 31, 2023 have been reclassified to conform to the current year’s presentation.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial information.

The condensed consolidated results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period.

The unaudited condensed consolidated results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with U.S.

The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make judgments, estimates, and assumptions about future events.

These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses.

These judgments, estimates and assumptions are used for but not limited to revenue recognition, provision for credit losses, inventory obsolescence, recoverability of long-lived assets, certain accrued expenses, stock-based compensation, determination of fair value of the Company’s convertible promissory notes, common stock (prior to the reverse recapitalization), warrant labilities and stock options, and deferred income taxes including related valuation allowances.

These judgments, estimates, and assumptions are used for but not limited to revenue recognition, provision for credit losses, deferred income taxes and related valuation allowances, inventory obsolescence, recoverability of long-lived assets, certain accrued expenses, stock-based compensation, determination of the fair value of the Company’s financial instruments, including convertible promissory notes, common stock of Legacy GCT prior to the reverse recapitalization, warrant liabilities, stock options, and common stock forward liability.

The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances.

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The carrying amount of certain financial instruments held by the Company, such as cash equivalents, accounts receivable, contract assets and liabilities, accounts payable, and accrued and other current liabilities, approximate fair value due to their short maturities.

The carrying amount of the liabilities for the convertible promissory notes represents their fair value.

The carrying amounts of the Company’s bank borrowings and lease liabilities approximate fair value due to the market interest rates that these obligations bear and interest rates available to the Company.

The carrying amount of the liabilities for the convertible promissory notes and the historical convertible promissory notes (see Note 5) represents their fair value.

The carrying amounts of the Company’s bank borrowings and lease liabilities approximate their fair values due to the market interest rates that these obligations bear and interest rates available to the Company.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

3 unchanged sentences

Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s Level 3 financial instruments consist of convertible promissory notes and warrant liabilities.

These financial instruments were valued using valuation techniques that are considered to be a Level 3 fair value measurement .

Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

A financial instrument's categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company’s Level 3 financial instruments consist of common stock forward liability, convertible promissory notes, and warrant liabilities.

Risk and Uncertainties

4 unchanged sentences

In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns.

As a result, the Company may experience significant period-to-period fluctuations in condensed consolidated operating results due to the factors mentioned above or other factors.

As a result, the Company may experience significant period-to-period fluctuations in unaudited condensed consolidated operating results due to the abovementioned factors.

The Company’s revenue may be impacted by its ability to obtain adequate wafer supplies from foundries and back-end production capacity from the Company’s test and assembly subcontractors.

The foundries with which the Company currently has arrangements may not be willing or able to satisfy all of the Company’s manufacturing requirements on a timely basis and/or at favorable prices.

The foundries with which the Company currently has arrangements may not be willing or able to satisfy all of the Company’s manufacturing requirements on a timely basis or at favorable prices.

The Company is also subject to the risks of service disruptions, raw material shortages and price increases by its foundries.

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Uncollectible receivables are written off when all efforts to collect have been exhausted and recoveries are recognized when they are recovered.

The Company determined that provisions for credit losses of approximately $ 1.9 million and $ 1.6 million were necessary as of March 31, 2024 and December 31, 2023, respectively.

The Company determined that provisions for credit losses of approximately $ 1.1 million and $ 1.6 million were necessary as of June 30, 2024 and December 31, 2023, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to the concentration of credit risk consist of cash and cash equivalents and accounts receivable.

The Company maintains its cash and cash equivalents primarily with one financial institution located in the United States and another financial institution located in Korea where amounts deposited may exceed Federal Deposit Insurance Corporation or Korea Deposit Insurance Corporation limits.

The Company’s financial instruments subject to credit risk concentration consist of cash and cash equivalents and accounts receivable.

The Company maintains its cash and cash equivalents primarily with one financial institution located in the United States and another located in South Korea, where amounts deposited may exceed Federal Deposit Insurance Corporation or Korea Deposit Insurance Corporation limits.

The Company’s accounts receivable balances are primarily derived from revenues recognized from customers located in the United States, China, South Korea, Japan, and Taiwan.

The Company performs ongoing credit evaluations of the financial condition of its customers and distributors and generally does not require collateral.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company’s accounts receivable balances are primarily derived from revenues earned from customers located in the United States, China, Korea, Japan and Taiwan.

The Company performs ongoing credit evaluations of its customers’ and distributors’ financial condition and generally does not require collateral from its customers.

The Company’s net revenue and accounts receivable are concentrated among a few significant customers, which could expose the Company to financial risk in the event of adverse developments with these customers.

Four customers accounted for approximately 28 percent, 19 percent, 18 percent and 13 percent of the Company’s gross accounts receivable as of March 31, 2024.

Four customers accounted for approximately 27 percent, 19 percent, 14 percent and 10 percent of the Company’s gross accounts receivable as of December 31, 2023.

Two customers accounted for approximately 61 percent and 24 percent of the Company’s total net revenues for the three months ended March 31, 2024.

Four customers accounted for approximately 28 percent, 28 percent, 25 percent, and 10 percent of the Company’s total net revenues for the three months ended March 31, 2023.

The Company’s net revenues and accounts receivable are concentrated among a few significant customers, which could expose the Company to financial risk in the event of adverse developments.

The following represents the concentration of the Company’s gross accounts receivable among key customers to the extent their share exceeds 10%:

June 30, 2024

December 31, 2023

The following table includes customers that individually accounted for more than 10% of the Company’s net revenues in the periods indicated:

Three Months Ended

Six Months Ended

Management closely monitors the creditworthiness and performance of these key customers and has established credit limits and terms to mitigate potential credit risks.

The Company also continues to diversify its customer base and explore opportunities to reduce its reliance on a few major customers.

The Company also continues diversifying its customer base and exploring opportunities to reduce its reliance on a few major customers.

Foreign Currency

1 unchanged sentence

dollars at the end-of-period exchange rates or at historical exchange rates for purposes of consolidation.

Revenues and expenses are translated using average exchange rates during the period.

Revenues and expenses are translated using average exchange rates during the reporting period.

Translation adjustments are included in accumulated other comprehensive loss within stockholders’ deficit.

Gains and losses resulting from transactions denominated in a currency other than the functional currency are included in other income, net in the condensed consolidated statements of operations.

The Company recognized $ 1.1 million and $ 0.7 million foreign currency exchange gains for the three months ended March 31, 2024 and 2023, respectively.

Gains and losses resulting from transactions denominated in a currency other than the functional currency are included in other income (expenses), net in the unaudited condensed consolidated statements of operations.

The Company recognized $ 0.8 million and $ 1.9 million foreign currency exchange gains for the three and six months ended June 30, 2024, respectively.

The Company recognized $ 0.2 million and $ 0.9 million foreign currency exchange gains for the three and six months ended June 30, 2023, respectively.

Convertible Promissory Notes

The Company has elected the fair value option to account for its outstanding convertible promissory notes.

Under the fair value option, the convertible promissory notes must be recorded at their initial fair value on the date of issuance, any modification, and at the end of each reporting period end date thereafter.

Changes in the estimated fair value of the convertible promissory notes are recognized as non-cash gains or losses in other income, net in the condensed consolidated statements of operations.

Contracts in Equity

The Company classifies contracts in equity, including warrants to purchase shares of the Company’s common stock, that do not meet the indexation guidance as liabilities.

At the end of each reporting period, such liability classified instruments are remeasured and changes in fair value during the reporting period are recognized within the condensed consolidated statements of operations until the earlier of the exercise, settlement, or expiration.

The Company classifies contracts in equity, including the Legacy GCT Earnouts and Sponsor Earnouts (discussed in Note 3), that meet the indexation and equity classification guidance as a component of stockholders’ deficit and are not subject to fair value remeasurements.

Changes in the estimated fair value of the outstanding convertible promissory notes are recognized in other income (expense), net in the condensed consolidated statements of operations.

Common Stock Warrants

The outstanding common stock warrants are liability-classified as they do not meet equity classification requirements based on their settlement mechanism upon a change of control and similar transactions.

The corresponding liability is remeasured at fair value while the common stock warrants remain outstanding, with changes in fair value recognized in other income (expense), net in the unaudited condensed consolidated statements of operations.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Certain Equity Contracts

The Company’s promises to potentially issue additional shares in the future, including the Legacy GCT Earnout Shares and the Sponsor Earnout Shares discussed in Note 3, were determined to be equity classified and credited to the stockholders’ deficit upon consummation of the Business Combination.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS” Act).

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards using private company timelines.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

As a result, these unaudited condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recent Accounting Pronouncements Adopted

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

ASU 2020-06 reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification.

The Company adopted this guidance effective January 1, 2024, and noted no material impact on the Company’s condensed consolidated financial statements.

The Company adopted this guidance effective January 1, 2024 and noted no material impact on the Company’s unaudited condensed consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) :

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which provides an exception to fair value measurement for contract assets and contract liabilities related to revenue contracts acquired in a business combination.

The ASU requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which provides an exception to fair value measurement for contract assets and contract liabilities related to revenue contracts acquired in a business combination.

ASU 2021-08 requires an acquirer to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606.

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

The Company adopted this guidance effective January 1, 2024, and noted no material impact on the Company’s condensed consolidated financial statements.

The Company adopted this guidance effective January 1, 2024 and noted no material impact on the Company’s unaudited condensed consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) :

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

The ASU clarifies that a contractual restriction on the sale of an equity security should not be considered in measuring the fair value of the equity security and cannot be recognized as a separate unit of account.

The ASU also requires the investor to disclose the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restriction(s), and the circumstances that could cause a lapse in the restriction(s).

The ASU is effective for annual and interim periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect the adoption of ASU 2022-03 will have on its condensed consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280) :

Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The ASU is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect the adoption of ASU 2023-07 will have on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740) :

Improvements to Income Tax Disclosures, which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

In addition, companies are required to disclose additional information about income taxes paid.

The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”).

ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security should not be considered in measuring the fair value of the equity security and cannot be recognized as a separate unit of account.

ASU 2022-03 also requires the investor to disclose the fair value of equity securities subject to contractual sale restrictions, the nature and remaining duration of the restrictions, and the circumstances that could cause a lapse in the restrictions.

ASU 2022-03 is effective for annual and interim periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect of the adoption of ASU 2022-03 on its unaudited condensed consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) :

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and for interim periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect of the adoption of ASU 2023-07 on its unaudited condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

In addition, companies are required to disclose additional

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

information about income taxes paid.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The standard is required to be adopted on a prospective basis;

however, retrospective application is permitted.

The Company is currently evaluating the effect the adoption of ASU 2023-09 will have on its condensed consolidated financial statements.

The Company is currently evaluating the effect of the adoption of ASU 2023-09 on its unaudited condensed consolidated financial statements.

Reverse Recapitalization

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● Each share of Legacy GCT common stock issued and outstanding prior to the Closing was cancelled and converted into the right to receive a number of shares of the Company common stock at the exchange ratio of 0.1868 .

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

● Each outstanding instrument of Legacy GCT stock options, restricted stock units (“RSUs”), and warrant shares were converted into equivalent Company stock options, RSUs, and warrant shares with the same terms and conditions and at the exchange ratio of 0.1868 .

● Certain GCT convertible promissory notes, including the CVT Financing (see Note 7), were automatically converted into the right to receive a number of shares of the Company common stock at the conversion price of $ 6.67 per share (see Note 7).

The number of shares of common stock issued and outstanding immediately following consummation of the Business Combination was (in thousands):

Immediately after the Closing, the Company’s outstanding common stock included the following components (in thousands):

Common stock of Concord III outstanding prior to the Business Combination

6 unchanged sentences

The Business Combination was accounted for as a reverse recapitalization under U.S.

GAAP because Legacy GCT was determined to be the accounting acquirer under the FASB’s Accounting Standards Codification (“ASC”) Topic 805, Business Combinations .

Under this method of accounting, Concord III was treated as the “acquired” company for financial reporting purposes.

Accordingly, for accounting purposes, the consolidated financial statements of the Company represent a continuation of the consolidated financial statements of Legacy GCT, with the Business Combination treated as the equivalent of Legacy GCT issuing stock for the net assets of Concord III, accompanied by a recapitalization.

The net assets of Concord III were stated at historical cost, with no goodwill or other intangible assets recorded.

Operations prior to the Business Combination are those of Legacy GCT.

Legacy GCT was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

● Legacy GCT stockholders comprise a relative majority of the voting power of GCT;

● Legacy GCT stockholders have the ability to nominate a majority of the members of the board of directors of GCT;

● Legacy GCT’s operations prior to the Business Combination will comprise the only ongoing operations of GCT;

● Legacy GCT’s senior management comprises the senior management of GCT;

● GCT substantially assuming the Legacy GCT name;

● Legacy GCT’s headquarters will become GCT’s headquarters;

GAAP because Legacy GCT was determined to be the accounting acquirer, and Concord III was identified as the accounting acquiree for financial reporting purposes.

Accordingly, the consolidated financial statements of the Company represent a continuation of the consolidated financial statements of Legacy GCT, with the Business Combination treated as the equivalent of Legacy GCT issuing its common stock for the net assets of Concord III, accompanied by a recapitalization, and the net assets of Concord III were recorded at historical cost, with no goodwill or other intangible assets recorded.

The results of operations prior to the Business Combination are those of Legacy GCT.

Legacy GCT was determined to be the accounting acquirer based the following facts and circumstances:

● Legacy GCT stockholders comprised a relative majority of the voting power of GCT;

● Legacy GCT stockholders had the ability to nominate a majority of the members of the board of directors of GCT;

● Legacy GCT’s operations prior to the Business Combination comprised the only ongoing operations of GCT;

● Legacy GCT’s senior management comprised the senior management of GCT;

● GCT substantially assumed the Legacy GCT name;

● Legacy GCT’s headquarters became GCT’s headquarters;

● Concord III did not meet the definition of a business.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

PIPE Financing

Concurrent with the execution of the Business Combination Agreement, certain investors (the “PIPE Investors”) entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors had committed to purchase in a private placement an aggregate of 4,529,967 shares of Company’s Common Stock (the “PIPE Shares”) at a purchase price of $ 6.67 per share for an aggregate purchase price of $ 30.2 million (the “PIPE Financing”).

The purchase of the PIPE Shares was conditioned upon the consummation of the Business Combination.

The PIPE Financing was consummated immediately prior to the Closing.

The Company received net proceeds of $ 17.1 million from the PIPE Financing.

Concurrent with the execution of the Business Combination Agreement, certain investors entered into agreements and committed to purchase in a private placement an aggregate of 4,529,967 shares of the Company’s common stock (the “PIPE Shares”) at a purchase price of $ 6.67 per share for an aggregate purchase price of $ 30.2 million (the “PIPE Financing”) upon the Business Combination Closing.

The PIPE Financing was consummated immediately prior to the Closing and resulted in net proceeds of $ 17.1 million to the Company.

Private Placement Warrants and Public Warrants

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(i) 9,400,000 warrant shares that were issued in a private placement and held by the sponsor and another company (the “Private Placement Warrants”) and (ii) 17,250,000 warrant shares that were issued in connection with the initial public offering of Concord III (the “Public Warrants”).

Collectively these warrant shares are referred to as “private and public warrants” and included settlement provisions that precluded equity classification.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Private Placement Warrants were reallocated at the Closing of the Business Combination as follows:

(i) 4,492,650 warrants were vested and retained by the sponsor parties, (ii) 2,087,350 warrants were reallocated from the sponsor parties to certain recipients at Legacy GCT’s discretion to incentivize investment, and (iii) 2,820,000 were forfeited by the sponsor parties.

The Company has historically accounted for the private and public warrants as liability-classified financial instruments.

This conclusion is based on the applicable provisions of the private and public warrants, including their settlement terms upon a change in control or similar transactions that precluded equity classification.

After the Closing, the private and public warrants remained liability-classified as the applicable provisions did not change and apply to future operations of the Company.

Subsequent to the Closing, the outstanding Private Placement Warrants and Public Warrants remained liability-classified as the applicable provisions precluding classification in equity did not change as a result of the Business Combination.

Legacy GCT Earnout Shares

At the Closing of the Business Combination, former Legacy GCT stockholders and other investors of Legacy GCT have the right to receive up to an aggregate of 20,000,000 shares of Company common stock (“Earnout Shares”), if at any time during the period starting 60 trading days following the Closing and expiring on the 5 th anniversary of the Closing Date:

(i) with respect to 6,666,667 of the Earnout Shares, the volume weighted average price (“VWAP”) of the Company’s common stock equals or exceeds $ 12.50 per share for any 20 trading days within a period of 30 consecutive trading days, (ii) with respect to 6,666,666 of the Earnout Shares, the VWAP of the Company’s common stock equals or exceeds $ 15.00 per share for any 20 trading days within a period of 30 consecutive trading days, and (iii) with respect to 6,666,667 of the Earnout Shares, the VWAP of the Company’s common stock equals or exceeds $ 17.50 per share for any 20 trading days within a period of 30 consecutive trading days.

At the Closing of the Business Combination, former Legacy GCT stockholders and other investors of Legacy GCT have the right to receive up to 20,000,000 shares of Company common stock (“Legacy GCT Earnout Shares”).

The Legacy GCT Earnout Shares may vest between May 2024 and March 2029 if the volume-weighted average price (“VWAP”) of the Company’s common stock for any 20 trading days within 30 consecutive trading day periods exceeds the following amounts per share (“VWAP Threshold”):

(i) one -third of the shares based on the $ 12.50 per share VWAP Threshold, (ii) one -third of the shares based on the $ 15.00 per share VWAP Threshold, and (iii) one -third of the shares based on the $ 17.50 per share VWAP Threshold.

In the event of a future transaction that results in a change in control in which shares of Company common stock are converted into the right to receive cash or other consideration having a value equal to or in excess of a triggering event, then the Legacy GCT Earnout Shares subject to the applicable triggering event that have not been previously issued will be issued to the Legacy GCT stockholders effective as of immediately prior to the consummation of such transaction.

In the event of a transaction that results in a change in control in which shares of Company common stock are converted into the right to receive cash or other consideration having a value less than a triggering event, then the Earnout Shares subject to the applicable triggering event that have not been previously issued will be forfeited.

The Legacy GCT Earnout shares have been recognized at fair value of approximately $ 108.8 million upon the Closing and classified within stockholders’ deficit as the Legacy GCT Earnout shares are indexed to the common stock and are otherwise not precluded from equity classification based on their settlement provisions.

The fair value of the Legacy GCT Earnout Shares was determined based on a valuation using a Monte Carlo simulation with key inputs and assumptions such as stock price, term, dividend yield, risk-free rate, and volatility.

Due to the fact that the Business Combination is accounted for as a reverse recapitalization, the Legacy GCT Earnout shares are treated as a deemed dividend.

Due to the fact that the Company does not have any retained earnings, the Company recorded the corresponding entries to additional paid-in capital and therefore have a net nil impact on stockholders’ deficit during the period ended March 31, 2024.

In future reporting periods, the Company will monitor that the Legacy GCT Earnout shares meet the equity classification criteria until expiration or settlement.

In the event of a transaction that results in a change in control in which shares of Company common stock are converted into the right to receive cash or other consideration having a value less than a triggering event, then the Legacy GCT Earnout Shares subject to the applicable triggering event that have not been previously issued will be forfeited.

The Legacy GCT Earnout Shares were recognized at a fair value of approximately $ 108.8 million upon the Closing and classified within the stockholders’ deficit as they are indexed solely to the Company’s common stock and are otherwise not precluded from equity classification based on their settlement provisions.

Under the reverse recapitalization method of accounting, the fair value of the Legacy GCT Earnout Shares was treated as a deemed dividend and, in the absence of retained earnings, credited to additional paid-in capital without any impact on the stockholders’ deficit balances.

Sponsor Earnout Shares

Concurrently with entering into the Business Combination Agreement, the sponsor parties and the Company entered into that certain sponsor support agreement, as amended, modified, or supplemented (the “Sponsor Support Agreement”).

Pursuant to the terms of the Sponsor Support Agreement, the sponsor parties have the right to receive an aggregate of 1,920,375 shares of the Company common stock multiplied by the Sponsor Earnout Ratio (as defined in the Sponsor Support Agreement) (“Sponsor Earnout Shares”), if at any time during the period starting 6 months following the Closing and expiring on the 5 th anniversary of the Closing Date:

(i) with respect to one -third of the Sponsor Earnout Shares, the VWAP of the Company’s common stock equals or exceeds $ 12.50 per share for any 20 trading days within a period of 30 consecutive trading days, (ii) with respect to one -third of the Sponsor Earnout Shares, the VWAP of the Company’s common stock equals or exceeds $ 15.00 per share for any 20 trading days within a period of 30 consecutive trading days, and (iii) with respect to one -third of the Sponsor Earnout Shares, the VWAP of the Company’s common stock equals or exceeds $ 17.50 per share for any 20 trading days within a period of 30 consecutive trading days.

Notwithstanding the foregoing, in no event shall the number of Sponsor Earnout Shares be less than 570,796 .

The Sponsor Earnout Shares have been recognized at fair value of approximately $ 10.4 million upon the Closing and classified within stockholders’ deficit as the Sponsor Earnout Shares are indexed to the common stock and are otherwise not precluded from equity

Pursuant to the terms of the Sponsor Support Agreement, the sponsor parties have the right to receive up to 1,920,375 shares of the Company's common stock (“Sponsor Earnout Shares”).

The Sponsor Earnout Shares are legally outstanding and remain unvested through June 30, 2024.

The Sponsor Earnout Shares may vest between September 2024 and March 2029 if the VWAP of the Company’s common stock for any 20 trading days within 30 consecutive trading day periods exceeds the following VWAP Thresholds:

(i) one -third of the shares

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

classification based on their settlement provisions.

The fair value of the Sponsor Earnout Shares was determined based on a valuation using a Monte Carlo simulation with key inputs and assumptions such as stock price, term, dividend yield, risk-free rate, and volatility.

Since the Business Combination is accounted for as a reverse recapitalization, the issuance of the Sponsor Earnout Shares are treated as a deemed dividend.

Since the Company does not have retained earnings, the issuance of the Sponsor Earnout Shares at the Closing is recorded within additional paid-in capital and has a net nil impact on stockholders’ deficit during the period ended March 31, 2024.

In future reporting periods, the Company will monitor that the Sponsor Earnout shares meet the equity classification criteria until expiration or settlement.

based on the $ 12.50 per share VWAP Threshold, (ii) one -third of the shares based on the $ 15.00 per share VWAP Threshold, and (iii) one -third of the shares based on the $ 17.50 per share VWAP Threshold.

The Sponsor Earnout Shares were recognized at a fair value of approximately $ 10.4 million upon the Closing and classified within the stockholders’ deficit as they are indexed solely to the Company’s common stock and are otherwise not precluded from equity classification based on their settlement provisions.

Under the reverse recapitalization method of accounting, the fair value of the Sponsor Earnout Shares was treated as a deemed dividend and, in the absence of retained earnings, credited to additional paid-in capital without any impact on the stockholders’ deficit balances.

Disaggregation of Revenue

Disaggregation of revenues from contracts with customers is as follows (in thousands):

Three Months Ended March 31, 2024

Product Revenues

Service Revenues

Timing of revenue recognition

At a point in time

Three Months Ended March 31, 2023

Product Revenues

Service Revenues

Timing of revenue recognition

At a point in time

Net revenues categorized by customer location are as follows (in thousands):

Three Months Ended March 31,

All product revenue presented in the condensed consolidated statement of operations is recognized at a point in time, and all service revenue is recognized over time.

Net revenues are categorized by customer location as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

United States

Contract Assets and Liabilities

Details of contract assets and liabilities is as follows (in thousands):

March 31, 2024

December 31, 2023

Contract assets

Assets recognized for costs incurred to fulfill a contract (*)

Contract liabilities

The balances are included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Net revenues recognized in relation to contract liabilities are as follows as of the periods indicated (in thousands):

March 31, 2024

March 31, 2023

Net revenues recognized that were included in the contract liabilities balance at the beginning of the period

Net revenues recognized during the six months ended June 30, 2024 and 2023 for the amounts included in the contract liabilities balance at the beginning of the respective annual periods are less than $ 0.1 million and $ 0.7 million, respectively.

As of June 30, 2024 and December 31, 2023, the contract assets were $ 4.6 million and $ 3.4 million, respectively.

The balances of contract liabilities and capitalized costs related to contract fulfilment were immaterial as of June 30, 2024 and December 31, 2023.

Fair Value of Measurements

Fair value hierarchy classifications of the financial instruments that are measured at fair value on a recurring basis are as follows (in thousands):

March 31, 2024

Recurring Fair Value Measurements

The following financial instruments are measured at fair value on a recurring basis (in thousands):

June 30, 2024

Convertible promissory notes

Warrant liabilities

Common stock forward liability

December 31, 2023

Convertible promissory notes

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Valuation techniques and the inputs

1 unchanged sentence

Valuation techniques

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

Discount rate, risk-free rate, credit spread, contractual cash flows

PWERM (“Probability-Weighted Expected Return Method”)

Scenario of initial public offering (“IPO”) and merger & acquisition (“M&A”)

Scenario of initial public offering (“IPO”) and merger and acquisition (“M&A”)

Common stock forward liability

Various utilization scenarios, risk-free rate, remaining term

Convertible promissory notes, net of current

1 unchanged sentence

Stock price, volatility, remaining term, risk-free rate, credit spread

Scenario of initial public offering (“IPO”) and merger & acquisition (“M&A”)

Warrant liabilities – private and public warrants

Scenario of initial public offering (“IPO”) and merger and acquisition (“M&A”)

Warrant liabilities

Black Scholes Merton Model (“BSM”) or BLM

Exercise price, term to expiration, volatility, risk-free rate

Warrant liabilities - other

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

As of March 31, 2024, the key inputs for the convertible promissory notes, current using the DCF were as follows:

As of June 30, 2024, the key inputs for the convertible promissory notes valuation using the DCF model were as follows:

remaining term of 0.17 years and a discount rate of 10.8 %.

As of March 31, 2024, the key inputs for the convertible promissory notes, net of current using the BLM were as follows:

As of June 30, 2024, the key inputs for the convertible promissory notes, net of current using the BLM were as follows:

stock price of $ 5.21 , volatility of 21.3 %, remaining term of 1.66 years, risk-free rate of 4.84 %, and credit spread of 5.7 %.

As of March 31, 2024, the key inputs for the private placement warrants using the BSM were as follows:

As of June 30, 2024, the key inputs for the common stock forward valuation using the DCF model were as follows:

a remaining term of 1.87 years and future risk-free rate estimates of 4.76 %- 5.47 % for this period.

As of June 30, 2024, the key inputs for the private placement warrants using the BSM were as follows:

exercise price of $ 11.50 per share, term to expiration of 4.7 years, volatility range of 21.3 %, and a risk-free rate of 4.3 %.

As of March 31, 2024, the key inputs for the public warrants using the BLM were as follows:

As of June 30, 2024, the key inputs for the public warrants using the BLM were as follows:

exercise price of $ 11.50 per share and term to expiration of 4.7 years.

As of March 31, 2024, the key inputs for the warrant liabilities – other using the BSM were as follows:

As of June 30, 2024, the key inputs for the other warrant liabilities using the BSM were as follows:

an exercise price of $ 5.00 per share, or $ 10.00 per share or $ 18.75 per share, term to expiration ranging from 0.12 years to 2.30 years, volatility ranging from 30.6 % to 33.8 %, and a risk-free rate ranging from 4.6 % to 5.4 %.

As of December 31, 2023, the PWERM was used as Legacy GCT was a private company.

After the Closing, and as of March 31, 2024, the valuation techniques used reflect that the Business Combination was consummated.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands):

Three Months Ended March 31,

Convertible promissory notes fair value - beginning of period

Change in fair value of convertible promissory notes

Conversion of convertible promissory notes

Borrowing of convertible promissory notes

Convertible promissory notes fair value - end of period

Three Months Ended March 31,

Warrant Liabilities Fair value - beginning of period

Private and public warrants assumed at Closing

Change in fair value of warrant liabilities

Warrant Liabilities Fair value - end of period

The gains and losses from fair value re-measurement of Level 3 financial liabilities are recorded as other income, net in the condensed consolidated statements of operations.

After the Closing, and as of June 30, 2024, the valuation techniques used reflect that the Business Combination was consummated.

The following table sets forth a summary of the changes in the fair value of the convertible promissory notes (in thousands):

As of December 31, 2023

Change in fair value

As of March 31, 2024

Change in fair value

As of June 30, 2024

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table sets forth a summary of the changes in the fair value of the warrant liabilities (in thousands):

As of December 31, 2023

Fair value of warrants assumed at Closing

Change in fair value

As of March 31, 2024

Change in fair value

As of June 30, 2024

The following table sets forth a summary of the changes in the fair value of the common stock forward liability (in thousands):

As of March 31, 2024

Loss from initial recognition

Settlement in equity

As of June 30, 2024

Balance Sheet Components

Inventories consists of the following (in thousands):

Inventories consist of the following (in thousands):

Raw materials

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Total inventory

There were no write-downs of inventory into cost of net revenues for the three months ended March 31, 2024 and 2023.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

There were no inventory write-downs during the six months ended June 30, 2024 and 2023.

Prepaid expenses and other assets

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Other receivables and current assets

Prepaid expenses and other current assets

Deferred transaction costs

Total prepaid expenses and other current assets

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Accrued and other current liabilities

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Professional fees

Product warranty liabilities

Royalty and license fee

Product warranty

Accrued and other current liabilities

Total accrued and other current liabilities

The Company’s outstanding debt was as follows (in thousands):

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Historical convertible promissory notes

2023 & 2024 convertible promissory notes

2023 and 2024 convertible promissory notes

Total convertible promissory notes

KEB Hana Bank

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Debt, net of current portion

Expected future minimum principal payments under the Company’s total debt is as follows as of June 30, 2024 (in thousands):

2024, remainder

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company elected the fair value option for the 2023 & 2024 convertible promissory notes and the historical convertible promissory notes (see Note 5).

The Company’s other borrowings approximate their fair value because interest rates are at prevailing market rates and/or the short-term nature of the remaining obligations.

See Note 14 for additional information on related parties.

Expected future minimum principal payments under the Company’s total debt is as follows as of March 31, 2024 (in thousands):

2024, remainder

Convertible Promissory Notes

4 unchanged sentences

In March 2024, upon the Closing of the Business Combination, an aggregate principal and interest amount of $ 32.1 million converted into 4,258,223 shares of common stock at a conversion price of $ 10.00 .

As of March 31, 2024, the remaining principal and interest amount of $ 7.9 million was outstanding and related to two noteholders where conversion is at each noteholder’s discretion and at a conversion price of $ 3.50 per share.

In April 2024, the Company repaid one of the convertible promissory notes (see Note 17).

2023 & 2024 Convertible Promissory Notes

In April 2024, the Company repaid one of the convertible promissory notes that was issued in 2021 with a principal amount of $ 0.6 million.

As of June 30, 2024, the remaining principal and interest amount of $ 7.1 million was outstanding and related to one noteholder where conversion is at the noteholder’s discretion and at a conversion price of $ 3.50 per share.

2023 and 2024 Convertible Promissory Notes

In November 2023, February 2024 and March 2024, the Company issued convertible promissory notes to certain investors (the “CVT Investors”), pursuant to which the CVT Investors agreed to lend to the Company an aggregate principal amount of $ 13.3 million.

1 unchanged sentence

In March 2024, upon the Closing of the Business Combination, an aggregate principal and interest amount of $ 13.4 million converted into 2,004,535 shares of common stock at a conversion price of $ 6.67 .

As of March 31, 2024, none of the notes issued to CVT Investors remain outstanding.

As of June 30, 2024, none of the notes issued to CVT Investors remain outstanding.

In February 2024, the Company issued a convertible promissory note to a strategic investor for a principal amount of $ 5.0 million, which matures in February 2026 and bears an interest rate of 5.0 % per annum.

1 unchanged sentence

This note includes customary representations, warranties, and events of default, as well as a covenant relating to the performance of obligations by the Company related to the Company’s 5G activity.

As of March 31, 2024, the remaining principal and interest amount of $ 5.0 million was outstanding.

As of June 30, 2024, the remaining principal and interest amount of $ 5.1 million was outstanding.

Borrowings Pursuant to Term Loan and Security Agreements

The amounts in Korean Won (“KRW”) presented below were converted into US dollars based on the applicable historical exchange rates.

KEB Hana Bank

In July 2016, the Company entered into an unsecured term loan agreement with KEB Hana Bank pursuant to which it borrowed KRW 9.0 billion ($ 6.7 million), bearing a variable interest rate ( 2.6 % initial annual interest rate and 5.2 % as of March 31, 2024), paid monthly, and maturing in July 2017.

In July 2016, the Company entered into an unsecured term loan agreement with KEB Hana Bank, pursuant to which it borrowed 9.0 billion in KRW ($ 6.7 million), bearing a variable interest rate (initial annual interest rate of 2.6 % and interest ranging between 3.5 - 5.2 % as of June 30, 2024), paid monthly, and maturing in July 2017.

The terms of such unsecured term loan agreement have been extended annually for additional one -year terms since 2017, and the maturity date is July 2024.

Anapass, Inc., a related party, provided certificates of deposit as collateral to KEB Hana

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Bank to secure the Company’s obligations under this loan (see Note 8).

As of March 31, 2024, the remaining principal and interest amount of $ 6.7 million was outstanding.

In April 2024, the Company executed an amendment to extend the maturity date to April 2025 for the principal amount of KRW 1.0 billion ($ 0.7 million).

Anapass, Inc., a related party, provided certificates of deposit as collateral to KEB Hana Bank to secure the Company’s obligations under this loan (see Note 8).

IBK Industrial Bank

1 unchanged sentence

The term loan has a maturity date in November 2024 and bears an annual interest rate of 4.9 %.

As of March 31, 2024, the remaining principal and interest amount of $ 6.8 million was outstanding.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note Payable (One Individual Investor)

In June 2021, the Company entered into a note payable agreement with an individual investor, pursuant to which the Company borrowed $ 1.0 million.

The note has a maturity date in June 2024 and bears an annual interest rate of 4.0 %.

The note has a maturity date of June 2024 and bears an annual interest rate of 4.0 %.

In April 2022, the Company entered into an amendment with this one individual investor to remove the conversion right from the note payable.

As of March 31, 2024, the remaining principal and interest amount of $ 1.1 million was outstanding.

In June 2024, the Company executed an amendment with the individual investor to extend the maturity date from June 2024 to August 2024.

M-Venture Investment, Inc.

1 unchanged sentence

pursuant to which the Company borrowed KRW 5.0 billion ($ 3.7 million) and repaid KRW 0.6 billion ($ 0.4 million) and KRW 0.4 billion ($ 0.3 million) in 2021 and 2022, respectively, such that KRW 4.0 billion ($ 3.0 million) remained outstanding.

The term loan has a maturity date in October 2024 and bears an annual interest rate of 6.5 %.

As of March 31, 2024, the remaining principal and interest amount of $ 3.1 million was outstanding.

In April 2022, the Company entered into a term loan and security agreement with M-Venture Investment, Inc.

pursuant to which the Company borrowed amounts in two draws of KRW 1.0 billion ($ 0.7 million) and KRW 5.0 billon ($ 3.7 million), respectively.

The term loan bears an annual interest rate of 6.5 %.

In April 2024, the Company executed an amendment with M-Venture Investment, Inc., pursuant to which the Company repaid KRW 2.0 billion ($ 1.5 million) in April 2024.

In May 2024, the Company repaid the term loan in full.

In April 2022, the Company entered into a term loan and security agreement with M-Venture Investment, Inc., pursuant to which the Company borrowed amounts in two draws of KRW 1.0 billion ($ 0.7 million) and KRW 5.0 billion ($ 3.7 million), respectively.

The term loan has a maturity date in April 2024, and each respective draw bears an annual interest rate of 6.5 % and 8.7 %.

As of March 31, 2024, the remaining principal and interest amount of $ 4.8 million was outstanding.

In April 2024, the Company executed amendments with M-Venture Investment, Inc.

(see Note 17).

In April 2024, the Company executed an amendment with M-Venture Investment, Inc., pursuant to which the maturity date for both draws were amended.

The maturity date for the principal amount of KRW 1.0 billion ($ 0.7 million) was extended from April 2024 to June 2024.

The maturity date for the principal amount of KRW 5.0 billion ($ 3.7 million) was extended from April 2024 to July 2024.

Anapass, Inc., Related Party

3 unchanged sentences

The loan is collateralized by the Company’s assets as described under the Assets Pledged as Collateral (see Note 8).

As of March 31, 2024, the remaining principal and interest amount of $ 4.5 million was outstanding.

In May and September 2022, the Company entered into two term loan agreements with Anapass, Inc.

pursuant to which the Company borrowed KRW 3.0 billion ($ 2.2 million) and KRW 4.0 billion ($ 3.0 million) in term loans.

pursuant to which the Company borrowed KRW 3.0 billion ($ 2.2 million) and KRW 4.0 billion ($ 3.0 million).

The term loans have respective maturity dates in May 2024 and September 2024 and both bear an annual interest rate of 5.5 %.

As of March 31, 2024, the remaining principal and interest amount of $ 5.2 million was outstanding.

In May 2024, the Company executed an amendment with Anapass, Inc., to extend the maturity date from May 2024 to May 2025 for the term loan entered in May 2022.

i Best Investment Co., Ltd

From 2022 and 2023, the Company entered into multiple term loans and security agreements with i Best Investment Co., Ltd pursuant to which it borrowed principal amounts in six draws with an aggregate principal balance of KRW 14.0 billion ($ 10.3 million).

Between 2022 and 2023, the Company entered into multiple term loans and security agreements with i Best Investment Co., Ltd pursuant to which it borrowed principal amounts in six draws with an aggregate principal balance of KRW 14.0 billion ($ 10.3 million).

All of the term loans have a maturity date in June 2024 and bear an annual interest rate of 6.5 %.

In June 2024, the Company executed an amendment with the I Best Investment Co., Ltd to extend the maturity date from June 2024 to August 2024 for its first draw, fifth draw and sixth draw.

In December 2023, the Company made a $ 0.8 million repayment of the outstanding principal and interest on its second draw.

In March 2024, the Company made a $ 2.3 million repayment of the outstanding principal and interest amount of its fourth draw.

As of March 31, 2024, the remaining principal and interest amounts outstanding were as follows:

$ 3.3 million outstanding on its first draw, $ 1.6 million outstanding on its third draw, $ 2.3 million outstanding on its fifth draw and $ 0.8 million on its sixth draw.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

In March 2024, the Company repaid $ 2.3 million of the outstanding principal and interest amount of its fourth draw.

In June 2024, the Company repaid in full of the term loans with a principal amount of $ 1.4 million outstanding on its third draw.

Kyeongho Lee, Related Party

From 2017 and 2021, the Company entered into multiple promissory note and term loan agreements with Kyeongho Lee pursuant to which the Company borrowed (a) KRW 500.0 million ($ 0.4 million), and KRW 500.0 million ($ 0.4 million) in promissory notes, and (b) KRW 1.0 billion ($ 0.7 million) and KRW 110.0 million ($ 0.1 million) in term loans.

Between 2017 and 2021, the Company entered into multiple promissory note and term loan agreements with Kyeongho Lee pursuant to which the Company borrowed (a) KRW 500.0 million ($ 0.4 million), and KRW 500.0 million ($ 0.4 million) in promissory notes, and (b) KRW 1.0 billion ($ 0.7 million) and KRW 110.0 million ($ 0.1 million) in term loans.

The promissory notes have a maturity date in November 2024 and bear an annual interest rate varying from 7.5 % and 9.0 %.

During the three months ended March 31, 2024, the Company repaid in full one of the term loans.

The term loan has a maturity date in May 2024 and bears an annual interest rate of 0.0 %.

As of March 31, 2024, the remaining principal and interest amount of $ 0.7 million and $ 82,000 was outstanding as it related to the promissory notes and a term loan, respectively.

In March 2024, the Company repaid to Kyeongho Lee the term loan of KRW 1.0 billion ($ 0.7 million).

The outstanding term loan has a maturity date in May 2024 and bears no interest.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

May 2024, the Company executed an amendment with Kyeongho Lee to extend the maturity date from May 2024 to November 2024 for its term loan.

Commitments and Contingencies

The Company is subject to various claims arising in the ordinary course of business.

Although no assurance can be given, the Company believes that it is not a party to any litigation of which the outcome, if determined adversely, would individually, or in the aggregate, be reasonably expected to have a material adverse effect on the business, consolidated operating results, cash flows or financial position of the Company as of March 31, 2024.

Third parties have from time to time claimed, and others may claim in the future, that the Company has infringed their past, current or future intellectual property rights.

1 unchanged sentence

As a result, these claims could harm the Company’s business, consolidated operating results, cash flows, and financial position.

Purchase Commitment

Purchase Commitments

The Company has certain commitments for outstanding purchase orders related to the manufacture of certain wafers utilized by the Company and other services that, once the wafers are placed into production, are noncancelable.

Otherwise, these production agreements are cancellable at any time with the Company required to pay all costs incurred through the cancellation date.

However, the Company has rarely cancelled these agreements once production has started.

As of March 31, 2024, the Company had no outstanding noncancelable purchase commitments for these production agreements.

However, the Company does not have a history of cancelling these agreements once production has started.

As of June 30, 2024, the Company had no outstanding noncancelable purchase commitments for these production agreements.

Samsung Agreement Liability Release

In July 2020, the Company entered into a research and development agreement with Samsung Electronics Co., Ltd (“Samsung”).

3 unchanged sentences

The Company recognized R&D expenses based on an estimate of the percentage completion of services provided by Samsung during the respective financial reporting period.

In the first quarter 2024, Samsung agreed to unconditionally release the Company from payment for work Samsung had completed to date because it had not met certain of the development milestones and due to a change in Samsung’s business strategy.

In the first quarter of 2024, Samsung agreed to unconditionally release the Company from payment for work Samsung had completed to date because it had not met certain of the development milestones and due to a change in Samsung’s business strategy.

As a result, the Company recognized a gain of $ 14.6 million upon such unconditional release of its liability to Samsung.

During the period ended March 31, 2024, the parties mutually agreed that the agreement had expired and there were no remaining obligations of either party under the agreement.

Alpha Foundry Product Development Agreement

In February 2024, the Company and Alpha Holdings Co., Ltd.

2 unchanged sentences

The Company recognizes R&D expenses based on an estimate of the percentage completion of services provided by Alpha during the respective financial reporting period.

For the three months ended March 31, 2024, the Company recorded $ 3.5 million in R&D expenses related to services provided by Alpha.

The aggregate unpaid amount related to this agreement is $ 5.0 million as of March 31, 2024.

For the three and six months ended June 30, 2024, the Company recorded $ 1.3 million and $ 4.8 million in R&D expenses related to services provided by Alpha.

The aggregate unpaid amount related to this agreement was $ 4.9 million as of June 30, 2024.

GCT SEMICONDUCTOR HOLDING, INC.

2 unchanged sentences

The Company has provided collateral to Anapass, Inc., a related party (see Note 14), for borrowings from KEB Hana Bank, IBK Industrial Bank and Anapass, Inc.

in the amount of $ 6.7 million, $ 6.8 million and $ 9.7 million, respectively, as of March 31, 2024, and $ 7.0 million, $ 7.1 million and $ 10.1 million, respectively, as of December 31, 2023 (see Note 7).

The following table includes a summary of the collateral provided to Anapass, Inc.

in the amount of $ 6.5 million, $ 6.6 million and $ 9.4 million, respectively, as of June 30, 2024, and $ 7.0 million, $ 7.1 million and $ 10.1 million, respectively, as of December 31, 2023 (see Note 7).

The following table includes a summary of the carrying amounts related to collateral provided to Anapass, Inc.

(in thousands):

1 unchanged sentence

Accounts receivable

Anapass, Inc.

Property and equipment

Intangible assets and others

In connection with the Closing of the Business Combination, the Company increased its total number of authorized shares to 440,000,000 shares, consisting of 400,000,000 shares of common stock and 40,000,000 shares of preferred stock.

Riley Purchase Agreement

Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to sell to B.

Riley, from time to time, up to $ 50.0 million worth of shares of its common stock (“Commitment Amount”), subject to certain limitations and conditions at the Company’s sole discretion.

The price per share payable by B.

Riley on each trading day represents an amount equal to 98 % of the VWAP of the Company’s common stock for the applicable pricing period.

The Purchase Agreement requires settlement in registered shares.

In May 2024, the Company filed a registration statement on Form S-1 with the SEC, which became effective on June 6, 2024 (“Registration Statement”).

The Company may sell shares of its common stock to B.

Riley through June 2026 up to the Commitment Amount so long that it remains in compliance with the Purchase Agreement.

The Purchase Agreement was determined to be an equity-linked contract that contains a purchased put option on the Company’s common stock and variable share forward.

These freestanding instruments are precluded from equity classification since the Purchase Agreement requires shareholder approval for the issuance of shares in excess of the applicable ownership limitation caps, which is not an input in a fixed-for-fixed option or forward on equity shares.

As of April 2024, the Company determined that the fair value of the put option was nominal due to the short settlement period of one day or less, and the Company recognized a liability of $ 0.6 million related to the freestanding common stock forward contract.

The fair value of the common stock forward liability represents the probability-adjusted present value of the discount to be granted to B.

Riley with respect to the sales of its common stock under the Purchase Agreement compared to the VWAP of the company’s common stock for the applicable pricing period.

In connection with the Purchase Agreement, the Company issued 56,818 shares of its common stock (“Commitment Shares”), which included a make-whole provision requiring the Company to reimburse B.

Riley in cash if the fair value of these shares is less than $ 0.25 million.

The Company recognized this amount as a liability which remained outstanding as of June 30, 2024 since the Commitment Shares remained unsold by B.

During the three months ended June 30, 2024, the Company sold an aggregate of 678,462 shares of common stock for $ 3.3 million, of which $ 0.5 million was withheld by B.

Riley against the outstanding amounts payable, and $ 2.8 million was received by the Company in cash.

Issuance of Common Stock to Underwriter

In April 2024, the Company authorized the issuance of 110,000 shares of its common stock to an underwriter previously involved in activities leading to the Business Combination, contingent on the Registration Statement’s effectiveness.

The Company determined that

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

its obligation to issue the underwriter shares met the criteria for equity classifications, and the underlying shares of common stock were issued in June 2024.

Based on the timing of approval, the Company recognized a $ 0.7 million charge to equity and expensed this amount to general and administrative expenses for the three and six months ended June 30, 2024.

Common Stock Reserved for Issuance

Upon the Closing of the Business Combination in March 2024, the Company increased its total number of authorized shares to 440,000,000 shares, consisting of 400,000,000 shares of common stock and 40,000,000 shares of preferred stock.

The Company has reserved shares of common stock for issuance as follows (in thousands):

Common stock warrants

Legacy GCT Earnout Shares

Shares available for future grant from 2024 plan

5 unchanged sentences

The following table represents a summary of warrants to purchase shares of the Company’s common stock that are outstanding (in thousands, except for exercise price):

March 31, 2024

June 30, 2024

Exercise Price

1 unchanged sentence

September 2021

September 2024

February 2023 - June 2023

$ 10.00 - $ 18.75

February 2026 – June 2026

Private and public warrants

March 26, 2029

(1) Within 3 years from the date of issuance.

See Note 3 with respect to further details on the private and public warrants and Note 5 with respect to valuation techniques and assumptions because the warrants are all liability-classified and subject to fair value measurement each reporting period.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock-Based Compensation

1 unchanged sentence

Legacy GCT’s 2011 Incentive Compensation Plan (the “2011 Plan”) permitted the grant of options, stock awards, and RSUs.

In connection with the Closing of the Business Combination, the 2011 Plan was terminated, the remaining unallocated shares reserved under the 2011 Plan were cancelled and no new awards will be granted under the 2011 Plan.

Each award of Legacy GCT stock options and RSUs were converted into equivalent Company stock options and RSUs with the same terms and conditions under the plan described below.

In connection with the Closing of the Business Combination, the 2011 Plan was terminated, the remaining unallocated shares reserved under the 2011 Plan were cancelled.

In March 2024, each award of Legacy GCT stock options and RSUs were converted into equivalent Company stock options and RSUs with the same terms and conditions under the plan described below.

2024 Incentive Compensation Plan

In connection with the Closing of the Business Combination, the Company adopted the 2024 Incentive Compensation Plan (the “2024 Plan”) under which 3,983,334 shares of common stock were initially reserved for issuance, subject to approval by the Company’s boards of directors.

The 2024 Plan permits the grant of stock options, stock appreciation rights, stock awards, restricted stock units, dividend equivalent right, cash awards and other awards to employees, non-employee directors, non-employee members of the board of directors, or consultants or independent advisors.

In March 2024, the Company adopted the 2024 Omnibus Incentive Compensation Plan (the “2024 Plan”), under which 3,983,334 shares of common stock were initially reserved for issuance.

The 2024 Plan permits the grant of stock options, stock appreciation rights, stock awards, RSUs, dividend equivalent rights, cash awards, and other awards to employees and non- employees, including members of the board of directors, consultants, or advisors.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Stock options outstanding under the 2024 Plan were as follows (in thousands, except per share amounts and years):

5 unchanged sentences

Balance as of December 31, 2023 (1)

Balance as of March 31, 2024

Vested as of March 31, 2024

Exercisable as of March 31, 2024

Balance as of June 30, 2024

Vested as of June 30, 2024

Exercisable as of June 30, 2024

There were no options granted during the three months ended March 31, 2024 and 2023.

As of March 31, 2024, unrecognized compensation cost related to stock options was nominal.

No options were granted, exercised or cancelled during the six months ended June 30, 2024 .

As of June 30, 2024, unrecognized compensation cost related to stock options was nominal.

Founder Awards to Board of Directors

In 2021, an aggregate of 90,000 founder shares of common stock were transferred to three members of Concord III’s board of directors.

The shares contained both a performance condition based upon a liquidity event and a service vesting condition.

As the liquidity and services conditions were met upon the Closing of the Business Combination, the Company recognized $ 0.9 million of stock-based compensation during the three months ended March 31, 2024.

In 2021, an aggregate of 90,000 shares of common stock were transferred to three members of Concord III’s board of directors (“Founder Shares”).

The Founder Shares contained double-trigger vesting, which required continuous service and a liquidity event for any shares to vest.

As the required conditions were met upon the Closing, the Company recognized $ 0.9 million of stock-based compensation upon the closing in March 2024.

During the three months ended June 30, 2024, the stock-based compensation was immaterial.

Restricted Stock Units

In December 2023, various employees and directors of Legacy GCT were granted RSUs that contain both a performance condition based upon a liquidity event and a service vesting condition such that the RSUs vest in four equal annual installments from the grant

In December 2023, various employees and directors of Legacy GCT were granted 392,000 RSUs that contain both a performance condition based upon a liquidity event and a service vesting condition such that (subject to the liquidity event condition being satisfied) the RSUs vest in four equal annual installments from the grant date (“2023 RSUs”).

The liquidity condition was met upon the Closing.

In June 2024, the Company granted to the members of its board of directors certain share-based awards with a fixed monetary amount of $ 0.7 million equally allocated among six grantees (“2024 RSUs”).

The number of shares issuable to each grantee under the 2024 RSUs is calculated by dividing one-fourth of the allocated fixed monetary amount by the closing price of the Company’s common stock at the end of each fiscal quarter between April 1, 2024 and March 31, 2025.

The RSUs will vest on March 31, 2025, subject to the grantees’ continuous service to the Company and will be settled in common stock on various dates in 2026 and 2027.

The 2024 RSUs are initially classified as a liability and reclassified to equity up to the monetary amount for which the number of shares to be issued becomes determinable.

As of June 28, 2024, this determination was made for 31,668 shares based on the closing price of the Company’s common stock as of that date.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Any unvested RSUs are forfeited upon separation from the Company.

The liquidity condition was met upon the Closing of the Business Combination and the Company recognized $ 0.3 million of stock-based compensation.

RSUs outstanding under the 2024 Plan were as follows (in thousands, except per share amounts):

5 unchanged sentences

Balances as of December 31, 2023 (1)

Balance as of March 31, 2024

Balance as of June 30, 2024

As of March 31, 2024, there was $ 2.1 million of unrecognized compensation cost related to RSUs, which is expected to be recognized on a straight-line basis over a weighted average period of 3.7 years.

For the three months ended March 31, 2024 and 2023, the Company recorded income tax expense of $ 59,000 and $ 50,000 , respectively.

The effective tax rate is 7.2 % and 3.7 % for the three months ended March 31, 2024 and 2023, respectively.

The Company recognized $ 0.3 million and $ 0.7 million of stock-based compensation during the three and six months ended June 30, 2024, respectively, related to the outstanding RSUs.

As of June 30, 2024, there was $ 2.4 million of unrecognized compensation cost related to RSUs, which is expected to be recognized on a straight-line basis over a weighted average period of 3.5 years.

Any unvested RSUs are forfeited upon separation from the Company, and the Company accounts for forfeitures when they occur.

Stock-Based Compensation

The following table summarizes stock-based compensation included in the Company’s condensed consolidated statements of operations:

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

Sales and marketing

General and administrative

For financial reporting purposes, the Company’s effective tax rate used for the interim periods is based on the estimated full-year income tax rate.

For the three months ended March 31, 2024, the Company’s effective tax rate differs from the statutory rate primarily due to the valuation allowance recorded against the net deferred tax asset balance.

As of March 31, 2024 the Company had unrecognized tax benefits of $ 3.1 million of which $ 1.7 million would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance.

The Company does not anticipate that the amount of unrecognized tax benefits relating to tax positions existing as of March 31, 2024 will significantly increase or decrease within the next twelve months.

There was no interest expense or penalties related to unrecognized tax benefits recorded as of March 31, 2024.

For the three and six months ended June 30, 2024, the Company’s effective tax rate differs from the statutory rate primarily due to the valuation allowance recorded against the net deferred tax asset balance.

For the six months ended June 30, 2024 and 2023, the Company recorded income tax of $ 0.1 million and $ 0.1 million, respectively.

The effective tax rate is ( 119.4 )% and ( 1.0 )% for six months ended June 30, 2024 and 2023, respectively.

Through June 30, 2024, the Company was not under examination by any taxing authority.

As of June 30, 2024 the Company had unrecognized tax benefits of $ 3.1 million of which $ 1.7 million would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance.

The Company does not anticipate that the amount of unrecognized tax benefits relating to tax positions existing as of June 30, 2024 will significantly increase or decrease within the next twelve months.

There was no interest expense or penalties related to unrecognized tax benefits recorded as of June 30, 2024.

A number of years may elapse before an uncertain tax position is audited and finally resolved.

While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that its reserves for income taxes reflect the most likely outcome.

The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances.

Settlement of any particular position could require the use of cash.

Currently the Company is not under examination by any taxing authority.

Employee Benefit Plans

Under Korean law, the Company is required to make severance payments to Korean employees leaving its employment.

The Company’s severance pay liability to its Korean employees, which is a function of the salary of each employee’s years of employment and severance factor, is reflected in the accompanying condensed consolidated balance sheets as the net defined benefit liabilities on an accrual basis.

The Company adjusts these reserves, as well as the related interest, considering changing facts and circumstances.

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The net liability for severance payments as of (in thousands):

March 31, 2024

Employee Benefit Plans

Under Korean law, the Company is required to make severance payments to Korean employees leaving their employment.

The Company’s severance pay liability to its Korean employees, which is a function of the employee’s salary, years of employment, and severance factor, is reflected in the accompanying unaudited condensed consolidated balance sheets as the net defined benefit liabilities on an accrual basis.

The net liability for severance payments was as follows (in thousands):

June 30, 2024

December 31, 2023

2 unchanged sentences

Related Party Transactions

A summary of balances and transactions with the related parties who are stockholders of the Company were as follows as of (in thousands):

March 31, 2024

A summary of balances and transactions with the related parties who are stockholders of the Company were as follows (in thousands):

June 30, 2024

December 31, 2023

Other current liabilities

For each of the three months ended March 31, 2024 and 2023, the Company recorded $ 0.1 million of interest expense with Anapass, Inc.

in the condensed consolidated statements of operations.

During the three months ended March 31, 2024 and 2023, the Company recorded $ 22,000 and $ 26,000 , respectively, of interest expense with Kyeongho Lee in the condensed consolidated statements of operations.

For each of the three and six months ended June 30, 2024, the Company recorded $ 0.1 million and $ 0.3 million, respectively, of interest expense with Anapass, Inc.

in the unaudited condensed consolidated statements of operations.

For each of the three and six months ended June 30, 2023, the Company recorded $ 0.1 million and $ 0.3 million, respectively, of interest expense with Anapass, Inc.

in the unaudited condensed consolidated statements of operations.

Interest expense related to the Company’s arrangements with Kyeongho Lee was immaterial during the three and six months ended June 30, 2024 and 2023.

Segments and Information

The Company operates in one segment.

Revenue information by geographic region is presented in Note 4 to these condensed consolidated financial statements.

Long-lived assets by geographic region were as follows as of (in thousands):

March 31, 2024

Revenue information by geographic region is presented in Note 4 to these unaudited condensed consolidated financial statements.

Tangible long-lived assets by geographic region were as follows (in thousands):

June 30, 2024

December 31, 2023

United States

Total long-lived assets

Net Income (Loss) Per Share

The following table summarizes the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):

Three Months Ended March 31,

Net income (loss), basic and diluted

Weighted-average common shares outstanding, basic

effect of dilutive securities

Weighted-average common shares outstanding, diluted

Net income (loss) per share, basic and diluted

GCT SEMICONDUCTOR HOLDING, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

The following outstanding potentially dilutive common stock equivalents were excluded from the computation of diluted net income (loss) per share for the periods indicated because including them would have been antidilutive (in thousands):

Net Loss Per Share

The following outstanding potentially dilutive common stock equivalents were excluded from the computation of diluted net loss per share for the periods indicated because including them would have been antidilutive (in thousands):

Legacy GCT Earnout Shares

Sponsor Earnout Shares

Convertible promissory notes

Subsequent Events

Purchase Agreement and Registration Rights Agreement

In April 2024, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) and a related registration rights agreement (the “Registration Rights Agreement”) with B.

Riley Principal Capital II, LLC (“B.

Riley Principal Capital II”).

Upon the terms and subject to the satisfaction of the conditions set forth in the Purchase Agreement, the Company has the right, in its sole discretion, to sell to B.

Riley Principal Capital II, from time to time, up to $ 50.0 million in aggregate gross purchase price of shares of the Company’s common stock, subject to certain limitations contained in the Purchase Agreement, during the term of 24 months .

Pursuant to the Registration Rights Agreement, the Company is required to file a registration statement on Form S-1 to register the resale of shares of common stock that are sold to B.

Riley Principal Capital II under the Purchase Agreement.

Sales of common stock by the Company to B.

Riley Principal Capital II pursuant to the Purchase Agreement, and the timing of any such sales, are solely at the option of the Company, and the Company is under no obligation to sell any securities to B.

Riley Principal Capital II under the Purchase Agreement.

M-Venture Investment, Inc.

In April 2024, the Company executed an amendment with M-Venture Investment, Inc.

for the KRW 4.0 billion ($ 3.0 million) term loan outstanding, pursuant to which the Company repaid KRW 2.0 billion ($ 1.5 million) in April 2024 and extended the maturity date from October 2024 to May 2024 (see Note 7).

In April 2024, the Company executed an amendment with M-Venture Investment, Inc.

for the KRW 6.0 billion ($ 4.4 million) term loan outstanding, pursuant to which the maturity date for both draws were amended.

The maturity date for the principal amount of KRW 1.0 billion ($ 0.7 million) was extended from April 2024 to June 2024.

The maturity date for the principal amount of KRW 5.0 billion ($ 3.7 million) was extended from April 2024 to July 2024 (see Note 7).

Historical Convertible Promissory Notes

In April 2024, the Company repaid in full a historical convertible promissory note that was issued in 2021 with a principal amount of $ 0.6 million (see Note 7).

Share Reserve

In May 2024, the board of directors of the Company approved 3,983,334 shares as the maximum number of shares of Common stock that may be issued pursuant to 2024 Plan, and 600,000 shares as reserved share amount of 2024 Employee Stock Purchase Plan.

i Best Investment Co., Ltd

In July 2024, the Company repaid KRW 1.0 billion ($ 0.7 million) to i Best Investment Co., Ltd.

In July 2024, the Company executed an amendment with i Best Investment Co., Ltd.

for the three term loans with an aggregate principal amount of KRW 6.0 billion ($ 4.3 million) outstanding, pursuant to which the maturity date for such loans was extended from August 2024 to February 2025.

M-Venture Investment Co., Ltd

In July 2024, the Company repaid KRW 1.0 billion ($ 0.7 million) to M-Venture Investment Co., Ltd.

In July 2024, the Company executed an amendment with M-Venture Investment Co., Ltd.

and Mujin Electronics Co., Ltd.

for the term loan of KRW 5.0 billion ($ 3.7 million) outstanding as of June 30, 2024.

As a result, Mujin Electronics Co., Ltd.

assumed the loan from M-Venture Investment Co., Ltd., and the maturity date was extended from July 2024 to January 2025 with an interest rate of 6.8 %.

KEB Hana Bank

In July 2024, the Company executed an amendment with KEB Hana Bank for the term loan of KRW 8.0 billion ($ 5.8 million) outstanding as of June 30, 2024, pursuant to which the maturity date was extended from July 2024 to July 2025.

Anapass, Inc.

In July 2024, the Company executed an amendment with Anapass, Inc., for the term note of KRW 6 billion ($ 4.3 million) outstanding, pursuant to which the maturity date was extended from July 2024 to July 2025.

Purchase Agreement

In July 2024, the Company sold 544,136 shares of its common stock for gross proceeds of $ 2.7 million, of which $ 0.5 million was withheld by B.

Riley against the outstanding amount payable, and $ 2.2 million was received by the Company in cash.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements