What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-11-05 · 60 added, 156 removed, 115 unchanged (65% of the section changed)

27 unchanged sentences

Additionally, we monitor and project cash flow to determine our sources and uses for working capital to fund our operations.

We also monitor Adjusted EBITDA, a non-GAAP financial measure, and design wins.

We define Adjusted EBITDA as net income or loss adjusted

for interest expense, taxes, depreciation and amortization, stock-based compensation expense, and restructuring costs, if any.

Adjusted EBITDA.

Our management and board of directors use Adjusted EBITDA to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operating and financing plans.

Accordingly, we believe that Adjusted EBITDA provides useful information for investors in understanding and evaluating our operating results in the same manner as our management and our board of directors.

Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a substitute for, net income reported in accordance with GAAP.

The following table presents a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA for the periods indicated:

Three Months Ended September 30,

Nine Months Ended September 30,

Adjusted EBITDA reconciliation:

Net (loss) income

Depreciation and amortization

We also monitor Adjusted net

income, a non-GAAP financial measure, and design wins.

We define Adjusted net income as net income adjusted for stock-based compensation expense.

Adjusted net income.

Our management and board of directors use Adjusted net income to assess and evaluate our overall performance and financial trends, inform the annual budgeting process, and guide both short-term and long-term operational and strategic planning.

As such, we believe Adjusted net income provides meaningful insight for investors into our financial performance, consistent with how our management team and board view and analyze our results.

Adjusted net income is a non-GAAP financial measure and should be considered alongside, but not as a replacement for or superior to, net income as reported in accordance with GAAP.

The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted net income for the periods presented:

Three Months Ended March 31,

(in thousands)

Adjusted Net Income (Loss) reconciliation:

Stock-based compensation expense

Interest expense

Income tax (benefit) expense

Adjusted EBITDA

Adjusted Net Income

Results of Operations

The following tables set forth our results of operations for the periods indicated:

Three Months Ended September 30,

(In thousands)

(As a percentage of revenue)

Product sales

Licensing, royalty, patent, and other revenue

Total revenue

Cost of product sales

Cost of licensing, royalty, patent, and other revenue

Total cost of sales

Operating expenses:

Research and development

General and administrative

Sales and marketing

Total operating expenses

(Loss) income from operations

Other income, net

Net income (loss) before income taxes

Income tax expense

Net income (loss) and comprehensive income (loss)

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Total operating expenses

(Loss) income from operations

Interest expense

Other income, net

Net income (loss) before income taxes

Loss from operations

Interest income

Other income (expense), net

Net loss before income taxes

Income tax expense

Net income (loss) and comprehensive income (loss)

Comparison of the three months ended September 30, 2024 and 2023

We generated 84% and 79% of our revenue from products sold to distributors for the three months ended September 30, 2024 and 2023, respectively.

Comparison of the three months ended March 31, 2025 and 2024

We generated 60% and 71% of our revenue from products sold to distributors for the three months ended March 31, 2025 and 2024, respectively.

In addition to selling our products to our distributors, we maintain a direct selling relationship, for strategic purposes, with several key customer accounts.

We have organized our sales team and representatives into three primary

We have organized our sales team and representatives into three primary regions:

North America;

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Our revenue by region and by type of revenue for the periods indicated were as follows (in thousands):

Three Months Ended September 30,

Three Months Ended March 31,

North America

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Three Months Ended

September 30,

(Dollars in thousands)

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Total revenue

Total revenue decreased by $4.4 million, or 26.6%, from $16.5 million during the three months ended September 30, 2023 to $12.1 million during the three months ended September 30, 2024.

The decrease was primarily due to a decrease in product sales of $3.1 million due to timing of customer demand and a decrease in licensing, royalty, patent, and other revenue of $1.3 million.

Total revenue decreased by $1.3 million, or 9.0%, from $14.4 million during the three months ended March 31, 2024 to $13.1 million during the three months ended March 31, 2025.

The decrease was primarily due to a decrease in licensing, royalty, patent, and other revenue of $1.5 million.

Licensing, royalty, patent, and other revenue is a highly variable revenue item characterized by a small number of transactions annually with revenue based on size and terms of each transaction.

Our best estimate of royalty revenue earned is made throughout the year for royalty contracts with an annual performance period, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year.

Licensing, royalty, patent, and other revenue decreased by $1.3 million, or 43.6% from $2.9 million during the three months ended September 30, 2023, to $1.7 million during the three months ended September 30, 2024.

The decrease was driven by licensing revenue generated from our RAD-Hard projects of $0.7 million, a decrease of $0.5 million in other revenue related to professional services and a decrease of $0.1 million in royalty revenue.

Licensing, royalty, patent, and other revenue decreased by $1.5 million, or 40.8% from $3.6 million during the three months ended March 31, 2024, to $2.1 million during the three months ended March 31, 2025.

The decrease was primarily due to the progression of our contractual agreements with customers for the development of RAD-Hard products, along with the conclusion of a contractual arrangement with a customer for the development of reliability models for strategic radiation hardened toggle MRAM, partially offset by a new agreement for the development of an AI technology application.

Cost of Sales and Gross Margin

Three Months Ended

September 30,

(Dollars in thousands)

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Total cost of sales

Cost of product sales decreased by $0.2 million, or 2.9%, from $5.9 million during the three months ended September 30, 2023, to $5.8 million during the three months ended September 30, 2024.

The decrease was primarily due to a reduction in product sales and increased yields on our toggle products.

Cost of licensing, royalty, patent, and other revenue decreased by $0.2 million, or 37.8% from $0.6 million during the three months ended September 30, 2023, to $0.4 million during the three months ended September 30, 2024.

The decrease was primarily due to a decrease in licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.

Gross margin decreased from 60.2% during the three months ended September 30, 2023, to 49.2% during the three months ended September 30, 2024.

Cost of product sales remained consistent at $6.0 million during the three months ended March 31, 2025 and 2024.

Cost of product sales relate primarily to costs of our toggle and STT products.

Cost of licensing, royalty, patent, and other revenue slightly increased by $0.1 million, or 32.8% from $0.3 million during the three months ended March 31, 2024, to $0.4 million during the three months ended March 31, 2025.

The increase was primarily due to an increase in licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.

Gross margin decreased from 56.5% during the three months ended March 31, 2024, to 51.4% during the three months ended March 31, 2025.

Gross margin decreased as a result of a shift in product mix, a decrease in FAB loadings, and a decrease in licensing revenue partially offset by increased yields on our toggle products.

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Three Months Ended

September 30,

(Dollars in thousands)

2 unchanged sentences

Research and Development Expenses.

Research and development expenses increased by $0.7 million, or 27.3%, from $2.7 million during the three months ended September 30, 2023, to $3.3 million during the three months ended September 30, 2024.

The primary driver of research and development expenses relates to our new Extended Serial Peripheral Interface (xSPI) family of STT-MRAM products.

Our xSPI products offer high-performance, multiple I/O, SPI-compatibility and feature a high-speed, low pin count SPI compatible interface.

Research and development expenses remained consistent at $3.4 million during the three months ended March 31, 2025 and 2024.

Research and development expenses relate primarily to the development and enhancement of our new Extended Serial Peripheral Interface (xSPI) family of STT-MRAM products,

which offer high-performance, multiple I/O, SPI-compatibility and feature a high-speed, low pin count SPI compatible interface, and increases in share-based compensation.

Three Months Ended

September 30,

(Dollars in thousands)

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General and Administrative Expenses.

General and administrative expenses decreased by $0.6 million, or 14.5%, from $3.9 million during the three months ended September 30, 2023, to $3.3 million during the three months ended September 30, 2024.

General and administrative expenses decreased by $0.2 million, or 4.9%, from $4.0 million during the three months ended March 31, 2024, to $3.8 million during the three months ended March 31, 2025.

The decrease is primarily due to reduced professional services costs.

Three Months Ended

September 30,

(Dollars in thousands)

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Sales and Marketing Expenses.

Sales and marketing expenses remained consistent at $1.3 million during the three months ended September 30, 2024 and 2023, respectively.

Sales and marketing expenses increased by $0.2 million, or 14.2%, from $1.3 million during the three months ended March 31, 2024, to $1.5 million during the three months ended March 31, 2025.

Sales and marketing expenses relate primarily to compensation costs and contract labor.

Other Income, Net

Three Months Ended

September 30,

(Dollars in thousands)

Other income, net

Other income, net increased by $3.9 million, or 857.7%, from $0.5 million during the three months ended September 30, 2023, to $4.4 million during the three months ended September 30, 2024.

The change was primarily due to $4.0 million recorded as other income on the condensed statements of operations and comprehensive (loss) income.

Comparison of the nine months ended September 30, 2024 and 2023

We generated 80% and 81% of our revenue from products sold to distributors for the nine months ended September 30, 2024 and 2023, respectively.

Our revenue by region and by type of revenue for the periods indicated were as follows (in thousands).

Nine Months Ended September 30,

North America

Total revenue

Nine Months Ended

September 30,

(Dollars in thousands)

Product sales

Licensing, royalty, patent, and other revenue

Total revenue

Total revenue decreased by $9.9 million, or 21.0%, from $47.1 million during the nine months ended September 30, 2023 to $37.2 million during the nine months ended September 30, 2024.

The decrease was primarily due to a decrease in product sales of $9.5 million due to timing of customer demand and a decrease of $0.4 million in licensing, royalty, patent and other revenue.

Licensing, royalty, patent and other revenue is a highly variable revenue item characterized by a small number of transactions annually with revenue based on size and term of each transaction.

Our best estimate of royalty revenue earned is made through the year, with an annual adjustment recognized for actual sales in the first quarter of each fiscal year.

Licensing, royalty, patent, and other revenue decreased by $0.4 million, or 5.7%, from $6.3 million during the nine months ended September 30, 2023, to $6.0 million during the nine months ended September 30, 2024.

The decrease was driven by a decrease of $0.3 million in other revenue related to professional services and a decrease of $0.1 million in royalty revenue.

Cost of Sales and Gross Margin

Nine Months Ended

September 30,

(Dollars in thousands)

Cost of product sales

Cost of licensing, royalty, patent, and other revenue

Total cost of sales

Cost of product sales decreased by $1.1 million, or 6.3%, from $18.1 million during the nine months ended September 30, 2023, to $17.0 million during the nine months ended September 30, 2024.

The decrease was primarily due to a reduction in product sales and increased yields on our toggle products.

Cost of licensing, royalty, patent, and other revenue decreased by $0.5 million, or 39.2%, from $1.4 million during the nine months ended September 30, 2023, to $0.8 million during the nine months ended September 30, 2024.

The decrease was due to a decrease in licensing costs related to labor and materials associated with the progression of our RAD-Hard projects.

Gross margin decreased from 58.5% during the nine months ended September 30, 2023, to 52.0% during the nine months ended September 30, 2024.

Gross margin decreased as a result of a shift in product mix, a decrease in FAB loadings, and a decrease in licensing revenue partially offset by increased yields on our toggle products.

Operating Expenses

Our operating expenses consist of research and development, general and administrative and sales and marketing expenses.

Personnel-related expenses, including salaries, benefits, bonuses and stock-based compensation, are among the most significant components of each of our operating expense categories.

Nine Months Ended September 30,

(Dollars in thousands)

Research and development

Research and development as a % of revenue

Research and Development Expenses.

Research and development expenses increased by $1.7 million, or 19.8%, from $8.6 million during the nine months ended September 30, 2023, to $10.2 million during the nine months ended September 30, 2024.

The primary driver of research and development expenses relates to our new xSPI family of STT-MRAM products.

Nine Months Ended September 30,

(Dollars in thousands)

General and administrative

General and administrative as a % of revenue

General and Administrative Expenses.

General and administrative expenses remained consistent at $10.7 million during both the nine months ended September 30, 2023 and 2024.

Nine Months Ended September 30,

(Dollars in thousands)

Sales and marketing

Sales and marketing as a % of revenue

Sales and Marketing Expenses.

Sales and marketing expenses decreased by $0.1 million, or 1.7%, from $4.0 million during the nine months ended September 30, 2023, to $3.9 million during the nine months ended September 30, 2024.

The decrease was primarily due to a decrease in variable compensation costs and contract labor.

Interest Expense

Nine Months Ended

September 30,

Three Months Ended March 31,

(Dollars in thousands)

Interest expense

Interest expense decreased by $0.1 million, or 100.0%, from $0.1 million during the nine months ended September 30, 2023, to zero during the nine months ended September 30, 2024.

The decrease was due to having no outstanding balance under our 2019 Credit Facility that we paid off in full in March 2023, resulting in no interest incurred during the nine months ended September 31, 2024.

Other Income, Net

Nine Months Ended

September 30,

Interest income

Interest income remained consistent at $0.4 million during the three months ended March 31, 2025 and 2024.

Other Income (Expense), Net

Three Months Ended

(Dollars in thousands)

Other income, net

Other income, net increased by $2.3 million, or 82.1%, from $2.8 million during the nine months ended September 30, 2023, to $5.2 million during the nine months ended September 30, 2024.

The increase was primarily due to $4.0 million recorded as other income on the condensed statements of operations and comprehensive (loss) income partially offset by the employee retention tax credit of $2.0 million recorded during the nine months ended September 30, 2023.

Other income (expense), net

Other income (expense), net increased by $0.4 million, or 1,046.3%, from $0.04 million other expense during the three months ended March 31, 2024, to $0.4 million other income during the three months ended March 31, 2025.

Other income relates primarily to other income recognized from a strategic award received by the Company to develop a long-term plan to provide manufacturing services for aerospace and defense segments.

Liquidity and Capital Resources

As of September 30, 2024, we had $39.6 million of cash and cash equivalents, compared to $36.9 million as of December 31, 2023.

As of September 30, 2024, we have no outstanding debt as we paid off our 2019 Credit Facility in full in March 2023.

As of March 31, 2025, we had $42.2 million of cash and cash equivalents, compared to $42.1 million as of December 31, 2024.

We believe our cash and cash equivalents are sufficient to meet our anticipated capital requirements in the next 12 months.

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The following table summarizes our cash flows for the periods indicated (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Cash provided by operating activities

Cash provided by (used in) operating activities

Cash used in investing activities

Cash provided by (used in) financing activities

Cash provided by financing activities

Cash Flows From Operating Activities

During the nine months ended September 30, 2024, cash provided by operating activities was $3.3 million , which consisted of net loss of $0.4 million , non-cash charges of $6.3 million and changes of net operating assets and liabilities of $2.6 million .

During the three months ended March 31, 2025, cash provided by operating activities was $1.4 million , which consisted of net loss of $1.2 million , non-cash charges of $2.4 million and changes of net operating assets and liabilities of $0.2 million .

The non-cash charges primarily consisted of stock-based compensation of $1.6 million, depreciation and amortization of $0.8 million .

The change in our net operating assets and liabilities was primarily due to an increase in accounts payable of $0.2 million , an increase in contract obligations of $3 .0 million, an increase in prepaid and other current assets of $3.6 million, a decrease in accounts receivable of $0.1 million due to timing of cash receipts for outstanding balances, and a decrease in accrued liabilities of $2.2 million.

During the nine months ended September 30, 2023, cash provided by operating activities was $11.1 million, which consisted of net income of $7.1 million, non-cash charges of $4.8 million and changes of net operating assets and liabilities of $0.8 million.

The non-cash charges primarily consisted of stock-based compensation of $3.7 million, depreciation and amortization of $0.9 million, and a loss on prepayment and termination of our 2019 Credit Facility of $0.2 million.

The change in our net operating assets and liabilities was primarily due to a decrease in accounts receivable of $0.6 million due to timing of cash receipts for outstanding balances, an increase in inventory of $2.0 million to meet anticipated production volumes, a decrease in prepaid and other current assets of $0.4 million, an increase in accounts payable of $0.6 million, a decrease in accrued liabilities of $0.1 million, and a decrease in deferred revenue of $0.3 million.

The change in our net operating assets and liabilities was primarily due to an increase in accounts payable of $1.1 million, an increase in deferred revenue of $1.1 million, an increase in contract obligations of $0.6 million, a decrease in prepaid expenses and other current assets of $0.2 million, offset by an increase in inventory of $1.9 million, and an increase in accounts receivable of $0.8 million.

During the three months ended March 31, 2024, cash used in operating activities was $1.3 million, which consisted of net loss of $0.2 million, cash provided by non-cash charges of $2.1 million and changes of net operating assets and liabilities of $3.3 million.

The non-cash charges consisted of stock-based compensation of $1.7 million and depreciation and amortization of $0.4 million.

The use of cash due to the change in our net operating assets and liabilities was primarily due to an increase in accounts receivable of $1.5 million due to timing of cash receipts for outstanding balances, offset by a decrease in inventory of $0.3 million, a decrease in prepaid and other current assets of $0.5 million, a decrease in accrued liabilities of $2.3 million, and a decrease in deferred revenue of $0.3 million.

Cash Flows From Investing Activities

Cash used in investing activities during the nine months ended September 30, 2024 was $1.3 million for the purchase of manufacturing equipment.

Cash used in investing activities during the nine months ended September 30, 2023 was $1.1 million primarily for the purchase of manufacturing.

Cash used in investing activities during the three months ended March 31, 2025 was $1.4 million primarily due to $0.9 million in purchases of manufacturing equipment and $0.5 million in purchase of intangible assets.

Cash used in investing activities during the three months ended March 31, 2024 was $1.2 million primarily for the purchases of manufacturing equipment.

Cash Flows From Financing Activities

Cash provided by financing activities during the nine months ended September 30, 2024, was $0.7 million, consisting of proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan.

Cash used in financing activities during the nine months ended September 30, 2023, was $1.9 million, consisting mainly of $2.8 million of payments to pay off our 2019 Credit Facility, offset by $0.9 million in proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan.

Cash provided by financing activities during the three months ended March 31, 2025 was $0.01 million, consisting of proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan, offset by payments of finance leases.

Cash provided by financing activities during the three months ended March 31, 2024 was $0.4 million, consisting of proceeds from the exercise of employee stock options.

Critical Accounting Policies and Significant Judgements and Estimates

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Evaluation of disclosure controls and procedures.

Our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2024, the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024.

There have been no changes in our internal control over financial reporting that occurred during the nine months ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of March 31, 2025, the end of the period covered by this Quarterly Report on Form 10-Q.

Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025.

There have been no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent limitation on the effectiveness of internal control.

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In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We intend to continue to monitor and upgrade our internal controls as necessary or

appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

PART II—O THER INFORMATIO N

3 unchanged sentences

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 2. Management’s Discussion and Analysis