What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-04-30 · 126 added, 41 removed, 134 unchanged (55% of the section changed)

35 unchanged sentences

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,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

1 unchanged sentence

Stock-based compensation expense

Adjusted Net Income

Adjusted Net Income (Loss)

Results of Operations

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

Three Months Ended March 31,

Three Months Ended June 30,

(In thousands)

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Net loss before income taxes

Income tax expense

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.

Income tax benefit (expense)

Comparison of the three months ended June 30, 2025 and 2024

We generated 66% and 87% of our revenue from products sold to distributors for the three months ended June 30, 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.

3 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

North America

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Total revenue

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.

Total revenue increased by $2.6 million, or 24.1%, from $10.6 million during the three months ended June 30, 2024 to $13.2 million during the three months ended June 30, 2025 .

The increase was due to an increase in product sales of $1.2 million, and an increase of licensing, royalty, patent, and other revenue of $1.4 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.

Licensing, royalty, patent, and other revenue increased by $1.4 million, or 181.7% from $0.7 million during the three months ended June 30, 2024, to $2.1 million during the three months ended June 30, 2025 .

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

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 $1.5 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

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Total cost of sales

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

Cost of product sales increased by $0.9 million, or 17.8%, from $5.2 million during the three months ended June 30, 2024 , to $6.2 million during the three months ended June 30, 2025 .

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.

Cost of licensing, royalty, patent, and other revenue slightly increased by $0.1 million, or 44.3% from $0.2 million during the three months ended June 30, 2024, to $0.3 million during the three months ended June 30, 2025 .

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

Gross margin increased from 49.0% during the three months ended June 30, 2024, to 51.3% during the three months ended June 30, 2025.

Gross margin increased as a result of a shift in product mix, an increase in licensing, royalty, patent, and other revenue revenue, offset by a decrease in FAB loadings.

Operating Expenses

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Research and Development Expenses.

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.

Research and development expenses increased by $0.1 million, or 3.6%, from $3.5 million during the three months ended June 30, 2024 , to $3.6 million during the three months ended June 30, 2025.

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

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General and Administrative Expenses.

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.

General and administrative expenses increased by $0.4 million, or 11.9%, from $3.3 million during the three months ended June 30, 2024, to $3.6 million during the three months ended June 30, 2025 .

The increase is primarily due to one-time professional services.

Three Months Ended

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Sales and Marketing Expenses.

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 increased by $0.2 million, or 13.8%, from $1.3 million during the three months ended June 30, 2024, to $1.5 million during the three months ended June 30, 2025.

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

Three Months Ended March 31,

Three Months Ended

(Dollars in thousands)

Interest income

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

Interest income remained consistent at $0.4 million during the three months ended June 30, 2025 and 2024, respectively.

Other Income (Expense), Net

2 unchanged sentences

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.

Other income (expense), net increased by $0.9 million, or 2906.7%, from $30,000 other expense during the three months ended June 30, 2024, to $0.8 million other income during the three months ended June 30, 2025 .

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

Six Months Ended June 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 from operations

Interest income

Other income (expense), net

Net loss before income taxes

Income tax benefit (expense)

Comparison of the six months ended June 30, 2025 and 2024

We generated 63% and 78% of our revenue from products sold to distributors for the six months ended June 30, 2025 and 2024, respectively.

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

Six Months Ended June 30,

North America

Total revenue

Six Months Ended

(Dollars in thousands)

Product sales

Licensing, royalty, patent, and other revenue

Total revenue

Total revenue increased by $1.3 million, or 5.1%, from $25.1 million during the six months ended June 30, 2024 to $26.3 million during the six months ended June 30, 2025.

The increase was primarily due to an increase in product sales revenue of $1.4 million.

Licensing, royalty, patent, and other revenue decreased by $0.1 million, or 2.2% from $4.3 million during the six months ended June 30, 2024, to $4.2 million during the six months ended June 30, 2025.

The decrease was primarily due to the conclusion of a contractual arrangement with a customer for the development of reliability models for strategic

radiation hardened toggle MRAM, partially offset by the progression of our contractual agreements with customers for the development of RAD-Hard products a new agreement for the development of an AI technology application.

Cost of Sales and Gross Margin

Six Months Ended

(Dollars in thousands)

Cost of product sales

Cost of licensing, royalty, patent, and other revenue

Total cost of sales

Cost of product sales increased by $1.0 million, or 8.5%, from $11.2 million during the six months ended June 30, 2024 , to $12.2 million during the six months ended June 30, 2025 .

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 $0.2 million, or 37.8% from $0.5 million during the six months ended June 30, 2024, to $0.6 million during the six months ended June 30, 2025.

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

Gross margin decreased from 53.4% during the six months ended June 30, 2024, to 51.3% during the six months ended June 30, 2025.

Gross margin decreased as a result of a decrease in FAB loadings, and a decrease in other revenue.

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.

Six Months Ended

(Dollars in thousands)

Research and development

Research and development as a % of revenue

Research and Development Expenses Research and development expenses increased by $0.1 million, or 0.9%, from $6.9 million during the six months ended June 30, 2024 , to $6.9 million during the six months ended June 30, 2025 .

Six Months Ended

(Dollars in thousands)

General and administrative

General and administrative as a % of revenue

General and Administrative Expenses.

General and administrative expenses increased by $0.2 million, or 2.6%, from $7.3 million during the six months ended June 30, 2024, to $7.5 million during the six months ended June 30, 2025.

The increase is primarily due to one-time professional services.

Six Months Ended

(Dollars in thousands)

Sales and marketing

Sales and marketing as a % of revenue

Sales and Marketing Expenses.

Sales and marketing expenses increased by $0.4 million, or 14.0%, from $2.6 million during the six months ended June 30, 2024, to $3.0 million during the six months ended June 30, 2025.

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

Six Months Ended

(Dollars in thousands)

Interest income

Interest income remained consistent at $0.9 million during the six months ended June 30, 2025 and 2024, respectively.

Other Income (Expense), Net

Six Months Ended

(Dollars in thousands)

Other income (expense), net

Other income (expense), net increased by $1.3 million, or 1,832.4%, from $0.1 million other expense during the six months ended June 30, 2024, to $1.2 million other income during the six months ended June 30, 2025.

Other income relates primarily to income recognized from a strategic award we received to develop a long-term plan to provide manufacturing services for aerospace and defense industries.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.

We are currently assessing its impact on our consolidated financial statements.

Liquidity and Capital Resources

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.

As of June 30, 2025, we had $45.0 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):

Three Months Ended March 31,

Six Month Ended June 30,

(In thousands)

Cash provided by (used in) operating activities

Cash provided by operating activities

Cash used in investing activities

1 unchanged sentence

Cash Flows From Operating Activities

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 $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.

During the six months ended June 30, 2025, cash provided by operating activities was $6.5 million , which consisted of net loss of $1.8 million , non-cash charges of $4.7 million and changes of net operating assets and liabilities of $3.6 million .

The non-cash charges consisted of stock-based compensation of $3.0 million and depreciation and amortization of $1.7 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.

The change in our net operating assets and liabilities was primarily due to a decrease in accounts receivable of $4.4 million due to a one-time distributor transition, which provided improved payment terms , an increase in accounts payable of $0.8 million, an increase in contract obligation of $0.7 million, a decrease in prepaid and other current assets of $0.2 million, offset by an increase in inventory of $2.2 million and a decrease in accrued liabilities of $0.2 million.

During the six months ended June 30, 2024 , cash provided by operating activities was $0.4 million, which consisted of net loss of $2.7 million, non-cash charges of $4.4 million and changes of net operating assets and liabilities of $1.2 million.

The non-cash charges consisted of stock-based compensation of $3.6 million and depreciation and amortization of $0.8 million.

The change in our net operating assets and liabilities was primarily due to a decrease in accounts receivable of $1.4 million due to timing of cash receipts for outstanding balances, a decrease in prepaid and other current assets of $0.5 million, and a decrease in inventory of $0.4 million offset by a decrease in accounts payable of $0.6 million, a decrease in accrued liabilities of $2.6 million and a decrease in deferred revenue of $0.3 million.

Cash Flows From Investing Activities

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 used in investing activities during the six months ended June 30, 2025 was $3.9 million due to $2.9 million of purchases of manufacturing equipment and $1.0 million in purchases of intangible assets.

Cash used in investing activities during the six months ended June 30, 2024 was $1.2 million, reflecting purchases of manufacturing equipment.

Cash Flows From Financing Activities

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.

Cash provided by financing activities during the six months ended June 30, 2025 was $0.3 million, primarily due to proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan offset by a nominal amount in payments on finance leases.

Cash provided by financing activities during the six months ended June 30, 2024 was $0.6 million, consisting of proceeds from the exercise of employee stock options and purchase of shares under our employee stock purchase plan.

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 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.

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 June 30, 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 June 30, 2025.

There have been no changes in our internal control over financial reporting that occurred during the three and six months ended June 30, 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.

8 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