What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-04 compared with 2025-02-27 · 78 added, 73 removed, 137 unchanged (52% of the section changed)

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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:

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:

Year Ended December 31,

(in thousands)

Adjusted EBITDA reconciliation:

Depreciation and amortization

Adjusted Net (Loss) Income reconciliation:

Net (loss) income $ (586) $ 781

Stock-based compensation expense 5,776 6,713

Interest expense

Income tax benefit

Adjusted EBITDA

Our Adjusted EBITDA for the year ended December 31, 2023 includes a one-time employee retention tax credit received of $2.0 million in the second quarter of 2023.

Adjusted Net (Loss) Income $ 5,190 $ 7,494

Design wins .

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New design wins in each successive quarter of 2025 were 44, 53, 55, and 85, respectively, compared to 31, 44, 50, and 53 in each successive quarter of 2024, respectively.

Effect of Health-Related Outbreaks on Our Business

Our global operations expose us to risks arising from public health crises and health-related outbreaks.

These crises and outbreaks can adversely affect global economies and financial markets, which have the potential to negatively impact our operations and financial condition.

The ultimate extent of the impact of health-related events on our business, results of operations and financial condition will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted.

See “Risk Factors” in Part I, Item 1A of this report for additional risks we face due to health-related events.

Results of Operations

Below are factors we want to highlight for understanding our 2025 annual results and year-over-year comparison with proper historical perspective:

● The first half of 2024 was impacted by supply chain challenges that were overcome in the second half of the year as the industry reverted to pre-health-related outbreak seasonal patterns.

● Our commitment to improving our manufacturing excellence enabled us to drive yield improvements within our internal and external foundries network to sustain and improve existing product margins.

• Our commitment to improving our manufacturing excellence enabled us to drive yield improvements within our internal and external foundries network to sustain existing product margins.

The following table sets forth our results of operations for the periods indicated:

Year Ended December 31,

(In thousands)

(As a percentage of revenue)

2025 2024 2025 2024

(In thousands) (As a percentage of revenue)

Product sales $ 48,292 $ 42,203 87 % 84 %

Licensing, royalty, patent, and other revenue

Licensing, royalty, patent, engineering services and other revenue 6,910 8,199 13 16

Total revenue 55,202 50,402 100 100

Cost of product sales 25,938 22,812 47 45

Cost of licensing, royalty, patent, and other revenue

Cost of licensing, royalty, patent, engineering services and other revenue 1,022 1,464 2 3

Total cost of sales 26,960 24,276 49 48

Gross profit 28,242 26,126 51 52

Operating expenses:

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Total operating expenses 34,750 33,217 63 66

(Loss) income from operations

Interest expense

Loss from operations (6,508) (7,091) (12) (14)

Interest income 1,646 1,766 3 3

Other income, net 4,405 6,066 8 13

Net income before income taxes

Income tax benefit

Net (loss) income before income taxes (457) 741 (1) 2

Income tax (expense) benefit (129) 40 — —

Net (loss) income and comprehensive (loss) income $ (586) $ 781 (1) % 2 %

Comparison of the Years Ended December 31, 2025 and 2024

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Year Ended December 31,

APAC $ 34,527 $ 28,688

North America 10,890 10,710

EMEA 9,785 11,004

Total revenue $ 55,202 $ 50,402

Year Ended December 31,

Year Ended December 31, Change

2025 2024 Amount %

(Dollars in thousands)

Product sales $ 48,292 $ 42,203 $ 6,089 14.4 %

Licensing, royalty, patent, and other revenue

Licensing, royalty, patent, engineering services and other revenue 6,910 8,199 (1,289) (15.7) %

Total revenue $ 55,202 $ 50,402 $ 4,800 9.5 %

Total revenue decreased by $13.4 million, or 21.0%, from $63.8 million during the year ended December 31, 2023, to $50.4 million during the year ended December 31, 2024.

The decrease was primarily due to a decrease in product sales of $10.9 million due to timing of customer demand.

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.

Total revenue increased by $4.8 million, or 9.5%, from $50.4 million during the year ended December 31, 2024, to $55.2 million during the year ended December 31, 2025.

The increase was due to an increase in product sales revenue of $6.1 million, and partially offset by a decrease in licensing, royalty, patent, engineering services and other revenue of $1.3 million.

Licensing, royalty, patent, engineering services 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.

We estimate royalty revenue earned throughout 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 $2.4 million, from $10.6 million during the year ended December 31, 2023, to $8.2 million during the year ended December 31, 2024.

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.

There were no patent sales during the year ended December 31, 2024.

Licensing, royalty, patent, engineering services and other revenue decreased by $1.3 million, from $8.2 million during the year ended December 31, 2024, to $6.9 million during the year ended December 31, 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.

Cost of Sales and Gross Margin

Year Ended December 31,

Year Ended December 31, Change

2025 2024 Amount %

(Dollars in thousands)

Cost of sales $ 25,938 $ 22,812 $ 3,126 13.7 %

Cost of licensing, royalty, patent, and other revenue

Cost of licensing, royalty, patent, engineering services and other revenue 1,022 1,464 (442) (30.2) %

Total cost of sales $ 26,960 $ 24,276 $ 2,684 11.1 %

Cost of product sales decreased by $1.9 million, or 7.6%, from $24.7 million during the year ended December 31, 2023, to $22.8 million during the year ended December 31, 2024.

The change was primarily due to a reduction in product sales compared to the prior year, offset in part by increased yields on our toggle products.

Cost of licensing, royalty, patent, and other revenue decreased by $0.4 million, or 19.9%, from $1.8 million during the year ended December 31, 2023, to $1.5 million during the year ended December 31, 2024.

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

Our gross margin decreased from 58.4% during the year ended December 31, 2023, to 51.8% during the year ended December 31, 2024.

Our 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.

Gross margin 51.2 % 51.8 % * *

Cost of product sales increased by $3.1 million, or 13.7%, from $22.8 million during the year ended December 31, 2024, to $25.9 million during the year ended December 31, 2025.

Cost of product sales relate primarily to costs of our Toggle and STT products and have increased consistently and proportionately with the increase in revenues.

Cost of licensing, royalty, patent, engineering services and other revenue decreased by $0.4 million, or 30.2%, from $1.5 million during the year ended December 31, 2024, to $1.0 million during the year ended December 31, 2025.

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 51.8% during the year ended December 31, 2024, to 51.2% during the year ended December 31, 2025.

Gross margin slightly decreased as a result of the different revenue mix.

Operating Expenses

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

Year Ended December 31,

Year Ended December 31, Change

2025 2024 Amount %

(Dollars in thousands)

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Research and development expenses increased by $0.4 million, or 2.9%, from $13.7 million during the year ended December 31, 2024, to $14.1 million during the year ended December 31, 2025.

The change was primarily due 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.

Year Ended December 31,

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.

Year Ended December 31, Change

2025 2024 Amount %

(Dollars in thousands)

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General and Administrative Expenses .

General and administrative expenses decreased by $0.2 million, or 1.1%, from $14.3 million during the year ended December 31, 2023, to $14.1 million during the year ended December 31, 2024.

The change was primarily driven by a reduction in professional services.

Year Ended December 31,

General and administrative expenses increased by $0.4 million, or 2.9%, from $14.1 million during the year ended December 31, 2024, to $14.6 million during the year ended December 31, 2025.

The increase is primarily due to one-time professional service fees.

Year Ended December 31, Change

2025 2024 Amount %

(Dollars in thousands)

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Sales and marketing expenses increased by $0.7 million, or 13.4%, from $5.4 million during the year ended December 31, 2024, to $6.1 million during the year ended December 31, 2025.

The change was primarily due to an increase in headcount and contract labor, partially offset by lower variable compensation costs.

Interest Expense

Year Ended December 31,

The increase is sales and marketing expenses relates primarily to higher compensation costs and contract labor.

Interest Income

Year Ended December 31, Change

2025 2024 Amount %

(Dollars in thousands)

Interest expense

Interest expense decreased by $0.1 million, or 100.0%, from $0.1 million during the year ended December 31, 2023, to zero during the year ended December 31, 2024.

The change was due to having no outstanding balance under our 2019 Credit Facility as we paid off the outstanding balance in full in March 2023, resulting in no interest incurred during 2024 after the outstanding balance was paid in full.

Interest income $ 1,646 $ 1,766 $ (120) (6.8) %

Interest income decreased by $0.1 million, or 6.8%, from $1.8 million during the year ended December 31, 2024, to $1.6 million during the year ended December 31, 2025.

The decrease is primarily due to the decrease in interest rates.

Other Income, Net

Year Ended December 31,

Year Ended December 31, Change

2025 2024 Amount %

(Dollars in thousands)

Other income, net $ 4,405 $ 6,066 $ (1,661) (27.4) %

Other income, net increased by $4.6 million, from $3.2 million during the year ended December 31, 2023, to $7.8 million during the year ended December 31, 2024.

The change was primarily due to other income of $6.1 million recognized from a strategic award received by the Company to develop a long-term plan to provide manufacturing services for aerospace and defense segments, a change in interest income earned on the money market cash account as a result of a change in cash balances, along with the non-recurrence of a loss on prepayment and termination of our 2019 Credit Facility, offset by non-recurrence of the employee retention tax credit of $2.0 million received during the second quarter of 2023.

Other income, net decreased by $1.7 million, from $6.1 million during the year ended December 31, 2024, to $4.4 million during the year ended December 31, 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.

On July 4, 2025, the OBBBA was enacted.

The OBBBA maintains the 21 percent corporate tax rate and makes permanent many of the beneficial expired and expiring tax provisions originally enacted in the Tax Cuts and Jobs Act of 2017, including the immediate expensing of domestic research and development expenditures, more favorable interest deductibility and 100 percent bonus depreciation with effective dates in 2025.

Revisions to the international tax framework are effective in 2026.

In the fourth quarter of 2025, the Company elected to immediately expense new domestic research and development expenditures, but continue amortizing the existing capitalized and unamortized expenditures as of December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2025, we had $44.5 million of cash and cash equivalents, compared to $42.1 million as of December 31, 2024.

As of December 31, 2024, we have no outstanding debt as we paid off our 2019 Credit Facility in full in March 2023.

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

Our future capital requirements will depend on many factors, including, among other things, our growth rate, the timing and extent of our spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, and the introduction of new products.

Additionally, see “Credit Facilities” below for information regarding our debt financing.

Our long-term capital requirements will depend on many factors, including, among other things, our growth rate, the timing and extent of our spending to support our current and future manufacturing requirements, research and development activities, the timing and cost of establishing additional sales and marketing capabilities, and the introduction of new products.

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

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Cash used in investing activities (8,674) (3,060)

Cash provided by (used in) financing activities

Cash provided by financing activities 1,067 1,112

Cash Flows from Operating Activities

During the year ended December 31, 2024, cash provided by operating activities was $7.1 million, which consisted of net income of $0.8 million, non-cash charges of $8.4 million and changes in net operating assets and liabilities of $2.1 million.

During the year ended December 31, 2025, cash provided by operating activities was $10.0 million , which consisted of net loss of $0.6 million , non-cash charges of $9.0 million and changes in net operating assets and liabilities of $1.6 million .

The non-cash charges primarily consisted of stock-based compensation of $5.8 million and depreciation and amortization of $3.2 million .

The change in our net operating assets and liabilities was primarily due to an increase in contract obligations of $2.0 million due to contracts the Company entered into in the third quarter of 2024, an increase in accounts receivable of $0.2 million due to timing of cash receipts for outstanding balances, an increase in inventory of $0.7 million to meet anticipated production volumes, an increase in prepaid and other current assets of $0.3 million, an increase in other assets of $0.5 million, a decrease in accounts payable of $0.4 million, a decrease in accrued liabilities of $1.9 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 $3.6 million due to timing of cash receipts for outstanding balances, an increase in accrued liabilities of $0.8 million, a decrease in other assets of $0.4 million , an increase in long-term income tax liability of $0.1 million, offset by an increase in inventory of $1.6 million to meet anticipated production volumes, a decrease in accounts payable of $0.5 million, a decrease in contract obligations of $0.6 million, and an increase in prepaid and other current assets of $0.6 million .

During the year ended December 31, 2024, cash provided by operating activities was $7.1 million, which consisted of net income of $0.8 million , non-cash charges of $8.4 million and changes in net operating assets and liabilities of $2.1 million .

The non-cash charges primarily consisted of stock-based compensation of $5.0 million, depreciation and amortization of $1.2 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 an increase in accounts receivable of $0.9 million due to timing of cash receipts for outstanding balances, an increase in inventory of $1.7 million to meet anticipated production volumes, an increase in prepaid and other current assets of $0.4 million, an

increase in other assets of $0.2 million, an increase in accounts payable of $0.5 million, an increase in accrued liabilities of $0.8 million, and a decrease in deferred revenue of $0.5 million.

The non-cash charges primarily consisted of stock-based compensation of $6.7 million and depreciation and amortization of $1.7 million .

The change in our net operating assets and liabilities was primarily due to an increase in

contract obligations of $2.0 million due to contracts the Company entered into in the third quarter of 2024, an increase in accounts receivable of $0.2 million due to timing of cash receipts for outstanding balances, an increase in inventory of $0.7 million to meet anticipated production volumes, an increase in prepaid and other current assets of $0.3 million , an increase in other assets of $0.5 million , a decrease in accounts payable of $0.4 million , a decrease in accrued liabilities of $1.9 million , and a decrease in deferred revenue of $0.3 million .

Cash Flows from Investing Activities

During the year ended December 31, 2025, cash used in investing activities was $8.7 million, which consisted of capital expenditures primarily for the purchase of manufacturing equipment and purchased software.

During the year ended December 31, 2023, cash used in investing activities was $1.4 million, which consisted of capital expenditures primarily for the purchase of manufacturing equipment offset by a nominal amount in proceeds received on the sale of property and equipment.

During the year ended December 31, 2024, cash used in investing activities was $3.1 million, which consisted of capital expenditures primarily for the purchase of manufacturing equipment and purchased software.

Cash Flows from Financing Activities

During the year ended December 31, 2025, cash provided by financing activities was $1.1 million, which consisted of proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.

During the year ended December 31, 2023, cash used in financing activities was $1.6 million, which primarily consisted of $2.8 million of payments to pay off our 2019 Credit Facility offset by $1.2 million in proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.

Critical Accounting Policies and Significant Judgements and Estimates

During the year ended December 31, 2024, cash used in financing activities was $1.1 million, which consisted of proceeds from stock option exercises and purchases of shares under our employee stock purchase plan.

Critical Accounting Policies and Significant Judgments and Estimates

Our financial statements have been prepared in accordance with U.S.

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We have received insignificant returns to date and believe that returns of our products will continue to be minimal.

Upon the transfer of control, generally at shipment, we record a trade receivable for the selling price as there is a legally enforceable obligation of the distributor to pay for the product delivered, an allowance is recorded for the estimated discount that will be provided to the distributor, and the net of these amounts is recorded as revenue on the statements of income and comprehensive income.

License Revenue

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We write down inventory for estimated excess or obsolete inventory equal to the difference between cost and estimated net realizable value.

Inventory write downs establish a new cost basis for inventory and charges are not subsequently reversed even if circumstances subsequently indicate that increased carrying amounts are recoverable.

Inventory write downs establish a new cost basis for inventory and charges are not subsequently reversed even if

circumstances subsequently indicate that increased carrying amounts are recoverable.

In estimating these reserves, our evaluation takes into consideration historical and expected future demand considering current market conditions and trends, the effect new products may have on the sale of existing products, technological obsolescence, and other factors.

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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-K

Item 7. Management’s Discussion and Analysis