What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-05 compared with 2026-04-29 · 157 added, 56 removed, 133 unchanged (62% of the section changed)

28 unchanged sentences

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.

We define adjusted net income as net income adjusted for stock-based compensation expense, litigation costs, and non-recurring engineering fees (“NRE”).

Adjusted net income .

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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,

2026 2025 2026 2025

(in thousands)

3 unchanged sentences

Litigation costs 4,027 — 5,656 —

Non-recurring engineering fees 1,050 — 1,050 —

Adjusted net income $ 2,862 $ 749 $ 5,495 $ 1,160

$ 2,633 $ 411

Results of Operations

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

Three Months Ended March 31,

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

Three Months Ended June 30,

2026 2025 2026 2025

1 unchanged sentence

Product sales $ 15,313 $ 11,091 82 % 84 %

Licensing, royalty, patent, engineering services and other revenue 772 2,112 5 16

Licensing, royalty, engineering services and other revenue 3,423 2,110 18 16

Total revenue 18,736 13,201 100 100

Cost of product sales 8,296 6,166 44 47

Cost of licensing, royalty, patent, engineering services and other revenue 74 356 — 3

Cost of licensing, royalty, engineering services and other revenue 343 267 2 2

Total cost of sales 8,639 6,433 46 49

9 unchanged sentences

Net loss before income taxes (3,589) (696) (18) (5)

(293) (1,136) (2) (9)

Income tax expense

Income tax benefit (expense) — 26 — —

Net loss and comprehensive loss $ (3,589) $ (670) (18) % (5) %

$ (296) $ (1,166) (2) % (9) %

Comparison of the three months ended March 31, 2026 and 2025

We generated 90% and 60% of our revenue from products sold through distributors for the three months ended March 31, 2026 and 2025, respectively.

Comparison of the three months ended June 30, 2026 and 2025

We generated 79% and 66% of our revenue from products sold through distributors for the three months ended June 30, 2026 and 2025, respectively.

We maintain a direct selling relationship, for strategic purposes, with several key customer accounts.

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Our revenue by region for the periods indicated was as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

APAC $ 10,866 $ 8,582

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Three Months Ended

March 31, Change

June 30, Change

2026 2025 Amount %

1 unchanged sentence

Product sales $ 15,313 $ 11,091 $ 4,222 38.1 %

Licensing, royalty, patent, engineering services and other revenue

772 2,112 (1,340) (63.4) %

Licensing, royalty, engineering services and other revenue 3,423 2,110 $ 1,313 62.2 %

Total revenue $ 18,736 $ 13,201 $ 5,535 41.9 %

Total revenue increased by $1.7 million, or 13.2%, from $13.1 million during the three months ended March 31, 2025 to $14.9 million during the three months ended March 31, 2026.

The increase was due to an increase in product sales of $3.1 million or 27.9%, 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, engineering services and other revenue decreased by $1.3 million, or 63.4% from $2.1 million during the three months ended March 31, 2025, to $0.8 million during the three months ended March 31, 2026.

The decrease was primarily due to the conclusion of an agreement for the development of an AI technology application.

Total revenue increased by $5.5 million, or 41.9%, from $13.2 million during the three months ended June 30, 2025 to $18.7 million during the three months ended June 30, 2026.

The increase was due to an increase in product sales of $4.2 million or 38.1%, primarily driven by higher customer demand and increased unit shipments, and an increase in licensing, royalty, engineering services and other revenue of $1.3 million or 62.2%.

Licensing, royalty, 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.

Licensing, royalty, engineering services and other revenue increased by $1.3 million, or 62.2%, from $2.1 million during the three months ended June 30, 2025, to $3.4 million during the three months ended June 30, 2026.

The increase was primarily due to the commencement of a subcontract agreement providing engineering services for military and aerospace applications.

Cost of Sales and Gross Margin

Three Months Ended

March 31, Change

June 30, Change

2026 2025 Amount %

1 unchanged sentence

Cost of product sales $ 8,296 $ 6,166 $ 2,130 34.5 %

Cost of licensing, royalty, patent, engineering services and other revenue

74 356 (282) (79.2) %

Cost of licensing, royalty, engineering services and other revenue 343 267 76 28.5 %

Total cost of sales $ 8,639 $ 6,433 $ 2,206 34.3 %

Gross margin 53.9 % 51.3 %

Cost of product sales increase d by $0.9 million , or 15.4% , from $6.0 million during the three months ended March 31, 2025 , to $7.0 million during the three months ended March 31, 2026 .

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 $0.3 million, or 79.2%, from $0.4 million during the three months ended March 31, 2025, to $0.1 million during the three months ended March 31, 2026.

The decrease was primarily due to a decrease in licensing costs related to labor and materials associated with the development of an AI technology application.

Gross margin increased from 51.4% during the three months ended March 31, 2025, to 52.7% during the three months ended March 31, 2026.

Gross margin increased as a result of the different revenue mix and yield improvements.

Cost of product sales increased by $2.1 million , or 34.5% , from $ 6.2 million during the three months ended June 30, 2025 , to $8.3 million during the three months ended June 30, 2026 .

Cost of product sales have increased consistently and proportionately with the increase in revenues on our Toggle and STT products.

Cost of licensing, royalty, engineering services and other revenue remained consistent at $0.3 million for the three months ended June 30, 2025 and the three months ended June 30, 2026, respectively.

Gross margin increased from 51.3% during the three months ended June 30, 2025, to 53.9% during the three months ended June 30, 2026.

Gross margin increased as a result of the different revenue mix.

Operating Expenses

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Three Months Ended

March 31, Change

June 30, Change

2026 2025 Amount %

3 unchanged sentences

Research and Development Expenses .

Research and development expenses increased by $0.2 million , or 7.4% , from $3.4 million during the three months ended March 31, 2025 , to $3.6 million during the three months ended March 31, 2026 .

The research and development expenses increase relates primarily to higher compensation costs and contract labor .

Research and development expenses increased by $1.3 million, or 35.1%, from $3.6 million during the three months ended June 30, 2025, to $4.8 million during the three months ended June 30, 2026.

The research and development expenses increase relates primarily to non-recurring engineering fees.

Three Months Ended

March 31, Change

June 30, Change

2026 2025 Amount %

3 unchanged sentences

General and Administrative Expenses .

General and administrative expenses increased by $1.2 million, or 31.9%, from $3.8 million during the three months ended March 31, 2025, to $5.1 million during the three months ended March 31, 2026.

General and administrative expenses increased by $4.2 million, or 114.9%, from $3.6 million during the three months ended June 30, 2025, to $7.8 million during the three months ended June 30,

The increase is primarily due to the litigation costs related to the patent infringement lawsuit described in Note 5 to our condensed financial statements included in Item 1 of this report.

Three Months Ended

March 31, Change

June 30, Change

2026 2025 Amount %

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Sales and Marketing Expenses .

Sales and marketing expenses increased by $0.4 million, or 27.0%, from $1.5 million during the three months ended March 31, 2025, to $1.9 million during the three months ended March 31, 2026.

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

Sales and marketing expenses increased by $0.3 million, or 20.4%, from $1.5 million during the three months ended June 30, 2025, to $1.8 million during the three months ended June 30, 2026.

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

Three Months Ended

March 31, Change

June 30, Change

2026 2025 Amount %

1 unchanged sentence

Interest income $ 316 $ 423 $ (107) (25.3) %

Interest income slightly decreased by $0.1 million, or 22.3%, from $0.4 million during the three months ended March 31, 2025, to $0.3 million during the three months ended March 31, 2026.

Interest income decreased by $0.1 million, or 25.3%, from $0.4 million during the three months ended June 30, 2025, to $0.3 million during the three months ended June 30, 2026.

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

1 unchanged sentence

Three Months Ended

March 31, Change

June 30, Change

2026 2025 Amount %

1 unchanged sentence

Other income, net $ 478 $ 842 $ (364) (43.2) %

Other income, net increased by $1.7 million, or 442.8%, from $0.4 million during the three months ended March 31, 2025, to $2.1 million during the three months ended March 31, 2026.

Other income, net decreased by $0.4 million, or 43.2%, from $0.8 million during the three months ended June 30, 2025, to $0.5 million during the three months ended June 30, 2026.

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,

2026 2025 2026 2025

(In thousands) (As a percentage of revenue)

Product sales $ 29,413 $ 22,117 88 % 84 %

Licensing, royalty, engineering services and other revenue 4,195 4,222 12 16

Total revenue 33,608 26,339 100 100

Cost of product sales 15,251 12,195 45 46

Cost of licensing, royalty, engineering services and other revenue 417 623 1 2

Total cost of sales 15,668 12,818 46 49

Gross profit 17,940 13,521 54 51

Operating expenses:

Research and development 8,443 6,936 25 26

General and administrative 12,888 7,480 38 28

Sales and marketing 3,708 2,998 11 11

Total operating expenses 25,039 17,414 74 65

Loss from operations (7,099) (3,893) (21) (15)

Interest income 633 831 2 3

Other income, net 2,584 1,230 8 5

Net loss before income taxes (3,882) (1,832) (11) (7)

Income tax benefit (expense) (3) (4) — —

Net loss and comprehensive loss $ (3,885) $ (1,836) (11) % (7) %

Comparison of the six months ended June 30, 2026 and 2025

We generated 84% and 63% of our revenue from products sold through distributors for the six months ended June 30, 2026 and 2025, respectively.

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 regions:

Asia-Pacific (APAC);

North America;

and Europe, Middle East and Africa (EMEA).

We recognize revenue by geography based on the region in which our products are sold, and not where the end products in which they are assembled are shipped.

Our revenue by region for the periods indicated was as follows (in thousands):

Six Months Ended June 30,

APAC $ 20,060 $ 15,841

North America 8,104 5,409

EMEA 5,444 5,089

Total revenue $ 33,608 $ 26,339

Six Months Ended

June 30, Change

2026 2025 Amount %

(Dollars in thousands)

Product sales $ 29,413 $ 22,117 $ 7,296 33.0 %

Licensing, royalty, engineering services and other revenue 4,195 4,222 (27) (0.6) %

Total revenue $ 33,608 $ 26,339 $ 7,269 27.6 %

Total revenue increased by $7.3 million, or 27.6%, from $26.3 million during the six months ended June 30, 2025 to $33.6 million during the six months ended June 30, 2026.

The increase was due to an increase in product sales of $7.3 million or 33.0%, primarily driven by higher customer demand and increased unit shipments.

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, engineering services and other revenue remained consistent at $4.2 million for six months ended June 30, 2025 and six months ended June 30, 2026, respectively.

Cost of Sales and Gross Margin

Six Months Ended

June 30, Change

2026 2025 Amount %

(Dollars in thousands)

Cost of product sales $ 15,251 $ 12,195 $ 3,056 25.1 %

Cost of licensing, royalty, engineering services and other revenue 417 623 (206) (33.1) %

Total cost of sales $ 15,668 $ 12,818 $ 2,850 22.2 %

Gross margin 53.4 % 51.3 %

Cost of product sales increased by $3.1 million, or 25.1%, from $12.2 million during the six months ended June 30, 2025, to $15.3 million during the six months ended June 30, 2026.

Cost of product sales have increased consistently and proportionately with the increase in revenues on our Toggle and STT products.

Cost of licensing, royalty, engineering services and other revenue decreased by $0.2 million, or 33.1%, from $0.6 million during the six months ended June 30, 2025, to $0.4 million during the six months ended June 30, 2026.

The decrease was primarily due to a decrease in licensing costs related to labor and materials associated with the development of an AI technology application.

Gross margin increased from 51.3% during the six months ended June 30, 2025, to 53.4% during the six months ended June 30, 2026.

Gross margin increased as a result of the different revenue mix.

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 component of each of our operating expense categories.

Six Months Ended

June 30, Change

2026 2025 Amount %

(Dollars in thousands)

Research and development $ 8,443 $ 6,936 $ 1,507 21.7 %

Research and development as a % of revenue 25 % 26 %

Research and Development Expenses .

Research and development expenses increased by $1.5 million, or 21.7%, from $6.9 million during the six months ended June 30, 2025, to $8.4 million during the six months ended June 30, 2026.

The research and development expenses increase relates primarily to non-recurring engineering fees.

Six Months Ended

June 30, Change

2026 2025 Amount %

(Dollars in thousands)

General and administrative $ 12,888 $ 7,480 $ 5,408 72.3 %

General and administrative as a % of revenue 38 % 28 %

General and Administrative Expenses .

General and administrative expenses increased by $5.4 million, or 72.3%, from $7.5 million during the six months ended June 30, 2025, to $12.9 million during the six months ended June 30, 2026.

The increase is primarily due to the litigation costs related to the patent infringement lawsuit described in Note 5 to our condensed financial statements included in Item 1 of this report.

Six Months Ended

June 30, Change

2026 2025 Amount %

(Dollars in thousands)

Sales and marketing $ 3,708 $ 2,998 $ 710 23.7 %

Sales and marketing as a % of revenue 11 % 11 %

Sales and Marketing Expenses .

Sales and marketing expenses increased by $0.7 million, or 23.7%, from $3.0 million during the six months ended June 30, 2025, to $3.7 million during the six months ended June 30, 2026.

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

Six Months Ended

June 30, Change

2026 2025 Amount %

(Dollars in thousands)

Interest income $ 633 $ 831 $ (198) (23.8) %

Interest income slightly decreased by $0.2 million, or 23.8%, from $0.8 million during the six months ended June 30, 2025, to $0.6 million during the six months ended June 30, 2026.

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

Other Income, Net

Six Months Ended

June 30, Change

2026 2025 Amount %

(Dollars in thousands)

Other income, net $ 2,584 $ 1,230 $ 1,354 110.1 %

Other income, net increased by $1.4 million, or 110.1%, from $1.2 million during the six months ended June 30, 2025, to $2.6 million during the six months ended June 30, 2026.

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 segments.

Liquidity and Capital Resources

As of March 31, 2026, we had $40.5 million of cash and cash equivalents, compared to $44.5 million as of December 31, 2025.

As of June 30, 2026, we had $43.9 million of cash and cash equivalents, compared to $44.5 million as of December 31, 2025.

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)

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Cash Flows From Operating Activities

During the three months ended March 31, 2026 , cash provided by operating activities was $0.6 million , which consisted of net loss of $0.3 million , non-cash charges of $2.0 million and changes of net operating assets and liabilities of $1.1 million .

The non-cash charges primarily consisted of stock-based compensation of $1.3 million , depreciation and amortization of $0.7 million .

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

accounts payable of $1.6 million , an increase in accrued liabilities of $0.9 million , offset by an increase in accounts receivable of $2.1 million , a decrease in contract obligation of $1.2 million , and an increase in inventory of $0.5 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 $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 six months ended June 30, 2026 , cash provided by operating activities was $0.7 million , which consisted of net loss of $3.9 million , non-cash charges of $4.1 million and changes of net operating assets and liabilities of $0.5 million .

The non-cash charges consisted of stock-based compensation of $ 2.7 million and depreciation and amortization of $1.4 million .

The change in our net operating assets and liabilities was primarily due to an increase in accrued liabilities of $3.1 million, an increase in deferred revenue of $3.0 million, a decrease in prepaid and other current assets of $0.6 million, an increase in accounts payable of $0.5 million, offset by an increase in accounts receivable of $2.7 million, an increase in inventory of $2.4 million , a decrease in contract obligation of $1.2 million and an increase in other assets of $0.4 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 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 .

Cash Flows From Investing Activities

Cash used in investing activities during the three months ended March 31, 2026 was $4.8 million primarily due to $4.4 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, 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 six months ended June 30, 2026 was $6.7 million due to $5.7 million in 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, 2025 was $3.9 million due to $2.9 million in purchases of manufacturing equipment and $1.0 million in purchases of intangible assets.

Cash Flows From Financing Activities

Cash provided by financing activities during the three months ended March 31, 2026 was $0.3 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, 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 six months ended June 30, 2026 was $5.4 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, 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.

Critical Accounting Policies and Significant Judgments and Estimates

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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-Q

Item 2. Management’s Discussion and Analysis