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Item 2. Management’s Discussion and Analysis

2026-08-11 compared with 2026-05-12 · 54 added, 37 removed, 123 unchanged (43% of the section changed)

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● our beliefs regarding the market and demand for our products or the component products we resell, including our beliefs regarding memory chip shortages and when new manufacturing facilities may become operational;

● our ability to collect any damages awarded to us, including in our litigation with Samsung Electronics Co., Ltd., Samsung Semiconductor Inc., and Samsung Electronics America Inc.

(collectively, “Samsung”) and/or in our litigation with Micron Technology, Inc.

● our ability to collect any damages awarded to us, including in our litigation with Micron Technology, Inc.

(“Micron”), Google, Inc.

(“Google”) or any other counter parties;

● our ability to collect amounts owed to us pursuant to the Samsung License Agreement entered into with Samsung in connection with the settlement of our intellectual property litigation with Samsung;

● our beliefs and estimates regarding potential intellectual property suits or claims in process under current litigation;

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In light of these risks and uncertainties, our forward-looking statements should not be relied on as predictions of future events.

All forward-looking statements reflect our assumptions, expectations and beliefs only as of the date they are made, and except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.

All forward-looking statements reflect our assumptions, expectations and

beliefs only as of the date they are made, and except as required by law, we undertake no obligation to revise or update any forward-looking statements for any reason.

The following MD&A should be read in conjunction with our condensed consolidated financial statements and the related notes included in Part I, Item 1 of this report, as well as our Annual Report.

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With a rich portfolio of patented technologies, our inventions are foundational to the advancement of artificial intelligence (“AI”) computing.

During the first quarter of 2026, we recorded net sales of $104.9 million, gross profit of $22.4 million and net income of $8.6 million.

During the second quarter of 2026, we recorded net sales of $109.8 million, gross profit of $22.9 million and net income of $1.4 million.

We have historically financed our operations primarily with proceeds from issuances of equity and debt securities and cash receipts from revenues.

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See “Liquidity and Capital Resources” below for more information.

Recent Developments

On August 4, 2026, we entered into a Patent Cross License Agreement, Settlement and Release Agreement, Supply Agreement, and ITC Cooperation Agreement with Samsung Electronics Co., Ltd.

and/or its affiliate Samsung Semiconductor, Inc., effective as of July 31, 2026.

In connection with the Supply Agreement, we also entered into a Securities Purchase Agreement and Lock-Up and Release Agreement with Samsung Semiconductor, Inc.

See Note 9 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for additional information regarding these agreements and their terms.

Economic Conditions, Challenges and Risks

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In our view, accelerated AI adoption has tightened industry supply relative to demand, contributing to broad - based price increases.

We currently expect these dynamics to continue until additional industry fabrication capacity becomes available, potentially beginning in late 2027 or 2028;

however, this capacity timing and end - market demand may differ from our expectations.

Increased industry fabrication capacity could improve component availability, place downward pressure on pricing, and shift product mix, which may moderate our volumes, pricing, and margins.

Future demand for our products is inherently unpredictable, and our current results of operations may not be indicative of our future results.

We currently expect these dynamics to continue until additional industry fabrication capacity becomes available, potentially beginning in 2028;

however, the timing, scale and effectiveness of any additional capacity, and the level of end-market demand when such capacity becomes available, may differ materially from our expectations.

Increased industry fabrication capacity could improve component availability, place downward pressure on pricing, and shift product mix, any of which may moderate or adversely affect our volumes, pricing, margins and results of operations.

The semiconductor industry is cyclical and subject to rapid changes in supply and demand, and future demand for our products is inherently unpredictable.

Our current results of operations may not be indicative of our future results.

In addition, the vast majority of our net product sales in recent periods have been generated from resales of products sourced from SK hynix pursuant to the Product Purchase and Supply Agreement with SK hynix, which was entered into on April 5, 2021 (the “Supply Agreement”).

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In such circumstances, our financial results, including our revenue, profits and margins in future periods may be adversely affected.

In August 2026 and as noted above, we entered into a Supply Agreement with

Samsung Semiconductor providing us with the right to purchase up to $300 million of DRAM and NAND products per year for an aggregate of up to $1.5 billion over a five-year term.

Should Samsung fail to comply with the terms of this agreement and the related arrangements, our financial results of operation would be adversely affected.

See Note 9 to the condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for additional information.

We are party to ongoing intellectual property litigation.

Although certain matters have resulted in favorable and significant court judgments in our favor, these judgements remain subject to appeal and other proceedings, and any ultimate recovery may be less than the amounts awarded or may not be realized.

While we have entered into the Settlement Agreement with Samsung to resolve our pending patent litigations with Samsung, other matters, including our litigation with Micron, remain subject to appeal and other proceedings, and any ultimate recovery from these matters may be less than the amounts awarded or may not be realized, including as a result of negotiated resolution, appeals, post-trial proceedings, patent office proceedings or other developments.

We account for potential recoveries as gain contingencies and do not recognize them until realization is probable and reasonably estimable.

The timing and amount of any recovery from these matters are inherently uncertain, and any resolution could materially affect our results of operations or cash flows in the period in which it occurs.

See “Legal Proceedings” in Part II, Item 1 of this report and See Note 5 to the condensed consolidated financial statements included in Part I, Item 1 of this report for more information.

Our performance, financial condition and prospects are also affected by a number of factors and are exposed to a number of other risks and uncertainties.

We operate in a competitive and rapidly evolving industry in which new risks emerge from time to time, and it is not possible for us to predict all of the risks we may face, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors could cause actual results to differ from our expectations.

See the discussion of certain risks that we face under “Risk Factors” in Part I, Item 1A of our Annual Report.

Results of Operations

Net Sales and Gross Profit

Net sales and gross profit for the three months ended March 28, 2026 and March 29, 2025 were as follows (dollars in thousands):

Net sales and gross profit for the three and six months ended June 27, 2026 and June 28, 2025 were as follows (dollars in thousands):

Three Months Ended

Six Months Ended

Cost of sales

Gross margin percentage

Net sales increased by approximately $75.9 million during the first quarter of 2026 compared to the same period of 2025, primarily as a result of a $63.7 million increase in the sale of registered DIMM (“RDIMM”) and discrete memory component products, a $0.2 million increase in sales of our flash and solid-state drives products, and a $12.0 million increase in sales of low-profile memory subsystem products.

Net sales increased by approximately $68.1 million during the second quarter of 2026 compared to the same period of 2025, primarily as a result of a $58.5 million increase in the sale of registered Dual Inline Memory Module (“RDIMM”) and discrete memory component products and a $9.7 million increase in sales of low-profile memory subsystem products, partially offset by a $0.1 million decrease in sales of our flash and solid-state drives products.

Net sales increased by approximately $144.1 million during the first six months of 2026 compared to the same period of 2025, primarily as a result of a $122.3 million increase in the sale of RDIMM and discrete memory component products, a $0.2 million increase in sales of our flash and solid-state drives products, and a $21.6 million increase in sales of low-profile memory subsystem products.

These increases are primarily due to the current supply-demand environment we discussed above.

Gross Profit and Gross Margin

Gross profit and gross margin percentage increased significantly during the first quarter of 2026 compared to the same period of 2025, primarily as a result of higher sales prices due to the current supply demand environment discussed above and product sales mix.

Gross profit and gross margin percentage increased significantly during the second quarter and first six months of 2026 compared to the same periods of 2025, primarily as a result of higher sales prices due to the current supply-demand environment discussed above and product sales mix.

Operating Expenses

Operating expenses for the three months ended March 28, 2026 and March 29, 2025, were as follows (dollars in thousands):

Operating expenses for the three and six months ended June 27, 2026 and June 28, 2025, were as follows (dollars in thousands):

Three Months Ended

Six Months Ended

Research and development

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Research and Development

Research and development expenses increased during the first quarter of 2026 compared to the same period of 2025, primarily due to higher employee headcount and the associated increase in overhead costs.

Research and development expenses increased during the second quarter and first six months of 2026 compared to the same periods of 2025, primarily due to higher employee headcount and the associated increase in overhead costs.

Intellectual Property Legal Fees

Intellectual property legal fees consist of fees incurred for patent enforcement and licensing, appeals, patent drafting and prosecution, and opposition to third-party post-grant patent proceedings.

Although we expect intellectual property legal fees to generally increase over time as we continue to expand, protect and enforce our patent portfolio, these increases may not be linear but may occur in lump sums depending on jury trial management, due dates of various filings and their associated fees, and the arrangements we may make with our legal advisors in connection with enforcement proceedings, which may include fee arrangements or contingent fee arrangements in which we would pay these legal advisors on a scaled percentage of any negotiated fees, settlements or judgments awarded to us based on if, how and when the fees, settlements or judgments are obtained.

These fees may not be linear but may occur in lump sums depending on jury trial management, due dates of various filings and their associated fees, and the arrangements we may make with our legal advisors in connection with enforcement proceedings, which may include fee arrangements or contingent fee arrangements in which we would pay these legal advisors on a scaled percentage of any negotiated fees, settlements or judgments awarded to us based on if, how and when the fees, settlements or judgments are obtained.

See Note 5 to the condensed consolidated financial statements included in Part I, Item 1 of this report for further discussion.

Intellectual property legal fees increased during the first quarter of 2026 compared to the same period of 2025 due primarily to higher legal expenses incurred to protect and enforce our patent portfolio.

In addition, in connection with the settlement of our patent litigations with Samsung (see Note 9 to the condensed consolidated financial statements), we expect to incur legal fees payable to outside counsel retained on a partial contingent fee basis, calculated as a percentage of amounts received under the Settlement Agreement and Samsung License Agreement.

Such fees may be material to our results of operations and cash flows in the periods in which they become payable.

Intellectual property legal fees increased during the second quarter and first six months of 2026 compared to the same periods of 2025 due primarily to higher legal expenses incurred to protect and enforce our patent portfolio.

Selling, General and Administrative

Selling, general and administrative expenses increased during the first quarter of 2026 compared to the same period of 2025 due primarily to increase in public company related fees and reporting costs and increased commissions due to higher sales that were completed in the first quarter of 2026 as compared to the first quarter of 2025.

Selling, general and administrative expenses increased during the second quarter and first six months of 2026 compared to the same periods of 2025 due primarily to an increase in public company related fees and reporting costs and increased commissions due to higher sales that were completed in the second quarter and first six months of 2026 as compared to the same periods of 2025.

Other Income, Net

Other income, net for the three months ended March 28, 2026 and March 29, 2025 was as follows (dollars in thousands):

Other income, net for the three and six months ended June 27, 2026 and June 28, 2025 was as follows (dollars in thousands):

Three Months Ended

Six Months Ended

Interest income, net

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Total other income, net

Interest income, net decreased during the first quarter of 2026 compared to the same period of 2025, primarily as a result of lower interest earned on lower cash balances.

Other income, net included a deposit returned for our former manufacturing facility located in the PRC during the first quarter of 2025.

Interest income, net decreased during the second quarter and first six months of 2026 compared to the same periods of 2025, primarily as a result of lower interest earned on our cash balances.

Other income, net included a deposit returned for our former manufacturing facility located in the People’s Republic of China during the first six months of 2025.

Liquidity and Capital Resources

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We have also funded our operations with our revolving line of credit under a bank credit facility with SVB and funds raised through the March 2025 Purchase Agreement.

The following tables present selected financial information as of March 28, 2026 and December 27, 2025 and for the first three months of 2026 and 2025 (in thousands):

The following tables present selected financial information as of June 27, 2026 and December 27, 2025 and for the first six months of 2026 and 2025 (in thousands):

Cash, cash equivalents and restricted cash

Working capital

Three Months Ended

Six Months Ended

Net cash used in operating activities

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Net cash provided by financing activities

During the three months ended March 28, 2026, net cash used in operating activities was primarily a result of net income of $8.6 million, non-cash adjustments to net income of $1.1 million, and net cash outflows from changes in operating assets and liabilities of $31.5 million driven predominantly by an increase in accounts receivable, an increase in inventories due to orders not shipped in March 2026, an increase in prepaid expenses and other assets, partially offset by an increase in accounts payable and an increase in deferred revenue related to advance payments received on orders shipped in April 2026.

Net cash provided by financing activities during the three months ended March 28, 2026 primarily consisted of $6.0 million in net proceeds from exercise of stock options and warrants, and $0.8 million in net borrowings under the 2023 SVB Credit Agreement (as defined below), partially offset by $0.1 million in payments of notes payable to finance insurance policies.

During the three months ended March 29, 2025, net cash used in operating activities was primarily a result of net loss of $9.5 million, non-cash adjustments to net loss of $0.9 million, and net cash outflows from changes in operating assets and liabilities of $1.5 million driven predominantly by a decrease in accounts payable due to the payments made for the legal fees incurred to defend our patent portfolio, partially offset by a decrease in inventories due to higher turnovers and an increase in deferred revenue related to advance payments

received on orders shipped in April 2025.

Net cash provided by financing activities during the three months ended March 29, 2025 primarily consisted of $0.9 million in net proceeds from issuance of common stock under the March 2025 Purchase Agreement and $0.3 million in net borrowings under the 2023 SVB Credit Agreement, partially offset by $0.2 million in payments of notes payable to finance insurance policies.

During the six months ended June 27, 2026, net cash used in operating activities was primarily a result of net income of $10 million, non-cash adjustments to net income of $2.1 million, and net cash outflows from changes in operating assets and liabilities of $30.6 million driven predominantly by an increase in accounts receivable, an increase in inventories, a decrease in deferred revenue related to advance payments from customers, partially offset by an increase in accounts payable and an increase in accrued payroll and related liabilities.

Net cash provided by financing activities during the six months ended June 27, 2026 primarily consisted of $16.6 million in net proceeds from exercise of stock options and warrants, and $0.8 million in net borrowings under the 2023 SVB Credit Agreement (as defined below), partially offset by $0.3 million in payments of notes payable to finance insurance policies.

During the six months ended June 28, 2025, net cash used in operating activities was primarily a result of net loss of $15.6 million, non-cash adjustments to net loss of $2.1 million, and net cash outflows from changes in operating assets and liabilities of $4.2 million driven predominantly by a decrease in accounts payable, an increase in inventories due to orders not shipped in June 2025, partially offset by an increase in deferred

revenue related to advance payments received on orders shipped in July 2025.

Net cash provided by financing activities during the six months ended June 28, 2025 primarily consisted of $1.1 million in net proceeds from the issuance of common stock under the March 2025 Purchase Agreement and $11.6 million in net proceeds from issuance of common stock under the June 2025 Purchase Agreement (as defined below), partially offset by $0.1 million in net repayments under the 2023 SVB Credit Agreement (as defined below), and $0.4 million in payments of notes payable to finance insurance policies.

Capital Resources

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On March 13, 2025, we entered into a purchase agreement (the “March 2025 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) , pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $75 million in shares of our common stock over the 36-month term of the March 2025 Purchase Agreement subject to the conditions and limitations set forth in the March 2025 Purchase Agreement.

As of March 28, 2026, $ 73.7 million remains available under the March 2025 Purchase Agreement with Lincoln Park.

As of June 27, 2026, $ 73.7 million remains available under the March 2025 Purchase Agreement with Lincoln Park.

Sales under the March 2025 Purchase Agreement are subject to daily volume - based limits and a contractual floor price, and our ability to access the remaining capacity at any point in time depends on prevailing market prices and trading volumes.

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On June 24, 2025, we entered into a Securities Purchase Agreement (the “June 2025 Purchase Agreement”) with certain investors, including Chun K.

Hong, Chairperson of our board of directors, President and Chief Executive Officer (collectively, the “June 2025 Purchasers”), pursuant to which we issued and sold to the June 2025 Purchasers in a registered offering (the “June 2025 Offering”) an aggregate of (i) 17,142,860 shares of our common stock and (ii) Common Stock Purchase Warrants (the “June 2025 Warrants”) to purchase up to an aggregate of 34,285,720 shares of our common stock (the “June 2025 Warrant Shares”) at a combined purchase price of $0.70 per share and accompanying June 2025 Warrant.

Hong, Chairperson of our Board of Directors (the “Board” or “Board of Directors”), President and Chief Executive Officer (collectively, the “June 2025 Purchasers”), pursuant to which we issued and sold to the June 2025 Purchasers in a registered offering (the “June 2025 Offering”) an aggregate of (i) 17,142,860 shares of our common stock and (ii) Common Stock Purchase Warrants (the “June 2025 Warrants”) to purchase up to an aggregate of 34,285,720 shares of our common stock (the “June 2025 Warrant Shares”) at a combined purchase price of $0.70 per share and accompanying June 2025 Warrant.

Hong purchased $3.0 million of shares and accompanying June 2025 Warrants in the June 2025 Offering.

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On November 7, 2025, we entered into a first amendment to the loan and security agreement (the “2023 SVB Credit Agreement Amendment”) to, among other things, extend the maturity date from November 7, 2025 to November 7, 2027.

As of March 28, 2026, the outstanding borrowings under the 2023 SVB Credit Agreement were $2.6 million with no availability under the revolving line of credit.

During the three months ended March 28, 2026, we had net borrowings of $0.8 million under the 2023 SVB Credit Agreement;

As of June 27, 2026, the outstanding borrowings under the 2023 SVB Credit Agreement were $2.6 million with no availability under the revolving line of credit.

During the six months ended June 27, 2026, we had net borrowings of $0.8 million under the 2023 SVB Credit Agreement;

because borrowing capacity is driven by eligible receivables and reserve adjustments, availability may fluctuate with collections and sales mix, and letters of credit issued under the facility and with other banks are secured by cash and reduce unrestricted liquidity.

Warrant Exercises

During the quarter ended March 28, 2026, we received $5.8 million in proceeds from the cash exercise of issued and outstanding warrants to purchase 9,642,860 shares of common stock.

Since March 28, 2026 and through May 8, 2026, we received $10.5 million in proceeds from the cash exercise of issued and outstanding warrants to purchase 15,395,749 shares of common stock.

During the six months ended June 27, 2026, we received $16.3 million in proceeds from the cash exercise of issued and outstanding warrants to purchase 25,038,609 shares of common stock.

From June 28, 2026 through August 6, 2026, we received $5.5 million in proceeds from the cash exercise of issued and outstanding warrants to purchase 5,676,949 shares of common stock.

Future warrant exercises will likely depend on market conditions, the strategies of the individual warrant holders, and are ultimately at the discretion of the individual warrant holders.

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Sufficiency of Cash Balances and Potential Sources of Additional Capital

We believe our existing balance of cash and cash equivalents (including restricted cash balances), which totaled $27 million as of March 28, 2026, along with cash receipts from revenues, borrowing availability under the 2023 SVB Credit Agreement, funds raised through the March 2025 Purchase Agreement and other future debt and equity offerings and taking into account cash expected to be used in our operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months.

We believe our existing balance of cash and cash equivalents (including restricted cash balances), which totaled $40.7 million as of June 27, 2026, along with cash receipts from revenues, payments pursuant to the Samsung License Agreement (with the upfront payment expected in August 2026), potential borrowing availability, if any, under the 2023 SVB Credit Agreement, funds raised through the March 2025 Purchase Agreement, proceeds received from warrant exercises, and other future debt and equity offerings and taking into account cash expected to be used in our operations, will be sufficient to meet our anticipated cash needs for at least the next 12 months.

This belief reflects our current assessment of known trends and uncertainties that could affect near-term liquidity, including the timing of cash effects from customer advance payments, fluctuations in borrowing-base availability and letters-of-credit usage and market conditions that affect our ability to utilize the March 2025 Purchase Agreement.

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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