# GCT Semiconductor Holding, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [GCT Semiconductor Holding, Inc.](/companies/gcts.md) (CIK 1851961)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 21:16 ET
- Period: 2024-09-30
- Accession: 0000950170-24-127082
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1851961/000095017024127082/gcts-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1851961/000095017024127082/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $2.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $7.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $984.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $2.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $1.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $4.5m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $4.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $13.9m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$5.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$5.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $667.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $3.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $61.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $187.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$7.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$7.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.16 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.19 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.16 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.19 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 45,645,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 38,418,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$28.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $185.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $1.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $20.0m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $22.6m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $61.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $80.9m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $4.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $36.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | −$58.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 57,572 characters.

*On March 26, 2024 (the “Closing Date” or “Closing”), GCT Semiconductor, Inc. (“Legacy GCT”) and Concord Acquisition Corp III, a Delaware corporation (“Concord III”), consummated the Merger pursuant to the Business Combination Agreement and Concord III changed its name to GCT Semiconductor Holding, Inc. (“GCT”). As a result, the financial statements of Legacy GCT are now the financial statements of GCT. This discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2024 and related notes appearing elsewhere in this Quarterly Report and Legacy GCT’s audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022 and related notes included in our Form 8‑K filing with the Securities and Exchange Commission (“SEC”) on April 1, 2024.*

*This discussion may contain forward-looking statements including, but not limited to, our expectations or predictions of future financial or business performance or conditions. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. You should read the sections in this Quarterly Report titled “Risk Factors” and “Special Note of Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by these forward-looking statements. Unless otherwise indicated, the terms “GCT,” “the Company,” “we,” “us,” or “our” refer to GCT Semiconductor Holding Inc., a Delaware corporation, together with our consolidated subsidiaries.*

### Overview

We are a fabless semiconductor company that specializes in the design, manufacturing and sale of communication semiconductors, including high-speed wireless communication technologies such as 5G/4.75G/4.5G/4G transceivers (“RF”) and modems, which are essential for a wide variety of industrial, B2B and consumer applications. We have successfully developed and supplied communication semiconductor chipsets and modules to leading wireless operators worldwide, as well as to original design manufacturers (“ODMs”) and original equipment manufacturers (“OEMs”) for portable wireless routers (e.g., Mobile Router/MiFi), indoor and outdoor fixed wireless routers (e.g., CPE), industrial M2M applications and smartphones.

We oversee sales, marketing, and accounting operations from our headquarters in San Jose, California. The Company conducts product design, development, and customer support through our wholly owned subsidiaries located in South Korea, one of which serves as our research and development center. In addition, we utilize separate sales offices for local technical support and sales in Taiwan, China, and Japan.

Our current product portfolio includes RF and modem chipsets based on 4th generation (“4G”), known as Long Term Evolution (“LTE”), technology offering a variety of chipsets differentiated by speed and functionality. These include 4G LTE, 4.5G LTE Advanced (twice the speed of LTE), and 4.75G LTE Advanced-Pro (four times the speed of LTE) chipsets. The Company also develops and sells cellular Internet of Things (“IoT”) chipsets for low-speed mobile networks such as eMTC/NB- IOT/Sigfox, and other network protocols.

Since inception, we have financed our operations primarily through cash receipts from customers, the issuance of convertible promissory notes, borrowings, issuance of capital stock, and the exercise of stock options.

### Business Combination

On the Closing Date, Concord III, a Delaware corporation, consummated a series of transactions that resulted in the combination of Gibraltar Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Concord III (“Merger Sub”), and Legacy GCT, pursuant to a Business Combination Agreement, dated November 2, 2023 (the “Business Combination Agreement”), by and among Concord III, Merger Sub and Legacy GCT. Pursuant to the terms of the Business Combination Agreement, Merger Sub merged with and into Legacy GCT, with Legacy GCT surviving the merger as a wholly-owned subsidiary of Concord III (the “Business Combination”). On the Closing Date, Concord III changed its name from Concord III to “GCT Semiconductor Holding, Inc.”

The Business Combination was accounted for as a reverse recapitalization, with Legacy GCT being the accounting acquirer and Concord III being the acquired company for financial reporting purposes. As a result, Legacy GCT’s consolidated financial statements for historical periods will be included in GCT’s future periodic reports filed with the SEC.

The Company received $17.2 million cash proceeds from the Business Combination and private investment from public equity financing (“PIPE Financing”), net of transaction costs. Total direct and incremental transaction costs of Concord III and Legacy GCT were $22.0 million and treated as a reduction of the cash proceeds, of which $8.9 million was deducted from additional paid-in capital for underwriting, accounting, legal and other fees, and the remaining balance of $13.1 million was expensed in the period incurred by Concord III.

### Key Factors Affecting Our Performance

We believe that our future success and financial performance depend on a number of factors that present significant opportunities for our business but also pose risks and challenges, including those in the section titled “Risk Factors” of this Quarterly Report.

#### Commercial Deployment of 4G LTE and 5G Market

Our business depends upon the continued commercial deployment of 4G and 5G wireless communications equipment, products, and services based on GCT’s technology. Deployment of new networks by wireless carriers requires significant capital expenditures well in advance of any revenue from such networks. If the rate of deployment of new networks by wireless carriers is slower than our expectation, this will reduce the sales of its products and could cause OEMs and ODMs to hold excess inventory. This would harm our revenues and our financial results. The worldwide commercial deployment and adoption of the narrow band LTE variants, Cat M and Cat NB, are expected to expand further the markets for Internet of Things devices. If deployments of the Cat M or Cat NB standards are delayed or if competing standards for Internet of Things devices become favored by wireless carriers, we may not be able to successfully increase sales of our Cat M and Cat NB products, which would harm our revenues and financial results.

#### Development of New Products

The markets in which we and our customers compete or plan to compete are characterized by rapidly changing technologies, industry standards, and technological obsolescence. Our ability to compete successfully depends on our ability to design, develop, market, and support new products and enhancements on a timely and cost-effective basis. A fundamental shift in technologies in any of our target markets, such as the 5G wireless communications markets, could harm our competitive position within these markets. Our failure to anticipate these shifts, develop new technologies, or react to changes in existing technologies could delay our development of new products, which could result in product obsolescence, decreased revenue, and loss of design wins.

The success of our new products will depend on accurate forecasts of long-term market demand, customer and consumer requirements, and future technological developments, as well as a variety of specific implementation factors, including:

- accurate prediction of the size and growth of the 4G and 5G markets;
- accurate prediction of the growth of the Internet of Things markets and the timing of commercial availability of 4G and 5G networks;
- accurate prediction of changes in device manufacturer requirements, technology, industry standards or consumer expectations, demands, and preferences;
- timely and efficient completion of product design and transfer to manufacturing, assembly and test, and securing sufficient manufacturing capacity to allow us to continue to timely and efficiently deliver products to our customers;
- market acceptance, adequate consumer demand, and commercial production of the products in which our mobile and wireless broadband semiconductor solutions are incorporated;
- the quality, performance, and reliability of the product as compared to competing products and technologies;
- effective marketing, sales, and service; and
- the ability to obtain licenses to use third-party technology to support the development of our products.

If we fail to introduce new products that meet the demands of our customers or our target markets, or if we fail to penetrate new markets, our revenue will likely decrease over time, and our financial condition could suffer.

#### Semiconductor and Communications Industry

The semiconductor industry has historically exhibited a pattern of cyclicality, which at various times has included significant downturns in customer demand. Cyclical downturns can result in substantial declines in semiconductor demand, production overcapacity, high inventory levels, and accelerated erosion of average selling prices. Such downturns result from a variety of market forces, including constant and rapid technological change, quick product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand.

Downturns in the semiconductor industry have been attributed to a variety of factors, including the COVID‑19 pandemic, ongoing trade disputes between the United States and China, weakness in demand and pricing for semiconductors across applications, and excess inventory. In addition, from the end of 2022, the semiconductor industry experienced a downturn due to inventory corrections and reduced consumer demands. These downturns have directly impacted GCT’s business, suppliers, distributors, and end customers. More recently the semiconductor industry has normalized however there have been lingering effects that continue to effect certain segments including that for 4G LTE, where channel inventories continue to exist and where demand has been reduced due to expedited customer transition from 4G LTE to 5G.

Because a significant portion of our expenses are fixed in the near term or are incurred in advance of anticipated sales, we may not be able to reduce our expenses rapidly enough to offset any unanticipated shortfall in revenue. If this situation were to occur, it could adversely affect our operating results, cash flow, and financial condition. In addition, the semiconductor industry has periodically experienced increased demand and production constraints. As a fabless semiconductor company, we rely exclusively on third-party foundries, including certain major semiconductor foundries such as UMC, Alpha and TSMC, for the manufacturing and supplies of its wafers and products. We do not have any formal foundry agreements that guarantee a minimum level of manufacturing capacity. In times of significant increasing demand for capacity, these foundries may experience production shortages and may not allocate sufficient manufacturing capacity to us. If this happens, we may not be able to produce sufficient quantities of our products to meet the increased demand. Any disruption in our supply chain can make it more difficult for us to obtain sufficient wafer, assembly, and test resources from our subcontract manufacturers. Any factor adversely affecting the semiconductor industry in general, or the particular segments of the industry that our products target, may adversely affect our ability to generate revenue and impact our operating results.

In addition, a shortage of manufacturing capacity can also impact the product development strategies of our major customers, which may, in turn, affect our business operations. For example, in 2022, the supply shortage caused our largest customer to change its priority on product development from 4G to the next generation of 5G products, which resulted in the reduction of 4G activity and a decline in demand for our products. Our business is expected to increase again with this customer after the launch of our 5G products.

In the past, the wireless communications industry has experienced pronounced downturns, and these cycles may continue in the future. A future decline in global economic conditions could have adverse, wide-ranging effects on demand for our products and for the products of our customers, particularly wireless communications equipment manufacturers or other members of the wireless industry, such as wireless network operators. Inflation, deflation, and economic recessions that adversely affect the global economy and capital markets also adversely affect our customers and our end consumers. For example, our customers’ ability to purchase or pay for our products and services, obtain financing, and upgrade wireless networks could be adversely affected, which may lead to many networking equipment providers slowing their research and development activities, canceling, or delaying new product development, reducing their inventories, and taking a cautious approach to acquiring our products, which would have a significant negative impact on our business. If this situation were to occur, it could adversely affect our operating results, cash flow, and financial condition. In the future, any of these trends may also cause our operating results to fluctuate significantly from year to year, which may increase the volatility of our stock price.

#### Public Company Costs

As a result of the Business Combination, we became the successor to an SEC-registered and NYSE-listed company, which requires us to hire additional personnel and implement procedures and processes to address and comply with public company regulatory requirements and customary practices. We have incurred, and expect to continue to incur, additional expenses as a public company including directors’ and officers’ liability insurance premiums, director fees, and additional internal and external accounting, legal and administrative costs.

### Key Components of Results of Operations

### Net Revenues

The timing of revenue recognition and the amount of revenue recognized in each case depends on various factors, including the specific terms of each arrangement and the nature of the underlying performance obligations. Our net revenues are comprised of product and service revenues.

#### Product Revenues

Our product sales are generated from the sale of mobile semiconductor products. Product revenues are recognized at a point in time once control has been transferred to a customer, which is generally at the time of shipment.

#### Service Revenues

Our service revenues are generated from the sale of mobile semiconductor platform solutions aimed at the 4G LTE and 5G industries, development services, technical advice, and maintenance services. Service revenues are generally recognized over time as the customer obtains control of the promised services.

### Cost of Net Revenues

Our cost of net revenues consists of product and service costs. The cost of product net revenues consists of direct and indirect costs related to the manufacturing of our products. Direct costs include wafer costs and costs of assembly and testing performed by third-party contract manufacturers. Indirect costs consist of provisions for excess and obsolete inventory, royalties, allocated overhead for employee costs and facility costs, warranty, and the amortization of our production mask sets and certain intangible assets. Shipping and handling costs incurred for inventory purchases related to the units sold and costs of product shipments are also recorded in the cost of net product revenues. Service costs consist of non-recurring engineering costs for service projects.

### Operating Expenses

#### Research and Development Expenses

Our research and development (“R&D”) expenses consist of costs incurred to develop our products and services. These expenses consist of personnel costs, including salaries, employee benefit costs, and stock-based compensation for employees engaged in R&D activities, software costs, computing costs, hardware and experimental supplies, and expenses for outside engineering consultants. We expense all R&D costs in the periods in which they are incurred.

#### Sales and Marketing Expenses

Our sales and marketing (“S&M”) expenses consist of employee-related expenses, including salaries, commissions, employee benefits costs, and stock-based compensation for all marketing, sales, and sales support employees. S&M expenses also include local and centralized advertising costs and the infrastructure required to support our marketing efforts. We expense S&M costs in the periods in which they are incurred.

#### General and Administrative Expenses

Our general and administrative (“G&A”) expenses consist of various components not related to R&D or S&M, such as personnel costs, regulatory fees, costs associated with maintaining and filing intellectual property, meals and entertainment expenses, travel expenses, insurance expenses, and other expenditures related to external professional services including legal, engineering, marketing, human resources, audit, and accounting services. Personnel costs include salaries, benefits, and stock-based compensation. As we continue to grow and expand our workforce and operations, and considering the increased costs associated with operating as a public company, we anticipate that our G&A expenses will increase for the foreseeable future.

### Gain on Extinguishment of Liability

Gain on extinguishment of liability relates to the release by a vendor due to a contract termination during the period of amounts payable by us for research and development services received in prior years.

### Interest Expense

Interest expense primarily consists of interest and amortization of related debt issuance costs related to our borrowings and convertible promissory notes.

### Other Income (Expenses), Net

Other income (expenses), net consists of foreign currency gains and losses, changes in fair value of convertible promissory notes, gains and losses associated with the redemption of convertible notes, and other miscellaneous income and expenses.

### Results of Operations

This section discusses the results of our operations for the periods indicated. The period-to-period comparison of financial results is not necessarily indicative of future results.

### For the Three Months Ended September 30, 2024 and 2023

The following table sets forth our historical results for the periods indicated and the changes between periods (in thousands):

| Net revenues: | Three Months Ended September 30, 2024 | 2023 | $ change | % change |
| --- | ---: | ---: | ---: | ---: |
| Product | $1,715 | $4,026 | $(2,311) | (57)% |
| Service | 895 | 450 | 445 | 99% |
| Total net revenues | 2,610 | 4,476 | (1,866) | (42)% |
| Cost of net revenues: |  |  |  |  |
| Product | 710 | 3,985 | (3,275) | (82)% |
| Service | 274 | (36) | 310 | (861)% |
| Total cost of net revenues | 984 | 3,949 | (2,965) | (75)% |
| Gross profit | 1,626 | 527 | 1,099 | 209% |
| Operating expenses: |  |  |  |  |
| Research and development | 4,210 | 2,367 | 1,843 | 78% |
| Sales and marketing | 949 | 744 | 205 | 28% |
| General and administrative | 2,379 | 1,433 | 946 | 66% |
| Total operating expenses | 7,538 | 4,544 | 2,994 | 66% |
| Loss from operations | (5,912) | (4,017) | (1,895) | 47% |
| Interest expense | (667) | (1,220) | 553 | (45)% |
| Other income (expenses), net | (481) | 929 | (1,410) | (152)% |
| Loss before provision for income taxes | (7,060) | (4,308) | (2,752) | 64% |
| Provision for income taxes | 61 | 38 | 23 | 61% |
| Net loss | $(7,121) | $(4,346) | $(2,775) | 64% |

#### Net Revenues

Net revenues decreased by $1.9 million, or 42%, to $2.6 million for the three months ended September 30, 2024 from $4.5 million for the three months ended September 30, 2023. The decrease was primarily attributable to a decrease of $2.3 million in product sales, partially offset by an increase of $0.4 million in service revenue.

Product sales decreased by $2.3 million from $4.0 million for the three months ended September 30, 2023 to $1.7 million for the three months ended September 30, 2024. The decrease was due to excess LTE channel inventory and our largest customers changing their priorities on product development from 4G to the next generation 5G products during 2023, which resulted in the reduction of 4G activity and decline for demand during the three months ended September 30, 2024. Our net revenues are expected to increase with these customers after the launch of our 5G products.

Service revenues increased by $0.4 million, from $0.5 million for the three months ended September 30, 2023 to $0.9 million for the three months ended September 30, 2024. This increase was due to more significant service projects that were ongoing in the third fiscal quarter of 2024.

#### Cost of Net Revenues

Cost of net revenues decreased by $3.0 million, or 75%, to $1.0 million for the three months ended September 30, 2024 from $3.9 million for the three months ended September 30, 2023. Product costs decreased by $3.3 million from $4.0 million for the three months ended September 30, 2023 to $0.7 million for the three months ended September 30, 2024. The decrease was primarily driven by a decrease in direct product costs as we sold fewer units. Service costs were $0.3 million for the three months ended September 30, 2024. Service costs were nominal for the three months ended September 30, 2023.

Our gross margin increased to 62% for the three months ended September 30, 2024 from 12% for the three months ended September 30, 2023 primarily due to changes in the revenue mix. Specifically, we increased the share of reference platform sales and generated higher margins from our service offerings during the third fiscal quarter of 2024.

#### Research and Development Expenses

Research and development expenses increased by $1.8 million, or 78%, from $2.4 million for the three months ended September 30, 2023 to $4.2 million for the three months ended September 30, 2024. This change was primarily due to a $1.5 million increase in research and development expenses mainly related to professional services provided by Alpha related to the design of 5G chip products.

#### Sales and Marketing Expenses

Sales and marketing expenses increased by $0.2 million, or 28%, from $0.7 million for the three months ended September 30, 2023 to $0.9 million for the three months ended September 30, 2024. This increase was primarily due to personnel-related costs.

#### General and Administrative Expenses

General and administrative expenses increased by $0.9 million, or 66%, from $1.4 million for the three months ended September 30, 2023 to $2.4 million for the three months ended September 30, 2024. The change was primarily due to a $0.4 million increase in stock-based compensation related to RSUs, a $0.4 million increase in professional and other expenses related to the public company operations, and a $0.1 million increase in personnel-related costs.

#### Interest Expense

Interest expense decreased by $0.6 million or 45%, from $1.2 million for the three months ended September 30, 2023 to $0.7 million for the three months ended September 30, 2024. The decrease was primarily due to the conversion of significant amounts of outstanding convertible notes upon the closing of the Business Combination.

#### Other Income (Expenses), Net

Other expenses, net for the three months ended September 30, 2024 of $0.5 million was primarily from the loss of $1.0 million on foreign currency transactions and $0.2 million loss from the change in fair value of convertible promissory notes, partially offset by a $0.8 million gain on warrants valuation. Other income, net for the three months ended September 30, 2023 of $0.9 million was primarily from gains on foreign currency transactions.

### For the Nine Months Ended September 30, 2024 and 2023

The following table sets forth our historical results for the periods indicated and the changes between periods (in thousands):

| Net revenues: | Nine Months Ended September 30, 2024 | 2023 | $ change | % change |
| --- | ---: | ---: | ---: | ---: |
| Product | $4,111 | $8,667 | $(4,556) | (53)% |
| Service | 3,232 | 3,172 | 60 | 2% |
| Total net revenues | 7,343 | 11,839 | (4,496) | (38)% |
| Cost of net revenues: |  |  |  |  |
| Product | 1,522 | 5,954 | (4,432) | (74)% |
| Service | 1,321 | 1,006 | 315 | 31% |
| Total cost of net revenues | 2,843 | 6,960 | (4,117) | (59)% |
| Gross profit | 4,500 | 4,879 | (379) | (8)% |
| Operating expenses: |  |  |  |  |
| Research and development | 13,895 | 7,254 | 6,641 | 92% |
| Sales and marketing | 2,921 | 2,337 | 584 | 25% |
| General and administrative | 8,075 | 5,537 | 2,538 | 46% |
| Gain on extinguishment of liability | (14,636) | — | (14,636) | 100% |
| Total operating expenses | 10,255 | 15,128 | (4,873) | (32)% |
| Loss from operations | (5,755) | (10,249) | 4,494 | (44)% |
| Interest expense | (3,509) | (4,878) | 1,369 | (28)% |
| Other income, net | 2,044 | 2,946 | (902) | (31)% |
| Loss before provision for income taxes | (7,220) | (12,181) | 4,961 | (41)% |
| Provision for income taxes | 187 | 125 | 62 | 50% |
| Net loss | $(7,407) | $(12,306) | $4,899 | (40)% |

#### Net Revenues

Net revenues decreased by $4.5 million, or 38%, from $11.8 million for the nine months ended September 30, 2023 to $7.3 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease of $4.6 million in product sales.

Product sales decreased by $4.6 million, or 53%, from $8.7 million for the nine months ended September 30, 2023 to $4.1 million for the nine months ended September 30, 2024. This decrease is driven by a reduction of $4.7 million of LTE product sales partially offset by an increase of $0.1 million in LTE platform sales. This trend was primarily due to excess LTE channel inventory and the changing priorities of our largest customers that shifted their focus to the next generation 5G products. Our net revenues are expected to increase with these customers after we launch our 5G products. Service revenues remained comparable for both the nine months ended September 30, 2024 and 2023.

#### Cost of Net Revenues

Cost of net revenues decreased by $4.1 million, or 59%, from $7.0 million for the nine months ended September 30, 2023 to $2.8 million for the nine months ended September 30, 2024, driven primarily by the reduction in our product sales. Product costs decreased by $4.4 million, or 74%, from $6.0 million for the nine months ended September 30, 2023 to $1.5 million for the nine months ended September 30, 2024. This decrease in product costs was driven primarily by the reduction in direct product costs as we sold fewer units. Service costs increased by $0.3 million, or 31%, from $1.0 million for the nine months ended September 30, 2023 to $1.3 million for the nine months ended September 30, 2024. This increase in service costs was driven primarily by requirements of our ongoing service projects in 2024.

Our gross margins increased to 61% for the nine months ended September 30, 2024 compared to 41% for the nine months ended September 30, 2023 primarily due to changes in the revenue mix. Specifically, we increased the share of reference platform sales and generated higher margins from our service offerings during the nine months ended September 30, 2024.

#### Research and Development Expenses

Research and development expenses increased by $6.6 million, or 92% from $7.3 million for the nine months ended September 30, 2023 to $13.9 million for the nine months ended September 30, 2024, primarily in connection with our development projects. This increase was primarily due to a $4.2 million increase in research and development expenses mainly related to professional services provided by Alpha related to the design of 5G chip products, a $2.1 million increase in expensed intellectual property costs related to our new 5G chip products, and a $0.4 million increase in stock-based compensation expense, partially offset by a $0.2 million decrease in personnel costs.

#### Sales and Marketing Expenses

Sales and marketing expenses increased by $0.6 million, or 25%, from $2.3 million for the nine months ended September 30, 2023 to $2.9 million for the nine months ended September 30, 2024. This change was primarily due to increase in personnel related costs.

#### General and Administrative Expenses

General and administrative expenses increased by $2.5 million, or 46%, from $5.5 million for the nine months ended September 30, 2023 to $8.1 million for the nine months ended September 30, 2024. The change was primarily due to a $1.6 million increase in stock-based compensation related to the vesting of equity awards with performance conditions met upon the closing of the Business Combination and a $0.8 million increase in professional expenses related to the public company operations.

#### Gain on Extinguishment of Liability

Gain on extinguishment of liability was $14.6 million for the nine months ended September 30, 2024 due to the release by a vendor of amounts payable by us for research and development services received in prior years. There was no similar transaction that took place during the comparable period of 2023.

#### Interest Expense

Interest expense decreased by $1.4 million, or 28%, from $4.9 million for the nine months ended September 30, 2023 to $3.5 million for the nine months ended September 30, 2024. The decrease of $1.4 million was primarily due to the conversion of significant amounts of outstanding convertible notes upon the closing of the Business Combination.

#### Other Income, Net

Other income, net for the nine months ended September 30, 2024 of $2.0 million was primarily from the net gain of $2.8 million from fair value remeasurement of our warrants based on the reduction in our stock price during the period then ended, a gain of $1.2 million from foreign currency transactions, partially offset by a net loss of $1.4 million related to the fair value measurement of our convertible promissory notes and a $0.6 million loss from the fair value measurement of our common stock forward liability. Other income, net for the nine months ended September 30, 2023 of $2.9 million was primarily from the fair value measurement of our convertible promissory notes and foreign currency gains.

### Non-GAAP Financial Measures

Since inception, we have financed our operations primarily through cash receipts from customers, the issuance of convertible promissory notes, borrowings, issuance of capital stock and the exercise of stock options.

The discussion below includes earnings or losses before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA, and Free Cash Flow, as defined below, which are not determined under accounting principles generally accepted in the United States (“non-GAAP financial measures”). Management uses EBITDA, Adjusted EBITDA, and Free Cash Flow for business planning purposes, including managing our business against internally projected results of operations and measuring our performance and liquidity. These supplemental performance measures also provide another basis for comparing period-to-period results by excluding potential differences caused by non-operational and unusual or non-recurring items and may not be comparable to similarly titled measures used by other companies.

#### Definitions and Limitations

EBITDA represents net loss before interest expense, interest income, income taxes and depreciation and amortization expense. Adjusted EBITDA represents EBITDA adjusted to eliminate stock-based compensation expense included in the results of our continuing operations.

We believe that the use of EBITDA and Adjusted EBITDA eliminates items that have less bearing on our operating performance, thereby highlighting trends in our core business which may not otherwise be apparent. We believe that the exclusion of stock-based compensation expense from Adjusted EBITDA provides a clearer view of the operating performance of our business and is appropriate given that grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time. We also present Adjusted EBITDA as a supplemental performance measure because we believe that this measure provides investors, securities analysts and other users of our consolidated financial statements with important supplemental information with which to evaluate our performance and to enable them to assess our performance on the same basis as management.

Free Cash Flow represents net cash provided by operating activities, less purchases of property and equipment.

We believe that Free Cash Flow provides meaningful information regarding our liquidity. Management believes that Free Cash Flow is useful for investors because it provides them with an important perspective on the cash available for strategic measures, after making necessary capital investments in property and equipment to support the Company’s ongoing business operations and provides them with the same measures that management uses as the basis of making capital allocation decisions.

These supplemental performance measures may vary from and may not be comparable to similarly titled measures used by other companies, including companies in the semiconductor industry. EBITDA, Adjusted EBITDA and Free Cash Flow are not recognized measurements under GAAP. When analyzing our performance with these three non-GAAP metrics, investors should (i) evaluate each adjustment in our reconciliation to the corresponding GAAP measure, and the explanatory footnotes regarding those adjustments, (ii) use EBITDA or Adjusted EBITDA in addition to, and not as an alternative to, net income attributable to common stock as a measure of operating results and (iii) use Free Cash Flow in addition to, and not as an alternative to, consolidated net cash provided by operating activities when evaluating our liquidity.

Adjusted EBITDA and Free Cash Flow have limitations as analytical tools, and users should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. These metrics should not be viewed as substitutes for, or superior to, net loss or net cash used in operating activities reported in accordance with GAAP as measures of profitability or liquidity. Some of these limitations include the following:

- EBITDA does not reflect interest income or expense, cash requirements for our income taxes, depreciation and amortization, which are significant and unavoidable operating costs given the level of capital expenditures needed to maintain our business, changes in, or cash requirements for, our working capital needs.
- Adjusted EBITDA does not consider or does not take into account the same indicators as EBITDA and the potentially dilutive impact of stock-based compensation.
- Free Cash Flow does not represent the total residual cash flow available for discretionary purposes because it does not reflect our contractual commitments or obligations.
- Other companies, including those in our industry, may calculate EBITDA, Adjusted EBITDA and Free Cash Flow differently, which reduces their usefulness as comparative measures.

Because of these limitations, investors consideration should include EBITDA, Adjusted EBITDA, and Free Cash Flow alongside other financial performance measures, including net loss, net cash used in operating activities, and our other GAAP results.

#### Reconciliation to GAAP Measures

The following is a reconciliation of net loss to EBITDA and Adjusted EBITDA for the periods presented (in thousands):

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net loss | $(7,121) | $(4,346) | $(7,407) | $(12,306) |
| Provision for income taxes | 61 | 38 | 187 | 125 |
| Interest expense | 667 | 1,220 | 3,509 | 4,878 |
| Depreciation and amortization | 149 | 264 | 528 | 654 |
| EBITDA | (6,244) | (2,824) | (3,183) | (6,649) |
| Stock-based compensation | 573 | 3 | 2,119 | 8 |
| Adjusted EBITDA | $(5,671) | $(2,821) | $(1,064) | $(6,641) |

The following is a reconciliation of net cash used in operating activities to free cash flow for the periods presented (in thousands):

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net cash used in operating activities | $(4,627) | $(1,549) | $(28,689) | $(7,920) |
| Purchases of property and equipment | (54) | (62) | (185) | (284) |
| Free cash flow | $(4,681) | $(1,611) | $(28,874) | $(8,204) |

35

### Liquidity and Capital Resources

Since inception, we have financed our operations primarily through cash receipts from customers, the issuance of convertible promissory notes, borrowings, issuance of capital stock and the exercise of stock options.

With limited exceptions, we have incurred and expect that we will continue to incur significant operating losses. For the three and nine months ended September 30, 2024, we had a net loss of $7.1 million and $7.4 million, respectively. For the nine months ended September 30, 2024 and 2023, we had cash used in operating activities of $28.7 million and $7.9 million, respectively. As of September 30, 2024, we had an accumulated deficit of $557.1 million. Our unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if we are unable to obtain adequate financing in the future.

In March 2024, we received $17.2 million in cash proceeds from the reverse recapitalization and PIPE Financing, net of transaction costs in connection with the closing of the Business Combination. As a result of the cash proceeds received in connection with the Business Combination and other capital resources available to us, including sales of our products and services and the Purchase Agreement discussed below, we believe we have sufficient cash to fund our operations for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q.

In April 2024, we entered into a common stock purchase agreement (the “Purchase Agreement”) and a related registration rights agreement (the “Registration Rights Agreement”) with B. Riley Principal Capital II, LLC (“B. Riley”). Pursuant to the Purchase Agreement, we have the right but not the obligation, to sell, from time to time, to B. Riley up to $50.0 million in aggregate gross purchase price of shares of our common stock in our sole discretion, subject to certain conditions and limitations, during the term of 24 months. Pursuant to the Registration Rights Agreement, the Company filed a registration statement on Form S-1 to register the resale of shares of common stock to be sold to B. Riley, which became effective on June 6, 2024. Through September 30, 2024, we sold an aggregate of 2,100,177 shares of our common stock for $8.8 million under the Purchase Agreement and received cash proceeds of $7.8 million, which included $1.0 million that was withheld by B. Riley against the outstanding amounts payable. In addition, in October 2024 we sold 103,596 shares of our common stock under the Purchase Agreement and received cash proceeds of $0.3 million.

As of September 30, 2024, we have outstanding convertible promissory notes and borrowings with a total principal amount of $41.8 million, of which $36.8 million is contractually due within 12 months from this reporting date. During July and October 2024, we were able to renegotiate the timing of payments for some of the obligations that initially were due in the third fiscal quarter of 2024 and first fiscal quarter of 2025. However, our existing debt obligations largely remain due within one year from September 30, 2024. In November 2024, we entered into a term loan agreement with Kyeongho Lee pursuant to which the Company borrowed $2.9 million maturing in December 2024. We will need to start generating positive cash flows, renegotiate our existing debt obligations and raise additional capital through debt or equity financing. There can be no assurance that such additional debt or equity financing will be available on terms acceptable to us or at all.

While a portion of the cash proceeds received in connection with the Business Combination was expended to support our 5G activity and fund other operational expenses, we expect that further and significant ongoing operating expenditures will be necessary to successfully implement our business plan and market our products. With the start of manufacturing, shipments and commercialization of our first 5G chipset expected during the first half of 2025, we anticipate significant related expenditures in the form of production-related costs, including mask sets, wafers, and design service fees, and most such costs will be incurred prior to the commencement of manufacturing and production. If we do not have sufficient funds to make such payments, or if we cannot extend the terms of our existing commercial loans or to raise additional capital, the payments can be delayed, which may adversely affect our business operations and financial performance. For a more detailed description of such risks, please see the section entitled “Risk Factors” disclosed in our Registration Statement on Form S-1 filed with the SEC on May 22, 2024.

We intend to mitigate the risk of any working capital deficit by continuing to seek and execute appropriate actions to secure funding as a publicly traded company, including extension and refinancing of existing loans, executing public or private equity offerings, debt financings, and other means. We have historically been able to raise capital through the issuance and sale of equity and equity-linked instruments, such as redeemable convertible preferred stock, convertible promissory notes, and borrowings, although no assurance can be provided that we would continue to be successful in doing so in the future.

We expect to use such additional liquidity and the cash and cash equivalents available to us after the Closing to finance the following activities:

- Cost of mass production of 5G and other products, including masks, wafers and design house fees;
- Acquisition of IP and tool enhancement to develop next generation of product;
- Hiring of additional personnel in engineering and sales and marketing functions; and
- Improvement of engineering equipment.

While we believe that we have a reasonable basis for our expectation and we will be available to raise additional funds, we cannot provide assurance that we will be able to complete additional financing in a timely manner. In addition, the sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and may include operating and financial covenants that would restrict our operations. We cannot be certain that any financing will be available in the amounts we need or on terms acceptable to us, if at all. Should we enter into definitive collaboration and/or joint venture agreements or engage in business combinations in the future, we may be required to seek additional financing.

### Cash flow Comparison for the Nine Months Ended September 30, 2024 and 2023

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

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(28,689) | $(7,920) |
| Net cash used in investing activities | (185) | (284) |
| Net cash provided by financing activities | 31,596 | 7,591 |
| Effect of exchange rate changes on cash and cash equivalents | (1,168) | (665) |
| Net increase (decrease) in cash and cash equivalents | $1,554 | $(1,278) |

#### Operating Activities

Cash used in operating activities of $28.7 million during the nine months ended September 30, 2024 was primarily attributable to our net loss of $7.4 million, non-cash adjustments of $12.2 million, and a net change in our operating assets and liabilities of $9.1 million. Non-cash adjustments consisted primarily of a $14.6 million gain from the extinguishment of liability, a $2.8 million gain from the change in fair value of warrant liabilities, a $0.5 million decrease in provision for credit loss, partially offset by $2.1 million in stock-based compensation, a $1.4 million loss from the change in fair value of convertible promissory notes, $0.7 million in non-cash expense related to the issuance of common stock to an underwriter, $0.5 million in depreciation and amortization charges, and a $0.5 million in operating lease right-of-use amortization. The change in our operating assets and liabilities of $9.1 million primarily resulted from a decrease of $3.0 million in accrued and other current liabilities due to the payment of costs incurred related to our Business Combination, a decrease of $2.3 million in accounts payable, an increase of $1.7 million in contract assets, an increase of $1.6 million in inventory, an increase or $0.9 million in accounts receivable, a decrease of $0.5 million in lease liabilities, and a decrease of $0.3 million in other liabilities, partially offset by an increase of $0.7 million in net defined benefit liabilities, an increase of $0.5 million in contract lease liabilities, and a decrease of $0.1 million in other assets.

Cash used in operating activities of $7.9 million during the nine months ended September 30, 2023 was primarily attributable to our net loss of $12.3 million, partially offset by $0.9 million in non-cash adjustments and $3.5 million change in our operating assets and liabilities. Non-cash adjustments consisted primarily of a $0.8 million increase in credit loss allowance, $0.7 million in depreciation and amortization charges, and $0.6 million in operating lease right-of-use amortization, partially offset by $1.1 million gain from the change in fair value of convertible promissory notes. The change in our operating assets and liabilities of $3.5 million primarily resulted from an increase of $7.4 million in our accrued and other current liabilities related to the timing of payments, a decrease of $1.8 million in inventory, a decrease of $0.8 million in prepaid expenses and other current assets, and a decrease of $0.1 million in other assets, partially offset by an increase of $3.3 million in accounts receivable, an increase of $2.0 million in in contract assets due to unbilled services provided under certain projects, a decrease of $0.8 million in lease liabilities and an decrease of $0.7 million in accounts payable and a decrease of $0.1 million in income tax payable.

#### Investing Activities

Cash used in investing activities during the nine months ended September 30, 2024 and 2023 was related solely to the purchases of property and equipment.

#### Financing Activities

Cash provided by financing activities of $31.6 million during the nine months ended September 30, 2024 consisted of $17.2 million from proceeds received from the reverse recapitalization and PIPE Financing, net of transaction costs, $16.3 million in proceeds from the issuance of convertible promissory notes, $7.8 million proceeds received from issuance of common stock to B. Riley under the Purchase Agreement, $3.7 million in proceeds from borrowings, and $2.2 million proceeds received from issuance of common stock in a private placement, partially offset by $14.1 million in repayment of our borrowings and $1.6 million repayment of convertible promissory notes.

Cash provided by financing activities of $7.6 million during the nine months ended September 30, 2023 primarily related to net proceeds from bank borrowings.

### Commitments and Contractual Obligations

We have material commitments and contractual obligations, including leases, purchase commitments, and research and development agreements. We have various operating leases, under which we lease office equipment and office space. The operating leases have various expiration dates through 2026.

We have certain commitments for outstanding purchase orders related to the manufacture of certain wafers utilized by the Company and other services, and we have entered into a material research and development agreement. See Note 8 to our unaudited condensed consolidated financial statements included in this Form 10-Q for more information regarding our additional commitments and contractual obligations.

We have certain debt agreements in place related to convertible promissory notes and borrowings. See Note 7, to our unaudited condensed consolidated financial statements included in this Form 10-Q for more information regarding our debt arrangements.

### Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts and related disclosures. We base our estimates on historical experience and various other factors that we believe to be reasonable under the circumstances, which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions due to the inherent uncertainty involved in making those estimates, and any such differences may be material.

There have been no material changes to our critical accounting estimates from those described in “Management’s Discussion and Analysis of Financial Condition,” “Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” disclosed in our Form 8-K filing with the SEC on April 1, 2024, except that from the Closing we have certain contracts in our own equity that are subject to liability classification and remeasurement each reporting periods.

### Revenue Recognition

Our revenues are generated by the sale of mobile semiconductor solutions consisting of products and platform solutions aimed at the LTE and 5G industries, development services, and technical advice and maintenance services.

The timing of revenue recognition and the amount of revenue recognized in each case depends on various factors, including the specific terms of each arrangement and the nature of the underlying performance obligations. Revenues from sales of our products are recognized upon transfer of control to the customer, which is generally at the time of shipment. Service revenues from development services, technical advice, and maintenance services are generally recognized over time as these performance obligations are satisfied.

We make estimates of potential future returns and sales allowances related to current period product revenue. We analyze historical return rates and changes in customer demand when evaluating the adequacy of returns and sales allowances. Although we believe we have a reasonable basis for our estimates, such estimates may differ from actual returns and sales allowances. These differences may materially impact reported net product revenues and amounts ultimately collected on accounts receivable.

### Provision for Credit Losses

Accounts receivable balances are primarily derived from revenues earned from customers located in the United States, China, South Korea, Japan, and Taiwan. We perform ongoing credit evaluations of the financial conditions of our customers and distributors, and generally do not require collateral from our customers. We continuously monitor collections and payments from customers and maintain a provision for credit losses based upon the collectibility of our customer accounts. We review the provision by considering certain factors such as historical experience, industry data, credit quality, age of balances and current economic conditions that may affect a customer’s ability to pay. Uncollectible receivables are written off when all efforts to collect have been exhausted and recoveries are recognized when they are recovered. We cannot guarantee that we will continue to experience the same credit loss rates that we had in the past. A significant change in the liquidity or financial position of any of our significant customers could have a material adverse effect on the collectibility of our accounts receivable and our future operating results. The provision for credit losses was $1.1 million and $1.6 million as of September 30, 2024 and December 31, 2023, respectively.

### Fair Value of Convertible Promissory Notes

We have made an election to account for our convertible promissory notes under the fair value option, the convertible promissory notes are recorded at their initial fair value on the date of issuance and then are adjusted to fair value upon any modification and at each balance sheet date thereafter. Changes in the estimated fair value of the convertible promissory notes are recognized as non-cash gains or losses in the unaudited condensed consolidated statements of operations within other income (expenses), net.

Our convertible promissory notes are valued using a discounted cash flow (“DCF”) model or binomial lattice model (“BLM”), and, prior to the Business Combination, were valued using a combination of an option pricing model and Probability-Weighted Expected Return Method (“PWERM”), which are a Level 3 fair value measurements. Significant assumptions used in the DCF include the remaining term and discount rate. Significant assumptions used in the BLM include volatility, remaining term, risk-free rate, and credit spread. The PWERM is a scenario-based methodology that estimates the fair value based using an analysis of future values for the Company that assumes various outcomes. The value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available. The future value under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability-weighted to arrive at an indication of value. Significant assumptions used in the PWERM include volatility, discount rate, and the probability of a future liquidity event.

### Contracts in Own Equity – Fair Value of Warrants

We classify contracts in equity, including warrants to purchase shares of the Company’s common stock, that do not meet the indexation guidance as liabilities. At the end of each reporting period, these liability-classified instruments are remeasured using an option pricing model or BLM. Significant assumptions are used in determining the fair value of our warrants and include volatility and the risk-free rate.

### Recent Accounting Pronouncements

See Note 2 to our unaudited condensed consolidated financial statements included herein for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition and results of operations.

### JOBS Act Accounting and Smaller Reporting Company Elections

We are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies.

We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our unaudited condensed consolidated financial statements may or may not be comparable to companies that comply with new or revised accounting pronouncements as of public companies’ effective dates.

We are also a “smaller reporting company,” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company.

We have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies, and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non- affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

## Market risk

As filed, 241 characters.

We are a smaller reporting company, as defined by Rule 12b‑2 under the Securities and Exchange Act of 1934, as amended (the Exchange Act) and in Item 10(f)(1) of Regulation S-K and are not required to provide the information under this item.

## Controls and procedures

As filed, 1,392 characters.

### Evaluation of Disclosure Controls and Procedures

As of September 30, 2024, management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of September 30, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control financial reporting.

## Risk factors

As filed, 5,782 characters.

Other than the risk factors discussed under this section, there have been no material changes to the risk factors we previously disclosed in our Registration Statement on Form S‑1 filed with the SEC on May 22, 2024. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

***We have a history of losses, and we may not achieve or sustain profitability in the future, on a quarterly or annual basis.***

We began operations in 1998 and have incurred losses on an annual basis since inception. We have incurred and will continue to incur significant operating losses. For the years ended December 31, 2023 and 2022, we had a net loss of $22.5 million and $26.4 million, respectively, and used cash in operating activities of $8.8 million and $18.1 million, respectively. For the nine months ended September 30, 2024, we had a net loss of $7.4 million, and used cash in operating activities of $28.7 million. As of September 30, 2024, we had an accumulated deficit of $557.1 million and negative working capital of approximately $41.9 million. We had short-term debt, including convertible promissory notes and borrowings, in the amount of $36.8 million as of September 30, 2024. As of December 31, 2023 , we had an accumulated deficit of $549.7 million and negative working capital of approximately $101.8 million. We had short-term debt in the amount of $72.3 million, including convertible promissory notes and borrowings as of December 31, 2023. We expect to incur significant expenses related to the research and development of our products and expansion of our business. Furthermore, the rapidly evolving wireless communications markets in which we sell our products, as well as other factors, make it difficult for us to forecast quarterly and annual revenue accurately. As a result, we could experience cash flow management problems, unexpected fluctuations in our results of operations and other difficulties, any of which would make it difficult for us to meet our debt obligations and achieve and maintain profitability.

Our condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if we are unable to obtain adequate financing in the future. Accordingly, if we do not generate sufficient level of revenue or become profitable, we will be required to seek other sources of funding, such as issuance of equity or debt securities to raise capital. Any such financings may not be accessible on acceptable terms, if at all. The failure to raise additional capital or otherwise obtain funding for our operation will have a material adverse effect on our business, results of operations and financial position.

***Our indebtedness could adversely affect our operations, including our ability to perform our obligations and fund working capital.***

As of September 30, 2024, we have outstanding convertible promissory notes and borrowings with a total principal amount of $41.8 million, of which $36.8 million is contractually due within 12 months from the reporting date. We may also incur substantial additional indebtedness. Our indebtedness could have important consequences, including the following:

- we may be unsuccessful in refinancing our existing indebtedness on a long-term basis;
- we could have difficulty satisfying our debt obligations, and if we fail to comply with these requirements, an event of default could result;
- we may be required to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the cash flow available to fund 5G and other product development, working capital, capital expenditures and other general corporate activities;
- in order to manage our debt and cash flows, we may increase our short-term indebtedness and decrease our long-term indebtedness which may not achieve the desired results;
- covenants relating to our indebtedness may limit our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities, which may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
- we may be more vulnerable to general adverse economic and industry conditions;
- we may be placed at a competitive disadvantage compared to our competitors with less debt; and
- we may have difficulty repaying or refinancing our obligations under our senior credit facilities on their respective maturity dates.

If any of these consequences occur, our financial condition, results of operations and ability to pay dividends could be adversely affected. This, in turn, could negatively affect the market price of our Common Stock, and we may need to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure that any refinancing would be possible, that any assets could be sold, or, if sold, of the timing of the sales and the amount of proceeds that may be realized from those sales, or that additional financing could be obtained on acceptable terms, if at all. In addition, while we were able to negotiate with our lenders of commercial loans to extend the maturity dates or modify payment schedules, there is no guarantee that we will be successful in negotiating such terms in the future, and failure to do so may result in defaults under the loans, which will have an adverse effect on our financial conditions and results of operations.

Filed Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-127082. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.