GCT Semiconductor Holding, Inc.: Form 10-Q for the period ended Sep 30, 2025

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, 2025 and related notes appearing elsewhere in this quarterly report on Form 10-Q (“Quarterly Report”) and our audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023 and related notes included in our Form 10‑K filing with the Securities and Exchange Commission (“SEC”) on March 25, 2025.

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, business-to-business (“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., customer premise equipment (“CPE”)), industrial machine-to-machine (“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.

Even as more and more applications are deployed on 5G networks, we nonetheless anticipate continued demand for our existing 4G LTE product lineup (4.75G/4.5G/4G, etc.) for the foreseeable future, because 4G products are expected to coexist in the market with 5G products at lower price points for some time in the same way that 3rd generation (“3G”) products coexisted with 4G products when 4G networks were first deployed. Having delivered initial samples to our lead 5G customers in the second quarter of 2025, we are focusing on production readiness now and anticipate first production shipments of our 5G products starting late in the fourth quarter of 2025 or early in the first quarter of 2026. Also, we expect the average sales prices for our 5G chipset to be approximately four times that of our 4G chipset, resulting in a significant increase in revenue and gross margins. We plan to continuously expand our product lineup to support 5G chipsets for future applications such as vehicle-to-everything standard (e.g., C-V2X), 5G-based satellite communication (e.g., Non-Terrestrial Network), and 5G-based IoT standard (e.g., RedCap). Our current chipset products are used in a wide variety of applications, including fixed wireless subscriber terminals (e.g., CPE), mobile wireless routers (e.g., Mobile Router/MiFi), various communication modules and devices, and industrial products.

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

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 further expand the markets for IoT devices. If deployments of the Cat M or Cat NB standards are delayed or if competing standards for IoT 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 IoT 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. More recently, the announcement and implementation of tariffs and other trade policies by the United States and other countries have resulted in a significant degree of uncertainty and risks in the global economic condition, which may negatively impact the semiconductor industry and the markets in which we operate. These downturns have directly impacted GCT’s business, suppliers, distributors, and end customers.

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 United Microelectronics Corporation, Samsung and Taiwan

Semiconductor Manufacturing Corporation, 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.

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, slow moving 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 R&D services received in prior years.

Other Income (Expense)

Interest Expense

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

Gain on foreign currency transactions, net

Gain on foreign currency transactions consists of gains, presented net of losses, from transactions denominated in other currencies, primarily South Korean won.

Change in fair value of common stock forward liability

Common stock forward liability represents a freestanding common stock forward contract under the purchase agreement (“Purchase Agreement”) with B. Riley Principal Capital II, LLC (“B. Riley”) executed in April 2024, which contains a variable share forward on our common stock. This freestanding instrument is precluded from equity classification since the Purchase Agreement with B. Riley requires shareholder approval for the issuance of shares in excess of the applicable ownership limitation caps, which is not an input in a fixed-for-fixed option or forward on equity shares. The fair value of this liability reflects the probability-adjusted present value of the discount to be provided to B. Riley for sales of our common stock under the Purchase Agreement, relative to the volume-weighted average price of our common stock during the applicable pricing period. Change in fair value of common stock forward liability includes measurement gains and losses driven by the change in the probability of scenarios to sell certain number of shares under the Purchase Agreement.

Change in fair value of common stock warrant liabilities

Common stock warrants are classified as liabilities if they do not meet equity classification requirements based on their settlement mechanism upon a change of control and similar transactions. The corresponding liability is remeasured at fair value while the common stock warrants remain outstanding.

Change in fair value of convertible promissory notes

Change in fair value of convertible promissory notes includes measurement gains and losses related to the outstanding convertible promissory notes that are accounted for under the fair value option.

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, 2025 and 2024

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

Net Revenues

Net revenues decreased by $2.2 million, or 84%, from $2.6 million for the three months ended September 30, 2024 to $0.4 million for the three months ended September 30, 2025. The reduction was attributable to a decrease of $1.6 million in product sales and $0.6 million in service revenue.

Product sales decreased by $1.6 million, or 91%, from $1.7 million for the three months ended September 30, 2024 to $0.1 million for the three months ended September 30, 2025. The sales of our LTE platforms contributed $1.5 million to our product sales in the three months ended September 30, 2024, and there were no LTE platform sales during the three months ended September 30, 2025. In addition, the sales of our LTE products decreased by $0.1 million due to our largest customers changing their priorities on product development from 4G to 5G products.

Service revenues decreased by $0.6 million, or 68%, from $0.9 million for the three months ended September 30, 2024 to $0.3 million for the three months ended September 30, 2025. The decrease was attributed to the substantial completion of a significant service project in the second quarter of 2024, which then did not contribute materially in subsequent quarters. Our service project portfolio and related revenue during the third quarter of 2025 was less extensive.

Cost of Net Revenues

Cost of net revenues increased by $0.5 million, or 50%, from $1.0 million for the three months ended September 30, 2024 to $1.5 million for the three months ended September 30, 2025.

Product costs increased by $0.7 million, or 100%, from $0.7 million for the three months ended September 30, 2024 to $1.4 million for the three months ended September 30, 2025. This increase in product costs was primarily driven by additional production overhead costs of $0.4 million and an additional $0.5 million write down related to slow moving and obsolete LTE inventory.

Service costs decreased by $0.2 million, or 78%, from $0.3 million for the three months ended September 30, 2024 to $0.1 million for the three months ended September 30, 2025. This decrease in service costs was commensurate with the level of our service project activity.

Our gross margin for the three months ended September 30, 2024 was 62%. Our current gross margin for the three months ended September 30, 2025 is negative and not meaningful, as we continue experiencing lower product revenue, which is currently not sufficient to fully absorb production overhead costs. This makes our current gross margins less indicative of the underlying profitability of our products and services. We expect operational efficiencies to improve as revenues increase, after 5G product sales start contributing more significantly to our overall revenue beginning in the first quarter of 2026.

Research and Development Expenses

Research and development expenses decreased by $1.0 million, or 23%, from $4.2 million for the three months ended September 30, 2024 to $3.3 million for the three months ended September 30, 2025. This decrease was primarily due to a $1.2 million reduction in professional services provided by Alpha related to the design of 5G chip products as this development project was completed in the second quarter of 2025, partially offset by a $0.2 million increase in personnel-related costs.

Sales and Marketing Expenses

Sales and marketing expenses remained consistent at $1.0 million and $0.9 million during the three months ended September 30, 2025 and 2024, respectively.

General and Administrative Expenses

General and administrative expenses increased by $1.5 million, or 64%, from $2.4 million for the three months ended September 30, 2024 to $3.9 million for the three months ended September 30, 2025. This increase was primarily driven by a $1.2 million increase in the stock-based compensation expense due to the issuance of the equity-classified common stock warrants to certain investors. This increase was also driven by a $0.2 million increase in personnel-related costs.

Interest Expense

Interest expense increased by $1.1 million, or 167%, from $0.7 million for the three months ended September 30, 2024 to $1.8 million for the three months ended September 30, 2025. This increase was primarily due to interest and penalties we incurred on outstanding term loan balances.

Gain (loss) on foreign currency transactions, net

Foreign currency transactions resulted in a gain of $1.3 million for the three months ended September 30, 2025 and a loss of $1.0 million for the three months ended September 30, 2024. The primary factor behind these fluctuations is our term loans portfolio, which is largely denominated in the South Korean won. The gain in the third quarter of fiscal 2025 was driven by the appreciation of the U.S. dollar against the South Korean won, while the loss in the third quarter of fiscal 2024 was attributable to the depreciation of the U.S. dollar against the South Korean won.

Change in fair value of common stock warrant liabilities

The change in fair value of common stock warrant liabilities resulted in a loss of $3.8 million for the three months ended September 30, 2025 and a gain of $0.8 million for the three months ended September 30, 2024. The loss in the third quarter of fiscal 2025 was driven by changes in the volatility implied by the traded price of our warrants as of the valuation date, which was used to determine the fair value of our common stock warrant liability. The gain in the third quarter of fiscal 2024 was primarily driven by changes in the fair value of our common stock during the three months ended September 30, 2024.

For the Nine Months Ended September 30, 2025 and 2024

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

Net Revenues

Net revenues decreased by $5.2 million, or 71%, from $7.3 million for the nine months ended September 30, 2024 to $2.1 million for the nine months ended September 30, 2025. The reduction was primarily attributable to a decrease of $3.5 million in product sales and a decrease of $1.8 million in service revenues.

Product sales decreased by $3.5 million, or 84%, from $4.1 million for the nine months ended September 30, 2024 to $0.6 million for the nine months ended September 30, 2025. The sales of our LTE platforms contributed $3.8 million to our product sales in the first three quarters of 2024, and there were no LTE platform sales during the first three quarters of 2025.

Service revenues decreased by $1.8 million, or 55%, from $3.2 million for the nine months ended September 30, 2024 to $1.5 million for the nine months ended September 30, 2025. The decrease was attributed to the substantial completion of a significant service project during the nine months ended September 30, 2024, which then did not contribute materially in subsequent quarters. Our service project portfolio during the nine months ended September 30, 2025 was less extensive resulting in lower service revenues.

Cost of Net Revenues

Cost of net revenues decreased by $0.2 million, or 5%, from $2.8 million for the nine months ended September 30, 2024 to $2.7 million for the nine months ended September 30, 2025.

Product costs increased by $0.7 million, or 45%, from $1.5 million for the nine months ended September 30, 2024 to $2.2 million for the nine months ended September 30, 2025. This increase was primarily driven by additional production overhead costs of $0.4 million and an additional $0.3 million write down for slow moving and obsolete LTE inventory.

Service costs decreased by $0.8 million, or 63%, from $1.3 million for the nine months ended September 30, 2024 to $0.5 million for the nine months ended September 30, 2025. This decrease in service costs was commensurate with the level of our service project activity.

Our gross margin for the nine months ended September 30, 2024 was 61%. Our gross margin for the nine months ended September 30, 2025 is negative and not meaningful, as we continue experiencing lower product revenue, which is currently not sufficient to fully absorb production overhead costs. This makes our current gross margins less indicative of the underlying profitability of our products and services. We expect operational efficiencies to improve as revenues increase, which will begin after 5G product sales start contributing more significantly to our overall revenue beginning in the first quarter of 2026.

Research and Development Expenses

Research and development expenses decreased by $3.0 million, or 22%, from $13.9 million for the nine months ended September 30, 2024 to $10.9 million for the nine months ended September 30, 2025. This decrease was primarily due to a $2.7 million reduction in professional services provided by Alpha related to the design of 5G chip products after completion of this development project in the second quarter of 2025, and a $1.5 million reduction in the project-specific intellectual property expenses incurred in 2024. This reduction was partially offset by a $0.7 million increase in personnel-related costs due to changes in our headcount and a $0.2 million increase in pre-production supplies for 5G chips related to our key business initiatives.

Sales and Marketing Expenses

Sales and marketing expenses remained relatively consistent at $3.2 million and $2.9 million for the nine months ended September 30, 2025 and 2024, respectively.

General and Administrative Expenses

General and administrative expenses increased by $1.9 million, or 23%, from $8.1 million for the nine months ended September 30, 2024 to $9.9 million for the nine months ended September 30, 2025. Changes in our expected credit loss estimates for receivables resulted in a $0.5 million gain in the nine months ended September 30, 2024, compared to a $1.4 million loss in the nine months ended September 30, 2025, resulting in a $1.9 million net increase to general and administrative expenses. Stock-based compensation expense increased by $0.6 million from $1.6 million in the nine months ended September 30, 2024 compared to $2.1 million for the nine months ended September 30, 2025. This increase was primarily due to the issuance of the equity-classified common stock warrants to certain investors with the fair value of $1.3 million in the third quarter of 2025, compared to $0.9 million of the stock-based compensation related to vesting of performance-based founder shares in the first quarter of 2024. Personnel-related costs increased by $0.3 million in the first three quarters of 2025 due to the increased headcount and merit-based salary adjustments. These increases were partially offset by a $1.0 million decrease in professional services and other costs in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, driven by lower transactional activity during this period.

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. No similar transactions took place during the nine months ended September 30, 2025.

Interest Expense

Interest expense increased by $0.9 million or 25%, from $3.5 million for the nine months ended September 30, 2024 to $4.4 million for the nine months ended September 30, 2025. This increase was primarily due to the increase in outstanding debt.

Gain (loss) on foreign currency transactions, net

Foreign currency transactions resulted in a loss of $1.9 million for the nine months ended September 30, 2025 and a gain of $1.2 million for the nine months ended September 30, 2024. The primary factor behind these fluctuations is our term loans portfolio, which is largely denominated in the South Korean won. The loss in the nine months ended September 30, 2025 was primarily driven by the depreciation of the U.S. dollar against the South Korean won, while the gain in the nine months ended September 30, 2024 was attributable to the appreciation of the U.S. dollar against the South Korean won.

Change in fair value of common stock forward liability

The change in fair value of common stock forward liability resulted in a gain of $0.3 million for the nine months ended September 30, 2025 and a loss of $0.6 million for the nine months ended September 30, 2024. The decrease in the fair value of the underlying liability of $0.3 million for the nine months ended September 30, 2025 was based on our expectations related to the utilization of the available commitment under the common stock purchase agreement with B. Riley. The increase in fair value of common stock forward liability of $0.6 million for the nine months ended September 30, 2024 was due to the initial recognition of this financial instrument based on our assumptions at the inception of this arrangement.

Change in fair value of common stock warrant liabilities

The change in fair value of common stock warrant liabilities resulted in a loss of $3.2 million for the nine months ended September 30, 2025 and a gain of $2.8 million for the nine months ended September 30, 2024. The loss in the first three quarters of 2025 was driven by changes in the volatility implied by the traded price of our warrants as of the valuation date, which was used to determine the fair value of our common stock warrant liability. The gain in the first three quarters of 2024 was driven by changes in the fair value of our common stock during the three months ended September 30, 2024.

Change in fair value of convertible promissory notes

Losses from changes in fair value of convertible promissory notes were less than $0.3 million and $1.4 million for the nine months ended September 30, 2025 and 2024, respectively. These losses in each year were derived from the fair value measurement and related assumptions, specifically remeasurement of the convertible notes prior to their settlement in our common stock, which significantly increased the underlying liability during the nine months ended September 30, 2024.

Liquidity and Capital Resources

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

With limited exceptions, we have incurred and expect to continue incurring significant operating losses. For the nine months ended September 30, 2025, we had a net loss of $34.4 million. For the years ended December 31, 2024 and 2023, we had a net loss of $12.4 million and $22.5 million, respectively. For the nine months ended September 30, 2025 and 2024, we had cash used in operating activities of $23.5 million and $28.7 million, respectively. As of September 30, 2025, we had an accumulated deficit of $596.4 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 April 2024, we entered into the Purchase Agreement and a related registration rights agreement (the “Registration Rights Agreement”) with B. Riley for an equity line of credit facility (“ELOC”). Pursuant to the ELOC, 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. Through September 30, 2025, we sold an aggregate of 2,438,737 shares of our common stock for $9.9 million under the ELOC and received cash proceeds of $8.7 million, of which $1.0 million was withheld by B. Riley against the outstanding amounts payable.

In April 2025, we executed an at-market issuance sales agreement (“ATM Agreement”) with B. Riley and H.C. Wainwright & Co., LLC, acting as sales agents. The ATM Agreement allows us to sell our common stock for gross proceeds of up to $75.0 million from time to time, through at-the-market offerings or to the sales agents as principal purchasers (“ATM Offering”). As there is no commitment for future sales of additional shares under the ATM Agreement or the ATM Offering, we cannot predict how much, if any, additional proceeds may be realized. During the nine months ended September 30, 2025, we received net proceeds of approximately $1.4 million in cash related to the ATM Offering.

In May 2025, we entered into securities purchase agreements with certain institutional investors to execute a registered direct offering (“RDO”), pursuant to which we sold an aggregate of 7,006,370 shares of our common stock and warrants to purchase up to 10,509,555 shares of common stock at a combined purchase price of $1.57 per share and warrant, for aggregate gross proceeds of approximately $11.0 million. The warrants have an exercise price of $1.71 per share and will be exercisable six months from issuance and will expire five years following such initial date of exercise. The RDO closed on May 16, 2025 and we received net proceeds of $9.9 million in cash.

In November and December 2024, we entered into term loan agreements with Dr. Kyeongho Lee, the chairman of our board of directors, pursuant to which we borrowed $2.9 million and $2.1 million, maturing in December 2024 and January 2025, respectively, which remain outstanding as of September 30, 2025. We incur a penalty of 3% of principal per month on loans from Kyeongho Lee that are past maturity date, calculated daily until principal and accrued interest has been paid.

In December 2024, we entered into a term loan agreement with Anapass, Inc., our major stockholder, pursuant to which we borrowed $3.4 million maturing in December 2025. In January 2025, we entered into a term loan agreement with Dr. Lee, pursuant to which we borrowed $4.4 million maturing in February 2025, which remained outstanding as of September 30, 2025. In March 2025, we entered into a term loan agreement with Anapass, Inc., pursuant to which we borrowed $3.1 million maturing in March 2026. In July 2025, we entered into a term loan agreement with Anapass, Inc. and borrowed $2.1 million that will mature in July 2026. In August 2025, we entered into a term loan agreement with Anapass, Inc. and borrowed $1.4 million that will mature in August 2026. In September 2025, we entered into a term loan agreement with Anapass, Inc. and borrowed $10.7 million that will mature in September 2026. In November 2025, the Company executed an amendment with Anapass, Inc. to extend the maturity date of a term loan, originally entered into in May 2022 with a principal of $2.1 million, from November 2025 to November 2026.

During nine months ended September 30, 2025, we were able to renegotiate the timing of payments for some of the obligations, including loan agreements with i Best Investment Co., Ltd, Dr. Lee, and Anapass, Inc., that initially were due in the first, second, and third fiscal quarter of 2025, respectively. We currently remain dependent on related party debt financing to fund our operations, including the loans received from Anapass Inc. and Dr. Lee.

We expect significant ongoing operating expenditures will be necessary to successfully implement our business plan and market our products. Having delivered initial samples to our lead 5G customers in the second quarter of 2025, we are focusing on production readiness now and anticipate the first production shipments of our 5G products starting late in the fourth quarter of 2025 or early in the first quarter of 2026. We anticipate continued significant related expenditures in the form of production-related costs, including mask sets, wafers, and assembly and test costs, and most such costs will be incurred prior to the commencement of manufacturing and production.

As of September 30, 2025, our existing sources of liquidity include cash and cash equivalents of $8.3 million. As of September 30, 2025, we have outstanding convertible promissory notes and borrowings with a total principal amount of $64.4 million, which are contractually due within 12 months from this Quarterly Report. 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.

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 through equity or debt offerings, the payments can be delayed, which may adversely affect our business operations and financial performance. While we believe that we will be able to secure additional capital and funding in the next 12 months to sustain our operations, there remains a substantial doubt as to our ability to continue as a going concern. For a more detailed description of such risks, please see the section entitled “Risk Factors” disclosed in our Annual Report on Form 10-K filed with the SEC on March 25, 2025.

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. In addition, we recently filed a universal shelf registration statement on Form S-3 that will allow us to raise up to $200.0 million from the issuance of our securities, which includes the $75.0 million for the ATM Offering. Following the completion of the RDO and through the date of this Quarterly Report, the Company has $114.0 million of remaining equity funding capacity available under its shelf registration statement. 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 additional liquidity and our available cash and cash equivalents 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 the next generation of product;
• Hiring of additional personnel in engineering, 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 able 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, 2025 and 2024

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

Overview of Cash Flows

During the nine months ended September 30, 2025 and 2024, we funded our operations primarily through financing activities. This included the proceeds received from the reverse recapitalization and concurrent PIPE financing completed in March 2024, as well as through the issuance of convertible promissory notes and term loans, primarily to related parties. We remain dependent on cash inflows from financing activities to fund our operating expenses. The repayment of the outstanding borrowings portfolio will require a combination of cash generated from future operations, additional financing activities, and renegotiation of maturity dates. We are continuously evaluating our capital structure and cash flow projections as we work towards meeting our debt obligations and other liabilities.

Operating Activities

Cash used in operating activities of $23.5 million during the nine months ended September 30, 2025, was primarily attributable to our net loss of $34.4 million, partially offset by non-cash adjustments of $8.5 million and a net change in our operating assets and liabilities of $2.4 million. Non-cash adjustments consisted primarily of a $3.2 million loss from the change in fair value of warrant liabilities, $2.9 million in stock-based compensation, a $1.4 million increase in provision for credit losses, $0.5 million in amortization of operating lease right-of-use assets, $0.5 million in depreciation and amortization charges, and a $0.3 million loss from the change in fair value of convertible promissory notes, partially offset by a $0.3 million gain from the change in fair value of common stock forward liability. The change in our operating assets and liabilities of $2.4 million primarily resulted from a decrease of $1.1 million in inventory primarily due to inventory write downs, an increase of $1.2 million in accrued and other current liabilities, an increase of $1.0 million in net defined benefit liabilities, a decrease of $0.7 million in accounts receivable, a decrease of $0.4 million in prepaid expenses and other current assets, and a $0.1 million decrease in other assets, partially offset by a decrease of $0.8 million in lease liabilities, an increase of $0.5 million in contract assets, a decrease of $0.4 million in income taxes payables, and a decrease of $0.2 million in other liabilities.

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 a liability, $2.8 million gain from the change in fair value of warrant liabilities, and $0.5 million in provision for credit losses, partially offset by $2.1 million in stock-based compensation, $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 the underwriter, $0.6 million loss from the initial recognition of the common stock forward liability, $0.5 million in depreciation and amortization charges and $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 our accrued and other current liabilities, a decrease of $2.3 million in accounts payable, an increase of $1.7 million in contract assets due to unbilled services provided under certain projects, an increase of $1.6 million in inventory due to lower sales, an increase of $0.9 million in accounts receivable primarily due to slower collections from certain customers, a decrease of $0.5 million in our 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 and an increase of $0.5 million in contract liabilities.

Investing Activities

Cash used in investing activities during the nine months ended September 30, 2025 and 2024 was related solely to the purchases of property and equipment.

Financing Activities

Cash provided by financing activities of $31.1 million during the nine months ended September 30, 2025, consisted of $21.8 million in proceeds from borrowings, $11.0 million gross proceeds received from the issuance of common stock in a registered direct offering, and $1.5 million in proceeds from the issuance of common stock under the at-market agreement, partially offset by a $2.2 million repayment of our bank borrowings and a $1.2 million payment of common stock issuance costs.

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, and $7.8 million proceeds received from the issuance of common stock to B. Riley under the Purchase Agreement, $3.7 million in proceeds from bank borrowings, and $2.2 million in proceeds from the issuance of common stock and common stock warrants in a private placement, partially offset by $14.1 million repayment of our bank borrowings and $1.6 million repayment of convertible promissory notes.

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 2028.

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 7 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 6 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 10-K filing with the SEC on March 25, 2025, 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 $2.6 million and $1.2 million as of September 30, 2025 and December 31, 2024, 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”), 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.

Contracts in Own Equity – Fair Value of Liability-Classified Warrants

We classify share-settled contracts, 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.

We are a “smaller reporting company”, as defined by Rule 12b‑2 of 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 otherwise required under this item.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2025, management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, has 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 this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that 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 that were effective as of September 30, 2025.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the three months ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Other than the risk factors discussed under this section, there have been no material changes to the risk factors we previously disclosed in our Annual Report on Form 10-K filed with the SEC on March 25, 2025. 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, 2024 and 2023, we had a net loss of $12.4 million and $22.5 million, respectively, and used cash in operating activities of $31.0 million and $8.8 million, respectively. For the nine months ended September 30, 2025, we had a net loss of $34.4 million, and used cash in operating activities of $23.5 million. As of September 30, 2025, we had an accumulated deficit of $596.4 million and negative working capital of approximately $65.2 million. We had short-term debt, including convertible promissory notes and borrowings, in the amount of $64.7 million as of September 30, 2025. As of December 31, 2024, we had an accumulated deficit of $562.0 million and negative working capital of approximately $43.3 million. We had short-term debt in the amount of $37.6 million, including convertible promissory notes and borrowings as of December 31, 2024. 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 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. 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, 2025, we have outstanding convertible promissory notes and borrowings with a total principal amount of $64.4 million, of which $64.4 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, and results of operations 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.