GCT Semiconductor Holding Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
GCTS$1.16+11.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001410578-24-001463
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0000950170-24-127082
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 141 previous paragraphs and 148 current paragraphs.
78 unchanged; 34 reworded; 35 added; 24 removed; 5 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
accurate prediction of the size and growth of the 4G and 5G markets;
Current report
accurate prediction of the growth of the Internet of Things markets and the timing of commercial availability of 4G and 5G networks;
Current report
accurate prediction of changes in device manufacturer requirements, technology, industry standards or consumer expectations, demands, and preferences;
Current report
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;
Current report
market acceptance, adequate consumer demand, and commercial production of the products in which our mobile and wireless broadband semiconductor solutions are incorporated;
Current report
the quality, performance, and reliability of the product as compared to competing products and technologies;
Current report
effective marketing, sales, and service; and
Current report
the ability to obtain licenses to use third-party technology to support the development of our products.
Current report
Our gross margin increased to 62%for the three months ended September 30, 2024 from 12% forthe 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.
Current report
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.
Current report
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.
Current report
For the Nine Months Ended September 30, 2024 and 2023
Current report
Our gross margins increased to 61%for the nine months ended September 30, 2024 compared to 41% forthe 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.
Current report
Other Income, Net
Current report
Non-GAAP Financial Measures
Current report
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.
Current report
Definitions and Limitations
Current report
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.
Current report
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.
Current report
Free Cash Flow represents net cash provided by operating activities, less purchases of property and equipment.
Current report
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.
Current report
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.
Current report
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:
Current report
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.
Current report
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.
Current report
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.
Current report
Other companies, including those in our industry, may calculate EBITDA, Adjusted EBITDA and Free Cash Flow differently, which reduces their usefulness as comparative measures.
Current report
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.
Current report
Reconciliation to GAAP Measures
Current report
The following is a reconciliation of net loss to EBITDA and Adjusted EBITDA for the periods presented (in thousands):
Current report
The following is a reconciliation of net cash used in operating activities to free cash flow for the periods presented (in thousands):
Current report
Cost of mass production of 5G and other products, including masks, wafers and design house fees;
Current report
Acquisition of IP and tool enhancement to develop next generation of product;
Current report
Hiring of additional personnel in engineering and sales and marketing functions; and
Current report
Improvement of engineering equipment.
Removed paragraphs (24)
Previous report
Net Revenues
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Cost of Net Revenues
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Research and Development Expenses
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Sales and Marketing Expenses
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General and Administrative Expenses
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Interest Expense
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Net Revenues
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Cost of Net Revenues
Previous report
Our gross margin decreased to 63% for the three months ended June 30, 2024 from 66% for the three months ended June 30, 2023 primarily due to decreased product sales.
Previous report
Research and Development Expenses
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Sales and Marketing Expenses
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General and Administrative Expenses
Previous report
General and administrative expenses increased by $0.2 million, or 9%, from $2.6 million for the three months ended June 30, 2023 to $2.9 million for the three months ended June 30, 2024. The change was primarily due to a $1.2 million increase in professional expenses related to the public company operations, partially offset by a net reduction of $0.8 million in provision for credit losses and $0.2 million net reduction in other expenses.
Previous report
Interest Expense
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For the Six Months Ended June 30, 2024 and 2023
Previous report
Net Revenues
Previous report
Service revenues decreased by $0.4 million, or 14%, to $2.3 million for the six months ended June 30, 2024 from $2.7 million for the six months ended June 30, 2023. The decrease was primarily due to several large projects resulting in $2.5 million of service revenues during the first fiscal quarter of 2023 that did not occur during the first fiscal quarter of 2024. We initiated a large project in the second quarter of 2024 and reduced the gap in service revenues for the six months ended June 30, 2024 compared to the same period in 2023.
Previous report
Cost of Net Revenues
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Our gross margins remained relatively stable at 61% for the six months ended June 30, 2024 compared to 59% for the six months ended June 30, 2023. Our service cost of net revenues remained stable and improved overall margin in spite of the reduction in product sales.
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Research and Development Expenses
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Sales and Marketing Expenses
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General and Administrative Expenses
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Interest Expense
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Other Income (Expenses), Net
Reworded paragraphs (34)
Previous wording
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 six months ended June 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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
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
Current wording
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.
Previous wording
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. While we expect a continued recovery of the broader semiconductor markets in the remainder of 2024, there is no guarantee that such recovery will occur or that the extent of recovery will be at a pace as initially anticipated.
Current wording
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.
Previous wording
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 5G products and the recovery of 4G business in 2024 as supply and inventory return to a more normal level.
Current wording
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.
Previous wording
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, promotion expenses, 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 in the foreseeable future.
Current wording
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.
Previous wording
Net revenues decreased by $2.8 million, or 66%, to $1.5 million for the three months ended June 30, 2024 from $4.3 million for the three months ended June 30, 2023. The decrease was primarily attributable to a decrease of $4.0 million in product sales, partially offset by an increase of $1.2 million service revenue.
Current wording
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.
Previous wording
Product sales decreased from $4.0 million for the three months ended June 30, 2023 to an insignificant amount for the three months ended June 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 June 30, 2024. Our net revenues are expected to increase with these customers after the launch of our 5G products.
Current wording
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.
Previous wording
Service revenues increased by $1.2 million, from $0.3 million for the three months ended June 30, 2023 to $1.5 million for the three months ended June 30, 2024. This increase was due to a new customer contract.
Current wording
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.
Previous wording
Cost of net revenues decreased by $0.9 million, or 63%, to $0.5 million for the three months ended June 30, 2024 from $1.5 million for the three months ended June 30, 2023. Product costs decreased by $0.8 million from $1.0 million for the three months ended June 30, 2023 to $0.2 million for the three months ended June 30, 2024. The change was primarily driven by a decrease in direct product costs as we sold fewer units. Service costs remained comparable for the three months ended June 30, 2024 and 2023.
Current wording
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.
Previous wording
Research and development expenses increased by $0.2 million, or 4%, from $4.0 million for the three months ended June 30, 2023 to $4.2 million for the three months ended June 30, 2024. This change was primarily due to a $0.3 million increase in research and development expenses mainly related to services provided by Alpha to design 5G chip products.
Current wording
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.
Previous wording
Sales and marketing expenses increased by $0.2 million, or 29%, from $0.8 million for the three months ended June 30, 2023 to $1.0 million for the three months ended June 30, 2024. This increase was primarily due to personnel-related costs.
Current wording
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.
Previous wording
Interest expense decreased by $2.0 million, or 72%, from $2.7 million for the three months ended June 30, 2023 to $0.8 million for the three months ended June 30, 2024. The decrease was primarily due to the conversion of significant amounts of outstanding convertible notes upon the closing of the Business Combination.
Current wording
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.
Previous wording
Net revenues decreased by $2.6 million, or 36%, from $7.3 million for the six months ended June 30, 2023 to $4.7 million for the six months ended June 30, 2024. The decrease was primarily due to a decrease of $2.2 million in product sales and $0.4 million decrease in service revenues.
Current wording
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.
Previous wording
Product sales decreased by $2.2 million, or 48%, from $4.6 million for the six months ended June 30, 2023 to $2.4 million for the six months ended June 30, 2024. This decrease included a net reduction of $1.4 million of LTE product sales and $0.8 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.
Current wording
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.
Previous wording
Cost of net revenues decreased by $1.2 million, or 38%, from $3.0 million for the six months ended June 30, 2023 to $1.9 million for the six months ended June 30, 2024, driven primarily by the reduction in our product sales. Product costs decreased by $1.2 million, or 59%, from $2.0 million for the six months ended June 30, 2023 to $0.8 million for the six months ended June 30, 2024. This change was driven primarily by the reduction in direct product costs as we sold fewer units. Service costs remained comparable for the six months ended June 30, 2024 and the six months ended June 30, 2023.
Current wording
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.
Previous wording
Research and development expenses increased by $4.8 million, or 98% from $4.9 million for the six months ended June 30, 2023 to $9.7 million for the six months ended June 30, 2024, primarily in connection with our development projects. This increase was primarily due to a $2.7 million increase in research and development expenses mainly related to services provided by Alpha to design 5G chip products, and a $2.0 million increase in expensed intellectual property costs related to our new 5G chip products.
Current wording
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.
Previous wording
Sales and marketing expenses increased by $0.4 million, or 24%, from $1.6 million for the six months ended June 30, 2023 to $2.0 million for the six months ended June 30, 2024. This change was primarily due to increase in personnel related costs.
Current wording
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.
Previous wording
General and administrative expenses increased by $1.6 million, or 39%, from $4.1 million for the six months ended June 30, 2023 to $5.7 million for the six months ended June 30, 2024. The change was primarily due to a $1.2 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 $1.2 million increase in professional expenses related to the public company operations, partially offset by a net decrease of $0.5 million in provision for credit losses.
Current wording
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.
Previous wording
Gain on extinguishment of liability was $14.6 million for the six months ended June 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.
Current wording
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.
Previous wording
Interest expense decreased by $0.8 million, or 22%, from $3.7 million for the six months ended June 30, 2023 to $2.8 million for the six months ended June 30, 2024. The decrease of $0.8 million was primarily due to the conversion of significant amounts of outstanding convertible notes upon the closing of the Business Combination.
Current wording
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.
Previous wording
Other income (expenses), net for the six months ended June 30, 2024 of $2.5 million was primarily from the net gain of $2.0 million from fair value remeasurement of our warrants based on the reduction in our stock price during the period then ended. Other income (expenses), net for the six months ended June 30, 2023 of $2.0 million was primarily from the fair value measurement of our convertible promissory notes and foreign currency gains.
Current wording
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.
Previous wording
With limited exceptions, we have incurred and expect that we will continue to incur significant operating losses. For the three and six months ended June 30, 2024, we had a net loss of $1.0 million and $0.3 million, respectively. For the six months ended June 30, 2024 and 2023, we had cash used in operating activities of $24.1 million and $6.4 million, respectively. As of June 30, 2024, we had an accumulated deficit of $549.9 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.
Current wording
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.
Previous wording
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
Current wording
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.
Previous wording
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 June 30, 2024, we sold an aggregate of 678,462 shares of our common stock and received net proceeds of $2.8 million under the Purchase Agreement and $0.5 million was withheld by B. Riley against the outstanding amounts payable.
Current wording
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.
Previous wording
As of June 30, 2024, we have outstanding convertible promissory notes and borrowings with a total principal amount of $43.6 million, of which $38.6 million is contractually due within 12 months from this reporting date. During July 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. However, our existing debt obligations largely remain due within one year from June 30, 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.
Current wording
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.
Previous wording
Cash flow Comparison for the Six Months Ended June 30, 2024 and 2023
Current wording
Cash flow Comparison for the Nine Months Ended September 30, 2024 and 2023
Previous wording
Cash used in operating activities of $24.1 million during the six months ended June 30, 2024 was primarily attributable to our net loss of $0.3 million, non-cash adjustments of $12.5 million, and net change in our operating assets and liabilities of $11.3 million. Non-cash adjustments consisted primarily of $14.6 million gain from the extinguishment of a liability, $2.0 million gain from the change in fair value of warrant liabilities and $0.5 million change in provision for credit loss, partially offset by $1.5 million in stock-based compensation, $1.2 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 underwriter, $0.6 million loss from the initial recognition of common stock forward liability, $0.4 million in depreciation and amortization charges and $0.3 million in operating lease right-of-use amortization. The change in our operating assets and liabilities of $11.3 million primarily resulted from a decrease of $7.8 million in our accounts payable and accrued and other current liabilities due to the payment of costs incurred related to our Business Combination, an increase of $1.7 million in our prepaid expenses and other current assets related to timing of payments for inventory and manufacturing of wafers, an increase of $1.2 million in our contract assets due to unbilled services provided under certain projects, and an increase of $0.5 million in our inventory due to lower sales.
Current wording
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.
Previous wording
Cash used in operating activities of $6.4 million during the six months ended June 30, 2023 was primarily attributable to our net loss of $8.0 million, partially offset by $0.5 million in non-cash adjustments and $1.1 million change in our operating assets and liabilities. Non-cash adjustments consisted primarily of $0.8 million net loss from provision for credit losses, $0.4 million in depreciation and amortization charges and $0.4 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 $1.1 million primarily resulted from an increase of $4.3 million in our accounts payable and accrued and other current liabilities related to the timing of payments, partially offset by an increase of $1.9 million in our contract assets due to unbilled services provided under certain projects, a decrease of $0.6 million in our contract liabilities due to the provision of our services under certain projects, an increase of $0.5 million in accounts receivable primarily due to slower collections from certain customers, and an increase of $0.2 million in inventory due to lower sales.
Current wording
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.
Previous wording
Cash used in investing activities during the six months ended June 30, 2024 and 2023 was related solely to the purchases of property and equipment.
Current wording
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.
Previous wording
Cash provided by financing activities of $27.9 million during the six months ended June 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 $2.8 million proceeds received from issuance of common stock to B. Riley under the Purchase Agreement, partially offset by $7.9 million repayment of our bank borrowings and $0.6 million repayment of convertible promissory notes.
Current wording
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.
Previous wording
Cash provided by financing activities of $6.8 million during the six months ended June 30, 2023 primarily related to net proceeds from bank borrowings.
Current wording
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.
Previous wording
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 Judgements 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.
Current wording
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.
Previous wording
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 collectability 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. While such credit losses have historically been minimal, 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
Current wording
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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
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
Previous report — wording carried elsewhere
constant and rapid technological change, quick product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand.
Previous report — wording carried elsewhere
Other income (expenses), net for the three months ended June 30, 2024 of $6.9 million was primarily from the net gain of $6.6 million from the fair value remeasurement of our warrants based on the reduction in our stock price during the second fiscal quarter. Other income (expenses), net for the three months ended June 30, 2023 of $0.7 million was primarily from the fair value measurement of our convertible promissory notes.
Previous report — wording carried elsewhere
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.
Previous report — wording carried elsewhere
significant customers could have a material adverse effect on the collectability of our accounts receivable and our future operating results. The provision for credit losses was $1.1 million and $1.6 million as of June 30, 2024 and December 31, 2023, respectively.