SMCISupermicro

We are subject to U.S. and other applicable trade control regulations that restrict with whom we may transact business, including the trade economic sanctions administered and enforced by the U.S. Treasury, Treasury Department’s Office of Foreign Assets Control and the import and export controls enforced by the U.S. Commerce Department’s Bureau of Industry and Security. Security (“BIS”), among other U.S. government agencies. If we fail to comply with applicable sanctions, export control or import laws and regulations restricting dealings with sanctioned countries or companies and/or persons on restricted lists, regulations, we may be subject to civil or criminal penalties. Any future Additionally, any violations could have an a material adverse impact on our ability to sell our products to United States federal, state and local government and related entities. We have business relationships with companies in China and elsewhere in Eastern Europe who have been, or may in the future be, added to a restricted party list. We take steps to minimize business disruption when these situations arise; however, we may be required to terminate or modify such relationships if our activities are prohibited by U.S. or other applicable laws. Further, our association with these parties could subject us to greater scrutiny or reputational harm among current or prospective customers, partners, suppliers, investors, other parties doing business with us or using our products, government enforcement agencies, or the general public. The United States and other countries continually update their lists of import and export-controlled items and technologies, and may impose new or more-restrictive import and export requirements on our products in the future. As a result of regulatory changes, we may be required to obtain licenses or other authorizations to continue supporting existing customers or to supply existing products to new customers in China, Eastern Europe and elsewhere. Further escalations in trade restrictions or hostilities, particularly between the United States and China, could impede our ability to sell or support our products. Although we historically sold products into Russia before broad sanctions were imposed, we no longer sell products or provide services to Russia. We had last recorded revenue from Russia in February 2022.

On September 11, 2024, certain current and former directors and certain current officers of the Company were named as defendants in a putative derivative lawsuit filed in the U.S. District Court for the Northern District of California, captioned Hollin v. Liang, et al., Case No. 5:24-cv-06410 (the “Hollin Action”). Four additional putative derivative lawsuits have been filed in the same court, captioned Latypov v. Liang, et al., Case No. 5:24-cv-06779 (filed Sept. 26, 2024), Keritsis v. Liang, et al., Case No. 5:24-cv-07753 (filed Nov. 6, 2024), Roy v. Liang, et al., Case No. 5:24-cv-08006 (filed Nov. 14, 2024), and Jha v. Liang, et al., No. 5:24-cv-08792 (filed Dec. 5, 2024) (together with the Hollin Action, the “Federal Derivative Litigation”). On November 20, 2024, a similar putative derivative lawsuit was filed in the Superior Court of California, County of Santa Clara, captioned Spatz v. Liang, et al., Case No. 24CV452241 (the “Spatz Action”). Two additional putative derivative lawsuits have been filed in the same court, captioned Clark v. Liang, et al., Case No. 24CV454416 (filed Dec. 17, 2024) and Carter, et al. v. Liang, et al., Case No. 24CV454689 (filed Dec. 20, 2024) (together with the Spatz Action, the “State Court Derivative Litigation,” and together with the Federal Derivative Litigation, the “Derivative Litigation”). We were The Company was also named as a nominal defendant in the Derivative Litigation. The Federal Derivative Litigation purports to allege derivative claims for breaches of Sections 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934, as amended, and Rules 10b-5 and 14a-9 promulgated thereunder, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, waste of corporate assets, and contribution arising out of allegations that our the Company’s officers and directors caused us the Company to issue materially false and misleading statements concerning our the Company’s business operations and financial results. The State Court Derivative Litigation purports to allege claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, waste of corporate assets, unjust enrichment, and insider trading arising out of similar allegations as the Federal Derivative Litigation. The plaintiffs in the Derivative Litigation seek unspecified money damages, in addition to punitive damages and other relief. On January 14, 2025, the Court The court in the Hollin Action granted plaintiffs’ motion to consolidate consolidated the five previously stayed Federal Derivative Litigation actions. On March 24, 2025, the Court The court in the Spatz Action entered a Stipulation and Order staying stayed all proceedings and consolidating consolidated the three State Court Derivative Litigation actions. On August 29, 2025, certain current and former directors and certain current officers of the Company were named as defendants in another putative derivative lawsuit filed in the Delaware Court of Chancery, captioned Anderson v. Liang, et al., C.A. No. 2025-0986-KSJM. On January 6, 2026, a substantially similar lawsuit was filed in the Delaware Court of Chancery, captioned Mathiyalagan v. Liang, et. al., C.A. No. 2026-0013-KSJM, which was consolidated with Anderson on May 8, 2026. On January 29, 2026, another substantially similar lawsuit was filed in Northern District of California by plaintiffs Employees’ Retirement System of the State of Rhode Island and Bucks County Employees’ Retirement System, Case No. 5:26-cv-00955-NC, which on May 29, 2026 was dismissed and refiled in the Delaware Court of Chancery, C.A. No. 2026-0699-KJSM. The refiled action was consolidated with Anderson on August 18, 2026. On May 19, 2026, a substantially similar lawsuit was filed in the Northern District of California, captioned Pill v. Liang, et. al., C.A. No. 5:26-cv-04775. Three additional substantially similar lawsuits were filed in the Northern District of California on June 24, 2026 (captioned City of Birmingham Retirement and Relief Systems v. Liang, et al., Case No. 5:26-cv-06292), on July 10, 2026 (captioned Cepeda v. Liang et al., Case No. 5:26-cv-07081), and on August 21, 2026 (captioned Roy v. Liang, et al., Case No. 5:26-cv-08757). These matters are too preliminary to form a judgment as to whether the likelihood of an adverse outcome is probable and we are unable to estimate the possible loss or range of loss, if any.

Research General and development administrative expenses. The $65.8 million or 24.6% year-over-year increase in research general and development administrative expenses was primarily driven by a $153.2 an increase in legal and internal investigation-related expenses of $31.7 million or 34.7% 98.4%, and an increase in employee-related costs, costs of $14.5 million or 10.6%, mainly comprised of a $81.0 $8.4 million or 70.0% 10.4% increase in salaries and benefits, and a $6.1 million or 10.8% increase in stock-based compensation, due to stock awards granted related to hiring and $60.2 million or 20.2% increase in salaries, as we expanded our workforce and invested in retention of key talent. Additionally, there was a $28.3 $13.4 million or 78.3% 248.1% increase in product development excise and franchise tax expense directly related to the increase in sales compared to prior-year, which increased the related tax expense, a $6.4 million or 711.1% increase in financing charges primarily driven by a $5.7 million or 100.0% increase in factoring fees for the receivables sold under the Receivables Purchase Agreement, and an increase of a $7.1 million or 54.6% in indirect facilities costs to support the development of next-generation products such as rental costs, utility costs, and technologies. depreciation costs. These increases along with other immaterial cost increases were partially offset by an $11.0 a $12.0 million or 50.9% increase 48.8% reduction in research audit and development fees received from certain suppliers and customers. tax fees, which were driven by an absence of additional costs related to the delayed filing of our Annual Report on Form 10-K for fiscal year 2024. Looking ahead, we expect research general and development administrative expenses to continue to rise rising as we invest in process improvements, expand our workforce workforce, and invest in attract key talent to remain at the forefront of innovation in next-generation products support our strategic initiatives and technologies. operational growth.

In November 2023, December 2025, the Financial Accounting Standards Board (the “FASB”) FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment ASU 2025-11, Interim Reporting (Topic 280) – Improvements 270): Narrow-scope Improvements. This update makes targeted, narrow-scope improvements to Reportable Segment Disclosures. This ASU requires that a public entity provide additional segment disclosures on an the interim reporting guidance in Topic 270 to clarify application and annual basis. improve consistency in practice. The amendments in this ASU should be applied retrospectively to all prior periods presented in do not change the financial statements unless impracticable. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period underlying principles of adoption. interim reporting. The ASU is effective for fiscal years interim reporting periods within annual reporting periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. 2027. Early adoption is permitted. The ASU is effective for interim reporting periods beginning in our fiscal year beginning July 1, 2024, 2028. We are currently evaluating the effects of the ASU and for the interim period beginning July 1, 2025. We noted that do not expect the adoption of this standard did not guidance to have a material impact on our consolidated financial statements, other than enhanced statements and disclosures. Please refer to Note 15, “Segment Reporting” in the notes to the consolidated financial statements for further discussion.