What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-12 compared with 2023-03-31 · 185 added, 358 removed, 45 unchanged (92% of the section changed)

7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion of our financial condition and results of operations should be read in conjunction with the financial statements

and related notes included in this Annual Report on Form 10-K.

This discussion may contain forward-looking statements based upon current

expectations that involve risks and uncertainties including those discussed under Part I, Item 1A, “Risk Factors.” These

risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements.

deliver a comprehensive WiFi as a Service platform to make everyone’s connected home safe and supportive for life and work.

believe the home router must go the way of the mobile phone.

Today’s routers are simple, single-purpose devices that rarely receive

firmware updates and have underdeveloped management applications, making them the #1 target in residential cybersecurity attacks.

can be so much more.

The router must offer frequent security updates, helpful apps, extensive personalization options and a delightful

That is what Minim delivers— not just the router or just an app, but WiFi as a Service.

Technically, it’s composed

of an intelligent router managed by a smart operating system that leverages cloud computing and AI to analyze and optimize the smart

home, combined with intuitive applications to engage with it.

continually seek to improve our product designs and manufacturing approach to elevate product performance and reduce our costs.

a strategy of outsourcing rather than internally developing our hardware product chipsets, which are application-specific integrated

circuits that form the technology base for our modems.

By outsourcing the chipset technology, we are able to concentrate our research

and development resources on modem system design, leverage the extensive research and development capabilities of our chipset suppliers,

and reduce our development time and associated costs and risks.

As a result of this approach, we are able to quickly develop new products

while maintaining a relatively low level of research and development expense as a percentage of net sales.

We also outsource aspects

of our manufacturing to contract manufacturers as a means of reducing our costs of production, and to provide us with greater flexibility

in our production capacity.

our gross margin for a given product depends on a number of factors, including the type of customer to whom we are selling.

margin for products sold to retailers tends to be higher than for some of our other customers;

but the sales, support, returns, and overhead

costs associated with products sold to retailers also tend to be higher.

Minim’s sales to certain countries are currently handled

by a single master distributor for each country that handles the support and marketing costs within the country.

Gross margin for sales

to these master distributors tends to be low, since lower pricing to these distributors helps them to cover the support and marketing

costs for their country.

cash and cash equivalents balance on December 31, 2022 was $530 thousand compared to $12.6 million on December 31, 2021.

31, 2022, we had $4.8 million of outstanding borrowings on our asset-based credit line with availability of $38 thousand and $1.0 million

outstanding on the Bridge Loan.

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included in this Annual Report on Form 10-K.

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties including those discussed under Part I, Item 1A, “Risk Factors.” These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements.

We historically delivered comprehensive

WiFi as a Service platform to make everyone’s connected home safe and supportive for life and work.

Generally, our gross margin for a given product depends on a number

of factors, including the type of customer to whom we were selling.

The gross margin for products sold to retailers tended to be higher

than for some of our other customers;

but the sales, support, returns, and overhead costs associated with products sold to retailers also

tended to be higher.

Our cash and cash equivalents balance on December 31, 2023 was $709 thousand compared to $530 thousand on December 31, 2022.

On December 31, 2023, we had no outstanding borrowings.

Our working capital was $(0.8) million as of December 31, 2023.

major changes in cash and cash equivalents during fiscal 2022 was a decrease of approximately $2.2 million in accounts receivables, a

decrease of $6.7 million in inventory, a decrease of $9.6 million in accounts payable, and a decrease of $839 thousand in accrued expenses.

The major changes in cash and cash equivalents during fiscal 2023 was a decrease of approximately $1.9 million in accounts receivables, a decrease of $15.5 million in inventory, an increase of $8.3 million in accounts payable, and a decrease of $3.2 million in accrued expenses.

In fiscal 2023, the Company also had a net loss of $17.6 million, which contributed to a decrease in cash and cash equivalents.

The Company’s ability to

maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand, increasing SaaS sales, and collecting

related receivables.

The Company will be required to refinance its debt in 2023 given the SVB Loan Agreement expires in January 2024.

In the first quarter of 2023, the Company has implemented cost reduction plans to align its cost structure to its sales and increase its

The Company will continue to monitor its cost in relation to its sales and adjust its cost structure accordingly.

the years ended December 31, 2022 and 2021, we generated net sales of $50.6 million and $55.4 million, respectively.

COVID-19 pandemic continued to impact our supply chain operations due to restrictions, reduced capacity, and limited availability from

suppliers on whom we rely for sourcing components and materials and from third-party partners on whom we rely for manufacturing, warehousing,

and logistics services.

In 2022, we experienced increases in costs of materials, components for our products, and freight costs.

in the third quarter of 2022, we began seeing reduction in transportation costs and transport availability.

We will not realize the gross

margin benefits from the transportation cost reductions until mid-2023 as we continue to work through inventory obtained when freight

costs were elevated.

If disruptions in our supply chain operations or any increases to costs associated with supply chain operations

brought on by COVID-19 occur again, we could experience a negative impact on our revenue and operating margin performance.

demand for our products has increased relative to pre-pandemic levels as consumers and businesses seek flexible networking solutions

for their day-to-day needs, customers’ purchasing decisions over the long-term may be impacted by the pandemic and its impact on

the economy, which could in turn impact our revenue and results of operations.

Accounting Standards

refer to Note 2 of the Notes to the Consolidated Financial Statements, which is incorporated herein by reference.

Accounting Policies and Estimates

is a discussion of what we view as our more significant accounting policies and estimates.

As described below, management judgments and

estimates must be made and used in connection with the preparation of our consolidated financial statements.

We have identified areas

where material differences could result in the amount and timing of our net sales, costs, and expenses for any period if we had made

different judgments or used different estimates.

We primarily sell hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct

to consumers and other channel partners via the Internet.

The hardware products include cable modems and gateways, mobile broadband modems,

wireless routers, MoCA adapters and mesh home networking devices.

We also sell the Minim subscription service that enables and secures

a better connected home using the Minim AI-driven smart home WiFi management and security platform.

SaaS is offered over a defined contract period, generally one year.

These services are available as an on-demand application over the

defined term.

The agreements include service offerings, which deliver applications and technologies via cloud-based deployment models

that we develop functionality for, provide unspecified updates and enhancements for, and host, manage, provide upgrades and support for

the customers’ access by entering into solution agreements for a stated period.

The monthly fees charged to the customers are based

on the number of subscribers utilizing the services each month, and the revenue recognized generally corresponds to the monthly billing

amounts as the services are delivered.

The Company’s ability

to maintain adequate levels of liquidity depends in part on our ability to sell inventory on hand and collect related receivables.

Company is evaluating options related to its liquidity.

The Company will continue to monitor its costs in relation to its sales and adjust

its cost structure accordingly.

In the years ended December 31, 2023 and 2022, we generated net sales of $26.1 million and $50.6 million, respectively.

Recent Accounting Standards

Please refer to Note 2 of the Notes to the Consolidated Financial Statements, which is incorporated herein by reference.

Critical Accounting Policies and Estimates

Following is a discussion of what we view as our more significant accounting policies and estimates.

As described below, management judgments and estimates must be made and used in connection with the preparation of our consolidated financial statements.

We have identified areas where material differences could result in the amount and timing of our net sales, costs, and expenses for any period if we had made different judgments or used different estimates.

Revenue Recognition.

primarily sell hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other

channel partners via the Internet.

The hardware products include cable modems and gateways, mobile broadband modems, wireless routers,

MoCA adapters and mesh home networking devices.

We also sell the Minim subscription service that enables and secures a better-connected

home using the Minim AI-driven smart home WiFi management and security platform.

The SaaS was offered over a defined contract period, generally one year.

These services were available as an on-demand application over the defined term.

The agreements included service offerings, which deliver applications and technologies via cloud-based deployment models that we develop functionality for, provide unspecified updates and enhancements for, and host, manage, provide upgrades and support for the customers’ access by entering into solution agreements for a stated period.

The monthly fees charged to the customers are based on the number of subscribers utilizing the services each month, and the revenue recognized generally corresponds to the monthly billing amounts as the services are delivered.

Customers do not have the contractual right or ability to take possession of the hosted software.

consider each product and each service contract to be a distinct performance obligation.

Revenue is recognized when a performance obligation

is satisfied, which occurs when control of the promised products or services is transferred to the customer in an amount that reflects

the consideration we expect to receive in exchange for those products or services.

Revenue from product sales is recognized at a point

in time when management has determined that control has transferred to the customer, which is generally when legal title has transferred

to the customer.

Revenue from SaaS contracts is recognized as the output of the service is transferred to the customer over time, typically

evenly over the contract term.

Revenue is recognized net of allowances for returns and any taxes collected from customers, which are

subsequently remitted to governmental authorities.

contracts with customers often include promises to transfer multiple products and services to a customer.

Determining whether products

and services are considered distinct performance obligations that should be accounted for separately versus together may require significant

We consider each product and each service contract to be a distinct performance obligation.

Revenue is recognized when a performance obligation is satisfied, which occurs when control of the promised products or services is transferred to the customer in an amount that reflects the consideration we expect to receive in exchange for those products or services.

Revenue from product sales is recognized at a point in time when management has determined that control has transferred to the customer, which is generally when legal title has transferred to the customer.

Revenue from SaaS contracts is recognized as the output of the service is transferred to the customer over time, typically evenly over the contract term.

Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Our contracts with customers often include promises to transfer multiple products and services to a customer.

Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.

Judgment is also required to determine the stand-alone selling price (“SSP”) for each distinct performance obligation.

We use an observable price to estimate SSP for items that are sold separately.

In instances where SSP is not directly observable, such

as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and

other observable inputs.

In instances where SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions and other observable inputs.

Product Returns .

Products are returned by retail stores and distributors for inventory balancing and warranty repair or replacements.

of actual returned product are compared to analyses of the product return estimates.

We have concluded that the current process of estimating

the return reserve represents a fair measure with which to adjust revenue.

Returned goods are variable and under ASC Topic 606, Revenue

from Contracts with Customers, are estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g.,

upon shipment of goods).

Under ASC Topic 606, the Company monitors pending authorized returns of goods and, if deemed appropriate, record

the right of return asset accordingly.

Valuation and Cost of Goods Sold.

Inventory is valued at the lower of cost, determined by the first-in, first-out method, or its

net realizable value.

We review inventories for obsolete and slow-moving products and make provisions based on our estimate of the probability

that the material will not be consumed or that it will be sold below cost.

Additionally, material product certification costs on new

products are capitalized and amortized over the expected period of value of the respective products.

of Deferred Tax Assets.

Analyses of actual returned product are compared to analyses of the product return estimates.

We have concluded that the current process of estimating the return reserve represents a fair measure with which to adjust revenue.

Returned goods are variable and under ASC Topic 606, Revenue from Contracts with Customers, are estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g., upon shipment of goods).

Under ASC Topic 606, the Company monitors pending authorized returns of goods and, if deemed appropriate, records the right of return asset accordingly.

Inventory Valuation and Cost of Goods Sold.

Inventory is valued at the lower of cost, determined by the first-in, first-out method, or its net realizable value.

We review inventories for obsolete and slow-moving products and make provisions based on our estimate of the probability that the material will not be consumed or that it will be sold below cost.

Additionally, material product certification costs on new products are capitalized and amortized over the expected period of value of the respective products.

Valuation of Deferred Tax Assets.

We estimate our income tax expense and deferred income tax position.

This process involves the estimation

of our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax

and accounting purposes.

This process involves the estimation of our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.

These differences result in deferred tax assets and liabilities, which are included in our balance sheet.

then assess the likelihood that our deferred tax assets will be recovered from future taxable income.

To the extent we believe that recovery

is not likely, we establish a valuation allowance.

We then assess the likelihood that our deferred tax assets will be recovered from future taxable income.

To the extent we believe that recovery is not likely, we establish a valuation allowance.

Changes in the valuation allowance are reflected in the statement of operations.

management judgment is required in determining our provision for income taxes and any valuation allowances.

We have recorded a 100% valuation

allowance against our deferred income tax assets.

It is management’s estimate that, after considering all available objective evidence,

historical and prospective, with greater weight given to historical evidence, it is more likely than not that these assets will not be

If we establish a record of continuing profitability, at some point we will be required to reduce the valuation allowance and

recognize an equal income tax benefit which will increase net income in that period.

of Operations

following table sets forth certain financial data derived from our consolidated statements of operations for the years ended December

31, 2022 and 2021 presented in absolute dollars and as a percentage of net sales, with dollars and percentage change year over year.

ended December 31,

$ (4,800,383 )

of goods sold

and marketing

and administrative

and development

of Trademark, net

Significant management judgment is required in determining our provision for income taxes and any valuation allowances.

We have recorded a 100% valuation allowance against our deferred income tax assets.

It is management’s estimate that, after considering all available objective evidence, historical and prospective, with greater weight given to historical evidence, it is more likely than not that these assets will not be realized.

If we establish a record of continuing profitability, at some point we will be required to reduce the valuation allowance and recognize an equal income tax benefit which will increase net income in that period.

Results of Operations

The following table sets forth certain financial data derived from our consolidated statements of operations for the years ended December 31, 2023 and 2022 presented in absolute dollars and as a percentage of net sales, with dollars and percentage change year over year.

Years ended December 31,

Cost of goods sold

Operating expenses:

(15,045,040 )

other income (expense)

before income taxes

(15,436,896 )

tax provision

$ (15,549,244 )

$ (2,198,667 )

$ (13,350,577 )

of Fiscal Years 2022 and 2021

following table sets forth our revenues by product and the changes in revenues for fiscal year ended December 31, 2022, as compared to

fiscal year ended December 31, 2021:

Selling and marketing

General and administrative

Research and development

Total operating expenses

Operating loss

Total other income (expense)

Loss before income taxes

Income tax provision

Comparison of Fiscal Years 2023 and 2022

The following table sets forth our revenues by product and the changes in revenues for fiscal year ended December 31, 2023, as compared to fiscal year ended December 31, 2022:

Years ended December 31,

Cable Modems & gateways

$ (5,317,742 )

Other networking products

Software as a Service

$ (4,800,383 )

total net sales decreased year-over-year by $4.8 million or 8.7%.

The decline in net sales is directly attributable to decreased sales

of Motorola branded cable modems and gateways, including intelligent networking products that include the Minim SaaS offering.

2022 and 2021, we primarily generated our sales by selling cable modems and gateways.

Sales related to SaaS offerings were $912 thousand

and $525 thousand in the years ended December 31, 2022 and 2021, respectively.

The increase in other networking products of $131 thousand

in 2022 compared to 2021 is primarily due to a reduction in MoCA products and a refocus on new products introductions.

of Goods Sold and Gross Margin

of goods sold consists primarily of the following:

Our total net sales decreased year-over-year by $24.5 million or 48.4%.

The decline in net sales is directly attributable to decreased sales of Motorola branded cable modems and gateways.

In both 2023 and 2022, we primarily generated our sales by selling cable modems and gateways.

Sales related to SaaS offerings were $1.6 million and $912 thousand in the years ended December 31, 2023 and 2022, respectively.

The decrease in other networking products of $700 thousand in 2023 compared to 2022 is primarily due to a reduction in MoCA products and a refocus on new products introductions.

Cost of Goods Sold and Gross Margin

Cost of goods sold consists primarily of the following:

the cost of finished products from our third-party manufacturers;

overhead costs,

including purchasing, product planning, inventory control, warehousing and distribution logistics;

overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics;

third-party software licensing fees;

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and costs attributable to the provision of service offerings.

decrease in gross profit was attributable to sales decline of Motorola branded cable modems and gateways, an inventory reserve on a single

product, and increased freight and component costs.

The decrease in gross profit was attributable to sales decline of Motorola branded cable modems and gateways, an inventory reserve on a single product, and increased freight and component costs.

We outsource our manufacturing, warehousing, and distribution logistics.

this outsourcing strategy allows us to better manage our product costs and gross margin.

Our gross margin can be affected by a number

of factors, including fluctuation in foreign exchange rates, sales returns, changes in average selling prices, end-user customer rebates

and other channel sales incentives, changes in our cost of goods sold due to fluctuations and increases in prices paid for components,

overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or obsolete inventory.

following table presents net sales, cost of goods sold, and gross margin, for the periods indicated:

We believe this outsourcing strategy allows us to better manage our product costs and gross margin.

Our gross margin can be affected by a number of factors, including fluctuation in foreign exchange rates, sales returns, changes in average selling prices, end-user customer rebates and other channel sales incentives, changes in our cost of goods sold due to fluctuations and increases in prices paid for components, overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or obsolete inventory.

The following table presents net sales, cost of goods sold, and gross margin, for the periods indicated:

Years ended December 31,

$ (4,800,383 )

Cost of goods sold

profit and gross margin decreased in fiscal 2022 compared to the prior fiscal year, primarily due to the decline in net sales and an

inventory reserve on a single product of approximately $1.9 million.

expect fiscal 2023 gross margins to increase.

In 2023, we do not anticipate significant inventory reserves.

In 2022, we experienced meaningful

increases in costs of freight, materials, and components for our products.

Although freight and certain component costs have reduced

beginning in the third quarter of 2022, we will not realize improvements to margins until mid-2023 as we continue to work through inventory

obtained when freight and component costs were elevated.

We may continue to experience disruptions from the pandemic, with manufacturing

partners being affected by factory uptime and scarcity of materials and components.

These disruptions could increase the length of time

taken between order to production and transportation of inventory.

If such disruptions become widespread, they could significantly affect

our ability to fulfill the demand for our products.

Forecasting gross margin percentages is difficult, and there are several risks related

to our ability to maintain or improve our current gross margin levels.

Our cost of goods sold as a percentage of net sales can vary significantly

based upon factors such as:

uncertainties surrounding revenue volumes, including future pricing and/or potential discounts as a result

of the economy, competition, the timing of sales, and related production level variances;

Gross profit and gross margin decreased in fiscal 2023 compared to the prior fiscal year, primarily due to the decline in net sales.

We expect fiscal 2024 gross

margins to increase.

Our cost of goods sold as a percentage of net sales can vary significantly based upon factors such as:

uncertainties

surrounding revenue volumes, including future pricing and/or potential discounts as a result of the economy, competition, the timing of

sales, and related production level variances;

import customs duties and imposed tariffs;

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expenses associated with writing off excessive or obsolete inventory;

fluctuations in

freight costs;

manufacturing and purchase price variances;

fluctuations in freight costs;

manufacturing and purchase price

and changes in prices on commodity components.

and Marketing

and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product

marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff, technical support expenses, and facility

Selling and Marketing

Selling and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff, technical support expenses, and facility allocations.

The following table presents sales and marketing expenses, for the periods indicated:

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Selling and marketing

and marketing expenses increased in fiscal 2022, as compared to the prior year, primarily due to an increase in marketing program campaigns

of $1.0 million and Motorola royalty fees of $0.3 million.

expect our selling and marketing expenses as a percentage of net sales in fiscal 2023 to decrease compared to fiscal 2022 levels.

may fluctuate depending on sales levels achieved as certain expenses, such as commissions, are determined based upon the net sales achieved.

Forecasting selling and marketing expenses is highly dependent on expected net sales levels and could vary significantly depending on

actual net sales achieved in any given quarter.

Marketing expenses may also fluctuate depending upon the timing, extent and nature of

marketing programs.

and Administrative

and administrative expenses consist of salaries and related expenses for executives, finance and accounting, human resources, information

technology, professional fees, including legal costs associated with defending claims against us, allowance for doubtful accounts, facility

allocations, and other general corporate expenses.

The following table presents general and administrative expenses, for the periods

Sales and marketing expenses decreased in fiscal 2023, as compared to the prior year, primarily due to a decrease in marketing program campaigns of $2.0 million, personnel costs of $1.5 million, and Motorola royalty fees of $1.5 million.

We expect our selling and marketing expenses as a percentage of net sales in fiscal 2024 to decrease compared to fiscal 2023 levels.

Expenses may fluctuate depending on sales levels achieved as certain expenses, such as commissions, are determined based upon the net sales achieved.

Forecasting selling and marketing expenses is highly dependent on expected net sales levels and could vary significantly depending on actual net sales achieved in any given quarter.

Marketing expenses may also fluctuate depending upon the timing, extent and nature of marketing programs.

General and Administrative

General and administrative expenses consist of salaries and related expenses for executives, finance and accounting, human resources, information technology, professional fees, including legal costs associated with defending claims against us, allowance for doubtful accounts, facility allocations, and other general corporate expenses.

The following table presents general and administrative expenses, for the periods indicated:

Years ended December 31,

General and administrative

and administrative expenses increased $1.2 million primarily due to an increase of $1.2 million in personnel costs, including $0.2 million

in severance costs and $0.3 million in stock compensation expense, and $0.6 million in software licenses, partially offset by a decrease

of $0.5 million in professional services fees.

general and administrative expense increases or decreases in absolute dollars are difficult to predict due to the lack of visibility

of certain costs, including legal costs associated with defending claims against us, and other factors.

and Development

and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and regulatory testing,

product certification expenditures to qualify our products for sale into specific markets, prototypes, IT, and other consulting fees.

General and administrative expenses decreased $1.4 million primarily due to a decrease of $1.4 million in personnel costs and $0.5 million in professional services fees, partially offset by an increase in insurance costs of $0.4 million.

Future general and administrative expense increases or decreases in absolute dollars are difficult to predict due to the lack of visibility of certain costs, including legal costs associated with defending claims against us, and other factors.

Research and Development

Research and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and regulatory testing, product certification expenditures to qualify our products for sale into specific markets, prototypes, IT, and other consulting fees.

Research and development expenses are recognized as they are incurred.

Our research and development organization is focused on enhancing

our ability to introduce innovative and easy-to-use products and services.

The following table presents research and development expenses,

for the periods indicated:

Our research and development organization is focused on enhancing our ability to introduce innovative and easy-to-use products and services.

The following table presents research and development expenses, for the periods indicated:

Years ended December 31,

Research and development

decrease of $339 thousand was primarily due to certification costs of $0.4 million, offset by $0.1 million in software licenses.

believe that innovation and technological leadership is critical to our future success, and we are committed to continuing a significant

level of research and development to develop new technologies, products and services.

We continue to invest in research and development

to expand our hardware product offerings focused on premium WiFi 6E, WiFi 6, and software solutions.

We expect research and development

expenses as a percentage of net sales in fiscal 2023 to be in line with or slightly below fiscal 2022 levels.

Research and development

expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of net

sales, depending on actual net sales achieved in any given year.

On August 12, 2021, the Company entered into an agreement with Zoom Video Communications, Inc.

to sell all of the Company’s

right, title and interest in the ZOOM® trademark for cash consideration in the amount of $4.0 million, net of legal costs incurred

of $44 thousand.

The Company did not have a carrying basis in the trademark that was subject to the agreement and recorded income of

approximately $4.0 million, which is recorded in income from continuing operations pursuant to ASC 360-10, Impairment or Disposal of

Long-Lived Assets.

Income (Expense)

ended December 31,

income (expense)

income (expense), net was an expense of $392 thousand in fiscal 2022 and expense of $206 thousand in fiscal 2021, primarily due to increased

borrowing interest rates related to the SVB Loan Agreement.

Tax Expense (Benefit).

We recorded minimum state income tax for a few states and tax related to our operations in Mexico, which was

$112 thousand and $64 thousand in fiscal 2022 and fiscal 2021, respectively.

The decrease of $2.4 million was primarily due to personnel costs of $1.7 million, $0.2 million software licenses, and $0.2 million professional services fees.

We believe that innovation and technological leadership is critical to our future success, and we are committed to continuing a significant level of research and development to develop new technologies, products and services.

We continue to invest in research and development to expand our hardware product offerings focused on premium WiFi 6E, WiFi 6, and software solutions.

We expect research and development expenses as a percentage of net sales in fiscal 2024 to be below fiscal 2023 levels.

Research and development expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of net sales, depending on actual net sales achieved in any given year.

Other Income (Expense)

Years ended December 31,

and Capital Resources

principal sources of liquidity are cash and cash equivalents, sales of inventory, borrowing under our line-of credit and a bridge loan

Other income (expense)

Other income (expense), net was an expense of $385 thousand in fiscal 2023 and expense of $392 thousand in fiscal 2022, primarily due to increased borrowing interest rates related to the SVB Loan Agreement.

Income Tax Expense.

We recorded minimum state income tax for a few states and tax related to our operations in Mexico, which was $43 thousand and $112 thousand in fiscal 2023 and fiscal 2022, respectively.

Years ended December 31,

Liquidity and Capital Resources

Our principal sources of

liquidity are cash and cash equivalents, sales of inventory, borrowing under our line of credit, prior to repayment and termination,

at December 31, 2023.

As of December 31, 2022, we had cash and cash equivalents of $530 thousand and $500 thousand in restricted cash

as compared to $12.6 million in cash and cash equivalents and $500 thousand in restricted cash on December 31, 2021.

On December 31,

2022, we had $4.8 million of borrowings outstanding and $38 thousand available on our $10.0 million SVB line-of-credit and working capital

of $15.7 million.

We have funded our operations and investing activities primarily through borrowings on our line of credit, the sale

of assets and the sale of our common stock.

historical cash outflows have primarily been associated with:

(1) cash used for operating activities such as the purchase and growth

of inventory, expansion of our sales and marketing and research and development and other working capital needs;

(2) capital expenditures related to the

acquisition of equipment;

As of December 31, 2023, we had cash and cash equivalents of $709 thousand and $0 in restricted cash

as compared to $530 thousand in cash and cash equivalents and $500 thousand in restricted cash on December 31, 2022.

December 31, 2023, we had no outstanding borrowings and working capital of $(0.8) million.

We have funded our operations.

Our historical cash outflows have primarily been associated with:

(1) cash used for operating activities such as the purchase and growth of inventory, expansion of our sales and marketing and research and development and other working capital needs;

(2) capital expenditures related to the acquisition of equipment;

and (4) cash used to repay our debt obligations and related interest expense.

Fluctuations in our working capital

due to timing differences of our cash receipts and cash disbursements also impact our cash inflows and outflows.

consolidated financial statements as of December 31, 2022 were prepared under the assumption that we will continue as a going concern.

Fluctuations in our working capital due to timing differences of our cash receipts and cash disbursements also impact our cash inflows and outflows.

Our consolidated financial statements as of December 31, 2023 were prepared under the assumption that we will continue as a going concern.

The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

However, substantial doubt exists about our ability to continue as a going concern, and we will require additional liquidity to

continue operations beyond the next 12 months.

Our consolidated

financial statements as of December 31, 2022, do not include any adjustments to the carrying amounts and classification of

assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.

If we are unable to

continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried

on our financial statements, and it is likely that investors will lose all or part of their investment.

following table presents our cash flows for the periods presented:

Years ended December 31,

Cash used in operating activities

$ (12,170,073 )

$ (14,272,267 )

However, substantial doubt exists about our ability to continue as a going concern, and we will require additional liquidity to continue operations beyond the next 12 months.

Our consolidated financial statements as of December 31, 2023, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.

If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or part of their investment.

The following table presents our cash flows for the periods presented:

Cash provided by (used in) operating activities

Cash used in investing activities

Cash provided by financing activities

Cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents

$ (12,040,335 )

Flows from Operating Activities.

used in operating activities of $12.2 million for 2022 reflected our net loss of $15.5 million, adjusted for non-cash expenses, consisting

primarily of $0.8 million of depreciation and amortization, $1.2 million of stock-based compensation expense, and a $0.1 million write-off

of goodwill and intangible assets.

Uses of cash included a reduction in accounts payable of $9.6 million and a decrease in accrued expenses

$0.8 million.

Sources of cash included a decrease of accounts receivable of $2.2 million, a decrease in inventory of $6.7 million, and

increase in deferred revenue of $671 thousand.

used in operating activities of $14.3 million for 2021 reflected our net loss of $2.2 million, adjusted for non-cash expenses, consisting

primarily of $1.0 million of depreciation and amortization and $1.0 million of stock-based compensation expense.

Uses of cash include

an increase in inventories ($18.0 million) and a decrease in accrued expenses ($2.3 million).

Sources of cash included a decrease of

accounts receivable of $4.3 million and increases in accounts payable of $862 thousand and deferred revenue of $662 thousand.

Flows from Investing Activities.

2022, $277 thousand was used to purchase equipment and $418 thousand was used for certification costs.

2021, $593 thousand was used to purchase equipment and $89 thousand was used for certification costs.

Flows from Financing Activities.

Cash provided by financing activities in 2022 consisted of proceeds from a bridge loan of $1

million, proceeds from stock option exercises of $0.2 million.

Uses of cash in 2022 included $0.4 million in borrowing reductions under

our SVB line-of-credit.

provided by financing activities in 2021 consisted of a source of cash of $22.7 million from a public offering, $5.2 million from borrowings

under our SVB line-of-credit, and $1.2 million in proceeds from the exercises of common stock options.

Uses of cash include the repayment

of the Rosenthal & Rosenthal, Inc.

line-of-credit of $2.4 million.

Liquidity Needs

primary short-term needs for capital, which are subject to change, include expenditures related to:

acquisition of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities;

to our information technology infrastructure to enhance our capabilities and improve overall productivity;

of our commercialization efforts related to our current and future products, including expansion of our direct sales force and field

support resources;

continued advancement of research and development activities.

we will need to refinance the SVB Loan Agreement and the Bridge Loan by January 2024, which is when the respective agreements terminate.

capital expenditures are largely discretionary and within our control.

We expect that our product sales and the resulting operating loss

as well as the status of each of our product development programs, will significantly impact our cash management decisions.

December 31, 2022, we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital

expenditures and operations during the next twelve months.

Our ability to continue as a going concern will depend on our ability to obtain

additional equity or debt financing, attain further operating efficiencies, reduce or contain expenditures and increase revenue s.

Based on these factors, management determined that there is substantial doubt regarding our ability to continue as a going concern.

In the first quarter of 2023, the Company has implemented cost reduction plans to align

its cost structure to its sales and increase its liquidity.

The Company will continue to monitor its costs in relation to its sales and

adjust its cost structure accordingly.

future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of any future operating

losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs,

working capital required to support our sales growth, funds required to service our debt, the receipt of and time required to obtain

regulatory clearances and approvals, our sales and marketing programs, our need for infrastructure to support our sales growth, the continuing

acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment.

ability to fund our longer-term cash needs is subject to various risks, many of which are beyond our control—See “Risk Factors—We

may require significant additional capital to pursue our growth strategy, and our failure to raise capital when needed could prevent

us from executing our growth strategy.” Should we require additional funding, such as additional capital investments, we may need

to raise the required additional funds through bank borrowings or public or private sales of debt or equity securities.

We cannot assure

that such funding will be available in needed quantities or on terms favorable to us, if at all.

December 31, 2022, we have Federal and state net operating loss carry forwards of approximately $60.6 million and $29.8 million, respectively,

available to reduce future taxable income.

A valuation allowance has been established for the full amount of deferred income tax assets

as management has concluded that it is more-likely than-not that the benefits from such assets will not be realized.

a description of our operating leases, refer to Note 8 and for a description of our bank credit line and bridge loan agreement, license

agreement and purchase commitments, refer to Note 9 in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this

Annual Report on Form 10-K.

Sheet Arrangements

2006, the Company entered into a maquiladora agreement with North American Production Sharing, Inc.

This agreement

provides that NAPS provide certain personnel and other services for a production facility in Mexico on our behalf.

Although the maquiladora

agreement expired on September 25, 2019, the agreement automatically renews annually unless otherwise cancelled per provisions in the

Cash Flows from Operating Activities.

Cash provided by operating activities of $4.9 million for 2023 reflected our net loss of $17.6 million, adjusted for non-cash expenses, consisting primarily of $0.6 million of depreciation and amortization, $0.3 million of stock-based compensation expense, and a $0.2 million provision for accounts receivable allowance.

Uses of cash included a reduction in accrued expenses of $3.3 million and decrease in deferred revenue of $1.4 million.

Sources of cash included a decrease of accounts receivable of $1.9 million, a decrease in inventory of $15.5 million, and decrease in prepaid expenses and other current assets of $0.3 million.

Cash used in operating activities of $12.2 million for 2022 reflected our net loss of $15.5 million, adjusted for non-cash expenses, consisting primarily of $0.8 million of depreciation and amortization, $1.2 million of stock-based compensation expense, and a $0.1 million write-off of goodwill and intangible assets.

Uses of cash included a reduction in accounts payable of $9.6 million and a decrease in accrued expenses of $0.8 million.

Sources of cash included a decrease of accounts receivable of $2.2 million, a decrease in inventory of $6.7 million, and increase in deferred revenue of $671 thousand.

Cash Flows from Investing Activities.

In 2023, $162 thousand was used to purchase equipment and $219 thousand was used for certification costs.

In 2022, $277 thousand was used to purchase equipment and $418 thousand was used for certification costs.

Cash Flows from Financing Activities.

Cash used in financing activities in 2023 consisted of $4.8 million in borrowing repayments under our SVB line-of-credit.

Cash provided by financing activities in 2022 consisted of proceeds from a bridge loan of $1 million, proceeds from stock option exercises of $0.2 million.

Use of cash in 2022 included $0.4 million in borrowing reductions under our SVB line-of-credit.

Future Liquidity Needs

Our primary short-term needs for capital, which are subject to change, include expenditures related to:

the acquisition of equipment and other fixed assets for use in our current and future manufacturing and research and development facilities;

upgrades to our information technology infrastructure to enhance our capabilities and improve overall productivity;

support of our commercialization efforts related to our current and future products, including expansion of our direct sales force and field support resources;

the continued advancement of research and development activities.

Our capital expenditures are largely discretionary and within our control.

We expect that our product sales and the resulting operating loss as well as the status of each of our product development programs, will significantly impact our cash management decisions.

At December 31, 2023,

we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital expenditures and

operations during the next twelve months.

Our ability to continue as a going concern will depend on our ability to obtain additional equity

or debt financing, attain further operating efficiencies, reduce or contain expenditures and increase revenues.

Based on these factors,

management determined that there is substantial doubt regarding our ability to continue as a going concern.

The Company will continue

to monitor its costs in relation to its sales and adjust accordingly.

Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of any future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, funds required to service our debt, the receipt of and time required to obtain regulatory clearances and approvals, our sales and marketing programs, our need for infrastructure to support our sales growth, the continuing acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment.

Our ability to fund our longer-term cash needs is subject to various risks, many of which are beyond our control—See “Risk Factors—We may require significant additional capital to pursue our growth strategy, and our failure to raise capital when needed could prevent us from executing our growth strategy.” Should we require additional funding, such as additional capital investments, we may need to raise the required additional funds through bank borrowings or public or private sales of debt or equity securities.

We cannot assure that such funding will be available in needed quantities or on terms favorable to us, if at all.

At December 31, 2023, we have Federal and state net operating loss carry forwards of approximately $76.9 million and $44.9 million, respectively, available to reduce future taxable income.

A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more likely than-not that the benefits from such assets will not be realized.

Contractual Obligations

For a description of our operating leases, refer to Note 6 and for a description of our bank credit line and bridge loan agreement, license agreement and purchase commitments, refer to Note 5 in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

In 2006, the Company entered into a maquiladora agreement with North American Production Sharing, Inc.

This agreement provides that NAPS provide certain personnel and other services for a production facility in Mexico on our behalf.

Although the maquiladora agreement expired on September 25, 2019, the agreement automatically renews annually unless otherwise cancelled per provisions in the agreement.

Any related assets, liabilities, or expenses are reported in the accompanying financial statements.

Additionally, the Company

is obligated to pay future minimum required royalty payments associated with certain licensing agreements which are not included in our

consolidated balance sheet.

Additionally, the Company is obligated to pay future minimum required royalty payments associated with certain licensing agreements which are not included in our consolidated balance sheet.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis