FiEE, Inc. 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required. ITEM 8 – CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 45 MINIM, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES Page Report of Independent Registered Public Accounting Firm (PCAOB ID 5041 ) F-2 Report of Independent Registered Public Accounting Firm (PCAOB ID: 49) F-3 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-4 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023 and 2022 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 F-7 Notes to Consolidated Financial Statements F-8- F-31 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the board of directors of Minim, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Minim, Inc. (the "Company") as of December 31, 2023, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. We have also audited the adjustments made for the effects of the adjustments to retrospectively apply the reverse stock split as described in Note 8 as of and for the years ended December 31, 2023 and 2022. In our opinion, such adjustments were appropriate and have been properly applied. We were not engaged to audit, review or apply any procedures to the 2022 consolidated financial statements of the Company other than with respect to the adjustments to Note 8 and, accordingly, we do not express an opinion or any other form of assurance of the 2022 consolidated financial statements taken as a whole. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or are required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ BF Borgers CPA PC We have served as the Company’s auditor since 2023. Lakewood, CO April 12, 2024 F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and the Board of Directors Minim, Inc. Opinion on the Financial Statements We have audited, before the effects of the adjustments to retrospectively apply the reverse stock split as described in Note 8, the accompanying consolidated balance sheets of Minim, Inc. and subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows, for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).The 2022 financial statements before the effects of the adjustments described in Note 8 are not presented herein. In our opinion, before the effects of the adjustments to retrospectively apply the reverse stock split, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. We were not engaged to audit, review, or apply any procedures to retrospectively apply the reverse stock split as described in Note 8 and accordingly we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors. Substantial Doubt About the Company’s Ability to Continue as a Going Concern The accompanying 2022 financial statements were prepared assuming that the Company would continue as a going concern. As discussed in Note 1 to the 2022 financial statements, the Company suffered recurring losses and negative cash flows from operations and needed additional funding within the next twelve months. This raised substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters were also described in Note 1 to the 2022 financial statements. The 2022 financial statements did not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ RSM US LLP We served as the Company’s auditor from 2021 to 2023. Boston, Massachusetts April 12, 2024 F- 3 MINIM, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2023 and 2022 2023 2022 ASSETS Current assets Cash and cash equivalents $ 709,322 $ 530,110 Restricted cash - 500,000 Accounts receivable, net of allowance for doubtful accounts of $ 312,983 and $ 138,331 as of December 31, 2023 and, 2022, respectively 701,377 2,758,406 Inventories, net 9,952,647 25,415,206 Prepaid expenses and other current assets 35,768 360,735 Total current assets 11,399,114 29,564,457 Equipment, net 432,505 636,973 Operating lease right-of-use assets 22,512 173,480 Intangible assets, net 33,247 73,301 Other assets 472,587 511,795 Total assets $ 12,359,965 $ 30,960,006 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Bank credit line $ - $ 4,758,663 Accounts payable 11,143,693 2,837,191 Current maturities of bridge loan agreement - 1,000,000 Current maturities of operating lease liabilities 22,512 150,968 Accrued expenses 1,077,843 4,440,724 Deferred revenue, current - 633,542 Total current liabilities 12,244,048 13,821,088 Operating lease liabilities, less current maturities - 22,512 Deferred revenue, noncurrent - 771,738 Total Liabilities 12,244,048 14,615,338 Commitments and Contingencies (Note 7) Stockholders’ equity Preferred Stock, Authorized: 2,000,000 shares at $ 0.001 par value; 0 shares issued and outstanding - - Common Stock: Authorized: 60,000,000 shares at December 31, 2023 and 2022, at $ 0.01 par value; issued and outstanding: 2,632,809 shares and 1,877,970 shares at December 31, 2023 and 2022, respectively 479,335 469,492 Additional paid-in capital 92,105,360 90,710,030 Accumulated deficit ( 92,468,778 ) ( 74,834,854 ) Total stockholders’ equity 115,917 16,344,668 Total liabilities and stockholders’ equity $ 12,359,965 $ 30,960,006 The accompanying notes are an integral part of these consolidated financial statements. F- 4 MINIM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2023 and 2022 2023 2022 Net sales $ 26,106,271 $ 50,622,143 Cost of goods sold 25,635,383 38,695,605 Gross profit 470,888 11,926,538 Operating expenses: Selling and marketing 9,472,527 15,022,638 General and administrative 4,758,357 6,124,034 Research and development 3,446,595 5,824,906 Total operating expenses 17,677,479 26,971,578 Operating loss ( 17,206,591 ) ( 15,045,040 ) Other income (expense): Interest income 2,554 457 Interest expense ( 385,952 ) ( 394,615 ) Other, net ( 1,316 ) 2,302 Total other income (expense) ( 384,714 ) ( 391,856 ) Loss before income taxes ( 17,591,305 ) ( 15,436,896 ) Income tax provision 42,619 112,348 Net loss $ ( 17,633,924 ) $ ( 15,549,244 ) Basic and diluted net loss per share $ ( 9.08 ) $ ( 8.38 ) Weighted average common and common equivalent shares: Basic and diluted 1,941,800 1,855,965 The accompanying notes are an integral part of these consolidated financial statements. F- 5 MINIM, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years Ended December 31, 2023 and 2022 Common Stock Additional Paid-in Accumulated Shares Amount Capital Deficit Total Balance at December 31, 2021 1,835,402 $ 458,850 $ 89,313,273 $ ( 59,285,610 ) $ 30,486,513 Net loss - - - ( 15,549,244 ) ( 15,549,244 ) Stock option exercises 17,237 4,308 232,496 - 236,804 Common stock issued for vested restricted units 25,331 6,334 ( 6,334 ) - - Stock-based compensation - - 1,170,595 - 1,170,595 Balance at December 31, 2022 1,877,970 469,492 90,710,030 ( 74,834,854 ) 16,344,668 Net loss - - - ( 17,633,924 ) ( 17,633,924 ) Common stock issued for vested restricted units 20,496 2,500 ( 2,500 ) - - Shares issued in exchange for debt conversion 734,343 7,343 1,118,435 - 1,125,778 Stock-Based Compensation - - 279,395 - 279,395 Balance at December 31, 2023 2,632,809 $ 479,335 $ 92,105,360 $ ( 92,468,778 ) $ 115,917 The accompanying notes are an integral part of these consolidated financial statements. F- 6 MINIM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2023 and 2022 2023 2022 Cash flows used in operating activities: Net loss $ ( 17,633,924 ) $ ( 15,549,244 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 612,138 837,228 Amortization of right-of-use assets 150,968 172,060 Amortization of debt issuance costs 29,845 71,401 Amortization of sales contract costs - 75,514 Stock-based compensation 279,395 1,170,595 Goodwill impairment charge - 58,872 Intangible asset impairment charge - 67,415 Provision for (recovery of) credit losses 174,652 ( 98,489 ) Provision for inventory reserves - 1,785,566 Changes in operating assets and liabilities: Accounts receivable 1,882,377 2,220,746 Inventories 15,462,559 6,690,515 Prepaid expenses and other current assets 324,963 227,150 Other assets 53,458 63,044 Accounts payable 8,306,503 ( 9,621,054 ) Accrued expenses ( 3,237,131 ) ( 839,265 ) Deferred revenue ( 1,405,280 ) 670,532 Operating lease liabilities ( 150,968 ) ( 172,659 ) Net cash provided by (used in) operating activities 4,849,555 ( 12,170,073 ) Cash flows from investing activities: Purchases of equipment ( 162,270 ) ( 276,665 ) Certification costs incurred and capitalized ( 219,595 ) ( 418,352 ) Net cash used in investing activities ( 381,865 ) ( 695,017 ) Cash flows from financing activities: Net repayment on the bank credit line ( 4,788,478 ) ( 377,811 ) Proceeds from bridge loan agreement - 1,000,000 Repayment of government loan - ( 34,237 ) Proceeds from stock option exercises - 236,803 Net cash provided by (used in) financing activities ( 4,788,478 ) 824,755 Net change in cash, cash equivalents, and restricted cash ( 320,788 ) ( 12,040,335 ) Cash, cash equivalents, and restricted cash - Beginning 1,030,110 13,070,445 Cash, cash equivalents, and restricted cash - Ending $ 709,322 $ 1,030,110 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 238,329 $ 394,615 Income taxes $ 42,619 $ 88,348 Cash is reported on the consolidated statements of cash flows as follows: Cash and cash equivalents $ 709,322 $ 530,110 Restricted cash - 500,000 Total cash, cash equivalents, and restricted cash $ 709,322 $ 1,030,110 The accompanying notes are an integral part of these consolidated financial statements. F- 7 MINIM, INC. Notes to Consolidated Financial Statements Years Ended December 31, 2023 and 2022 (1) NATURE OF OPERATIONS AND BASIS OF PRESENTATION Minim, Inc. and its wholly owned subsidiaries, MME Sub 1 LLC, Cadence Connectivity, Inc., MTRLC LLC, and Minim Asia Private Limited, are herein collectively referred to as “Minim” or the “Company”. The Company delivers intelligent networking products that reliably and securely connect homes and offices around the world. We were the exclusive global license holder to the Motorola brand for home networking hardware until 2023. The Company designs and manufactures products including cable modems, cable modem/routers, mobile broadband modems, wireless routers, Multimedia over Coax (“MoCA”) adapters and mesh home networking devices. Our AI-driven cloud software platform and applications make network management and security simple for home and business users, as well as the service providers that assist them— leading to higher customer satisfaction and decreased support burden. On January 21, 2022, Zoom Connectivity, Inc. filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Certificate of Incorporation to change its legal corporate name from “Zoom Connectivity, Inc.” to “Cadence Connectivity, Inc.”, effective as of January 21, 2022. MME Sub 1 LLC, a wholly owned subsidiary of Minim, Inc., was formed in March 2024 and is a limited liability company organized in Florida that is intended for the purpose of the Merger Agreement with e2Companies LLC (Note 12). Going Concern The Company’s consolidated financial statements as of December 31, 2023 were prepared under the assumption that the Company 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, as of December 31, 2023, substantial doubt exists about the Company’s ability to continue as a going concern. The Company has incurred recurring losses and negative cash flows from operations, and 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. As of December 31, 2023, the Company had cash and cash equivalents of $709 709,322 thousand and during the year ended December 31, 2023, the Company recorded a net loss of $17.6 17,633,924 million. The Company will require additional liquidity to continue operations beyond the next 12 months. The Company is evaluating strategies to obtain the required additional funding for future operations. These strategies may include but are not limited to equity offerings, debt financings, and cost reductions. However, given a variety of external factors, the Company may be unable to access further equity or debt financing when needed. The Company may engage in cost-cutting measures in an attempt to extend its cash resources. The Company may explore sale or merger of its operations. As such, there can be no assurance that the Company will be able to obtain additional liquidity when needed or under acceptable terms, if at all. On March 12, 2024, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with e2 Companies LLC, a Florida limited liability company (“e2 Companies”). No guarantee exists that the merger will successfully be consummated (refer to Note 12 for more information on the Merger Agreement with e2 Companies). The Company’s 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 the Company were unable to continue as a going concern. If the Company is unable to raise additional capital and is therefore unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value at which those assets are carried on its consolidated financial statements, and it is likely that investors will lose all or part of their investment. Liquidity The Company’s operations have historically been financed through the issuance of common stock and borrowings. Since inception, the Company has incurred significant losses and negative cash flows from operations. During the year ended December 31, 2023, the Company incurred a net loss of $17.6 17,633,924 million, and generated cash in operations of $4.9 million, 4,849,555 which was offset by $ 5.2 million in combined uses of cash from investing and financing activities. As of December 31, 2023, the Company had an accumulated deficit of $92.5 92,468,778 million and cash and cash equivalents of $709 709,322 thousand. The Company will continue to monitor its costs in relation to its sales and adjust its cost structure accordingly. Management of the Company believes it will not have sufficient resources to continue as a going concern through at least one year from the issuance of these financial statements. F- 8 Basis of Presentation The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated in the consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation. Certain amounts in the consolidated financial statements and associated notes may not add up due to rounding. All percentages have been calculated using unrounded amounts. On April 17, 2023, the Company effected a 25:1 reverse stock split for each share of common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock split. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. These judgments, estimates and assumptions made by the Company include, but are not limited to revenue recognition, expected credit losses; contract liabilities (sales returns); valuation allowance for deferred income tax assets; write-downs of inventory for slow-moving and obsolete items and stock-based compensation. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results may differ from those estimates under different assumptions or conditions and the differences may be material. Foreign Currencies The Company’s reporting currency is the U.S. dollar. The Company generates a portion of its revenues in markets outside North America principally in transactions denominated in foreign currencies, which exposes the Company to risks of foreign currency fluctuations. Foreign currency transaction gains (losses) are included in the consolidated statements of operations under other income (expense). (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash, Cash Equivalents and Restricted Cash As of December 31, 2022, the restricted cash balance of $500 500,000 thousand, respectively, related to letters of credit to support a bond on tariffs. The Company did no t have restricted cash balance as of December 31, 2023. The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. As of December 31, 2023 and 2022, the Company’s cash equivalents were held in institutions in the U.S. and include deposits in higher-interest bank accounts which were unrestricted as to withdrawal or use. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, restricted cash and accounts receivable. Substantially all the Company’s cash and cash equivalents and restricted cash are held at one financial institution, Silicon Valley Bank, which was placed into receivership by the FDIC on March 9, 2023. On March 10, 2023, the Silicon Valley Bank depositor accounts and loan facilities, including the Company’s bank accounts and line of credit, were transferred to Silicon Valley Bridge Bank. Through Silicon Valley Bridge Bank, the Company’s bank balances are fully insured by the FDIC and the line of credit facility remains operational, allowing the Company to draw from it as required. The Company has not experienced any credit losses on its cash and cash equivalents and restricted cash through December 31, 2023 and has not experienced any credit losses as of the date of filing this Form 10-K F- 9 For the year ended December 31, 2023, two customers accounted for 10% or greater individually, and 80 % in the aggregate of the Company’s total net sales. For the year ended December 31, 2022, two customers accounted for 10% or greater individually, and 87 % in the aggregate of the Company’s total net sales. Accounts receivable are unsecured and the Company does not require collateral; however, the Company does assess the collectability of accounts receivable based on a number of factors, including past transaction history with, and the creditworthiness of, the customer. Accordingly, the Company is exposed to credit risk associated with accounts receivable. At December 31, 2023, one customer with an accounts receivable balance of 10% or greater individually accounted for 96 % of the Company’s accounts receivable. At December 31, 2022, two customers with an accounts receivable balance of 10% or greater individually accounted for a combined 75 % of the Company’s accounts receivable. To reduce risk, the Company closely monitors the amounts due from its customers and assesses the financial strength of its customers through a variety of methods that include, but are not limited to, engaging directly with customer operations and leadership personnel, visiting customer locations to observe operating activities, and assessing customer longevity and reputation in the marketplace. As a result, the Company believes that its accounts receivable credit risk exposure is limited. The Company depends on many third-party suppliers for key components contained in its product offerings. For some of these components, the Company may only use a single source supplier, in part due to the lack of alternative sources of supply. During 2023 and 2022, the Company had one and two suppliers that provided 86 % and 93 % , respectively, of the Company’s purchased inventory. Accounts Receivable, Net Accounts receivable are recorded at invoice value, net of any allowance for doubtful accounts that are based on credit losses. Estimates of the allowance for doubtful accounts are determined based on existing contractual payment terms, historical payment patterns of customers, and individual customer circumstances. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the failure or inability of its customers to make required payments. In determining the allowance for doubtful accounts, the Company considers the probability of recoverability of its accounts receivable based on past experience, taking into account current collection trends as well as general economic factors. Credit risks are assessed based on historical write-offs, net of recoveries, as well as analysis of the aged accounts receivables balances with allowances generally increasing as the receivables age. Inventories Inventories are stated at the lower of cost, or net realizable value. Cost is determined using the weighted average cost method, which approximates actual costs as determined on a first-in, first-out basis. The Company regularly monitors inventory quantities on hand and records write-downs for excess and obsolete inventories based on the Company’s estimate of demand for its products, potential obsolescence of technology, product life cycles and whether pricing trends or forecasts indicate that the carrying value of inventory exceeds its estimated selling price. These factors are impacted by market and economic conditions, technology changes and new product introductions and require significant estimates that may include elements that are uncertain. Actual demand may differ from forecasted demand and may have a material effect on gross profit. If inventory is written down, a new cost basis is established that cannot be increased in future periods. The carrying value of inventories is reduced for any difference between cost and net realizable value of inventories that is determined to be obsolete or unmarketable, based upon assumptions about future demand and market conditions. Equipment, net Equipment is stated at cost, net of accumulated depreciation. Depreciation is generally computed using the straight-line method based on the estimated useful lives of the assets, which is generally three to five years. Maintenance and repairs are charged to expense as incurred. Significant improvements that substantially enhance the useful life of an asset are capitalized and depreciated. When assets are retired or disposed of, the cost together with related accumulated depreciation is removed from the balance sheet and any resulting gain or loss is reflected in the Company’s statements of operations in the period realized. F- 10 Goodwill The Company records goodwill when consideration paid in a business acquisition exceeds the value of the net assets acquired. The Company’s estimates of fair value are based upon assumptions believed to be reasonable at the time, but such estimates are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate and unanticipated events or circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or actual results. Goodwill is not amortized but rather is tested for impairment annually in the fourth quarter or more frequently, if facts and circumstances warrant a review. Circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or legal factors, an adverse action or assessment by a regulator, or unanticipated competition. The Company has determined that there is a single reporting unit for the purpose of conducting the goodwill impairment assessment. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, we first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If after assessing the totality of events or circumstances, we determine that it is more likely than not (i.e. greater than 50% likelihood) that the fair value of the reporting unit is less than its carrying amount, then the quantitative test is required. The quantitative goodwill impairment test requires us to estimate and compare the fair value of the reporting unit, determined using an income approach and a market approach, with its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets, goodwill is not impaired. If the fair value of the reporting unit is less than the carrying value, the difference is recorded as an impairment loss up to the amount of goodwill. Application of the goodwill impairment test requires judgments, including identification of the reporting units, assigning goodwill to reporting units, a qualitative assessment to determine whether there are any impairment indicators, and determining the fair value of each reporting unit which often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. There is no assurance that the actual future earnings or cash flows of the reporting unit will not decline significantly from the projections used in the impairment analysis. As part of the Company’s annual impairment test, which determined that the carrying amount of its single reporting unit exceeded its fair value, the Company recorded a goodwill impairment charge of $ 0 thousand and $59 58,872 thousand for the years ended December 31, 2023 and 2022, respectively. Intangible Assets and Long-Lived Assets Intangible assets are comprised of developed technology (ERP system), purchased technology (web domain), and customer relationships acquired through business combinations. All of the Company’s intangible assets are amortized using the straight-line method over their estimated useful life. The Company capitalizes certain implementation costs related to its cloud-based enterprise resourcing planning (“ERP”) system. Costs incurred during the application development stage are capitalized. Costs incurred in the preliminary stages of development are expensed as incurred. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable that the expenditures will result in additional functionality. Capitalized implementation costs are amortized on a straight-line basis over its estimated useful life, however there were no capitalized costs incurred during the years ended December 31, 2023 and 2022, respectively. The Company reviews long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows estimated to be generated by those assets over their estimated economic life to the related carrying value of those assets to determine if the assets are impaired. If an impairment is indicated, the asset is written down to its estimated fair value. The cash flow estimates used to identify the potential impairment reflect our best estimates using appropriate assumptions and projections at that time. In evaluating potential impairment of these assets, we specifically consider whether any indicators of impairment are present, including, but not limited to: F- 11 ● whether there has been a significant adverse change in the business climate that affects the value of an asset: ● whether there has been a significant change in the extent or way an asset is used; and ● whether there is an expectation that the asset will be sold or disposed of before the end of its originally estimated useful life. For the years ended December 31, 2023 and 2022, respectively, the Company recorded an impairment charge of $ 0 thousand and $ 67 thousand related to its customer relationships, which is associated with the Company’s ISP business that is being discontinued. The Company’s other intangible assets and long-lived assets were determined to not be impaired as of December 31, 2023. Leases The Company determines if an arrangement is a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable. As the implicit rate in the Company’s leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease terms may include options to extend or terminate the lease when the Company is reasonably certain it will exercise such options. Lease costs for the Company’s operating leases are recognized on a straight-line basis over the reasonably assured lease term. Variable lease payments include lease operating expenses. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense is included in general and administrative expenses on the consolidated statements of operations. The Company has elected to not separate lease and non-lease components for any leases within its existing classes of assets and, as a result, accounts for any lease and non-lease components as a single lease component. The Company has also elected to not apply the recognition requirement to any leases within its existing classes of assets with a term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Other Assets Other assets are stated at cost, less accumulated amortization, and primarily include certain certification costs and long-term insurance policies. Certain certification costs incurred that are necessary to market and sell products are capitalized and reported as “other assets” in the accompanying consolidated balance sheets when the costs are measurable, significant, and relating to products that are projected to generate revenue beyond twelve months. These costs are amortized over an 18- month period, beginning when the related products are available to be sold. As of December 31, 2023 and 2022, the balance outstanding for certifications costs, net of accumulated amortization, was $ 417 thousand and $ 402 thousand, respectively. The long-term insurance policies are amortized over the term of the coverage period. As of December 31, 2023 and 2022, the balance outstanding for long-term insurance policies, net of accumulated amortization, was $ 47 thousand and $ 71 thousand, respectively. F- 12 Income Taxes We compute deferred income taxes based on the differences between the financial statement and tax basis of assets and liabilities using enacted rates in effect in the years in which the differences are expected to reverse. We establish a valuation allowance to offset temporary deductible differences, net operating loss carryforwards and tax credits when it is more likely than not that the deferred tax assets will not be realized. We recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax position. The evaluation of an uncertain tax position is based on factors that include, but are not limited to, changes in the tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, and changes in facts or circumstances related to a tax position. Any changes to these estimates, based on the actual results obtained and/or a change in assumptions, could impact our tax provision in future periods. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as a provision for income tax in the consolidated statements of operations. Loss Per Common Share Basic loss per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. For the purposes of this calculation, stock options are considered common stock equivalents in periods in which they have a dilutive effect. Stock options that are antidilutive are excluded from the calculation. Net loss per share for the year ended December 31, 2023 and 2022, respectively, are as follows: Schedule of net income (loss) per share Years ended December 31, 2023 2022 Numerator: Net loss $ ( 17,633,924 ) $ ( 15,549,244 ) Denominator: Weighted average common shares - basic 1,941,800 1,855,965 Effect of dilutive common share equivalents - - Weighted average common shares - dilutive 1,941,800 1,855,965 Basic and diluted net loss per share $ ( 9.08 ) $ ( 8.38 ) Diluted loss per common share for the years ended December 31, 2023 and 2022 excludes the effects of 0 and 36,318 common share equivalents, respectively, since such inclusion would be anti-dilutive. The common share equivalents consist of shares of common stock issuable upon exercise of outstanding stock options. Revenue Recognition The Company primarily sells hardware products to its customers. The hardware products include cable modems and gateways, mobile broadband modems, wireless routers, MoCA adapters and mesh home networking devices. The Company derives its net sales primarily from the sales of hardware products to computer peripherals retailers, computer product distributors, OEMs, and direct to consumers and other channel partners via the Internet. The Company accounts for point-of-sale taxes on a net basis. F- 13 The Company also sells and earns revenues from Software as a Service (“SaaS”), including services that enable and secures a better-connected home with the AI-driven smart home WiFi management and security platform. Customers do not have the contractual right or ability to take possession of the hosted software. The Company has concluded that transfer of control of its hardware products transfers to the customer upon shipment or delivery, depending on the delivery terms of the purchase agreement. Revenues from sales of hardware products are recognized at a point in time upon transfer of control. The SaaS agreements are offered over a defined contract period, generally one year, and are sold to Internet service providers, who then promote the services to their subscribers. 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 the Company develops functionality for, provides unspecified updates and enhancements for, and hosts, manages, provides upgrade 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. Multiple Performance Obligations The Company has hardware products that include SaaS services as a bundled product. The Company accounts for these sales in accordance with the multiple performance obligation guidance of ASC Topic 606. For multiple performance obligation contracts, the Company accounts for the promises separately as individual performance obligations if they are distinct. Performance obligations are determined to be distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria of being distinct, the Company considers a number of factors, such as degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. SaaS included with certain hardware products is considered distinct from the hardware, and therefore the hardware and SaaS offerings are treated as separate performance obligations. After identifying the separate performance obligations, the transaction price is allocated to the separate obligations on a relative standalone selling price basis (“SSP”). SSP’s are generally determined based on the prices charged to customers when the performance obligation is sold separately or using an adjusted market assessment. The estimated SSP of the hardware and SaaS offerings are directly observable from the sales of those products and SaaS based on a range of prices. Revenue is recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware products bundled with SaaS offerings are recognized at the time control of the product transfers to the customer. The transaction price allocated to the SaaS offering is recognized ratably beginning when the customer is expected to activate their account and over a three-year period that the Company has estimated based on the expected replacement of the hardware. Other considerations of ASC 606 include the following: ● Returned Goods - analyses of actual returned products are compared to the product return estimates and historically have resulted in immaterial differences. The Company has concluded that the current process of estimating the return reserve represents a fair measure to adjust revenue. Returned goods are a form of variable consideration and under ASC Topic 606 are estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g., upon shipment of goods). The sales returns accrual was $ 578 thousand and $ 982 thousand at December 31, 2023 and 2022, respectively. ● Warranties - the Company does not offer its customers a separate warranty for purchase. Therefore, there is no separate performance obligation. The Company accrues for assurance-type warranties, which do not include any additional distinct services other than the assurance that the goods comply with agreed-upon specifications. The warranty reserve was no t material at December 31, 2023 and December 31, 2022. F- 14 ● Price protection - if the Company reduces the price on any products sold to the customer, the Company will guarantee an account credit for the price difference for all quantities of that product that the customer still holds. Price protection is variable and under ASC Topic 606 is estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g., upon shipment of goods). The price protection accrual was not material at December 31, 2023 and December 31, 2022. ● Volume Rebates and Promotion Programs - volume rebates are variable dependent upon the volume of goods sold-through the Company’s customers to end-users and under ASC Topic 606 are estimated and recognized as a reduction of revenue as performance obligations are satisfied (e.g., upon shipment of goods). The rebate and promotion accrual was not material at December 31, 2023 and 2022, respectively. Contract Balances Accounts receivable is recorded when the Company has an unconditional right to the consideration. When the timing of the Company’s delivery of goods or services is different from the timing of payments made by customers, the Company recognize either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). When a customer prepays, that payment is reflected as deferred revenue until the performance obligation is satisfied. Contract assets consist of unbilled receivables (see Note 3). The Company’s business is controlled as a single operating segment that consists of the manufacture and sale of cable modems and gateway, and the majority of the Company’s customers are retailers and distributors. Stock-Based Compensation Expense Stock-based compensation expense relates to stock options with a service condition and restricted stock units (RSUs). Stock-based compensation expense for the Company’s stock-based awards is based on their grant date fair value. Service-based options initially granted to an optionee generally vest at a rate of 25 % on the first anniversary of the original vesting date, with the balance vesting monthly over the remaining three years. The fair value of stock options with a service condition on the grant date is estimated using the Black-Scholes option-pricing model. The fair value of these awards is recognized as compensation expense on a straight-line basis over the requisite service period in which the awards are expected to vest and forfeitures are recognized as they occur. The Black-Scholes model considers several variables and assumptions in estimating the fair value of service-based stock options. These variables include the per share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected annual dividend yield and expected stock price volatility over the expected term. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the equity-settled award. RSUs initially granted to an optionee generally vest at a rate of 25 % on the first anniversary of the original vesting date, with the balance vesting quarterly over the remaining three years. The fair value of RSUs is based on the market price of the Company’s common stock on the date of grant. Advertising Costs Advertising costs are expensed as incurred and reported in selling expense in the accompanying consolidated statements of operations, and include costs of advertising, production, trade shows, and other activities designed to enhance demand for the Company’s products. The Company reported advertising costs of approximately $ 2.0 million and $ 4.0 million in 2023 and 2022, respectively. Shipping and Freight Costs The Company records the expense associated with customer-delivery, shipping and freight costs in selling and marketing expense. The Company reported shipping and freight costs of $ 363 thousand and $ 452 thousand in 2023 and 2022, respectively. F- 15 Segment The Company operates as a single operating segment. The Company’s chief operating decision maker, its Chief Executive Officer, reviews financial information on an aggregate basis for the purposes of allocating resources and evaluating financial performance. The Company’s primary operation is in the United States, and it has derived substantially all of its revenue from sales to customers in the U.S. Recently Adopted Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments Credit Losses — Measurement of Credit Losses on Financial Instruments. ” ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, which includes the Company’s accounts receivable. This ASU is effective for the Company for reporting periods beginning after December 15, 2022. The Company adopted ASU 2016-13 in 2023, and the adoption of this ASU did not have a material impact on its consolidated financial statements. There have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations and cash flows . (3) REVENUE AND OTHER CONTRACTS WITH CUSTOMERS Revenue is recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware products bundled with SaaS offerings are recognized at the time control of the product transfers to the customer. The transaction price allocated to the SaaS offering is recognized ratably beginning when the customer is expected to activate their account and over a three-year period that the Company has estimated based on the expected replacement of the hardware. Transaction Price Allocated to the Remaining Performance Obligations The remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for shipment, and that are not yet invoiced. As of December 31, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations related to SaaS performance obligations that are unsatisfied or partially unsatisfied was $ 0 . Contract costs The Company recognizes the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales commissions meet the requirements to be capitalized, and the Company amortizes these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our consolidated balance sheets. The Company applied a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. These costs include sales commissions on software maintenance contracts with a contract period of one year or less as sales commissions on contract renewals are commensurate with those paid on the initial contract. F- 16 Contract Balances The Company records accounts receivable when it has an unconditional right to the consideration. Contract liabilities consist of deferred revenue, which represents payments received in advance of revenue recognition related to SaaS agreements and for prepayments for products or services yet to be delivered. Payment terms vary by customer. The time between invoicing and when payment is due is not significant. For certain products or services and customer types, payment is required before the products or services are delivered to the customer. The following table reflects the contract balances as of the year ended: Schedule of contract balances December 31, 2023 2022 Accounts receivable $ 701,377 $ 2,758,406 Deferred revenue - current $ - $ 633,542 Deferred revenue - noncurrent $ - $ 771,738 During the year ended December 31, 2023, the change in deferred revenue was as follows: Schedule of change in contract balances Balance at December 31, 2022 $ 1,405,280 Billings 767,832 Revenue recognized ( 2,173,112 ) Balance at December 31, 2023 $ - Disaggregation of Revenue The following table sets forth our revenues by distribution channel: Schedule of disaggregation of revenue by distribution channel Years ended December 31, 2023 2022 Retailers $ 23,675,014 $ 48,728,624 Distributors 88,847 654,428 Other 2,342,770 1,239,091 $ 26,106,271 $ 50,622,143 The following table sets forth our revenues by product: Years ended December 31, 2023 2022 Cable Modems & gateways $ 23,972,004 $ 48,433,757 Other networking products 571,517 1,276,849 Software as a Service 1,562,750 911,537 $ 26,106,271 $ 50,622,143 F- 17 (4) BALANCE SHEET COMPONENTS Inventories Inventories, net consists of the following: Schedule of inventories December 31, 2023 2022 Materials $ 210,318 $ 397,133 Work in process 1,640,347 5,842,251 Finished goods 8,101,982 19,175,822 Total $ 9,952,647 $ 25,415,206 Finished goods includes consigned inventory held by our customers of $ 0 and $ 4.2 million at December 31, 2023 and 2022, respectively. The Company reviews inventory for obsolete and slow-moving products each quarter and makes provisions based on its estimate of the probability that the material will not be consumed or that it will be sold below cost. The inventory reserves were $ 1.7 million and $ 2.5 million for the years ended December 31, 2023 and 2022, respectively. Equipment Equipment, net consists of the following: Schedule of equipment December 31, Estimated Useful 2023 2022 lives in years Computer hardware and software $ 603,836 $ 497,913 3 Machinery and equipment 726,326 725,568 5 Molds, tools and dies 1,242,711 1,187,541 5 Office furniture and fixtures 79,147 78,728 5 2,652,020 2,489,750 Accumulated depreciation ( 2,219,515 ) ( 1,852,777 ) $ 432,505 $ 636,973 Depreciation expense was $ 368 thousand and $ 403 thousand for the years ended December 31, 2023 and 2022, respectively. Goodwill In December 2018, Cadence Connectivity acquired the net assets of MCP Networks Inc., a provider of a cloud-based home network management platform. The acquisition expanded Cadence Connectivity’s subscriber base and thereby offered sales opportunities of Cadence Connectivity’s SaaS to these subscribers. Cadence Connectivity recorded $ 58 thousand of goodwill related to this acquisition in its historical accounts of December 2018. As of December 31, 2022, the Company determined that the goodwill was impaired after the annual impairment test indicated that the carrying amount of the Company’s single reporting unit exceeded the estimated fair value and accordingly recorded a $59 58,872 thousand impairment charge to general and administrative expense in the statement of operations. F- 18 Intangible Assets In December 2018, Cadence Connectivity acquired the net assets of MCP Networks Inc., a provider of a cloud-based home network management platform. The acquisition expanded Cadence Connectivity’s subscriber base and thereby offered sales opportunities of Cadence Connectivity’s SaaS to these subscribers. Cadence Connectivity recorded $ 122 thousand of customer relationships related to this acquisition in its historical accounts of December 2018. As of December 31, 2022, the Company determined that the intangible asset of customer relationships was impaired as result of the Company’s discontinuation of the ISP business to which these customers are associated and accordingly recorded a $ 67 thousand impairment, net of accumulated amortization, to sales and marketing expense in the statement of operations. As of December 31, 2023, the Company had no impairment. Intangible assets consisted of the following at December 31, 2023 and 2022: Schedule of intangible assets Estimated As of December 31, 2023 As of December 31, 2022 Useful Gross Gross Life Carrying Accumulated Carrying Accumulated (in years) Amount Amortization Net Amount Amortization Net Customized internal use software 2.5 $ - $ - $ - $ 230,106 $ ( 207,399 ) $ 22,707 Acquired web domain 5.0 86,732 ( 53,485 ) 33,247 86,732 ( 36,138 ) 50,594 $ 86,732 $ ( 53,485 ) $ 33,247 $ 316,838 $ ( 243,537 ) $ 73,301 Amortization expense was $xx thousand and $ 40 thousand in the years ended December 31, 2023 and 2022, respectively. The estimated annual amortization expense for each of the two succeeding years and thereafter is as follows: Schedule of annual amortization expenses Years ended December 31, 2024 $ 17,346  2025 15,901 Total $ 33,247 Accrued expenses Accrued expenses consists of the following: Schedule of accrued expenses December 31, 2023 2022 Inventory purchases $ - $ 24,901 Payroll and related benefits - 430,358 Professional fees 229,950 290,588 Royalty costs - 1,650,000 Sales allowances 697,884 1,226,856 Sales and use tax 150,009 113,200 Other - 704,821 Total accrued other expenses $ 1,077,843 $ 4,440,724 F- 19 (5) BANK CREDIT LINE, BRIDGE LOAN, AND GOVERNMENT LOANS Bank Credit Line On March 12, 2021, the Company entered into a loan and security agreement with Silicon Valley Bank (the “SVB Loan Agreement”). On November 1, 2021, the Company entered into the first amendment to the SVB Loan Agreement (the “First Amendment”). The SVB Loan Agreement, as amended, provides for a revolving facility up to a principal amount of $ 25.0 million. The borrowing base equals the sum of (a) 85.0 percent of eligible customer receivables, plus (b) the least of (i) 60 percent of the value of eligible inventory (valued at cost), (ii) 85% of the net orderly liquidation value of inventory, and (iii) $6.2 million in each, as determined by SVB from the Company’s most recent borrowing base statement; provided that SVB has the right to decrease the foregoing percentages in its good faith business judgement to mitigate the impact of events, conditions, contingencies, or risks which may adversely affect the collateral or its value. The SVB Loan Agreement is secured by substantially all of the Company’s assets but excludes the Company’s intellectual property. Loans under the credit facility bear interest at a rate per annum equal to (i) at all times when a streamline period is in effect, the greater of (a) one-half of one percent (0.50%) above the Prime Rate or (b) three and three-quarters of one percent (3.75%) and (ii) at all times when a streamline period is not effect, the greater of (a) one percent (1.0%) above the Prime Rate and (b) four and one-quarter of one percent (4.25%). On December 12, 2022, the Company entered into its second Amendment to the SVB Loan Agreement (the “Second Amendment”). The Second Amendment (i) reduced the aggregate amount available under the revolving credit line from $ 25 million to $ 10 million, (ii) extends maturity to January 15, 2024, and (iii) provides a waiver for an existing default under the SVB Loan Agreement by virtue of the Company having entered into a Bridge Loan and Security Agreement dated as of November 23, 2022 by and among Borrower and Slingshot Capital, LLC, under which Borrower incurred certain Indebtedness and granted a Lien to Slingshot Capital. The Company incurred $ 143 thousand in origination costs in connection with entering into the SVB Loan Agreement. These origination costs were recorded as a debt discount and are being expensed over the remaining term of the facility. Interest expense was $ 30 thousand and $ 71 thousand for the years ended December 31, 2023 and 2022, respectively. On October 18, 2023, the Company paid in full the outstanding balance and immediately terminated the SVB Loan Agreement. As of December 31, 2023, the Company had $ 0 outstanding under the SVB Loan Agreement. On March 10, 2023, Silicon Valley Bank went into receivership with the Federal Deposit Insurance Corporation (FDIC) and is now the Silicon Valley Bridge Bank. The SVB Loan Agreement has been transferred to Silicon Valley Bridge Bank, and the revolving facility remains accessible to the Company. On March 27, 2023, the SVB Loan Agreement was transferred to First-Citizens Bank & Trust Company (“First-Citizens”) upon First-Citizens entered into a purchase and assumption agreement for all deposits and loans of Silicon Valley Bridge Bank. Covenants The SVB Loan Agreement included a minimum interest expense per month of $ 20 thousand. The First Amendment required the Company to maintain certain levels of minimum adjusted EBITDA, which were tested on the last day of each calendar quarter and measured for the trailing 3-month period ending on the last day of each quarter. The Second Amendment removed the minimum EBITDA covenants. In addition, pursuant to the SVB Loan Agreement, the Company was not permitted to pay any dividends without the prior written consent of SVB. F- 20 Bridge Loan On November 30, 2022 (the “Effective Date”), the Company and Slingshot Capital, LLC (“Slingshot Capital”) entered into a Bridge Loan Agreement (the “Bridge Loan Agreement”) pursuant to which Slingshot Capital agreed to make available a bridge loan in the principal amount up of up to $ 1,500,000 . In conjunction with the Bridge Loan Agreement, the Company executed a bridge term note (the “Bridge Term Note”) in favor of Slingshot Capital. The Company has drawn down $ 1,000,000 under the Bridge Loan Agreement. Subject to Slingshot Capital’s sole discretion, the other $ 500,000 may be drawn by the Company. Principal amounts borrowed under the Bridge Loan Agreement bear interest for the period from the Effective Date until February 28, 2023 of 8.00 % per annum. Unpaid principal after February 28, 2023 bears an interest of 14.00 % per annum until paid in full. In the event of default, all outstanding principal and interest shall bear interest at an annual rate of 18 % . In connection with the Bridge Loan Agreement, the Company, Slingshot Capital, and Silicon Valley Bank (the “Senior Lender”) executed a subordination agreement (the “Subordination Agreement”) on November 30, 2022. The Loan Agreement is subordinated to the outstanding indebtedness and obligations under the Company’s senior credit facility. Subject to the Senior Lender’s written consent, the Company shall grant Slingshot Capital a second-priority security interest in all of the Company’s collateral, which shall be subordinated to any and all security interests granted to the Senior Lender and at all times shall be limited to the same collateral granted to the Senior Lender under the senior credit facility. Principal and interest are not due and payable until the maturity date, which is January 15, 2024, unless the Company’s senior credit facility with the Senior Lender is paid in full in cash on an earlier date. The Company reimbursed Slingshot Capital $ 20,000 for its reasonable and documented expenses and fees related to the negotiations, documentation, and execution of the Bridge Loan Agreement, Subordination Agreement, and Bridge Term Note. On December 6, 2023, the Company and Slingshot Capital entered into a Debt Conversion Agreement (“Conversion Agreement”) pursuant to which the Company agreed to issue 734,343 shares of the Company’s common stock (based on $ 1.533 per share) (the “Shares”) in exchange for the cancellation of a total principal amount of $ 1,000,000 (“Principal Amount”) outstanding under the Bridge Loan Agreement and Bridge Term Note (collectively, the “Loan Agreements”), with Slingshot Capital, plus $ 125,778 in accrued and unpaid interest on such Principal Amount as of December 6, 2023. The price per share used in the exchanged was determined by the weighted average price per share and trade volume on September 13, 2023 and November 28, 2023. Slingshot Capital is owned by the Company’s former Chairperson of the Board and a former Board of Director, Jeremy Hitchcock and Elizabeth Hitchcock, respectively. Government Loans The Company participated in the Coronavirus Aid, Relief, and Economic Security Act and received an aggregate $ 1,128,000 in unsecured loans under the Small Business Administration Paycheck Protection Program, at a fixed rate of 1 % per annum. Under the terms of the loans, the Company received forgiveness of an aggregate $ 20,000 and $ 1,048,000 in 2021 and 2020, respectively. The Company repaid $ 34,000 and $ 26,000 in 2022 and 2021, respectively. As of December 31, 2023 and 2022, the Company had no outstanding balances under the loans. F- 21 (6) Leases The Company performs most of the final assembly, testing, packaging, warehousing and distribution at two production and warehouse facilities, totalling approximately 24,000 square feet, in Tijuana, Mexico. In November 2021, the Company entered into operating lease agreements extending each lease through November 30, 2023. The Company did not renew the lease and the lease expired on November 30, 2023. Lease payments total approximately $ 9 thousand per month. Rent expense was $ 101 thousand and $ 110 thousand for the years ended December 31, 2023 and 2022, respectively. In May 2020, the Company signed a two-year lease agreement for 3,218 square feet of office space at 275 Turnpike Executive Park in Canton, MA. The agreement includes a one-time option to cancel the second year of lease with three months advance notice . The location is currently utilized by the Company’s research and development group. Rent expense was $ 55 thousand and $ 54 thousand for the year ended December 31, 2023, and 2022, respectively. On December 1, 2021, the Company executed an amendment to extend the lease from June 2022 to May 2024 with monthly payments of approximately $ 5 thousand. The Company leases the facility that comprises its headquarters at 848 Elm Street in Manchester, NH. The facility lease agreement was effective from August 1, 2019 to July 31, 2021 and was renewed for a one-year extension until July 31, 2022. On July 18, 2022, the lease agreement was amended to a month-to-month lease arrangement and may be terminated by either party with a 60-day notice. The facility lease agreement provides for the lease of 2,656 square feet of office space. Rent expense was $ 42 thousand and $ 33 thousand for the years ended December 31, 2023 and 2022, respectively. The components of lease costs were as follows: Schedule of components of lease costs Years ended December 31, 2023 2022 Operating lease costs $ 155,379 $ 181,361 Short-term lease costs 41,550 29,740 Total lease costs $ 196,929 $ 211,101 The weighted-average remaining lease term and discount rate were as follows: Schedule of weighted average remaining lease term and discount rate Years ended December 31, 2023 2022 Operating leases: Weighted average remaining lease term (years) 0.4 1.1 Weighted average discount rate 4.2 % 4.2 % Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Schedule of supplemental cash flow information related to operating leases Years ended December 31, 2023 2022 Operating cash flow information: Amounts included in measurement of lease liabilities $ 150,968 $ 172,730 Non-cash activities: ROU asset obtained in exchange for lease liability $ - $ 103,914 F- 22 The maturity of the Company’s operating lease liabilities as of December 31, 2023 were as follows: Schedule of maturity of operating lease liabilities Years ended December 31, 2024 $ 22,794 Total lease payments $ 22,794 Less: imputed interest ( 282 ) Present value of operating lease liabilities $ 22,512 Operating lease liabilities, current $ 22,512 Operating lease liabilities, noncurrent $ - ( 7) COMMITMENTS AND CONTINGENCIES (a) Contingencies The Company is a party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit. The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If either or both of the criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses, that the amount is not material, or that an estimate of the loss cannot be made. The Company expenses its legal fees as incurred. In the ordinary course of their business, the Company and its subsidiaries are subject to lawsuits, arbitrations, claims, and other legal proceedings in connection with their business. Some of the legal actions include claims for substantial or unspecified compensatory and/or punitive damages. A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on the Company’s financial condition, results of operations, and cash flows. Management believes that the Company has adequate legal defenses with respect to the legal proceedings to which it is a defendant or respondent, and that the outcome of these pending proceedings is not likely to have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, the Company is unable to predict the outcome of these matters. (b) Commitments The Company was a party to a license agreement with Motorola Mobility LLC pursuant to which the Company has an exclusive license to use certain trademarks owned by Motorola Trademark Holdings, LLC for the manufacture, sale and marketing of consumer cable modem products, consumer routers, WiFi range extenders, MoCa adapters, cellular sensors, home powerline network adapters, and access points worldwide through a wide range of authorized sales channels. The license agreement had a term ending December 31, 2025 prior to its cancellation in 2023. In connection with the license agreement, the Company had committed to reserve a certain percentage of wholesale prices for use in advertising, merchandising and promotion of the related products. Additionally, the Company was required to make quarterly royalty payments equal to a certain percentage of the preceding quarter’s net sales with minimum annual royalty payments. Following the Company’s agreement with Motorola Mobility LLC on January 22, 2024, the Company’s quarterly royalty payments current and future obligations were satisfied in exchange for certain assets of the Company (refer to Note 12). F- 23 Royalty expense under the License Agreement amounted to $ 6,600,000 and $ 6,600,000 for the years ended December 31, 2023 and 2022, respectively, and is reported in selling and marketing expense on the accompanying consolidated statements of operations. On January 22, 2024, the Company, entered into a Letter Agreement re Product Purchase (the “Letter Agreement”) and a Debt Settlement Agreement (the “Settlement Agreement,” and with the Letter Agreement, the “Agreements”) with Motorola Mobility, LLC (“Motorola”). Pursuant to the Letter Agreement, the Company (A) initially transferred a portion of its inventory to Motorola and (B) agreed to transfer the reminder of such inventory upon receipt of certain funding in order to satisfy liabilities owed to Motorola, while agreeing to continue to provide certain customer and technical support. Pursuant to the Settlement Agreement, the Company agreed (i) to pay Motorola a settlement amount of $1,167,071 and (ii) to transfer additional funds as collected from the Company’s customers in an amount up to $263,752. The Company believes that the Agreements, together with arrangements it has finalized with other major vendors, will allow the Company to streamline its operations while reducing its current liabilities. (c) Vendor Obligation Releases In its efforts to manage its liquidity and cash-flow position, the Company negotiated and executed liability release agreements with certain vendors in Q4 2023 who comprised $ 5.0 million of outstanding accounts payable as of December 31, 2023. In aggregate, the executed release agreements resulted in a reduction of outstanding accounts payable obligations by $3.6 million from $5.0 million to $1.4 million. The executed release agreements become effective and are contingent upon payment of the $ 1.4 million negotiated amounts, which was paid during the period of Q1 2024. (8) STOCKHOLDERS’ EQUITY In July 2021, the Company’s shareholders voted to increase the number of authorized shares of capital stock to 62,000,000 shares, consisting of 60,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock (see Note 1). On April 17, 2023, the Company effected a 25:1 reverse stock split for each share of common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock split. Preferred Stock The Company is authorized to issue 2,000,000 shares of preferred stock at $ 0.001 par value per share. As of December 31, 2023 and 2022, no shares of preferred stock were outstanding. The Board of Directors may determine the rights, preferences, privileges, qualifications, limitations and restrictions granted or imposed upon any series of preferred stock. Common Stock The Company is authorized to issue 60,000,000 shares of common stock at $ 0.01 par value per share. As of December 31, 2023 and 2022, the Company had 2,632,809 and 1,877,970 , respectively, shares of common stock outstanding. Equity Compensation Plans In July 2019, the Company terminated the 2009 Stock Option Plan and the 2009 Directors Option Plan (collectively, the “Prior Plans”) and adopted the 2019 Stock Option Plan (the “2019 Stock Options Plan”) and the 2019 Directors Option Plan (the “2019 Directors Option Plan”) (collectively, the “2019 Plans”, and together with the Prior Plans, the “Plans”). The purpose of the 2019 Plans is to provide certain incentive and non-statutory stock options to employees, directors and certain non-employees. As a result, the Company may not grant any additional awards under the Prior Plans. The Prior Plans will continue to govern outstanding stock options previously granted thereunder. The Company has initially reserved 160,000 shares and 40,000 shares of common stock for issuance of awards under the 2019 Stock Option Plans and the 2019 Directors Option Plan, respectively. F- 24 The 2019 Plans authorize grants to purchase shares of authorized but unissued common stock. Stock options can be granted with an exercise price no less than or equal to the stock’s fair market value at the date of grant. All awards have 10-year terms. The 2019 Plans permit incentive stock options, or ISOs and non-qualified stock options, or NSOs. If the stock options are granted to a 10% stockholder, then the exercise price per share may not be less than 110% of the fair market value per share of the Company’s common stock on the grant date. The board of directors sets the fair value and exercise price for the underlying shares at the grant date. On November 9, 2021, the Company’s Board of Directors approved the Omnibus Incentive Compensation Plan and Non-Employee Directors Compensation Plan (collectively, the “2021 Equity Plans”) and terminated the 2019 Plans. The purpose of the 2021 Equity Plans is to provide certain incentive and non-statutory stock options, restricted stock, restricted stock units, and stock appreciation rights to employees, directors, and certain non-employees. As a result, the Company may not grant any additional awards under the 2019 Plans. The Prior Plans and the 2019 Plans will continue to govern outstanding stock options previously granted thereunder. The Company has initially reserved 120,000 shares and 50,000 shares of common stock for issuance of awards under the Omnibus Incentive Compensation Plan and Non-Employee Directors Compensation Plan, respectively. On June 9, 2022, the 2021 Equity Plans were approved by the Company’s shareholders. Stock Option Activity Stock option activity under Stock Option Plans was as follows: Summary of stock option activity Outstanding Options Weighted average exercise price Weighted average remaining contractual term Aggregate Intrinsic Value Outstanding at December 31, 2021 94,583 $ 36.75 2.80 $ 10.50 Granted - - - - Exercised ( 17,233 ) 13.75 - - Forfeited ( 38,424 ) 36.75 - - Outstanding at December 31, 2022 38,926 $ 46.75 2.20 $ 10.50 Granted - - - - Exercised - - - - Forfeited ( 38,926 ) 46.75 - - Outstanding at December 31, 2023 - $ - - $ - Exercisable at December 31, 2023 - $ - - $ - There were no options granted during 2023 and 2022 under the stock option plan. The total intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $ 0 and $ 140 thousand, respectively. The intrinsic value is the difference between the estimated fair value of the Company’s common stock at the time of exercise and the exercise price of the stock option. The total fair value of options that vested during the years ended December 31, 2023 and 2022 was $ 162 thousand and $ 710 thousand, respectively. As of December 31, 2023, the total unrecognized stock-based compensation expense related to the stock options was $ 0 thousand. F- 25 Stock-based Valuation Assumptions During 2023 and 2022, the Company did no t grant stock options and consequently had no requirement to value stock options. Restricted Stock Units During 2023, the Company granted 14,831 RSUs with a total fair value of $ 80 thousand under the 2021 Equity Plans. As of December 31, 2023, there were no RSUs vested with a fair value of $ 0 thousand. The Company recorded $ 118 thousand and $ 692 thousand in stock-based compensation expense for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the total unrecognized stock-based compensation expense was $ 0 thousand. A summary of plan activity for the 2021 Equity Plans is as follows: Schedule of restricted stock units Weighted Average Units Grant Date Fair value Unvested at December 31, 2021 48,956 $ 31.00 Granted 34,080 15.50 Vested ( 25,331 ) 21.00 Forfeited ( 13,189 ) 34.75 Unvested at December 31, 2022 44,516 $ 23.75 Granted 14,831 5.39 Vested ( 20,498 ) ( 21.63 ) Forfeited ( 38,849 ) ( 17.86 ) Unvested at December 31, 2023 - $ - Stock-based Compensation Expense The following table sets forth stock-based compensation expense included in the Company’s consolidated statements of operations: Schedule of stock based compensation expense Years ended December 31, 2023 2022 Cost of goods sold $ 17,205 $ 79,498 Sales and marketing 55,657 201,373 General and administrative 75,921 456,970 Research and development 130,612 432,754 Total stock-based compensation expense $ 279,395 $ 1,170,595 F- 26 (9) INCOME TAXES Income tax expense consists of: Schedule of income taxes Current Deferred Total Year Ended December 31, 2022: U.S. Federal $ - $ - $ - State and local 59,846 - 59,846 Foreign 52,502 - 52,502 $ 112,348 $ - $ 112,348 Year Ended December 31, 2023: U.S. Federal $ - $ - $ - State and local 16,623 - 16,623 Foreign 25,996 - 25,996 $ 42,619 $ - $ 42,619 The principal components of deferred tax assets, net, were as follows at December 31: Schedule of deferred tax assets 2023 2022 Deferred income tax assets: Capitalized research and development $ - $ 1,234,710 Inventories 550,023 889,821 Accounts receivable 261,564 357,920 Accrued expenses 29,414 266,665 Net operating loss and tax credit carry forwards 19,244,464 14,742,578 Plant and equipment 85,332 39,311 Stock compensation - 120,661 Other – interest expense 293,932 187,990 Total deferred income tax assets 20,464,729 17,839,656 Valuation allowance ( 20,464,729 ) ( 17,839,656 ) Net deferred tax assets $ - $ - As of December 31, 2023, the Company had Federal net operating loss carry forwards of approximately $ 76.9 million which are available to offset future taxable income. They are due to expire in varying amounts from 2024 to 2041. Federal net operating losses occurring after December 31, 2018, of approximately $ 38.5 million may be carried forward indefinitely. As of December 31, 2023, the Company had state net operating loss carry forwards of approximately $ 44.9 million which are available to offset future taxable income. They are due to expire in varying amounts from 2033 through 2040. A valuation allowance has been established for the full amount of net 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. The total valuation allowance increased by $ 2.6 million from December 31, 2022 to December 31, 2023. F- 27 The Federal and state NOLs may be subject to certain limitations under Section 382 of the Internal Revenue Code, which could significantly restrict the Company’s ability to use the NOLs to offset taxable income in subsequent years. As result of changes made by the Tax Cuts and Jobs Act of 2017, that became effective as of January 1, 2022, the company is now required to capitalize for tax purposes certain research and development expenses and amortize domestic expenses over a 5 year period and foreign expenses over a 15 year period, resulting in a deferred tax asset for the capitalized amounts as reflected in the above table. The following is a reconciliation of the statutory Federal income tax rate to the actual effective income tax rate for continuing operations: Schedule of reconciliation of statutory federal income tax rate 2023 2022 Federal tax (benefit) rate 21 % 21 % Increase (decrease) in taxes resulting from: State income taxes 4 1 Change in valuation allowance ( 21 ) ( 9 ) Expiration of NOLs ( 5 ) ( 13 ) Expiration of stock options ( 1 ) ( 14 ) Permanent differences 1 ( 1 ) Changes in Federal and state rates 1 1 Effective income tax rate 0 % ( 1 )% The Company reviews annually the guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a “more-likely-than-not” recognition threshold. At December 31, 2023 and 2022, the Company did no t have any material uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2023 and 2022. The Company files income tax returns in the U.S., India, and Mexico. Tax years subsequent to 2017 remain subject to examination for both U.S. Federal and state tax reporting purposes. Tax years subsequent to 2016 remain subject to examination for Mexico tax reporting purposes. The foreign income tax reported represents tax on operations for the Company that is located in a special economic zone in Mexico. Other than the Mexico facility, the Company has an India operation and has no other operations in a foreign location. The India operation had no tax obligations as of December 31, 2023. F- 28 (10) RETIREMENT PLAN The Company sponsors a 401(k) retirement savings plan for employees. Effective January 1, 2022, the Company increased the Company match to an amount not to exceed 3 % of an employee’s contribution. Employees could contribute to the 401(k) up to 100% of their wages with a maximum of $ 20,500 for 2022. Under the Economic Growth and Tax Relief Reconciliation Act, employees who are age 50 or older could contribute an additional $ 6,500 per year for a maximum of $ 22,500 for 2023. Contributions by the employees are invested in one or more funds at the direction of the employee; however, employee contributions cannot be invested in Company stock. Contributions by the Company are made in accordance with the investment elections made by each participant for his or her deferral contributions. The matching contribution is applied to the employee accounts after each payroll. The Company matching contributions charged to expense were $ 98 thousand and $ 179 thousand in the years ended December 31, 2023, and 2022, respectively. (11) RELATED PARTY TRANSACTIONS The Company leases office space located at 848 Elm Street, Manchester, NH. The landlord is an affiliate entity owned by Mr. Hitchcock. The two-year facility lease agreement was effective from August 1, 2019, to July 31, 2021 and was extended to July 31, 2022. On July 18, 2022, the lease agreement was amended to a month-to-month lease arrangement and may be terminated by either party with a 60-day notice. The facility lease agreement provides for 2,656 square feet. For the twelve-months period ended December 31, 2023 and 2022, the rent expense was $ 42 thousand and $ 33 thousand, respectively. On November 30, 2022, the Company and Slingshot Capital, LLC (“Slingshot Capital”) entered into a Bridge Loan Agreement (the “Bridge Loan Agreement”) pursuant to which Slingshot Capital agreed to make available a bridge loan in the principal amount up of up to $ 1,500,000 . The Company has drawn down $ 1,000,000 under the Bridge Loan Agreement. Subject to Slingshot Capital’s sole discretion, the other $ 500,000 may be drawn by the Company. On December 6, 2023, the Company and Slingshot Capital entered into a Debt Conversion Agreement (“Conversion Agreement”) pursuant to which the Company agreed to issue 734,343 shares of the Company’s common stock (based on $ 1.533 per share) (the “Shares”) in exchange for the cancellation of a total principal amount of $ 1,000,000 (“Principal Amount”) outstanding under the Bridge Loan Agreement and Bridge Term Note (collectively, the “Loan Agreements”), with Slingshot Capital, plus $ 125,778 in accrued and unpaid interest on such Principal Amount as of December 6, 2023. The price per share used in the exchanged was determined by the weighted average price per share and trade volume on September 13, 2023 and November 28, 2023. Slingshot Capital is owned by the Company’s former Chairperson of the Board and a former Board of Director, Jeremy Hitchcock and Elizabeth Hitchcock, respectively. F- 29 (12) SUBSEQUENT EVENTS The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The Company evaluated all subsequent events and determined that there are no material recognized or unrecognized subsequent events requiring disclosure, except as described below. Motorola License Agreements and Obligation On January 22, 2024, the Company entered into a Letter Agreement regarding Product Purchase (the “Letter Agreement”) and a Debt Settlement Agreement (the “Settlement Agreement,” and with the Letter Agreement, the “Agreements”) with Motorola Mobility, LLC (“Motorola”). Pursuant to the Letter Agreement, the Company and Motorola agreed to the termination of the License Agreement for modems and routers, effective January 1, 2016, as amended (the “Modem Agreement”) and the License Agreement for home security devices and services effective March 27, 2020, as amended (the “Home Security Agreement”) between Motorola and the Company (collectively, the “License Agreements”). The Company and Motorola agreed that the Company is obligated to pay $ 6.1 million of current outstanding royalty fees and its future royalty obligations of $ 15.9 million. Motorola further agreed to release and forgive up to $ 5.0 million of the $6.1 million of current outstanding royalty fees, resulting in a reduced liability owed to Motorola of $ 1.1 million. The Company and Motorola further agreed to reduce the obligation of the $15.9M future royalties upon the Company transferring to Motorola certain inventory, product certifications, Moto Sync and Moto Manage applications, customer support software, and e-commerce accounts. Sale of Preferred Stock On January 23, 2024, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with David Lazar (“Lazar”), a member of the Company’s Board of Directors, whereby the Company will sell and whereby Lazar will purchase two million eight hundred thousand 2,800,000 shares of the Company’s preferred stock, $ 0.01 par value per share (the “Preferred Stock”), at a price per share of $ 1.00 , for an aggregate purchase price of $ 2,800,000 , subject to the conditions described below pursuant to the exemptions afforded by the Securities Act and Regulation S thereunder. Under the Purchase Agreement, the Company has agreed to designate 2,800,000 of the Preferred Stock as Series A Preferred Stock (the “Series A Preferred Stock”) for the sale to Lazar. Each share of Series A Preferred Stock shall be convertible, at the option of the holder, into one share of common stock of the Company, $.01 par value per share (the “Common Stock”), and vote on an “as-if-converted” basis and shall have full ratchet protection in any subsequent offerings. Newly Appointed Chief Executive Officer/Chief Financial Officer On February 20, 2024, the Company entered into a three (3) year Employment Agreement (the “Agreement”) with David Lazar (“Lazar”). Pursuant to the Agreement, the Company engaged Mr. Lazar to act as the Chief Executive Officer and Chief Financial Officer (“CEO/CFO”) following the resignation of Jeremy Hitchcock after a certain transition period. Mr. Lazar will have the customary powers and responsibilities of a CEO/CFO of a corporation of the size and type of the Company. F- 30 Merger Agreement with e2 Companies, LLC On March 12, 2024, the “Company”, and its wholly owned subsidiary, MME Sub 1 LLC, which was formed in March 2024, a Florida limited liability company (“Merger Sub”), entered into an Agreement and Plan of Merger (“Merger Agreement”) with e2Companies LLC, a Florida limited liability company (“e2Companies”). Pursuant to the Merger Agreement, Merger Sub will merge with and into e2Companies, with e2Companies remaining as the surviving entity (the “Merger”). Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), holders of the outstanding common units of e2Companies (“e2 Shares”) will receive such number of shares of common stock, par value $ 0.01 per share, of the Company (“Company Shares”) representing 97% of the issued and outstanding Company Shares (on a fully-diluted basis). Pursuant to the terms of the Merger Agreement, the Company has agreed to appoint upon the Effective Time, two individuals selected by the Company to the Company’s board of directors. The Merger Agreement contains representations and warranties, closing deliveries and indemnification provisions customary for a transaction of this nature. The closing of the Merger is conditioned upon, among other things, (i) the Company Shares to be issued in the Merger (“Merger Consideration”) being approved for listing on the Nasdaq Capital Market (“Nasdaq”), (ii) the effectiveness of a registration statement on Form S-4 registering the Merger Consideration; (iii) any waiting period applicable to the consummation of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, will have expired or been terminated; and (iv) the consent or approval of the Company’s stockholders, as applicable, of (a) the Merger, (b) the issuance of the Merger Consideration, and (c) an amendment to the Company’s Amended and Restated Certificate of Incorporation, as amended, to among other things, change the Company’s name to e2Companies, Inc. following the Merger (the “Stockholder Approvals”). The Merger Agreement may be terminated under certain customary and limited circumstances prior to the closing including by the mutual consent of the Company and e2Companies if the closing has not occurred by June 15, 2024, subject to the right of either party to gain a 30 day extension, and including, but not limited to, if the Stockholder Approvals have not been obtained, if the Company Shares are delisted from Nasdaq and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), upon uncured breaches of representations, warranties and covenants or if a court of competent jurisdiction permanently restrains the Merger from occurring. F- 31 ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None