What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-19 · 101 added, 102 removed, 106 unchanged (66% of the section changed)

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We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise that may arise after the date of this Quarterly Report on Form 10-Q.

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

We historically delivered

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

continue to grow and expand our Software as a Service (“SaaS”) operations as a digital service provider focused on

integrating artificial intelligence and data analytics into content creation and brand management.

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

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

Our cash and cash equivalents balance on September 30, 2024 was $0.2 million compared to $0.7 million on December 31, 2023.

On September 30, 2024, we had no outstanding borrowings and working capital of negative $0.8 million.

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

Our cash and cash equivalents balance on March 31, 2025 was $9 thousand compared to $30 thousand on December 31, 2024.

On March 31, 2025, we had no outstanding borrowings and working capital of negative $743 thousand.

The Company’s ability to maintain adequate levels of liquidity depends in part on our ability to generate cash from operations and its ability to raise additional funds through equity or debt financing.

The Company is evaluating options related to its liquidity.

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The Company continues to experience losses, which in part is due to declining revenues.

In the three and nine months ended September 30, 2024 and 2023, we generated net sales of $0 million and $6.7 million, respectively, and $0.6 million and $24.6 million, respectively.

In the three months ended March 31, 2025 and 2024, we generated net sales of $125 and $640 thousand, respectively.

Our most recent Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on April 10, 2025, provides additional information about our business and operations.

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Our critical accounting policies and estimates, which are revenue recognition, product returns, inventory valuation and costs of goods sold, warrants, valuation of deferred tax assets are described under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024.

For the nine months ended September 30, 2024, there have been no significant changes in our critical accounting policies and estimates.

For the three months ended March 31, 2025, there have been no significant changes in our critical accounting policies and estimates.

Results of Operations

The following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three months ended September 30, 2024 and 2023, presented in absolute dollars and as a percentage of net sales, with dollars and percentage change period over period:

The following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024, presented in absolute dollars and as a percentage of net sales, with dollars and percentage change period over period:

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Cost of goods sold

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Loss before income taxes

Income tax expense (benefit)

Comparison of the three and nine months ended September 30, 2024 to the three and nine months ended September 30, 2023

The following table sets forth our revenues by product and the changes in revenues for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023:

Income tax benefit

(299,128.0 )%

$ (3,258,955 )

Comparison of the three months ended March 31, 2025 to the three months ended March 31, 2024

The following table sets forth our revenues by product and the changes in revenues for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024:

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Cable modems & gateways

Other network products

The majority of the Company’s revenues by geographic area are earned in North America for the three and nine months ended September 30, 2023.

Our total net sales decreased year-over-year by $6.7 million or 100% in the three months ended September 30, 2024 and by $24.0 million or 97.4% in the nine months ended September 30, 2024.

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

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

Sales related to SaaS offerings were $0 thousand and $3 thousand in the three months ended September 30, 2024 and 2023, respectively, and $0 thousand and $164 thousand in the nine months ended September 30, 2024 and 2023, respectively.

The decrease in other category of $244 thousand in the three months ended September 30, 2024 compared to the three months ended in September 30, 2023 and the decrease of $567 thousand in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 is primarily due to a reduction in DSL and MoCA products.

Generally, our lower sales outside North America reflect the fact that cable modems are sold successfully through retailers in the U.S.

but not in most countries outside the U.S., due primarily to variations in government regulations.

Other networking products

The majority of the Company’s revenues by geographic area are earned in North America for the three months ended March 31, 2024.

For the three months ended March 31, 2025, the Company recognized revenue under a service agreement executed in March 2025, which governs content creation, account operations, and commercial monetization services.

Our total net sales

decreased year-over-year by $640 thousand or 100%.

The decrease in net sales primarily reflects the Company’s strategic

transition from legacy hardware operations to software-as-a-service (SaaS) solutions, with new business focus on

integrating artificial intelligence and big data into content creation and brand management.

Notably, during March 2025, the new business successfully secured its first customer orders and generated initial sales,

marking a critical milestone in the strategic pivot.

Our target clients are individuals or entities seeking to grow their online

presence as influencers or content creators.

As of April 30, 2025, the Company has onboarded 39 customers, corresponding to

prepaid service fees totaling $203 thousand, which underscore the early traction of our SaaS offerings.

Subsequent to March 31, 2025,

incremental customer acquisitions and advanced payments further validate the scalability of the SaaS platform.

Cost of Goods Sold and Gross Margin

Cost of goods sold consists primarily of the following:

Cost of goods sold consisted

primarily of the following:

the cost of direct labor;

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

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

third-party software licensing fees;

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

third-party software

licensing fees;

inbound freight;

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warranty costs associated with returned goods;

write-downs for excess and obsolete inventory;

write-downs for excess and

obsolete inventory;

amortization of certain acquired intangibles and software development costs;

and costs attributable to the provision of service offerings.

The decrease in gross profit was attributable to less sales, largely resulting from the Motorola license termination.

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

and costs attributable to the

provision of service offerings.

The decrease in gross profit

was attributable to less sales, largely resulting from the Motorola license termination.

Our gross margin can be affected by a

number of factors, including fluctuation in labor cost, foreign exchange rates, sales returns, changes in average selling prices,

end-user customer rebates and other channel sales incentives, changes in our cost of goods sold due to fluctuations and increases in

prices paid for components, overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or obsolete

The following table presents net sales and gross margin, for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Gross profit decreased in the three months ended September 30, 2024, compared to the three months ended in the prior fiscal year period, primarily due to insufficient sales levels necessary to cover fixed costs and certain variable costs.

Gross profit decreased in the nine months ended September 30, 2024, compared to the nine months ended in the prior fiscal year period, primarily due decreased sales of Motorola branded cable modems and gateways.

For the remainder of fiscal 2024, we expect gross margin to decrease in sales of Motorola branded cable modems and gateways.

Three Months Ended March 31,

Gross profit decreased in the three months ended March 31, 2025, compared to the three months ended in the prior fiscal year period, primarily due to insufficient sales levels necessary to cover fixed costs and certain variable costs.

The gross margin of Q1 2025 is not representative of future trends, as the new business was in its initial launch phase during this period, incurring elevated upfront costs associated with market entry, product deployment, and operational ramp-up.

Forecasting gross margin percentages is difficult, and there are several risks related to our ability to maintain or improve our current gross margin levels.

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

uncertainties surrounding revenue volumes, including the timing of sales.

uncertainties surrounding revenue volumes, including future pricing and/or potential discounts as a result of the economy, competition, the timing of sales, and related production level variances;

and changes in technology components.

Selling and Marketing

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

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Three Months ended March 31,

Selling and marketing

Selling and marketing expenses decreased in the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to reductions in personnel expenses by $0.3 million, Motorola royalty fees of $1.7 million, and other sales support costs of $0.1 million.

Selling and marketing expenses decreased in the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to reductions in personnel expenses by $1.4 million, marketing campaigns by $2.2 million, Motorola royalty fees of $5.1 million, and other sales support costs of $0.6 million.

For the remainder of the fiscal year 2024, we expect our selling and marketing expenses to decrease compared to the first three quarters of 2024.

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

Selling and marketing expenses decreased in the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to reductions in sales support costs of $21 thousand.

For the remainder of the fiscal year 2025, we expect our selling and marketing expenses may fluctuate depending on sales levels achieved as certain expenses, such as commissions, and are determined based upon the net sales achieved.

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

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

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Three Months Ended March 31,

General and administrative

General and administrative expenses decreased $0.3 million in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily due to a decrease in professional fees of $0.3 million and software subscriptions of $0.1 million.

General and administrative expenses decreased $1.2 million in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily due to a decrease in personnel expenses of $0.8 million and professional fees of $0.4 million.

General and administrative

expenses decreased $678 thousand primarily due to the reallocation of our business operation from hardware - focus to software -

focus and cost reduction effort, which significantly reduced expenses associated with personnel, administrative support, and related

infrastructure.

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

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

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except percentage data)

Three Months Ended March 31,

Research and development

The decrease of $0.7 million in the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was primarily due to decreases in personnel expenses of $0.5 million, professional fees of $0.1 million, and other support costs of $0.1 million.

The decrease of $3.2 million in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was primarily due to decreases in personnel expenses of $2.3 million, contract labor of $0.2 million, professional fees of $0.2 million, and certification and other costs of $0.5 million.

For the remainder of the fiscal year 2024, we expect research and development expenses to decrease compared to the first three quarters of 2024.

The decrease of $42 thousand was primarily due to decreases in software subscriptions and support costs.

For Q1 2025, we entered into a collaboration with a new vendor to develop the “FiEE All-in-One Media Operations SaaS Platform”, which is designed to provide content creation, multi-platform publishing, data analytics, and collaboration tools for media teams and individual creators.

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

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Our principal sources of liquidity are cash and cash equivalents.

As of September 30, 2024, we had cash and cash equivalents of $0.2 million as compared to $0.7 million on December 31, 2023.

On September 30, 2024, we had no borrowings outstanding and working capital of negative $0.8 million.

We have funded our operations and financing activities primarily through sale of preferred stock.

As of March 31, 2025, we had cash and cash equivalents of $9 thousand as compared to $30 thousand on December 31, 2024.

On March 31, 2025, we had no borrowings outstanding and working capital of negative $743 thousand.

We have funded our operations and financing activities primarily through sale of preferred stock and common stock.

Our historical cash outflows have primarily been associated with:

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

Our consolidated financial statements, as of September 30, 2024, were prepared under the assumption that we will continue as a going concern.

Our consolidated financial statements, as of March 31, 2025, were prepared under the assumption that we will continue as a going concern.

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

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

Our consolidated financial statements as of September 30, 2024, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.

Our consolidated financial statements as of March 31, 2025, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern.

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

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

September 30,

Cash provided by (used in) operating activities

Three Months Ended

Cash (used in) operating activities

Cash used in investing activities

Cash provided by (used in) financing activities

Cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash Flows from Operating Activities.

Cash used from operating activities of $3.8 million during the nine months ended September 30, 2024 reflected our net loss of $4.4 million, adjusted for non-cash expenses, consisting primarily of $432 thousand of stock-based compensation expense, $290 thousand in depreciation and amortization expense, and $2.2 million in vendor forgiveness, net of asset transfers.

Cash used from operating activities of $371 thousand during the three months ended March 31, 2025 reflected our net loss of $374 thousand, adjusted for non-cash expenses, consisting primarily of $60 thousand in depreciation and amortization expense.

Uses of cash included a decrease in accounts payable of $43 thousand and other assets of $88 thousand.

Sources of cash included decrease of prepaid expenses and other current assets of $40 thousand.

Cash used from operating activities of $2.5 million during the three months ended March 31, 2024 reflected our net loss of $3.3 million, adjusted for non-cash expenses, consisting primarily of $426 thousand of stock-based compensation expense, $104 thousand in depreciation and amortization expense, and $2.4 million in vendor forgiveness, net of asset transfers.

Uses of cash included a decrease in accounts payable of $3.2 million and accrued expenses of $66 thousand.

Sources of cash included primarily a decrease of accounts receivable of $709 thousand, and inventories of $404 thousand.

Cash provided by operating activities of $3.7 million during the nine months ended September 30, 2023 reflected our net loss of $16.5 million, adjusted for non-cash expenses, consisting primarily of $0.3 million of stock-based compensation expense and $0.4 million in depreciation and amortization expense.

Uses of cash included a decrease in accounts receivable of $0.1 million and accrued expenses of $3.0 million.

Sources of cash included primarily a decrease of inventories of $14.9 million, increase in accounts payable of $7.4 million, increase in prepaid expenses of $0.2 million, and increase in deferred revenue of $0.2 million.

Cash Flows from Investing Activities.

During the nine months ended September 30, 2024, the Company had no cash flows generated or used by investing activities.

During the nine months ended September 30, 2023, $162 thousand was used to purchase equipment and $220 thousand was used for certification costs.

During the three months ended March 31, 2025, the Company had no cash flows generated or used by investing activities.

During the three months ended March 31, 2024, the Company had no cash flows generated or used by investing activities.

Cash Flows from Financing Activities.

Cash provided from financing activities during the nine months ended September 30, 2024 consisted of proceeds from issuance of preferred stock of $2.8 million and issuance of common stock of $0.5 million.

Cash used in financing activities during the nine months ended September 30, 2023 consisted of repayment of $3.9 million on the borrowings under our SVB line-of-credit.

Cash provided from financing activities during the three months ended March 31, 2025 consisted of proceeds from issuance of common stock of $350 thousand.

Cash provided from financing activities during the three months ended March 31, 2024 consisted of proceeds from issuance of preferred stock of $2.8 million.

Future Liquidity Needs

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

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

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

● upgrades to our information technology infrastructure to

enhance our capabilities and improve overall productivity;

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

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

At September 30, 2024, we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months.

At March 31, 2025, we believe our current cash and cash equivalents may not be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months.

Our ability to continue as a going concern will depend on our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce or contain expenditures and increase revenues.

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

At September 30, 2024, we have Federal and state net operating loss carry forwards of approximately $79.4 million and $48.0 million, respectively, available to reduce future taxable income.

At March 31, 2025, we have Federal net operating loss carry forwards of approximately $69.3 million available to reduce future taxable income.

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

As a result, as of September 30, 2024 and December 31, 2023, we recorded a full valuation allowance against our net deferred tax assets.

As a result, as of March 31, 2025 and December 31, 2024, we recorded a full valuation allowance against our net deferred tax assets.

To support the Company’s strategic transition to SaaS solutions and the scaling of its AI-driven platform, management anticipates requiring approximately $10 million in total funding over the next 3 years.

The Company plans to allocate $3.0 million in 2025 to fund critical infrastructure development and initial operational scaling, laying the foundation for its SaaS transition, $4.0 million in 2026 to develop AI technology for content, build fan community and membership system, and $3.0 million in 2027 to enhance our SaaS system, and develop robust security for other IP protection technologies.

To provide for such liquidity needs over the next 3 years, on May 9, 2025, the Company entered into a Purchase Agreement with Helena Global Investment Opportunities I Ltd.

(Helena Global Investment Opportunities I Ltd., “Helena”, and such purchase agreement, “Helena Purchase Agreement”) whereby the Company shall have the right to issue and sell to Helena, from time to time, and Helena shall purchase from the Company, up to $15,000,000 of the Common Stock.

Unless terminated earlier pursuant to Section 11.02 of the Helena Purchase Agreement, at any time between May 9, 2025 and the first day of the month next following the 36-month anniversary of May 9, 2025, the Company may require Helena to purchase Common Stock by delivering an Advance Notice to Helena and, in its sole discretion, select the amount of the Advance, not to exceed the Maximum Advance Amount, it desires to issue and sell to Helena in each Advance Notice and the time it desires to deliver each Advance Notice.

In no event shall the number of shares of Common Stock issuable to Helena pursuant to an Advance cause the aggregate number of shares of Common Stock beneficially owned by Helena and its affiliates as a result of previous issuances and sales of Common Stock to Helena under the Helena Purchase Agreement to exceed 9.99% of the then issued and outstanding Common Stock.

The closing of each Advance and each sale and purchase of Common Stock related to each Advance (each, a “Closing”) shall take place on the applicable Settlement Date, at a Purchase Price based on 95% of the lowest VWAP for the Common Stock, in respect of any Advance, during the three (3) Trading Days commencing on the date of Helena’s receipt of the shares of Common Stock relating to such Advance.

In consideration for Helena’s execution and delivery of the Helena Purchase Agreement, the Company shall issue or cause to be issued to Helenna, as a commitment fee, shares of Common Stock, having an aggregate value of $150,000, of which (i) $75,000 of such shares shall be issued on a date no later than three (3) Business Days from the Helena Purchase Agreement, and (ii) $75,000 of such shares shall be issued on the date which is ninety (90) days following such date.

On May 9, 2025, the Company also entered into,

and simultaneously closed the transactions under, a Securities Purchase Agreement with Cao Yu, whereby the Company sold 1,585,366 shares

of the Company’s Common Stock to Cao Yu, for an aggregate purchase price of $2,600,000.

On May 9, 2025, the Company also

entered into, and simultaneously closed the transactions under, a Securities Purchase Agreement with Hu Bin, whereby the Company sold

853,659 shares of Common Stock to Hu Bin, for an aggregate purchase price of $1,400,000.

Commitments and Contractual Obligations

During the nine months ended September 30, 2024, except as otherwise disclosed in this Form 10-Q, there were no material changes to our capital commitments and contractual obligations from those disclosed in our Form 10-K for the year ended December 31, 2023.

During the three months ended March 31, 2025, except as otherwise disclosed in this Form 10-Q, there were no material changes to our capital commitments and contractual obligations from those disclosed in our Form 10-K for the year ended December 31, 2024.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of September 30, 2024.

We did not have any material off-balance sheet arrangements as of March 31, 2025.

See Note 5 to the accompanying consolidated financial statements for additional disclosure.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis