What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-12 compared with 2025-08-13 · 96 added, 52 removed, 158 unchanged (48% of the section changed)

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These strategic initiatives reflect our commitment to innovation and expansion, positioning us for long-term growth and success in emerging industries.

Recent Developments

On June 30, 2025, FiEE (HK) Limited entered into an Asset Purchase Agreement with Hongyan Sun, Lin Lin, and Suzhou Yixuntong Network Technology Co., Ltd.

(“Suzhou Yixuntong”), to acquire certain fixed assets and intellectual property, including patents and copyrights, of Suzhou Yixuntong.

The total purchase price for the transaction was $1.4 million, which was partially paid as part of a simultaneous signing and closing transaction, completed on the same day.

This transaction is expected to enhance the Company’s portfolio of intellectual property and fixed assets, aligning with its strategic goals.

Key Factors Affecting Our Performance

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The Company continues to experience losses, which in part is due to costs related to our new SaaS operating platform launched in Q1 2025.

In the three and six months ended June 30, 2025 and 2024, we generated net sales of $45 thousand and $0, respectively, and $45 thousand and $640 thousand, respectively.

The following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024, presented in absolute dollars and as a percentage of net sales, with dollars and percentage change period over period:

and marketing

and administrative

and development

liability forgiveness, net of asset transfers

In the three and nine months ended September 30, 2025 and 2024, we generated net sales of $2 million and $0, respectively, and $2 million and $640 thousand, respectively.

The following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three and nine months ended September 30, 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,

Cost of sales

Operating expenses:

other expense

before income taxes

Comparison of the three and six months ended June 30, 2025 to the three and six months ended June 30, 2024

The following table sets forth our revenues by product and the changes in revenues for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024:

Selling and marketing

General and administrative

Research and development

Vendor liability forgiveness, net of asset transfers

Total operating expenses

Operating income (loss)

Total other expense

Income (Loss) before income taxes

Net income (loss)

Comparison of the three and nine months ended September 30, 2025 to the three and nine months ended September 30, 2024

The following table sets forth our revenues by product and the changes in revenues for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cable modems & gateways

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SaaS MCN digital services

The majority of the Company’s revenues by geographic area are earned in North America for the three and six months ended June 30, 2024.

For the three and six months ended June 30, 2025, the Company recognized revenue under a service agreement executed in March 2025, which governs content creation, account operations, and commercial monetization services.

Our net sales increased by $45 thousand for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Software services

The majority of the Company’s revenues by geographic area are earned in North America for the three and nine months ended September 30, 2024.

For the three and nine months ended September 30, 2025, the Company recognized revenue under MCN service agreements executed commencing in March 2025, which governs content creation, account operations, and commercial monetization services, along with revenue from customized software R&D contracts signed beginning in July 2025.

Our net sales increased by $2 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

The increase in net sales primarily reflects the Company’s strategic transition from legacy hardware operations to software-as-a-service (SaaS) solutions, with a new business focus on integrating artificial intelligence and big data into content creation and brand management.

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Our target clients are individuals or entities seeking to grow their online presence as influencers or content creators.

As of June 30, 2025, the Company onboarded 245 customers, corresponding to prepaid service fees totaling $1.5 million, which underscore the early traction of the Company’s SaaS offerings.

As of September 30, 2025,

the Company onboarded 528 customers, corresponding to service fees totaling $4.24 million, of which $1.80 million was recognized as revenue.

Building on this momentum, the

Company introduced customized software services in July 2025.

As of September 30, 2025, the Company had secured contracts totaling $480

thousand for customized software services, a portion of which was recognized as revenue in the current period based on the progress of

As of September 30, 2025, it had successfully signed contracts with 11 customers for these services, with related accounts

receivable amounting to $187,347.

Cost of Sales, Gross Margin and Gross Profit (Loss)

Cost of sales consisted primarily of the following:

Cost of sales for the year ended December 31, 2024 consisted primarily of the following:

the cost of direct labor;

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write-downs for excess and obsolete inventory;

and costs attributable to the provision of service offerings.

Cost of sales for the year ended December 31, 2025 consisted primarily of the following:

the cost of direct labor;

amortization of certain acquired intangibles and software development costs;

and costs attributable to the provision of service offerings.

The increase in gross profit was attributable to less sales in 2024, largely resulting from the termination of the Motorola license.

The increase in gross profit was attributable to lower sales in 2024, largely resulting from the termination of the Motorola license.

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 inventory.

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Three Months Ended

Six Months Ended

Gross profit decreased in the six month ended June 30, 2025, compared to the six 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 for the three and six months ended June 30, 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.

Nine Months Ended

September 30,

Gross profit increased in the nine months ended September 30, 2025, compared to the same period in the prior fiscal year, primarily due to a notable turnaround in the Company’s profitability profile during the third quarter.

The first half of 2025 was characterized by an initial investment and strategic positioning phase, with the implementation of increased operational capacity and a successful diversification into new, higher-margin service lines commencing in July 2025.

The improvement in gross profit margin was primarily contributed by the MCN digital services revenue stream.

As a result, the Company achieved a substantial increase in its gross margin.

The benefits of this strategic shift and enhanced scale are clearly reflected in the consolidated results for the nine-month period.

The gross margin for the three and nine months ended September 30, 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Selling and marketing

Selling and marketing expenses decreased by $28 thousand and $49 thousand in the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to reductions in sales support costs in 2024 and lower operational scale during the initial phases of business development in 2025.

Selling and marketing expenses increased by $32 thousand and decreased by $17 thousand in the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, primarily due to reductions in sales support costs in 2024 and lower operational scale during the initial phases of business development in 2025.

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

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

General and administrative

General and administrative expenses increased by $37 thousand and decreased by $641 thousand in the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to the reallocation of our business operation from hardware - focus to software - focus and cost reduction effort in 2024, which significantly reduced expenses associated with personnel, administrative support, and related infrastructure.

General and administrative expenses increased by $1.09 million and increased by $450 thousand in the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, primarily due to the reallocation of our business operation from hardware - focus to software - focus and cost reduction effort in 2024, which significantly reduced expenses associated with personnel, administrative support, and related infrastructure.

Expenses from new SaaS business launched in Q1 2025 remained within projected budget for market-entry initiatives during its startup phase.

The warrant issuance to Mr.

Lazar accounted for approximately $1.07 million in stock-based compensation expenses in Q3 2025, representing over 98.5% of the total increase in general and administrative expenses for the three-month period.

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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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development

Research and development expenses decreased by $23 thousand and $66 thousand in the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024.

Research and development expenses decreased by $0 thousand and $66 thousand in the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024.

The R&D expense incurred in 2025 were primarily used for software subscriptions and support costs.

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In 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.

The total contract price is $300 thousand, as of June 30, 2025, payable under the contract is $90 thousand.

The total contract price is $300 thousand, as of September 30, 2025, payable under the contract is $180 thousand.

Development costs incurred for internal-use software are capitalized only during the application development stage.

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Our principal sources of liquidity are cash and cash equivalents.

As of June 30, 2025, we had cash and cash equivalents of $4.5 million as compared to $30 thousand on December 31, 2024.

On June 30, 2025, we had no borrowings outstanding and working capital of $1.1 million.

As of September 30, 2025, we had cash and cash equivalents of $6 million as compared to $30 thousand on December 31, 2024.

On September 30, 2025, we had no borrowings outstanding and working capital of $2 million.

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

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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 June 30, 2025 were prepared under the assumption that we will continue as a going concern.

Our consolidated financial statements as of September 30, 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 June 30, 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.

Our consolidated financial statements as of September 30, 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:

Six Months Ended

Nine Months Ended

September 30,

Cash provided by (used in) operating activities

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Cash Flows from Operating Activities.

Cash used from operating activities of $172 thousand during the six months ended June 30, 2025 reflected our net loss of $1 million, adjusted for non-cash expenses, consisting primarily of $91 thousand in depreciation and amortization expense.

Uses of cash included increase in other receivables of $520 thousand.

Cash provided by operating activities of $2.5 million during the nine months ended September 30, 2025 reflected our net loss of $1.3 million, adjusted for non-cash expenses, consisting primarily of $260 thousand in depreciation and amortization expense.

Uses of cash included increase in other receivables of $431 thousand, accounts receivable of $187 thousand.

Sources of cash included an increase of contract liabilities of $2.5 million.

Cash used from operating activities of $2.9 million during the six months ended June 30, 2024 reflected our net loss of $3.7 million, adjusted for non-cash expenses, consisting primarily of $426 thousand of stock-based compensation expense, $238 thousand in depreciation and amortization expense, and $2.2 million in vendor forgiveness, net of asset transfers.

Uses of cash included a decrease in accounts payable of $3.1 million.

Sources of cash included primarily a decrease of accounts receivable of $731 thousand, inventories of $404 thousand, and accrued expenses of $16 thousand.

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, $313 thousand in depreciation and amortization expense, and $2.2 million in vendor forgiveness, net of asset transfers.

Uses of cash included a decrease in accounts payable of $3.1 million and accrued expenses of $394 thousand.

Sources of cash included primarily a decrease of accounts receivable of $731 thousand and inventories of $404 thousand.

Cash Flows from Investing Activities.

During each of the six months ended June 30, 2025 and 2024, the Company had no cash flows generated or used by investing activities.

During the nine months ended September 30, 2025, $906 thousand was used to purchase intangible assets and equipment.

During the nine months ended September 30, 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 six months ended June 30, 2025 consisted of proceeds from issuance of common stock of $4 million, net proceeds from the issuance of convertible note of $300 thousand.

Cash provided from financing activities during the six months ended June 30, 2024 consisted of proceeds from issuance of preferred stock of $2.8 million.

Cash provided from financing activities during the nine months ended September 30, 2025 consisted of proceeds from issuance of common stock of $4 million, net proceeds from the issuance of a convertible note of $300 thousand.

Cash provided from financing activities during the nine months ended September 30, 2024 consisted of proceeds from the issuance of preferred stock of $2.8 million and issuance of common stock of $465 thousand .

Future Liquidity Needs

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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 June 30, 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.

At September 30, 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 June 30, 2025, we have Federal net operating loss carry forwards of approximately $70 million available to reduce future taxable income.

At September 30, 2025, we have Federal net operating loss carry forwards of approximately $90.6 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 June 30, 2025 and December 31, 2024, we recorded a full valuation allowance against our net deferred tax assets.

As a result, as of September 30, 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.

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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.

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 were issued on May 14, 2025, and (ii) $75,000 of such shares were issued on August 11, 2025.

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.

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Commitments and Contractual Obligations

During the six months ended June 30, 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.

During the nine months ended September 30, 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 June 30, 2025.

We did not have any material off-balance sheet arrangements as of September 30, 2025.

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

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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 three and six months ended June 30, 2025, the Company’s critical accounting policies is revenue recognition, and no critical accounting estimates were identified.

For the three and nine months ended September 30, 2025, the Company’s critical accounting policies are revenue recognition, and no critical accounting estimates were identified.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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